1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995MARCH 31, 1996
Commission File Number 0-2525
HUNTINGTON BANCSHARES INCORPORATED
MARYLAND 31-0724920
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
41 SOUTH HIGH STREET, COLUMBUS, OHIO 43287
Registrant's telephone number (614) 480-8300
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
----- -----=== ===
There were 133,642,449132,891,485 shares of Registrant's without par value common stock
outstanding on October 31, 1995.April 30, 1996.
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PART I. FINANCIAL INFORMATION
1. FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------
Part I. Financial Information
1. Financial Statements
- --------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- ----------------------------------------------------------------------------------------------------------
(in thousands of dollars) September 30, DecemberMARCH 31, September 30,DECEMBER 31, MARCH 31,
1996 1995 1994 19941995
------------ ------------- ------------ ------------------------
ASSETS
Cash and due from banks ................................ $ 852,399 $ 885,327 $ 832,696banks.................................. $789,092 $860,958 $896,514
Interest bearing deposits in banks ..................... 1,259 3,059 2,168banks....................... 1,666 284,393 1,366
Trading account securities ............................. 19,135 9,427 22,319securities............................... 13,466 12,924 25,558
Federal funds sold and securities
purchased under resale agreements ................. 276,747 5,329 281,800agreements................... 5,833 197,531 21,125
Mortgages held for sale ................................ 156,051 138,997 191,274sale.................................. 155,528 159,705 117,404
Securities available for sale - at fair value .......... 4,290,570 3,304,493 2,733,266value............ 4,954,577 4,721,144 3,442,958
Investment securities - fair value $419,773; $474,147$75,392 ; $69,196;
and $491,767, respectively ........................ 416,236 475,692 488,291$453,454, respectively......................... 74,213 67,604 452,054
Total loans (1) ........................................ 13,457,831 12,264,436 11,871,412.......................................... 13,369,308 13,261,667 12,817,663
Less allowance for loan losses .................... 198,573 200,492 205,964losses...................... 197,375 194,456 201,088
----------- ------------------------ -----------
Net loans .............................................. 13,259,258 12,063,944 11,665,448loans................................................ 13,171,933 13,067,211 12,616,575
----------- ------------------------ -----------
Premises and equipment ................................. 296,708 288,793 287,897equipment................................... 310,985 296,465 294,512
Customers' acceptance liability ........................ 59,785 53,883 64,249liability.......................... 68,312 56,926 61,300
Accrued income and other assets ........................ 544,982 541,696 420,510assets.......................... 592,377 529,737 491,168
----------- ------------------------ -----------
TOTAL ASSETS ........................................... $20,173,130 $17,770,640 $16,989,918ASSETS............................................. $20,137,982 $20,254,598 $18,420,534
=========== ======================== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Total deposits (1) ..................................... $12,544,500 $11,965,067 $11,602,246....................................... $13,006,213 $12,636,582 $12,188,579
Short-term borrowings .................................. 4,047,206 2,898,201 2,661,627borrowings.................................... 3,150,974 3,514,773 3,088,467
Bank acceptances outstanding ........................... 59,785 53,883 64,249outstanding............................. 68,312 56,926 61,300
Long-term debt ......................................... 1,622,411 1,214,052 1,088,134debt........................................... 1,985,806 2,103,024 1,253,032
Accrued expenses and other liabilities ................. 416,429 227,617 171,841liabilities................... 424,167 424,428 319,527
----------- ------------------------ -----------
Total Liabilities ................................. 18,690,331 16,358,820 15,588,097Liabilities................................... 18,635,472 18,735,733 16,910,905
----------- ------------------------ -----------
Shareholders' equity
Preferred stock - authorized 6,617,808 shares;
none outstanding
Common stock - without par value; authorized
200,000,000 shares; issued and outstanding
141,394,248; 131,119,504;141,402,769; 141,402,769 ; and 130,540,584134,400,331
shares, respectively ......................... 1,056,146 912,318 902,427respectively........................... 1,056,209 1,056,209 914,020
Less 6,877,908; 904,739;8,392,446; 8,351,978; and 1,130,0541,215,779
treasury shares, respectively ................ (144,262) (16,577) (22,952)respectively.................. (193,213) (180,632) (22,168)
Capital surplus ................................... 235,661 215,084 217,056surplus..................................... 241,079 235,802 235,184
Net unrealized (losses) gains (losses) on securities
available for sale ........................... 7,162 (63,289) (33,577)sale............................. (3,954) 40,972 (17,806)
Retained earnings ................................. 328,092 364,284 338,867earnings................................... 402,389 366,514 400,399
----------- ------------------------ -----------
Total Shareholders' Equity ........................ 1,482,799 1,411,820 1,401,821Equity.......................... 1,502,510 1,518,865 1,509,629
----------- ------------------------ -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............. $20,173,130 $17,770,640 $16,989,918EQUITY............... $20,137,982 $20,254,598 $18,420,534
=========== ============= ===========
===========
See notes to consolidated financial statements.
(1) See page 8
See notes to consolidated financial statements.
(1) See page 7 for detail of total loans and total deposits.
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CONSOLIDATED STATEMENTS OF INCOME
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
(in thousands of dollars, except per share amounts) THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
1995 1994 1995 1994MARCH 31,
Interest and fee income -------------------------------- -------------------------------1996 1995
----------------------------
Loans ........................................ $ 290,129 $ 273,109
Securities ................................... $296,472 $248,330 $ 857,639 $716,340
Investment securities..................... 7,284 8,528 22,690 23,318
Securities available for sale ............ 70,410 38,308 188,469 133,281
Mortgages held for sale .................. 3,351 4,149 7,628 23,61080,653 65,370
Other .................................... 342 2,409 4,033 4,297
----------- ----------- ----------- -----------........................................ 3,514 3,918
------------ ------------
TOTAL INTEREST INCOME .............. 377,859 301,724 1,080,459 900,846
----------- ----------- ----------- -----------374,296 342,397
------------ ------------
Interest Expense
Deposits ................................. 111,549 74,485 313,207 212,112..................................... 113,535 95,506
Short-term borrowings .................... 57,054 27,297 156,763 70,993........................ 44,537 47,514
Long-term debt ........................... 22,678 16,391 67,812 38,941
----------- ----------- ----------- -----------............................... 31,506 23,168
------------ ------------
TOTAL INTEREST EXPENSE .............. 191,281 118,173 537,782 322,046
----------- ----------- ----------- -----------............. 189,578 166,188
------------ ------------
NET INTEREST INCOME ................. 186,578 183,551 542,677 578,800
----------- ----------- ----------- -----------................ 184,718 176,209
------------ ------------
Provision for loan losses .................. 7,187 1,113 16,582 12,796
----------- ----------- ----------- -----------......................... 11,823 4,608
------------ ------------
NET INTEREST INCOME
AFTER PROVISION FOR LOAN LOSSES .... 179,391 182,438 526,095 566,004
----------- ----------- ----------- -----------172,895 171,601
------------ ------------
Total non-interest income (1)............... 61,204 53,793 180,029 171,444 ..................... 68,162 57,887
Total non-interest expense (1).............. 138,850 151,356 426,957 449,990
----------- ----------- ----------- ----------- .................... 143,496 144,641
------------ ------------
INCOME BEFORE INCOME TAXES ........ 101,745 84,875 279,167 287,458......... 97,561 84,847
Provision for income taxes.................. 35,808 28,973 100,207 97,361
----------- ----------- ----------- -----------taxes ........................ 34,736 29,985
------------ ------------
NET INCOME ........................................... $ 65,93762,825 $ 55,902 $ 178,960 $190,097
=========== =========== =========== ===========54,862
============ ============
PER COMMON SHARE (2)
Net income ............................ $0.48 $0.41 $1.29 $1.40................................... $ 0.47 $ 0.39
Cash dividends declared................ $0.20 $0.19 $0.58 $0.49declared ...................... $ 0.20 $ 0.19
AVERAGE COMMON SHARES OUTSTANDING .......... 137,182,768 136,107,853 139,112,764 136,257,881
See notes to consolidated financial statements.
(1) See page 9................. 135,054,096 140,192,042
See notes to consolidated financial statements.
(1) See page 8 for detail of non-interest income and non-interest expense.
(2) Adjusted for the five percent stock dividend distributed July 31, 1995.
