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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, 1998
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, 1998, was $5,598,777,206. As of January 31, 1999,
210,481,413 shares of common stock without par value were outstanding.
Documents Incorporated By Reference
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Part III of this Form 10-K incorporates by reference certain information
from the registrant's definitive Proxy Statement for the 1999 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,
selling other insurance products, and issuing commercial paper guaranteed by
Huntington, and provide other financial products and services. At December 31,
1998, Huntington's subsidiaries had 187 banking offices in Ohio, 135 banking
offices in Michigan, 126 banking offices in Florida, 44 banking offices in West
Virginia, 24 banking offices in Indiana, 13 banking offices in Kentucky, and one
foreign office in the Cayman Islands and Hong Kong, respectively. 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, 1998, Huntington and its subsidiaries had 10,159
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 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, subject to certain limitations
by individual states.
On June 26, 1998, Huntington completed the acquisition of sixty former
Barnett Banks banking offices in Florida from NationsBank Corporation (the
Branch Purchase). The transaction was accounted for as a purchase; accordingly,
the assets acquired and liabilities assumed were recorded at estimated fair
value. The Branch Purchase added approximately $1.3 billion in loans and $2.3
billion in deposits. Intangible assets arising from the transaction totaled
approximately $460 million. The acquired branches' results of operations have
been included in Huntington's consolidated totals from the date of the
acquisition only.
On October 31, 1997, Huntington acquired The Bank of Winter Park
(Winter Park), a $90 million bank headquartered in Winter Park, Florida, for
approximately 364,000 shares of Huntington common stock. On February 28, 1997,
Huntington acquired Citi-Bancshares, Inc. (Citi-Bancshares), a $548 million
one-bank holding company headquartered in Leesburg, Florida, for $47.7 million
in cash and 2.9 million shares of Huntington common stock. These transactions
were accounted for as purchases; accordingly, the results of Citi-Bancshares and
Winter Park have been included in the consolidated financial statements from the
date of acquisition.
On September 30, 1997, Huntington completed its acquisition of First
Michigan Bank Corporation (First Michigan), a $3.6 billion bank holding company
headquartered in Holland,
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Michigan, in a transaction accounted for as a pooling of interests. Huntington
issued approximately 32.2 million shares of common stock to the shareholders of
First Michigan. All financial information reported by Huntington, except
dividends per share, was restated for the First Michigan acquisition.
In December 1998, Huntington applied for regulatory approval for the
merger of The Huntington State Bank, its state bank subsidiary in Ohio, into The
Huntington National Bank, an interstate national bank. The merger was
consummated in January 1999. As a result, The Huntington National Bank is
Huntington's sole bank subsidiary.
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"). Huntington 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 in 1996,
Huntington may, in most cases, commence permissible new nonbanking business
activities de novo with only subsequent notice to the Federal Reserve Board and
may acquire smaller companies that engage in permissible nonbanking activities
under an expedited procedure requiring only 12 business days notice to the
Federal Reserve Board.
Huntington's national bank subsidiary has deposits insured by the Bank
Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation ("FDIC"). It
is subject to supervision, examination, and regulation by the Office of the
Comptroller of the Currency ("OCC"). Certain deposits of Huntington's national
bank subsidiary 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 subsidiary is subject to affiliate
transaction restrictions under federal law which limit the transfer of funds by
the subsidiary bank 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 a subsidiary bank to its parent corporation or to
any individual nonbank subsidiary of the parent are limited in amount to 10% of
the subsidiary
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bank's capital and surplus and, with respect to such parent together with all
such nonbank subsidiaries of the parent, to an aggregate of 20% of the
subsidiary bank'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, 1998, approximately $222.7 million
was available for loans to Huntington from its subsidiary bank.
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 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.
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. Huntington, as the sole
shareholder of its subsidiary bank, is subject to such provisions. Moreover, 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 subsidiary (including
the FDIC, as the subrogee of such holders) would receive priority over the
holders of notes and other senior debt of such subsidiary in the event of a
liquidation or other resolution and over the interests of Huntington as sole
shareholder of its subsidiary.
DIVIDEND RESTRICTIONS
Dividends from its subsidiary bank are a significant source of funds
for payment of dividends to Huntington's shareholders. In the year ended
December 31, 1998, Huntington declared cash dividends to its shareholders of
approximately $161.4 million. There are, however, statutory limits on the amount
of dividends that Huntington's depository institution subsidiary can pay to
Huntington without regulatory approval.
Huntington's subsidiary bank may not, without prior regulatory
approval, pay a dividend in an amount greater than such bank's undivided
profits. In addition, the prior approval of the OCC is required for the payment
of a dividend by a national bank if the total of all dividends declared by the
bank in a calendar year would exceed the total of its net income for the year
combined with its retained net income for the two preceding years. Under these
provisions and in accordance with the above-described formula, Huntington's
subsidiary bank could, without regulatory approval, declare dividends to
Huntington in 1999 of approximately $153.0 million plus an additional amount
equal to its net profits during 1999.
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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
and the OCC have issued policy statements that provide that insured banks and
bank holding companies should generally only pay dividends out of current
operating earnings.
FDIC INSURANCE
Under current FDIC practices, Huntington's bank subsidiary will not be
required to pay deposit insurance premiums during 1999. However, the bank
subsidiary 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. Huntington's subsidiary bank is subject to substantially
similar capital requirements.
Generally, under the applicable guidelines, a financial institution's
capital is divided into two tiers. Institutions that must incorporate market
risk exposure into their risk-based capital requirements may also have a third
tier of capital in the form of restricted short-term subordinated debt. "Tier
1", or core capital, includes common equity, noncumulative perpetual preferred
stock (excluding auction rate issues), and minority interests in equity accounts
of consolidated subsidiaries, less goodwill and, with certain limited
exceptions, all other intangible assets. Bank holding companies, however, may
include cumulative preferred stock in their Tier 1 capital, up to a limit of 25%
of such Tier 1 capital. "Tier 2", or supplementary capital, includes, among
other things, cumulative and limited-life preferred stock, hybrid capital
instruments, mandatory convertible securities, qualifying subordinated debt, and
the allowance for loan and lease losses, subject to certain limitations. "Total
capital" is the sum of Tier 1 and Tier 2 capital.
The Federal Reserve Board and the other federal banking regulators
require that all intangible assets, with certain limited exceptions, be deducted
from Tier 1 capital. Under the Federal Reserve Board's rules, as amended on
August 10, 1998, the only types of intangible assets that may be included in
(i.e., not deducted from) a bank holding company's capital are originated or
purchased mortgage servicing rights ("MSRs"), nonmortgage servicing assets
("NMSAs"), and purchased credit card relationships ("PCCRs"), provided that, in
the aggregate, the total amount of MSRs, NMSAs, and PCCRs included in capital
does not exceed 100% of
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Tier 1 capital. NMSAs and PCCRs are subject to a separate aggregate sublimit of
25% of Tier 1 capital. The amount of MSRs, NMSAs, 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 MSRs, NMSAs, 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 that 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, 1998, 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% 7.10%
Total Risk-Based Capital Ratio 8.00% 10.73%
Tier I Leverage Ratio 3.00% 6.37%
</TABLE>
As of December 31, 1998, Huntington's bank subsidiary also had capital in
excess of the minimum requirements.
The risk-based capital standards of the Federal Reserve Board, the OCC,
and the FDIC 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. These
banking agencies 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.
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FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") 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, Huntington's depository
subsidiary had $4.3 million of brokered deposits at December 31, 1998.
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
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Federal Reserve Board and other federal banking agencies have adopted a
regulation in the form of guidelines covering most of these items. Huntington
believes that the regulation and guidelines will not have a material effect on
the operations of its depository institution subsidiaries.
INTERSTATE BRANCHING AND CONSOLIDATIONS
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
("Riegle-Neal") 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, and interstate branching and consolidations of existing bank
subsidiaries in different states became permissible as of June 1, 1997. On June
30, 1997, Huntington availed itself of the interstate branching and
consolidation authority by merging into its lead national bank subsidiary all of
its other bank subsidiaries, except The Huntington State Bank, which was
subsequently merged into Huntington's lead national bank subsidiary on January
29, 1999. As of that date, The Huntington National Bank was Huntington's sole
bank subsidiary. Future bank acquisitions, if any, in states where Huntington
formerly had a separate bank subsidiary, will not require compliance with
Riegle-Neal entry provisions.
OTHER DEVELOPMENTS
The United States Congress considered but did not adopt comprehensive
financial sector reform legislation during 1998. Such legislation, if adopted,
would have allowed, inter alia, affiliations between banking organizations and
insurance companies, and permitted activities currently prohibited by the
Glass-Steagall Act. Similar legislation is expected to be considered by the
United States Congress during 1999.
GUIDE 3 INFORMATION
Information required by Industry Guide 3 relating to statistical
disclosure by bank holding companies is set forth in Items 7 and 8.
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 lease term expires
in 2009, with renewal options for up to 50 years but with no purchase option.
The Huntington National Bank has an equity interest in the entity that owns the
building. 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 eighteen-story office building in
Charleston, West Virginia; a three-story office building located in Holland,
Michigan; an office building in Lakeland, Florida; an eleven-story office
building in Sarasota, 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. All of the other major properties are held under long-term leases.
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In 1998, Huntington entered into a sale/leaseback agreement that
included the sale of 59 properties. The transaction included a mix of branch
banking offices, regional offices, and operational facilities, including certain
properties described above, which Huntington will continue to operate under
long-term leases with terms expiring through the year 2020.
During the first half of 1999, Huntington expects to occupy its newly
constructed Business Service Center. This 460,000 square foot facility will
serve as Huntington's primary Operations and Data Center and will house
approximately 1,800 employees.
ITEM 3: LEGAL PROCEEDINGS
Information required by this item is set forth in Item 8 in Note 16 of
Notes to Consolidated Financial Statements on page 45.
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 Stock Market under the symbol "HBAN". The stock is listed as "HuntgBcshr"
or "HuntBanc" in most newspapers. As of January 31, 1999, Huntington had 35,182
shareholders of record.
Information regarding the high and low sale prices of Huntington Common
Stock and cash dividends declared on such shares, as required by this item, is
set forth in a table entitled "Market Prices, Key Ratios and Statistics
(Quarterly Data)" on page 27 in Item 7. Information regarding restrictions on
dividends, as required by this item, is set forth in Item 1 under the caption
"Business-Regulatory Matters-Dividend Restrictions" on pages 4 and 5 above and
in Item 8 in Notes 11 and 14 of Notes to Consolidated Financial Statements on
pages 41 and 44, respectively.
On January 6, 1998, Huntington acquired Pollock and Pollock, an insurance agency
headquartered in Cleveland, Ohio ("Pollock"). In connection with this
acquisition, Huntington issued 159,730 unregistered shares of Huntington common
stock, without par value, to five shareholders of Pollock in exchange for all of
the issued and outstanding Pollock capital stock. The issuance of shares in this
transaction was deemed to be exempt from registration under the Securities Act
of 1933, as amended, in reliance on Section 4(2) since this was a transaction by
an issuer not involving a public offering.
ITEM 6: SELECTED FINANCIAL DATA
Information required by this item is set forth in Item 7 in Table 1 on
page 10.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
<TABLE>
<CAPTION>
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TABLE 1
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CONSOLIDATED SELECTED FINANCIAL DATA Year Ended December 31,
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(in thousands of dollars, except per
share amounts) 1998 1997 1996 1995 1994 1993
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<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Total interest income $ 1,999,364 $ 1,981,473 $ 1,775,734 $ 1,709,627 $ 1,418,610 $ 1,410,401
Total interest expense 978,271 954,243 880,648 856,860 546,880 514,812
Net interest income 1,021,093 1,027,230 895,086 852,767 871,730 895,589
Securities gains 29,793 7,978 17,620 9,380 2,297 27,316
Provision for loan losses 105,242 107,797 76,371 36,712 21,954 84,682
Net income 301,768 292,663 304,269 281,801 276,320 266,925
Operating earnings (1) 362,068 338,897 304,269 281,801 276,320 266,925
PER COMMON SHARE (2)
Net income
Basic 1.43 1.39 1.44 1.29 1.27 1.25
Diluted 1.41 1.38 1.42 1.28 1.26 1.23
Diluted--Operating (1) 1.70 1.60 1.42 1.28 1.26 1.23
Cash dividends declared 0.76 0.68 0.62 0.56 0.51 0.42
Book value at year-end 10.20 9.60 8.60 8.35 7.54 7.08
BALANCE SHEET HIGHLIGHTS
Total assets at year-end 28,296,336 26,730,540 24,371,946 23,495,337 20,688,505 20,214,835
Total long-term debt at year-end 707,359 498,889 550,531 517,202 555,514 580,605
Average long-term debt 620,688 526,379 515,664 529,140 561,872 612,617
Average shareholders' equity 2,064,241 1,893,788 1,776,151 1,742,826 1,621,443 1,415,839
Average total assets $ 26,891,558 $ 25,150,659 $ 23,374,490 $ 22,098,785 $ 19,498,530 $ 19,340,577
</TABLE>
<TABLE>
<CAPTION>
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KEY RATIOS AND STATISTICS 1998 1997 1996 1995 1994 1993
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<S> <C> <C> <C> <C> <C> <C>
MARGIN ANALYSIS--AS A %
OF AVERAGE EARNING ASSETS (3)
Interest income 8.33% 8.52% 8.26% 8.43% 7.99% 8.02%
Interest expense 4.05 4.08 4.07 4.19 3.04 2.88
------------ ------------ ------------ ------------ ------------ ------------
NET INTEREST MARGIN 4.28% 4.44% 4.19% 4.24% 4.95% 5.14%
============ ============ ============ ============ ============ ============
RETURN ON
Average total assets 1.12% 1.16% 1.30% 1.28% 1.42% 1.38%
Average total
assets--Operating (1) 1.35 1.35 1.30 1.28 1.42 1.38
Average shareholders' equity 14.62 15.44 17.13 16.17 17.04 18.85
Average shareholders'
equity--Operating (1) 17.54 17.88 17.13 16.17 17.04 18.85
Dividend payout ratio 53.15 49.67 42.22 43.82 38.50 32.47
Average shareholders' equity to
average total assets 7.68 7.53 7.60 7.89 8.32 7.32
Tier I risk-based capital ratio 7.10 8.83 8.11 8.66 9.67 9.78
Total risk-based capital ratio 10.73 11.68 11.29 12.01 13.32 13.81
Tier I leverage ratio 6.37% 7.77% 6.80% 6.99% 7.95% 7.12%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
OTHER DATA 1998 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Full-time equivalent employees 10,159 9,485 9,467 9,083 9,642 9,820
Banking offices 531 454 429 406 420 423
</TABLE>
(1) Reported net income, adjusted to exclude special charges and related taxes.
(2) Adjusted for stock splits and stock dividends, as applicable.
(3) Presented on a fully tax equivalent basis assuming a 35% tax rate.
10
<PAGE> 11
INTRODUCTION
FORWARD-LOOKING STATEMENTS
- --------------------------
Congress passed the Private Securities Litigation Reform Act of 1995 to
encourage corporations to provide investors with information about the company's
anticipated future financial performance, goals, and strategies. The act
provides a safe harbor for such disclosure, or in other words, protection from
unwarranted litigation if actual results are not the same as management's
expectations.
Huntington Bancshares Incorporated (Huntington) desires to provide its
shareholders with sound information about past performance and future trends.
Consequently, this Form 10-K, including Management's Discussion and Analysis of
Financial Condition and Results of Operations, contains forward-looking
statements including certain plans, expectations, goals, and
projections--including without limitation those relating to Huntington's Year
2000 readiness--that are subject to numerous assumptions, risks, and
uncertainties. Actual results could differ materially from those contained in or
implied by Huntington's statements due to a variety of factors including:
changes in economic conditions; movements in interest rates; competitive
pressures on product pricing and services; success and timing of business
strategies; the successful integration of acquired businesses; the nature,
extent, and timing of governmental actions and reforms; the risks of Year 2000
disruption; and extended disruption of vital infrastructure. The management of
Huntington encourages readers of this Form 10-K to understand forward-looking
statements to be strategic objectives rather than absolute targets of future
performance.
ACQUISITIONS AND OTHER STRATEGIC INITIATIVES
- --------------------------------------------
In June 1998, Huntington completed the acquisition of sixty former Barnett
Banks banking offices in Florida from NationsBank Corporation (the Branch
Purchase). The transaction was accounted for as a purchase; accordingly, the
assets acquired and liabilities assumed were recorded at estimated fair
<TABLE>
<CAPTION>
TABLE 2
- -------------------------------------------------------------------------------------------------------------------
CHANGE IN NET INTEREST INCOME DUE TO CHANGES IN AVERAGE VOLUME AND INTEREST RATES (1)
- -------------------------------------------------------------------------------------------------------------------
1998 1997
------------------------------ --------------------------------
Increase (Decrease) Increase (Decrease)
From Previous From Previous
Year Due To: Year Due To:
------------------------------ --------------------------------
Fully Tax Equivalent Basis (2) Volume Yield/ Total Volume Yield/ Total
(in millions of dollars) Rate Rate
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest bearing deposits in banks $ 0.6 $ (0.1) $ 0.5 $ (0.3) $ -- $ (0.3)
Trading account securities -- -- -- (0.4) 0.1 (0.3)
Federal funds sold and securities purchased
under resale agreements 10.4 0.1 10.5 (1.3) (0.1) (1.4)
Mortgages held for sale 11.1 (1.0) 10.1 1.4 -- 1.4
Taxable securities (28.7) (2.3) (31.0) 10.0 (3.9) 6.1
Tax-exempt securities (1.6) (1.8) (3.4) (2.6) -- (2.6)
Total loans 76.9 (47.2) 29.7 145.6 56.7 202.3
-------- -------- -------- -------- -------- --------
TOTAL EARNING ASSETS 68.7 (52.3) 16.4 152.4 52.8 205.2
-------- -------- -------- -------- -------- --------
Interest bearing demand deposits 10.2 1.8 12.0 3.6 0.6 4.2
Savings deposits 7.5 6.1 13.6 7.0 7.1 14.1
Other domestic time deposits 24.1 (4.7) 19.4 22.2 (2.8) 19.4
Certificates of deposit of $100,000 or more (3.0) 0.6 (2.4) 22.6 1.3 23.9
Foreign time deposits (16.0) (0.3) (16.3) 4.5 (0.7) 3.8
Short-term borrowings (35.8) (12.9) (48.7) (3.3) 0.6 (2.7)
Medium-term notes 52.3 (3.9) 48.4 9.3 (13.3) (4.0)
Subordinated notes and other long-term debt,
including capital securities 7.6 (9.5) (1.9) 13.7 1.1 14.8
-------- -------- -------- -------- -------- --------
TOTAL INTEREST BEARING LIABILITIES 46.9 (22.8) 24.1 79.6 (6.1) 73.5
-------- -------- -------- -------- -------- --------
NET INTEREST INCOME $ 21.8 $ (29.5) $ (7.7) $ 72.8 $ 58.9 $ 131.7
======== ======== ======== ======== ======== ========
</TABLE>
(1) The change in interest rates 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.
11
<PAGE> 12
value. The Branch Purchase added approximately $1.3 billion in loans and $2.3
billion in deposits. Intangible assets arising from the transaction totaled
approximately $460 million. The acquired branches' results of operations have
been included in Huntington's consolidated totals from the date of the
acquisition only.
In October 1998, Huntington announced several initiatives to strengthen the
company's financial performance. These included the realignment of the banking
network; the exit of under-performing product lines and delivery channels;
implementation of numerous cost savings measures, including the reduction of
approximately 10% of workforce positions; and a repositioning of the balance
sheet to maximize returns on equity. When fully implemented, management
anticipates that these actions will result in an estimated $125 million in
sustainable pretax annual profit improvements. In connection with these
initiatives, Huntington incurred one-time, pre-tax expenses of $90 million in
the fourth quarter of 1998. This special charge included $32 million related to
exit activities, $26 million for severance and other personnel-related items,
$20 million from the closure of banking offices, and $12 million of fixed asset
write-offs.
"Operating" results, as used below, refers to Huntington's financial
performance before the impact of the fourth quarter 1998 special charges and the
merger-related expenses incurred in connection with the acquisition in 1997 of
First Michigan Bank Corporation, a $3.6 billion bank holding company
headquartered in Holland, Michigan (First Michigan).
OVERVIEW
Huntington's operating earnings totaled $362.1 million in 1998, up from
$338.9 million in the preceding year, and $304.3 million in 1996. On a diluted
per share basis, operating earnings were $1.70 in the recent year, versus $1.60
and $1.42, respectively, in 1997 and 1996. Reported net income for 1998,
including special charges, was $301.8 million, or $1.41 per share. Per share
amounts for all prior periods have been restated to reflect the ten percent
stock dividend distributed to shareholders in July 1998.
<TABLE>
<CAPTION>
TABLE 3
- --------------------------------------------------------------------------------
LOAN PORTFOLIO COMPOSITION DECEMBER 31,
- --------------------------------------------------------------------------------
(in millions of dollars) 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial $ 6,027 $ 5,271 $ 5,130 $ 4,869 $ 4,285
Real Estate
Construction 919 864 699 524 414
Mortgage 3,640 3,598 3,623 3,552 3,736
Consumer
Loans 6,958 6,463 6,123 5,741 5,214
Lease financing 1,911 1,542 1,183 784 572
------- ------- ------- ------- -------
TOTAL LOANS $19,455 $17,738 $16,758 $15,470 $14,221
======= ======= ======= ======= =======
</TABLE>
Note: There are no loans outstanding which would be considered a concentration
of lending in any particular industry or group of industries.
<TABLE>
<CAPTION>
TABLE 4
- -----------------------------------------------------------------------------------------------
MATURITY SCHEDULE OF SELECTED LOANS
- -----------------------------------------------------------------------------------------------
(in millions of dollars) DECEMBER 31, 1998
- -----------------------------------------------------------------------------------------------
After One
Within But Within After
One Year Five Years Five Years Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Commercial $ 1,371 $ 3,815 $ 841 $ 6,027
Real estate - construction 381 402 136 919
------------ ------------ ------------ ------------
TOTAL $ 1,752 $ 4,217 $ 977 $ 6,946
============ ============ ============ ============
Variable interest rates $ 2,451 $ 649
============ ============
Fixed interest rates $ 1,766 $ 328
============ ============
</TABLE>
12
<PAGE> 13
On an operating basis, return on average equity (ROE) was 17.54% in 1998
and return on average assets (ROA) was 1.35%. In the two preceding years, ROE
was 17.88% and 17.13%, respectively, and ROA was 1.35% and 1.30%. Adjusted for
the impact of intangible assets and related amortization expense, "cash" basis
ROE improved to 24.35% for 1998, compared with 21.36% for 1997 and 19.88% in
1996. Cash basis ROA was 1.45% in the recent twelve months versus 1.41% and
1.36% in 1997 and 1996, respectively.
Total assets were $28.3 billion at December 31, 1998, up nearly 6% from
year-end 1997. The Branch Purchase drove much of the asset growth, complemented
by new loan production, including a significant increase in mortgages held for
sale. A strategic repositioning of the balance sheet, designed to improve equity
returns, resulted in other portions of the balance sheet showing reductions from
1997. These initiatives included the sale of $3.4 billion of securities
available for sale, the exit of out-of-market credit card operations through the
sale of approximately $90 million of loans outstanding, and the closure of the
Pittsburgh indirect loan production office. Huntington also sold 59 properties
with a book value approximating $110 million, that included a mix of branch
banking offices, regional offices, and operations facilities, which the company
will continue to operate under long-term leases.
Adjusted for the impact of the Branch Purchase and loan
sales/securitizations, average total loans outstanding were up 4.2% from 1997.
Both commercial and consumer loans grew more than 5%. Residential mortgage
refinancing activity, coupled with the impact of the General Motors strike on
automobile dealer floor plan lending, softened overall loan growth.
Core deposits, adjusted for the Branch Purchase, increased 3.1% with
particular strength in transaction accounts and savings products--up 5.5% and
3.2%, respectively. Core deposits represent Huntington's most significant source
of funding; when combined with other core funding sources, they provide
approximately 76% of Huntington's funding needs.
In terms of wholesale liabilities, Huntington issued $300 million of
subordinated notes in 1998 as well as an additional $100 million of capital
securities through Huntington Capital II, a special-purpose subsidiary.
LINES OF BUSINESS
For internal reporting and planning purposes, Huntington segments its
operations into five distinct lines of business: retail banking, corporate
banking, dealer sales, private financial group, and treasury/other. Line of
business results are determined based upon Huntington's business profitability
reporting system which assigns balance sheet and income statement items to each
of the business segments identified above. This is a dynamic process that
mirrors Huntington's organizational and management structure. Accordingly, the
results are not necessarily comparable with similar information published by
other financial institutions that may define business segments differently. In
addition, methodologies used to assign certain balance sheet, income statement,
and overhead items may change as Huntington continues to refine the data and its
allocation assumptions used to present segment information.
A description of each line of business and its operating earnings
contribution is discussed below:
RETAIL BANKING
Retail Banking provides products and services to retail and small
community banking business customers. This business unit's products include home
equity loans, first mortgage loans, installment loans, credit cards, deposit
products, as well as investment and insurance services. These products and
services are offered through Huntington's traditional banking network, in-store
branches, Direct Bank, and Web Bank.
CORPORATE BANKING
Customers in this segment represent the small, middle-market, and large
corporate banking relationships which use a variety of banking products and
services including, but not limited to, commercial loans, asset based financing,
international trade, and cash management. Huntington's capital markets division
also provides alternative financing solutions for larger business clients,
including privately placed debt and syndicated commercial lending.
DEALER SALES
Dealer Sales product offerings pertain to the automobile lending sector
and include floor plan financing, as well as indirect consumer loans and leases.
Indirect consumer lending comprises the vast majority of the business and
involves dealerships selling Huntington's products to individuals purchasing or
leasing vehicles.
13
<PAGE> 14
PRIVATE FINANCIAL GROUP
Huntington's Private Financial Group (PFG) provides an array of products
and services designed to meet the needs of Huntington's higher wealth banking
customers. Revenue is derived through personal trust, asset management,
investment advisory, and other wealth management services. Huntington's Private
Financial Group provides customers with "one-stop shopping" for all their
financial needs.
TREASURY/OTHER
Huntington uses a match-funded transfer pricing system to allocate
interest income and interest expense to its business segments. This approach
consolidates the interest rate risk management of the company into its Treasury
Group. As part of its overall interest rate risk and liquidity management
strategy, Treasury administers an investment portfolio of approximately $5
billion. Revenue and expense associated with these activities remain within
Treasury. Additionally, the Treasury/Other group absorbs unassigned equity that
may be used to fund acquisitions or other internal growth initiatives. Costs
associated with intangibles that have not been allocated to the major business
lines are also included in the Other category.
EARNINGS CONTRIBUTION BY BUSINESS SEGMENT
- -----------------------------------------
Retail banking provided 43% of Huntington's operating earnings for 1998.
This segment represents 36% of Huntington's outstanding loan portfolio, and
generates retail deposits, the key source of funding for Huntington. Retail
Banking is allocated from Treasury a "deposit credit" based on the cost of
deposits gathered versus rates available on wholesale funds of similar duration.
The Corporate Banking lending portfolio represents approximately 31% of
Huntington's total loan book and was responsible for 29% of 1998 operating
earnings. Dealer Sales represented 29% of the loans outstanding and provided a
14% earnings contribution in the recent year. Private Financial Group, a very
profitable and growing business segment, generated 6% of the annual operating
earnings, mostly driven by its fee-based services. Treasury/Other includes
approximately $30 million of securities gains in 1998.
[PIE GRAPH]
14
<PAGE> 15
RESULTS OF OPERATIONS
NET INTEREST INCOME
- -------------------
Huntington's net interest income was $1,021.1 million in 1998, compared
with $1,027.2 million and $895.1 million, respectively, in 1997 and 1996. The
net interest margin, on a fully tax equivalent basis, was 4.28% during the
recent twelve months, versus 4.44% and 4.19% in the two preceding years. The
margin decline is primarily due to the drop in earning asset yields, as the
highly competitive marketplace continues to erode loan spreads across much of
the banking industry. Interest rate swaps and other off-balance sheet financial
instruments used for asset/liability management purposes provided benefits of
$27.3 million and $6.0 million in the recent two years versus a reduction of
$52.1 million in 1996.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
- ---------------------------------------
The provision for loan losses was $105.2 million in 1998, down slightly
from $107.8 million one year ago. In 1996, the provision totaled $76.4 million.
Net charge-offs as a percent of average total loans were .51% in the year just
ended versus .50% in 1997 and .44% in 1996. Consumer losses were up 10.1% from
1997, while commercial charge-offs increased 5.6%.
The allowance for loan losses (ALL) is maintained at a level considered
appropriate by management, based on its estimate of probable losses 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, recent 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.
At December 31, 1998, the ALL was $290.9 million and represented 1.50% of
total loans, up modestly from 1.46% a year ago. The ALL covered non-performing
loans more than three times, consistent with the prior year's level. Additional
information regarding the ALL and asset quality appears in the section "Credit
Risk".
NON-INTEREST INCOME
- -------------------
Non-interest income totaled $438.2 million in 1998, versus $342.8 million
and $314.1 million, respectively, in 1997 and 1996. Excluding securities gains,
non-interest income increased 22% over last year. Fee income continues to be a
growing source of revenue for Huntington, as it represented 28.6% of total
revenues in the recent year, versus 24.6% in 1997. Improvements were evident in
all non-interest income categories, led by brokerage and insurance services,
electronic banking, and mortgage banking. Huntington also generated $28.7
million of income from Bank Owned Life Insurance policies in 1998. Included in
"Other" non-interest income is a gain of $9.5 million from the sale of
Huntington's out-of-market credit card portfolio.
NON-INTEREST EXPENSE
- --------------------
On an operating basis, non-interest expense was $823.9 million, compared
with $751.9 million and $675.5 million in the two preceding years. Fueling the
expenses were higher sales commissions related to growth in fee-based
businesses; additional telecommunication costs resulting from continued
expansion of Huntington's ATM network; contract programming for Year 2000
remediation; systems conversions and other costs of consolidating operations;
and intangible asset amortization attributable to the Branch Purchase.
Huntington believes it is well positioned to achieve significant
efficiencies in the future. The movement to a common operating platform is
substantially completed, banking activities are provided under a single
interstate charter, and the number of operations and processing centers has been
significantly reduced. Moreover, the company recently announced several
additional strategic actions that are expected to enhance profitability,
including its plans to close approximately 39 underperforming banking offices
and terminate certain business activities including employee benefit plan
administrative services. In connection with the initiatives, Huntington expects
to eliminate approximately 1,000 positions, or roughly 10% of its work force.
During the fourth quarter of 1998, Huntington recorded a $90 million
(approximately $60 million net of taxes, or $.28 per share) special charge as a
result of the above-mentioned strategic actions. It is anticipated that the exit
activities and the closure of banking offices will be completed by the end of
1999. At the recent year end, approximately $54 million of the reserves remained
from the special charge. See note 2 to the Consolidated Financial Statements for
additional information regarding the 1998 Special Charge.
15
<PAGE> 16
<TABLE>
<CAPTION>
TABLE 5
SUMMARY OF ALLOWANCE FOR LOAN LOSSES AND SELECTED STATISTICS
- -----------------------------------------------------------------------------------------------------------
(in thousands of dollars) 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES, BEGINNING OF $ 258,171 $ 230,778 $ 222,487 $ 225,225 $ 233,123
YEAR
LOAN LOSSES
Commercial (24,512) (23,276) (23,904) (15,947) (11,450)
Real estate
Construction (80) (375) -- (392) (5,957)
Mortgage (3,358) (2,663) (2,768) (5,086) (5,840)
Consumer
Loans (84,961) (74,761) (59,843) (39,000) (27,283)
Leases (13,444) (9,648) (4,492) (1,989) (962)
--------- --------- --------- --------- ---------
Total loan losses (126,355) (110,723) (91,007) (62,414) (51,492)
--------- --------- --------- --------- ---------
RECOVERIES OF LOANS PREVIOUSLY CHARGED
OFF
Commercial 4,546 4,373 4,884 3,696 8,204
Real estate
Construction 441 111 556 5 1
Mortgage 2,167 619 1,402 977 859
Consumer
Loans 23,140 16,382 13,457 11,156 10,830
Leases 1,554 1,057 721 303 353
--------- --------- --------- --------- ---------
Total recoveries of loans
previously charged off 31,848 22,542 21,020 16,137 20,247
--------- --------- --------- --------- ---------
NET LOAN LOSSES (94,507) (88,181) (69,987) (46,277) (31,245)
--------- --------- --------- --------- ---------
PROVISION FOR LOAN LOSSES 105,242 107,797 76,371 36,712 21,954
ALLOWANCE ACQUIRED/OTHER 22,042 7,777 1,907 6,827 1,393
--------- --------- --------- --------- ---------
ALLOWANCE FOR LOAN LOSSES, END OF YEAR $ 290,948 $ 258,171 $ 230,778 $ 222,487 $ 225,225
========= ========= ========= ========= =========
AS A % OF AVERAGE TOTAL LOANS
Net loan losses 0.51% 0.50% 0.44% 0.30% 0.23%
Provision for loan losses 0.57% 0.61% 0.48% 0.24% 0.16%
Allowance for loan losses as a %
of total loans (end of period) 1.50% 1.46% 1.38% 1.44% 1.58%
Net loan loss coverage (1) 6.72x 7.01x 7.62x 10.07x 13.86x
</TABLE>
(1) Income before income taxes (excluding special charges) and the provision for
loan losses to net loan losses.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
TABLE 6
- ------------------------------------------------------------------------------------------------------------------------
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
- ------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
Percent Percent Percent Percent Percent
of Loans of Loans of Loans of Loans of Loans
to Total to Total to Total to Total to Total
(in thousands of dollars) Loans Loans Loans Loans Loans
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial $ 82,129 31.0% $ 86,439 29.7% $113,555 30.6% $119,200 31.5% $133,542 30.1%
Real estate
Construction 11,112 4.7 8,140 4.9 2,033 4.2 2,258 3.4 1,454 2.9
Mortgage 40,070 18.7 38,598 20.3 18,987 21.6 18,179 23.0 20,601 26.3
Consumer
Loans 104,198 35.8 75,405 36.4 54,564 36.5 43,880 37.1 36,315 36.7
Leases 17,823 9.8 6,631 8.7 3,457 7.1 3,651 5.0 2,632 4.0
Unallocated 35,616 -- 42,958 -- 38,182 -- 35,319 -- 30,681 --
-------- ------- -------- ------- -------- ------- -------- ------- -------- -------
Total $290,948 100.0% $258,171 100.0% $230,778 100.0% $222,487 100.0% $225,225 100.0%
======== ======= ======== ======= ======== ======= ======== ======= ======== =======
</TABLE>
16
<PAGE> 17
In connection with the acquisition of First Michigan in 1997,
Huntington incurred a merger-related charge of $51 million consisting
primarily of personnel, facilities, and systems costs, as well as $12 million of
professional fees and other costs to effect the business combination. At
December 31, 1998, the merger-related reserve had been fully used.
