UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY PERIOD ENDED March 31, 2002
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 247,248,217 shares of Registrant's without par value common stock
outstanding on April 30, 2002.
HUNTINGTON BANCSHARES INCORPORATED
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 2002 and 2001 and December 31, 2001 3
Consolidated Statements of Income -
For the three months ended March 31, 2002 and 2001 4
Consolidated Statements of Changes in Shareholders' Equity -
For the three months ended March 31, 2002 and 2001 5
Consolidated Statements of Cash Flows -
For the three months ended March 31, 2002 and 2001 6
Notes to Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures about Market Risk 25
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 34-35
Signatures 36
2
PART I. FINANCIAL INFORMATION
1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31, MARCH 31,
(in thousands, except share amounts) 2002 2001 2001
------------ ------------ ------------
(Unaudited) (Unaudited)
ASSETS
Cash and due from banks $ 654,312 $ 1,138,366 $ 1,006,809
Interest bearing deposits in banks 29,537 21,205 5,011
Trading account securities 4,040 13,392 70,550
Federal funds sold and securities
purchased under resale agreements 60,118 83,275 155,738
Loans held for sale 184,353 629,386 388,545
Securities available for sale - at fair value 2,869,826 2,849,579 3,632,034
Investment securities - fair value $11,400; $12,499;
and $15,586, respectively 11,264 12,322 15,358
Total loans (1) 19,338,947 21,601,873 20,870,648
Less allowance for loan losses 386,053 410,572 301,777
------------ ------------ ------------
Net loans 18,952,894 21,191,301 20,568,871
------------ ------------ ------------
Bank owned life insurance 852,931 843,183 814,502
Goodwill and other intangible assets 209,942 716,054 745,023
Premises and equipment 362,135 452,036 457,504
Customers' acceptance liability 15,558 13,670 16,510
Accrued income and other assets 539,044 536,390 564,733
------------ ------------ ------------
TOTAL ASSETS $ 24,745,954 $ 28,500,159 $ 28,441,188
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Total deposits (1) $ 16,266,785 $ 20,187,304 $ 19,130,157
Short-term borrowings 1,803,250 1,955,926 2,700,351
Bank acceptances outstanding 15,558 13,670 16,510
Medium-term notes 1,969,398 1,795,002 2,084,859
Subordinated notes and other long-term debt 938,407 944,330 894,937
Company obligated mandatorily redeemable preferred
capital securities of subsidiary trusts holding solely
junior subordinated debentures of the Parent Company 300,000 300,000 300,000
Accrued expenses and other liabilities 1,018,618 887,487 909,118
------------ ------------ ------------
Total Liabilities 22,312,016 26,083,719 26,035,932
------------ ------------ ------------
Shareholders' equity
Preferred stock - authorized 6,617,808 shares;
none issued or outstanding -- -- --
Common stock - without par value; authorized
500,000,000 shares; issued 257,866,255;
257,866,255; and 257,866,255 shares, respectively;
outstanding 249,991,932; 251,193,814; and
251,001,821 shares, respectively 2,486,832 2,490,724 2,491,848
Less 7,874,323; 6,672,441; and 6,864,434
treasury shares, respectively (144,199) (123,849) (126,532)
Accumulated other comprehensive income (loss) 9,484 25,488 (4,221)
Retained earnings 81,821 24,077 44,161
------------ ------------ ------------
Total Shareholders' Equity 2,433,938 2,416,440 2,405,256
------------ ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 24,745,954 $ 28,500,159 $ 28,441,188
============ ============ ============
(1) See Page 13 for detail of Loans and Deposits.
3
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED
MARCH 31,
----------------------
(in thousands, except per share amounts) 2002 2001
-------- --------
(Unaudited) (Unaudited)
Interest and fee income
Loans $342,102 $446,785
Securities 44,781 63,834
Other 6,712 7,356
-------- --------
TOTAL INTEREST INCOME 393,595 517,975
-------- --------
Interest expense
Deposits 109,967 185,081
Short-term borrowings 11,605 33,163
Medium-term notes 16,598 36,663
Subordinated notes and other long-term debt 12,600 19,944
-------- --------
TOTAL INTEREST EXPENSE 150,770 274,851
-------- --------
NET INTEREST INCOME 242,825 243,124
Provision for loan losses 55,781 33,464
-------- --------
NET INTEREST INCOME
AFTER PROVISION FOR LOAN LOSSES 187,044 209,660
-------- --------
Total non-interest income (1) 301,428 117,724
Total non-interest expense (1) 263,570 234,090
-------- --------
INCOME BEFORE INCOME TAXES 224,902 93,294
Income taxes 127,175 25,428
-------- --------
NET INCOME $ 97,727 $ 67,866
======== ========
PER COMMON SHARE
Net income
Basic $ 0.39 $ 0.27
Diluted $ 0.39 $ 0.27
Cash dividends declared $ 0.16 $ 0.20
AVERAGE COMMON SHARES
Basic 250,749 250,998
Diluted 251,953 251,510
(1) See Page 14 for detail of Non-Interest Income and Non-Interest Expense.