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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)-----------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) NET
UNREALIZED
GAINS
(LOSSES)
COMMON COMMON TREASURY TREASURY CAPITAL (LOSSES) ON RETAINED
SHARES STOCK SHARES STOCK SURPLUS SECURITIES EARNINGS TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ------- ------------ -------- ---------- -------- -------- -------- -----------
Three Months Ended March 31, 1995:
Nine Months Ended September 30, 1994:
BALANCE, BEGINNING
OF PERIOD ............... 104,411Balance, beginning of period 131,120 $ 902,107 (608) $ (15,290) $216,168 -- $ 221,652 $1,324,637
Change in
accounting method912,318 (905) ($ 16,577) $215,084 ($63,289) $364,284 $1,411,820
Stock issued for securities ....... $ 65,548 1,624 67,172acquisition 3,279 1,690 19,947 (985) 8,474 29,126
Net income ............. 190,097 190,09754,862 54,862
Cash dividends declared
($.49.19 per share) .... (67,447) (67,447)
Five-for-four
stock split ......... 26,088 (160)(25,986) (25,986)
Stock options exercised ........... 279 6,394 721 (5,470) 1,64519 337 116 (398) 55
Treasury shares purchased ........... (1,798) (42,127) (42,127)(957) (17,331) (17,331)
Treasury shares sold:
Shareholder dividend reinvestment plan .. 752 18,417 30 (1,298) 17,149425 7,780 6 (792) 6,994
Employee stock purchase
and otherbenefit plans ... 405 9,654 137 (291) 9,500202 3,623 31 (45) 3,609
Conversion of convertible notes ............. 41 320 3201 12 12
Change in net unrealized gains (losses)
on securities available for sale ............ (99,125) (99,125)46,468 46,468
-------- ----------- -------- --------- ------- --------- --------- -------- --------- -----------
BALANCE, END OF PERIOD ... 130,540 $902,427 (1,130) $(22,952) $217,056 $(33,577) $338,867 $1,401,821-------- -------- ----------
Balance, end of period 134,400 $ 914,020 (1,216) ($ 22,168) $235,184 ($17,806) $400,399 $1,509,629
======== =========== ======== ========= ======= ========= ========= ======== ========= ===========
Nine======== ======== ==========
Three Months Ended September 30, 1995:
BALANCE, BEGINNING
OF PERIOD .............. 131,120March 31, 1996:
Balance, beginning of period 141,403 $ 912,318 (905)1,056,209 (8,352) ($180,632) $235,802 $ (16,577) $215,084 $ (63,289) $ 364,284 $1,411,82040,972 $366,514 $1,518,865
Stock issued for acquisitions ....... 3,510 3,434 20,061 (985) 8,474 30,984acquisition 4,733 102,760 5,037 107,797
Net income ........... 178,960 178,96062,825 62,825
Cash dividenddividends declared
($.58.20 per share) ... (79,852) (79,852)
5% stock dividend .... 6,732 140,146 (45) (140,272) (126)(26,950) (26,950)
Stock options exercised ........... 184 3,233 76 (2,342) 96719 376 (298) 78
Treasury shares purchased ........... (7,726) (159,368) (159,368)(5,189) (124,313) (124,313)
Treasury shares sold:
Shareholder dividend reinvestment plan .............. 1,213 21,434 310 (1,114) 20,630326 7,050 390 7,440
Employee stock purchase
and otherbenefit plans ... 401 7,016 130 (46) 7,100
Conversion of convertible
notes ................ 32 248 24871 1,546 148 1,694
Change in net unrealized gains (losses)
on securities available for sale ... 71,436 71,436(44,926) (44,926)
-------- ----------- -------- --------- ------- --------- --------- -------- --------- -----------
BALANCE, END OF PERIOD .... 141,394 $1,056,146 (6,878)-------- -------- ----------
Balance, end of period 141,403 $ (144,262) $235,661 $ 7,162 $328,092 $1,482,7991,056,209 (8,392) ($193,213) $241,079 ($ 3,954) $402,389 $1,502,510
======== =========== ======== ========= ======= ========= ========= ======== ========= =================== ======== ==========
See notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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- ----------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
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(in thousands of dollars) NINETHREE MONTHS ENDED SEPTEMBER 30,MARCH 31,
1996 1995
1994
----------------------- -------------
OPERATING ACTIVITIES
OPERATING ACTIVITIES
Net Income.......................................................Income ........................................................... $ 178,96062,825 $ 190,09754,862
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses................................... 16,582 12,796
Provision for other real estate............................. (2,263) (2,889)losses .................................. 11,823 4,608
Provision for depreciation and amortization................. 47,182 66,378amortization ................ 21,178 14,364
Deferred income tax expense................................. 18,034 24,500(benefit) expense ...................... (66) 814
Increase in trading account securities...................... (9,708) (355)
(Increase) decreasesecurities ..................... (542) (16,131)
Decrease in mortgages held for sale.............. (17,054) 841,064sale ........................ 4,177 21,593
Net gains on sales of securities available for sale......... (8,142) (2,545)
Net gains on calls of investment securities................. (612) (104)
(Increase) decrease........................... (7,090) (60)
Decrease (increase) in accrued income receivable............ (26,900) 13,060receivable ........... 1,199 (3,590)
Net (increase) decrease in other assets..................... (28,534) 52,387assets ............................... 506 14,020
Increase (decrease) in accrued expenses..................... 114,417 (29,411)expenses .................... 20,968 (3,703)
Net (decrease) increase (decrease) in other liabilities................ 16,953 (67,736)
---------- ----------liabilities ............... (374) 71,222
----------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES........... 298,915 1,097,242
---------- ----------ACTIVITIES .......... 114,604 157,999
----------- ---------
INVESTING ACTIVITIES
Decrease in interest bearing deposits in banks.................. 1,800 10,442banks ....................... 282,927 1,693
Proceeds from:from :
Maturities and calls of investment securities........................... 27,106 20,797securities .................... 6,061 24,091
Maturities of securities available for sale................... 212,750 239,777
Calls of investment securities................................ 34,686 44,459
Sales and calls of securities available for sale.............. 2,388,018 2,195,640
Purchases of:
Investment securities......................................... (2,660) (222,352)
Securitiessale ............ 69,208 109,170
Sales of securities available for sale................................. (3,377,820) (1,356,416)sale ........................... 1,032,686 603,745
Purchases of securities available for sale ........................... (1,060,567) (664,461)
Proceeds from sales of loans ......................................... 35,657 --
Net loan originations............................................. (1,071,526) (952,145)originations, excluding sales ............................... (37,302) (423,254)
Proceeds from disposal of premises and equipment.................. 2,344 833equipment ..................... 522 111
Purchases of premises and equipment............................... (23,255) (19,511)equipment .................................. (11,769) (5,498)
Proceeds from sales of other real estate.......................... 26,446 26,968estate ............................. 2,299 18,244
Net cash received from purchase/salepurchase of subsidiaries.............. 148,490 --
---------- ----------
NET CASH USED FOR INVESTING ACTIVITIES................ (1,633,621) (11,508)
---------- ----------
FINANCING ACTIVITIES
Increase (decrease) in total deposits........................... 231,223 (424,786)
Increase (decrease) in short-term borrowings.................... 1,144,187 (533,836)
Proceeds from issuance of long-term debt........................ 590,000 350,000
Payment of long-term debt....................................... (181,565) (26,415)
Dividends on common stock....................................... (59,348) (50,298)
Acquisition of treasury stock................................... (159,368) (42,127)
Sales of treasury stock......................................... 7,100 9,500
Proceeds from exercise of stock options......................... 967 1,645
---------- ----------subsidiaries ...................... 631 33,463
----------- ---------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES 320,353 (302,696)
----------- ---------
FINANCING ACTIVITIES.. 1,573,196 (716,317)
---------- ----------ACTIVITIES
Decrease in total deposits ........................................... (61,715) (20,322)
(Decrease) increase in short-term borrowings ......................... (377,841) 185,448
Proceeds from issuance of long-term debt ............................. 200,000 50,000
Payment of long-term debt ............................................ (317,275) (11,065)
Dividends paid on common stock ....................................... (26,589) (25,708)
Acquisition of treasury stock ........................................ (124,313) (17,331)
Proceeds from issuance of treasury stock ............................. 9,212 10,658
----------- ---------
NET CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES (698,521) 171,680
----------- ---------
CHANGE IN CASH AND CASH EQUIVALENTS................... 238,490 369,417EQUIVALENTS ................ (263,564) 26,983
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD......PERIOD ... 1,058,489 890,656
745,079
---------- --------------------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............ $1,129,146 $1,114,496
========== ==========PERIOD ......... $ 794,925 $ 917,639
=========== =========
See notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A. The accompanying unaudited consolidated financial statements reflect all
adjustments (consisting of normal recurring accruals) which are, in the opinion
of management, necessary for a fair presentation of the results for the interim
periods. The Notes to the Consolidated Financial Statements appearing in
Huntington's 19941995 Annual Report to Shareholders should be read in conjunction
with these interim financial statements.
B. On January 1, 1995,1996, Huntington adopted Financial Accounting Standards Board
Statement No. 114,121, "Accounting by Creditors for the Impairment of a Loan"Long-Lived Assets and for
Long-Lived Assets to be Disposed of" (FAS 114), as amended by FAS 118. Under121). The Statement prescribes the
accounting for the impairment of long-lived assets and goodwill related to those
assets. The new rules specify when assets should be reviewed for impairment, how
to determine whether an asset or group of assets is impaired, how to measure an
impairment loss, and what financial statement disclosures are necessary. Also
prescribed is the 1995 allowanceaccounting for loan
losses relatedlong-lived assets and identifiable intangibles
that a company plans to loansdispose of, other than those that are identified for evaluation in accordance with
FAS 114part of a
discontinued operation. Any impairment of a long-lived asset resulting from
management's review is based on discounted cash flows using the loan's initial effective
interest rate or the fair value of the collateral for collateral-dependent
loans. Prior to 1995, the allowance for loan losses related to these loans was
based on undiscounted cash flows or the fair value of the collateral for
collateral-dependent loans. Huntington uses the cost recovery method in
accounting for cash received on non-accrual loans. Under this method, cash
receipts are generally applied entirely against principal until the loan has
been collected in full, after which time any additional cash receipts arebe recognized as interest income.
Under FAS 114, $20.7 milliona component of non-performing loans presented in the
table on page 23 of this report are considered impaired. Included in this
amount is $13.3 million of impaired loans for which the related allowance for
loan losses is $7.9 million and $7.4 million of impaired loans that as a result
of write-downs do not have an allowance for loan losses.
As more fully described in Management's Discussion and Analysis,
Huntington also adopted FAS 122, "Accounting for Mortgage Servicing Rights", in
the third quarter of 1995.non-interest expense.
The adoption of FAS 122121 did not have a material effect on Huntington's
consolidated financial statements.
C. Huntington acquired Security National Corporation (Security)Peoples Bank of Lakeland (Lakeland), a $189$551 million
one-bank holding company headquartered in Maitland, Florida on May 1,
1995, and Reliance Bank of Florida (Reliance), a $98 millioncommercial bank headquartered in Melbourne,Lakeland, Florida, on May 16, 1995.January 23, 1996.
Huntington paid $46.2 million in cash and issued approximately 3.54.7 million
shares of common stock in exchange for all the common stock of Security
and Reliance. Prior year financial statements were not restated for these
immaterial pooling-of-interests transactions. On July 16, 1995, Huntington
consummated the acquisition of First Seminole Bank (First Seminole), a $51
million bank headquartered in Lake Mary, Florida. Huntington paid cash of $8.4
million for all of the stock of First Seminole in aLakeland. The
transaction was accounted for as a purchase.
In August 1995, Huntington entered into a merger agreement with Peoples
Bankpurchase; accordingly, the results of
Lakeland (Peoples), a $534 million commercial bank headquarteredhave been included in Lakeland, Florida. Huntington is to exchange a combinationthe consolidated financial statements from the
date of its common stock
and cash for the outstanding common stock of Peoples in a purchase transaction.
The acquisition is expected to be completed in January 1996, subject to approval
by Peoples shareholders and applicable regulatory authorities.
6
7acquisition.
D. Per common share amounts have been calculated based on the weighted average
number of common shares outstanding in each period, adjusted for the five
percent stock dividend issued July 31, 1995. The dilutive effects of unexercised
stock options and convertible debentures were not significant for any period
presented.
E. Certain amounts in the prior year's financial statements have been
reclassified to conform with the 19951996 presentation. These reclassifications had
no effect on net income.
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FINANCIAL REVIEW
- ------------------------------------------------------------
LOAN PORTFOLIO COMPOSITION
- ------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
LOAN PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------------------------------------------------------------------------------------
(in thousands of
dollars) SEPTEMBER 30,MARCH 31, DECEMBER 31, SEPTEMBER 30,MARCH 31,
1996 1995 1994 1994
------------- ------------ -------------1995
----------- ----------- -----------
Commercial ....................................Commercial................................. $ 4,106,7634,243,363 $ 3,610,8924,190,237 $ 3,566,660
Tax-free ...................................... 53,539 58,006 60,4033,962,921
Real Estate
Construction.............................. 364,721 304,769 286,999
Commercial................................ 1,540,534 1,378,398 1,373,936
Residential............................... 1,546,754 1,624,367 1,465,988
Consumer ...................................... 5,059,492 4,641,946 4,523,251Estate................................
Construction.......................... 374,178 367,889 325,736
Commercial............................ 1,614,090 1,578,891 1,457,381
Residential........................... 1,148,113 1,176,715 1,668,562
Consumer................................... 5,078,645 5,094,036 4,726,277
Lease financing................................ 786,028 646,058 594,175financing............................ 910,919 853,899 676,786
----------- ----------- -----------
TOTAL LOANS............................... $13,457,831 $12,264,436 $11,871,412LOANS .......................... $13,369,308 $13,261,667 $12,817,663
=========== =========== ===========
- ------------------------------------------------------------
DEPOSIT COMPOSITION
- ------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
DEPOSIT COMPOSITION
- --------------------------------------------------------------------------------------------------
(in thousands of dollars) SEPTEMBER 30,MARCH 31, DECEMBER 31, SEPTEMBER 30,MARCH 31,
1996 1995 1994 1994
------------- ------------ -------------1995
----------- ----------- -----------
Demand deposits
Non-interest bearing ...................................... $ 1,989,6242,010,396 $ 2,169,0952,088,074 $ 2,062,8062,147,204
Interest bearing ......................... 2,686,800 2,646,785 2,632,437..................... 2,873,281 2,772,845 2,553,270
Savings deposits .............................. 2,118,333 2,227,406 2,308,881.......................... 2,486,925 2,207,378 2,134,725
Certificates of deposit of $100,000 or more.... 916,157 605,763 582,991more 990,825 909,403 725,822
Other domestic time deposits .................. 4,523,528 3,909,061 3,589,791.............. 4,447,207 4,384,949 4,356,152
Foreign time deposits ................ 310,058 406,957 425,340..................... 197,579 273,933 271,406
----------- ----------- -----------
TOTAL DEPOSITS .................. $12,544,500 $11,965,067 $11,602,246....................... $13,006,213 $12,636,582 $12,188,579
=========== =========== ===========
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98
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FINANCIAL REVIEW
- --------------------------------------------------------------------------------
ANALYSIS OF NON-INTEREST INCOME
- --------------------------------------------------------------------------------
(in thousands of dollars) THREE MONTHS ENDED
NINE MONTHS ENDED
SEPTEMBER 30,MARCH 31, PERCENT
SEPTEMBER 30, PERCENT1996 1995 1994 CHANGE 1995 1994 CHANGE
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Service charges on deposit accounts.... $21,109 $19,628 7.55% $ 64,110 $ 57,419 11.65%accounts $22,461 $22,514 (0.24)%
Mortgage banking ...................... 9,678 9,246 4.67 28,278 41,737 (32.25).................. 8,877 9,573 (7.27)
Trust services ........................ 7,312 6,732 8.62 22,953 21,762 5.47.................... 8,793 8,055 9.16
Securities gains .................. 7,090 60 N.M.