PROVISION FOR INCOME TAXES
- --------------------------
The provision for income taxes was $138.4 million in 1998, down from
$166.5 million in 1997, and $153.0 million in 1996. Huntington's effective tax
rate decreased to 31.4% in the recent year versus 36.3% in 1997. The lower rate
is due primarily to a higher mix of tax-exempt income. In addition, the 1997
rate was higher than normal as a result of significant nondeductible expenses
incurred in connection with the First Michigan and other bank acquisitions.
YEAR 2000
The Year 2000 problem is the result of many existing computer programs
using only the last two-digits, as opposed to four digits, to indicate the year.
Such computer systems may be unable to recognize a year that begins with "20"
instead of "19". If not corrected, many computer programs could cause systems to
fail or other computer errors, leading to possible disruptions in operations or
creation of erroneous results.
Huntington, in an enterprise-wide effort, is taking steps to ensure that
its internal systems are secure from such failure and that its current products
will perform. The company's Year 2000 Plan (the Plan) addresses all systems,
software, hardware, and infrastructure components. In addition, business
processes are being assessed and validated throughout the organization.
The Plan identifies and addresses "Mission Critical" and "Non-mission
Critical" components for Information Technology (IT) systems, Non-information
Technology (Non-IT) systems, and business processes. IT includes, for example,
systems that service loan and deposit customers. Non-IT systems include, among
other things, security systems, elevators, utilities, and voice/data
communications. An application, system, or process is Mission Critical if it is
vital to the successful continuance of a core business activity.
Huntington's progress towards meeting the Plan's goals for both IT and
Non-IT systems, which follows a five phase approach recommended by federal bank
regulators, is as follows:
<TABLE>
<CAPTION>
Percent Completion
Phase Complete Date
- ------------------------ ------------- -------------
<S> <C> <C>
MISSION CRITICAL
Awareness 100% 06/30/1998
Assessment 100% 09/30/1998
Renovation 95% 06/30/1999
Testing/Validation 95% 06/30/1999
Implementation 73% 06/30/1999
NON-MISSION CRITICAL
Awareness 100% 06/30/1998
Assessment 100% 12/31/1998
Renovation 90% 06/30/1999
Testing/Validation 63% 06/30/1999
Implementation 58% 10/31/1999
</TABLE>
Huntington depends on various third-party vendors, suppliers, and service
providers. The activities undertaken by these third parties can vary from
processing and settlement of automated teller transactions to mortgage loan
processing. Huntington will be dependent on the continued service by its
vendors, suppliers, service providers, and ultimately its customers' continued
operations in order to avoid business interruptions. Any interruption in a third
party's ability to provide goods and services, such as issues with
telecommunication links, power, and transportation, could present problems.
Huntington has identified approximately ten material third-party relationships
with a focus on those considered "Mission Critical." Huntington is presently
working with each of these parties to test transactions and/or interfaces
between its processors, obtain appropriate information from each party, or
assess each party's ability to be prepared for the Year 2000.
Over forty full-time staff members are dedicated to the Year 2000 effort
and, on a part-time basis, multitudes of internal personnel from various
disciplines throughout the Huntington organization are also working on this
project. Furthermore, Huntington has engaged an independent consultant to
establish a Year 2000 Program Management Office (PMO). The PMO organizes
Huntington's Year 2000 project management activities beyond the technical
information services group into all business units. The PMO creates the
methodology that is used in every business unit and also brings a quality
assurance process that reviews the thoroughness of the actions taken to remedy
the Year 2000 problem.
17
<PAGE> 18
Identifiable costs for the Year 2000 project incurred in 1998 were $13.1
million. Management estimates it will cost an additional $16 million to bring
its systems and business processes into compliance and to implement elements of
its contingency plan. However, these expenses are not expected to materially
impact operating results in any one period. These estimated costs incorporate
not only incremental third-party expenses but also include salary and benefit
costs of employees redeployed and full implementation of a call center to handle
increased customer inquiries before and after January 1, 2000.
Major business risks associated with the Year 2000 problem include, but are
not limited to, infrastructure failures, disruptions to the economy in general,
excessive cash withdrawal activity, closure of government offices, foreign
banks, and clearing houses, and increased problem loans and credit losses in the
event that borrowers fail to properly respond to the problem. These risks, along
with the risk of Huntington failing to adequately complete the remaining phases
of its project work and the resulting possible inability to properly process
core business transactions and meet contractual servicing agreements, could
expose Huntington to loss of revenues, litigation, and asset quality
deterioration.
The Year 2000 problem is unique in that it has never previously occurred;
thus, it is not possible to completely foresee or quantify the overall or any
specific financial or operational impacts to Huntington or to third parties
which provide Mission Critical services to the company. Huntington has, however,
implemented several proactive processes to identify and mitigate risk involving
systems and processes over which it has control, including strengthening its
Business Resumption Plan for the Year 2000 by adding alternatives for systems
and networks in support of critical applications. The modifications to
Huntington's contingency plan are now complete and have been tested and
validated for all core business processes. Huntington's senior management
believes successful modifications to existing systems and conversions to new
systems will substantially reduce the risk of Year 2000 disruption.
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
<TABLE>
<CAPTION>
TABLE 7
- -----------------------------------------------------------
INVESTMENT SECURITIES DECEMBER 31,
- -----------------------------------------------------------
(in thousands of dollars) 1998 1997 1996
- -----------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury and $ 156 $ 656 $111,559
Federal Agencies
States and political 24,778 32,354 233,458
subdivisions
Other Securities -- -- 118
-------- -------- --------
TOTAL INVESTMENT
SECURITIES $ 24,934 $ 33,010 $345,135
======== ======== ========
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AMORTIZED COST AND FAIR VALUES BY MATURITY
AT DECEMBER 31, 1998
- -----------------------------------------------------------
AMORTIZED FAIR
(in thousands of dollars) COST VALUE YIELD
- -----------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury and
Federal Agencies
1-5 years $ 156 $ 156 6.57%
------- -------
Total 156 156
------- -------
States and political
subdivisions
Under 1 year 4,318 3,937 8.45%
1-5 years 13,310 13,530 7.59%
6-10 years 5,463 5,674 8.44%
Over 10 years 1,687 1,747 8.70%
------- -------
Total 24,778 24,888
------- -------
TOTAL INVESTMENT
SECURITIES $24,934 $25,044
======= =======
</TABLE>
Note: 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.
operating limits that govern a variety of financial risks inherent in
Huntington's operations, including interest rate, liquidity, counterparty,
settlement, 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 the
business flows onto the balance sheet, wholesale investment and funding, 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 global markets--money, bond, 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.
18
<PAGE> 19
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 that are believed to be
affected by interest rates. These include prepayment speeds on mortgages and
consumer installment loans, cash flows of loans and deposits, principal
amortization on revolving credit instruments, and balance sheet growth
assumptions. The model also 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 assigns probabilities and,
therefore, believes that, at any point in time, the model provides a reasonably
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, 1998, the results of Huntington's interest sensitivity
analysis indicated that net interest income would increase by approximately 1%
given a 100 to 200 basis point 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
decrease by approximately 1% if rates rose 100 basis points and would drop 2% in
the event of a 200 basis point increase.
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. Often, 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 performing identically, they require less capital while
preserving access to the marketplace.
<TABLE>
<CAPTION>
TABLE 8
- -----------------------------------------------------------
SECURITIES AVAILABLE FOR SALE December 31,
- -----------------------------------------------------------
(in thousands of dollars) 1998 1997 1996
- ----------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury and
Federal Agencies $4,096,134 $5,001,034 $4,714,821
Other 685,281 708,780 494,572
---------- ---------- ----------
TOTAL SECURITIES
AVAILABLE FOR SALE $4,781,415 $5,709,814 $5,209,393
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
AMORTIZED COST AND FAIR VALUES BY MATURITY
AT DECEMBER 31, 1998
- -----------------------------------------------------------
AMORTIZED FAIR
(in thousands of dollars) COST VALUE YIELD(1)
- ----------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury
Under 1 year $ 1,000 $ 1,007 7.00%
1-5 years 63,537 65,364 5.50%
6-10 years 169,959 176,945 5.52%
---------- ----------
Total 234,496 243,316
---------- ----------
Federal Agencies
Mortgage-backed
securities
1-5 years 11 11 8.13%
6-10 years 87,342 89,162 6.79%
Over 10 years 1,356,722 1,363,015 6.40%
---------- ----------
Total 1,444,075 1,452,188
---------- ----------
Other agencies
1-5 years 968,753 975,253 6.00%
6-10 years 678,245 684,230 5.71%
Over 10 years 740,139 741,147 6.39%
---------- ----------
Total 2,387,137 2,400,630
---------- ----------
Total U.S. Treasury and
Federal Agencies 4,065,708 4,096,134
---------- ----------
Other
Under 1 year 7,492 7,478 8.33%
1-5 years 188,551 190,871 7.48%
6-10 years 204,788 210,698 7.36%
Over 10 years 268,319 268,930 6.05%
Marketable equity
securities 8,359 7,304 5.52%
---------- ----------
Total 677,509 685,281
---------- ----------
TOTAL SECURITIES
AVAILABLE FOR SALE $4,743,217 $4,781,415
========== ==========
</TABLE>
At December 31, 1998, Huntington had no concentrations of securities by a single
issuer in excess of 10% of shareholders' equity.
(1) Weighted average yields were calculated on the basis of amortized cost.
19
<PAGE> 20
<TABLE>
<CAPTION>
TABLE 9
- -----------------------------------------------------------------------------------------------------
INTEREST RATE SWAP PORTFOLIO DECEMBER 31, 1998
- -----------------------------------------------------------------------------------------------------
LIABILITY CONVERSION SWAPS
-------------------------------------------------------------
ASSET Receive BASIS
CONVERSION Receive fixed- Pay PROTECTION
(in millions of dollars) SWAPS Fixed amortizing fixed Total SWAPS
- ------------------------------------------------------------------------------------------------------
(1)
<S> <C> <C> <C> <C> <C> <C>
Notional value $ 941 $ 1,620 $ 152 $ 975 $ 2,747 $ 985
Average maturity (years) 3.60 3.88 0.90 2.57 3.25 1.27
Market value $ 7.0 $ 41.2 $ 0.3 $ (9.8) $ 31.7 $ (0.1)
Average rate:
Receive 6.22% 6.33% 5.63% 5.35% 5.94% 5.23%
Pay 5.29 5.43 5.62 5.25 5.38 5.14
</TABLE>
(1) Receive fixed only at December 31, 1998.
Table 9 above 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 at December 31, 1998.
As is the case with cash securities, the market value of interest rate
swaps 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 Table 9, 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 interbank offered rate (LIBOR). Receive-fixed asset
conversion swaps and receive-fixed liability conversion swaps with notional
values of $600 million and $800 million, respectively, have embedded written
LIBOR-based call options. 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 that 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 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, 1998, Huntington's credit
risk from interest rate swaps used for asset/liability management purposes was
$103.4 million, which represents the sum of the aggregate fair value of
positions that have become favorable to Huntington, including any accrued
interest receivable due from counterparties. In order to minimize the risk that
a swap counterparty will not satisfy its interest payment obligation under the
terms of the contract, Huntington performs credit reviews on all counterparties,
restricts the number of counterparties used to a select group of high quality
institutions, obtains collateral, and enters into formal netting arrangements.
Huntington has never experienced any past due amounts from a swap counterparty
and does not anticipate nonperformance in the future by any such counterparties.
The total notional amount of off-balance sheet instruments used by
Huntington on behalf of customers (for which the related interest rate risk is
offset by third party contracts) was $564 million at December 31, 1998. Total
credit exposure from such contracts is not material. 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.
20
<PAGE> 21
<TABLE>
<CAPTION>
TABLE 10
- ---------------------------------------------------
MATURITY OF DOMESTIC CERTIFICATES OF DEPOSIT OF
$100,000 OR MORE AS OF DECEMBER 31, 1998
- ---------------------------------------------------
(in thousands of dollars)
- ---------------------------------------------------
<S> <C>
Three months or less $ 900,764
Over three through six months 390,580
Over six through twelve months 265,308
Over twelve months 142,609
-----------
Total $ 1,699,261
===========
</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. The company's
$6 billion domestic bank note and $2 billion European bank note programs are
significant sources of wholesale funding. Under these programs, unsecured
senior and subordinated notes are issuable with maturities ranging from one
month to thirty years. A similar $750 million note program exists at the parent
holding 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 December 31, 1998,
approximately $5.2 billion of notes were available under these programs to fund
Huntington's future activities. Huntington also has $300 million of capital
securities outstanding through its wholly-owned subsidiaries, Huntington
Capital I and II. A $200 million line of credit is also available to the parent
holding company to support commercial paper borrowings and other short-term
working capital needs.
While liability sources are many, significant liquidity is also 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 the end of the recent year,
sufficient liquidity was available to meet estimated short-term and long-term
funding needs.
<TABLE>
<CAPTION>
TABLE 11
- ------------------------------------------------------------------------------------------------
SHORT-TERM BORROWINGS Year Ended December 31,
- ------------------------------------------------------------------------------------------------
(in thousands of dollars) 1998 1997 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FEDERAL FUNDS PURCHASED AND REPURCHASE AGREEMENTS
Balance at year-end $2,137,374 $3,064,344 $3,309,445
Weighted average interest rate at year-end 4.05% 5.26% 5.21%
Maximum amount outstanding at month-end during the year $2,897,385 $3,387,690 $3,309,445
Average amount outstanding during the year $1,980,648 $2,733,764 $2,766,185
Weighted average interest rate during the year 4.72% 5.15% 5.16%
</TABLE>
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.
Non-performing assets consist 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. Total non-performing
assets were $96.1 million and $87.1 million, respectively, at December 31, 1998
and 1997. As of these same dates, non-performing loans represented .40% of total
loans, and non-performing assets as a percent of total loans and other real
estate were .49%. Loans past due ninety days or more but continuing to accrue
interest were $51.0 million at the end of the recent year, up only slightly from
$49.7 million in 1997.
Huntington also actively manages potential problem loans that are current
as to principal and interest but require closer monitoring in the event of
deterioration in borrower performance. These potential problem credits totaled
$27.1 million and $54.2 million, respectively, at December 31, 1998, and 1997.
21
<PAGE> 22
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.
Average shareholders' equity for the twelve months ended December 31,
1998, and 1997 was $2.1 billion and $1.9 billion, respectively. Huntington's
ratio of average equity to average assets in the recent twelve months was 7.68%,
compared with 7.53% one year ago.
Risk-based capital guidelines established by the Federal Reserve Board
set minimum capital requirements and require institutions to calculate
risk-based capital ratios by assigning risk weightings to assets and
off-balance sheet items, such as interest rate swaps and loan commitments.
These guidelines further define "well-capitalized" levels for Tier 1, Total
Capital, and Leverage ratio purposes at 6%, 10%, and 5%, respectively. At the
recent year end, Huntington's Tier 1 risk-based capital ratio was 7.10%, its
total risk-based capital ratio was 10.73%, and its leverage ratio was 6.37%,
each of which exceeds the "well-capitalized" requirements.
Cash dividends declared were $.76 a share in 1998, up 11.8% from 1997. A
10% stock dividend was also distributed to shareholders in the year just ended,
marking the twenty-fifth consecutive year in which Huntington has issued a stock
split or stock dividend.
In September 1998, the Board of Directors authorized the reactivation of
Huntington's common stock repurchase program, which was previously suspended in
May 1997 due to the First Michigan pooling-of-interests merger transaction. In
connection with the reinstatement of the program, the Board of Directors also
increased the number of shares authorized for repurchase to 15 million, up from
approximately 3 million shares remaining when the
<TABLE>
<CAPTION>
TABLE 12
- ----------------------------------------------------------------------------------------------------------------------
NON-PERFORMING ASSETS AND PAST DUE LOANS DECEMBER 31,
- ----------------------------------------------------------------------------------------------------------------------
(in thousands of dollars) 1998 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Non-accrual loans $ 72,429 $ 65,981 $ 55,040 $ 55,423 $ 47,524 $ 81,310
Renegotiated loans 4,706 5,822 4,422 5,320 3,768 3,080
-------- -------- -------- -------- -------- --------
TOTAL NON-PERFORMING LOANS 77,135 71,803 59,462 60,743 51,292 84,390
-------- -------- -------- -------- -------- --------
Other real estate, net 18,964 15,343 17,208 23,598 54,153 66,578
-------- -------- -------- -------- -------- --------
TOTAL NON-PERFORMING ASSETS $ 96,099 $ 87,146 $ 76,670 $ 84,341 $105,445 $150,968
======== ======== ======== ======== ======== ========
ACCRUING LOANS PAST DUE 90 DAYS OR MORE $ 51,037 $ 49,608 $ 39,267 $ 30,937 $ 23,753 $ 28,623
======== ======== ======== ======== ======== ========
NON-PERFORMING LOANS AS A % OF TOTAL
LOANS 0.40% 0.40% 0.35% 0.39% 0.36% 0.67%
NON-PERFORMING ASSETS AS A % OF TOTAL
LOANS AND OTHER REAL ESTATE 0.49% 0.49% 0.46% 0.54% 0.74% 1.19%
ALLOWANCE FOR LOAN LOSSES AS A % OF
NON-PERFORMING LOANS 377.19% 359.55% 388.11% 366.28% 439.10% 276.24%
ALLOWANCE FOR LOAN LOSSES AND OTHER REAL
ESTATE AS A % OF NON-PERFORMING ASSETS 301.00% 294.32% 297.12% 250.06% 199.12% 146.25%
ACCRUING LOANS PAST DUE 90 DAYS OR MORE
TO TOTAL LOANS 0.26% 0.28% 0.23% 0.20% 0.17% 0.23%
</TABLE>
Note: For 1998, the amount of interest income which would have been recorded
under the original terms for total loans classified as non-accrual or
renegotiated was $6.4 million. Amounts actually collected and recorded as
interest income for these loans totaled $2.9 million.
22
<PAGE> 23
plan was suspended. The shares will be purchased through open market purchases
and privately negotiated transactions. Repurchased shares will be reserved for
reissue in connection with Huntington's dividend reinvestment, stock option, and
other benefit plans as well as for stock dividends and other corporate purposes.
In 1998, Huntington repurchased approximately 1.1 million shares.
FOURTH QUARTER RESULTS
On an operating basis, earnings for the fourth quarter of 1998 were $91.5
million, compared with $90.6 million in the same period last year. On a diluted
per share basis, operating earnings were $.43, versus $.42 per share in 1997.
ROE for the most recent quarter was 17.87%, compared with 18.23% for the same
period a year ago. ROA was 1.31%, versus 1.41% in last year's final three
months. Cash basis ROE was 29.44% in the recent quarter compared with 21.78% in
the comparable period of 1997. Cash basis ROA was 1.45% versus 1.48% one year
ago. Reported net income for the fourth quarter of 1998, including special
charges, was $31.2 million, or $.15 per share. ROE was 6.10% and ROA was .45%.
Net interest income was $267.3 million in the recent quarter, an increase
of 3% over the corresponding period last year. This increase was driven by
growth in, and a favorable mix of, earning assets as well as a less expensive
liability structure. Compression in loan spreads and higher non-earning assets
mitigated these benefits and caused a narrowing of the margin percentage.
Commercial loans, indirect automobile financing, credit card, and home equity
lending each posted double-digit growth in the recent three months. As a result,
total loans increased 6.6% (annualized) from the prior quarter, despite softness
in real estate portfolio lending. Core deposits grew 3.2%, primarily due to
increases in transaction accounts of 2.4% and savings deposits of 13.8%.
The provision for loan losses was $34.3 million in the last quarter of the
year, compared with $26.2 million in the same period of 1997. Annualized net
charge-offs were .61% of average loans in both the fourth quarters of 1998 and
1997.
Non-interest income, excluding securities gains, was $106.7 million for the
recent quarter, up from $87.5 million for the three months ended December 31,
1997, or an increase of 22%. Improvements were broad-based with substantial
increases in brokerage and insurance and electronic banking. Non-interest
expense, excluding special charges, totaled $208.9 million in the most recent
three months, versus $188.5 million in the final three months of 1997. The
recently announced expense reduction initiatives have already contributed to a
7.3% decrease in personnel and related costs versus the prior quarter and helped
reduce the fourth quarter efficiency ratio to 52.98%.
23
<PAGE> 24
<TABLE>
<CAPTION>
CONSOLIDATED AVERAGE BALANCES AND INTEREST RATES
- -----------------------------------------------------------------------------------------------------------------
1998 1997
------------------------------ ------------------------------
INTEREST Interest
Fully Tax Equivalent Basis(1) AVERAGE INCOME/ YIELD/ Average Income/ Yield/
(in millions of dollars) BALANCE EXPENSE RATE Balance Expense Rate
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest bearing deposits in banks $ 10 $ 1.0 5.22% $ 9 $ 0.5 5.47%
Trading account securities 11 0.6 5.71 10 0.6 5.70
Federal funds sold and securities purchased
under resale agreements 229 12.9 5.64 44 2.4 5.50
Mortgages held for sale 289 20.2 6.99 131 10.1 7.75
Securities:
Taxable 4,896 308.8 6.31 5,351 339.8 6.35
Tax exempt 247 21.9 8.83 264 25.3 9.55
------- -------- ------- --------
Total Securities 5,143 330.7 6.43 5,615 365.1 6.50
------- -------- ------- --------
Loans:
Commercial 5,629 469.0 8.33 5,302 456.6 8.61
Real Estate
Construction 829 71.7 8.65 813 73.8 8.85
Mortgage 3,604 304.2 8.44 3,761 326.9 8.71
Consumer
Loans 6,679 593.9 8.89 6,299 574.8 9.12
Leases 1,693 120.1 7.09 1,406 106.7 7.59
------- -------- ------- --------
Total Consumer loans 8,372 714.0 8.53 7,705 681.5 8.84
------- -------- ------- --------
Total Loans 18,434 1,558.9 8.46 17,581 1,538.8 8.75
------- -------- ------- --------
Allowance for loan losses/loan fees 280 85.4 253 75.8
------- -------- ------- --------
Net loans 18,154 1,644.3 8.92 17,328 1,614.6 9.18
------- -------- ------- --------
Total earning assets 24,116 2,009.7 8.33% 23,391 1,993.3 8.52%
------- -------- ------- --------
Cash and due from banks 975 910
All other assets 2,081 1,103
------- -------
TOTAL ASSETS $26,892 $25,151
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Core deposits
Non-interest bearing deposits $ 3,287 $ 2,774
Interest bearing demand deposits 3,585 96.4 2.69% 3,204 84.4 2.64%
Savings deposits 3,277 114.0 3.46 3,056 100.4 3.28
Other domestic time deposits 6,291 349.1 5.55 5,857 329.7 5.63
------- -------- ------- --------
Total core deposits 16,440 559.5 4.25 14,891 514.5 4.25
------- -------- ------- --------
Certificates of deposit of $100,000 or more 1,870 107.0 5.72 1,922 109.4 5.70
Foreign time deposits 103 5.9 5.66 382 22.2 5.81
------- -------- ------- --------
Total deposits 18,413 672.4 4.44 17,195 646.1 4.48
------- -------- ------- --------
Short-term borrowings 2,084 97.7 4.83 2,826 146.4 5.18
Medium-term notes 2,903 164.6 5.67 1,983 116.2 5.86
Subordinated notes and other long-term debt,
including capital securities 876 43.6 4.98 739 45.5 6.16
------- -------- ------- --------
Total interest bearing liabilities 20,989 978.3 4.66% 19,969 954.2 4.78%
------- -------- ------- --------
All other liabilities 552 514
Shareholders' equity 2,064 1,894
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $26,892 $25,151
======= =======
Net interest rate spread 3.67% 3.74%
Impact of non-interest bearing funds on margin 0.61% 0.70%
NET INTEREST MARGIN $1,031.4 4.28% $1,039.1 4.44%
======== ========
</TABLE>
(1) Fully tax equivalent yields are calculated assuming a 35% tax rate.
Average loan balances include non-accruing loans. Interest income includes
cash on non-accruing loans.
24
<PAGE> 25
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993
- ----------------------------- ----------------------------- ---------------------------- -------------------------------
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>
$ 14 $ 0.8 5.85% $ 26 $ 1.6 5.99% $ 8 $ 0.5 6.23% $ 30 $ 1.3 4.27%
16 0.9 5.66 23 1.6 7.29 14 0.9 6.16 10 0.5 5.04
67 3.8 6.03 93 5.6 6.10 134 5.8 4.30 103 3.3 3.22
113 8.7 7.74 133 10.0 7.58 367 25.9 7.06 827 60.2 7.28
5,194 333.7 6.42 4,679 310.7 6.64 3,713 226.5 6.10 4,703 284.5 6.05
291 27.9 9.59 342 33.2 9.73 419 42.0 10.03 464 49.6 10.70
------- ------- ------- -------- ------- -------- ------- --------
5,485 361.6 6.59 5,021 343.9 6.85 4,132 268.5 6.50 5,167 334.1 6.47
------- ------- ------- -------- ------- -------- ------- --------
4,955 396.9 8.01 4,703 403.3 8.58 4,140 350.1 8.46 3,823 321.5 8.41
580 50.7 8.75 473 41.6 8.79 396 30.6 7.73 445 31.1 6.99
3,614 312.3 8.64 3,834 328.1 8.56 3,474 278.3 8.01 3,084 253.9 8.24
5,880 528.4 8.99 5,508 494.2 8.97 4,837 401.6 8.31 4,008 364.6 9.10
950 74.8 7.87 657 51.0 7.76 485 34.7 7.15 349 27.8 7.97
------- ------- ------- -------- ------- -------- ------- --------
6,830 603.2 8.83 6,165 545.2 8.84 5,322 436.3 8.20 4,357 392.4 9.01
------- ------- ------- -------- ------- -------- ------- --------
15,979 1363.1 8.53 15,175 1,318.2 8.69 13,332 1,095.3 8.21 11,709 998.9 8.53
------- ------- ------- -------- ------- -------- ------- --------
231 49.2 227 43.4 235 40.1 215 33.2
------- ------- ------- -------- ------- -------- ------- --------
15,748 1412.3 8.84 14,948 1,361.6 8.97 13,097 1,135.4 8.52 11,494 1,032.1 8.82
------- ------- ------- -------- ------- -------- ------- --------
21,674 1788.1 8.26% 20,471 1,724.3 8.43% 17,987 1,437.0 7.99% 17,846 1,431.5 8.02%
------- ------- ------- -------- ------- -------- ------- --------
901 883 841 787
1,031 972 906 923
------- ------- ------- -------
$23,375 $22,099 $19,499 $19,341
======= ======= ======= =======
$ 2,664 $ 2,477 $ 2,390 $ 2,384
3,068 80.2 2.61% 2,815 68.6 2.44% 2,984 65.9 2.21% 2,908 70.2 2.41%
2,836 86.3 3.04 2,666 77.9 2.92 2,935 68.0 2.32 2,863 75.4 2.63
5,463 310.3 5.68 5,382 300.3 5.58 4,383 187.3 4.27 4,376 187.6 4.29
------- ------- ------- -------- ------- -------- ------- --------
14,031 476.8 4.19 13,340 446.8 4.11 12,692 321.2 3.12 12,531 333.2 3.28
------- ------- ------- -------- ------- -------- ------- --------
1,525 85.5 5.61 1,269 74.8 5.89 914 39.3 4.30 1,049 39.8 3.79
305 18.4 6.03 262 17.0 6.50 286 12.2 4.25 455 15.0 3.30
------- ------- ------- -------- ------- -------- ------- --------
15,861 580.7 4.40 14,871 538.6 4.34 13,892 372.7 3.24 14,035 388.0 3.33
------- ------- ------- -------- ------- -------- ------- --------
2,883 149.1 5.17 2,422 138.1 5.70 1,606 59.2 3.68 2,503 73.8 2.95
1,835 120.2 6.55 2,103 146.4 6.96 1,532 75.2 4.91 478 20.3 4.23
516 30.7 5.96 529 33.8 6.38 562 39.8 7.09 613 32.7 5.35
------- ------- ------- -------- ------- -------- ------- --------
18,430 880.7 4.78% 17,448 856.9 4.91% 15,202 546.9 3.60 15,244 514.8 3.38%
------- ------- ------- -------- ------- -------- ------- --------
505 432 3.48% 286 298 4.39%
1,776 1,742 0.71% 1,621 1,415 0.56%
------- ------- ------- -------
$23,375 $22,099 4.19% $19,499 $19,341 4.95%
======= ======= ======= =======
3.52% 4.64%
0.72% 0.50%
$ 907.4 $ 867.4 4.24% $ 890.1 $ 916.7 5.14%
======= ======== ======== ========
</TABLE>
25
<PAGE> 26
SELECTED ANNUAL INCOME STATEMENT DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(in thousands of dollars, ---------------------------------------------------------------------------------------
except per share amounts) 1998 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TOTAL INTEREST INCOME $ 1,999,364 $ 1,981,473 $ 1,775,734 $ 1,709,627 $ 1,418,610 $ 1,410,401
TOTAL INTEREST EXPENSE 978,271 954,243 880,648 856,860 546,880 514,812
------------ ------------ ------------ ------------ ------------ ------------
NET INTEREST INCOME 1,021,093 1,027,230 895,086 852,767 871,730 895,589
Provision for loan losses 105,242 107,797 76,371 36,712 21,954 84,682
------------ ------------ ------------ ------------ ------------ ------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 915,851 919,433 818,715 816,055 849,776 810,907
------------ ------------ ------------ ------------ ------------ ------------
Service charges on deposit accounts 126,403 117,852 107,669 97,505 88,457 83,570
Mortgage banking 60,006 55,715 43,942 39,309 47,194 63,964
Trust services 50,754 48,102 42,237 37,627 35,278 33,879
Brokerage and insurance income 36,710 27,084 20,856 17,979 14,721 16,342
Electronic banking fees 29,202 22,705 12,013 6,190 3,405 2,078
Bank Owned Life Insurance income 28,712 -- -- -- -- --
Credit card fees 21,909 20,467 23,086 18,757 18,589 18,084
Other 54,711 42,936 46,640 48,343 34,773 35,967
------------ ------------ ------------ ------------ ------------ ------------
TOTAL NON-INTEREST INCOME BEFORE
SECURITY GAINS 408,407 334,861 296,443 265,710 242,417 253,884
------------ ------------ ------------ ------------ ------------ ------------
Securities gains 29,793 7,978 17,620 9,380 2,297 27,316
------------ ------------ ------------ ------------ ------------ ------------
TOTAL NON-INTEREST INCOME 438,200 342,839 314,063 275,090 244,714 281,200
------------ ------------ ------------ ------------ ------------ ------------
Personnel and related costs 428,539 392,793 360,865 344,905 347,361 350,615
Outside data processing and other services 74,795 66,683 58,367 53,582 56,424 49,924
Equipment 62,040 57,867 50,887 44,646 44,806 43,012
Net occupancy 54,123 49,509 49,676 47,824 46,304 45,496
Marketing 32,260 32,782 20,331 17,598 20,074 18,163
Telecommunications 29,429 21,527 16,567 13,946 13,068 11,454
Amortization of intangible assets 25,689 13,019 10,220 9,471 9,612 6,671
Legal and other professional services 25,160 24,931 20,313 18,656 18,457 21,060
Printing and supplies 23,673 21,584 19,602 18,103 18,379 18,405
Franchise and other taxes 22,103 19,836 20,359 17,083 16,149 15,920
Other 46,118 51,414 48,323 76,247 92,886 108,731
------------ ------------ ------------ ------------ ------------ ------------
TOTAL NON-INTEREST EXPENSE BEFORE
SPECIAL CHARGES 823,929 751,945 675,510 662,061 683,520 689,451
Special charges, including merger costs 90,000 51,163 -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
TOTAL NON-INTEREST EXPENSE 913,929 803,108 675,510 662,061 683,520 689,451
------------ ------------ ------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 440,122 459,164 457,268 429,084 410,970 402,656
Provision for income taxes 138,354 166,501 152,999 147,283 134,650 135,731
------------ ------------ ------------ ------------ ------------ ------------
NET INCOME $ 301,768 $ 292,663 $ 304,269 $ 281,801 $ 276,320 $ 266,925
============ ============ ============ ============ ============ ============
PER COMMON SHARE(1)
Net income
Basic $ 1.43 $ 1.39 $ 1.44 $ 1.29 $ 1.27 $ 1.25
Diluted $ 1.41 $ 1.38 $ 1.42 $ 1.28 $ 1.26 $ 1.23
Cash dividends declared $ 0.76 $ 0.68 $ 0.62 $ 0.56 $ 0.51 $ 0.42
FULLY TAX EQUIVALENT MARGIN:
Net Interest Income $ 1,021,093 $ 1,027,230 $ 895,086 $ 852,767 $ 871,730 $ 895,589
Tax Equivalent Adjustment(2) 10,307 11,864 12,363 14,602 18,405 21,072
------------ ------------ ------------ ------------ ------------ ------------
Tax Equivalent Net Interest Income $ 1,031,400 $ 1,039,094 $ 907,449 $ 867,369 $ 890,135 $ 916,661
============ ============ ============ ============ ============ ============
</TABLE>
(1) Adjusted for stock dividends and stock splits, as applicable.
(2) Calculated assuming a 35% tax rate.