4
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
ACCUMULATED
COMMON STOCK TREASURY STOCK OTHER
-------------------- ------------------- COMPREHENSIVE RETAINED
(in thousands) SHARES AMOUNT SHARES AMOUNT INCOME (LOSS) EARNINGS TOTAL
------ -------- ------ -------- ------------- -------- -----------
Three Months Ended March 31, 2001:
Balance, beginning of period 257,866 $ 2,493,645 (7,007) $(129,432) $ (24,520) $26,354 $ 2,366,047
Comprehensive Income:
Net income 67,866 67,866
Cumulative effect of change in accounting
principle for derivatives (9,113) (9,113)
Unrealized net holding gains on
securities available for sale arising
during the period, net of reclassifi-
cation adjustment for net gains
included in net income 26,289 26,289
Unrealized gains on derivative
instruments used in cash flow
hedging relationships 3,123 3,123
------------
Total comprehensive income 88,165
------------
Cash dividends declared (50,059) (50,059)
Stock options exercised (1,797) 99 2,189 392
Treasury shares sold to
employee benefit plans 44 711 711
------- ----------- ------ --------- -------- ------- -----------
Balance, end of period (Unaudited) 257,866 $ 2,491,848 (6,864) $(126,532) $ (4,221) $44,161 $ 2,405,256
======= =========== ====== ========= ======== ======= ===========
THREE MONTHS ENDED MARCH 31, 2002:
BALANCE, BEGINNING OF PERIOD 257,866 $ 2,490,724 (6,672) $(123,849) $ 25,488 $24,077 $ 2,416,440
COMPREHENSIVE INCOME:
NET INCOME 97,727 97,727
UNREALIZED NET HOLDING LOSSES ON
SECURITIES AVAILABLE FOR SALE
ARISING DURING THE PERIOD,
NET OF RECLASSIFICATION ADJUSTMENT
FOR NET GAINS INCLUDED IN NET INCOME (14,800) (14,800)
UNREALIZED GAINS ON DERIVATIVE
INSTRUMENTS USED IN CASH
FLOW HEDGING RELATIONSHIPS (1,204) (1,204)
------------
TOTAL COMPREHENSIVE INCOME 81,723
------------
CASH DIVIDENDS DECLARED (39,983) (39,983)
STOCK OPTIONS EXERCISED (3,892) 258 7,760 3,868
TREASURY SHARES PURCHASED (1,460) (28,110) (28,110)
------- ----------- ------ --------- -------- ------- -----------
BALANCE, END OF PERIOD (UNAUDITED) 257,866 $ 2,486,832 (7,874) $(144,199) $ 9,484 $81,821 $ 2,433,938
======= =========== ====== ========= ======== ======= ===========
See notes to unaudited consolidated financial statements.
5
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31,
-----------------------------
(in thousands of dollars) 2002 2001
----------- -----------
(Unaudited) (Unaudited)
OPERATING ACTIVITIES
Net Income $ 97,727 $ 67,866
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses 55,781 33,464
Provision for depreciation and amortization 17,613 32,136
Deferred income tax expense 10,990 24,255
Decrease (increase) in trading account securities 9,352 (65,827)
Decrease (increase) in mortgages held for sale 445,033 (233,441)
Gains on sales of securities available for sale (457) (2,078)
Gains on sales/securitizations of loans (1,395) (1,666)
Gains on sale of Florida operations (175,344) --
Decrease in accrued income receivable 32,038 18,476
Net increase in other assets (61,852) (72,942)
Increase in accrued expenses 30,158 34,048
Increase in other liabilities 14,924 37,077
Restructuring and special charges 56,184 --
----------- -----------
NET CASH PROVIDED (USED FOR) BY OPERATING ACTIVITIES 530,752 (128,632)
----------- -----------
INVESTING ACTIVITIES
Increase in interest bearing deposits in banks (8,332) (41)
Proceeds from:
Maturities and calls of investment securities 1,056 614
Maturities and calls of securities available for sale 238,433 397,078
Sales of securities available for sale 226,295 483,033
Purchases of securities available for sale (497,921) (367,003)
Proceeds from sales/securitizations of loans 110,128 92,974
Net loan originations, excluding sales (623,960) (394,355)
Proceeds from sale of premises and equipment 13,251 533
Purchases of premises and equipment (21,123) (16,612)
Proceeds from sales of other real estate 2,412 1,892
Net cash paid related to sale of Florida operations (1,289,917) --
----------- -----------
NET CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES (1,849,678) 198,113
----------- -----------
FINANCING ACTIVITIES
Increase (decrease) in total deposits 853,834 (647,339)
(Decrease) increase in short-term borrowings (152,676) 712,592
Maturity of long-term debt -- (4,000)
Proceeds from issuance of medium-term notes 675,000 300,000
Payment of medium-term notes (500,000) (675,000)
Dividends paid on common stock (40,201) (50,173)
Repurchases of common stock (28,110) --
Net proceeds from issuance of common stock 3,868 1,103
----------- -----------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 811,715 (362,817)
----------- -----------
CHANGE IN CASH AND CASH EQUIVALENTS (507,211) (293,336)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,221,641 1,455,883
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 714,430 $ 1,162,547
=========== ===========
See notes to unaudited consolidated financial statements.
6
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
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 consolidated financial
position, the results of operations, and cash flows for the periods presented.
These unaudited consolidated financial statements have been prepared according
to the rules and regulations of the Securities and Exchange Commission and,
therefore, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. The Notes to the Consolidated Financial Statements
appearing in Huntington Bancshares Incorporated's (Huntington) 2001 Annual
Report on Form 10-K (2001 Annual Report), which include descriptions of
significant accounting policies, should be read in conjunction with these
interim financial statements.
Certain amounts in the prior year's financial statements have been
reclassified to conform to the 2002 presentation. These reclassifications had no
effect on net income.
NOTE 2 - EARNINGS PER SHARE
Basic earnings per share is the amount of earnings for the period
available to each share of common stock outstanding during the reporting period.
Diluted earnings per share is the amount of earnings available to each share of
common stock outstanding during the reporting period adjusted for the potential
issuance of common shares for stock options. The calculation of basic and
diluted earnings per share for each of the periods ended March 31, is as
follows:
THREE MONTHS ENDED
MARCH 31,
(in thousands, except per share amounts) 2002 2001
-------- --------
Net Income $ 97,727 $ 67,866
======== ========
Average common shares outstanding 250,749 250,943
Dilutive effect of stock options 1,204 567
-------- --------
Diluted common shares outstanding 251,953 251,510
======== ========
Earnings per share
Basic $ 0.39 $ 0.27
Diluted $ 0.39 $ 0.27
Approximately 5.6 million and 6.9 million stock options were outstanding
at the end of each respective period but were not included in the computation of
diluted earnings per share because the options' exercise price was greater than
the average market price of the common shares for the period and, therefore, the
effect would be antidilutive.
NOTE 3 - INTANGIBLE ASSETS
In June 2001, the Financial Accounting Standards Board issued SFAS No.