Credit card fees ...................... 5,939 5,846 1.59 16,305 15,126 7.79
Securities gains ...................... 2,315 648 N.M. 8,754 2,649 N.M................... 4,836 3,945 22.59
Investment product sales .............. 2,159 1,694 27.45 5,829 5,317 9.63.......... 3,239 1,699 90.64
Electronic banking fees ........... 1,666 954 74.63
Other ................................. 12,692 9,999 26.93 33,800 27,434 23.20............................. 11,200 11,087 1.02
------- ------- -------- --------
TOTAL NON-INTEREST INCOME ............. $61,204 $53,793 13.78% $180,029 $171,444 5.01%......... $68,162 $57,887 17.75%
======= ======= ======== ========
- --------------------------------------------------------------------------------
ANALYSIS OF NON-INTEREST EXPENSE
- --------------------------------------------------------------------------------
(in thousands of dollars) THREE MONTHS ENDED
NINE MONTHS ENDED
SEPTEMBER 30,MARCH 31, PERCENT
SEPTEMBER 30, PERCENT1996 1995 1994 CHANGE 1995 1994 CHANGE
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Salaries ........................................................ $ 54,39155,819 $ 57,740 (5.80)% $165,473 $172,354 (3.99)56,108 (0.52)%
Commissions ........................... 3,074 3,547 (13.34) 6,694 9,252 (27.65)....................... 3,607 1,688 113.68
Employee benefits ..................... 13,958 13,388 4.26 45,038 45,067 (0.06)................. 17,216 15,661 9.93
Net occupancy ..................... 10,874 10,686 1.76
Equipment ......................... 10,039 10,593 (5.23) 30,804 30,329 1.57
Equipment ............................. 9,470 9,651 (1.88) 28,865 28,641 0.78
FDIC insurance ........................ 5,807 5,992 (3.09) 18,892 19,053 (0.85)9,614 9,802 (1.92)
Credit card ....................... 3,572 3,118 14.56
Printing and supplies ................. 3,508 3,734 (6.05) 10,442 10,910 (4.29)
Credit card ........................... 3,398 3,777 (10.03) 9,712 10,067 (3.53)............. 3,495 3,572 (2.16)
Advertising ........................... 3,149 2,684 17.32 9,092 11,168 (18.59)....................... 2,865 3,031 (5.48)
Legal and loan collection.............. 1,857 1,719 8.03 5,885 4,928 19.42collection.......... 1,894 2,123 (10.79)
FDIC insurance .................... 519 6,536 (92.06)
Other ................................. 30,199 38,531 (21.62) 96,060 108,221 (11.24)
-------- --------............................. 34,021 32,316 5.28
-------- --------
TOTAL NON-INTEREST EXPENSE............. $138,850 $151,356 (8.26)% $426,957 $449,990 (5.12)EXPENSE......... $143,496 $144,641 (0.79)%
======== ========
======== ========
N.M. - Not meaningful
9
8
10
2.9
Management's Discussion and Analysis
- ------------------------------------
OVERVIEW
Huntington reported net income of $65.9$62.8 million, or $.48$.47 per share, for
the thirdfirst quarter of 19951996 compared with $55.9$54.9 million, or $.41$.39 per share, for
the same period last year. For the first nine months of the year, net income was
$179.0 million, or $1.29Though Huntington anticipates earnings per share versus $190.1 million, or $1.40 per share,for
all of 1996 to exceed the previous year, the 20.5% increase in the first nine months of 1994.
Huntington achieved returns on average assets (ROA) of 1.34% and 1.27%
in the third quarter
and first nine months, respectively, of 1995 and returns on
average equity (ROE) of 17.03% and 15.75% in these same periods. ROA was 1.35%
and 1.53% and ROE was 15.77% and 18.14%is higher than what is expected for the comparable periodsentire year due to net income in 1994.
The increase in earnings for the recent quarter compared with the same
three months of last year is principally the result of Huntington's strong loan
growth and effective management of non-interest expenses. This improvement
follows the downturn in earnings experienced by Huntington during the
second half of 19941995 being much stronger than last year's first six months.
Returns on average assets and representsaverage equity were 1.26% and 16.02%,
respectively, in the third consecutivemost recent quarter versus 1.23% and 15.08% in the first
three months of increased net
income. Huntington also continues to benefit from its exceptional asset quality
and solid capital position.1995.
Total assets were $20.2$20.1 billion at September 30, 1995,March 31, 1996, relatively flat with
year end but up 13.5% from
December 31, 1994, and 18.7%9.3% from one year ago. Average total loans grew to
$13.2 billion forIn terms of asset composition, the third quarter of the year, compared with $11.7 billion for
the same period last year. Securities available for sale were $4.3 billion at
the most
recent quarter end versus $2.7 billion at September 30, 1994. This
increasebalance sheet reflects a large decrease in temporary
investments from December 31, 1995, that was substantially offset by increases
in securities and loans arising from the acquisition of Peoples Bank of
Lakeland, Florida (Lakeland) in January 1996. The growth in investments from the
first quarter of 1995 was the result of programs directed by Huntington's
Asset/Liability Management Committee (ALCO) in the second half of last year to
neutralize the interest rate risk exposure arising from customer-driven business
sectors. Huntington also experienced solid loan growth over the past twelve
months. Excluding the effects of $340 million of principally fixed-rate
residential mortgage loans that were sold in the recent two quarters, average
total loans increased 8.2%.
Total deposits at September 30,grew 2.9% from year-end 1995, of $12.5 billion were higher than
both December 31 and September 30, 1994, principallyin large part because of
bank
acquisitions consummated during 1995the Lakeland acquisition, and an increase in6.7% from the same time deposits of
$100,000 or more. The mix of deposits has also changed, as retail customers have
shifted their investment preferences, opting for the higher yields available
through certificates of deposit.one year ago. Huntington's
short-term and long-term borrowings are up from a year ago, largelydecreased during the quarter just ended as a
result of the reduced temporary
9
10
investments referred to above. Borrowings have increased purchasesfrom the end of term federal funds and additionalthe
first quarter of last year because of bank notes issued by its lead subsidiary,Huntington and other
funds obtained in the wholesale market to support the higher asset base.
Huntington issued 4.7 million common shares and paid cash of $46.2
million in exchange for all of Lakeland's common shares outstanding. As the
business combination was recorded under the purchase method of accounting, the
results of Lakeland have been included in the consolidated financial statements
from the date of acquisition. The Huntington National Bank.$551 million of assets arising from the
Lakeland transaction brings Huntington's total assets in Central and West Coast
Florida to $1.2 billion.
Shareholders' equity was $1.5 billion atflat with both December 31 and March 31, 1995.
Huntington continues to maintain an appropriate balance between capital adequacy
and returns to shareholders. A primary tool used by management in this regard
has been the common stock repurchase program. At the most recent quarter end.quarter-end,
Huntington's regulatory capital ratios, including those of its bank
subsidiaries, show continued strength and exceedexceeded the levels established for well-capitalized institutions.
10
11(See "Capital" section for further information).
RESULTS OF OPERATIONS
NET INTEREST INCOME
For the quarter ended September 30, 1995,
Huntington reported net interest income of $186.6$184.7 million for the three
months ended March 31, 1996, up from $176.2 million in the same period of 1995.
The increase was principally attributable to growth in earning assets of 10.2%.
The net interest margin was 4.03% during the recent quarter, 5 basis points
higher than the immediately preceding quarter but 23 basis points less than the
first three months of 1995. The lower margin from one year ago was
10
11
the result of increased deposit rates (partially offset by reduced wholesale
funding rates), a reduced yield on the investment securities portfolio, and a
change in the mix of earning assets.
For the quarter just ended, interest rate swaps and other off-balance
sheet financial instruments used for asset/liability management purposes reduced
interest income by $9.1 million and increased interest expense by $6.0 million.
These products decreased interest income by $4.5 million and increased interest
expense by $7.0 million in the same period one year ago. Included in the
preceding amounts is amortization of deferred gains and losses from terminated
contracts, that decreased net interest income by $10.2 million in 1996 and $3.9
million in 1995. Expressed in terms of the margin, the effect of the off-balance
sheet portfolio was a reduction of 33 basis points and 28 basis points for the
respective quarters ended March 31, of which 21 basis points and 10 basis points
related to amortization of net losses from closed positions. A swap strategy
used by Huntington to create synthetic fixed rate wholesale liabilities, while
lowering funding costs from what would have resulted from a comparable cash
instrument, resulted in the majority of the remaining margin reduction
attributable to the off-balance sheet portfolio.
NON-INTEREST INCOME
Non-interest income, excluding securities transactions, was $61.1
million for the first three months of 1996 compared with $183.6$57.8 million during
the same period one year ago. The 5.7% increase was driven by higher fee income
from retail investment sales, credit cards, trust, and electronic banking
services.
Mortgage banking income was $8.9 million in the first quarter of 1996
versus $9.6 million for the quarter ended March 31, 1995. Net servicing fees
were down $1.2 million due to a reduction in the average volume of loans
serviced for others by Huntington as a result of large servicing sales that
occurred in 1995. The decrease in servicing income was partially offset by
11
12
more origination fees, as mortgage loan production increased from $163 million
in the first three months of 1995 to $355 million in the quarter just ended.
Gains from servicing sales were $4.2 million lower quarter-to-quarter, as
Huntington sold no servicing rights in 1996, compared with $350 million sold in
the same period last year. Net interestSubstantially mitigating the effect of the reduced
gains from servicing sales were gains from the sale of certain portfolio loans
and the positive impact of a new accounting standard adopted by Huntington in
third quarter 1995 related to the capitalization of mortgage servicing rights.
At the recent quarter end, the mortgage loan servicing portfolio (including
loans serviced by Huntington on its own behalf) totaled $5.7 billion.
Huntington realized income was $542.7from securities transactions of $7.1
million in the recent quarter. These gains resulted principally from
collateralized mortgage obligations and mortgage backed securities that were
sold to reduce price and/or prepayment risk.
NON-INTEREST EXPENSE
Non-interest expense in the first ninethree months of 1996 was $143.5
million, a slight decline from $144.6 million one year ago. Most major
categories of non-interest expense were flat to down with FDIC insurance showing
the biggest decrease, as Huntington benefited from the reduction in assessment
rates on bank deposits that occurred in the latter part of 1995. This was
largely offset by higher commissions and increased personnel costs related to
corporate-sponsored retirement and benefit programs, as well as certain other
costs following the Lakeland acquisition. Fringe benefit costs are typically
higher early in the year versus $578.8 millionand trend downward in the corresponding period of 1994.