26
<PAGE> 27
MARKET PRICES, KEY RATIOS
AND STATISTICS (QUARTERLY DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
QUARTERLY COMMON STOCK SUMMARY (1) 1998
- ---------------------------------- -------------------------------------------------
IV Q III Q II Q I Q
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
High $31 1/2 $33 7/8 $34 9/16 $34 7/32
Low 23 5/8 22 29 9/16 29 1/16
Close 30 1/16 25 1/8 30 9/16 33 1/8
Cash dividends declared $0.20 $0.20 $0.18 $0.18
</TABLE>
<TABLE>
<CAPTION>
1997
--------------------------------------------------
IV Q III Q II Q I Q
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
High $35 5/16 $34 5/16 $25 1/16 $26 1/4
Low 28 5/8 24 1/16 21 5/16 20 11/16
Close 32 3/4 32 3/4 24 3/4 21 11/16
Cash dividends declared $0.18 $0.18 $0.16 $0.16
</TABLE>
(1) Adjusted for stock splits and stock dividends, as applicable.
Note: Stock price quotations were obtained from NASDAQ.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
KEY RATIOS AND STATISTICS(1) 1998
----------------------------------------------------
IV Q III Q II Q I Q
- ------------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
MARGIN ANALYSIS - AS A %
OF AVERAGE EARNING ASSETS(2)
Interest Income 8.17% 8.33% 8.37% 8.48%
Interest Expense 3.93 4.15 4.14 4.18
---------- ---------- ---------- ----------
Net Interest Margin 4.24% 4.18% 4.23% 4.30%
========== ========== ========== ==========
RETURN ON
Average total assets 1.31% 1.28% 1.42% 1.38%
Average total assets- cash basis 1.45% 1.43% 1.49% 1.44%
Average shareholders' equity 17.87% 16.43% 17.70% 17.73%
Average shareholders' equity-cash basis 29.44% 26.59% 21.17% 21.09%
</TABLE>
<TABLE>
<CAPTION>
1997
----------------------------------------------------
IV Q III Q II Q I Q
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
MARGIN ANALYSIS - AS A %
OF AVERAGE EARNING ASSETS(2)
Interest Income 8.51% 8.52% 8.62% 8.43%
Interest Expense 4.07 4.11 4.08 4.04
---------- ---------- ---------- ----------
Net Interest Margin 4.44% 4.41% 4.54% 4.39%
========== ========== ========== ==========
RETURN ON
Average total assets 1.41% 1.37% 1.33% 1.27%
Average total assets- cash basis 1.48% 1.44% 1.40% 1.33%
Average shareholders' equity 18.23% 17.85% 18.07% 17.42%
Average shareholders' equity- cash basis 21.78% 21.37% 21.90% 20.59%
</TABLE>
(1) Presented on an "operating" basis (excludes special charges and related
taxes).
(2) Presented on a fully tax equivalent basis assuming a 35% tax rate.
27
<PAGE> 28
SELECTED QUARTERLY INCOME STATEMENT DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
(in thousands of dollars, ----------------------------------------- -----------------------------------------
except per share amounts) IVQ IIIQ IIQ IQ IVQ IIIQ IIQ IQ
- ----------------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL INTEREST INCOME $500,395 $505,221 $491,268 $502,480 $499,760 $502,821 $503,018 $475,874
TOTAL INTEREST EXPENSE 233,094 253,706 243,839 247,632 240,197 245,663 240,060 228,323
-------- -------- -------- -------- -------- -------- -------- --------
NET INTEREST INCOME 267,301 251,515 247,429 254,848 259,563 257,158 262,958 247,551
Provision for loan losses 34,306 24,160 24,595 22,181 26,235 28,351 30,831 22,380
-------- -------- -------- -------- -------- -------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 232,995 227,355 222,834 232,667 233,328 228,807 232,127 225,171
-------- -------- -------- -------- -------- -------- -------- --------
Service charges on deposit accounts 33,992 32,493 30,428 29,490 31,035 30,382 28,841 27,594
Mortgage banking 15,388 15,270 15,191 14,157 15,889 20,672 10,157 8,997
Trust services 12,924 12,502 12,745 12,583 12,019 12,124 11,814 12,145
Brokerage and insurance income 9,848 10,057 8,520 8,285 6,131 7,614 6,254 7,085
Electronic banking fees 8,037 7,897 7,520 5,748 6,175 5,965 6,200 4,365
Bank Owned Life Insurance income 8,098 8,098 7,168 5,348 -- -- -- --
Credit card fees 6,367 5,197 5,450 4,895 6,634 5,112 4,787 3,934
Other 12,057 12,512 18,318 11,824 9,593 12,986 9,844 10,513
-------- -------- -------- -------- -------- -------- -------- --------
TOTAL NON-INTEREST INCOME BEFORE
SECURITY GAINS 106,711 104,026 105,340 92,330 87,476 94,855 77,897 74,633
-------- -------- -------- -------- -------- -------- -------- --------
Securities gains 1,773 10,615 14,316 3,089 1,034 1,242 3,604 2,098
-------- -------- -------- -------- -------- -------- -------- --------
TOTAL NON-INTEREST INCOME 108,484 114,641 119,656 95,419 88,510 96,097 81,501 76,731
-------- -------- -------- -------- -------- -------- -------- --------
Personnel and related costs 103,600 111,744 108,483 104,712 97,217 101,334 96,994 97,248
Outside data processing and other services 20,915 17,550 16,988 19,342 19,067 16,665 16,454 14,497
Equipment 16,202 15,001 15,688 15,149 16,004 14,503 14,173 13,187
Net occupancy 11,602 15,019 14,063 13,439 11,755 12,772 11,650 13,332
Amortization of intangible assets 9,436 9,467 3,393 3,393 3,285 3,382 3,406 2,946
Marketing 8,251 8,762 8,315 6,932 8,187 7,845 7,785 8,965
Telecommunications 8,173 7,793 7,450 6,013 5,636 5,639 5,285 4,967
Legal and other professional services 7,847 5,291 6,234 5,788 8,318 6,095 5,089 5,429
Printing and supplies 6,450 5,851 5,611 5,761 6,239 5,384 5,035 4,926
Franchise and other taxes 5,554 5,523 5,526 5,500 4,576 4,685 5,335 5,240
Other 10,902 9,876 14,927 10,413 8,248 15,443 14,599 13,124
-------- -------- -------- -------- -------- -------- -------- --------
TOTAL NON-INTEREST EXPENSE BEFORE
SPECIAL CHARGES 208,932 211,877 206,678 196,442 188,532 193,747 185,805 183,861
Special charges, including merger costs 90,000 -- -- -- -- 51,163 -- --
-------- -------- -------- -------- -------- -------- -------- --------
TOTAL NON-INTEREST EXPENSE 298,932 211,877 206,678 196,442 188,532 244,910 185,805 183,861
-------- -------- -------- -------- -------- -------- -------- --------
INCOME BEFORE INCOME TAXES 42,547 130,119 135,812 131,644 133,306 79,994 127,823 118,041
Provision for income taxes 11,329 41,364 43,503 42,158 42,657 38,762 44,220 40,862
-------- -------- -------- -------- -------- -------- -------- --------
NET INCOME $ 31,218 $ 88,755 $ 92,309 $ 89,486 $ 90,649 $ 41,232 $ 83,603 $ 77,179
======== ======== ======== ======== ======== ======== ======== ========
PER COMMON SHARE(1)
Net income--Diluted $ 0.15 $ 0.42 $ 0.43 $ 0.42 $ 0.42 $ 0.20 $ 0.39 $ 0.37
Cash dividends declared $ 0.20 $ 0.20 $ 0.18 $ 0.18 $ 0.18 $ 0.18 $ 0.16 $ 0.16
OPERATING RESULTS(2)
Net income $ 91,518 $ 88,755 $ 92,309 $ 89,486 $ 90,649 $ 87,466 $ 83,603 $ 77,179
Net income per common share
Diluted $ 0.43 $ 0.42 $ 0.43 $ 0.42 $ 0.42 $ 0.41 $ 0.39 $ 0.37
Diluted--cash basis(3) $ 0.47 $ 0.45 $ 0.45 $ 0.43 $ 0.44 $ 0.43 $ 0.41 $ 0.38
</TABLE>
(1) Adjusted for stock dividends and stock splits, as applicable.
(2) Presented on an "operating basis" (excludes special charges and related
taxes).
(3) Tangible or "Cash Basis" net income excludes amortization of goodwill and
other intangibles.
28
<PAGE> 29
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Information required by this item is set forth in Item 7 on pages 18
through 21 under the caption "Interest Rate Risk and Liquidity Management."
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF MANAGEMENT
- --------------------------------------------------------------------------------
The integrity of the financial statements and other financial information
contained in this Form 10-K is the responsibility of the management of
Huntington. Such financial information has been prepared in accordance with
generally accepted accounting principles, based on the best estimates and
judgment of management.
Huntington maintains a system of internal accounting controls designed to
provide reasonable assurance that transactions are executed and recorded in
accordance with management's authorization and that the assets of Huntington are
properly safeguarded. This system includes the careful selection and training of
staff, the communication of policies and procedures consistent with the highest
standards of business conduct, and the maintenance of an internal audit
function.
The Audit Committee of the Board of Directors is composed entirely of
outside directors and it meets periodically with both internal and independent
auditors to review the results and recommendations of their audits. This
Committee selects the independent auditor with the approval of shareholders.
The accounting firm of Ernst & Young LLP has been engaged by Huntington to
audit its financial statements, and their report appears to the right.
/s/ Frank Wobst /s/ Gerald R. Williams
Frank Wobst Gerald R. Williams
Chairman and Executive Vice President
Chief Executive Officer and Chief Financial Officer
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders
Huntington Bancshares Incorporated
We have audited the accompanying consolidated balance sheets of Huntington
Bancshares Incorporated and Subsidiaries as of December 31, 1998 and 1997, 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,
1998. 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. Those 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, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Columbus, Ohio
January 13, 1999
29
<PAGE> 30
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
- ----------------------------------------------------------------------------------------------------------
DECEMBER 31,
----------------------------
(in thousands of dollars) 1998 1997
- ---------------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,215,814 $ 1,142,450
Interest bearing deposits in banks 102,564 39,618
Trading account securities 3,839 7,082
Federal funds sold and securities purchased under resale agreements 135,764 509,119
Mortgages held for sale 466,664 192,948
Securities available for sale - at fair value 4,781,415 5,709,814
Investment securities - fair value $25,044 and $33,383, respectively 24,934 33,010
Total loans 19,454,551 17,738,248
Less allowance for loan losses 290,948 258,171
------------ ------------
Net loans 19,163,603 17,480,077
------------ ------------
Bank owned life insurance 727,837 400,000
Premises and equipment 447,038 389,481
Customers' acceptance liability 22,591 27,818
Accrued income and other assets 1,204,273 799,123
------------ ------------
TOTAL ASSETS $ 28,296,336 $ 26,730,540
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits
Non-interest bearing $ 3,129,199 $ 2,549,518
Interest bearing 4,642,147 3,762,862
Savings deposits 3,690,040 3,133,014
Other domestic time deposits 6,186,985 6,115,534
------------ ------------
Total Core Deposits 17,648,371 15,560,928
------------ ------------
Certificates of deposit of $100,000 or more 1,699,261 1,903,657
Foreign time deposits 375,140 519,133
------------ ------------
Total Deposits 19,722,772 17,983,718
------------ ------------
Short-term borrowings 2,216,644 3,141,671
Bank acceptances outstanding 22,591 27,818
Medium-term notes 2,539,900 2,332,150
Subordinated notes and other long-term debt 707,359 498,889
Company obligated mandatorily redeemable preferred capital securities of
subsidiary trusts holding solely the junior subordinated debentures
of the parent company 300,000 200,000
Accrued expenses and other liabilities 638,275 520,903
------------ ------------
Total Liabilities 26,147,541 24,705,149
------------ ------------
Shareholders' equity
Preferred stock - authorized 6,617,808 shares; none outstanding
Common stock - without par value; authorized 500,000,000
shares; issued and outstanding 212,596,344 and 193,279,797
shares, respectively 2,152,076 1,528,768
Less 1,850,007 and 1,543,371 treasury shares, respectively (49,271) (36,791)
Capital surplus (14,161) 404,235
Accumulated other comprehensive income 24,693 14,800
Retained earnings 35,458 114,379
------------ ------------
Total Shareholders' Equity 2,148,795 2,025,391
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 28,296,336 $ 26,730,540
============ ============
</TABLE>
See notes to consolidated financial statements.
30
<PAGE> 31
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------
(in thousands of dollars, except per share amounts) 1998 1997 1996
- --------------------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Interest and fee income
Loans $ 1,641,081 $ 1,611,541 $ 1,411,551
Securities 323,595 356,388 349,937
Other 34,688 13,544 14,246
------------ ------------ ------------
TOTAL INTEREST INCOME 1,999,364 1,981,473 1,775,734
------------ ------------ ------------
Interest expense
Deposits 672,433 646,121 580,685
Short-term borrowings 97,656 146,397 149,088
Medium-term notes 164,590 116,221 120,147
Subordinated notes and other long-term debt 43,592 45,504 30,728
------------ ------------ ------------
TOTAL INTEREST EXPENSE 978,271 954,243 880,648
------------ ------------ ------------
NET INTEREST INCOME 1,021,093 1,027,230 895,086
Provision for loan losses 105,242 107,797 76,371
------------ ------------ ------------
NET INTEREST INCOME
AFTER PROVISION FOR LOAN LOSSES 915,851 919,433 818,715
------------ ------------ ------------
Total non-interest income 438,200 342,839 314,063
Total non-interest expense 913,929 803,108 675,510
------------ ------------ ------------
INCOME BEFORE INCOME TAXES 440,122 459,164 457,268
Provision for income taxes 138,354 166,501 152,999
------------ ------------ ------------
NET INCOME $ 301,768 $ 292,663 $ 304,269
============ ============ ============
PER COMMON SHARE(1)
Net income
Basic $ 1.43 $ 1.39 $ 1.44
Diluted $ 1.41 $ 1.38 $ 1.42
Cash dividends declared $ 0.76 $ 0.68 $ 0.62
AVERAGE COMMON SHARES(1)
Basic 211,426,422 209,884,443 211,740,756
Diluted 213,454,215 212,447,637 213,764,495
</TABLE>
(1) Adjusted for stock dividends and stock splits, as applicable.
See notes to consolidated financial statements.
31
<PAGE> 32
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------------------------------
ACCUMULATED
OTHER
COMMON COMMON TREASURY TREASURY CAPITAL COMPREHENSIVE RETAINED
(in thousands, except per share amounts) SHARES STOCK SHARES STOCK SURPLUS INCOME EARNINGS TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE -- JANUARY 1, 1996 163,172 $1,075,057 (8,352) $(180,632) $ 382,732 $ 42,790 $ 452,746 $1,772,693
Comprehensive Income:
Net income 304,269 304,269
Unrealized net holding losses on
securities available for sale arising
during the period (56,721) (56,721)
----------
Total comprehensive income 247,548
----------
Stock issued for acquisitions 4,733 102,760 5,037 107,797
Cash dividends declared ($0.62 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
Pre-merger transactions of pooled
subsidiary 8,612 7,456 16,898 (45,026) (20,672)
-------- ---------- ------- --------- --------- -------- --------- ----------
BALANCE -- DECEMBER 31, 1996 182,265 1,290,968 (9,285) (204,634) 401,176 (13,931) 312,079 1,785,658
-------- ---------- ------- --------- --------- -------- --------- ----------
Comprehensive Income:
Net income 292,663 292,663
Unrealized net holding gains on
securities available for sale arising
during the period 28,731 28,731
---------
Total comprehensive income 321,394
----------
Stock issued for acquisitions 3,244 73,775 16,463 90,238
Cash dividends declared ($0.68 per share) (128,013) (128,013)
Stock options exercised 461 7,000 (3,641) 3,359
10% stock dividend 9,181 236,214 5,274 124,920 (51,488) (309,846) (200)
Treasury shares purchased (1,930) (53,427) (2,748) (56,175)
Treasury shares sold:
Shareholder dividend reinvestment plan 534 11,968 2,345 14,313
Employee benefit plans 159 3,607 1,110 4,717
Pre-merger transactions of pooled
subsidiary 1,833 1,586 41,018 (52,504) (9,900)
-------- ---------- ------- --------- --------- -------- --------- ----------
BALANCE -- DECEMBER 31, 1997 193,279 1,528,768 (1,543) (36,791) 404,235 14,800 114,379 2,025,391
-------- ---------- ------- --------- --------- -------- --------- ----------
Comprehensive Income:
Net income 301,768 301,768
Unrealized net holding gains on
securities available for sale arising
during the period 9,893 9,893
----------
Total comprehensive income 311,661
----------
Stock issued for acquisition 160 3,883 (3,815) 68
Cash dividends declared ($0.76 per share) (161,447) (161,447)
Stock options exercised 736 14,350 (10,348) 4,002
10% stock dividend 19,317 623,308 (83) (404,437) (219,242) (371)
Treasury shares purchased (1,139) (31,192) (31,192)
Treasury shares sold to
employee benefit plans 19 479 204 683
-------- ---------- ------- --------- --------- -------- --------- ----------
BALANCE -- DECEMBER 31, 1998 212,596 $2,152,076 (1,850) $ (49,271) $ (14,161) $ 24,693 $ 35,458 $2,148,795
======== ========== ======= ========= ========= ======== ========= ==========
</TABLE>
See notes to consolidated financial statements.
32
<PAGE> 33
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ---------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------
(in thousands of dollars) 1998 1997 1996
- ----------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income $ 301,768 $ 292,663 $ 304,269
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses 105,242 107,797 76,371
Provision for depreciation and amortization 80,956 63,383 91,903
Deferred income tax expense 2,769 47,687 35,740
Decrease (increase) in trading account securities 3,243 (5,209) 11,051
(Increase) decrease in mortgages held for sale (273,716) (71,526) 46,909
Net gains on sales of securities (29,793) (7,978) (17,620)
Net gains on sales of loans (9,903) (12,200) (1,382)
Decrease (increase) in accrued income receivable 31,663 (7,003) 6,319
Net increase in other assets (79,588) (111,259) (53,471)
Decrease in accrued expenses 65,938 15,993 (26,066)
Net (decrease) increase in other liabilities (31,150) 11,228 5,111
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 167,429 323,576 479,134
----------- ----------- -----------
INVESTING ACTIVITIES
(Increase) decrease in interest bearing deposits in banks (62,946) (36,185) 286,537
Proceeds from :
Maturities and calls of investment securities 8,348 90,287 104,180
Maturities and calls of securities available for sale 1,356,659 787,788 477,462
Sales of securities 3,782,540 2,297,166 2,743,036
Purchases of:
Investment securities (355) (2,962) (19,247)
Securities available for sale (4,043,068) (2,958,135) (3,111,606)
Proceeds from sales of loans 142,801 357,396 110,737
Net loan originations, excluding sales (724,662) (1,209,015) (1,354,362)
Proceeds from sale of premises and equipment 176,513 8,243 1,664
Purchases of premises and equipment (147,045) (45,849) (51,617)
Proceeds from sales of other real estate 13,856 17,441 18,627
Purchases of Bank Owned Life Insurance (300,000) (400,000) --
Net cash received (paid) in purchase acquisitions 417,031 (2,294) 631
----------- ----------- -----------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES 619,672 (1,096,119) (793,958)
----------- ----------- -----------
FINANCING ACTIVITIES
(Decrease) increase in total deposits (495,638) 1,025,005 521,255
(Decrease) increase in short-term borrowings (925,027) (251,629) 307,317
Proceeds from issuance of long-term debt 300,000 95,500 66,866
Payment of long-term debt (90,038) (122,372) (58,421)
Proceeds from issuance of medium-term notes 1,395,000 1,792,150 1,540,300
Payment of medium-term notes (1,187,250) (1,245,300) (1,934,000)
Proceeds from issuance of capital securities 100,000 200,000 --
Dividends paid on common stock, including pre-merger dividends
of pooled subsidiary (157,632) (132,760) (125,379)
Repurchases of common stock (31,192) (56,175) (258,415)
Proceeds from issuance of common stock 4,685 27,266 43,971
----------- ----------- -----------
NET CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES (1,087,092) 1,331,685 103,494
----------- ----------- -----------
CHANGE IN CASH AND CASH EQUIVALENTS (299,991) 559,142 (211,330)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,651,569 1,092,427 1,303,757
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,351,578 $ 1,651,569 $ 1,092,427
=========== =========== ===========
</TABLE>
NOTE: Huntington made interest payments of $995,625, $964,203, and $886,020 in
1998, 1997, and 1996, respectively. Federal income tax payments were
$77,407 in 1998, $114,755 in 1997, and $120,645 in 1996.
See notes to consolidated financial statements.
33
<PAGE> 34
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 to 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.
NEW PRONOUNCEMENTS: In June 1997, the Financial Accounting Standards Board
(FASB) issued Statement No. 130, "Reporting Comprehensive Income." Pursuant to
this rule, the Consolidated Statements of Changes in Shareholders' Equity now
include a new measure called "Comprehensive Income," which includes net income
as well as certain items that are reported within a separate component of
shareholders' equity that bypass net income. Currently, Huntington's only
component of Other Comprehensive Income is its unrealized gains (losses) on
securities available for sale.
The FASB also issued Statement No. 131, "Disclosure about Segments of an
Enterprise and Related Information" in June 1997. The provisions of this
Statement require disclosure of financial and descriptive information about an
enterprise's operating segments. The Statement defines an operating segment as a
component of an enterprise that engages in business activities that generate
revenue and incur expense. A segment is further defined as a component whose
operating results are reviewed by the chief operating decision-maker in the
determination of resource allocation and performance, and for which discrete
financial information is available. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
Note 15 to the Consolidated Financial Statements includes the segment
information required by the new standard.
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (FAS 133). This Statement establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. The Statement requires that changes in the derivative's fair value
be recognized currently in earnings unless specific hedge accounting criteria
are met. Special accounting for qualifying hedges allows gains and losses from
derivatives to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate, and
assess the effectiveness of transactions for which hedge accounting is applied.
FAS 133 is effective for fiscal years beginning after June 15, 1999. It may
be implemented earlier provided adoption occurs as of the beginning of any
fiscal quarter after issuance. FAS 133 cannot be applied retroactively.
Huntington expects to adopt FAS 133 in the first quarter of 2000. Based on
information available, the impact of adoption is not expected to be material to
the 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
available for sale are carried as a separate component of accumulated other
comprehensive income in 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 on loans and leases 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
34
<PAGE> 35
1. ACCOUNTING POLICIES (CONTINUED)
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.
Net direct loan origination costs/fees, when material, 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 probable
losses 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, as applicable.
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 buildings, 10 to 20
years for building improvements, 10 years for land improvements, 3 to 7 years
for equipment, and 10 years for furniture and fixtures.
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 (MSRs) are evaluated for impairment
based on the fair value of those rights, using a disaggregated approach. MSRs
are amortized on an accelerated basis over the estimated period of net servicing
revenue.
BUSINESS COMBINATIONS: Net assets of entities acquired, for which the
purchase method of accounting was used by Huntington, were recorded at their
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 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 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 accumulated other comprehensive
income. 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 generally over the remaining life of the
hedged item.
35
<PAGE> 36
1. ACCOUNTING POLICIES (CONTINUED)
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."
2. 1998 SPECIAL CHARGE
In October 1998, Huntington announced several initiatives to strengthen its
financial performance. These initiatives included the realignment of the banking
network; the exit of underperforming product lines and delivery channels; the
reduction of 1,000 work force positions, or approximately 10% of the total
employee base; and other cost savings measures. As a result of the above
initiatives, Huntington incurred a special charge of $90 million in the fourth
quarter of the year. Included in the one-time expenses were severance costs for
terminated employees, the non-cash write-off of information systems equipment
and software that were abandoned in the fourth quarter of the year, the
write-down to fair value of retail banking offices to be closed, the costs to
terminate certain long-term lease contracts related to retail banking offices to
be closed, and the estimated amounts to be written off or paid to complete the
exit activities, as more fully described below, that were begun in 1998.
Management expects that the actions discussed below will be substantially
complete by the fourth quarter of 1999.
The work force reduction spans the entire organization and is in large part
attributable to continued internal consolidation efforts by Huntington that
resulted in the formation of a single interstate banking charter, as well as
continued efficiency opportunities in back room operations such as loan and
deposit administration. Through December 31, 1998, 409 employees had been
terminated.
Operational equipment charges relate to the write-off of $4 million in
computer equipment that was abandoned and replaced in the fourth quarter of
1998. In addition, Huntington abandoned certain customized software projects
with a book value of $8 million that were determined not to be economically
viable and had no alternative use within the organization.
The retail banking office costs stem from Huntington's announcement that it
will close 39 underperforming banking offices, substantially all of which will
be closed by the end of the second quarter of 1999. Non-cash charges relate to
the write-down to fair value (estimated selling price) of 20 branches that are
to be closed and held for disposal. These branches have a remaining carrying
value of approximately $4 million. Other non-cash charges relate to the
write-off of leasehold improvements in 19 branches that are to be closed. The
cash portion of the charge relates to amounts to be paid to terminate lease and
other contracts on the branches that are to be closed.
Non-cash exit costs relate to unrecoverable assets associated with
discontinued business activities such as returned check processing, commercial
equipment leasing, out of geographic market credit card lending, and the
indirect lending operation in Pittsburgh. Cash exit costs relate principally to
the decision to terminate the employee benefit plan administrative services
business. Such business was exited in the fourth quarter of 1998. The costs
primarily are composed of cash payments to third party vendors to be incurred to
fulfill Huntington's contractual obligations with regard to benefit plan
customers prior to the transfer of the administrative service to another vendor.
Revenues and operating income of activities exited and retail banking
offices to be closed are not significant to Huntington's operating results.
The table below summarizes the major components of the special charge, as
well as the related amounts applied against the reserve in 1998. Huntington
expects that the remaining reserve of $54 million, which represents estimated
future cash outlays, will be substantially utilized during 1999.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
EMPLOYEE OPERATION RETAIL EXIT
(in millions of dollars) COSTS EQUIPMENT BANK OFFICES COSTS TOTAL
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Special Charge $ 26 $ 12 $ 20 $ 32 $ 90
Utilization:
Cash (8) --- --- (7) (15)
Non-cash --- (12) (5) (4) (21)
------ ------ ------ ----- ------
Balance as of December 31, 1998 $ 18 $ --- $ 15 $ 21 $ 54
====== ====== ===== ===== ======
</TABLE>
36
<PAGE> 37
3. MERGERS AND ACQUISITIONS
On June 26, 1998, Huntington completed the acquisition of sixty former
Barnett Banks banking offices in Florida from NationsBank Corporation. The
transaction was accounted for as a purchase, and accordingly, the assets
acquired and liabilities assumed were recorded at estimated fair value. The
transaction added approximately $1.3 billion in loans and $2.3 billion in
deposits. Intangible assets arising from the acquisition totaled approximately
$460 million. The acquired branches' results of operations have been included in
Huntington's consolidated totals from the date of the acquisition only.
On September 30, 1997, Huntington completed its acquisition of First
Michigan, a $3.6 billion bank holding company headquartered in Holland,
Michigan. Huntington issued approximately 32.2 million shares of common stock to
the shareholders of First Michigan in a transaction accounted for as a pooling
of interests. In connection with the acquisition, Huntington incurred a merger-
related charge of $51 million consisting primarily of personnel, facilities, and
systems costs, as well as $12 million of professional fees and other costs to
effect the business combination. At December 31, 1998, the merger-related
reserve had been fully used.
4. SECURITIES AVAILABLE FOR SALE
Amortized cost, unrealized gains and losses, and fair values of securities
available for sale as of December 31, 1998 and 1997, were:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNREALIZED
----------------------
AMORTIZED GROSS GROSS FAIR
(in thousands of dollars) COST GAINS LOSSES VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1998
U.S. Treasury $ 234,496 $ 8,820 $ -- $ 243,316
Federal Agencies
Mortgage-backed securities 1,444,075 12,098 3,985 1,452,188
Other agencies 2,387,137 21,892 8,399 2,400,630
---------- ---------- ---------- ----------
Total U.S. Treasury and Federal
Agencies 4,065,708 42,810 12,384 4,096,134
Other Securities 677,509 11,689 3,917 685,281
---------- ---------- ---------- ----------
Total securities available for sale $4,743,217 $ 54,499 $ 16,301 $4,781,415
========== ========== ========== ==========
AT DECEMBER 31, 1997
U.S. Treasury $ 730,862 $ 4,501 $ 5,689 $ 729,674
Federal Agencies
Mortgage-backed securities 1,368,502 8,031 5,093 1,371,440
Other agencies 2,888,971 16,049 5,100 2,899,920
---------- ---------- ---------- ----------
Total U.S. Treasury and Federal
Agencies 4,988,335 28,581 15,882 5,001,034
Other Securities 698,584 11,953 1,757 708,780
---------- ---------- ---------- ----------
Total securities available for sale $5,686,919 $ 40,534 $ 17,639 $5,709,814
========== ========== ========== ==========
</TABLE>
Contractual maturities of securities available for sale as of December 31, 1998
and 1997, were:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
AMORTIZED FAIR AMORTIZED FAIR
(in thousands of dollars) COST VALUE (in thousands of dollars) COST VALUE
- -------------------------------------------------------- ------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AT DECEMBER 31, 1998 AT DECEMBER 31, 1997
Under 1 year $ 8,492 $ 8,485 Under 1 year $ 18,148 $ 18,145
1 - 5 years 1,220,852 1,231,499 1 - 5 years 2,381,776 2,387,294
6 - 10 years 1,140,334 1,161,035 6 - 10 years 1,805,524 1,812,872
Over 10 years 2,365,180 2,373,092 Over 10 years 1,419,307 1,430,374
Marketable equity Marketable equity
securities 8,359 7,304 securities 62,164 61,129
----------- ----------- ----------- -----------
Total $ 4,743,217 $ 4,781,415 Total $ 5,686,919 $ 5,709,814
============ ============ =========== ===========
</TABLE>
37
<PAGE> 38
4. SECURITIES AVAILABLE FOR SALE (CONTINUED)
Gross gains from sales of securities of $41.5. million, $12.3 million, and
$24.7 million were realized in 1998, 1997, and 1996, respectively. Gross losses
totaled $11.7 million in 1998, $4.3 million in 1997, and $7.1 million in 1996.
Huntington securitized and transferred to securities available for sale $108.7
million and $115.1 million of residential mortgage loans in 1998 and 1997,
respectively.
5. INVESTMENT SECURITIES
Amortized cost, unrealized gains and losses, and fair values of investment
securities as of December 31, 1998 and 1997, were:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
UNREALIZED
--------------
AMORTIZED GROSS GROSS FAIR
(in thousands of dollars) COST GAINS LOSSES VALUE
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1998
U.S. Treasury and
Federal Agencies $ 156 $ -- $ -- $ 156
States and
political Subdivisions 24,778 154 44 24,888
------- ------- ------- -------
Total investment
Securities $24,934 $ 154 $ 44 $25,044
======= ======= ======= =======
AT DECEMBER 31, 1997
U.S. Treasury and
Federal Agencies $ 656 $ -- $ -- $ 656
States and political
Subdivisions 32,354 471 98 32,727
------- ------- ------- -------
Total investment $33,010 $ 471 $ 98 $33,383
Securities ======= ======= ======= =======
</TABLE>
Amortized cost and fair values by contractual maturity at December 31, 1998
and 1997, were:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
AMORTIZED FAIR
(in thousands of dollars) COST VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
AT DECEMBER 31, 1998
Under 1 year $ 4,318 $ 3,937
1 - 5 years 13,466 13,686
6 - 10 years 5,463 5,674
Over 10 years 1,687 1,747
---------- ----------
Total $ 24,934 $ 25,044
========== ==========
AT DECEMBER 31, 1997
Under 1 year $ 6,311 $ 6,310
1 - 5 years 14,248 14,375
6 - 10 years 9,605 9,788
Over 10 years 2,846 2,910
---------- ----------
Total $ 33,010 $ 33,383
========== ==========
</TABLE>
The portfolio of investment securities acquired in the September 1997
First Michigan merger was sold and/or transferred to the available for sale
category to maintain Huntington's existing interest rate risk position. At the
date of sale/transfer, amortized cost and fair value were $225.3 million and
$233.5 million, respectively.
6. LOANS
At December 31, 1998 and 1997, loans were comprised of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
(in thousands of dollars) 1998 1997
- --------------------------------------------------------------------
<S> <C> <C>
Commercial $ 6,026,736 $ 5,270,660
Real estate
Construction 919,326 863,635
Commercial 2,231,786 2,370,652
Residential 1,408,289 1,228,446
Consumer
Loans 6,957,772 6,462,716
Leases 1,910,642 1,542,139
----------- -----------
Total loans $19,454,551 $17,738,248
=========== ===========
</TABLE>
Huntington's subsidiaries have granted loans to their officers, directors,
and related associates. Such loans were made in the ordinary course of business
under normal credit terms, including interest rate and collateralization, and do
not represent more than the normal risk of collection. These loans to related
parties are summarized as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
(in thousands of dollars) 1998 1997
- --------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of year $ 206,971 $ 173,491
Loans made 97,887 126,503
Repayments (161,945) (46,828)
Changes due to status
of executive officers
and directors (10,744) (46,195)
--------- ---------
Balance, end of year $ 132,169 $ 206,971
========= =========
</TABLE>
38
<PAGE> 39
7. ALLOWANCE FOR LOAN LOSSES
A summary of the transactions in the allowance for loan losses and details
regarding impaired loans follows for the three years ended December 31:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
(in thousands of dollars) 1998 1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, BEGINNING OF YEAR $ 258,171 $ 230,778 $ 222,487
Allowance related to acquisitions/other 22,042 7,777 1,907
Loan losses (126,355) (110,723) (91,007)
Recoveries of loans previously charged off 31,848 22,542 21,020
Provision for loan losses 105,242 107,797 76,371
--------- --------- ---------
BALANCE, END OF YEAR $ 290,948 $ 258,171 $ 230,778
========= ========= =========
RECORDED BALANCE OF IMPAIRED LOANS, AT END OF YEAR:
With related allowance for loan losses $ 13,277 $ 20,593 $ 11,770
With no related allowance for loan losses 18,340 14,166 17,503
--------- --------- ---------
Total $ 31,617 $ 34,759 $ 29,273
========= ========= =========
AVERAGE BALANCE OF IMPAIRED LOANS FOR THE YEAR $ 32,547 $ 33,968 $ 31,519
========= ========= =========
ALLOWANCE FOR LOAN LOSSES RELATED TO IMPAIRED LOANS $ 4,459 $ 6,449 $ 4,785
========= ========= =========
</TABLE>
8. PREMISES AND EQUIPMENT
At December 31, 1998 and 1997, premises and equipment stated at cost were
comprised of the following:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
(in thousands of dollars) 1998 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Land and land improvements $ 61,902 $ 71,313
Buildings 257,066 286,320
Leasehold improvements 98,162 93,485
Equipment 439,435 355,668
-------- --------
Total premises and equipment 856,565 806,786
Less accumulated depreciation and amortization
409,527 417,305
Net premises and equipment -------- --------
$447,038 $389,481
======== ========
</TABLE>
Depreciation and amortization charged and rental income credited to expense
were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
(in thousands of dollars) 1998 1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total depreciation and amortization $ 40,489 $ 41,383 $ 39,492
========= ========= =========
Rental income credited to occupancy expense $ 13,133 $ 14,842 $ 11,966
========= ========= =========
</TABLE>
In 1998, Huntington entered into a sale/leaseback agreement that included
the sale of 59 properties with a book value approximating $110 million. The
transaction included a mix of branch banking offices, regional offices, and
operations facilities, which Huntington will continue to operate under a
long-term lease. Proceeds of $174.1 million received from the sale were used to
reduce short-term debt. The resulting deferred gain is being amortized as a
reduction of occupancy expense over the lease term.