141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets,
effective for fiscal years beginning after December 15, 2001. Under the new
rules, goodwill is no longer amortized but is subject to annual impairment tests
in accordance with the Statements. Other intangible assets continue to be
amortized over their useful lives. At March 31, 2002 and 2001, Huntington had
$209.9 million and $745.0 million in goodwill and other intangible
7
assets, respectively. The following table reflects the activity in goodwill and
other intangible assets for the three months ended March 31:
(in thousands of dollars) 2002 2001
--------- ---------
Balance, beginning of period $ 716,054 $ 755,270
Additions 168 329
Sale of Florida operations (504,904) --
Amortization (1,376) (10,576)
--------- ---------
BALANCE, END OF PERIOD $ 209,942 $ 745,023
========= =========
Huntington applied the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. Prior to the sale of
Huntington's operations in Florida, a majority of goodwill and other intangible
assets related to those operations. The application of the non-amortization
provisions of SFAS No. 142 resulted in an increase in net income per share of
$.03 for the first quarter 2002. Had no amortization of goodwill, net of tax,
been recorded in the prior year, net income and diluted earnings per share for
the first quarter 2001 would have been $75.7 million and $0.30 per share,
respectively. During 2002, Huntington will perform the first of the required
impairment tests of the remaining goodwill as of January 1, 2002. Huntington's
management does not expect the implementation of the impairment provisions of
SFAS No. 142 to have a material impact on its results of operations or financial
condition.
NOTE 4 - COMPREHENSIVE INCOME
Comprehensive Income includes net income as well as certain items that are
reported directly within a separate component of stockholders' equity that are
not considered part of net income. Currently, Huntington's only components of
Other Comprehensive Income are the unrealized gains (losses) on securities
available for sale and unrealized gains and losses on certain derivatives. The
related before and after tax amounts are as follows:
THREE MONTHS ENDED
MARCH 31,
-------- --------
(in thousands of dollars) 2002 2001
-------- --------
Cumulative effect of change in accounting method for derivatives used in cash
flow hedging relationships:
Unrealized net losses $ -- $(14,020)
Related tax benefit -- 4,907
-------- --------
Net -- (9,113)
-------- --------
Unrealized holding (losses) gains on securities available for sale arising
during the period:
Unrealized net (losses) gains (22,312) 42,525
Related tax benefit (expense) 7,809 (14,884)
-------- --------
Net (14,503) 27,641
-------- --------
Unrealized holding (losses) gains on derivatives used in cash flow hedging
relationships arising during the period:
Unrealized net (losses) gains (1,852) 4,805
Related tax benefit (expense) 648 (1,682)
-------- --------
Net (1,204) 3,123
-------- --------
Less: Reclassification adjustment for net gains from sales
of securities available for sale realized during the period:
Realized net gains 457 2,078
Related tax expense (160) (726)
-------- --------
Net 297 1,352
-------- --------
Total Other Comprehensive (Loss) Income $(16,004) $ 20,299
======== ========
8
Activity in Accumulated Other Comprehensive Income for the three months
ended March 31, 2002 and 2001 was as follows:
UNREALIZED GAINS
(LOSSES) ON DERIVATIVE
UNREALIZED GAINS (LOSSES) INSTRUMENTS USED IN
ON SECURITIES CASH FLOW HEDGING
(in thousands of dollars) AVAILABLE FOR SALE RELATIONSHIPS
------------------------- ----------------------
Balance, December 31, 2000 (24,520) --
Change in accounting method -- (9,113)
Current-period change 26,289 3,123
-------- -------
Balance, March 31, 2001 $ 1,769 $(5,990)
======== =======
Balance, December 31, 2001 29,469 (3,981)
Current-period change (14,800) (1,204)
-------- -------
Balance, March 31, 2002 $ 14,669 $(5,185)
======== =======
NOTE 5 - RESTRUCTURING AND SPECIAL CHARGES
During the first quarter of 2002, Huntington recorded pre-tax
restructuring and special charges of $56.2 million related to the implementation
of strategic initiatives announced July 2001. These charges included expenses of
$32.7 million related to the sale of the Florida operations, $8.0 million for
asset impairment, $4.3 million for the exit of certain e-commerce activities,
$1.8 million related to facilities, and $9.4 million for other non-recurring
costs. These charges amounted to $36.5 million, or $0.14 per share, on an
after-tax basis and are reflected in non-interest expense in the accompanying
unaudited consolidated financial statements.
Combined with the amounts recorded in 2001, these pre-tax charges totaled
$233.1 million ($151.5 million after-tax, or $0.60 per share), and consisted of
$71.7 million related to credit quality, $45.3 million for asset impairment,
$34.7 million for the costs related to sell the Florida operations, $20.1
million for the exit or curtailment of certain e-commerce activities, $15.6
million related to owned or leased facilities that Huntington has vacated or
intends to vacate, and $45.7 million related to reduction of ATMs, employee
severance, non-recurring legal, accounting, consulting, and other operational
costs.
NOTE 6 - SALE OF FLORIDA OPERATIONS
On February 15, 2002, Huntington completed the sale of its Florida
operations to SunTrust Banks, Inc. Included in the sale were $4.8 billion of
deposits and other liabilities and $2.8 billion of loans and other assets.
Huntington received a deposit premium of 15%, or $711.9 million. The total net
pre-tax gain from the sale was $175.3 million and is reflected in non-interest
income. The after-tax gain was $56.8 million, or $0.22 per share. Income taxes
related to this transaction were $118.6 million. Most of the goodwill relating
to the Florida operations was non-deductible for tax purposes. Pro forma
financial information reflecting the effect of the sale is presented and
described below. Since the transaction was completed during the quarter, no pro
forma balance sheet is presented.
The following unaudited pro forma consolidated income statement is
presented for the quarter ended March 31, 2002, giving effect to the sale as if
it had occurred on January 1, 2002, and does not include the net gain realized
on the sale of Huntington's Florida operations or any related special charges.
These pro forma financial statements do not include any assumptions as to future
share repurchases pursuant to the previously announced share repurchase program
that commenced following the sale.