The net interest margin, on a fully tax equivalent basis, was 4.18% and 4.21%,
respectively, for the three and nine months ended September 30, 1995. For the
same periods one year ago, the margin was 4.89% and 5.11%, respectively. Though
spreads available in the marketplace remained narrow, net interest income was up
quarter-to-quarter as loan growth and purchases of investment securities fueled
a 19.0% increase in average earning assets. Huntington anticipates that the
margin will continue to decline in the fourth quarter, primarily due to the
larger securities portfolio, competitive pressure on loan pricing, and changes
in deposit mix.subsequent quarters.
12
13
INTEREST RATE RISK MANAGEMENT
INTEREST RATE RISK MANAGEMENT
Huntington seeks to achieve consistent growth in net interest income
and net income while managing volatility arising from shifts in interest rates.
This
is accomplished with the oversight of ALCO which is comprised of key members of
executive management. ALCO establishesoversees risk management, establishing broad policies and specific
operating limits that govern the managementa variety of risks inherent in Huntington's
operations including interest rate, liquidity, price, and market risk as well as ensure maintenance of
adequate liquidity. Both on-risks. On and
off-balance sheet strategies and tactical programs are
regularly reviewed and monitored
regularly by ALCO to confirm theirensure consistency with approved risk tolerances.
Interest rate risk management is a dynamic process, encompassing both
the business flows onto the balance sheet objectives and their appropriateness in light ofthe changing market and business
conditions.
Active and effectiveenvironment. Effective management of interest rate risk requires the use
of a variety ofbegins with
appropriately diversified financial instruments and funding sources. On-balanceTo
accomplish its overall balance sheet investmentobjectives, Huntington regularly uses a
multiple of markets: money market, bond market, and funding vehicles, along with off-balance sheetfutures and options market.
In addition, dealers in over-the-counter financial instruments such asprovide
availability of interest rate swaps interest rate caps/floors,as needed.
Measurement and financial futures represent the primary means by which Huntington responds to
the balance sheet mismatches created by customer loan and deposit preferences
and to changing market conditions.
Huntington monitors itsmonitoring of interest rate risk exposure by measuringis 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. Estimated netThe income simulation model used by
Huntington captures all assets and liabilities and off-balance sheet financial
instruments, accounting for significant variables which are believed to be
affected by interest income-at-risk is determined using multiplerates. These include prepayment speeds on real estate
mortgages and consumer installment credits, cash flow assumptions on other
financial instruments, and changing balance
13
14
sheet volume assumptions. The model captures embedded options, e.g. interest
rate caps and balance sheet
scenarios to providefloors or call options, and accounts for changes in rate
relationships as various rate indices lead and lag changes in short-term market
rates. While these assumptions are inherently uncertain, management believes
that the model provides an accurate indication of the company's interest rate
risk exposure and is a rangemore relevant depiction of possible outcomes for evaluating its
risk tolerance.interest rate risks than less
sophisticated measures. Management reporting of this information is regularly
shared with the Board of Directors.
At September 30, 1995,March 31, 1996, the results of Huntington's internal interest
sensitivity analysis indicated that net interest income would be relatively
unchanged by a 100 basis points increase or decrease in the federal funds rate
(assuming the change occurs evenly over the next year and that corresponding
changes in other market rates occur as forecasted). A decrease ofNet interest income is
expected to increase 1.5% if rates were to fall 200 basis points could reduce net interest income by approximately .9%. Underlying these
estimates is the assumption that certain core deposits, which have not repriced
upward during the last 300 basis
11
12
point increase in short-term rates, will not reprice downward in a falling rate
environment.points. A 200 basis
points increaserise in rates could result in a decreasedecline in net interest income of .2% to 1.6%2.7%.
Huntington uses a range in measuring its
"at-risk" position in a rising rate scenario because of varying assumptions
regarding the volume and rate behaviors of certain loans and core deposits.
Interest rate swaps are the principal off-balance sheet vehicles used by
Huntington forActive interest rate risk management.management includes the use of various types
of off-balance sheet financial instruments, primarily interest rate swaps. For
example, risk created by different indices on assets and liabilities, by unequal
terms to maturity of assets and liabilities, and by products that are appealing
to customers but incompatible with current risk limits are but a few risks that
can be eliminated or decreased in a cost efficient manner. The overall swap strategy has
also enabled Huntington to lower the costs of raising wholesale liabilities and has
allowed management to synthetically alter, or customize, the repricing
characteristics of selected on-balance sheet financial instruments. "Asset
conversion swaps" are used by Huntington to convert variable rate loans and
other floating rate assets to fixed rate assets. Similarly, "liability
conversion swaps" have been used to change the repricing characteristics of
various on-balance sheet liabilities, primarily in connection with ALCO programs
to lower the cost of raising wholesale liabilities. "Basis swaps" represent
contracts in which both parties receive floating rates of interest according to
different indices and are used to protect against changes in spreads. Financial
futures and interest rate caps/floors, as well as forward delivery contracts
purchased in connection with mortgage banking activities, are also integral to
risk management. Thesefunds.
Other off-balance sheet financial instruments used to control risk
effectively include financial futures, interest rate caps and floors, options,
and forward rate agreements. These instruments are used regularly in mortgage
banking, securities investing, and wholesale funding. The use of these products
versus similar cash instruments is often preferable to securities or other on-balance sheet alternatives because, though
14
15
they provide similar protection against interest rate movements,perform financially quite similarly, they may require less capital and
preserve liquidity.
Inaccess to the third quarter of 1995, interest rate swaps and other off-balance
sheet financial instruments usedmarketplace for risk management purposes reduced interest
income by $9.5 million and increased interest expense by $3.8 million. On a
year-to-date basis, the decrease in interest income was $22.2 million and
interest expense increased $16.8 million. For the same periods last year, these
products increased interest income by $5.3 million and $27.5 million and
increased (decreased) interest expense by $.8 million and ($12.9) million.
Included in the preceding amounts is amortization of deferred gains and losses
from terminated contracts, that decreased net interest income by $8.9 million
for the most recent quarter and $18.6 million for the first nine months of 1995,
and increased net interest income by $5.9 million and $19.2 million,
respectively, in the three and nine months ended September 30, 1994. Expressed
in terms of the net interest margin, the effect of the off-balance sheet
portfolio was a reduction of 29 basis points and 30 basis points, respectively,
for the third quarter and first nine months of 1995 versus an addition of 12
basis points and 35 basis points in the corresponding periods one year ago.future needs.
The following table illustrates the approximate market values,
estimated maturities and weighted average rates of the interest rate swaps used
by Huntington in its interest rate risk management program. The valuation of
interest rate swap contracts is largely a function of the financial market's
expectations regarding the future direction of interest rates. Since year end,
expectations regarding the future direction of interestAt March 31,
1996, forward rates have shifted, with
the marketplace now anticipating flat to slightly lower short-term rates over
the next several months versus the expectations which prevailedwere somewhat higher than those prevailing at the end of
1994 for significantly higher rates.recent
year end. Consequently, the netinterest rate swap portfolio ended the first quarter
with an unrealized loss of $29.6$9.5 million at the end of September 1995 was down considerably from $268.9versus a $10.9 million unrealized gain
at December 31, 1994. The31. Current market values at the most recent quarter end are not necessarily indicative of the
future impact of the swaps on net interest income. This will depend, 12
13
in large
part, on the shape of the yield curve as well as interest rate levels. Management has made no assumptions with respect to future changes in interest
rates forFor
purposes of the variable rate information and the indexed amortizing swap
maturities presented below.in the table below, management made no assumptions with
respect to future changes in interest rates.
Average Average Rate
Notional Maturity Market --------------------------
(dollars in millions) Value (years) Value Receive Pay
- --------------------- -------- -------- ----------- ------- ----- ------- ---
September 30, 1995:
March 31, 1996:
ASSET CONVERSION SWAPS
Receive fixed $ 809 2.44 ($ 6.8) 5.59% 5.89%875 2.32 $ (3.5) 5.70% 5.39%
Receive fixed-amortizing 395 2.49 ( 6.2) 5.58 5.8899 2.25 (1.1) 5.27 5.50
------ -------------
TOTAL ASSET CONVERSION SWAPS $1,204 2.46 ($13.0) 5.59% 5.89%$ 974 2.31 $ (4.6) 5.65% 5.40%
====== =============
LIABILITY CONVERSION SWAPS
Receive fixed $1,016 3.53$1,401 2.71 $ 15.1 6.28% 5.84%12.7 5.90% 5.40%
Receive fixed-amortizing 283 2.73 ( 6.9) 5.39 5.83197 3.25 (4.6) 5.63 5.40
Pay fixed 2,258 .83 ( 21.2) 5.91 7.011,801 .46 (12.7) 5.48 7.15
------ -------------
TOTAL LIABILITY CONVERSION SWAPS $3,557 1.75 ($13.0) 5.98% 6.58%$3,399 1.55 $ (4.6) 5.67% 6.33%
====== =============
BASIS PROTECTION SWAPS $ 700 1.33 ($ 3.6) 6.14% 6.02%250 2.95 $ (.3) 5.38% 5.58%
====== =============
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16
The pay rates on Huntington's receive fixed swaps vary based on movements in
the applicable London inter-bank offered rate (LIBOR). Receive fixed liability
conversion swaps with a notional value of $150 million have embedded written
LIBOR-based caps. Also, receive fixed liability conversion
swaps with a notional value of $415 million and receive fixed asset conversion swaps with a notional
value of $200 million have embedded written LIBOR-based call options. The
portfolio of amortizing swaps consists of contracts with notional values that
are indexed to the prepayment experience of a specified pool of mortgage loans LIBOR
or Constant Maturity U.S. Treasury yields (CMT). As market interest rates
change, the amortization of the notional values will also change, generally
slowing as rates increase and accelerating when rates fall. Basis swaps are
contracts which provide for both parties to receive floating rates of interest
according to different indices. Allindices and are used to protect against changes in
spreads. The receive and pay amounts applicable to Huntington's basis swaps are
determined by LIBOR the
prime rate, or other indices common to the banking industry. The basis swaps
have embedded written periodic caps and, in some cases, purchased periodic
floors.
The notional values of the swap portfolio represent contractually determined
amounts on which calculations of interest payments to be exchanged are based.
These notional values do not represent direct credit exposures. At September 30, 1995,March 31,
1996, Huntington's credit risk from interest rate swaps used for asset/liability
management purposes was $44.4$42.2 million, which is significantly less than the
notional value of the contracts, and represents the sum of the aggregate fair
value of positions that have become favorable to Huntington, including any
accrued interest receivable due from counterparties. In order to minimize the
risk that a swap counterparty will not satisfy its interest payment obligation
under the terms of the contract, Huntington performs credit 13
14
reviews on all
counterparties, restricts the number of counterparties used to a select group of
high quality institutions, obtains collateral, and enters into formal netting
arrangements. Huntington
16
17
has never experienced any past due amounts from a swap counterparty and does not
anticipate non-performance in the future by any such counterparties.