39
<PAGE> 40
9. SHORT-TERM BORROWINGS
At December 31, 1998 and 1997, short-term borrowings were comprised of
the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------
(in thousands of dollars) 1998 1997
- --------------------------------------------------------
<S> <C> <C>
Federal funds purchased
and securities sold
under agreements to
repurchase $2,137,374 $3,064,344
Commercial paper 30,133 40,050
Other 49,137 37,277
---------- ----------
Total short-term borrowings $2,216,644 $3,141,671
========== ==========
</TABLE>
Information concerning securities sold under agreements to repurchase is
summarized as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------
(in thousands of dollars) 1998 1997
- ---------------------------------------------------------
<S> <C> <C>
Average balance during
the year $1,304,499 $1,253,724
Average interest rate
during the year 4.48% 4.58%
Maximum month-end
balance during the year $1,647,599 $1,356,785
</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 short-term working capital needs. Under the terms of the
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 1998 or
1997.
Securities pledged to secure public or trust deposits, repurchase
agreements, and for other purposes were $2.0 billion and $2.1 billion at
December 31, 1998 and 1997, respectively.
10. CAPITAL SECURITIES
The Company obligated mandatorily redeemable preferred capital securities
of subsidiary trusts holding solely the junior subordinated debentures of the
parent company ("Capital Securities") were issued by two wholly-owned business
trusts, Huntington Capital I and II ("the Trusts"). Huntington Capital I was
formed in January 1997 while Huntington Capital II was formed in June 1998. The
Trusts used the proceeds from the issuance of the Capital Securities, together
with Huntington's investment in the common stock of the Trusts, to purchase
debentures of the parent company. The junior subordinated debentures of the
parent company are the only assets of the Trusts. The debentures and their
related income statement effects are eliminated in Huntington's consolidated
financial statements.
The parent company has entered into contractual arrangements that, taken
collectively and in the aggregate, constitute a full and unconditional
guarantee by the parent company of the Trusts' obligations under the Capital
Securities. The contractual arrangements guarantee payment of (a) accrued and
unpaid distributions required to be paid on the Capital Securities; (b) the
redemption price with respect to any Capital Securities called for redemption
by the Trusts; and (c) payments due upon voluntary or involuntary liquidation,
winding-up, or termination of the Trusts, as set forth in the Guarantee. The
Capital Securities, and common stock, and related debentures are summarized as
follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1998
- ---------------------------------------------------------------------------------------------------------------------
Interest
Rate of
Principal Securities Maturity of
Capital Common Amount of and Securities and
(in thousands of dollars) Securities Stock Debentures Debentures Debentures
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Huntington Capital I $ 200,000 $ 6,186 $ 206,186 LIBOR + .70% (1) 02/01/2027
Huntington Capital II 100,000 3,093 103,093 LIBOR + .625%(2) 06/15/2028
--------- ------- ---------
Total $ 300,000 $ 9,279 $ 309,279
========= ======= =========
</TABLE>
(1) Variable effective rate at December 31, 1998 and 1997, of 5.92% and 6.48%,
respectively.
(2) Variable effective rate at December 31, 1998, of 5.85%.
40
<PAGE> 41
11. DEBT
At December 31, 1998 and 1997, Huntington's debt consisted of the
following:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
(in thousands of dollars) 1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
MEDIUM-TERM
Parent company (maturing through 1999) $ 60,000 $ 220,000
Subsidiary bank (maturing through 2007) 2,479,900 2,112,150
---------- ----------
TOTAL MEDIUM-TERM DEBT 2,539,900 2,332,150
---------- ----------
LONG-TERM
Subordinated notes, 7 5/8 % , maturing in 2003, face value $150,000 at
December 31, 1998 and 1997, net of discount 149,724 149,657
Subordinated notes, 7 7/8%, maturing in 2002, face value $150,000 at
December 31, 1998 and 1997, net of discount 149,505 149,376
Subordinated notes, 6 3/4%, maturing in 2003, face value $100,000 at
December 31, 1998 and 1997, net of discount 99,852 99,819
Subordinated notes, 6 3/5%, maturing in 2018, face value $200,000 at
December 31, 1998, net of discount 198,278 --
Subordinated notes, Floating Rate, maturing in 2008, face value $100,000
at December 31, 1998, net of discount 100,000 --
Federal Home Loan Bank notes maturing through 1999 10,000 95,500
Other -- 4,537
---------- ----------
TOTAL SUBORDINATED NOTES AND OTHER LONG-TERM DEBT 707,359 498,889
---------- ----------
TOTAL DEBT $3,247,259 $2,831,039
========== ==========
</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, 1998, the
effective interest rate on the swap-adjusted Notes was 5.96%.
The Medium-term notes had weighted average interest rates of 6.12% and
5.99% at December 31, 1998 and 1997, 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
effective rates were 5.82% and 5.26%, respectively, at December 31, 1998. These
Notes are not redeemable prior to maturity in 2003, and do not provide for any
sinking fund. The 6 3/5% Notes and the Floating Rate Notes were issued by The
Huntington National Bank in 1998. Adjusted for the effects of interest rate
swaps, the interest rates were 5.68% and 5.73% at December 31, 1998. The
Floating Rate Notes are based on the three-month London Interbank Offered Rate
(LIBOR).
The Medium-term bank notes had weighted average interest rates of 5.57% and
5.98% at December 31, 1998 and 1997, respectively. The stated interest rates on
certain of these notes have also been modified by interest rate swaps. At
December 31, 1998, the weighted average effective interest rate on the
swap-adjusted Medium-term bank notes was 5.16%.
The Federal Home Loan Bank notes mature serially from February 1999 through
December 1999, and had a weighted average interest rate of 6.15% and 5.84% at
December 31, 1998 and 1997, respectively. These advances cannot be prepaid
without penalty.
The terms of Huntington's medium and 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, 1998, Huntington was in
compliance with all such covenants.
41
<PAGE> 42
11. DEBT (CONTINUED)
<TABLE>
<CAPTION>
- ------------------------------------------------------
YEAR (in thousands of dollars)
- ------------------------------------------------------
<S> <C>
1999 $ 1,537,750
2000 340,000
2001 475,000
2002 242,150
2003 305,000
2004 and thereafter 350,000
-----------
3,249,900
Discount (2,641)
-----------
Total $ 3,247,259
===========
</TABLE>
12. OPERATING LEASES
At December 31, 1998, Huntington and its subsidiaries were obligated under
noncancelable operating 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, as of December 31, 1998, have initial or
remaining noncancelable lease terms in excess of one year.
Excluded from the following amounts are minimum sublease rentals of $50.3
million due in the future under noncancelable subleases. The rental expense for
all operating leases was $23.3 million for 1998, compared with $25.2 million in
1997 and $23.0 million in 1996.
<TABLE>
<CAPTION>
- ------------------------------------------------------
YEAR (in thousands of dollars)
- ------------------------------------------------------
<S> <C>
1999 $ 41,206
2000 38,458
2001 36,515
2002 34,406
2003 32,164
2004 and thereafter 429,918
----------
Total Minimum Payments $ 612,667
==========
</TABLE>
13. 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, 1998, Huntington's credit risk from these off-balance sheet arrangements,
including trading activities, was approximately $131.3 million.
42
<PAGE> 43
13. OFF-BALANCE SHEET TRANSACTIONS (CONTINUED)
The contract or notional amount of financial instruments with off-balance
sheet risk at December 31, 1998 and 1997, is presented in the following table:
<TABLE>
<CAPTION>
- -----------------------------------------------------------
(in millions of dollars) 1998 1997
- -----------------------------------------------------------
<S> <C> <C>
CONTRACT AMOUNT REPRESENTS CREDIT RISK
Commitments to extend credit
Commercial $3,833 $4,058
Consumer 3,820 2,992
Other 227 314
Standby letters of credit 758 677
Commercial letters of credit 138 132
NOTIONAL AMOUNT EXCEEDS CREDIT RISK
Asset/liability management activities
Interest rate swaps 4,673 3,194
Purchased interest rate options 965 679
Interest rate forwards and futures 620 267
Trading activities
Interest rate swaps 496 126
Interest rate options 68 53
</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 nearly 90% are expected to expire without
being drawn upon.
Commercial letters of credit represent short-term, self-liquidating
instruments that facilitate customer trade transactions and have maturities of
no longer than ninety days. These instruments are normally secured by the
merchandise or cargo being traded.
Interest rate swaps are agreements between two parties to exchange periodic
interest payments that are calculated on a notional principal amount. Huntington
enters into swaps to synthetically alter the repricing characteristics of
designated earning assets and interest bearing liabilities and, on a much more
limited basis, as an intermediary for customers. Because only interest payments
are exchanged, cash requirements of swaps are significantly less than the
notional amounts.
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.
43
<PAGE> 44
14. REGULATORY MATTERS
The bank subsidiary of Huntington is required to maintain reserve balances
with the Federal Reserve Bank. During 1998, the average balance of these
deposits was $192.5 million.
Payment of dividends to Huntington by its subsidiary bank is subject to
various regulatory restrictions. Regulatory approval is required prior to the
declaration of any dividends in excess of available retained earnings. 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 bank could, without regulatory approval, declare dividends in 1999 of
approximately $153.0 million plus an additional amount equal to its net income
through the date of declaration.
The subsidiary bank is also restricted as to the amount and type of loans
it may make to Huntington. At December 31, 1998, the subsidiary bank could lend
to Huntington $222.7 million, subject to the qualifying collateral requirements
defined in the regulations.
Huntington and its bank subsidiary 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
subsidiary's 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 must be at
least 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. As of December 31, 1998 and
1997, Huntington has met all capital adequacy requirements. In addition, its
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
bank subsidiary, The Huntington National Bank, as well as a comparison of the
period-end capital balances with the related amounts established by the
regulatory agencies.
<TABLE>
<CAPTION>
Capital Amounts
--------------------------------
Well
(in millions of dollars) Ratios Actual Minimum Capitalized
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AS OF DECEMBER 31, 1998:
Tier I Risk-Based Capital
Huntington Bancshares Incorporated 7.10% $ 1,720 $ 970 $ 1,454
The Huntington National Bank 6.28 1,507 960 1,440
Total Risk-Based Capital
Huntington Bancshares Incorporated 10.73 2,601 1,939 2,424
The Huntington National Bank 10.48 2,515 1,920 2,400
Tier I Leverage
Huntington Bancshares Incorporated 6.37 1,720 810 1,350
The Huntington National Bank 5.61 1,507 806 1,343
AS OF DECEMBER 31, 1997:
Tier I Risk-Based Capital
Huntington Bancshares Incorporated 8.83% $ 1,954 $ 885 $ 1,328
The Huntington National Bank 6.62 1,456 880 1,321
Total Risk-Based Capital
Huntington Bancshares Incorporated 11.68 2,584 1,770 2,213
The Huntington National Bank 11.10 2,443 1,761 2,201
Tier I Leverage
Huntington Bancshares Incorporated 7.77 1,954 755 1,258
The Huntington National Bank 5.70 1,456 766 1,276
</TABLE>
44
<PAGE> 45
15. LINES OF BUSINESS
Huntington segments its operations into five distinct lines of
business: Retail Banking; Corporate Banking; Dealer Sales; Private Financial
Group; and Treasury/Other. Line of business results are determined based upon
Huntington's business profitability reporting system, which assigns balance
sheet and income statement items to each of the business segments. The process
is designed around Huntington's organizational and management structure and
accordingly, the results are not necessarily comparable with similar information
published by other financial institutions. Listed below is certain financial
information regarding Huntington's 1998 results by line of business. For a
detailed description of the individual segments, refer to pages 13 and 14 of
this Form 10-K.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1998
- -------------------------------------------------------------------------------------------------------------
Private
INCOME STATEMENT Retail Corporate Dealer Financial Treasury/ Huntington
(IN THOUSANDS OF DOLLARS) Banking Banking Sales Group Other Consolidated
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net interest income (FTE) $ 576,211 $ 235,041 $ 164,774 $ 31,585 $ 23,789 $1,031,400
Provision for Loan Losses 39,934 14,631 49,655 1,022 -- 105,242
Non-Interest Income 242,152 70,381 7,992 43,978 73,697 438,200
Non-Interest Expense 543,969 134,697 49,074 39,989 146,200 913,929
Income Taxes/FTE Adjustment 79,704 52,982 25,119 11,727 (20,871) 148,661
---------- ---------- ---------- ---------- ---------- ----------
Net Income $ 154,756 $ 103,112 $ 48,918 $ 22,825 $ (27,843) $ 301,768
========== ========== ========== ========== ========== ==========
Depreciation and Amortization $ 43,438 $ 7,408 $ 1,412 $ 1,370 $ 27,328 $ 80,956
========== ========== ========== ========== ========== ==========
BALANCE SHEET
(IN MILLIONS OF DOLLARS)
- ----------------------------
Identifiable Assets (avg) $ 7,652 $ 6,003 $ 5,268 $ 597 $ 7,372 $ 26,892
Total Deposits (avg) $ 16,392 $ 997 $ 62 $ 475 $ 487 $ 18,413
Capital Expenditures $ 37 $ 6 $ -- $ -- $ 104 $ 147
</TABLE>
16. LEGAL CONTINGENCIES
In the ordinary course of business, there are various legal proceedings
pending against Huntington and its subsidiaries. In the opinion of management,
the aggregate liabilities, if any, arising from such proceedings are not
expected to have a material adverse effect on Huntington's consolidated
financial position.
17. 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.
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, post-retirement healthcare and life insurance
benefits are based upon the employee's number of months of service and are
limited to the actual cost of coverage.
45
<PAGE> 46
17. EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table reconciles the funded status of the pension plan and
the post-retirement benefit plan at the applicable September 30 measurement
dates with the amounts recognized in the consolidated balance sheet at December
31:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
PENSION POST-RETIREMENT
BENEFITS BENEFITS
- ---------------------------------------------------------------------------------------------------
(in thousands of dollars) 1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Projected benefit obligation at
beginning of year $ 178,325 $ 163,113 $ 40,477 $ 32,203
Changes due to:
Service cost 11,979 10,698 1,410 959
Interest cost 12,897 12,502 3,080 2,386
Benefits paid (16,619) (11,701) (3,148) (2,694)
Plan amendments -- -- 846 4,139
Actuarial assumptions 11,959 3,713 3,786 3,484
--------- --------- --------- ---------
Total changes 20,216 15,212 5,974 8,274
--------- --------- --------- ---------
Projected benefit obligation at end of year 198,541 178,325 46,451 40,477
--------- --------- --------- ---------
Fair value of plan assets at
beginning of year 194,336 158,903 -- --
Changes due to:
Actual return on plan assets 4,608 47,943 -- --
Benefits paid (19,217) (12,510) -- --
--------- --------- --------- ---------
Total changes (14,609) 35,433 -- --
--------- --------- --------- ---------
Fair value of plan assets at end of year 179,727 194,336 -- --
--------- --------- --------- ---------
Projected benefit obligation less
(greater) than plan assets (18,814) 16,011 (46,451) (40,477)
Unrecognized net actuarial loss (gain) 2,145 (26,920) (1,119) (4,653)
Unrecognized prior service cost (13,578) (14,905) 9,078 6,474
Unrecognized transition (asset)/
liability, net of amortization (1,545) (1,986) 17,649 19,679
--------- --------- --------- ---------
Accrued liability $ (31,792) $ (27,800) $ (20,843) $ (18,977)
========= ========= ========= =========
Weighted-average assumptions at September 30:
Discount rate 7.00% 7.50% 7.00% 7.50%
Expected return on plan assets 9.25% 8.75% N/A N/A
Rate of compensation increase 5.00% 5.00% N/A N/A
</TABLE>
The following table shows the components of pension cost recognized in
1998, 1997, and 1996:.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
PENSION BENEFITS POST-RETIREMENT BENEFITS
--------------------------------- --------------------------------
(in thousands of dollars) 1998 1997 1996 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 11,979 $ 10,698 $ 11,243 $ 1,410 $ 959 $ 1,214
Interest cost 12,897 12,502 11,731 3,080 2,386 2,832
Expected return on plan assets (16,447) (14,197) (12,404) -- -- --
Amortization of transition asset (319) (341) (367) 1,261 1,331 1,331
Amortization of prior service cost (1,326) 1 140 670 259 500
Recognized net actuarial (gain) loss (620) (755) 24 (52) (323) 6
-------- -------- -------- -------- -------- --------
Benefit cost $ 6,164 $ 7,908 $ 10,367 $ 6,369 $ 4,612 $ 5,883
======== ======== ======== ======== ======== ========
</TABLE>
The 1999 health care cost trend rate was projected to be 8.50% for pre-65
participants and 7.50% for post-65 participants compared with estimates of 9.25%
and 8.00% in 1998. These rates are assumed to decrease gradually until they
reach 4.75% in the year 2005 and remain at that level thereafter.
46
<PAGE> 47
17. EMPLOYEE BENEFIT PLANS (CONTINUED)
The assumed health care cost trend rate has a significant effect on the
amounts reported. A one-percentage point increase would increase service and
interest costs and post-retirement benefit obligation by $103 thousand and $1.1
million, respectively. A one-percentage point decrease would reduce service and
interest costs by $124 thousand and post-retirement benefit obligation by $1.3
million.
Huntington also sponsors an unfunded Supplemental Executive Retirement
Plan, a nonqualified 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, 1998 and 1997, the accrued pension cost for
this plan totaled $9.8 million and $10.5 million, respectively. Pension expense
for the plan was $1.2 million in 1998, and $1.3 million in both 1997, and 1996.
Huntington has a contributory employee investment and tax savings plan
available to eligible employees. The plan was restated from an employee stock
purchase plan effective April 1, 1998, and renamed the Huntington Investment and
Tax Savings Plan. Matching contributions by Huntington equal 100% on the first
3% and 50% on the next 2% of participant elective deferrals. The cost of
providing this plan was $8.3 million in 1998, $9.7 million in 1997 and $9.0
million in 1996.
18. STOCK OPTIONS
Huntington sponsors non-qualified and incentive stock option plans covering
key employees. Approximately 19.8 million shares have been authorized under the
plans, 6.6 million of which were available at December 31, 1998 for future
grants. All options granted have a maximum term of ten years. Options granted on
or after May 18, 1994, vest ratably over prescribed periods; 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 three
years ended December 31 is summarized below. All such data has been restated, as
applicable, for subsequent stock splits and stock dividends.
<TABLE>
<CAPTION>
1998 1997 1996
----------------------- ---------------------- ----------------------
WEIGHTED Weighted Weighted
AVERAGE Average Average
OPTIONS EXERCISE Options Exercise Options Exercise
(in thousands, except per share) (IN 000'S) PRICE (in 000's) Price (in 000's) Price
- --------------------------------- ---------- ----------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of period 5,417 $ 15.28 5,157 $ 12.45 5,087 $ 10.86
Granted 1,244 30.91 1,323 25.14 1,140 17.62
Exercised (1,278) 10.92 (891) 13.45 (1,009) 10.14
Forfeited/Expired (222) 22.82 (172) 15.69 (61) 14.75
--------- -------- --------
Outstanding at end of period 5,161 $ 19.80 5,417 $ 15.28 5,157 $ 12.45
========= ======== ========
Exercisable at end of period 2,906 $ 14.52 3,242 $ 11.61 3,117 $ 9.96
========= ======== ========
Weighted-average fair value of
options granted during the year $ 8.59 $ 6.94 $ 5.02
</TABLE>
Exercise prices for options outstanding as of December 31, 1998, ranged
from $5.30 to $32.27. The weighted-average remaining contractual life of these
options is 6.9 years.
The fair value of the options presented above was estimated at the date of
grant using a Black-Scholes option pricing model. The following weighted-average
assumptions were used for 1998, 1997, and 1996, respectively: risk-free interest
rates of 5.28%, 6.44%, and 6.78%; dividend yields of 2.59%, 2.86%, and 3.41%;
volatility factors of the expected market price of Huntington's common stock of
.262, .262, and .280; and a weighted average expected option life of 6 years.
47
<PAGE> 48
18. STOCK OPTIONS (CONTINUED)
The following pro forma disclosures present Huntington's net income and
earnings per common share under the fair value method of accounting for stock
options:
<TABLE>
<CAPTION>
- -------------------------------------------------------
YEAR ENDED DECEMBER 31,
- -------------------------------------------------------
(in millions, except per
share amounts) 1998 1997 1996
- -------------------------------------------------------
<S> <C> <C> <C>
PRO FORMA
Net income $ 297.8 $ 290.6 $ 303.2
Earnings per common
share--diluted $1.40 $1.37 $1.42
- -------------------------------------------------------
</TABLE>
19. EARNINGS PER SHARE AND COMMON STOCK
REPURCHASE PROGRAM
Basic earnings per share is the amount of earnings for the period available
to each share of common stock outstanding during the reporting period. Diluted
earnings per share is the amount of earnings available to each share of common
stock outstanding during the reporting period adjusted for the potential
issuance of common shares for stock options and the conversion impact of
convertible equity instruments. The calculation of basic and diluted earnings
per share follows for each of the three years ended December 31:
<TABLE>
<CAPTION>
- --------------------------------------------------------
(in thousands, except 1998 1997 1996
per share amounts)
- --------------------------------------------------------
<S> <C> <C> <C>
Net income $301,768 $292,663 $304,269
Impact of
convertible
debt -- -- 13
-------- -------- --------
Diluted net income $301,768 $292,663 $304,282
======== ======== ========
Average common
shares outstanding 211,426 209,884 211,741
Dilutive effect of:
Stock options 2,028 2,564 1,991
Convertible debt -- -- 33
-------- -------- --------
Diluted common
shares
outstanding 213,454 212,448 213,765
======== ======== ========
Earnings per share
Basic $ 1.43 $ 1.39 $ 1.44
Diluted $ 1.41 $ 1.38 $ 1.42
</TABLE>
Average common shares outstanding and the dilutive effect of stock options
and convertible debt have been adjusted for subsequent stock dividends and stock
splits, as applicable.
In September 1998, the Board of Directors authorized the reactivation of
Huntington's common stock repurchase program, which was previously suspended in
May 1997 due to the First Michigan pooling-of-interests merger transaction. In
connection with the reinstatement of the program, the Board of Directors also
increased the number of shares authorized for repurchase to 15 million, up from
approximately 3 million shares remaining when the plan was suspended. The shares
will be purchased through open market purchases and privately negotiated
transactions.
Repurchased shares will be reserved for reissue in connection with
Huntington's dividend reinvestment, stock option, and other benefit plans as
well as for stock dividends and other corporate purposes. In 1998, Huntington
repurchased approximately 1.1 million shares.
20. INCOME TAXES
The following is a summary of the provision for income taxes:
<TABLE>
<CAPTION>
- ----------------------------------------------------------
(in thousands of dollars) 1998 1997 1996
- ----------------------------------------------------------
<S> <C> <C> <C>
Currently payable
Federal $133,012 $115,197 $114,183
State 2,573 3,617 3,076
-------- -------- --------
Total current 135,585 118,814 117,259
-------- -------- --------
Deferred tax expense
Federal 1,972 46,088 34,378
State 797 1,599 1,362
-------- -------- --------
Total deferred 2,769 47,687 35,740
-------- -------- --------
Total provision for
income taxes $138,354 $166,501 $152,999
======== ======== ========
</TABLE>
Tax expense associated with securities transactions included in the above
amounts were $10.8 million in 1998, $2.9 million in 1997, and $6.2 million in
1996.
The following is a reconcilement of income tax expense to the amount
computed at the statutory rate of 35%:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
(in thousands of dollars) 1998 1997 1996
- ----------------------------------------------------------------
<S> <C> <C> <C>
Pre-tax income
computed at the
statutory rate $ 154,043 $160,708 $160,043
Increases
(decreases):
Tax-exempt income (16,107) (7,101) (7,623)
State income taxes 2,191 3,391 2,885
Other-net (1,773) 9,503 (2,306)
-------- -------- --------
Provision for income
Taxes $138,354 $166,501 $152,999
======== ======== ========
</TABLE>
The significant components of deferred tax assets and liabilities at
December 31, 1998 and 1997, are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------
(in thousands of dollars) 1998 1997
- -----------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 87,642 $ 85,873
Pension and other
employee benefits 29,214 28,131
Premises and equipment 7,641 --
Revalued liabilities - net 6,991 --
Other 36,322 12,535
-------- --------
Total deferred tax assets 167,810 126,539
-------- --------
Deferred tax liabilities:
Lease financing 225,883 181,987
Mortgage servicing rights 18,964 14,094
Premises and equipment -- 12,201
Securities 13,369 8,192
Other 27,637 23,057
-------- --------
Total deferred tax liabilities 285,853 239,531
-------- --------
Net deferred tax liability $118,043 $112,992
======== ========
</TABLE>
48
<PAGE> 49
21. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results of operations
for the years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(in thousands of dollars,
except per share data) I Q II Q III Q IV Q
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998
Interest income $502,480 $491,268 $505,221 $500,395
Interest expense 247,632 243,839 253,706 233,094
-------- -------- -------- --------
Net interest income 254,848 247,429 251,515 267,301
-------- -------- -------- --------
Provision for loan losses 22,181 24,595 24,160 34,306
Securities gains 3,089 14,316 10,615 1,773
Non-interest income 92,330 105,340 104,026 106,711
Non-interest expense 196,442 206,678 211,877 208,932
Special charges -- -- -- 90,000
-------- -------- -------- --------
Income before income taxes 131,644 135,812 130,119 42,547
Provision for income taxes 42,158 43,503 41,364 11,329
-------- -------- -------- --------
Net income $ 89,486 $ 92,309 $ 88,755 $ 31,218
======== ======== ======== ========
Net income per common share (1)
Basic $ 0.42 $ 0.44 $ 0.42 $ 0.15
Diluted $ 0.42 $ 0.43 $ 0.42 $ 0.15
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(in thousands of dollars,
except per share data) I Q II Q III Q IV Q
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997
Interest income $475,874 $503,018 $502,821 $499,760
Interest expense 228,323 240,060 245,663 240,197
-------- -------- -------- --------
Net interest income 247,551 262,958 257,158 259,563
-------- -------- -------- --------
Provision for loan losses 22,380 30,831 28,351 26,235
Securities gains 2,098 3,604 1,242 1,034
Non-interest income 74,633 77,897 94,855 87,476
Non-interest expense 183,861 185,805 193,747 188,532
Special charges -- -- 51,163 --
-------- -------- -------- --------
Income before income taxes 118,041 127,823 79,994 133,306
Provision for income taxes 40,862 44,220 38,762 42,657
-------- -------- -------- --------
Net income $ 77,179 $ 83,603 $ 41,232 $ 90,649
======== ======== ======== ========
Net income per common share (1)
Basic $ 0.37 $ 0.40 $ 0.20 $ 0.43
Diluted $ 0.37 $ 0.39 $ 0.20 $ 0.42
- ---------------------------------------------------------------------------
</TABLE>
(1) Adjusted for stock dividends and stock splits, as applicable.
49
<PAGE> 50
22. NON-INTEREST INCOME
A summary of the components in non-interest income follows for the three
years ended December 31:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
(in thousands of dollars) 1998 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Service charges on deposit accounts $126,403 $117,852 $107,669
Mortgage banking 60,006 55,715 43,942
Trust services 50,754 48,102 42,237
Brokerage and insurance income 36,710 27,084 20,856
Electronic banking fees 29,202 22,705 12,013
Bank Owned Life Insurance income 28,712 -- --
Credit card fees 21,909 20,467 23,086
Other 54,711 42,936 46,640
-------- -------- --------
TOTAL NON-INTEREST INCOME BEFORE SECURITIES
GAINS 408,407 334,861 296,443
-------- -------- --------
Securities gains 29,793 7,978 17,620
-------- -------- --------
TOTAL NON-INTEREST INCOME $438,200 $342,839 $314,063
======== ======== ========
</TABLE>
23. NON-INTEREST EXPENSE
A summary of the components in non-interest expense follows for the three
years ended December 31:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
(in thousands of dollars) 1998 1997 1996
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Personnel and related costs $428,539 $392,793 $360,865
Outside data processing and other services 74,795 66,683 58,367
Equipment 62,040 57,867 50,887
Net occupancy 54,123 49,509 49,676
Marketing 32,260 32,782 20,331
Telecommunications 29,429 21,527 16,567
Amortization of intangible assets 25,689 13,019 10,220
Legal and other professional services 25,160 24,931 20,313
Printing and supplies 23,673 21,584 19,602
Franchise and other taxes 22,103 19,836 20,359
Other 46,118 51,414 48,323
-------- -------- --------
TOTAL NON-INTEREST EXPENSE BEFORE SPECIAL
CHARGES 823,929 751,945 675,510
-------- -------- --------
Special charges, including merger costs 90,000 51,163 --
-------- -------- --------
TOTAL NON-INTEREST EXPENSE $913,929 $803,108 $675,510
======== ======== ========
</TABLE>
24. COMPREHENSIVE INCOME
The components of Other Comprehensive Income were as follows in each of the
three years ended December 31:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
(in thousands of dollars) 1998 1997 1996
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized holding gains (losses)
arising during the period:
Unrealized net gains (losses) $ 45,095 $ 52,806 $(70,164)
Related tax (expense) benefit (15,837) (18,889) 24,896
-------- -------- --------
Net 29,258 33,917 (45,268)
-------- -------- --------
Less: Reclassification adjustment
for net gains realized during the period:
Realized net gains 29,793 7,978 17,620
Related tax expense (10,428) (2,792) (6,167)
-------- -------- --------
Net 19,365 5,186 11,453
-------- -------- --------
Total Other Comprehensive Income $ 9,893 $ 28,731 $(56,721)
======== ======== ========
</TABLE>
50
<PAGE> 51
25. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and estimated fair values of Huntington's financial
instruments are presented in the table on the next page. Certain assets, the
most significant being Bank Owned Life Insurance and 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.
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 that 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 probable losses 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, as well as
medium-term notes and Capital Securities, 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
obligations 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.
51
<PAGE> 52
25. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
AT DECEMBER 31, 1998 AT DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------------------
CARRYING FAIR CARRYING FAIR
(in thousands of dollars) AMOUNT VALUE AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash and short-term assets $ 1,454,142 $ 1,454,142 $ 1,691,187 $ 1,691,187
Trading account securities 3,839 3,839 7,082 7,082
Mortgages held for sale 466,664 466,664 192,948 192,948
Securities 4,806,349 4,806,459 5,742,824 5,743,197
Loans 19,163,603 19,338,129 17,480,077 17,777,451
Customers' acceptance liability 22,591 22,591 27,818 27,818
Interest rate contracts:
Asset/liability management 19,610 67,507 17,557 42,547
Customer accommodation 9,638 9,638 2,606 2,606
FINANCIAL LIABILITIES:
Deposits (19,722,772) (19,788,328) (17,983,718) (18,012,315)
Short-term borrowings (2,216,644) (2,216,644) (3,141,671) (3,141,671)
Bank acceptances outstanding (22,591) (22,591) (27,818) (27,818)
Medium-term notes (2,539,900) (2,560,426) (2,332,150) (2,341,040)
Subordinated notes and other long-term debt (707,359) (733,083) (498,889) (517,791)
Capital Securities (300,000) (299,609) (200,000) (192,726)
Interest rate contracts:
Asset/liability management -- (11,126) -- (2,554)
Customer accommodation (7,388) (7,388) (1,859) (1,859)
</TABLE>
52
<PAGE> 53
26. HUNTINGTON BANCSHARES INCORPORATED (PARENT COMPANY ONLY)
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
BALANCE SHEETS DECEMBER 31,
- -----------------------------------------------------------------------------------------------
(in thousands of dollars) 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 179,981 $ 285,926
Securities available for sale 22,659 7,635
Due from subsidiaries
Bank subsidiary 220,842 600,578
Non-bank subsidiaries 18,859 10,297
Investment in subsidiaries on the equity method
Bank subsidiary 2,235,414 1,721,789
Non-bank subsidiaries 24,110 29,411
Excess of cost of investment in subsidiaries over net assets acquired 11,586 12,155
Other assets 86,227 89,321
---------- ----------
TOTAL ASSETS $2,799,678 $2,757,112
========== ==========
LIABILITIES
Short-term borrowings $ 30,644 $ 40,525
Medium-term notes 60,000 220,000
Subordinated notes
Subsidiary trusts 309,279 206,187
Unaffiliated companies 149,505 153,913
Dividends payable 42,406 38,591
Accrued expenses and other liablities 59,049 72,505
---------- ----------
TOTAL LIABILITIES 650,883 731,721
---------- ----------
SHAREHOLDERS' EQUITY 2,148,795 2,025,391
---------- ----------
TOTAL LIABLITIES AND SHAREHOLDERS' EQUITY $2,799,678 $2,757,112
========== ==========
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
STATEMENTS OF INCOME YEAR ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------------------
(in thousands of dollars) 1998 1997 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME
Dividends from
Bank subsidiary $ 186,381 $ 228,892 $ 348,516
Non-bank subsidiaries 4,000 2,961 6,385
Interest from
Bank subsidiary 41,507 18,227 3,482
Non-bank subsidiaries 329 19,032 11,787
Other 3,094 1,537 813
--------- --------- ---------
TOTAL INCOME 235,311 270,649 370,983
--------- --------- ---------
EXPENSE
Interest on debt 27,340 36,128 23,716
Other 13,722 30,020 18,295
--------- --------- ---------
TOTAL EXPENSE 41,062 66,148 42,011
--------- --------- ---------
Income before income taxes and equity in
undistributed net income of subsidiaries 194,249 204,501 328,972
Income tax expense (benefit) 2,089 (8,630) (13,986)
--------- --------- ---------
Income before equity in undistributed
net income of subsidiaries 192,160 213,131 342,958
--------- --------- ---------
Equity in undistributed net income of
Bank subsidiary 106,967 80,523 (48,616)
Non-bank subsidiaries 2,641 (991) 9,927
--------- --------- ---------
NET INCOME $ 301,768 $ 292,663 $ 304,269
========= ========= =========
</TABLE>
53
<PAGE> 54
26. HUNTINGTON BANCSHARES INCORPORATED (PARENT COMPANY ONLY)
FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS YEAR ENDED DECEMBER 31,
- ---------------------------------------------------------------------------------------------------------
(in thousands of dollars) 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income $ 301,768 $ 292,663 $ 304,269
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in undistributed net income of subsidiaries (109,608) (79,532) 38,689
Provision for amortization and depreciation 3,244 3,460 5,285
Increase in other assets (14,413) (4,961) (26,139)
Decrease in other liabilities (15,978) (13,942) (18,340)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 165,013 197,688 303,764
--------- --------- ---------
INVESTING ACTIVITIES
(Increase) decrease in investments in subsidiaries (386,500) 197,263 (1,433)
Repayments from (advances to) subsidiaries 374,140 (71,485) (167,289)
Other (41) (15,000) (4,775)
--------- --------- ---------
NET CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES (12,401) 110,778 (173,497)
--------- --------- ---------
FINANCING ACTIVITIES
(Decrease) increase in short-term borrowings (9,881) -- 15,000
Proceeds from issuance of subordinated notes to subsidiary trusts 100,000 200,000 --
Payment of long-term debt (4,537) (25,000) (346)
Proceeds from issuance of medium-term notes -- 40,000 225,000
Payment of medium-term notes (160,000) (140,000) (80,000)
Dividends paid on common stock (157,632) (132,760) (125,379)
Acquisition of treasury stock (31,192) (56,175) (258,415)
Proceeds from issuance of treasury stock 4,685 27,266 43,971
--------- --------- ---------
NET CASH USED FOR FINANCING ACTIVITIES (258,557) (86,669) (180,169)
--------- --------- ---------
CHANGE IN CASH AND CASH EQUIVALENTS (105,945) 221,797 (49,902)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 285,926 64,129 114,031
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 179,981 $ 285,926 $ 64,129
========= ========= =========
</TABLE>
Supplemental data required for this item is set forth in Item 7 on page 28
under the caption "Selected Quarterly Income Statement Data."