The pro forma consolidated income statement may not be indicative of the
results of operations that would have actually occurred had the transaction been
consummated during the period indicated. This pro forma financial information is
also not intended to be an indication of the results of operations that may be
attained in
9
the future. These pro forma consolidated financial statements should be read in
conjunction with Huntington's historical financial statements.
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE QUARTER ENDED MARCH 31, 2002
Florida Related Huntington
(in thousands of dollars) Huntington Operations Transactions Pro Forma
- ------------------------- ---------- ---------- ------------ ----------
Net interest income $242,825 $ (9,724) $ -- $233,101
Provision for loan losses 55,781 (5,186) -- 50,595
-------- -------- --------- --------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 187,044 (4,538) -- 182,506
-------- -------- --------- --------
Non-interest income 301,428 (10,633) (175,344) 115,451
Non-interest expense 263,570 (18,335) (32,728) 212,507
-------- -------- --------- --------
INCOME BEFORE INCOME TAXES 224,902 3,164 (142,616) 85,450
Income taxes 127,175 1,107 (107,098) 21,184
-------- -------- --------- --------
NET INCOME $ 97,727 $ 2,057 $ (35,518) $ 64,266
======== ======== ========= ========
NET INCOME PER COMMON SHARE -- DILUTED $ 0.39 $ 0.01 ($ 0.14) $ 0.26
======== ======== ========= ========
OPERATING NET INCOME (1) $ 77,456 $ 2,057 $ 79,513
======== ======== ========
OPERATING NET INCOME PER COMMON
SHARE -- DILUTED (1) $ 0.31 $ 0.01 $ 0.32
======== ======== ========
(1) Excludes after-tax gain on sale of the Florida operations and
restructuring and special charges.
The column entitled Florida Operations includes all direct revenue and
expenses for Florida from January 1, 2002 through February 15, 2002, and any
indirect revenue and expenses that ceased with the sale, including $1.1 million
of amortization expense on intangible assets related to Florida. In addition,
net interest income in that column includes a funding credit of $5.3 million
related to the $2.0 billion of funding that Florida provided to Huntington and
the $1.9 million of interest that would have been earned on the $711.9 million
deposit premium. Both the funding credit and the assumed interest earned on the
deposit premium are based on the average one-year LIBOR rate for the first
quarter of 2002 of 2.15%. The column entitled Related Transactions reflects the
$175.3 million net gain on the sale of the Florida operations, $32.7 million of
the $56.2 million special charges recorded in the first quarter of 2002 that
related to the sale of Florida, and the applicable income taxes. After excluding
the remaining restructuring and special charges, net of taxes, the earnings per
share were $0.32 for the first quarter of 2002.
NOTE 7 - SEGMENT REPORTING
Huntington views its operations as four distinct segments. Regional
Banking, Dealer Sales, and the Private Financial Group (PFG) are Huntington's
major business lines. The fourth segment includes Huntington's Treasury function
and other unallocated assets, liabilities, revenue, and expense. Line of
business results are determined based upon Huntington's business profitability
reporting system, which assigns balance sheet and income statement items to each
of the business segments. The process is designed around Huntington's
organizational and management structure and accordingly, the results below are
not necessarily comparable with similar information published by other financial
institutions. In the first quarter of 2002, changes were made to the
methodologies utilized for certain balance sheet and income statement
allocations performed by Huntington's business profitability reporting system.
The prior quarters have not been restated for these changes.
The chief decision-makers for Huntington rely on "operating earnings",
which are results of operations excluding the net gain from the sale of the
Florida operations and restructuring and special charges, for review of
performance and for critical decision making purposes. See note 5 to the
unaudited consolidated financial
10
statements for further discussions regarding restructuring and special charges
and note 6 for the net gain on sale of Huntington's Florida operations. Net
interest income is presented on a fully tax equivalent (FTE) basis using a 35%
tax rate.
The following provides a brief description of the four operating segments of
Huntington:
REGIONAL BANKING: provides products and services to retail, business
banking, and corporate customers. This segment's products include home equity
loans, first mortgage loans, installment loans, business loans, personal and
business deposit products, as well as investment and insurance services. These
products and services are offered through Huntington's traditional banking
network, Direct Bank, and Web Bank. Regional Banking also represents the
middle-market and large corporate banking relationships which use a variety of
banking products and services including, but not limited to, commercial loans,
international trade, and cash management. Huntington's capital markets division
also provides alternative financing solutions for larger business clients,
including privately placed debt, syndicated commercial lending, and the sale of
interest rate protection products.
DEALER SALES: product offerings pertain to the automobile lending sector
and include indirect consumer loans and leases, as well as floor plan financing.
The consumer loans and leases comprise the vast majority of the business and
involve the financing of vehicles purchased or leased by individuals through
dealerships.
PRIVATE FINANCIAL GROUP: this segment's array of products and services are
designed to meet the needs of Huntington's higher wealth customers. Revenue is
derived through the sale of personal trust, asset management, investment
advisory, brokerage, insurance, and deposit and loan products and services.
TREASURY / OTHER: this segment absorbs unassigned assets, liabilities,
equity, revenue, and expense that cannot be directly assigned or allocated to
one of Huntington's lines of business. Furthermore, Huntington uses a
match-funded transfer pricing system to allocate interest income and interest
expense to its business segments. This approach consolidates the interest rate
risk management of Huntington into its Treasury Group. As part of its overall
interest rate risk and liquidity management strategy, the Treasury Group
administers an investment portfolio of approximately $2.9 billion. Revenue and
expense associated with these activities remain within the Treasury Group.
Additionally, the net gain from the 2002 sale of Huntington's Florida
operations, the restructuring and special charges, and amortization expense of
intangible assets are also components of Treasury/Other.
Listed below is certain reported financial information reconciled to
Huntington's first quarter 2002 and 2001 operating results by line of business.