The following table summarizes activity in the interest rate swap portfolio
used for asset/liability management purposes during the quarterfirst three months of
1996 and nine months ended September 30, 1995 and 1994:1995:
Asset Liability Basis
Conversion Conversion Protection
-------------------------------------------------------------------------
(in millions)
Balance at June 30,December 31, 1995 $ 1,307 $3,3571,115 $ 7003,142 $ 250
Additions --- 465 ---175 500 --
Maturities/Amortization (78) (265) ---(13) (243) --
Terminations (25) --- ---(303) -- --
------- ------ ------------- -------
Balance at September 30, 1995March 31, 1996 $ 1,204 $3,557974 $ 7003,399 $ 250
======= ====== ======
Balance at June 30, 1994 $ 1,863 $1,851 $2,900
Additions 250 780 ---
Maturities/Amortization (5) (40) (100)
Terminations (200) --- (250)
------- ------ ------
Balance at September 30, 1994 $ 1,908 $2,591 $2,550
======= ====== =============
Balance at December 31, 1994 $ 2,508 $3,332 $1,000$ 3,332 $ 1,000
Additions --- 1,040 ----- 525 --
Maturities/Amortization (109) (481)(31) (100) (300)
Terminations (1,195) (334) ----- (34) --
------- ------ ------------- -------
Balance at September 30,March 31, 1995 $ 1,204 $3,5572,477 $ 3,723 $ 700
======= ====== ======
Balance at December 31, 1993 $ 2,281 $1,821 $2,800
Additions 463 995 350
Maturities/Amortization (236) (225) (100)
Terminations (600) --- (500)
------- ------ ------
Balance at September 30, 1994 $ 1,908 $2,591 $2,550
======= ====== =============
Terminations reflect the decisions made by ALCO to modify, refine, or change
balance sheet management strategies, as a result of either a change in overall
interest rate risk tolerances or changes in balance sheet composition. The terminations that occurred in the first three quarters of 1995 were
associated with ALCO directed programs to realign Huntington's interest rate
sensitivity posture in light of prevailing economic and market conditions and
trends in the customer-driven balance sheet. At September 30, 1995,March
31, 1996, Huntington had deferred approximately 14
15
$45.3$27.8 million of net realized
losses from terminated interest rate swaps, which are to be amortized as yield
adjustments over the remaining term of the original contracts, as presented
below.
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Amortizing In
-------------------------------------------------------------
1995--------------------------------------
1996 1997 1998 1999 Total
----
---- ---- ---- ---- -----
(in millions)
SEPTEMBER 30, 1995:MARCH 31, 1996:
Deferred gains $ 4.5 $ 15.010.6 $ 8.3 $ 7.0 $5.7 $ 40.55.7 $ 31.6
Deferred losses (13.3) (51.4)(38.3) (19.4) (1.3) (.4) (85.8)(59.4)
------- ------- ------ ------ ------ ----- ---- -------------
Net (losses) gains $ (8.8) $(36.4) $(11.1)(27.7) $ (11.1) $ 5.7 $5.3 $(45.3)$ 5.3 $ (27.8)
======= ======= ====== ====== ====== ===== ==== =============
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 $454$452 million at September 30, 1995.March 31, 1996. Total
credit exposure from such contracts, represented by those instruments with a
positive fair value, was $1.7$1.3 million at the most recent quarter end. These separate
activities, which are accounted for at fair value, are not a significant part of
Huntington's operations. Accordingly, they have been excluded from the above
discussion of off-balance sheet financial instruments and the related tables.
NON-INTEREST INCOME
Non-interest income, exclusive of securities transactions, for the third
quarter and first nine months of 1995 was $58.9 million and $171.3 million,
compared with $53.1 million and $168.8 million for the corresponding periods one
year ago. The quarter-to-quarter increase was driven by improvements in all
major categories. Huntington's non-interest income also showed broad-based
growth on a year-to-date basis, as increased service charges on deposits, credit
card fees, trust revenues, and other income more than offset a 32.3% decline in
mortgage banking income (see following table for an analysis of mortgage banking
income). Other non-interest income was up during the respective periods
principally as a result of increased trading account profits and higher income
from certain fee based initiatives.
During the first nine months of 1995, Huntington realized net gains from
securities transactions of $8.8 million. The majority of these gains resulted
from the sale of callable agency securities, the proceeds from which were
reinvested into securities of moderately longer duration.
15
16
The major components of mortgage banking income were as follows:
Third Quarter Nine Months
------------------- --------------------
1995 1994 1995 1994
------ ------- ------- -------
(in thousands)
Net servicing fees $3,334 $ 5,576 $11,720 $16,913
Fee income 1,363 2,393 3,611 11,849
Gain on sale of
servicing rights --- 2,981 5,295 10,745
Other income (expense) 4,981 (1,704) 7,652 2,230
------ ------- ------- -------
$9,678 $ 9,246 $28,278 $41,737
====== ======= ======= =======
Net servicing fees in the third quarter and first nine months of 1995
were considerably less than the amounts reported in the corresponding periods of
last year, principally because of sales of servicing rights. A summary of the
servicing portfolio follows:
As of September 30,
1995 1994
---- ----
(in thousands of dollars)
Loan principal $5,169,294 $6,627,351
Weighted average:
Coupon rate 8.11% 8.15%
Contractual maturity 20 yrs. 21 yrs.
The decrease in fee income reflected in the above table is the result of
a significant drop in mortgage loan production, as the decline in origination
volumes that began in 1994 (and was much more pronounced in the second half of
the year) continued into 1995.
During the most recent quarter, Huntington sold no servicing rights,
compared with sales in the same period of 1994 of $700 million. For the nine
months ended September 30, 1995, $421 million of servicing rights were sold,
versus $1.9 billion in the first three quarters of last year.
Other mortgage banking income is up largely because of the adoption of
Financial Accounting Standards Board Statement No. 122, "Accounting for Mortgage
Servicing Rights" (FAS 122) in the third quarter of 1995. FAS 122, an amendment
of Statement 65, requires the recognition of rights to service loans for others
as separate assets, however those servicing rights are acquired. FAS 122 also
requires that a mortgage banking enterprise assess its capitalized servicing
rights for impairment based on the fair value of those rights, using a
disaggregated approach for mortgage servicing rights that are capitalized after
adoption of the new standard. The increased income from FAS 122 implementation
relates primarily to 1995 sales of retail loan production for which the retained
servicing rights were capitalized. Other mortgage banking
16
17
income in the third quarter of 1994 was adversely affected by the lower of cost
or market value adjustment with respect to mortgages held for sale.
NON-INTEREST EXPENSE
Non-interest expense in the third quarter of 1995 was $138.9 million,
down 8.3% from the same three months in 1994. This represents the fourth
consecutive quarter that non-interest expense has been reduced. A decline in
non-interest expense of 5.1% occurred from the first nine months of 1994 to the
corresponding period this year. These decreases were a direct result of
initiatives begun in 1994 to reduce operating costs by restructuring certain
business activities, including the retail delivery system and the mortgage
company. Moreover, these cost reductions were achieved despite the completion of
three bank acquisitions during 1995 and were primarily attributable to reduced
personnel costs.
PROVISION FOR INCOME TAXES
The provision for income taxes was $35.8 million in the most recent
quarter, an increase of 23.6% from the same period one year ago. For the first
nine months of the year, the provision for income taxes was $100.2 million
versus $97.4 million in the corresponding period of 1994. The higher provision
in 1995, when comparing the respective quarters, is largely the result of
increased pre-tax earnings. The year-to-date provision for income taxes was
significantly affected by a one-time charge of $2.1 million related to the May
1995 conversion of an existing thrift to a bank charter as well as various
non-deductible expenses incurred in connection with bank acquisitions
consummated over the past twelve months.
ASSET QUALITY
Huntington's exposure to credit risk is actively managed through the use of
underwriting standards which emphasize "in-market" lending to established
borrowers. Highly leveraged transactions and excessive industry or other
concentrations are avoided. Huntington's managementThe credit administration function also employs
extensive monitoring procedures to ensure that problem loans are promptly
identified and that loans adhere to corporate policy. These procedures provide
executive management with the adequacy of the allowance for loan losses (ALL),
including timely reviews of specific credits, monthly analysis of delinquencies,
assessment of current economic conditions,information necessary to implement appropriate
change and other relevant factors.
Huntington's assettake corrective action as needed.
Asset quality remains among the best of the largest banking
companies in the country.continues to be strong. Non-performing loans, which
represent only .34%include loans that are no longer accruing interest and loans that have been
renegotiated based upon financial difficulties of total loansthe borrower, totaled $63.1
million at the most recent quarter end were as follows:
17and represented .47% of
18
18
September 30, December 31, September 30,
1995 1994 1994
----- ----- -----
(in millions)
Commercial $21.8 $21.0 $26.0
Construction 3.1 4.6 6.2
Commercial real estate 10.5 10.1 18.5
Residential mortgage 10.6 8.7 3.0
Consumer .3 .1 .1
----- ----- -----
Total $46.3 $44.5 $53.8
===== ===== =====
Net charge-offs (annualized) as a percentage of average19
total loans. Huntington also has certain loans were
.31%which are past due ninety days or
more but have not been placed on nonaccrual status. These loans, which total
$25.8 million at March 31, 1996, are primarily consumer and .24%, respectively,residential real
estate loans that are considered well-secured and in the third quarter andprocess of collection
or are being extended.
Other real estate owned (ORE) totaled $20.3 million at the end of the first
ninethree months of 1995,
indicative of Huntington's continued high credit quality. For1996, down from $26.6 million at the same periods
one year ago, these ratios were .26% and .22%. The ALL as a percentage of total
loans was 1.48% as of September 30, 1995, compared with ratios of 1.63% at
year-end 1994 and 1.73% one year ago. Huntington believes this decrease is
appropriate, as the ratio of the ALL to non-performing loans remains strong at
429%.
In addition to the improvements in credit quality referred to above, net
other real estate (ORE) declined significantly during the past twelve months
from $51.6 million to $23.7 million at September 30, 1995.time last year.
Huntington's management continues to aggressively pursue the sale of its ORE to
further reduce these non-performing assets.
The allowance for loan losses (ALL) is maintained at a level considered
appropriate by management based on its estimate of losses inherent in the loan
portfolio. The procedures employed by Huntington in evaluating the adequacy of
the ALL include an analysis of specific credits that are generally selected for
review on the basis of size and relative risk, portfolio trends, current and
historical loss experience, prevailing economic conditions, and other relevant
factors. The provision for loan losses was $11.8 million in the first three
months of 1996 versus $4.6 million in the same period one year ago. Annualized
net charge-offs as a percent of average total loans were .34% for the quarter
just ended, roughly flat with full year 1995. At the recent quarter end, the ALL
represented 1.48% of total loans and covered 312.8% of non-performing loans;
when combined with the allowance for other real estate, it was 225% of total
non-performing assets.
CAPITAL
Huntington'sHuntington places significant emphasis on the maintenance of strong
capital, position remains strong. Shareholders' equitywhich promotes investor confidence, provides access to the national
markets under favorable terms, and enhances the ability to capitalize on
business growth and acquisition opportunities. The company also recognizes the
importance of managing excess capital and continually strives to maintain an
19
20
appropriate balance between capital adequacy and returns to shareholders.
Capital is managed at each subsidiary based upon the most recent quarter end was approximately $1.5 billion, an increase of 5.9%
from one year ago.respective risks and growth
opportunities, as well as regulatory requirements.
Average equity to average assets was 7.87%7.89% in the thirdfirst quarter of 1995 and 8.10% for the first nine months of the year, versus 8.54%
and 8.42%1996,
compared with 8.15% in the same periods in 1994. At September 30, 1995, the Tier 1 and
total risk-basedperiod last year. Presented below are
Huntington's regulatory capital ratios were 8.46% and 12.17%, respectively, and
exceeded the corresponding minimumrelated levels to be considered "well capitalized" of
6% and 10%, respectively. Huntington's Tier 1 leverage ratio of 6.96% also
exceeded the minimum regulatory requirement of 5%.established for
"well-capitalized" institutions:
March 31, 1996 "Well Capitalized"
-------------- ------------------
Tier 1 risk-based capital 7.94% 6.00%
Total risk-based capital 11.53 10.00
Leverage 6.62 5.00
On April 27, 1995,February 21, 1996, the Board of Directors authorized Huntington to
repurchase up to 10.510 million additional shares of its common stock (as adjusted
for the 5% stock dividend issued in July 1995).through open
market purchases and privately negotiated transactions. The authorization
represents a continuation of the common stock repurchase program begun in August
1987 Common Stock Repurchase Program and provides that the shares will be reserved for reissue in connection
with Huntington's benefit plans as well as for other corporate purposes. Approximately 7.7The
company acquired 5.2 million shares were acquired in the first three quarters of 1995quarter just ended at an aggregate
cost of $159.4 million. Certain of these shares are to be used in the pending
purchase business combination with Peoples Bank of Lakeland, Florida. As of
September 30, 1995, approximately 5.8$124.3 million, leaving 8.7 million shares were available for repurchase.