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
54
<PAGE> 55
Part III
--------
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 2
through 4, under the caption "Executive Officers of the Corporation" on
pages 18 and 19 and under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" on page 23 of Huntington's 1999 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 7 through 14, and under the caption
"Compensation of Directors" on pages 4 and 5, of Huntington's 1999 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 5 and 6, of Huntington's 1999 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 pages 6 and 7, and under
the caption "Compensation Committee Interlocks and Insider Participation" on
page 14 of Huntington's 1999 Proxy Statement, and is incorporated herein by
reference.
Part IV
-------
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) The report of independent auditors and consolidated financial
statements appearing in Item 8.
(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 58 through 60 of this Form 10-K. The management contracts and
compensation plans or arrangements required to be filed as exhibits to this Form
10-K are listed as Exhibits 10(a) through 10(n) in the Exhibit Index.
55
<PAGE> 56
(b) During the quarter ended December 31, 1998, Huntington filed one Current
Report on Form 8-K. The report, dated October 14, 1998, was filed under Item 7,
and concerned Huntington's results of operations for the quarter ended September
30, 1998.
(c) The exhibits to this Form 10-K begin on page 58.
(d) See Item 14(a)(2) above.
56
<PAGE> 57
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, 1999.
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)
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, 1999.
/s/Don M. Casto, III /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/Wm. J. Lhota /s/William J. Williams
- ------------------------------- ---------------------------------------
Wm. J. Lhota William J. Williams
Director Director
/s/Robert H. Schottenstein
- -------------------------------
Robert H. Schottenstein
Director
57
<PAGE> 58
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 quarter ended March 31, 1996, and
incorporated herein by reference.
(i)(c). Articles of Amendment to Articles of Restatement of Charter --
previously filed as Exhibit 3(i)(c) to Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998, and
incorporated herein by reference.
(ii). Amended and Restated Bylaws.
4(a). Instruments defining the Rights of Security Holders -- reference
is made to Articles Fifth, Eighth, and Tenth 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 National Bank (as
successor to 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). Form of Tier I Executive Agreement for certain executive
officers.
(c). Form of Tier II Executive Agreement for certain executive
officers.
(d). Schedule identifying material details of Executive Agreements,
substantially similar to Exhibits 10(b) and 10(c).
58
<PAGE> 59
(e). Huntington Bancshares Incorporated Amended and Restated
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.
(f). Amended and Restated Long-Term Incentive Compensation Plan, as
amended and effective for performance cycles beginning on or
after January 1, 1996 -- previously filed as Exhibit 10(j)(2)
to Annual Report on Form 10-K for the year ended December 31,
1996, and incorporated herein by reference.
(g)(1). Supplemental Executive Retirement Plan with First and Second
Amendments -- 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.
(g)(2). Third Amendment to Supplemental Executive Retirement Plan --
previously filed as Exhibit 10(k)(2) to Annual Report on Form
10-K for the year ended December 31, 1997, and incorporated
herein by reference.
(h). 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.
(i)(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.
(i)(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.
(i)(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.
(i)(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.
(i)(5). 1983 Stock Option Plan -- Fifth Amendment -- previously filed as
Exhibit (m)(5) to Annual Report on Form 10-K for the year
ended December 31, 1996, and incorporated herein by
reference.
(j)(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.
(j)(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.
59
<PAGE> 60
(j)(3). Second Amendment to Huntington Bancshares Incorporated 1990 Stock
Option Plan -- previously filed as Exhibit 10(n)(3) to Annual
Report on Form 10-K for the year ended December 31, 1996, and
incorporated herein by reference.
(j)(4). Amended and Restated 1994 Stock Option Plan -- previously filed
as Exhibit 10(r) to Annual Report on Form 10-K for the year
ended December 31, 1996, and incorporated herein by reference.
(k)(1). 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.
(k)(2). First Amendment to The Huntington Supplemental Stock Purchase and
Tax Savings Plan and Trust Plan -- previously filed as Exhibit
10(o)(2) to Annual Report on Form 10-K for the year ended
December 31, 1997, and incorporated herein by reference.
(l). 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.
(m). 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.
(n). 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.
21. Subsidiaries of the Registrant.
23(a). Consent of Ernst & Young, LLP, Independent Auditors.
27. Financial Data Schedule.
60
<PAGE> 1
Exhibit 3(ii)
HUNTINGTON BANCSHARES INCORPORATED
BYLAWS
(AMENDED AND RESTATED AS OF JANUARY 20, 1999)
ARTICLE I.
STOCKHOLDERS
SECTION 1.01. ANNUAL MEETING. The Corporation shall hold an annual
meeting of its stockholders to elect directors and transact any other business
within its powers, at such time and on such date during the thirty-one day
period beginning March 30 and ending April 29 as the Board of Directors shall
determine. In the absence of a determination by the Board of Directors, the
annual meeting of stockholders shall be held at 3:00 p.m. on the third Thursday
of April in each year if not a legal holiday, and if a legal holiday, then on
the next secular day following. At the annual meeting, the stockholders shall
elect a Board of Directors and may transact any other business as may be brought
before the annual meeting by the Board of Directors or by any stockholder as set
forth in Section 1.09 of these Bylaws.
SECTION 1.02. SPECIAL MEETING. At any time in the interval between
annual meetings, a special meeting of the stockholders may be called by the
Chairman of the Board, the President, a majority of the Board of Directors by
vote at a meeting or in writing (addressed to the Secretary of the Corporation),
or by the stockholders on the written request (addressed to the Secretary of the
Corporation) of stockholders entitled to cast at least a majority of all the
votes entitled to be cast at the meeting.
SECTION 1.03. PLACE OF MEETINGS. Meetings of stockholders shall be held
at such place in the United States as is set from time to time by the Board of
Directors.
SECTION 1.04. NOTICE OF MEETINGS; WAIVER OF NOTICE. Not less than ten
nor more than 90 days before each stockholders' meeting, the Secretary shall
give written notice of the meeting to each stockholder entitled to vote at the
meeting and each other stockholder entitled by statute to notice of the meeting.
The notice shall state the time and place of the meeting and, if the meeting is
a special meeting or notice of the purpose is required by statute, the purpose
of the meeting. Notice is given to a stockholder when it is personally delivered
to him, left at his residence or usual place of business, or mailed to him at
his address as it appears on the records of the Corporation. Notwithstanding the
foregoing provisions, each person who is entitled to notice waives notice if he
before or after the meeting signs a waiver of the notice which is filed with the
records of stockholders' meetings, or is present at the meeting in person or by
proxy.
SECTION 1.05. QUORUM; VOTING. Unless statute or the Charter provides
otherwise, at any meeting of stockholders the presence in person or by proxy of
stockholders entitled to cast a majority of all the votes entitled to be cast at
the meeting constitutes a quorum, and a majority of all the votes cast at a
meeting at which a quorum is present is sufficient to approve any matter which
properly comes before the meeting, except that a plurality of all votes cast at
a meeting at which a quorum
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is present is sufficient to elect a director.
SECTION 1.06. ADJOURNMENTS. Whether or not a quorum is present, a
meeting of stockholders convened on the date for which it was called may be
adjourned from time to time by the presiding officer or by the stockholders
present in person or by proxy by a majority vote. Any business which might have
been transacted at the meeting as originally notified may be deferred and
transacted at any such adjourned meeting at which a quorum shall be present. No
further notice of an adjourned meeting other than by announcement shall be
necessary if held on a date not more than 120 days after the original record
date.
SECTION 1.07. GENERAL RIGHT TO VOTE; PROXIES. Unless the Charter
provides for a greater or lesser number of votes per share or limits or denies
voting rights, each outstanding share of stock, regardless of class, is entitled
to one vote on each matter to be submitted at a meeting of stockholders. A
stockholder may vote the stock the stockholder owns of record either in person
or by proxy. A stockholder may sign a writing authorizing another person to act
as proxy. Signing may be accomplished by the stockholder or the stockholder?s
authorized agent signing the writing or causing the stockholder?s signature to
be affixed to the writing by any reasonable means, including facsimile
signature. A stockholder may authorize another person to act as proxy by
transmitting, or authorizing the transmission of, a telegram, cablegram,
datagram, or other means of electronic transmission to the person authorized to
act as proxy or to a proxy solicitation firm, proxy support service
organization, or other person authorized by the person who will act as proxy to
receive the transmission. Unless a proxy provides otherwise, it is not valid
more than 11 months after its date.
SECTION 1.08. NOMINATIONS OF PERSONS FOR ELECTION TO THE BOARD OF
DIRECTORS. No person shall be appointed, nominated or elected a director of the
Corporation after having attained the age of 75 years. Notwithstanding the
above, no person who has been employed on a full-time basis by this Corporation
or one of its direct or indirect subsidiaries may be appointed, nominated or
elected a director of the Corporation after having attained the age of 65 years
except (i) any such person who, as of the date of these Bylaws, is over the age
of 65 years and is serving as a director and (ii) the Chief Executive Officer of
this Corporation.
Only persons nominated in accordance with the procedures set forth in
this Section 1.08 shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of stockholders by or at the
direction of the Board of Directors, or by any stockholder of the
Corporation entitled to vote for the election of directors at such a
meeting who complies with the notice procedures set forth in this
Section 1.08. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to timely
notice in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 30 days
nor more than 60 days prior to the date of a stockholder meeting;
provided, however, that if less than 40 days' notice or prior public
disclosure of the date of the stockholders' meeting is given or made to
the stockholders, notice by the stockholder to be timely must be so
delivered or received not later than the close of business on the 10th
day following the earlier of (i) the day on which such notice of the
date of the meeting was mailed or (ii) the day on which such
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public disclosure was made.
A stockholder's notice to the Secretary shall set forth (i) as to each
person whom the stockholder proposes to nominate for election as a director, (a)
the name, age, business address and residence address of such person, (b) the
principal occupation or employment of such person during each of the last five
years, (c) the class and number of shares of the Corporation which are
beneficially owned by such person on the date of such stockholder's notice, and
(d) any other information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended, or any successor act or regulation (including without
limitation such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); and (ii) as to the
stockholder giving the notice, (a) the name and address, as they appear on the
Corporation's books, of the stockholder and any other stockholders known by such
stockholder to be supporting such nominees, and (b) the class and number of
shares of the Corporation which are beneficially owned by such stockholder on
the date of such stockholder's notice and by any other stockholders known by
such stockholder to be supporting such nominees on the date of such
stockholder's notice. The Corporation may require any proposed nominee to
furnish such other information as may be reasonably required by the Corporation
to determine the qualifications of such proposed nominee to serve as a director
of the Corporation.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 1.08. The chairman of the stockholders meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by these Bylaws, and if he should so
determine, he shall so declare to the meeting and the defective nomination shall
be disregarded.
SECTION 1.09. STOCKHOLDER PROPOSALS. At an annual or special meeting of
stockholders, only such business shall be conducted, and only such proposals
shall be acted upon, as shall have been properly brought before such meeting. To
be properly brought before a meeting of stockholders, business must be (i) in
the case of a special meeting, specified in the notice of the special meeting
(or any supplement thereto) given by or at the direction of the Board of
Directors, (ii) properly brought before the meeting by or at the direction of
the Board of Directors, or (iii) otherwise properly brought before the meeting
by a stockholder. For business to be properly brought before a meeting of
stockholders by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 30 days nor more
than 60 days prior to the stockholder meeting; provided, however, that if less
than 40 days' notice or prior public disclosure of the date of the meeting is
given or made to the stockholders, notice by the stockholder to be timely must
be so delivered or received not later than the close of business on the 10th day
following the earlier of (i) the day on which such notice of the date of the
meeting was mailed, or (ii) the day on which such public disclosure was made.
A shareholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before a meeting of stockholders, (i) a
brief description of the business desired to be brought before the meeting and
the reasons for conducting such business at the meeting, (ii) the name and
address, as they appear on the Corporation's books, of the stockholder proposing
such
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business and any stockholders known by such stockholder to be supporting such
proposal, (iii) the class and number of shares of the Corporation which are
beneficially owned by the stockholder on the date of such stockholder's notice
and by any other stockholders known by such stockholder to be supporting such
proposal on the date of such stockholder's notice, and (iv) any material
interest of the stockholder in such proposal.
Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at a meeting of stockholders except in accordance with the
procedures set forth in this Section 1.09. The chairman of the stockholder
meeting shall, if the facts warrant, determine and declare to the meeting that
the business was not properly brought before the meeting in accordance with the
procedures prescribed by these Bylaws, and if he should so determine, he shall
so declare to the meeting and any such business not properly brought before the
meeting shall not be transacted.
SECTION 1.10. CONDUCT OF VOTING. At all meetings of stockholders, unless
the voting is conducted by inspectors, the proxies and ballots shall be
received, and all questions relating to the qualification of voters, the
validity of proxies and the acceptance or rejection of votes shall be decided,
by the chairman of the meeting. If demanded by stockholders, present in person
or by proxy, entitled to cast 10% in number of votes entitled to be cast, or if
ordered by the chairman of the meeting, the vote upon any election or question
shall be taken by ballot and, upon like demand or order, the voting shall be
conducted by two inspectors, in which event the proxies and ballots shall be
received; and all questions relating to the qualification of voters, the
validity of proxies and the acceptance or rejection of votes shall be decided,
by such inspectors. Unless so demanded or ordered, no vote need be by ballot and
voting need not be conducted by inspectors. The stockholders at any meeting may
choose an inspector or inspectors to act at such meeting, and in default of such
election, the chairman of the meeting may appoint an inspector or inspectors. No
candidate for election as a director at a meeting shall serve as an inspector.
ARTICLE II.
BOARD OF DIRECTORS
SECTION 2.01. FUNCTION OF DIRECTORS. The business and affairs of the
Corporation shall be managed under the direction of its Board of Directors. All
powers of the Corporation may be exercised by or under authority of the Board of
Directors, except as conferred on or reserved to the stockholders by statute or
by the Charter or these Bylaws.
SECTION 2.02. NUMBER OF DIRECTORS. The Corporation shall have the number
of directors provided by the Charter until changed as provided in this Section
2.02. A majority of the entire Board of Directors may alter the number of
directors set by the Charter to not more than 25 nor less than three directors;
provided that any such action may not affect the tenure of office of any
director.
SECTION 2.03. ELECTION AND TENURE OF DIRECTORS. Beginning with the
election of directors in 1987, the Board of Directors shall be divided into
three classes, Class 1, Class II and Class III. Each such class shall consist,
as nearly as possible, of one-third of the total number of directors, and any
remaining directors shall be included within such class or classes as the Board
of Directors shall
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designate. At the annual meeting of stockholders in 1987, Class I directors
shall be elected for a one-year term, Class II directors for a two-year term,
and Class III directors for a three-year term. Except as provided in Section
2.04 of this Article II, at each succeeding annual meeting of stockholders
beginning in 1988, successors to the class of directors whose term expires at
that annual meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible. Any director who has been employed on a full-time basis by the
Corporation and who has attained the age of 65 years, or any other director who
has attained the age of 75 years, shall retire effective on the date of the next
annual meeting of stockholders. Notwithstanding the foregoing, any director who
has been employed on a full-time basis by the Corporation and (i) who, as of the
date of these Bylaws has attained the age of 65 years or (ii) is the Chief
Executive Officer of this Corporation, shall retire effective on the date of
next annual meeting of stockholders after such director attains the age of 75
years. A director may otherwise be removed from office for cause only and,
subject to such removal, death, resignation, retirement or disqualification,
shall hold office until the annual meeting for the year in which his term
expires and until his successor shall be elected and qualify.
SECTION 2.04. VACANCY ON BOARD. The stockholders may elect a successor
to fill a vacancy on the Board of Directors which results from the retirement or
removal of a director. A director elected by the stockholders to fill such a
vacancy serves for the balance of the term of the retired or removed director. A
majority of the remaining directors, whether or not sufficient to constitute a
quorum, may fill a vacancy on the Board of Directors which results from any
cause except an increase in the number of directors and a majority of the entire
Board of Directors may fill a vacancy which results from an increase in the
number of directors. A director elected by the Board of Directors to fill a
vacancy serves until the next annual meeting of stockholders and until his
successor is elected and qualifies.
SECTION 2.05. REGULAR MEETINGS. After each annual meeting of
stockholders at which directors shall have been elected, the Board of Directors
shall meet as soon as practicable for the purpose of organization and the
transaction of other business. Such first regular meeting shall be held at any
place as may be designated by the Chairman, President or Board of Directors for
such first regular meeting, or in default of such designation at the place of
the holding of the immediately preceding meeting of stockholders. Any other
regular meeting of the Board of Directors shall be held on such date and at any
place as may be designated from time to time by the Chairman of the Board. No
notice of such regular meetings shall be necessary if held as hereinabove
provided.
SECTION 2.06. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called at any time by the Chairman of the Board, the President
or by a majority of the then-acting directors by vote at a meeting or in
writing, or by a majority of the members of the executive committee, if one be
constituted, by vote at a meeting or in writing. A special meeting of the Board
of Directors shall be held on such date and at any place as may be designated
from time to time by the Board of Directors. In the absence of such designation,
such meeting shall be held at such place as may be designated in the call.
SECTION 2.07. NOTICE OF MEETING. Except as provided in Section 2.05, the
Secretary shall give notice or cause to be given to each director of each
regular and special meeting of the Board of
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Directors. The notice shall state the time and place of the meeting. Notice is
given to a director when it is delivered personally to him, left at his
residence or usual place of business, or sent by telegraph or telephone, at
least 48 hours before the time of the meeting or, in the alternative, by mail to
his address as it shall appear on the records of the Corporation, at least 72
hours before the time of the meeting; provided, however, that notice of a
special meeting which is called by the Chairman or the President is given to a
director when it is delivered personally to him or sent by telegraph or
telephone at least one hour before the time of the meeting. Unless these Bylaws
or a resolution of the Board of Directors provides otherwise, the notice need
not state the business to be transacted at or the purposes of any regular or
special meeting of the Board of Directors. No notice of any meeting of the Board
of Directors need be given to any director who attends, or to any director who,
in writing executed and filed with the records of the meeting either before or
after the holding thereof, waives such notice. Any regular or special meeting of
the Board of Directors may adjourn from time to time to reconvene at the same or
some other place, and no notice need be given of any such adjourned meeting
other than by announcement.
SECTION 2.08. ACTION BY DIRECTORS. Unless statute, the Charter or these
Bylaws requires a greater proportion, the action of a majority of the directors
present at a meeting at which a quorum is present is the action of the Board of
Directors. A majority of the entire Board of Directors shall constitute a quorum
for the transaction of business. In the absence of a quorum, the directors
present, by majority vote and without notice other than by announcement, may
adjourn the meeting from time to time until a quorum shall attend. At any such
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally
notified. Any action required or permitted to be taken at a meeting of the Board
of Directors may be taken without a meeting, if an unanimous written consent
which sets forth the action is signed by each member of the Board of Directors
and filed with the minutes of the proceedings of the Board of Directors.
SECTION 2.09. MEETING BY CONFERENCE TELEPHONE. Members of the Board of
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
constitutes presence in person at a meeting.
SECTION 2.10. COMPENSATION. The Board of Directors shall have the
authority to fix the compensation of the Directors. The directors may be paid
their expenses, if any, of attendance at each regular and special meeting of the
Board of Directors or committees thereof. In addition, by resolution of the
Board of Directors, a stated annual retainer and/or a fixed sum for attendance
at each regular or special meeting of the Board of Directors or committees
thereof, and other compensation for their services as such, may be paid to
directors. A director who serves the Corporation in any other capacity also may
receive compensation for such other services.
ARTICLE III.
COMMITTEES
SECTION 3.01. COMMITTEES. The Board of Directors may appoint from among
its members an Executive Committee and other committees composed of two or more
directors and delegate to
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these committees any of the powers of the Board of Directors, except the power
to declare dividends or other distributions on stock, elect directors, issue
stock other than as provided in the next sentence, recommend to the stockholders
any action which requires stockholder approval, amend these Bylaws, or approve
any merger or share exchange which does not require stockholder approval. If the
Board of Directors has given general authorization for the issuance of stock, a
committee of the Board of Directors, in accordance with a general formula or
method specified by the Board of Directors by resolution or by adoption of a
stock option or other plan, may fix the terms of stock subject to classification
or reclassification and the terms on which any stock may be issued, including
all terms and conditions required or permitted to be established or authorized
by the Board of Directors.
SECTION 3.02. COMMITTEE PROCEDURE. The Board of Directors shall have the
power to prescribe the manner in which proceedings of each committee shall be
held. Unless the Board of Directors shall otherwise provide, the actions of each
committee shall be governed by the following rules of procedure. A majority of
the members of a committee shall constitute a quorum for the transaction of
business and the act of a majority of those present at a meeting at which a
quorum is present shall be the act of the committee. The members of a committee
present at any meeting, whether or not they constitute a quorum, may appoint a
director to act in the place of an absent member. Any action required or
permitted to be taken at a meeting of a committee may be taken without a
meeting, if an unanimous written consent which sets forth the action is signed
by each member of the committee and filed with the minutes of the committee. The
members of a committee may conduct any meeting thereof by conference telephone
or similar communications equipment if all persons participating in the meeting
can hear each other at the same time. Participation in a meeting by these means
constitutes presence in person at a meeting. In the absence of any prescription
by the Board of Directors or any applicable provision of these Bylaws, each
committee may prescribe the manner in which its proceedings shall be conducted.
SECTION 3.03. DELEGATION. The Board of Directors may delegate to
officers, employees or agents, the performance of duties not specifically
required by law or these Bylaws to be performed by the Board of Directors.
ARTICLE IV.
OFFICERS
SECTION 4.01. EXECUTIVE AND OTHER OFFICERS. The Corporation shall have a
President, a Secretary, and a Treasurer and may also have a Chairman of the
Board, which officers shall be the executive officers of the Corporation. The
Board of Directors may designate who shall serve as Chief Executive Officer,
having general supervision of the business and affairs of the Corporation, and
as Chief Operating Officer, having supervision of the operations of the
Corporation. In the absence of designation the Chairman shall serve as Chief
Executive Officer. The Corporation may also have one or more Vice Presidents
(which may be designated Executive Vice President, Senior Vice President or Vice
President), assistant officers and such other officers as may be established
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by the Board of Directors. A person may hold more than one office in the
Corporation but may not serve concurrently as both President and Vice President
of the Corporation. The Chairman of the Board and President shall be directors.
The other officers may be directors.
SECTION 4.02. ELECTION, TENURE AND REMOVAL OF OFFICERS. The Board of
Directors shall elect the officers or may from time to time authorize any
committee or officer to appoint assistant and subordinate officers. The officers
shall be appointed to hold their respective offices during the pleasure of the
Board of Directors. The Board of Directors or, as to any assistant or
subordinate officer, any committee or officer authorized by the Board of
Directors, may remove an officer at any time. The removal of an officer does not
prejudice any of his contractual rights. The Board of Directors or, as to any
assistant or subordinate officer, any committee or officer authorized by the
Board of Directors, may fill a vacancy which occurs in any office.
SECTION 4.03. CHAIRMAN OF THE BOARD. The Chairman of the Board, if one
be elected, shall preside at all meetings of the Board of Directors and of the
stockholders at which he shall be present; he may sign and execute, in the name
of the Corporation, all authorized deeds, mortgages, bonds, contracts or other
instruments of every description. In general, he shall perform all such duties
as are from time to time assigned to him by the Board of Directors.
SECTION 4.04. PRESIDENT. The President, in the absence of the Chairman
of the Board, shall preside at all meetings of the Board of Directors and of the
stockholders at which he shall be present; he may sign and execute, in the name
of the Corporation, all authorized deeds, mortgages, bonds, contracts or other
instruments of every description. In general, he shall perform all duties
usually performed by a president of a corporation and such other duties as are
from time to time assigned to him by the Board of Directors or the Chief
Executive Officer of the Corporation.
SECTION 4.05. VICE PRESIDENTS. The Vice President or Vice Presidents, at
the request of the Chief Executive Officer or the President, or in the
President's absence or during his inability to act, shall perform the duties and
exercise the functions of the President, and when so acting shall have the
powers of the President. If there be more than one Vice President, the Board of
Directors may determine which one or more of the Vice Presidents shall perform
any of such duties or exercise any of such functions, or if such determination
is not made by the Board of Directors, the Chief Executive Officer, or the
President may make such determination; otherwise any of the Vice Presidents may
perform any of such duties or exercise any of such functions. The Vice President
or Vice Presidents shall have such other powers and perform such other duties,
and have such additional descriptive designations in their titles, if any, as
are from time to time assigned to them by the Board of Directors, the Chief
Executive Officer, or the President.
SECTION 4.06. SECRETARY. The Secretary shall keep the minutes of the
meetings of the stockholders and the Board of Directors in books provided for
such purpose; he shall see that all notices are duly given in accordance with
the provision of these Bylaws or as required by law; he shall be custodian of
the records of the Corporation; he may witness any document on behalf of the
Corporation, the execution of which is duly authorized, see that the corporate
seal is affixed where such document is required or desired to be under its seal,
and, when so affixed, may attest the same; and, in general, he shall perform all
duties incident to the office of a secretary of a corporation, and such other
duties as are from time to time assigned to him by the Board of Directors, the
Chief
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Executive Officer, or the President.
SECTION 4.07. TREASURER. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation, and shall deposit, or cause to be deposited, in the name of the
Corporation, all moneys or other valuable effects in such banks, trust companies
or other depositories as shall, from time to time, be selected by the executive
officers. He shall render to the Chief Executive Officer, the President and the
Board of Directors, whenever requested, an account of the financial condition of
the Corporation; and, in general, he shall perform all the duties incident to
the office of a treasurer of a corporation, and such other duties as are from
time to time assigned to him by the Board of Directors, the Chief Executive
Officer, or the President.
SECTION 4.08. ASSISTANT AND SUBORDINATE OFFICERS. The assistant and
subordinate officers of the Corporation are all officers below the office of
Vice President, Secretary, or Treasurer. The assistant or subordinate officers
shall have such duties as are from time to time assigned to them by the Board of
Directors, the Chief Executive Officer, the President or any committee or
officer authorized by the Board of Directors to appoint any such assistant and
subordinate officers.
ARTICLE V.
STOCK
SECTION 5.01. CERTIFICATES FOR STOCK. Each stockholder is entitled to
certificates which represent and certify the shares of stock he holds in the
Corporation. Each stock certificate shall include on its face the name of the
Corporation, the name of the stockholder or other person to whom it is issued,
and the class of stock and number of shares it represents. The certificate shall
be in such form, not inconsistent with law or with the Charter, as shall be
approved by the Board of Directors or any officer or officers designated for
such purpose by resolution of the Board of Directors. Each stock certificate
shall be signed by the Chairman of the Board, the President, or a Vice
President, and countersigned by the Secretary, an Assistant Secretary, the
Treasurer, or an Assistant Treasurer. Each certificate may be sealed with the
actual corporate seal or a facsimile of it or in any other form and the
signatures may be either manual or facsimile signatures. A certificate is valid
and may be issued whether or not an officer who signed it is still an officer
when it is issued.
SECTION 5.02. TRANSFER. The Board of Directors shall have the power and
authority to make such rules and regulations as it may deem expedient concerning
the issue, transfer and registration of certificates of stock; and may appoint
transfer agents and registrars thereof. The duties of transfer agent and
registrar may be combined.
SECTION 5.03. RECORD DATE AND CLOSING OF TRANSFER BOOKS. The Board of
Directors may set a record date or direct that the stock transfer books be
closed for a stated period for the purpose of making any proper determination
with respect to the stockholders, including which stockholders are entitled to
notice of a meeting, vote at a meeting, receive a dividend, or be allotted other
rights. The record date may not be prior to the close of business on the day the
record date is fixed and may not be more than 90 days before the date on which
the action requiring the determination will be taken; the transfer books may not
be closed for a period longer than 20 days; and, in the case of a meeting of
stockholders, the record date or the closing of the transfer books shall
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be at least ten days before the date of the meeting.
SECTION 5.04. STOCK LEDGER. The Corporation shall maintain a stock
ledger which contains the name and address of each stockholder and the number of
shares of stock of each class which the stockholder holds. The stock ledger may
be in written form or in any other form which can be converted within a
reasonable time into written form for visual inspection. The original or a
duplicate of the stock ledger shall be kept at the offices of a transfer agent
for the particular class of stock, or, if none, at the executive offices of the
Corporation.
SECTION 5.05. LOST STOCK CERTIFICATES. The Board of Directors of the
Corporation may determine the conditions for issuing a new stock certificate in
place of one which is alleged to have, been lost, stolen, or destroyed, or the
Board of Directors may delegate such power to any officer or officers of the
Corporation. In their discretion, the Board of Directors or such officer or
officers may refuse to issue such new certificate save upon the order of some
court having jurisdiction in the premises.
ARTICLE VI.
FINANCE
SECTION 6.01. CHECKS, DRAFTS, ETC. All checks, drafts and orders for the
payment of money, notes and other evidences of indebtedness, issued in the name
of the Corporation, shall be signed by such agents as may be designated from
time to time by the Board of Directors or authorized officers of the
Corporation.
SECTION 6.02. ANNUAL STATEMENT OF AFFAIRS. The Chairman, President, a
Vice President or the Treasurer shall prepare or cause to be prepared annually a
full and correct statement of the affairs of the Corporation, including a
balance sheet and a financial statement of operations for the preceding fiscal
year.
SECTION 6.03. FISCAL YEAR. The fiscal year of the Corporation shall be
the twelve calendar months period ending December 31 in each year, unless
otherwise provided by the Board of Directors.
SECTION 6.04. DIVIDENDS. If declared by the Board of Directors at any
meeting thereof, the Corporation may pay dividends on its shares in cash,
property, or in shares. of the capital stock of the Corporation, unless such
dividend is contrary to law or to a restriction contained in the Charter.
ARTICLE VII.
SUNDRY PROVISIONS
SECTION 7.01. BOOKS AND RECORDS. The Corporation shall keep correct and
complete books and records of its accounts and transactions and minutes of the
proceedings of its stockholders and Board of Directors and of any executive or
other committee when exercising any of the powers
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of the Board of Directors. The books and records of the Corporation may be in
written form or in any other form which can be converted within a reasonable
time into written form for visual inspection. Minutes shall be recorded in
written form but may be maintained in the form of a reproduction. The original
or a certified copy of these Bylaws shall be kept at the principal office of the
Corporation.
SECTION 7.02. CORPORATE SEAL. The Board of Directors shall provide a
suitable seal, bearing the name of the Corporation, which shall be in the charge
of the Secretary. The Board of Directors may authorize one or more duplicate
seals and provide for the custody thereof. If the Corporation is required to
place its corporate seal to a document, it is sufficient to meet the requirement
of any law, rule, or regulation relating to a corporate seal to place the word
"Seal" adjacent to the signature of the person authorized to sign the document
on behalf of the Corporation.
SECTION 7.03. BONDS. The Board of Directors may require any officer,
agent or employee of the Corporation to give a bond to the Corporation,
conditioned upon the faithful discharge of his duties, with one or more sureties
and in such amount as may be satisfactory to the Board of Directors.
SECTION 7.04. VOTING UPON SHARES IN OTHER CORPORATIONS. Stock of other
corporations or associations which is registered in the name of, or beneficially
owned by, the Corporation, or which the Corporation is entitled to vote or
direct the voting of in its fiduciary capacity or otherwise, may be voted by the
Chairman, the President, any Vice President, or a proxy appointed by any of
them. The Board of Directors, however, may by resolution appoint some other
person to vote such shares, in which case such person shall be entitled to vote
such shares upon the production of a certified copy of such resolution.
SECTION 7.05. EXECUTION OF DOCUMENTS. A person who holds more than one
office in the Corporation may not act in more than one capacity to execute,
acknowledge, or verify an instrument required by law to be executed,
acknowledged, or verified by more than one officer.