INCOME STATEMENTS Regional Dealer Treasury/ Huntington
(in thousands of dollars) Banking Sales PFG Other Consolidated
-------- ------- ------- --------- ------------
2002
Net interest income (FTE) $159,638 $53,070 $ 7,635 $ 23,651 $ 243,994
Provision for loan losses 28,969 26,812 -- -- 55,781
Non-Interest income 89,537 2,640 23,566 185,685 301,428
Non-Interest expense 160,281 18,222 17,409 67,658 263,570
Income taxes/FTE adjustment 20,974 3,737 4,827 98,806 128,344
-------- ------- ------- --------- ---------
Net income, as reported 38,951 6,939 8,965 42,872 97,727
Gain on sale of Florida operations, net of tax -- -- -- 56,790 56,790
Restructuring and special charges, net of tax -- -- -- (36,519) (36,519)
-------- ------- ------- --------- ---------
Operating earnings $ 38,951 $ 6,939 $ 8,965 $ 22,601 $ 77,456
======== ======= ======= ========= =========
11
INCOME STATEMENTS Regional Dealer Treasury/ Huntington
(in thousands of dollars) Banking Sales PFG Other Consolidated
-------- ------- ------- --------- ------------
2001
Net interest income (FTE) $201,438 $54,356 $ 9,556 $(20,224) $245,126
Provision for loan losses 17,369 16,095 -- -- 33,464
Non-Interest income 79,602 11,273 23,520 3,329 117,724
Non-Interest expense 174,952 13,660 26,665 18,813 234,090
Income taxes/FTE adjustment 31,052 12,556 2,244 (18,422) 27,430
-------- ------- ------- -------- --------
Net income, as reported 57,667 23,318 4,167 (17,286) 67,866
Restructuring and special charges, net of tax -- -- -- -- --
-------- ------- ------- -------- --------
Operating earnings $ 57,667 $23,318 $ 4,167 $(17,286) $ 67,866
======== ======= ======= ======== ========
BALANCE SHEETS AVERAGE ASSETS AVERAGE DEPOSITS
---------------------- ----------------------
(in millions of dollars) 2002 2001 2002 2001
------- ------- ------- -------
Regional Banking $13,972 $14,263 $16,752 $18,027
Dealer Sales 7,916 7,037 57 82
PFG 903 718 731 637
Treasury / Other 3,753 6,221 385 321
------- ------- ------- -------
Total $26,544 $28,239 $17,925 $19,067
======= ======= ======= =======
12
FINANCIAL REVIEW
LOAN PORTFOLIO COMPOSITION
MARCH 31, 2002 DECEMBER 31, 2001 MARCH 31, 2001
-------------------- ------------------- ------------------
(in thousands of dollars) BALANCE % BALANCE % BALANCE %
----------- ----- ----------- ----- ----------- -----
Commercial (unearned income $5,662, $2,859, and $1,343) $ 5,681,788 29.4 $ 6,439,372 29.8 $ 6,729,992 32.2
Commercial real estate 3,645,114 18.8 3,975,562 18.4 3,599,262 17.2
----------- ----- ----------- ----- ----------- -----
Total Commercial and Commercial Real Estate 9,326,902 48.2 10,414,934 48.2 10,329,254 49.5
----------- ----- ----------- ----- ----------- -----
Consumer
Auto leases - Indirect (unearned income $471,421,
$500,430 and $520,569) 3,126,101 16.2 3,207,514 14.8 3,175,981 15.2
Auto loans - Indirect (unearned income $12, $19, and $28) 2,561,936 13.2 2,883,279 13.3 2,511,652 12.0
Home equity lines 2,189,649 11.3 2,535,885 11.7 2,223,647 10.7
Residential mortgage 1,075,141 5.6 970,704 4.5 959,852 4.6
Other loans (unearned income $16, $24, and $36) 1,059,218 5.5 1,589,557 7.4 1,670,262 8.0
----------- ----- ----------- ----- ----------- -----
Total Consumer 10,012,045 51.8 11,186,939 51.8 10,541,394 50.5
----------- ----- ----------- ----- ----------- -----
TOTAL LOANS $19,338,947 100.0 $21,601,873 100.0 $20,870,648 100.0
=========== ===== =========== ===== =========== =====
DEPOSIT COMPOSITION
MARCH 31, 2002 DECEMBER 31, 2001 MARCH 31, 2001
-------------------- ------------------- ------------------
(in thousands of dollars) BALANCE % BALANCE % BALANCE %
----------- ----- ----------- ----- ----------- -----
Demand deposits
Non-interest bearing $ 2,857,233 17.6 $ 3,635,173 18.0 $ 3,256,604 17.0
Interest bearing 4,747,283 29.2 5,723,160 28.4 4,688,109 24.5
Savings deposits 2,895,445 17.8 3,466,305 17.2 3,607,404 18.9
Other domestic time deposits 4,179,814 25.7 5,868,451 29.1 5,897,999 30.8
----------- ----- ----------- ----- ----------- -----
TOTAL CORE DEPOSITS (1) 14,679,775 90.3 18,693,089 92.7 17,450,116 91.2
----------- ----- ----------- ----- ----------- -----
Domestic time deposits of $100,000 or more 895,427 5.5 1,130,563 5.6 1,350,813 7.1
Brokered time deposits and negotiable CDs 451,173 2.8 137,915 0.7 136,147 0.7
Foreign time deposits 240,410 1.4 225,737 1.0 193,081 1.0
----------- ----- ----------- ----- ----------- -----
TOTAL DEPOSITS $16,266,785 100.0 $20,187,304 100.0 $19,130,157 100.0
=========== ===== =========== ===== =========== =====
(1) Core deposits include non-interest bearing and interest bearing demand
deposits, savings deposits, CDs under $100,000, and IRA deposits.
13
FINANCIAL REVIEW
ANALYSIS OF NON-INTEREST INCOME
THREE MONTHS ENDED
MARCH 31,
------------------- PERCENT
(in thousands of dollars) 2002 2001 CHANGE
-------- -------- --------
Service charges on deposit accounts $ 38,530 $ 38,907 (1.0)%
Mortgage banking 19,565 10,031 95.0
Brokerage and insurance 18,792 18,768 0.1
Trust services 15,501 14,314 8.3
Bank Owned Life Insurance income 11,676 9,560 22.1
Other service charges and fees 10,632 11,098 (4.2)
Other 10,931 12,968 (15.7)
-------- -------- --------
TOTAL NON-INTEREST INCOME BEFORE GAIN ON SALE OF FLORIDA
OPERATIONS AND SECURITIES GAINS 125,627 115,646 8.6
Gain on sale of Florida operations 175,344 -- N.M.