Huntington's management believes that the majority of the remaining authorized shares will be
repurchased by the end of the first quarter
1996.
181997.
20
19
- --------------------------------------------------------------------------------
CONSOLIDATED FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------21
_____________________________________________________________________________________
CONSOLIDATED FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------
(in thousands of dollars, except per share amounts)
- -------------------------------------------- ----------- ----------- -----------------
THREE MONTHS ENDED SEPTEMBER 30,MARCH 31, 1996 1995 1994 % CHANGE
----------- ----------- -----------------
NET INCOME................................ $65,937 $55,902 18.0%INCOME.................................. $62,825 $54,862 14.5 %
PER COMMON SHARE AMOUNTS (1)............................
Net income........................... $ 0.48 $ 0.41 17.1income............................. $0.47 $0.39 20.5
Cash dividends declared.............. $ 0.20 $ 0.19declared................ $0.20 $0.19 5.3
AVERAGE SHARES OUTSTANDING (1)........... 137,182,768 136,107,853 0.8............. 135,054,096 140,192,042 (3.7)
KEY RATIOS
Return on:
Average total assets................. 1.34% 1.35% (0.7)assets................... 1.26% 1.23% 2.4
Average shareholders' equity......... 17.03% 15.77% 8.0equity........... 16.02% 15.08% 6.2
Efficiency ratio.......................... 56.74% 63.44% (10.6)ratio............................ 58.24% 61.90% (5.9)
Average equity/average assets............. 7.87% 8.54% (7.8)
NET INTEREST MARGIN....................... 4.18% 4.89% (14.5)
assets............... 7.89% 8.15% (3.2)
Net Interest Margin......................... 4.03% 4.26% (5.4)
- -------------------------------------------------------------------------------------- ----------- ----------- --------
NINE MONTHS ENDED SEPTEMBER 30,---------
AT MARCH 31, 1996 1995 1994 % CHANGE
----------- ----------- --------
NET INCOME................................ $178,960 $190,097 (5.9)---------
Total Loans................................. $13,369,308 $12,817,663 4.3 %
PER COMMON SHARE AMOUNTS (1).............
Net income........................... $ 1.29 $ 1.40 (7.9)
Cash dividends declared.............. $ 0.58 $ 0.49 18.4
AVERAGE SHARES OUTSTANDING (1)........... 139,112,764 136,257,881 2.1
KEY RATIOS
Return on:
Average total assets................. 1.27% 1.53% (17.0)
Average shareholders' equity......... 15.75% 18.14% (13.2)
Efficiency ratio.......................... 59.63% 60.18% (0.9)
Average equity/average assets............. 8.10% 8.42% (3.8)
NET INTEREST MARGIN....................... 4.21% 5.11% (17.6)
- ------------------------------------------ ----------- ----------- --------
AT SEPTEMBER 30, 1995 1994 % CHANGE
----------- ----------- --------
Total Loans............................... $13,457,831 $11,871,412 13.4%Deposits.............................. $13,006,213 $12,188,579 6.7
Total Deposits............................ $12,544,500 $11,602,246 8.1
Total Assets.............................. $20,173,130 $16,989,918 18.7Assets................................ $20,137,982 $18,420,534 9.3
Shareholders' Equity...................... $ 1,482,799 $ 1,401,821 5.8Equity........................ $1,502,510 $1,509,629 (0.5)
Period-End Shares Outstanding (1)......... 134,516,340 135,881,057 (1.0)........... 133,010,323 139,843,779 (4.9)
Shareholders' Equity Per Common Share (1). $ 11.02 $ 10.32 6.8... $11.30 $10.80 4.6
Total Risk-Adjusted Assets................ $16,116,690 $13,682,649 17.8Assets.................. $16,618,923 $14,895,301 11.6
Tier 1 Risk-Based Capital Ratio........... 8.46% 9.90% (14.5)Ratio............. 7.94% 9.58% (17.1)
Total Risk-Based Capital Ratio............ 12.17% 14.06% (13.4)Ratio.............. 11.53% 13.51% (14.7)
Tier 1 Leverage Ratio..................... 6.96% 8.15% (14.6)
Ratio....................... 6.62% 7.81% (15.2)
(1) Adjusted for the five percent stock dividend distributed July 31, 1995.
19
21
20
- --------------------------------------------------------------------------------
FINANCIAL REVIEW
- --------------------------------------------------------------------------------
Investment Securities - amortized cost & fair values by maturity at
September 30, 1995 and December 31, 1994
- --------------------------------------------------------------------------------22
__________________________________________________________________________________
FINANCIAL REVIEW
- ------------------------------------------------------------------------------------------------------------
INVESTMENT SECURITIES - AMORTIZED COST & FAIR VALUES BY MATURITY AT MARCH 31, 1996 AND DECEMBER 31, 1995
- ----------------------------------------------------------------------------------------------------------
(in thousands of dollars) SEPTEMBER 30, 1995MARCH 31, 1996 December 31, 19941995
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
AMORTIZED COST FAIR VALUE Amortized Cost Fair Value
- ----------------------------------------------------------------------------------------------------------------
U.S. Treasury
1-5 years.............................. $ 156 $ 156 $ 150 $ 150
-------- -------- -------- --------
Total...............................years...................... $156 $156 $156 $156
------- ------- ------- -------
Total....................... 156 156 150 150
-------- -------- -------- --------
Federal agencies
Mortgage-backed securities
1-5 years.............................. - - 371 344
6-10 years............................. 3,882 3,985 4,812 4,806
Over 10 years.......................... 2,652 2,737 3,130 3,133
-------- -------- -------- --------
Total............................... 6,534 6,722 8,313 8,283
-------- -------- -------- --------
Other agencies
1-5 years.............................. 243,376 242,902 101,774 99,446
6-10 years............................. 49,859 49,857 207,043 205,358
Over 10 years.......................... - - 433 350
-------- -------- -------- --------
Total............................... 293,235 292,759 309,250 305,154
-------- -------- -------- --------
Total U.S. Treasury and Federal agencies.... 299,925 299,637 317,713 313,587
-------- -------- -------- --------156 156
------- ------- ------- -------
States and political subdivisions
Under 1 year........................... 42,173 42,679 56,361 57,080year................... 29,488 29,805 27,340 27,592
1-5 years.............................. 48,786 51,166 72,812 74,975years...................... 21,924 22,552 23,637 24,496
6-10 years............................. 15,624 16,175 18,433 18,059years..................... 18,619 18,789 12,638 13,040
Over 10 years.......................... 5,561 6,009 6,043 6,196
-------- -------- -------- --------
Total............................... 112,144 116,029 153,649 156,310
-------- -------- -------- --------
Other
Under 1 year........................... 1,500 1,500 1,508 1,508
1-5 years.............................. 505 505 5 5
6-10 years............................. 879 819 1,504 1,424
Over 10 years.......................... 1,283 1,283 1,313 1,313
-------- -------- -------- --------
Total............................... 4,167 4,107 4,330 4,250
-------- -------- -------- --------years.................. 4,026 4,090 3,833 3,912
------- ------- ------- -------
Total....................... 74,057 75,236 67,448 69,040
------- ------- ------- -------
Total Investment Securities................. $416,236 $419,773 $475,692 $474,147
======== ======== ======== ========Securities......... $74,213 $75,392 $67,604 $69,196
======= ======= ======= =======
2022
21
- --------------------------------------------------------------------------------
FINANCIAL REVIEW
- --------------------------------------------------------------------------------
Securities Available for Sale - amortized cost & fair values by maturity at
September 30, 1995 and December 31, 1994
- --------------------------------------------------------------------------------23
_______________________________________________________________________________
FINANCIAL REVIEW
- -----------------------------------------------------------------------------------------------------------------------
SECURITIES AVAILABLE FOR SALE - AMORTIZED COST & FAIR VALUES BY MATURITY AT MARCH 31, 1996 AND DECEMBER 31, 1995
- -----------------------------------------------------------------------------------------------------------------------
(in thousands of dollars) SEPTEMBER 30, 1995MARCH 31, 1996 December 31, 19941995
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
AMORTIZED COST FAIR VALUE Amortized Cost Fair Value
- -------------------------------------------------------------------------------------------------------------_______________________________________________________________________________________________________________________
U.S. Treasury
Under 1 year.......................... $ 118,049 $ 118,921 $ 25,399 $ 25,320year......................... $178,980 $180,191 $176,502 $178,264
1-5 years............................. 368,259 366,915 662,106 643,100years............................ 525,996 517,515 228,234 231,018
6-10 years............................ 162,441 155,144 166,909 147,671years........................... 162,265 153,987 162,352 160,596
---------- ---------- ---------- ----------
Total.............................. 648,749 640,980 854,414 816,091Total............................. 867,241 851,693 567,088 569,878
---------- ---------- ---------- ----------
Federal agencies
Mortgage-backed securities
Under 1 year.......................... 726 737 - -year......................... 1,156 1,167 1,097 1,124
1-5 years............................. 135,589 138,926 17,727 16,922years............................ 81,432 84,440 110,192 114,723
6-10 years............................ 698,421 702,315 369,061 362,716years........................... 819,997 821,075 712,804 724,317
Over 10 years......................... 90,925 92,537 114,742 110,119years........................ 7,822 8,187 58,762 60,695
---------- ---------- ---------- ----------
Total.............................. 925,661 934,515 501,530 489,757Total............................. 910,407 914,869 882,855 900,859
---------- ---------- ---------- ----------
Other agencies
Under 1 year.......................... 38,727 39,095 531,082 526,617year......................... 123,365 124,413 53,912 54,499
1-5 years............................. 1,640,855 1,653,243 506,740 499,748years............................ 1,819,936 1,821,039 1,928,431 1,953,446
6-10 years............................ 180,519 177,835 382,849 369,404years........................... 199,152 197,355 234,393 234,920
Over 10 years......................... 482,661 477,425 323,451 304,660years........................ 472,981 472,046 509,735 514,568
---------- ---------- ---------- ----------
Total.............................. 2,342,762 2,347,598 1,744,122 1,700,429Total............................. 2,615,434 2,614,853 2,726,471 2,757,433
---------- ---------- ---------- ----------
Total U.S. Treasury and Federal agencies... 3,917,172 3,923,093 3,100,066 3,006,277agencies.. 4,393,082 4,381,415 4,176,414 4,228,170
---------- ---------- ---------- ----------
Other
Under 1 year.......................... 1,711 1,717 - -year......................... 951 983 6,818 6,826
1-5 years............................. 685 688 95,410 94,887years............................ 20,471 21,450 22,352 23,578
6-10 years............................ 249,719 255,822 165,422 164,087years........................... 261,260 267,799 230,651 240,965
Over 10 years......................... 101,962 102,193 32,854 32,818years........................ 276,951 275,972 212,950 214,605
Marketable equity securities..........securities......... 8,359 7,0576,958 8,359 6,4247,000
---------- ---------- ---------- ----------
Total.............................. 362,436 367,477 302,045 298,216Total............................. 567,992 573,162 481,130 492,974
---------- ---------- ---------- ----------
Total Securities Available for Sale........ $4,279,608 $4,290,570 $3,402,111 $3,304,493Sale....... $4,961,074 $4,954,577 $4,657,544 $4,721,144
========== ========== ========== ==========
2123
22
- --------------------------------------------------------------------------------
FINANCIAL REVIEW
- --------------------------------------------------------------------------------
LOAN LOSS EXPERIENCE
- --------------------------------------------------------------------------------24
________________________________________________________________________________
FINANCIAL REVIEW
____________________________________________________________________________________________________________________________
LOAN LOSS EXPERIENCE
____________________________________________________________________________________________________________________________
(in thousands of dollars) THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,1996 1995
1994 1995 1994
-------------------------------- --------------------------------------------------------------------------------------------------
IQ IVQ IIIQ IIQ IQ
-------- ----------------------------------------------------
ALLOWANCE FOR LOAN LOSSES, BEGINNING OF PERIOD ........... $194,456 $198,573 $198,264 $212,479$201,088 $200,492 $211,835
Loan losses ................................................................................. (15,707) (21,500) (13,557) (12,613) (34,068) (31,520)(10,718) (9,793)
Recoveries of loans previously charged off ................... 4,603 3,494 3,222 4,985 10,490 12,8533,312 3,956
Provision for loan losses ..................................................... 11,823 12,139 7,187 1,113 16,582 12,7964,787 4,608
Allowance of assets acquired ........................(sold)/other .......... 2,200 1,750 3,457 - 5,077 -(205) 1,825
-------- -------- ---------- -------- --------
Allowance for loan losses, end of period ............---------
ALLOWANCE FOR LOAN LOSSES, END OF PERIOD ........... $197,375 $194,456 $198,573 $205,964 $198,573 $205,964$198,264 $201,088
======== ======== ========== ======== =================
AS A % OF AVERAGE TOTAL LOANS
Net loan losses -- annualized ......................................... 0.34% 0.53% 0.31% 0.26% 0.24% 0.22%0.23% 0.19%
Provision for loan losses -- annualized ..................... 0.36% 0.36% 0.22% 0.04% 0.17%0.15% 0.15%
Allowance for loan losses as a % of total loans ......... 1.48% 1.73%1.47% 1.48% 1.73%1.51% 1.57%
Net loan loss coverage (1) ................................................... 9.85x 6.19x 10.54x 11.27x 12.54x 16.08x
(1) Income before taxes and the provision for loan losses to net loan losses.