SECTION 7.06. AMENDMENTS. The Board of Directors shall have the power,
at any regular or special meeting thereof, to amend, alter or repeal the Bylaws
of the Corporation, or to make and adopt new bylaws. These Bylaws may be
amended, altered or repealed and new bylaws may be adopted by the stockholders
of the Corporation to the extent and as provided in the Charter of the
Corporation.
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Exhibit 10(b)
- ------------
FORM OF TIER I EXECUTIVE AGREEMENT
EXECUTIVE AGREEMENT
THIS IS AN AGREEMENT between HUNTINGTON BANCSHARES INCORPORATED, a
Maryland corporation (the "Corporation"), with its principal office located at
the Huntington Center, 41 South High Street, Columbus, Ohio 43287, and
________________________ (the "Executive"), effective as of April 1, 1998.
RECITALS:
The Corporation considers the establishment and maintenance of a sound
and vital management to be part of its overall corporate strategy and to be
essential to protecting and enhancing the interests of the Corporation and its
shareholders. As part of this corporate strategy, the Corporation wishes to act
to retain its well-qualified executive officers notwithstanding any actual or
threatened change in control of the Corporation.
The Executive is a key executive officer of the Corporation and the
Executive's services, experience and knowledge of the affairs of the
Corporation, and reputation and contacts in the industry are extremely valuable
to the Corporation. The Executive's continued dedication, availability, advice,
and counsel to the Corporation are deemed important to the Corporation, its
Board of Directors (the "Board"), and its shareholders. It is, therefore, in the
best interests of the Corporation to secure the continued services of the
Executive notwithstanding any actual or threatened change in control of the
Corporation. Accordingly, the Board has approved this Agreement with the
Executive and authorized its execution and delivery on behalf of the
Corporation.
AGREEMENT:
1. TERM OF AGREEMENT. This Agreement will begin on the date entered
above and will continue in effect through December 31, 1999. On December 31,
1999, and on the second anniversary date of each term thereafter (a "Renewal
Date"), the term of this Agreement will be extended automatically for an
additional two-year period unless, not later than 30 days prior to such Renewal
Date, the Corporation gives written notice to the Executive that it has elected
not to extend this Agreement. Notwithstanding the above, if a "Change of
Control" (as defined herein) of the Corporation occurs during the term of this
Agreement, the term of this Agreement will be extended for 36 months beyond the
end of the month in which any such Change of Control occurs.
2. DEFINITIONS. The following defined terms shall have the meanings set
forth below, for purposes of this Agreement:
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(a) ANNUAL AWARD. "Annual Award" means the cash payment paid
or payable to the Executive with respect to a fiscal year under the
Corporation's Incentive Compensation Plan.
(b) BASE ANNUAL SALARY. "Base Annual Salary" means the greater
of (1) the highest annual rate of base salary in effect for the
Executive during the 12 month period immediately prior to a Change of
Control or, (2) the annual rate of base salary in effect at the time
Notice of Termination is given (or on the date employment is terminated
if no Notice of Termination is required).
(c) CAUSE. "Cause" means any of the following:
(1) The Executive shall have committed a felony or an
intentional act of gross misconduct, moral turpitude, fraud,
embezzlement, or theft in connection with the Executive's
duties or in the course of the Executive's employment with the
Corporation or any Subsidiary, and the Board shall have
determined that such act is materially harmful to the
Corporation;
(2) The Corporation or any Subsidiary shall have been
ordered or directed by any federal or state regulatory agency
with jurisdiction to terminate or suspend the Executive's
employment and such order or directive has not been vacated or
reversed upon appeal; or
(3) After being notified in writing by the Board to
cease any particular Competitive Activity (as defined herein),
the Executive shall have continued such Competitive Activity
and the Board shall have determined that such act is
materially harmful to the Corporation.
For purposes of this Agreement, no act or failure to
act on the part of the Executive shall be deemed "intentional" if it
was due primarily to an error in judgment or negligence, but shall be
deemed "intentional" only if done or omitted to be done by the
Executive not in good faith and without reasonable belief that the
Executive's action or omission was in the best interest of the
Corporation. Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for "Cause" under this Agreement unless
and until there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters of the Board at a meeting called and held for such
purposes, after reasonable notice to the Executive and an opportunity
for the Executive, together with the Executive's counsel (if the
Executive chooses to have counsel present at such meeting), to be heard
before the Board, finding that, in the good faith opinion of the Board,
the Executive had committed an act constituting "Cause" as defined in
this Agreement and specifying the particulars of the act constituting
"Cause" in detail. Nothing in this Agreement will limit the right of
the Executive or the Executive's beneficiaries to contest the validity
or propriety of any such determination.
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(d) CHANGE OF CONTROL. "Change of Control" means the
occurrence of any of the following:
(1) Any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Corporation
representing 25% or more of the combined voting power of the
Corporation's then outstanding securities; or
(2) A majority of the Board of Directors of the
Corporation at any time is comprised of other than Continuing
Directors (for purposes of this section, the term "Continuing
Director" means a director who was either (A) first elected or
appointed as a Director prior to the date of this Agreement;
or (B) subsequently elected or appointed as a director if such
director was nominated or appointed by at least a majority of
the then Continuing Directors); or
(3) Any event or transaction if the Corporation would
be required to report it in response to Item 6(e) of Schedule
14A of Regulation 14A promulgated under the Exchange Act; or
(4) Any of the following occurs:
(A) a merger or consolidation of the
Corporation, other than a merger or consolidation in
which the voting securities of the Corporation
immediately prior to the merger or consolidation
continue to represent (either by remaining
outstanding or being converted into securities of the
surviving entity) 51% or more of the combined voting
power of the Corporation or surviving entity
immediately after the merger or consolidation with
another entity;
(B) a sale, exchange, lease, mortgage,
pledge, transfer, or other disposition (in a single
transaction or a series of related transactions) of
all or substantially all of the assets of the
Corporation which shall include, without limitation,
the sale of assets or earning power aggregating more
than 50% of the assets or earning power of the
Corporation on a consolidated basis;
(C) a liquidation or dissolution of the
Corporation;
(D) a reorganization, reverse stock split,
or recapitalization of the Corporation which would
result in any of the foregoing; or
(E) a transaction or series of related
transactions having, directly or indirectly, the same
effect as any of the foregoing.
(e) CHANGE YEAR. "Change Year" means the fiscal year in which
a Change of Control occurs.
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(f) COMPETITIVE ACTIVITY. "Competitive Activity" means that
Executive's participation, without the written consent of an officer of
the Corporation, in the management of any business enterprise if such
enterprise engages in substantial and direct competition with the
Corporation and such enterprise's revenues derived from any product or
service competitive with any product or service of the Corporation
amounted to 10% or more of such enterprise's revenues for its most
recently completed fiscal year and if the Corporation's revenues for
such product or service amounted to 10% of the Corporation's revenues
for its most recently completed fiscal year. "Competitive Activity"
will not include (i) the mere ownership of securities in any such
enterprise and the exercise of rights appurtenant thereto and (ii)
participation in the management of any such enterprise other than in
connection with the competitive operations of such enterprise.
(g) DISABILITY. "Disability" means that, as a result of the
Executive's incapacity due to physical or mental illness, the Executive
shall be eligible for the receipt of benefits under the Corporation's
long term disability plan.
(h) EMPLOYEE BENEFITS. "Employee Benefits" means the
perquisites, benefits, and service credit for benefits as provided
under any and all employee retirement income and welfare benefit
policies, plans, programs, or arrangements in which the Executive is
entitled to participate, including without limitation any stock option,
stock purchase, stock appreciation, savings, pension, supplemental
executive retirement, or other retirement income or welfare benefit,
deferred compensation, incentive compensation, group or other life,
health, medical/hospital, or other insurance (whether funded by actual
insurance or self-insured by the Corporation), disability, salary
continuation, expense reimbursement, and other employee benefit
policies, plans, programs, or arrangements that may now exist or any
equivalent successor policies, plans, programs, or arrangements that
may be adopted hereafter, providing perquisites, benefits, and service
credit for benefits at least as great in a monetary equivalent as are
payable thereunder prior to a Change in Control.
(i) EMPLOYMENT AGREEMENT. "Employment Agreement" means an
executed employment agreement between the Corporation and the
Executive.
(j) GOOD REASON. "Good Reason" means the occurrence of any one
or more of the following:
(1) The assignment to the Executive after a Change in
Control of the Corporation of duties which are materially
different from or inconsistent with the duties,
responsibilities, and status of the Executive's position at
any time during the 12 month period prior to such Change of
Control, or which result in a significant change in the
Executive's authority and responsibility as a senior executive
of the Corporation;
(2) A reduction by the Corporation in the Executive's
Base Annual Salary as of the day immediately prior to a Change
of Control of the Corporation, or the failure to grant salary
increases and bonus payments on a basis comparable to those
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granted to other executives of the Corporation, or a reduction
of the Executive's most recent highest incentive bonus
potential prior to such Change of Control under the
Corporation's Incentive Compensation Plan, Long-Term Incentive
Plan, or any successor plans;
(3) A demand by the Corporation that the Executive
relocate to a location in excess of 35 miles from the location
where the Executive is currently based, or in the event of any
such relocation with the Executive's express written consent,
the failure of the Corporation or a Subsidiary to pay (or
reimburse the Executive for) all reasonable moving expenses
incurred by the Executive relating to a change of principal
residence in connection with such relocation and to indemnify
the Executive against any loss in the sale of the Executive's
principal residence in connection with any such change of
residence, all to the effect that the Executive shall incur no
loss on an after tax basis;
(4) The failure of the Corporation to obtain a
satisfactory agreement from any successor to the Corporation
to assume and agree to perform this Agreement, as contemplated
in Section 14 of this Agreement;
(5) The failure of the Corporation to provide the
Executive with substantially the same Employee Benefits that
were provided to him immediately prior to the Change in
Control, or with a package of Employee Benefits that, though
one or more of such benefits may vary from those in effect
immediately prior to such Change in Control, is substantially
comparable in all material respects to such Employee Benefits
taken as a whole; or
(6) Any reduction in the Executive's compensation or
benefits or adverse change in the Executive's location or
duties, if such reduction or adverse change occurs at any time
after the commencement of any discussion with a third party
relating to a possible Change of Control of the Corporation
involving such third party, if such reduction or adverse
change is in contemplation of such possible Change of Control
and such Change of Control is actually consummated within 12
months after the date of such reduction or adverse change.
The existence of Good Reason shall not be affected by
the Executive's incapacity due to physical or mental illness. The
Executive's continued employment shall not constitute a waiver of the
Executive's rights with respect to any circumstance constituting Good
Reason under this Agreement. The Executive's determination of Good
Reason shall be conclusive and binding upon the parties to this
Agreement provided such determination has been made in good faith.
Notwithstanding anything to the contrary in this Agreement, in the
event that the Executive is serving as Chief Executive Officer of the
Corporation immediately prior to the Change of Control, the occurrence
of the Change of Control shall be conclusively deemed to constitute
Good Reason.
(k) HIGHEST INCENTIVE COMPENSATION. "Highest Incentive
Compensation" means the greater of the Executive's Potential Annual
Award for the Executive's Incentive
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Group for (a) the Change Year or (b) the fiscal year immediately
preceding the Change Year. For purposes of (b) above, if the Executive
first became a participant in the Corporation's Incentive Compensation
Plan for the Change Year, the Executive shall be deemed to have been a
participant in the Corporation's Incentive Compensation Plan, and in
the same Incentive Group, for the fiscal year immediately preceding the
Change Year.
(l) HIGHEST LONG-TERM INCENTIVE COMPENSATION. "Highest
Long-Term Incentive Compensation" means the greater of the Executive's
Potential Long-Term Award for the Executive's Incentive Group pursuant
to the Corporation's Long-Term Incentive Compensation Plan for (1) the
multi-year cycle in which the Change Year occurs or (2) the multi-year
cycle immediately prior to the multi-year cycle in which the Change
Year occurs; provided, however, that if the Change of Control occurs on
a date that falls within two multi-year cycles, the Highest Long-Term
Incentive Compensation shall mean the greater of the Executive's
Potential Long-Term Award for either of such multi-year cycles. If the
Executive first became a participant in the Corporation's Long-Term
Incentive Compensation Plan during the Change Year or the year
immediately preceding the Change Year, the Executive shall be deemed to
have been a participant in the Corporation's Long-Term Incentive
Compensation Plan and in the same Incentive Group for (1) the
multi-year cycle in which the Change Year occurs and the multi-year
cycle immediately prior to the multi-year cycle in which the Change
Year occurs or, (2) if the Change of Control occurs on a date that
falls within two multi-year cycles, for both such multi-year cycles.
(m) INCENTIVE COMPENSATION PLAN. "Incentive Compensation Plan"
means the Corporation's Incentive Compensation Plan in effect as of the
effective date of this Agreement, as well as any successor plan.
(n) INCENTIVE GROUP. "Incentive Group" means the group or
category into which an Executive is placed pursuant to the
Corporation's Incentive Compensation Plan or Long-Term Incentive
Compensation Plan, as the case may be.
(o) LONG-TERM AWARD. "Long-Term Award" means the total amount
paid or payable at the end of a performance cycle under the
Corporation's Long-Term Incentive Compensation Plan.
(p) LONG-TERM INCENTIVE COMPENSATION PLAN. "Long-Term
Incentive Compensation Plan" means the Corporation's Long-Term
Incentive Compensation Plan in effect as of the effective date of this
Agreement, as well as any successor plan.
(q) NOTICE OF TERMINATION. "Notice of Termination" means a
written notice indicating the specific termination provision in this
Agreement relied upon and setting forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the
employment under the provision so indicated.
(r) POTENTIAL ANNUAL AWARD. "Potential Annual Award" means the
maximum possible Annual Award the Executive could receive according to
his or her Incentive Group pursuant to the Corporation's Incentive
Compensation Plan assuming that (1) the Corporation
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met the maximum ROAE for the Corporation's Incentive Compensation Plan
for a particular fiscal year (whether or not such maximum ROAE was or
could be met); (2) there are no adjustments for business unit or
individual performance, and (3) the Executive's Base Annual Salary is
used to determine the Potential Annual Award.
(s) POTENTIAL LONG-TERM AWARD. "Potential Long-Term Award"
means the maximum possible Long-Term Award payable to the Executive
pursuant to Executive's Incentive Group assuming that (1) the
Corporation met the maximum ROAE for the Corporation's Long-Term
Incentive Compensation Plan for a particular cycle (whether or not such
maximum ROAE was or could be met); and (2) the Executive's Base Annual
Salary is used to determine the Potential Long-Term Award.
(t) RETIREMENT. "Retirement" means having reached normal
retirement age as defined in the Corporation's noncontributory pension
plan or taking early retirement in accordance with the terms of the
Corporation's noncontributory pension plan.
(u) ROAE "ROAE" means return on average equity as referenced
in the Corporation's Incentive Compensation Plan and the Corporation's
Long-Term Incentive Compensation Plan, as the case may be.
(v) SEVERANCE BENEFITS. "Severance Benefits" means the
benefits described in Section 4 of this Agreement, as adjusted by the
applicable provisions of Section 5 of this Agreement.
(w) SUBSIDIARY. "Subsidiary" means any corporation, bank, or
other entity a majority of the voting control of which is directly or
indirectly owned or controlled at the time by the Corporation.
3. ELIGIBILITY FOR SEVERANCE BENEFITS. The Corporation or its successor
shall pay or provide to the Executive the Severance Benefits if the Executive's
employment is terminated voluntarily or involuntarily during the term of this
Agreement, either:
(a) by the Corporation (1) at any time within 36 months after
a Change of Control of the Corporation, or (2) at any time prior to a
Change of Control but after the commencement of any discussions with a
third party relating to a possible Change of Control of the Corporation
involving such third party, if such termination is in contemplation of
such possible Change of Control and such Change of Control is actually
consummated within 12 months after the date of such termination, in
either case unless the termination is on account of the Executive's
death or Disability or for Cause, provided that, in the case of a
termination on account of the Executive's Disability or for Cause, the
Corporation shall give Notice of Termination to the Executive with
respect thereto; or
(b) by the Executive for Good Reason (1) at any time within 36
months after a Change of Control of the Corporation or (2) at any time
after the commencement of any discussions with a third party relating
to a possible Change of Control of the Corporation involving such third
party, if such Change of Control is actually consummated within 12
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months after the date of such termination, and, in any such case,
provided that the Executive shall give Notice of Termination to the
Corporation with respect thereto.
4. SEVERANCE BENEFITS. The Executive, if eligible under Section 3,
shall receive the following Severance Benefits, adjusted by the applicable
provisions of Section 5 (in addition to accrued compensation, bonuses, and
vested benefits and stock options):
(a) BASE ANNUAL SALARY. In addition to any accrued
compensation payable as of the Executive's termination of employment
(either by reason of an Employment Agreement or otherwise), a lump sum
cash amount equal to the Executive's Base Annual Salary, multiplied by
3.
(b) ANNUAL INCENTIVE COMPENSATION. In addition to any
compensation payable pursuant to Article 5 of the Corporation's
Incentive Compensation Plan, a lump sum cash amount equal to the
Executive's Highest Incentive Compensation, multiplied by 3. In order
to be entitled to a payment pursuant to this Section 4(b), the
Executive must have been a participant in the Corporation's Incentive
Compensation Plan at some time during the 12 month period immediately
preceding the Change of Control.
(c) LONG-TERM INCENTIVE COMPENSATION. In addition to any
accrued compensation payable pursuant to Article 9 of the Corporation's
Long-Term Incentive Compensation Plan, a lump sum cash amount equal to
the Highest Long-Term Incentive Compensation, multiplied by 1.5. In
order to be entitled to a payment pursuant to this Section 4(c), the
Executive must have been a participant in the Corporation's Long-Term
Incentive Compensation Plan at some time during the 12 month period
immediately preceding the Change of Control.
(d) INSURANCE BENEFITS. For a three year period after the date
the employment is terminated, the Corporation will arrange to provide
to the Executive at the Corporation's expense, with:
(1) HEALTH CARE. Health care coverage comparable to
that in effect for the Executive immediately prior to the
termination (or, if more favorable to the Executive, that
furnished generally to salaried employees of the Corporation),
including, but not limited to, hospital, surgical, medical,
dental, prescription, and dependent coverage. Upon the
expiration of the health care benefits required to be provided
pursuant to this subsection 4(d), the Executive shall be
entitled to the continuation of such benefits under the
provisions of the Consolidated Omnibus Budget Reconciliation
Act. Health care benefits otherwise receivable by the
Executive pursuant to this subsection 4(d) shall be reduced to
the extent comparable benefits are actually received by the
Executive from a subsequent employer during the three-year
period following the date the employment is terminated and any
such benefits actually received by the Executive shall be
reported by the Executive to the Corporation.
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(2) LIFE INSURANCE. Life and accidental death and
dismemberment insurance coverage (including any supplemental
coverage, purchase opportunity, and double indemnity for
accidental death that was available to the Executive) equal
(including policy terms) to that in effect at the time Notice
of Termination is given (or on the date the employment is
terminated if no Notice of Termination is required) or, if
more favorable to the Executive, equal to that in effect at
the date the Change of Control occurs.
(3) DISABILITY INSURANCE. Disability insurance
coverage (including policy terms) equal to that in effect at
the time Notice of Termination is given (or on the date
employment is terminated if no Notice of Termination is
required) or, if more favorable to the Executive, equal to
that in effect immediately prior to the Change of Control;
provided, however, that no income replacement benefits will be
payable under such disability policy with regard to the three
year period following a termination of employment provided
that the payments payable under subsections 4(b) and (c) above
have been made.
In the event the Executive's participation in any such plan or
program is not permitted, the Corporation will directly provide, at no
after-tax cost to the Executive, the benefits to which the Executive
would be entitled under such plans and programs.
(e) RETIREMENT BENEFITS. The Executive will be entitled to
receive retirement benefits as provided herein, so that the total
retirement benefits the Executive receives from the Corporation will
approximate the total retirement benefits the Executive would have
received under all (qualified and nonqualified) retirement plans (which
shall not include severance plans) of the Corporation in which the
Executive participates were the Executive fully vested under such
retirement plans and had the Executive continued in the employ of the
Corporation for 36 months following the date of the Executive's
termination or until the Executive's Retirement, if earlier (provided
that such additional period shall be inclusive of and shall not be in
addition to any period of service credited under any severance plan of
the Corporation). The benefits specified in this subsection will
include all ancillary benefits, such as early retirement and survivor
rights and benefits available at retirement. The amount payable to the
Executive or the Executive's beneficiaries under this subsection shall
equal the excess of (1) the retirement benefits that would be paid to
the Executive or the Executive's beneficiaries, under all retirement
plans of the Corporation in which the Executive participates if (A) the
Executive were fully vested under such plans, (B) the 36-month period
(or the period until the Executive's Retirement, if less) following the
date of the Executive's termination were added to the Executive's
credited service under such plans, (C) the terms of such plans were
those most favorable to the Executive in effect at any time during the
period commencing prior to the Change of Control and ending on the date
of Notice of Termination (or on the date employment is terminated if no
Notice of Termination is required), and (D) the Executive's highest
average annual compensation as defined under such retirement plans and
was calculated as if the Executive had been employed by the Corporation
for a 36-month period (or the period until the Executive's Retirement,
if earlier) following the date of the Executive's termination and had
the Executive's compensation during such period been equal to the
Executive's compensation used to calculate the
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Executive's benefit under subsections 4(a), 4(b), and 4(c); over (2)
the retirement benefits that are payable to the Executive or the
Executive's beneficiaries under all retirement plans of the Corporation
in which the Executive participates. These retirement benefits
specified in this subsection are to be provided on an unfunded basis,
are not intended to meet the qualification requirements of Section 401
of the Internal Revenue Code, and shall be payable solely from the
general assets of the Corporation. These retirement benefits shall be
payable at the time and in the manner provided in the applicable
retirement plans to which they relate.
(f) OUTPLACEMENT. The Corporation shall pay all fees for
outplacement services for the Executive up to a maximum equal to 15% of
the Executive's Annual Base Salary used to calculate the Executive's
benefit under subsection 4(a), plus provide a travel expense account of
up to $5,000 to reimburse job search travel.
(g) STOCK OPTIONS. Stock Options held by the Executive become
exercisable upon a Change of Control according to the terms of the
Corporation's Stock Option Plans as interpreted by the Corporation's
Compensation and Stock Option Committee as such Committee existed
immediately prior to the Change of Control.
In computing and determining Severance Benefits under subsections 4(a),
(b), (c), (d), (e), (f), and (g) above, a decrease in the Executive's salary,
incentive bonus potential, or insurance benefits shall be disregarded if such
decrease occurs within six months before a Change of Control, is in
contemplation of such Change of Control, and is taken to avoid the effect of
this Agreement should such action be taken after such Change of Control. In such
event, the salary, incentive bonus potential, and/or insurance benefits used to
determine Severance Benefits shall be that in effect immediately before the
decrease that is disregarded pursuant to this Section 4.
The Severance Benefits provided in subsections 4(a), (b), and (c) above
shall be paid not later than 45 business days following the date the Executive's
employment terminates.
5. TAX GROSS-UP. If any Severance Benefit or other benefit paid or
provided under Section 4, or the acceleration of stock option vesting, or the
payment or distribution of any Employee Benefits or similar benefits are subject
to excise tax pursuant to Section 4999 of the Internal Revenue Code of 1986, as
amended (or any similar federal or state excise tax), the Corporation shall pay
to the Executive such additional compensation as is necessary (after taking into
account all federal, state, and local income taxes payable by the Executive as a
result of the receipt of such additional compensation) to place the Executive in
the same after-tax position he would have been in had no such excise tax (or any
interest or penalties thereon) been paid or incurred with respect to any of such
amounts (the "Tax Gross-Up"). The Corporation shall pay such additional
compensation at the time when the Corporation withholds such excise tax from any
payments to the Executive. The calculation of the Tax Gross-Up shall be approved
by the Corporation's independent certified public accounting firm engaged by the
Corporation immediately prior to the Change in Control and the calculation shall
be provided to the Executive in writing. The Executive shall then be given 15
days, or such longer period as the Executive reasonably requests, to accept or
reject the calculation of the Tax Gross-Up. If the Executive rejects the Tax
Gross-Up calculation and the parties are thereafter unable to agree within an
additional 45 days, the arbitration provisions of Section 10 shall control.
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The Corporation shall reimburse the Executive for all reasonable legal and
accounting fees incurred with respect to the calculation of the Tax Gross-Up and
any disputes related thereto.
For purposes of determining the amount of the Tax Gross-Up,
the 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 Tax
Gross-Up is to be made and state and local income taxes at the highest marginal
rates of taxation in the state and locality of the Executive's residence on the
date of termination.
If the excise tax is subsequently determined to be less than
the amount taken into account hereunder at the time of termination of
employment, the Executive shall repay to the Corporation at the time the
reduction in excise tax is finally determined, the portion of the Tax Gross-Up
attributable to such reduction. Notwithstanding the Executive's acceptance or
rejection of the Tax Gross-Up calculation, if the excise tax is determined to
exceed the amount taken into account hereunder at the time of termination of
employment, the Corporation shall make an additional Tax Gross-Up payment to the
Executive in respect of such excess at the time the amount of such excess is
finally determined.
6. WITHHOLDING OF TAXES. The Corporation may withhold from any amounts
payable under this Agreement all federal, state, city, or other taxes as
required by law.
7. ACKNOWLEDGEMENT. The Corporation hereby acknowledges that it will be
difficult and may be impossible for the Executive to find reasonably comparable
employment, or to measure the amount of damages which the Executive may suffer
as a result of termination of employment hereunder. Accordingly, the payment of
the Severance Benefits by the Corporation to the Executive in accordance with
the terms of this Agreement is hereby acknowledged by the Corporation to be
reasonable and will be liquidated damages, and the 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 the Executive hereunder or
otherwise, except for a reduction in health insurance coverage as provided in
subsection 4(d)(1). The Corporation shall not be entitled to set off or
counterclaim against amounts payable hereunder with respect to any claim, debt,
or obligation of the Executive.
8. ENFORCEMENT COSTS; INTEREST. The Corporation is aware that, upon the
occurrence of a Change in Control, the Board or a stockholder of the Corporation
may then cause or attempt to cause the Corporation to refuse to comply with its
obligations under this Agreement, or may cause or attempt to cause the
Corporation to institute, or may institute, litigation, arbitration, or other
legal action seeking to have this Agreement declared unenforceable, or may take,
or attempt to take, other action to deny the Executive the benefits intended
under this Agreement. In these circumstances, the purpose of this Agreement
could be frustrated. It is the intent of the Corporation that the Executive not
be required to incur the expenses associated with the enforcement of the
Executive's rights under this Agreement by litigation, arbitration, or other
legal action nor be bound to negotiate any settlement of the Executive's 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
the Executive under this Agreement. Accordingly, if following a Change in
Control it should
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appear to the Executive that the Corporation has failed to comply with any of
its obligations under this Agreement, including the proper calculation of the
Tax Gross-Up, or in the event that the Corporation 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
the Executive, the benefits intended to be provided to the Executive hereunder,
the Corporation irrevocably authorizes the Executive from time to time to retain
counsel (legal and accounting) of the Executive's choice at the expense of the
Corporation as provided in this Section 8 to represent the Executive in
connection with the calculation of the Tax Gross-Up, or the initiation or
defense of any litigation or other legal action, whether by or against the
Corporation or any director, officer, stockholder, or other person affiliated
with the Corporation. Notwithstanding any existing or prior attorney-client
relationship between the Corporation and such counsel, the Corporation
irrevocably consents to the Executive entering into an attorney-client
relationship with such counsel, and in that connection the Corporation and the
Executive agree that a confidential relationship shall exist between the
Executive and such counsel. The reasonable fees and expenses of counsel selected
from time to time by the Executive as provided in this Section shall be paid or
reimbursed to the Executive by the Corporation on a regular, periodic basis upon
presentation by the Executive of a statement or statements prepared by such
counsel in accordance with its customary practices. In any action involving this
Agreement, the 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 the Executive pursuant to this Agreement at an annual rate of interest equal
to the prime commercial rate in effect at The Huntington National Bank or its
successor from time to time during the prejudgment period plus 4 percent.
9. INDEMNIFICATION. From and after the earliest to occur of a Change of
Control or termination of employment, the Corporation shall (a) for a period of
five years after such occurrence, provide the Executive (including the
Executive's heirs, executors, and administrators) with coverage under a standard
directors' and officers' liability insurance policy at the Corporation's
expense, and (b) indemnify and hold harmless the Executive, to the fullest
extent permitted or authorized by the law of the State of Maryland as it may
from time to time be amended, if the Executive is (whether before or after the
Change of Control) made or threatened to be made a party to any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, by reason of the fact that the Executive is or
was a director, officer, or employee of the Corporation or any Subsidiary, or is
or was serving at the request of the Corporation or any Subsidiary as a
director, trustee, officer, or employee of a bank, corporation, partnership,
joint venture, trust, or other enterprise. The indemnification provided by this
Section 9 shall not be deemed exclusive of any other rights to which the
Executive may be entitled under the charter or bylaws of the Corporation or of
any Subsidiary, or any agreement, vote of shareholders or disinterested
directors, or otherwise, both as to action in the Executive's official capacity
and as to action in another capacity while holding such office, and shall
continue as to the Executive after the Executive has ceased to be a director,
trustee, officer, or employee and shall inure to the benefit of the heirs,
executors, and administrators of the Executive.
10. ARBITRATION. The initial method for resolving any dispute arising
out of this Agreement shall be nonbinding arbitration in accordance with this
Section. Except as provided otherwise in this Section, arbitration pursuant to
this Section shall be governed by the Commercial Arbitration Rules of the
American Arbitration Association. A party wishing to obtain arbitration of
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an issue shall deliver written notice to the other party, including a
description of the issue to be arbitrated. Within 15 days after either party
demands arbitration, the Corporation and the Executive shall each appoint an
arbitrator. Within 15 additional days, these two arbitrators shall appoint the
third arbitrator by mutual agreement; if they fail to agree within this 15 day
period, then the third arbitrator shall be selected promptly pursuant to the
rules of the American Arbitration Association for Commercial Arbitration. The
arbitration panel shall hold a hearing in Columbus, Ohio, within 90 days after
the appointment of the third arbitrator. The fees and expenses of the
arbitrator, and any American Arbitration Association fees, shall be paid by the
Corporation. Both the Corporation and the Executive may be represented by
counsel (legal and accounting) and may present testimony and other evidence at
the hearing. Within 90 days after commencement of the hearing, the arbitration
panel will issue a written decision; the majority vote of two of the three
arbitrators shall control. The majority decision of the arbitrators shall not be
binding on the parties, and the parties may pursue other available legal
remedies if the parties are not satisfied with the majority decision of the
arbitrator. The Executive shall be entitled to seek specific performances of the
Executive's rights under this Agreement during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
11. EMPLOYMENT RIGHTS. This Agreement sets forth the Severance Benefits
payable to the Executive in the event the Executive's employment with the
Corporation is terminated under certain conditions specified in Section 3. This
Agreement is not an employment contract nor shall it confer upon the Executive
any right to continue in the employ of the Corporation or its Subsidiaries and
shall not in any way affect the right of the Corporation or its Subsidiaries to
dismiss or otherwise terminate the Executive's employment at any time with or
without cause.
12. ARRANGEMENTS NOT EXCLUSIVE. The specific benefit arrangements
referred to in this Agreement are not intended to exclude the Executive from
participation in or from other benefits available to executive personnel
generally or to preclude the Executive's right to other compensation or benefits
as may be authorized by the Board 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 the Executive's existing rights, or rights which
would accrue solely as the result of the passage of time under any compensation
plan, 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. Notwithstanding anything to the contrary in this
Section 12, the Severance Benefits provided in Section 4 are in lieu of any
benefits to which the Executive would be entitled following the termination of
his or her employment pursuant to any Employment Agreement or pursuant to the
Corporation's Transition Pay or any successor to such plan.
13. TERMINATION. Except for termination of employment described in
Section 3(b), this Agreement shall terminate if the employment of the Executive
with the Corporation shall terminate prior to a Change in Control.
14. SUCCESSORS; BINDING AGREEMENTS. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal and legal
representatives, executors, administrators, successors, heirs, distributees,
devisees, and legatees. The Executive's rights and benefits under this Agreement
may not be assigned, except that if the Executive dies while any amount would
still be payable to the Executive hereunder if the Executive had continued to
live, all such amounts, unless
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otherwise provided herein, shall be paid in accordance with the terms of this
Agreement, to the beneficiaries designated by the Executive to receive benefits
under this Agreement in a writing on file with the Corporation at the time of
the Executive's death or, if there is no such beneficiary, to the Executive's
estate. The Corporation will require any successor (whether direct or indirect,
by purchase, merger, consolidation, or otherwise) to all or substantially all of
the business and/or assets of the Corporation (or of any division or Subsidiary
thereof employing the Executive) to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform it if no such succession had taken place. Failure of the
Corporation to obtain such assumption and agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Corporation in the same amount and on the
same terms to which the Executive would be entitled hereunder if the Executive
terminated employment for Good Reason following a Change of Control.
15. NO VESTED INTEREST. Neither the Executive nor the Executive's
beneficiaries shall have any right, title, or interest in any benefit under this
Agreement prior to the occurrence of the right to the payment of such benefit.
16. NOTICE. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the such addresses as each party may designate from time to time to the other
party in writing in the manner provided herein. Unless designated otherwise
notices to the Corporation should be sent to the Corporation at:
Huntington Bancshares Incorporated
41 South High Street
Columbus, Ohio 43287
Attention: Cindy Rohletter/Corporate Compensation
Until designated otherwise, notices shall be sent to the employee at the address
indicated on the Beneficiary Designation and Notice form attached hereto as
Exhibit A. If the parties by mutual agreement supply each other with telecopier
numbers for the purposes of providing notice by facsimile, such notice shall
also be proper notice under this Agreement. Notice sent by certified or
registered mail shall be effective two days after deposit by delivery to the
U.S. Post Office.