Securities gains 457 2,078 (78.0)
-------- -------- --------
TOTAL NON-INTEREST INCOME $301,428 $117,724 156.0%
======== ======== ========
ANALYSIS OF NON-INTEREST EXPENSE
THREE MONTHS ENDED
MARCH 31,
-------------------- PERCENT
(in thousands of dollars) 2002 2001 CHANGE
-------- -------- --------
Personnel costs $114,285 $117,662 (2.9)%
Outside data processing and other services 18,439 16,654 10.7
Net occupancy 17,239 19,780 (12.9)
Equipment 16,949 19,972 (15.1)
Marketing 7,003 9,939 (29.5)
Telecommunications 6,018 7,125 (15.5)
Professional services 5,401 4,969 8.7
Printing and supplies 3,837 5,059 (24.2)
Franchise and other taxes 2,328 2,120 9.8
Amortization of intangible assets 1,376 10,576 (87.0)
Other 14,511 20,234 (28.3)
-------- -------- --------
TOTAL NON-INTEREST EXPENSE BEFORE SPECIAL CHARGES 207,386 234,090 (11.4)
Special charges 56,184 -- N.M.
-------- -------- --------
TOTAL NON-INTEREST EXPENSE $263,570 $234,090 12.6%
======== ======== ========
N.M. - Not Meaningful.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
Huntington is a multi-state financial holding company headquartered in
Columbus, Ohio. Its subsidiaries are engaged in full-service commercial and
consumer banking, mortgage banking, lease financing, trust services, discount
brokerage services, underwriting credit life and disability insurance, issuing
commercial paper guaranteed by Huntington, and selling other insurance and
financial products and services. Huntington's subsidiaries operate domestically
in offices located in Ohio, Michigan, Florida, West Virginia, Indiana, and
Kentucky. Huntington has a foreign office in each of the Cayman Islands and Hong
Kong.
FORWARD-LOOKING STATEMENTS
This interim report, including Management's Discussion and Analysis of
Financial Condition and Results of Operations, contains forward-looking
statements about Huntington. These include descriptions of products or services,
plans, or objectives of its management for future operations, and forecasts of
its revenues, earnings, or other measures of economic performance.
Forward-looking statements can be identified by the fact that they do not relate
strictly to historical or current facts.
By their nature, forward-looking statements are subject to numerous
assumptions, risks, and uncertainties. A number of factors, including but not
limited to, those set forth under the heading "Business Risks" included in Item
1 of Huntington's 2001 Annual Report and other factors described from time to
time in Huntington's other filings with the Securities and Exchange Commission,
could cause actual conditions, events, or results to differ significantly from
those described in the forward-looking statements.
The management of Huntington encourages readers of this interim report on
Form 10-Q to understand forward-looking statements to be strategic objectives
rather than absolute targets of future performance. Forward-looking statements
speak only as of the date they are made. Huntington does not update
forward-looking statements to reflect circumstances or events that occur after
the date the forward-looking statements are made or to reflect the occurrence of
unanticipated events.
The following discussion and analysis, the purpose of which is to provide
investors and others with information that Huntington's management believes to
be necessary for an understanding of its financial condition, changes in
financial condition, and results of operations, should be read in conjunction
with the financial statements, notes, and other information contained in this
document.
SIGNIFICANT ACCOUNTING POLICIES
Note 1 to Huntington's consolidated financial statements included in the
2001 Annual Report lists significant accounting policies used in the development
and presentation of its financial statements. This discussion and analysis, the
significant accounting policies, and other financial statement disclosures
identify and address key variables and other qualitative and quantitative
factors that are necessary for an understanding and evaluation of Huntington and
its results of operations.
SALE OF FLORIDA OPERATIONS
On February 15, 2002, Huntington completed the sale of its Florida
operations to SunTrust Banks, Inc. These operations included 143 banking offices
and 456 ATMs with approximately $2.8 billion in loans and other tangible assets,
and $4.8 billion in deposits and other liabilities. Huntington received a 15%
premium on the deposits sold, resulting in a net pre-tax gain of $175.3 million
($56.8 million after-tax, or $0.22 per share). The transaction slightly improved
Huntington's earnings sensitivity to rising interest rates. In addition, the net
interest margin, tangible equity to assets, and efficiency ratios were and will
be favorably impacted in the future. The dollar value of NPAs was reduced but
the NPA ratios increased with the sale. See note 6 to Huntington's unaudited
consolidated financial statements regarding the sale of the Florida operations.
ACQUISITION OF HABERER INVESTMENT ADVISOR, INC.
On April 1, 2002, Huntington closed the acquisition of Haberer Investment
Advisor, Inc. (Haberer), a Cincinnati-based registered investment advisory firm.
Haberer has approximately $500 million in assets under management and will
become part of Huntington's Private Financial Group line of business as a
wholly-owned subsidiary of Huntington.
15
STRATEGIC REFOCUSING AND OTHER RESTRUCTURING
During the first quarter 2002, Huntington implemented its strategic
refocusing plan announced last July. This plan included the sale of Huntington's
Florida operations, which closed in February 2002 as discussed above, the
consolidation of numerous non-Florida branch offices, as well as credit-related
and other actions to strengthen Huntington's balance sheet. These initiatives
were designed to attain more positive revenue and earnings for shareholders and
to improve capital efficiency. Huntington recorded $56.2 million of pre-tax
restructuring and special charges during the first quarter of 2002 ($36.5
million after-tax, or $0.14 per share) related to its strategic refocusing plan.
Combined with the amounts recorded in 2001, these pre-tax charges totaled $233.1
million ($151.5 million after-tax, or $0.60 per share), and consisted of $71.7
million related to credit quality, $45.3 million for asset impairment, $34.7
million for the costs related to the sale of the Florida operations, $20.1
million for the exit or curtailment of certain e-commerce activities, $15.6
million related to owned or leased facilities that Huntington has vacated or
intends to vacate, and $45.7 million related to reduction of ATMs, employee
severance, non-recurring legal, accounting, consulting, and other operational
costs.