- --------------------------------------------------------------------------------
13.15x 15.33x
(1) Income before taxes and the provision for loan losses to net loan losses.
____________________________________________________________________________________________________________________________
NON-PERFORMING ASSETS AND PAST DUE LOANS
(Quarter-End) 1996 1995 1994
---------------------------------- ----------------------
(in thousands of dollars) III Q II Q I Q IV Q III Q
--------------------------------------------------------------
-------------------------------------------------------------------
IQ IVQ IIIQ IIQ IQ
-------- ----------------------------------------------------
Non-accrual loans ................................... $ 41,997 $ 41,554 $ 41,576 $ 41,929 $ 40,313.................................. $57,530 $50,669 $41,997 $41,554 $41,576
Renegotiated loans ................................................................... 5,578 4,299 4,313 13,424 11,568
2,550 13,547
-------- -------- ---------- -------- -------- -----------------
TOTAL NON-PERFORMING LOANS ................................................... 63,108 54,968 46,310 54,978 53,144
44,479 53,860
-------- -------- ---------- -------- -------- -----------------
Other real estate, net ........................................................... 20,386 22,026 23,668 24,029 26,558
51,909 51,558
-------- -------- ---------- -------- -------- -----------------
TOTAL NON-PERFORMING ASSETS ......................... $ 69,978 $ 79,007 $ 79,702 $ 96,388 $105,418........................ $83,494 $76,994 $69,978 $79,007 $79,702
======== ======== ======== ======== ================== ========= =========
NON-PERFORMING LOANS AS A
% OF TOTAL LOANS ................................................................... 0.47% 0.41% 0.34% 0.42% 0.41% 0.36% 0.45%
NON-PERFORMING ASSETS AS A
% OF TOTAL LOANS AND OTHER REAL ESTATE ....................... 0.62% 0.58% 0.52% 0.60% 0.62% 0.78% 0.88%
ALLOWANCE FOR LOAN LOSSES AS A % OF
NON-PERFORMING LOANS ........................................................... 312.76% 353.76% 428.79% 360.62% 378.38% 450.76% 382.41%
ALLOWANCE FOR LOAN LOSSES AND OTHER REAL
ESTATE AS A % OF NON-PERFORMING ASSETS ....................... 225.01% 238.65% 263.26% 234.30% 235.10% 193.13% 181.70%
ACCRUING LOANS PAST DUE 90 DAYS OR MORE ............. $ 24,001 $ 20,685 $ 19,771 $ 20,877 $ 24,182............ $25,824 $27,018 $24,001 $20,685 $19,771
======== ======== ================= ======== ========
2224
23
- --------------------------------------------------------------------------------25
_____________________________________________________________________________
CONSOLIDATED AVERAGE BALANCES AND INTEREST RATES (QUARTERLY DATA)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Fully Tax Equivalent Basis (1) 3RD1ST QUARTER 1995 2ND1996 4TH QUARTER 1995
--------------------- --------------------
(in millions of dollars) ------------------ -------------------
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE RATE BALANCE RATE
--------------------- -------------------------------------- -------------------
ASSETS
Interest bearing deposits in banks..................................... $ 2 5.73% $ 3 5.03%banks................................. $39 5.70 % $74 6.10 %
Trading account securities............................................. 24 7.54 23 8.07securities......................................... 19 5.64 20 6.88
Federal funds sold and securities purchased ....................... 27 6.19 48 5.52
under resale agreements.... 22 7.49 70 6.70agreements
Mortgages held for sale................................................ 174 7.73 109 7.52
Securities available for sale.......................................... 4,170 6.77 3,601 6.76
Investment securities.................................................. 421 7.92 439 7.74sale............................................ 127 7.18 129 6.78
Securities:
Taxable....................................................... 4,835 6.55 4,550 6.74
Tax exempt.................................................... 106 9.09 110 10.04
-------- --------
Total Securities......................................... 4,941 6.60 4,660 6.82
-------- --------
Loans
Commercial........................................................ 4,045 8.09 4,027 8.55
Tax-free.......................................................... 54 10.53 55 10.75Commercial.................................................... 4,212 7.76 4,178 7.91
Real Estate
Construction................................................. 349 8.68 324 8.38
Mortgage..................................................... 3,058 8.59 3,100 8.20
Consumer.......................................................... 4,979 9.05 4,805 8.90Construction............................................. 364 8.52 369 8.54
Mortgage................................................. 2,760 8.48 3,011 8.56
Consumer...................................................... 5,079 8.99 5,099 8.97
Lease Financing.................................................. 747 7.53 690 7.43
------- -------Financing.............................................. 880 7.90 826 7.93
-------- --------
Total Loans.................................................. 13,232 8.56 13,001 8.54Loans.............................................. 13,295 8.41 13,483 8.53
Allowance for loan losses....................................losses................................ 198 201
------- -------198
-------- --------
Net loans.................................................... 13,034 9.04 12,800 9.00
------- -------loans................................................ 13,097 8.87 13,285 8.93
-------- --------
Total earning assets......................................... 18,045 8.37% 17,246 8.38%
------- -------assets..................................... 18,448 8.14 % 18,414 8.26 %
-------- --------
Cash and due from banks................................................ 783 796banks............................................ 746 766
All other assets....................................................... 876 838
------- -------assets................................................... 988 895
-------- --------
TOTAL ASSETS........................................................... $19,506 $18,679
======= =======ASSETS....................................................... $19,984 $19,877
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits
Non-interest bearing.......................................... $2,391 $2,241
Interest bearing.............................................. $ 2,194 $ 2,159
Interest bearing.................................................. 2,488 2.45% 2,533 2.45%2,506 2.53 % 2,514 2.48 %
Savings deposits....................................................... 2,020 2.76 2,013 2.68deposits................................................... 2,249 3.03 2,084 2.93
Certificates of deposit of $100,000 or more............................ 878 5.78 770 5.84more........................ 977 5.52 926 5.68
Other domestic time deposits........................................... 4,467deposits....................................... 4,458 5.69 4,447 5.544,458 5.76
Foreign time deposits.................................................. 318 6.32 264 6.57
-------deposits.............................................. 268 6.15 189 6.50
-------- -------
Total deposits.................................................... 12,365 3.57 12,186 3.49
------- -------deposits................................................ 12,849 4.36 12,412 4.38
-------- --------
Short-term borrowings.................................................. 3,786 5.96 3,348 6.13borrowings.............................................. 3,078 5.72 3,682 5.91
Long-term debt......................................................... 1,403 6.36 1,208 7.23
------- -------debt..................................................... 2,016 6.20 1,850 6.76
-------- --------
Interest bearing liabilities...................................... 15,360 4.92% 14,583 4.93%
------- -------liabilities.................................. 15,552 4.87 % 15,703 5.02 %
-------- --------
All other liabilities.................................................. 416 390liabilities.............................................. 464 447
Shareholders' equity................................................... 1,536 1,547
------- -------equity............................................... 1,577 1,486
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $19,506 $18,679
======= =======$19,984 $19,877
======== ========
Net interest rate spread............................................... 3.45% 3.45%spread........................................... 3.27 % 3.24 %
Impact of non-interest bearing funds on margin......................... 0.73% 0.76%margin..................... 0.76 % 0.74 %
NET INTEREST MARGIN.................................................... 4.18% 4.21%
MARGIN................................................ 4.03 % 3.98 %
(1) Fully tax equivalent yields are calculated assuming a 35% tax rate.