17. SAVINGS CLAUSE. If any payments otherwise payable to the Executive
under this Agreement are prohibited or limited by any statute or regulation in
effect at the time the payments would otherwise be payable, including, without
limitation, any regulation issued by the Federal Deposit Insurance Company (the
"FDIC") that limits executive change of control payments that can be made by an
FDIC insured institution or its holding company if the institution is
financially troubled (any such limiting statute or regulation a "Limiting
Rule"):
(a) Corporation will use its best efforts to obtain the
consent of the appropriate governmental agency (whether the FDIC or any
other agency) to the payment by Corporation to the Executive of the
maximum amount that is permitted (up to the amounts that would be due
to the Executive absent the Limiting Rule); and
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(b) the Executive will be entitled to elect to have apply, and
therefore to receive benefits directly under, either (i) this Agreement
(as limited by the Limiting Rule) or (ii) any generally applicable
Corporation severance, separation pay, and/or salary continuation plan
that may be in effect at the time of the Executive's termination.
Following any such election, the Executive will be entitled to receive benefits
under this agreement or plan elected only if and to the extent the agreement or
plan is applicable and subject to its specific terms.
18. AMENDMENT; WAIVER. This Agreement may not be amended or modified
and no provision may be waived unless such amendment, modification, or waiver is
agreed to in writing and signed by the Executive and the Corporation.
19. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
20. PRIOR EXECUTIVE AGREEMENTS. This Agreement supersedes any and all
prior Executive Agreements between the Corporation (or any predecessor of the
Corporation) and the Executive and no payments or benefits of any kind shall be
made under, on account of, or by reference to the prior Executive Agreements.
21. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
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22. GOVERNING LAW. Except as otherwise provided, this Agreement shall
be governed by the laws of the State of Ohio, without giving effect to any
conflict of law provisions.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the day and
year written above.
CORPORATION:
------------
HUNTINGTON BANCSHARES INCORPORATED
By: /s/ Frank Wobst
________________________________________
Chief Executive Officer
EXECUTIVE:
----------
__________________________________________
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Exhibit 10(b)
- -------------
EXHIBIT A
BENEFICIARY DESIGNATION AND NOTICE FORM
BENEFICIARY DESIGNATION
In the event of my death, I 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.
NOTICE
Until notified otherwise, pursuant to Section 16 of the Agreement,
notices should be sent to me at the following address
______________________________
Street Address
______________________________
City, State and Zip Code
_______________________ ________________________________
Date Executive
________________________________
Beneficiary
________________________________
Relationship to Executive
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Exhibit 10(c)
- -------------
FORM OF TIER II EXECUTIVE AGREEMENT
EXECUTIVE AGREEMENT
THIS IS AN AGREEMENT between HUNTINGTON BANCSHARES INCORPORATED, a
Maryland corporation (the "Corporation"), with its principal office located at
the Huntington Center, 41 South High Street, Columbus, Ohio 43287, and
________________________ (the "Executive"), effective as of April 1, 1998.
RECITALS:
The Corporation considers the establishment and maintenance of a sound
and vital management to be part of its overall corporate strategy and to be
essential to protecting and enhancing the interests of the Corporation and its
shareholders. As part of this corporate strategy, the Corporation wishes to act
to retain its well-qualified executive officers notwithstanding any actual or
threatened change in control of the Corporation.
The Executive is a key executive officer of the Corporation and the
Executive's services, experience and knowledge of the affairs of the
Corporation, and reputation and contacts in the industry are extremely valuable
to the Corporation. The Executive's continued dedication, availability, advice,
and counsel to the Corporation are deemed important to the Corporation, its
Board of Directors (the "Board"), and its shareholders. It is, therefore, in the
best interests of the Corporation to secure the continued services of the
Executive notwithstanding any actual or threatened change in control of the
Corporation. Accordingly, the Board has approved this Agreement with the
Executive and authorized its execution and delivery on behalf of the
Corporation.
AGREEMENT:
1. TERM OF AGREEMENT. This Agreement will begin on the date entered
above and will continue in effect through December 31, 1999. On December 31,
1999, and on the second anniversary date of each term thereafter (a "Renewal
Date"), the term of this Agreement will be extended automatically for an
additional two-year period unless, not later than 30 days prior to such Renewal
Date, the Corporation gives written notice to the Executive that it has elected
not to extend this Agreement. Notwithstanding the above, if a "Change of
Control" (as defined herein) of the Corporation occurs during the term of this
Agreement, the term of this Agreement will be extended for 36 months beyond the
end of the month in which any such Change of Control occurs.
2. DEFINITIONS. The following defined terms shall have the meanings set
forth below, for purposes of this Agreement:
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(a) ANNUAL AWARD. "Annual Award" means the cash payment paid
or payable to the Executive with respect to a fiscal year under the
Corporation's Incentive Compensation Plan.
(b) BASE ANNUAL SALARY. "Base Annual Salary" means the greater
of (1) the highest annual rate of base salary in effect for the
Executive during the 12 month period immediately prior to a Change of
Control or, (2) the annual rate of base salary in effect at the time
Notice of Termination is given (or on the date employment is terminated
if no Notice of Termination is required).
(c) CAUSE. "Cause" means any of the following:
(1) The Executive shall have committed a felony or an
intentional act of gross misconduct, moral turpitude, fraud,
embezzlement, or theft in connection with the Executive's
duties or in the course of the Executive's employment with the
Corporation or any Subsidiary, and the Board shall have
determined that such act is materially harmful to the
Corporation;
(2) The Corporation or any Subsidiary shall have been
ordered or directed by any federal or state regulatory agency
with jurisdiction to terminate or suspend the Executive's
employment and such order or directive has not been vacated or
reversed upon appeal; or
(3) After being notified in writing by the Board to
cease any particular Competitive Activity (as defined herein),
the Executive shall have continued such Competitive Activity
and the Board shall have determined that such act is
materially harmful to the Corporation.
For purposes of this Agreement, no act or failure to
act on the part of the Executive shall be deemed "intentional" if it
was due primarily to an error in judgment or negligence, but shall be
deemed "intentional" only if done or omitted to be done by the
Executive not in good faith and without reasonable belief that the
Executive's action or omission was in the best interest of the
Corporation. Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for "Cause" under this Agreement unless
and until there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters of the Board at a meeting called and held for such
purposes, after reasonable notice to the Executive and an opportunity
for the Executive, together with the Executive's counsel (if the
Executive chooses to have counsel present at such meeting), to be heard
before the Board, finding that, in the good faith opinion of the Board,
the Executive had committed an act constituting "Cause" as defined in
this Agreement and specifying the particulars of the act constituting
"Cause" in detail. Nothing in this Agreement will limit the right of
the Executive or the Executive's beneficiaries to contest the validity
or propriety of any such determination.
(d) CHANGE OF CONTROL. "Change of Control" means the
occurrence of any of the following:
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(1) Any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Corporation
representing 25% or more of the combined voting power of the
Corporation's then outstanding securities; or
(2) A majority of the Board of Directors of the
Corporation at any time is comprised of other than Continuing
Directors (for purposes of this section, the term "Continuing
Director" means a director who was either (A) first elected or
appointed as a Director prior to the date of this Agreement;
or (B) subsequently elected or appointed as a director if such
director was nominated or appointed by at least a majority of
the then Continuing Directors); or
(3) Any event or transaction if the Corporation would
be required to report it in response to Item 6(e) of Schedule
14A of Regulation 14A promulgated under the Exchange Act; or
(4) Any of the following occurs:
(A) a merger or consolidation of the
Corporation, other than a merger or consolidation in
which the voting securities of the Corporation
immediately prior to the merger or consolidation
continue to represent (either by remaining
outstanding or being converted into securities of the
surviving entity) 51% or more of the combined voting
power of the Corporation or surviving entity
immediately after the merger or consolidation with
another entity;
(B) a sale, exchange, lease, mortgage,
pledge, transfer, or other disposition (in a single
transaction or a series of related transactions) of
all or substantially all of the assets of the
Corporation which shall include, without limitation,
the sale of assets or earning power aggregating more
than 50% of the assets or earning power of the
Corporation on a consolidated basis;
(C) a liquidation or dissolution of the
Corporation;
(D) a reorganization, reverse stock split,
or recapitalization of the Corporation which would
result in any of the foregoing; or
(E) a transaction or series of related
transactions having, directly or indirectly, the same
effect as any of the foregoing.
(e) CHANGE YEAR. "Change Year" means the fiscal year in which
a Change of Control occurs.
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(f) COMPETITIVE ACTIVITY. "Competitive Activity" means that
Executive's participation, without the written consent of an officer of
the Corporation, in the management of any business enterprise if such
enterprise engages in substantial and direct competition with the
Corporation and such enterprise's revenues derived from any product or
service competitive with any product or service of the Corporation
amounted to 10% or more of such enterprise's revenues for its most
recently completed fiscal year and if the Corporation's revenues for
such product or service amounted to 10% of the Corporation's revenues
for its most recently completed fiscal year. "Competitive Activity"
will not include (i) the mere ownership of securities in any such
enterprise and the exercise of rights appurtenant thereto and (ii)
participation in the management of any such enterprise other than in
connection with the competitive operations of such enterprise.
(g) DISABILITY. "Disability" means that, as a result of the
Executive's incapacity due to physical or mental illness, the Executive
shall be eligible for the receipt of benefits under the Corporation's
long term disability plan.
(h) EMPLOYEE BENEFITS. "Employee Benefits" means the
perquisites, benefits, and service credit for benefits as provided
under any and all employee retirement income and welfare benefit
policies, plans, programs, or arrangements in which the Executive is
entitled to participate, including without limitation any stock option,
stock purchase, stock appreciation, savings, pension, supplemental
executive retirement, or other retirement income or welfare benefit,
deferred compensation, incentive compensation, group or other life,
health, medical/hospital, or other insurance (whether funded by actual
insurance or self-insured by the Corporation), disability, salary
continuation, expense reimbursement, and other employee benefit
policies, plans, programs, or arrangements that may now exist or any
equivalent successor policies, plans, programs, or arrangements that
may be adopted hereafter, providing perquisites and benefits at least
as great in a monetary equivalent as are payable thereunder prior to a
Change in Control.
(i) EMPLOYMENT AGREEMENT. "Employment Agreement" means an
executed employment agreement between the Corporation and the
Executive.
(j) GOOD REASON. "Good Reason" means the occurrence of any one
or more of the following:
(1) The assignment to the Executive after a Change in
Control of the Corporation of duties which are materially and
adversely different from or inconsistent with the duties,
responsibilities, and status of the Executive's position at
any time during the 12 month period prior to such Change of
Control, or which result in a significant change in the
Executive's authority and responsibility as a senior executive
of the Corporation;
(2) A reduction by the Corporation in the Executive's
Base Annual Salary as of the day immediately prior to a Change
of Control of the Corporation, or the failure to grant salary
increases and bonus payments on a basis comparable to those
granted to other executives of the Corporation, or a reduction
of the Executive's most
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recent highest incentive bonus potential prior to such Change
of Control under the Corporation's Incentive Compensation
Plan, Long-Term Incentive Plan, or any successor plans;
(3) A demand by the Corporation that the Executive
relocate to a location in excess of 35 miles from the location
where the Executive is currently based, or in the event of any
such relocation with the Executive's express written consent,
the failure of the Corporation or a Subsidiary to pay (or
reimburse the Executive for) all reasonable moving expenses
incurred by the Executive relating to a change of principal
residence in connection with such relocation and to indemnify
the Executive against any loss in the sale of the Executive's
principal residence in connection with any such change of
residence, all to the effect that the Executive shall incur no
loss on an after tax basis;
(4) The failure of the Corporation to obtain a
satisfactory agreement from any successor to the Corporation
to assume and agree to perform this Agreement, as contemplated
in Section 14 of this Agreement;
(5) The failure of the Corporation to provide the
Executive with substantially the same Employee Benefits that
were provided to him immediately prior to the Change in
Control, or with a package of Employee Benefits that, though
one or more of such benefits may vary from those in effect
immediately prior to such Change in Control, is substantially
comparable in all material respects to such Employee Benefits
taken as a whole; or
(6) Any reduction in the Executive's compensation or
benefits or adverse change in the Executive's location or
duties, if such reduction or adverse change occurs at any time
after the commencement of any discussion with a third party
relating to a possible Change of Control of the Corporation
involving such third party, if such reduction or adverse
change is in contemplation of such possible Change of Control
and such Change of Control is actually consummated within 12
months after the date of such reduction or adverse change.
The existence of Good Reason shall not be affected by
the Executive's incapacity due to physical or mental illness. The
Executive's continued employment shall not constitute a waiver of the
Executive's rights with respect to any circumstance constituting Good
Reason under this Agreement. The Executive's determination of Good
Reason shall be conclusive and binding upon the parties to this
Agreement provided such determination has been made in good faith.
Notwithstanding anything to the contrary in this Agreement, in the
event that the Executive is serving as Chief Executive Officer of the
Corporation immediately prior to the Change of Control, the occurrence
of the Change of Control shall be conclusively deemed to constitute
Good Reason.
(k) HIGHEST INCENTIVE COMPENSATION. "Highest Incentive
Compensation" means the greater of the Executive's Potential Annual
Award for the Executive's Incentive Group for (a) the Change Year or
(b) the fiscal year immediately preceding the Change Year.
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For purposes of (b) above, if the Executive first became a participant
in the Corporation's Incentive Compensation Plan for the Change Year,
the Executive shall be deemed to have been a participant in the
Corporation's Incentive Compensation Plan, and in the same Incentive
Group, for the fiscal year immediately preceding the Change Year.
(l) HIGHEST LONG-TERM INCENTIVE COMPENSATION. "Highest
Long-Term Incentive Compensation" means the greater of the Executive's
Potential Long-Term Award for the Executive's Incentive Group pursuant
to the Corporation's Long-Term Incentive Compensation Plan for (1) the
multi-year cycle in which the Change Year occurs or (2) the multi-year
cycle immediately prior to the multi-year cycle in which the Change
Year occurs; provided, however, that if the Change of Control occurs on
a date that falls within two multi-year cycles, the Highest Long-Term
Incentive Compensation shall mean the greater of the Executive's
Potential Long-Term Award for either of such multi-year cycles. If the
Executive first became a participant in the Corporation's Long-Term
Incentive Compensation Plan during the Change Year or the year
immediately preceding the Change Year, the Executive shall be deemed to
have been a participant in the Corporation's Long-Term Incentive
Compensation Plan and in the same Incentive Group for (1) the
multi-year cycle in which the Change Year occurs and the multi-year
cycle immediately prior to the multi-year cycle in which the Change
Year occurs or, (2) if the Change of Control occurs on a date that
falls within two multi-year cycles, for both such multi-year cycles.
(m) INCENTIVE COMPENSATION PLAN. "Incentive Compensation Plan"
means the Corporation's Incentive Compensation Plan in effect as of the
effective date of this Agreement, as well as any successor plan.
(n) INCENTIVE GROUP. "Incentive Group" means the group or
category into which an Executive is placed pursuant to the
Corporation's Incentive Compensation Plan or Long-Term Incentive
Compensation Plan, as the case may be.
(o) LONG-TERM AWARD. "Long-Term Award" means the total amount
paid or payable at the end of a performance cycle under the
Corporation's Long-Term Incentive Compensation Plan.
(p) LONG-TERM INCENTIVE COMPENSATION PLAN. "Long-Term
Incentive Compensation Plan" means the Corporation's Long-Term
Incentive Compensation Plan in effect as of the effective date of this
Agreement, as well as any successor plan.
(q) NOTICE OF TERMINATION. "Notice of Termination" means a
written notice indicating the specific termination provision in this
Agreement relied upon and setting forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the
employment under the provision so indicated.
(r) POTENTIAL ANNUAL AWARD. "Potential Annual Award" means the
maximum possible Annual Award the Executive could receive according to
his or her Incentive Group pursuant to the Corporation's Incentive
Compensation Plan assuming that (1) the Corporation met the maximum
ROAE for the Corporation's Incentive Compensation Plan for a particular
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<PAGE> 7
fiscal year (whether or not such maximum ROAE was or could be met); (2)
there are no adjustments for business unit or individual performance,
and (3) the Executive's Base Annual Salary is used to determine the
Potential Annual Award.
(s) POTENTIAL LONG-TERM AWARD. "Potential Long-Term Award"
means the maximum possible Long-Term Award payable to the Executive
pursuant to Executive's Incentive Group assuming that (1) the
Corporation met the maximum ROAE for the Corporation's Long-Term
Incentive Compensation Plan for a particular cycle (whether or not such
maximum ROAE was or could be met); and (2) the Executive's Base Annual
Salary is used to determine the Potential Long-Term Award.
(t) RETIREMENT. "Retirement" means having reached normal
retirement age as defined in the Corporation's noncontributory pension
plan or taking early retirement in accordance with the terms of the
Corporation's noncontributory pension plan.
(u) ROAE "ROAE" means return on average equity as referenced
in the Corporation's Incentive Compensation Plan and the Corporation's
Long-Term Incentive Compensation Plan, as the case may be.
(v) SEVERANCE BENEFITS. "Severance Benefits" means the
benefits described in Section 4 of this Agreement, as adjusted by the
applicable provisions of Section 5 of this Agreement.
(w) SUBSIDIARY. "Subsidiary" means any corporation, bank, or
other entity a majority of the voting control of which is directly or
indirectly owned or controlled at the time by the Corporation.
3. ELIGIBILITY FOR SEVERANCE BENEFITS. The Corporation or its successor
shall pay or provide to the Executive the Severance Benefits if the Executive's
employment is terminated voluntarily or involuntarily during the term of this
Agreement, either:
(a) by the Corporation (1) at any time within 36 months after
a Change of Control of the Corporation, or (2) at any time prior to a
Change of Control but after the commencement of any discussions with a
third party relating to a possible Change of Control of the Corporation
involving such third party, if such termination is in contemplation of
such possible Change of Control and such Change of Control is actually
consummated within 12 months after the date of such termination, in
either case unless the termination is on account of the Executive's
death or Disability or for Cause, provided that, in the case of a
termination on account of the Executive's Disability or for Cause, the
Corporation shall give Notice of Termination to the Executive with
respect thereto; or
(b) by the Executive for Good Reason (1) at any time within 36
months after a Change of Control of the Corporation or (2) at any time
after the commencement of any discussions with a third party relating
to a possible Change of Control of the Corporation involving such third
party, if such Change of Control is actually consummated within 12
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<PAGE> 8
months after the date of such termination, and, in any such case,
provided that the Executive shall give Notice of Termination to the
Corporation with respect thereto.
4. SEVERANCE BENEFITS. The Executive, if eligible under Section 3,
shall receive the following Severance Benefits, adjusted by the applicable
provisions of Section 5 (in addition to accrued compensation, bonuses, and
vested benefits and stock options):
(a) BASE ANNUAL SALARY. In addition to any accrued
compensation payable as of the Executive's termination of employment
(either by reason of an Employment Agreement or otherwise), a lump sum
cash amount equal to the Executive's Base Annual Salary, multiplied by
2.5.
(b) ANNUAL INCENTIVE COMPENSATION. In addition to any
compensation payable pursuant to Article 5 of the Corporation's
Incentive Compensation Plan, a lump sum cash amount equal to the
Executive's Highest Incentive Compensation, multiplied by 2.5. In order
to be entitled to a payment pursuant to this Section 4(b), the
Executive must have been a participant in the Corporation's Incentive
Compensation Plan at some time during the 12 month period immediately
preceding the Change of Control.
(c) LONG-TERM INCENTIVE COMPENSATION. In addition to any
accrued compensation payable pursuant to Article 9 of the Corporation's
Long-Term Incentive Compensation Plan, a lump sum cash amount equal to
the Highest Long-Term Incentive Compensation, multiplied by 1.5. In
order to be entitled to a payment pursuant to this Section 4(c), the
Executive must have been a participant in the Corporation's Long-Term
Incentive Compensation Plan at some time during the 12 month period
immediately preceding the Change of Control.
(d) INSURANCE BENEFITS. For a three year period after the date
the employment is terminated, the Corporation will arrange to provide
to the Executive at the Corporation's expense, with:
(1) HEALTH CARE. Health care coverage comparable to
that in effect for the Executive immediately prior to the
termination (or, if more favorable to the Executive, that
furnished generally to salaried employees of the Corporation),
including, but not limited to, hospital, surgical, medical,
dental, prescription, and dependent coverage. Upon the
expiration of the health care benefits required to be provided
pursuant to this subsection 4(d), the Executive shall be
entitled to the continuation of such benefits under the
provisions of the Consolidated Omnibus Budget Reconciliation
Act. Health care benefits otherwise receivable by the
Executive pursuant to this subsection 4(d) shall be reduced to
the extent comparable benefits are actually received by the
Executive from a subsequent employer during the three-year
period following the date the employment is terminated and any
such benefits actually received by the Executive shall be
reported by the Executive to the Corporation.
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<PAGE> 9
(2) LIFE INSURANCE. Life and accidental death and
dismemberment insurance coverage (including any supplemental
coverage, purchase opportunity, and double indemnity for
accidental death that was available to the Executive) equal
(including policy terms) to that in effect at the time Notice
of Termination is given (or on the date the employment is
terminated if no Notice of Termination is required) or, if
more favorable to the Executive, equal to that in effect at
the date the Change of Control occurs.
(3) DISABILITY INSURANCE. Disability insurance
coverage (including policy terms) equal to that in effect at
the time Notice of Termination is given (or on the date
employment is terminated if no Notice of Termination is
required) or, if more favorable to the Executive, equal to
that in effect immediately prior to the Change of Control;
provided, however, that no income replacement benefits will be
payable under such disability policy with regard to the three
year period following a termination of employment provided
that the payments payable under subsections 4(b) and (c) above
have been made.
In the event the Executive's participation in any such plan or
program is not permitted, the Corporation will directly provide, at no
after-tax cost to the Executive, the benefits to which the Executive
would be entitled under such plans and programs.
(e) RETIREMENT BENEFITS. The Executive will be entitled to
receive retirement benefits as provided herein, so that the total
retirement benefits the Executive receives from the Corporation will
approximate the total retirement benefits the Executive would have
received under all (qualified and nonqualified) retirement plans (which
shall not include severance plans) of the Corporation in which the
Executive participates were the Executive fully vested under such
retirement plans and had the Executive continued in the employ of the
Corporation for 36 months following the date of the Executive's
termination or until the Executive's Retirement, if earlier (provided
that such additional period shall be inclusive of and shall not be in
addition to any period of service credited under any severance plan of
the Corporation). The benefits specified in this subsection will
include all ancillary benefits, such as early retirement and survivor
rights and benefits available at retirement. The amount payable to the
Executive or the Executive's beneficiaries under this subsection shall
equal the excess of (1) the retirement benefits that would be paid to
the Executive or the Executive's beneficiaries, under all retirement
plans of the Corporation in which the Executive participates if (A) the
Executive were fully vested under such plans, (B) the 36-month period
(or the period until the Executive's Retirement, if less) following the
date of the Executive's termination were added to the Executive's
credited service under such plans, (C) the terms of such plans were
those most favorable to the Executive in effect at any time during the
period commencing prior to the Change of Control and ending on the date
of Notice of Termination (or on the date employment is terminated if no
Notice of Termination is required), and (D) the Executive's highest
average annual compensation as defined under such retirement plans and
was calculated as if the Executive had been employed by the Corporation
for a 36-month period (or the period until the Executive's Retirement,
if earlier) following the date of the Executive's termination and had
the Executive's compensation during such period been equal to the
Executive's compensation used to calculate the
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<PAGE> 10
Executive's benefit under subsections 4(a), 4(b), and 4(c); over (2)
the retirement benefits that are payable to the Executive or the
Executive's beneficiaries under all retirement plans of the Corporation
in which the Executive participates. These retirement benefits
specified in this subsection are to be provided on an unfunded basis,
are not intended to meet the qualification requirements of Section 401
of the Internal Revenue Code, and shall be payable solely from the
general assets of the Corporation. These retirement benefits shall be
payable at the time and in the manner provided in the applicable
retirement plans to which they relate.
(f) OUTPLACEMENT. The Corporation shall pay all fees for
outplacement services for the Executive up to a maximum equal to 15% of
the Executive's Annual Base Salary used to calculate the Executive's
benefit under subsection 4(a), plus provide a travel expense account of
up to $5,000 to reimburse job search travel.
(g) STOCK OPTIONS. Stock Options held by the Executive become
exercisable upon a Change of Control according to the terms of the
Corporation's Stock Option Plans as interpreted by the Corporation's
Compensation and Stock Option Committee as such Committee existed
immediately prior to the Change of Control.
In computing and determining Severance Benefits under subsections 4(a),
(b), (c), (d), (e), (f), and (g) above, a decrease in the Executive's salary,
incentive bonus potential, or insurance benefits shall be disregarded if such
decrease occurs within six months before a Change of Control, is in
contemplation of such Change of Control, and is taken to avoid the effect of
this Agreement should such action be taken after such Change of Control. In such
event, the salary, incentive bonus potential, and/or insurance benefits used to
determine Severance Benefits shall be that in effect immediately before the
decrease that is disregarded pursuant to this Section 4.
The Severance Benefits provided in subsections 4(a), (b), and (c) above
shall be paid not later than 45 business days following the date the Executive's
employment terminates.
5. TAX GROSS-UP. If any Severance Benefit or other benefit paid or
provided under Section 4, or the acceleration of stock option vesting, or the
payment or distribution of any Employee Benefit or similar benefit is subject to
excise tax pursuant to Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code") (or any similar federal or state excise tax), the
Corporation shall pay to the Executive such additional compensation as is
necessary (after taking into account all federal, state, and local income taxes
payable by the Executive as a result of the receipt of such additional
compensation) to place the Executive in the same after-tax position he would
have been in had no such excise tax (or any interest or penalties thereon) been
paid or incurred with respect to any of such amounts (the "Tax Gross-Up"). The
Corporation shall pay such additional compensation at the time when the
Corporation withholds such excise tax from any payments to the Executive. The
calculation of the Tax Gross-Up shall be approved by the Corporation's
independent certified public accounting firm engaged by the Corporation
immediately prior to the Change in Control and the calculation shall be provided
to the Executive in writing. The Executive shall then be given 15 days, or such
longer period as the Executive reasonably requests, to accept or reject the
calculation of the Tax Gross-Up. If the Executive rejects the Tax Gross-Up
calculation and the parties are thereafter unable to agree within an additional
45 days, the arbitration provisions of Section 10 shall
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<PAGE> 11
control. The Corporation shall reimburse the Executive for all reasonable legal
and accounting fees incurred with respect to the calculation of the Tax Gross-Up
and any disputes related thereto.
For purposes of determining the amount of the Tax Gross-Up,
the 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 Tax
Gross-Up is to be made and state and local income taxes at the highest marginal
rates of taxation in the state and locality of the Executive's residence on the
date of termination.
If the excise tax is subsequently determined to be less than
the amount taken into account hereunder at the time of termination of
employment, the Executive shall repay to the Corporation at the time the
reduction in excise tax is finally determined, the portion of the Tax Gross-Up
attributable to such reduction. Notwithstanding the Executive's acceptance or
rejection of the Tax Gross-Up calculation, if the excise tax is determined to
exceed the amount taken into account hereunder at the time of termination of
employment, the Corporation shall make an additional Tax Gross-Up payment to the
Executive in respect of such excess at the time the amount of such excess is
finally determined.
Notwithstanding anything to the contrary in this Section 5, if
any Severance Benefit or other benefit paid or provided under Section 4, or the
acceleration of stock option vesting, or the payment or distribution of any
Employee Benefits or similar benefits would be subject to excise tax pursuant to
Section 4999 of the Code (or any similar federal or state excise tax), but would
not be so subject if the total of such payments would be reduced by 10% or less,
then such payment shall be reduced by the minimum amount necessary so as not to
cause Corporation to have paid an Excess Severance Payment as defined in Section
280G(b)(l) of the Code and so the Executive will not be subject to Excise Tax
pursuant to Section 4999 of the Code. The calculation of any potential reduction
pursuant to this paragraph or any disputes related thereto shall be resolved as
described above with respect to the calclulation of the Tax Gross-Up. In the
event that the amount of any Severance Payments that would be payable to or for
the benefit of Executive under this Agreement must be modified or reduced to
comply with this provision, Executive shall direct which Severance Payments are
to be modified or reduced; provided, however, that no increase in the amount of
any payment or change in the timing of the payment shall be made without the
consent of Corporation. In no event shall the total payments be reduced by more
than 10% in order to avoid treatment as an Excess Severance Payment.
6. WITHHOLDING OF TAXES. The Corporation may withhold from any amounts
payable under this Agreement all federal, state, city, or other taxes as
required by law.
7. ACKNOWLEDGEMENT. The Corporation hereby acknowledges that it will be
difficult and may be impossible for the Executive to find reasonably comparable
employment, or to measure the amount of damages which the Executive may suffer
as a result of termination of employment hereunder. Accordingly, the payment of
the Severance Benefits by the Corporation to the Executive in accordance with
the terms of this Agreement is hereby acknowledged by the Corporation to be
reasonable and will be liquidated damages, and the 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
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<PAGE> 12
mitigation, offset, reduction, or any other obligation on the part of the
Executive hereunder or otherwise, except for a reduction in health insurance
coverage as provided in subsection 4(d)(1). The Corporation shall not be
entitled to set off or counterclaim against amounts payable hereunder with
respect to any claim, debt, or obligation of the Executive.
8. ENFORCEMENT COSTS; INTEREST. The Corporation is aware that, upon the
occurrence of a Change in Control, the Board or a stockholder of the Corporation
may then cause or attempt to cause the Corporation to refuse to comply with its
obligations under this Agreement, or may cause or attempt to cause the
Corporation to institute, or may institute, litigation, arbitration, or other
legal action seeking to have this Agreement declared unenforceable, or may take,
or attempt to take, other action to deny the Executive the benefits intended
under this Agreement. In these circumstances, the purpose of this Agreement
could be frustrated. It is the intent of the Corporation that the Executive not
be required to incur the expenses associated with the enforcement of the
Executive's rights under this Agreement by litigation, arbitration, or other
legal action nor be bound to negotiate any settlement of the Executive's 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
the Executive under this Agreement. Accordingly, if following a Change in
Control it should appear to the Executive that the Corporation has failed to
comply with any of its obligations under this Agreement, including the proper
calculation of the Tax Gross-Up, or in the event that the Corporation 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 the Executive, the benefits intended to be provided to the
Executive hereunder, the Corporation irrevocably authorizes the Executive from
time to time to retain counsel (legal and accounting) of the Executive's choice
at the expense of the Corporation as provided in this Section 8 to represent the
Executive in connection with the calculation of the Tax Gross-Up, or the
initiation or defense of any litigation or other legal action, whether by or
against the Corporation or any director, officer, stockholder, or other person
affiliated with the Corporation. Notwithstanding any existing or prior
attorney-client relationship between the Corporation and such counsel, the
Corporation irrevocably consents to the Executive entering into an
attorney-client relationship with such counsel, and in that connection the
Corporation and the Executive agree that a confidential relationship shall exist
between the Executive and such counsel. The reasonable fees and expenses of
counsel selected from time to time by the Executive as provided in this Section
shall be paid or reimbursed to the Executive by the Corporation on a regular,
periodic basis upon presentation by the Executive of a statement or statements
prepared by such counsel in accordance with its customary practices. In any
action involving this Agreement, the 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 the Executive pursuant to this Agreement at an annual rate
of interest equal to the prime commercial rate in effect at The Huntington
National Bank or its successor from time to time during the prejudgment period
plus 4 percent.
9. INDEMNIFICATION. From and after the earliest to occur of a Change of
Control or termination of employment, the Corporation shall (a) for a period of
five years after such occurrence, provide the Executive (including the
Executive's heirs, executors, and administrators) with coverage under a standard
directors' and officers' liability insurance policy at the Corporation's
expense, and (b) indemnify and hold harmless the Executive, to the fullest
extent permitted or authorized by the law of the State of Maryland as it may
from time to time be amended, if the Executive is (whether
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<PAGE> 13
before or after the Change of Control) made or threatened to be made a party to
any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, by reason of the fact that
the Executive is or was a director, officer, or employee of the Corporation or
any Subsidiary, or is or was serving at the request of the Corporation or any
Subsidiary as a director, trustee, officer, or employee of a bank, corporation,
partnership, joint venture, trust, or other enterprise. The indemnification
provided by this Section 9 shall not be deemed exclusive of any other rights to
which the Executive may be entitled under the charter or bylaws of the
Corporation or of any Subsidiary, or any agreement, vote of shareholders or
disinterested directors, or otherwise, both as to action in the Executive's
official capacity and as to action in another capacity while holding such
office, and shall continue as to the Executive after the Executive has ceased to
be a director, trustee, officer, or employee and shall inure to the benefit of
the heirs, executors, and administrators of the Executive.
10. ARBITRATION. The initial method for resolving any dispute arising
out of this Agreement shall be nonbinding arbitration in accordance with this
Section. Except as provided otherwise in this Section, arbitration pursuant to
this Section shall be governed by the Commercial Arbitration Rules of the
American Arbitration Association. A party wishing to obtain arbitration of an
issue shall deliver written notice to the other party, including a description
of the issue to be arbitrated. Within 15 days after either party demands
arbitration, the Corporation and the Executive shall each appoint an arbitrator.
Within 15 additional days, these two arbitrators shall appoint the third
arbitrator by mutual agreement; if they fail to agree within this 15 day period,
then the third arbitrator shall be selected promptly pursuant to the rules of
the American Arbitration Association for Commercial Arbitration. The arbitration
panel shall hold a hearing in Columbus, Ohio, within 90 days after the
appointment of the third arbitrator. The fees and expenses of the arbitrator,
and any American Arbitration Association fees, shall be paid by the Corporation.
Both the Corporation and the Executive may be represented by counsel (legal and
accounting) and may present testimony and other evidence at the hearing. Within
90 days after commencement of the hearing, the arbitration panel will issue a
written decision; the majority vote of two of the three arbitrators shall
control. The majority decision of the arbitrators shall not be binding on the
parties, and the parties may pursue other available legal remedies if the
parties are not satisfied with the majority decision of the arbitrator. The
Executive shall be entitled to seek specific performances of the Executive's
rights under this Agreement during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
11. EMPLOYMENT RIGHTS. This Agreement sets forth the Severance Benefits
payable to the Executive in the event the Executive's employment with the
Corporation is terminated under certain conditions specified in Section 3. This
Agreement is not an employment contract nor shall it confer upon the Executive
any right to continue in the employ of the Corporation or its Subsidiaries and
shall not in any way affect the right of the Corporation or its Subsidiaries to
dismiss or otherwise terminate the Executive's employment at any time with or
without cause.
12. ARRANGEMENTS NOT EXCLUSIVE. The specific benefit arrangements
referred to in this Agreement are not intended to exclude the Executive from
participation in or from other benefits available to executive personnel
generally or to preclude the Executive's right to other compensation or benefits
as may be authorized by the Board 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 the Executive's existing rights, or rights which
would accrue solely as the result of the
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passage of time under any compensation plan, 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.