OFF BALANCE SHEET ARRANGEMENTS
Like other financial organizations, Huntington uses various commitments in
its ordinary course of business that, under accounting principles generally
accepted in the United States (GAAP), are not recorded in its financial
statements. Huntington makes various commitments to extend credit to customers
and to sell loans, and has obligations under operating-type noncancelable leases
for its facilities.
SPECIAL PURPOSE ENTITIES (SPEs)
Huntington utilized two securitization trusts, or SPEs, in 2000 as funding
sources. In the securitization transactions, loans that Huntington originated
were sold to these trusts in exchange for funding collateralized by these loans.
Under GAAP, these trusts are not consolidated in Huntington's financial
statements. As such, the loans originated by Huntington and the funding it
obtained are not included on the balance sheets.
DERIVATIVES
Huntington uses a variety of derivatives, principally interest rate swaps,
in its asset and liability management activities to protect against the risk of
adverse interest rate movements on either cash flows or market value of certain
assets and liabilities. This, along with other information regarding
derivatives, is discussed under the "Interest Rate Risk Management" section of
this report and also in the notes to Huntington's unaudited consolidated
financial statements.
RELATED PARTY TRANSACTIONS
Various directors and executive officers of Huntington are customers of
The Huntington National Bank, Huntington's bank subsidiary, and other affiliates
and had transactions with these affiliates in the ordinary course of business.
Directors and executive officers of Huntington may also be affiliated with
entities that are customers of Huntington and its affiliates, which enter into
transactions with these affiliates in the ordinary course of business. A summary
of the indebtedness of management can be found in note 4 to Huntington's 2001
Annual Report. All other related party transactions, including those reported in
Huntington's 2002 Proxy Statement, were considered immaterial to its financial
condition and results of operations.
OVERVIEW
Huntington reported net income of $97.7 million, or $0.39 per common
share, for the first quarter of 2002. This compares with $67.9 million, or $0.27
per common share, for the same period a year ago. Return on average common
equity (ROE) for the comparable periods was 16.72% and 11.53%, while return on
average assets (ROA) was 1.49% and 0.97%.
"Operating earnings" for the first quarter of 2002 exclude the $175.3
million net pre-tax gain on the sale of the Florida operations and the $56.2
million pre-tax restructuring and special charges related to the strategic
refocusing plan discussed above. Operating earnings were $77.5 million, or $0.31
per common share, in the first three months of 2002, versus $67.9 million, or
$0.27 per common share in the first quarter of last year. On this same basis,
ROE was 13.26% for the recent three months, compared with 11.53% for the same
period a year ago. ROA was 1.18% and 0.97% for the same respective periods.
In addition to the net gain on the sale of the Florida operations and the
restructuring and special charges, the first quarter 2002 results included the
Florida operations for only one-half of the quarter. Comparison of the first
quarter 2002 to other period's results is better understood when these items are
excluded. Comments below are on this basis except where indicated. The following
table reconciles Huntington's reported results with its operating earnings and
results excluding the operations in Florida for the first quarter of 2002 and
2001:
16
FOR THE THREE MONTHS ENDED MARCH 31, 2002
- ---------------------------------------------------------------------------------------------------------------------
Gain on Sale
of Florida Operating
Operations/ Earnings
Restructuring Excluding
(in thousands, except per share Reported and Special Operating Florida Florida
amounts) Earnings Charges Earnings Operations Operations
-------- -------- -------- ---------- ----------
Net interest income $242,825 $242,825 $ 9,724 $233,101
Provision for loan losses 55,781 55,781 5,186 50,595
Securities gains 457 457 -- 457
Non-interest income 300,971 $175,344 125,627 10,633 114,994
Non-interest expense 263,570 56,184 207,386 18,335 189,051
-------- -------- -------- -------- --------
Pre-tax income 224,902 119,160 105,742 (3,164) 108,906
Income taxes 127,175 98,889 28,286 (1,107) 29,393
-------- -------- -------- -------- --------
NET INCOME $ 97,727 $ 20,271 $ 77,456 $ (2,057) $ 79,513
-------- -------- -------- -------- --------
NET INCOME PER COMMON
SHARE -- DILUTED $ 0.39 $ 0.08 $ 0.31 ($ 0.01) $ 0.32
======== ======== ======== ======== ========
FOR THE THREE MONTHS ENDED MARCH 31, 2001
- ---------------------------------------------------------------------------------------------------------------------
Operating
Earnings
Restructuring Excluding
(in thousands, except per share Reported and Special Operating Florida Florida
amounts) Earnings Charges Earnings Operations Operations
-------- ------------- -------- ---------- ----------
Net interest income $243,124 $ -- $243,124 $ 24,606 $218,518
Provision for loan losses 33,464 -- 33,464 3,755 29,709
Securities gains 2,078 -- 2,078 2,078
Non-interest income 115,646 -- 115,646 19,073 96,573
Non-interest expense 234,090 -- 234,090 40,273 193,817
-------- -------- -------- -------- --------
Pre-tax income 93,294 -- 93,294 (349) 93,643
Income taxes 25,428 -- 25,428 965 24,463
-------- -------- -------- -------- --------
NET INCOME $ 67,866 $ -- $ 67,866 $ (1,314) $ 69,180
-------- -------- -------- -------- --------
NET INCOME PER COMMON
SHARE -- DILUTED $ 0.27 $ 0.00 $ 0.27 ($ 0.01) $ 0.28
======== ======== ======== ======== ========
Total assets declined to $24.7 billion from $28.5 billion at December 31,
2001, reflecting the impact of the sale of loans and other assets in Florida.