23
25
24
- --------------------------------------------------------------------------------26
CONSOLIDATED AVERAGE BALANCES AND INTEREST RATES (QUARTERLY DATA)
- --------------------------------------------------------------------------------
__________________________________________________________________________________________________________________________________
Fully Tax Equivalent Basis (1) 3RD QUARTER 1995 2ND QUARTER 1995 1ST QUARTER 1995 4TH QUARTER 1994 3RD QUARTER 1994
---------------- ---------------- ----------------
(in millions of dollars) ----------------- ----------------- -------------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE RATE BALANCE RATE BALANCE RATE
---------------- ---------------- --------------------------------- ----------------- -------------------
ASSETSAssets
Interest bearing deposits in banks..................................... $ 3 4.50% $ 2 8.80% $ 3 7.46%banks............................ $2 5.73 % $3 5.03 % $3 4.50 %
Trading account securities.............................................securities.................................... 24 7.54 23 8.07 27 6.68 15 6.21 17 6.61
Federal funds sold and securities purchased under
resale agreements....agreement........................................... 22 7.49 70 6.70 45 6.56 115 4.91 188 4.48
Mortgages held for sale................................................sale....................................... 174 7.73 109 7.52 106 8.42
135Securities:
Taxable.................................................. 4,473 6.76 3,913 6.75 214 7.74
Securities available for sale.......................................... 3,501 6.58 2,977 6.33 2,553 5.98
Investment securities.................................................. 458 8.09 475 8.09 498 8.09
Loans
Commercial........................................................ 3,776 8.65 3,562 8.75 3,511 8.47
Tax-free.......................................................... 56 10.77 593,819 6.63
Tax exempt............................................... 118 10.55 127 10.29 140 10.28 62 9.87
Real Estate
Construction................................................. 315 8.57 302 7.82 275 8.02
Mortgage..................................................... 3,111 8.09 2,905 8.06 2,822 8.04
Consumer.......................................................... 4,678 8.58 4,578 8.24 4,440 8.12
Lease Financing.................................................. 660 7.24 620 7.24 574 7.26
------- ------- -------
Total Loans..................................................Securities.................................... 4,591 6.86 4,040 6.86 3,959 6.75
------- ------- -------
Loans
Commercial............................................... 4,099 8.13 4,082 8.58 3,832 8.68
Real Estate
Construction........................................ 349 8.68 324 8.38 315 8.57
Mortgage............................................ 3,058 8.59 3,100 8.20 3,111 8.09
Consumer................................................. 4,979 9.05 4,805 8.90 4,678 8.58
Lease Financing......................................... 747 7.53 690 7.43 660 7.24
------- ------- -------
Total Loans......................................... 13,232 8.56 13,001 8.54 12,596 8.42 12,026 8.29 11,684 8.17
Allowance for loan losses....................................losses........................... 198 201 203 205 212
------- ------- -------
Net loans....................................................loans........................................... 13,034 9.04 12,800 9.00 12,393 8.87 11,821 8.60 11,472 8.48
------- ------- -------
Total earning assets.........................................assets................................ 18,045 8.37 % 17,246 8.38 % 16,736 8.26% 15,745 8.11% 15,158 7.98%8.26 %
------- ------- -------
Cash and due from banks................................................banks....................................... 783 796 774 770 737
All other assets.......................................................assets.............................................. 876 838 798 759 781
------- ------- -------
TOTAL ASSETS...........................................................Total Assets.................................................. $19,506 $18,679 $18,105 $17,069 $16,465
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITYLiabilities and Shareholders' Equity
Demand deposits
Non-interest bearing.............................................. $ 2,119 $ 2,127 $ 2,061bearing..................................... $2,194 $2,159 $2,119
Interest bearing..................................................bearing......................................... 2,488 2.45 % 2,533 2.45 % 2,622 2.42% 2,652 2.30% 2,695 2.21%2.42 %
Savings deposits.......................................................deposits.............................................. 2,020 2.76 2,013 2.68 2,097 2.62 2,171 2.43 2,264 2.23
Certificates of deposit of $100,000 or more............................more................... 878 5.78 770 5.84 671 5.59 581 4.88 589 4.38
Other domestic time deposits...........................................deposits.................................. 4,467 5.69 4,447 5.54 4,156 5.14
3,678 4.62 3,553 4.23
Foreign time deposits..................................................deposits......................................... 318 6.32 264 6.57 274 6.31 296 5.41 199 4.66
------- ------- -------
Total deposits....................................................deposits........................................... 12,365 4.34 12,186 4.24 11,939 3.24 11,505 3.50 11,359 3.183.94
------- ------- -------
Short-term borrowings..................................................borrowings......................................... 3,786 5.96 3,348 6.13 3,137 5.99
2,797 5.06 2,519 4.30
Long-term debt.........................................................debt................................................ 1,403 6.36 1,208 7.23 1,246 7.44 1,138 8.19 938 6.99
------- ------- -------
Interest bearing liabilities......................................liabilities............................. 15,360 4.92 % 14,583 4.93 % 14,203 4.71% 13,313 4.23% 12,756 3.68%4.71 %
------- ------- -------
All other liabilities..................................................liabilities......................................... 416 390 308
220 242
Shareholders' equity...................................................equity.......................................... 1,536 1,547 1,475 1,409 1,406
------- ------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITYTotal Liabilities and Shareholders' Equity $19,506 $18,679 $18,105 $17,069 $16,465
======= ======= =======
Net interest rate spread............................................... 3.55% 3.88% 4.30%spread...................................... 3.45 % 3.45 % 3.55 %
Impact of non-interest bearing funds on margin......................... 0.71% 0.66% 0.59%
NET INTEREST MARGIN.................................................... 4.26% 4.54% 4.89%
margin................ 0.73 % 0.76 % 0.71 %
Net Interest Margin........................................... 4.18 % 4.21 % 4.26 %
(1) Fully tax equivalent yields are calculated assuming a 35% tax
rate.
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_______________________________________________
SELECTED QUARTERLY INCOME STATEMENT DATA
_________________________________________________________________________________________________________
1996 1995
1994
---------------------------------- ------------------------- ------------------------------------------
(in thousands of dollars, except per share amounts) IQ IVQ IIIQ IIQ IQ
IVQ IIIQ
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME........................INCOME.................... $374,296 $381,437 $377,859 $360,203 $342,397
$318,875 $301,724
TOTAL INTEREST EXPENSE.......................EXPENSE................... 189,578 199,551 191,281 180,313 166,188 141,625 118,173
-------- -------- -------- -------- --------
Net Interest Income..........................NET INTEREST INCOME...................... 184,718 181,886 186,578 179,890 176,209
177,250 183,551
Provision for loan losses....................losses................ 11,823 12,139 7,187 4,787 4,608 2,488 1,113
-------- -------- -------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES..................LOSSES.............. 172,895 169,747 179,391 175,103 171,601 174,762 182,438
-------- -------- -------- -------- --------
Service charges on deposit accounts .........accounts...... 22,461 21,008 21,109 20,487 22,514
19,417 19,628
Mortgage banking ............................ 9,678 7,959 10,641 8,630 9,246........................ 8,877 9,752 8,274 6,613 9,573
Trust services ........................................................ 8,793 7,424 7,312 7,586 8,055
6,686 6,732Securities gains ........................ 7,090 302 2,315 6,379 60
Credit card fees ............................ 5,939 5,467 4,899 5,873 5,846
Securities gains (losses).................... 2,315 6,379 60 (55) 648........................ 4,836 5,450 4,669 4,399 3,945
Investment product sales .................................... 3,239 2,292 2,159 1,971 1,699
1,307 1,694Electronic banking fees ................. 1,666 1,740 1,270 1,068 954
Other .......................................................................... 11,200 18,830 12,692 10,021 11,087 9,012 9,999
-------- -------- -------- -------- --------
TOTAL NON-INTEREST INCOME ................... 61,204 59,870 58,955 50,870 53,793............... 68,162 66,798 59,800 58,524 57,887
-------- -------- -------- -------- --------
Salaries .................................................................... 55,819 54,695 54,391 54,974 56,108
54,314 57,740
Commissions .............................................................. 3,607 3,149 3,074 1,932 1,688
1,523 3,547
Employee benefits .................................................. 17,216 12,752 13,958 15,419 15,661
13,091 13,388
Net occupancy .......................................................... 10,874 10,459 10,039 10,079 10,686
9,962 10,593
Equipment .................................................................. 9,614 9,406 9,470 9,593 9,802
10,151 9,651
FDIC insurance .............................. 5,807 6,549 6,536 6,218 5,992Credit card ............................. 3,572 3,695 3,398 3,196 3,118
Printing and supplies .......................................... 3,495 3,705 3,508 3,362 3,572
3,911 3,734
Credit card ................................. 3,398 3,196 3,118 3,426 3,777
Advertising .............................................................. 2,865 2,179 3,149 2,912 3,031 4,152 2,684
Legal and loan collection .................................. 1,894 2,758 1,857 1,905 2,123
3,370 1,719FDIC insurance .......................... 519 1,820 151 6,549 6,536
Other ....................................... 30,199 32,477 33,384 36,498 38,531................................... 34,021 32,646 34,451 31,131 32,316
-------- -------- -------- -------- --------
TOTAL NON-INTEREST EXPENSE .................. 138,850 142,398 145,709 146,616 151,356.............. 143,496 137,264 137,446 141,052 144,641
-------- -------- -------- -------- --------
INCOME BEFORE INCOME TAXES ................................ 97,561 99,281 101,745 92,575 84,847 79,016 84,875
Provision for income taxes ................................ 34,736 33,752 35,808 34,414 29,985 26,520 28,973
-------- -------- -------- -------- --------
NET INCOME .................................. $ 65,937 $ 58,161 $ 54,862 $ 52,496 $ 55,902.............................. $62,825 $65,529 $65,937 $58,161 $54,862
======== ======== ======== ======== ========
PER COMMON SHARE (1)
Net income ................................ $ 0.48 $ 0.42 $ 0.39 $ 0.39 $ 0.41............................ $0.47 $0.49 $0.48 $0.42 $0.39
Cash dividends declared ................... $ 0.20 $ 0.19 $ 0.19 $ 0.19 $ 0.19............... $0.20 $0.20 $0.20 $0.19 $0.19
FULLY TAX EQUIVALENT MARGIN:
Net Interest Income .............................................. $184,718 $181,886 $186,578 $179,890 $176,209 $177,250 $183,551
Tax Equivalent Adjustment (2) .......................... 1,368 1,523 1,635 1,723 1,885 2,042 2,211
-------- -------- -------- -------- --------
Tax Equivalent Net Interest Income ..........$186,086 $183,409 $188,213 $181,613 $178,094
$179,292 $185,762======== ======== ======== ======== ========
========
(1) Adjusted for the five percent stock dividend distributed July 31, 1995.
(2) Calculated assuming a 35% tax rate.
25
27
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PART II. OTHER INFORMATION
In accordance with the instructions to Part II, the other specified items in
this part have been omitted because they are not applicable or the information
has been previously reported.
Item 6. Exhibits6.Exhibits and Reports on Form 8-K
(a) Exhibits
3. ( i )( a ) Articles of Restatement of Charter, Articles of
Amendment to Articles of Restatement of Charter, and Articles
Supplementary -- previously filed as Exhibit 3(i) to Annual
Report on Form 10-K for the year ended December 31, 1993, and
incorporated herein by reference.
( i )( b ) Articles of Amendment to Articles of Restatement of
Charter, filed with the State Department of Assessments and
Taxation of the State of Maryland on May 3, 1996.
( ii ) By LawsBylaws -- previously filed as Exhibit 3(b) to Annual
Report on Form 10-K for the year ended December 31, 1987, and
incorporated herein by reference.
4. Instruments defining the Rights of Security Holders:
Reference is made to Articles Fifth, Eighth and Tenth of Articles
of Restatement of Charter, previously filed as Exhibit 3(i) to
Form 10-K for the year ended December 31, 1993, and incorporated
herein by reference. Also, reference is made to Rights Plan,
dated February 22, 1990, previously filed as Exhibit 1 to
Registration Statement on Form 8-A, and incorporated herein by
reference and to Amendment No. 1 to the Rights Agreement, dated
as of August 16, 1995, previously filed as Exhibit 4(b) to Form
8-K filed with the Securities and Exchange Commission on August
28, 1995, and incorporated herein by reference. Instruments
defining the rights of holders of long-term debt will be
furnished to the Securities and Exchange Commission upon request.
11. Computation of Earnings Per Share
27. Financial Data Schedule
(b) Reports on Form 8-K
1. A report on Form 8-K, dated July 12, 1995,January 10, 1996, was filed under
report item numbers 5 and 7, concerning Huntington's results of
operations for the fourth quarter and year ended June 30,December 31,
1995.
A second report
on Form 8-K , dated August 16, 1995, was filed
under report item numbers 5 and 7, concerning
Amendment No. 1 to the Rights Agreement between
Huntington and the Huntington Trust Company, N.A.,
as Rights Agent.
2628
2729
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Huntington Bancshares Incorporated
----------------------------------
(Registrant)
Date: November 14, 1995May 15, 1996 /s/ Ralph K. Frasier
-------------------------------------------------------
Ralph K. Frasier
General Counsel and Secretary
Date: November 14, 1995May 15, 1996 /s/ John D. Van Fleet
--------------------------------------------------------
John D. Van Fleet
Senior Vice President, Corporate Controller, and Principal
Accounting Officer (Chief Accounting Officer)
2729