Notwithstanding anything to the contrary in this Section 12, the Severance
Benefits provided in Section 4 are in lieu of any benefits to which the
Executive would be entitled following the termination of his or her employment
pursuant to any Employment Agreement or pursuant to the Corporation's Transition
Pay or any successor to such plan.
13. TERMINATION. Except for termination of employment described in
Section 3(b), this Agreement shall terminate if the employment of the Executive
with the Corporation shall terminate prior to a Change in Control.
14. SUCCESSORS; BINDING AGREEMENTS. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal and legal
representatives, executors, administrators, successors, heirs, distributees,
devisees, and legatees. The Executive's rights and benefits under this Agreement
may not be assigned, except that if the Executive dies while any amount would
still be payable to the Executive hereunder if the Executive had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement, to the beneficiaries designated by
the Executive to receive benefits under this Agreement in a writing on file with
the Corporation at the time of the Executive's death or, if there is no such
beneficiary, to the Executive's estate. The Corporation will require any
successor (whether direct or indirect, by purchase, merger, consolidation, or
otherwise) to all or substantially all of the business and/or assets of the
Corporation (or of any division or Subsidiary thereof employing the Executive)
to expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the Corporation would be required to perform it if no
such succession had taken place. Failure of the Corporation to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle the Executive to compensation
from the Corporation in the same amount and on the same terms to which the
Executive would be entitled hereunder if the Executive terminated employment for
Good Reason following a Change of Control.
15. NO VESTED INTEREST. Neither the Executive nor the Executive's
beneficiaries shall have any right, title, or interest in any benefit under this
Agreement prior to the occurrence of the right to the payment of such benefit.
16. NOTICE. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the such addresses as each party may designate from time to time to the other
party in writing in the manner provided herein. Unless designated otherwise
notices to the Corporation should be sent to the Corporation at:
Huntington Bancshares Incorporated
41 South High Street
Columbus, Ohio 43287
Attention: Cindy Rohletter/Corporate Compensation
Until designated otherwise, notices shall be sent to the employee at the address
indicated on the Beneficiary Designation and Notice form attached hereto as
Exhibit A. If the parties by mutual
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agreement supply each other with telecopier numbers for the purposes of
providing notice by facsimile, such notice shall also be proper notice under
this Agreement. Notice sent by certified or registered mail shall be effective
two days after deposit by delivery to the U.S. Post Office.
17. SAVINGS CLAUSE. If any payments otherwise payable to the Executive
under this Agreement are prohibited or limited by any statute or regulation in
effect at the time the payments would otherwise be payable, including, without
limitation, any regulation issued by the Federal Deposit Insurance Company (the
"FDIC") that limits executive change of control payments that can be made by an
FDIC insured institution or its holding company if the institution is
financially troubled (any such limiting statute or regulation a "Limiting
Rule"):
(a) Corporation will use its best efforts to obtain the
consent of the appropriate governmental agency (whether the FDIC or any
other agency) to the payment by Corporation to the Executive of the
maximum amount that is permitted (up to the amounts that would be due
to the Executive absent the Limiting Rule); and
(b) the Executive will be entitled to elect to have apply, and
therefore to receive benefits directly under, either (i) this Agreement
(as limited by the Limiting Rule) or (ii) any generally applicable
Corporation severance, separation pay, and/or salary continuation plan
that may be in effect at the time of the Executive's termination.
Following any such election, the Executive will be entitled to receive benefits
under this agreement or plan elected only if and to the extent the agreement or
plan is applicable and subject to its specific terms.
18. AMENDMENT; WAIVER. This Agreement may not be amended or modified
and no provision may be waived unless such amendment, modification, or waiver is
agreed to in writing and signed by the Executive and the Corporation.
19. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
20. PRIOR EXECUTIVE AGREEMENTS. This Agreement supersedes any and all
prior Executive Agreements between the Corporation (or any predecessor of the
Corporation) and the Executive and no payments or benefits of any kind shall be
made under, on account of, or by reference to the prior Executive Agreements.
21. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
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22. GOVERNING LAW. Except as otherwise provided, this Agreement shall
be governed by the laws of the State of Ohio, without giving effect to any
conflict of law provisions.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the day and
year written above.
CORPORATION:
------------
HUNTINGTON BANCSHARES INCORPORATED
By: /s/ Frank Wobst
--------------------------------
Chief Executive Officer
EXECUTIVE:
----------
________________________________________
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Exhibit 10(c)
- -------------
19. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
20. PRIOR EXECUTIVE AGREEMENTS. This Agreement supersedes any and all
prior Executive Agreements between the Corporation (or any predecessor of the
Corporation) and the Executive and no payments or benefits of any kind shall be
made under, on account of, or by reference to the prior Executive Agreements.
21. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
22. GOVERNING LAW. Except as otherwise provided, this Agreement shall
be governed by the laws of the State of Ohio, without giving effect to any
conflict of law provisions.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
day and year written above.
CORPORATION:
------------
HUNTINGTON BANCSHARES INCORPORATED
By:______________________________________
Secretary and General Counsel
EXECUTIVE:
----------
_________________________________________
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Exhibit 10(c)
- -------------
EXHIBIT A
BENEFICIARY DESIGNATION AND NOTICE FORM
BENEFICIARY DESIGNATION
In the event of my death, I 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.
NOTICE
Until notified otherwise, pursuant to Section 16 of the Agreement,
notices should be sent to me at the following address
_____________________________
Street Address
_____________________________
City, State and Zip Code
___________________________ __________________________________
Date
Executive
__________________________________
Beneficiary
__________________________________
Relationship to Executive
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<PAGE> 1
EXHIBIT 10(d)
SCHEDULE IDENTIFYING MATERIAL DETAILS OF
EXECUTIVE AGREEMENTS SUBSTANTIALLY
SIMILAR TO EXHIBIT 10(b)
<TABLE>
<CAPTION>
NAME EFFECTIVE DATE
----- ---------------
<S> <C>
Peter E. Geier April 1, 1998
Ronald J. Seiffert April 1, 1998
Frank Wobst April 1, 1998
</TABLE>
SCHEDULE IDENTIFYING MATERIAL DETAILS OF
EXECUTIVE AGREEMENTS SUBSTANTIALLY
SIMILAR TO EXHIBIT 10(c)
<TABLE>
<CAPTION>
NAME EFFECTIVE DATE
----- ---------------
<S> <C>
Richard A. Cheap May 4, 1998
Judith D. Fisher April 1, 1998
Gerald R. Williams April 1, 1998
</TABLE>
<PAGE> 1
Exhibit 10(e)
- -------------
HUNTINGTON BANCSHARES INCORPORATED
INCENTIVE COMPENSATION PLAN
As Amended and Restated Effective for Performance Cycles
beginning on or after January 1, 1999
(including amendment adopted January 20, 1999)
PURPOSE; EFFECTIVE DATE
-----------------------
1.1 The purpose of this Incentive Compensation Plan ("Plan") is to
encourage, recognize, and reward exceptional levels of corporate, business unit,
and individual performance. The Plan's intent is to use award dollars as a clear
communication vehicle linking the interests of eligible officers with the
interests of Huntington Bancshares Incorporated ("Corporation") by establishing
a direct link between performance and incentive payments. The Plan serves to
reinforce a management style which closely ties officer rewards to performance
directly under his or her control and establishes the Corporation's willingness
to reward individual performance that has a direct impact on incremental
earnings. The purpose of this 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
meeting on April 22, 1999, but will relate to Performance Cycles beginning
January 1, 1999, and thereafter. No payments will be made under the Plan unless
shareholder approval is obtained.
1
<PAGE> 2
DEFINITION OF TERMS
-------------------
2.1 As used herein, the following words shall have the meanings stated
after them, unless otherwise specifically provided:
(a) "AWARD" shall mean a cash incentive payment granted to a
Participant under the Plan.
(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 directors each of whom is an "outside director"
within the meaning of Section 162(m) as hereinafter defined.
(d) "CORPORATION" shall mean Huntington Bancshares
Incorporated.
(e) "COVERED OFFICERS" shall mean the Participant or
Participants the Committee designates in order to maintain qualified
performance-based compensation within the meaning of Section 162(m).
(f) "EXTRAORDINARY EVENTS" shall mean (i) asset write-downs,
(ii) litigation or claim judgments or settlements, (iii) the effect of
changes in tax law, accounting principles or other such laws or
provisions affecting reported results, (iv) accruals for reorganization
and restructuring programs, (v) capital gains and losses, (vi) special
charges in connection with the mergers and acquisitions, and (vii) any
extraordinary non-recurring items as described in Accounting Principles
Board Opinion No. 30 and/or in management's discussion and analysis of
financial condition and results of operation appearing or incorporated
by
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<PAGE> 3
reference in the Corporation's Annual Report on Form 10-K filed with
the Securities and Exchange Commission for the applicable year.
(g) "OFFICER" shall mean an officer of the Corporation or of a
Subsidiary.
(h) "PARTICIPANT" shall mean an Officer selected to
participate in the Plan in accordance with section 4.1.
(i) "PERFORMANCE CYCLE" shall mean the calendar year.
(j) "QUALIFYING PERFORMANCE CRITERIA" shall mean any one or
more of the following performance criteria (either individually,
alternatively or in any combination, applied to either the Corporation
as a whole or to a business unit or subsidiary, either individually,
alternatively or in any combination, and measured annually, on an
absolute basis or relative to a pre-established target to previous
years' results or to a designated comparison group, in each case as
specified by the Committee in the Award): (a) net income, (b) earnings
per share, (c) return on equity or return on average equity ("ROAE"),
(d) return on assets or return on average assets, and (e) operating
expenses as a percentage of total revenues (known as the "efficiency
ratio"). In all cases, such amounts will be on either a reported basis
or adjusted to exclude the impact of intangible assets and related
amortization expense (referred to as "cash basis" or "tangible"
results) whichever will produce the higher Award.
(k) "SECTION 162(M)" shall mean Section 162(m) of the Internal
Revenue Code of 1986, as amended, or any successor statute of similar
import.
(l) "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.
3
<PAGE> 4
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
specified by the Committee 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 the
Covered Officers and other Officers who will participate in the Plan for each
Performance Cycle during the first 90 days of the Performance Cycle (or no later
than such earlier or later date as may be the applicable deadline for any
compensation payable to be considered performance-based pursuant to Section
162(m)) and may select Officers who are hired or promoted during a Performance
Cycle to participate for the remainder of the Performance Cycle. Selection to
participate in this Plan in any Performance Cycle does not require the Committee
to, or imply that the Committee will, select the same person to participate in
the Plan in any subsequent Performance Cycle.
4
<PAGE> 5
PERFORMANCE CRITERIA AND GOALS, MAXIMUM AWARD
---------------------------------------------
5.1 PERFORMANCE CRITERIA. Awards paid under the Plan may be based upon
corporate, business unit, and individual performance; however, Awards paid to
Covered Officers under the Plan will be based upon the achievement of a
performance goal or goals measured solely by the Qualifying Performance Criteria
selected by the Committee for a Performance Cycle. Measures of performance for
other Participants will be determined based upon the Qualifying Performance
Criteria selected by the Committee and evaluations of the Participant's business
unit and individual performance. Such evaluations will be made by the
Participant's appropriate manager or senior officer. The Committee may select
different Qualifying Performance Criteria for different incentive groups. The
maximum annual Award payable to any Participant shall not exceed $2,500,000
notwithstanding that the Qualifying Performance Criteria for a Performance Cycle
may exceed the maximum performance goal.
5.2 PERFORMANCE GOALS. The Committee will establish annual written
performance goals reflecting corporate performance. Performance goals based on
the Qualifying Performance Criteria and the potential Award, expressed as a
percentage of base salary as of December 31 of each plan year, that will be
payable upon attainment of those performance goals, will be established in
writing not later than 90 days after the commencement of the year to which the
goals relate (or such earlier or later date as is permitted or required by
Section 162(m)). Potential Awards may vary among Participants in different
incentive groups as determined by the Committee. Extraordinary Events shall
either be excluded or included in determining the extent to which the
corresponding performance goal has been achieved, whichever will produce the
higher Award.
5.3 ADJUSTMENTS. The Committee may increase individual Awards based
upon extraordinary circumstances; however, under no circumstance may the
Committee increase a
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<PAGE> 6
Covered Officer's Award above the amount determined based on the attainment of
the specified performance goals identified in accordance with Section 5.2. In
addition, notwithstanding the attainment of specified performance goals, the
Committee has the discretion to reduce or eliminate an Award that would
otherwise be paid to any Participant, including any Covered Officer, based on
its evaluation of Extraordinary Events or other factors. However,
notwithstanding Section 9.1 or any provision of the Plan, an Award which is
payable may not be reduced or eliminated following a Change in Control.
PAYMENT OF AWARDS
-----------------
6.1 PAYMENT OF AWARDS. Unless payment is deferred, Awards will be
payable in cash as soon as practicable following the close of the Performance
Cycle and calculation of the amount of the Awards; provided that Awards will be
paid to Covered Officers only after the Committee has certified in writing in
the minutes of a committee meeting or otherwise that performance goals
applicable to Covered Officers and other material terms of the Plan have been
satisfied. Except in the situation of a Change in Control, the Committee may
defer payment of an Award for such period as the Committee may determine. No
Award will be paid to an officer who is not employed by the Corporation or an
affiliate on the day the Award is paid except in the case of death, disability,
or retirement of the officer or in the event that payment of the Award is
deferred by the Committee or that a Change in Control of the Corporation has
occurred. Awards are subject to federal, state and local income and other
payroll tax withholding or the Corporation may require that the Participant pay
to the Corporation an amount equal to any such taxes.
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
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<PAGE> 7
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
------------------------------------
7.1 INTERIM AWARDS. In the event of a "Change in Control" of the
Corporation, as hereinafter defined, or at the direction of the Committee in
anticipation of a Change in Control, the following provisions shall apply:
(a) The Committee shall make interim incentive compensation
Awards based upon the Corporation's quarterly financial
statements for the quarter ending immediately prior to or
coinciding with the Change in Control.
(b) In determining the amount of interim incentive
compensation Awards, the Committee shall follow the procedures
for granting annual Awards, except that the Committee shall
annualize each objective performance factor used in
calculating such Awards. The amount of the Awards so
calculated shall be pro rated based upon the quarter as of
which the interim Awards are granted in accordance with the
following percentages: First Quarter - 25%; Second Quarter -
50%; Third Quarter - 75%; and Fourth Quarter - 100%
(c) Notwithstanding the foregoing, each interim Award to be
made under this Section 7 to any Participant who received an
Award under this Plan for the Performance Cycle immediately
preceding the year in which the Change in Control occurs,
expressed as a percentage of base salary on a pro rated basis
in accordance with paragraph (b) above, shall be not less than
the Award, expressed on the same
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<PAGE> 8
basis, actually paid to that Participant under this Plan for
the immediately preceding Performance Cycle.
(d) The Committee shall grant an interim incentive
compensation Award in accordance with this Section 7 to all
Participants of the Plan whether or not the Participants are
employed by the Corporation when the Change in Control becomes
effective.
7.2 CHANGE IN CONTROL DEFINED. 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, any of the following occurs:
(a) Any "person" (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing 25%
or more of the combined voting power of the Corporation's then
outstanding securities; or
(b) A majority of the Board of Directors of the Corporation at any
time is comprised of other than Continuing Directors (for
purposes of this section, the term "Continuing Director" means
a director who was either (i) first elected or appointed as a
Director prior to the date of this Agreement; or (ii)
subsequently elected or appointed as a director if such
director was nominated or appointed by at least a majority of
the then Continuing Directors); or
(c) Any event or transaction if the Corporation would be required
to report it in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act; or
8
<PAGE> 9
(d) Any of the following occurs: (i) a merger or consolidation of
the Corporation, other than a merger or consolidation in which
the voting securities of the Corporation immediately prior to
the merger or consolidation continue to represent (either by
remaining outstanding or being converted into securities of
the surviving entity) 51% or more of the combined voting power
of the Corporation or surviving entity immediately after the
merger or consolidation with another entity; (ii) a sale,
exchange, lease, mortgage, pledge, transfer, or other
disposition (in a single transaction or a series of related
transactions) of all or substantially all of the assets of the
Corporation which shall include, without limitation, the sale
of assets or earning power aggregating more than 50% of the
assets or earning power of the Corporation on a consolidated
basis; (iii) a liquidation or dissolution of the Corporation;
(iv) a reorganization, reverse stock split, or
recapitalization of the Corporation which would result in any
of the foregoing; or (v) a transaction or series of related
transactions having, directly or indirectly, the same effect
as any of the foregoing.
MISCELLANEOUS PROVISIONS.
-------------------------
8.1 GUIDELINES - From time to time the Committee may adopt written
guidelines for implementation and administration of the Plan and in conformity
with Section 162(m).
8.2 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.
9
<PAGE> 10
8.3 UNFUNDED PLANS AND RESTRICTIONS ON TRANSFER - It is intended that
the Plan be an "unfunded" plan for incentive compensation. The Committee may
authorize the use of trusts or other arrangements to meet the obligations
hereunder, provided, however, that the existence of such trusts or arrangements
is consistent with the "unfunded" status of the Plan. 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.
Participants and beneficiaries shall have only the rights of a general unsecured
creditor of the Corporation.
8.4 STATUS OF AWARDS UNDER SECTION 162(m) - It is the intent of the
Corporation that Awards granted to persons who are Covered Officers shall
constitute "qualified performance-based compensation" satisfying the
requirements of Section 162(m). Accordingly, the provisions of the Plan shall be
interpreted in a manner consistent with Section 162(m). If any provision of the
Plan or any agreement relating to such an Award does not comply or is
inconsistent with the requirements of Section 162(m), such provision shall be
construed or deemed amended to the extent necessary to conform to such
requirements.
8.5 DEFERRALS OF AWARDS - A Participant may elect to defer payment of
the Participant's Award under the Plan if deferral of an Award under the Plan is
permitted pursuant to the terms of a deferred compensation program established
by the Committee existing at the time the election to defer is permitted to be
made, and the Participant complies with the terms of such program. Deferred
payments may include, without limitation, provisions for the payment or
crediting of reasonable interest on installment or deferred payment.
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<PAGE> 11
8.6 EXPENSES OF PLAN - The costs and expenses of administering the Plan
will be borne by the Corporation.
8.7 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.
8.8 GOVERNING LAW - The Plan shall be governed by and construed
according to the laws of the State of Ohio.
AMENDMENT AND TERMINATION
-------------------------
9.1 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(f)
- -------------
HUNTINGTON BANCSHARES INCORPORATED
LONG-TERM INCENTIVE COMPENSATION PLAN
As Amended and Restated, Effective for Performance Cycles
beginning on or after January 1, 1999
(including amendments adopted January 20, 1999)
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
meeting on April 22, 1999, but will relate to Performance Cycles beginning
January 1, 1999, 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) "AWARD" shall mean any stock or cash incentive award
granted to a Participant under the Plan.
1
<PAGE> 2
(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 directors each of whom is an "outside director"
within the meaning of Section 162(m) as hereinafter defined.
(d) "COMMON STOCK" shall mean the shares without par value of
common stock of the Corporation, whether presently or hereafter issued.
(e) "CORPORATION" shall mean Huntington Bancshares
Incorporated.
(f) "EXTRAORDINARY EVENTS" shall mean (i) asset write-downs,
(ii) litigation or claim judgments or settlements, (iii) the effect of
changes in tax law, accounting principles or other such laws or
provisions affecting reported results, (iv) accruals for reorganization
and restructuring programs, (v) capital gains and losses, (vi) special
charges in connection with the mergers and acquisitions, and (vii) any
extraordinary non-recurring items as described in Accounting Principles
Board Opinion No. 30 and/or in management's discussion and analysis of
financial condition and results of operation appearing or incorporated
by reference in the Corporation's Annual Report on Form 10-K filed with
the Securities and Exchange Commission for the applicable year.
(f) "OFFICER" shall mean an officer of the Corporation or of a
Subsidiary.
(g) "PARTICIPANT" shall mean an Officer selected to
participate in the Plan in accordance with section 4.1.
2
<PAGE> 3
(h) "PERFORMANCE CYCLE" shall mean the two, three, or four
calendar year period designated by the Committee.
(i) "QUALIFYING PERFORMANCE CRITERIA" shall mean any one or
more of the following performance criteria (either individually,
alternatively or in any combination, applied to either the Corporation
as a whole or to a business unit or subsidiary, either individually,
alternatively or in any combination, and measured over a period of
years, on an absolute basis or relative to a pre-established target to
previous years' results or to a designated comparison group, in each
case as specified by the Committee): (a) net income, (b) earnings per
share, (c) return on equity or return on average equity ("ROAE"), (d)
return on assets or return on average assets, (e) operating expenses as
a percentage of total revenues (known as the efficiency ratio). In all
cases, such amounts will be on either a reported basis or adjusted to
exclude the impact of intangible assets and related amortization
expense (referred to as "cash basis" or "tangible" results in order to
produce the highest Award) whichever will produce the higher Award.
(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.
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
3
<PAGE> 4
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
specified by the Committee 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 Performance Cycle (or no later than such earlier or later
date as may be the applicable deadline for any compensation payable to be
considered performance-based pursuant to Section 162(m)) and may select Officers
who are hired or promoted during a Performance Cycle to participate for the
remainder of the Performance Cycle. Selection to participate in this Plan in any
Performance Cycle does not require the Committee to, or imply that the Committee
will, select the same person to participate in the Plan in any subsequent
Performance Cycle.
PERFORMANCE CRITERIA AND GOALS, MAXIMUM AWARD
---------------------------------------------
5.1 During the first 90 days of each Performance Cycle (or no later
than such earlier or later date as may be the applicable deadline for any
compensation payable to be considered performance-based pursuant to Section
162(m)), the Committee shall establish written performance goals based on the
Qualifying Performance Criteria selected by the Committee for that Performance
Cycle. The Committee may select different Qualifying Performance Criteria for
different incentive
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<PAGE> 5
groups. Awards under the Plan shall be based upon the achievement of a
performance goal or goals during a Performance Cycle measured by the selected
Qualifying Performance Criteria.
5.2 Awards under the Plan shall be equal to a percentage of a
Participant's 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 Performance 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 (or no later than such earlier or later date
as may be the applicable deadline for any compensation payable to be considered
performance-based pursuant to Section 162(m)). Potential Awards may vary among
Participants in different incentive groups as determined by the Committee. For
an Officer who is selected to participate after the first 90 days of a
Performance 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 Qualifying Performance Criteria for that
Performance Cycle is below the minimum corporate performance goal established by
the Committee. Extraordinary Events shall either be excluded or included in
determining the extent to which the corresponding performance goal has been
achieved, whichever will produce the higher Award.
5.3 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 based on its evaluation of Extraordinary
Events and other factors. The Committee may not increase an Award payable
pursuant to the provisions of the Plan. Notwithstanding any other provision of
this Plan, the maximum individual Award payable under the Plan with respect to a
Performance Cycle shall be $4,000,000 (or the Corporation's Common Stock
equivalent), notwithstanding that
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<PAGE> 6
the Qualifying Performance Criteria for a Performance Cycle may exceed the
maximum performance goal.
PAYMENT OF AWARDS
-----------------
6.1 Awards will be made under the Plan in the form of shares of Common
Stock of the Corporation; provided, however, that the maximum number of shares
of Common Stock to be issued after January 1, 1999, 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 9.2 or 9.3 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
and other material terms of the Plan have been satisfied.
6.2 Except as provided in Sections 7.2 and 8.1--8.5 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.
6.3 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
may 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.
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<PAGE> 7
6.4 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.
TERMINATION OF EMPLOYMENT
-------------------------
7.1 Except as provided in Section 8.1 -- 8.5 hereof, 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 Performance Cycle.
7.2 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
------------------------------------
8.1 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 8.1 - 8.5 and any other section of the
Plan, the provisions of Sections 8.1 - 8.5 shall prevail.
8.2 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 Performance Cycle, no payment shall be made with
respect to that Performance Cycle.
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<PAGE> 8
(b) If the Change in Control occurs during the second year of a
Performance Cycle or thereafter, Participants shall receive
the full amount of the Award for that Performance Cycle based
upon the Qualifying Performance Criteria, as established by
the Committee for that Performance Cycle, determined using all
calendar years in such Performance Cycle completed prior to
the year of the Change in Control. Notwithstanding the above,
if the Change in Control occurs in the second year of a
Performance Cycle, the determination of the Qualifying
Performance Criteria used in calculating the amount the Award
shall include results under the Qualifying Performance
Criteria using the calendar year results for the two calendar
years immediately preceding the year of the Change in Control.
8.3 Notwithstanding Section 7.1 hereof, Participants whose employment
terminates following a Change in Control, either voluntarily or involuntarily,
shall receive payment of Awards in accordance with Section 8.2, unless such
termination was pursuant to the commission by the Participant of a felony or an
intentional act of fraud, embezzlement, or theft in connection with the
Participant's duties to the Corporation.
8.4 Notwithstanding Section 11.1 of the Plan, 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.
8.5 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,
any of the following have occurred:
(a) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) is or becomes the
8
<PAGE> 9
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Corporation representing 25% or more of the combined voting
power of the Corporation's then outstanding securities; or
(b) a majority of the Board of Directors of the Corporation at any
time is comprised of other than Continuing Directors (for
purposes of this section, the term "Continuing Director" means
a director who was either (i) first elected or appointed as a
Director prior to the date of this Agreement; or (ii)
subsequently elected or appointed as a director if such
director was nominated or appointed by at least a majority of
the then Continuing Directors); or
(c) any event or transaction if the Corporation would be required
to report it in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act; or
(d) Any of the following occurs: (i) a merger or consolidation of
the Corporation, other than a merger or consolidation in which
the voting securities of the Corporation immediately prior to
the merger or consolidation continue to represent (either by
remaining outstanding or being converted into securities of
the surviving entity) 51% or more of the combined voting power
of the Corporation or surviving entity immediately after the
merger or consolidation with another entity; (ii) a sale,
exchange, lease, mortgage, pledge, transfer, or other
disposition (in a single transaction or a series of related
transactions) of all or substantially all of the assets of the
Corporation which shall include, without limitation, the sale
of assets or earning power aggregating more than 50% of the
assets or earning power of the Corporation on a consolidated
basis; (iii) a liquidation or dissolution of the Corporation;
(iv) a
9
<PAGE> 10
reorganization, reverse stock split, or recapitalization of
the Corporation which would result in any of the foregoing; or
(v) a transaction or series of related transactions having,
directly or indirectly, the same effect as any of the
foregoing.
PURCHASE AND DELIVERY OF STOCK
------------------------------
9.1 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
no case shall a Participant be entitled to receive a fractional share.
9.2 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 dollar amount
of the Award to be made to that Participant, as provided in Section 5.2, 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 NASDAQ 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 the date on which the Committee
certifies (in accordance with Section 6.1) that the performance goals and any
other material terms were in fact satisfied, or if such date is not a trading
day, the next preceding trading day.
10
<PAGE> 11
9.3 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.
9.4 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.
-------------------------
10.1 GUIDELINES - From time to time the Committee may adopt written
guidelines for implementation and administration of the Plan and in conformity
with Section 162(m).
10.2 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.
10.3 UNFUNDED PLAN, RESTRICTIONS ON TRANSFER - It is intended that the
Plan be an "unfunded" plan for incentive compensation. The Committee may
authorize the use of Trusts or other
11
<PAGE> 12
arrangements to meet the obligations hereunder, provided, however, that unless
the Committee otherwise determines, the existence of such trusts or arrangements
are consistent with the "unfunded" status of the Plan. 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.
Participants and beneficiaries shall have only the rights of a general unsecured
creditor of the Corporation.
10.4 STATUS OF AWARDS UNDER SECTION 162(m) - It is the intent of the
Corporation that Awards granted to persons who are Covered Employees within the
meaning of Section 162(m) shall constitute "qualified performance-based
compensation" satisfying the requirements of Section 162(m). Accordingly, the
provisions of the Plan shall be interpreted in a manner consistent with Section
162(m). If any provision of the Plan or any agreement relating to such an Award
does not comply or is inconsistent with the requirements of Section 162(m), such
provision shall be construed or deemed amended to the extent necessary to
conform to such requirements.
10.5 DEFERRALS OF AWARDS - A Participant may elect to defer payment of
the Participant's Award under the Plan if deferral of an Award under the Plan is
permitted pursuant to the terms of a deferred compensation program established
by the Committee existing at the time the election to defer is permitted to be
made, and the Participant complies with the terms of such program. Deferred
payments may include, without limitation, provisions for the payment or
crediting of reasonable interest on installment or deferred payment or the
granting or crediting of dividend equivalents in respect of installment or
deferred payments in Common Stock of the Corporation.
12
<PAGE> 13
10.6 EXPENSES OF PLAN - The costs and expenses of administering the
Plan, including brokerage fees and commissions, if any, will be borne by the
Corporation.
10.7 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.
10.8 GOVERNING LAW - The Plan shall be governed by and construed
according to the laws of the State of Ohio.
AMENDMENT AND TERMINATION
-------------------------
11.1 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).
13
<PAGE> 1
Exhibit 21
- ----------
SUBSIDIARIES OF HUNTINGTON BANCSHARES INCORPORATED
--------------------------------------------------
The subsidiaries of Huntington Bancshares Incorporated, as of February 1, 1999,
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 Holding
Company (Indiana), 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.
(Delaware)**, FMB Insurance Agency, Inc. (Michigan), Huntington Insurance
Agency, Inc. (Kentucky), The Bank of Winter Park Mortgage Company (Florida),
Huntington Title Services, Inc. (Michigan), Huntington Title Services, Inc.
(West Virginia), and Huntington Merchant Services L.L.C. (Delaware)**,
Huntington Insurance Agency Services, Inc., Huntington Insurance Agency, Inc.
(Michigan), Huntington Property and Casualty Insurance Agency, Inc., and
Huntington Life Insurance Agency, Inc.
CB&T Capital Investment Company, Inc. (West Virginia)
Huntington Capital Corp.
Huntington Bancshares Financial Corporation
The Huntington National Life Insurance Company (Arizona)**
Huntington Bancshares Ohio, Inc.
Huntington Bancshares Florida, Inc.
The Huntington Service Company
The Huntington Community Development Corporation
Security First Technologies Corporation (Delaware) and its direct subsidiary,
Security First Technologies, Inc. (Kentucky)*
Money Station, Inc.**
Heritage Service Corporation
Huntington Capital I (Delaware)
Huntington Capital II (Delaware)
1
<PAGE> 2
Superior Financial Corporation (Michigan)
First Michigan Life Insurance Company (Arizona)
The Huntington Capital Investment Company
The Huntington Real Estate Investment Company
* - Huntington owns less than a 5% voting interest in Security First
Technologies Corporation, 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.
** - Less than 100% owned.
2
<PAGE> 1
Exhibit 23 (a)
- --------------
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
We consent to the incorporation by reference in Post-Effective Amendment No. 1
to Registration Statement No. 33-44208 dated April 1, 1998, Post-Effective
Amendment No. 1 to Registration Statement No. 33-46327 dated April 1, 1998,
Registration Statement No. 33-52553 dated March 8, 1994, Registration Statement
No. 33-59068 dated March 12, 1993, Registration Statement No. 33-41774 dated
July 19, 1991, Post-Effective Amendment No. 2 to Registration Statement No.
33-10546 dated January 28, 1991, Registration Statement No. 33-38784 dated
January 28, 1991, Registration Statement No. 33-37373 dated October 18, 1990,
and Registration Statement No. 2-89672 dated February 27, 1984, all on Form S-8,
and Post-Effective Amendment No. 2 to Registration Statement No. 33-52569 dated
September 25, 1998, Registration Statement No. 33-63175 dated October 3, 1995,
both on Form S-3, and Registration Statement Nos. 333-53579, 333-53579-01,
333-53579-02, 333-53579-03, 333-53579-04, and 333-53579-05 all on Form S-3 dated
May 26, 1998 and amended June 5, 1998 of our report dated January 13, 1999, with
respect to the consolidated financial statements of Huntington Bancshares
Incorporated included in this Annual Report on Form 10-K for the year ended
December 31, 1998, filed with the Securities and Exchange Commission.
s/ ERNST & YOUNG LLP
Columbus, Ohio
February 19, 1999
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM HUNTINGTON BANCSHARES INCORPORATED'S FORM 10 K, ITEM 8.
FOR THE YEAR ENDED DECEMBER 31, 1998, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,215,814
<INT-BEARING-DEPOSITS> 102,564
<FED-FUNDS-SOLD> 135,764
<TRADING-ASSETS> 3,839
<INVESTMENTS-HELD-FOR-SALE> 4,781,415
<INVESTMENTS-CARRYING> 24,934
<INVESTMENTS-MARKET> 25,044
<LOANS> 19,921,215
<ALLOWANCE> 290,948
<TOTAL-ASSETS> 28,296,336
<DEPOSITS> 19,722,772
<SHORT-TERM> 2,216,644
<LIABILITIES-OTHER> 660,866
<LONG-TERM> 707,359
0
0
<COMMON> 2,152,076
<OTHER-SE> (3,281)
<TOTAL-LIABILITIES-AND-EQUITY> 28,296,336
<INTEREST-LOAN> 1,641,081
<INTEREST-INVEST> 323,595
<INTEREST-OTHER> 34,688
<INTEREST-TOTAL> 1,999,346
<INTEREST-DEPOSIT> 672,433
<INTEREST-EXPENSE> 978,271
<INTEREST-INCOME-NET> 1,021,093
<LOAN-LOSSES> 105,242
<SECURITIES-GAINS> 29,793
<EXPENSE-OTHER> 913,929
<INCOME-PRETAX> 440,122
<INCOME-PRE-EXTRAORDINARY> 440,122
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 301,768
<EPS-PRIMARY> 1.43
<EPS-DILUTED> 1.41
<YIELD-ACTUAL> 4.28
<LOANS-NON> 72,429
<LOANS-PAST> 51,037
<LOANS-TROUBLED> 4,706
<LOANS-PROBLEM> 27,096
<ALLOWANCE-OPEN> 258,171
<CHARGE-OFFS> 126,355
<RECOVERIES> 31,848
<ALLOWANCE-CLOSE> 290,948
<ALLOWANCE-DOMESTIC> 255,332
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 35,616
</TABLE>