Excluding Florida, managed loans grew at an annualized rate of 5% during the
quarter, which helped offset the impact from the sale. Home equity lines of
credit and residential real estate loans showed robust growth of 13% and 70%,
respectively, during the quarter largely the result of the refinancing boom that
occurred in the latter portion of 2001 that continued into the first quarter of
2002. Huntington's focus on origination of adjustable-rate mortgages produced
$600 million in new loans recorded since September of 2001 and another $175
million that are in the pipeline. The growth in home equity lines of credit has
been favorably impacted by the lower interest rate environment and has increased
as a result of successful cross-selling to meet the needs of mortgage loan and
other customers. Commercial real estate loans increased 16% on an annualized
basis during the first quarter of 2002, primarily in construction loans.
Commercial loans, auto loans and leases, and installment loans all showed
declining growth rates for the quarter as a result of the weakened economic
conditions. Commercial loans declined 6%, auto loans and leases were down 1%,
and installment loans were lower by 17% on an annualized basis for the quarter.
Auto loan and lease origination volume was down for the first quarter of 2002 to
$699 million from $759 million in the fourth quarter of 2001.
Core deposits, which are comprised of non-interest bearing and interest
bearing deposits, savings accounts, certificates of deposit under $100,000, and
IRAs, were $14.7 billion versus $19.8 billion at the end of 2001. Excluding the
impact of the sale of the Florida deposits, core deposits increased at an annual
rate of 6% during the quarter. This increase is the result of continued emphasis
on attracting more retail deposits through Huntington's
17
sales management process and marks the third consecutive quarter of deposit
growth. This broad-based growth helped to fund the sale of the Florida
operations, as a lower level of wholesale funding was required to balance the
transaction.
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income was $242.8 million for the three months ended March
31, 2002, down from $255.2 million for the fourth quarter of 2001 and nearly
flat compared to $243.1 million in the same period a year earlier. Excluding the
contribution from the Florida operations, net interest income was $233.1
million, versus $236.6 million and $218.5 million for the same respective
periods. The net interest margin increased 21 basis points from a year ago to
4.14% for the first quarter of 2002, and was up 3 basis points from the fourth
quarter of 2001. The net interest margin, excluding Florida, increased 23 basis
points from 3.98% a year ago to 4.21% for the first quarter of 2002, but was
down 6 basis points from the fourth quarter of 2001. This margin compression
during the recent quarter was driven primarily by the reduction in benefit
derived from the lag in repricing related to Huntington's $2 billion variable
rate home equity lines of credit. The margin expansion over the recent five
quarters is the result of a richer asset mix, primarily through the sale of
lower-margin earning assets. Huntington's net interest margin analysis and
average balance sheets for the recent five quarters can be found on pages 29 and
30 of this report.
Huntington regularly enters into various types of derivative financial
instruments, primarily interest rate swaps, to manage its exposure to changes in
interest rates. The cash flows generated by derivative instruments used to
manage risk associated with earning assets and interest bearing liabilities are
recorded along with the interest from the hedged item and consequently impact
the yields on those assets and liabilities. The impact of these derivatives
increased the net interest margin by 12 basis points for the first quarter of
2002 and lowered it by 4 basis points for the same period in 2001. Huntington's
interest rate risk position as well as the implementation of a new accounting
standard regarding derivatives is discussed further in the "Interest Rate Risk
Management" section of this report.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses is the expense necessary to maintain the
allowance for loan losses (ALL) at a level adequate to absorb management's
estimate of inherent losses in the loan portfolio. The provision expense
increased to $55.8 million for the quarter ended March 31, 2002, from $33.5
million in the year-ago quarter. This increase in expense represents increases
in net charge-offs, which were 111 basis points for the current quarter, up from
55 basis points last year. Excluding the losses on the sub-prime automobile and
truck and equipment lending businesses that Huntington exited last year for
which reserves were established in the second quarter of 2001, net charge offs
were 104 basis points for the current quarter compared to 55 basis points last
year. Excluding losses related to the exited businesses and Florida, net charge
offs were 100 basis points for the recent period compared to 57 basis points for
the period last year. On this same basis, commercial net charge offs rose to 131
basis points for the first quarter 2002 compared with 41 basis points for the
same period a year ago and consumer net charge offs were 110 basis points and 78
basis points for the same periods.
The ALL was $386.1 million at March 31, 2002, up from $301.8 million the
end of the first quarter 2001. This represents 2.00% of total 2002 first
quarter-end loans compared with 1.45% of total loans at the end of the same
quarter last year. The ALL was $410.6 million at the end of 2001 and was reduced
by $22.3 million related to $2.8 billion of loans sold in conjunction with the
sale of Florida during the first quarter of 2002. Non-performing loans were
covered by the ALL 1.8 times compared with 1.9 times at the end of 2001 and 2.7
times at the end of the first quarter last year. Additional information
regarding the ALL and asset quality appears in the "Credit Risk" section.
Huntington allocates the ALL to each loan category based on an expected
loss ratio determined by continuous assessment of credit quality based on
portfolio risk characteristics and other relevant factors such as historical
performance, internal controls, and impacts from mergers and acquisitions. For
the commercial and industrial and commercial real estate credits, expected loss
factors are assigned by credit grade at the individual loan level. The
aggregation of these factors represents management's estimate of the inherent
loss. The portion of the allowance allocated to the more homogeneous consumer
loan segments is determined by developing expected loss ratios based on the risk
characteristics of the various segments and giving consideration to existing
economic conditions and trends.
Projected loss ratios incorporate factors such as trends in past due and
non-accrual amounts, recent loan loss experience, current economic conditions,
risk characteristics, and concentrations of various loan categories. Actual
18
loss ratios experienced in the future, however, could vary from those projected
as a loan's performance is a function of not only economic factors but also
other factors unique to each customer. The diversity in size of commercial and
commercial real estate loans can be significant as well. The dollar exposure
could significantly vary from estimated amounts due to diversity. To ensure
adequacy to a higher degree of confidence, a portion of the ALL is considered
unallocated. While amounts are allocated to various portfolio segments, the
total ALL, excluding impairment reserves prescribed under provisions of
Statement of Financial Accounting Standard No. 114, is available to absorb
losses from any segment of the portfolio. Unallocated reserves are based on
levels of criticized/classified assets, delinquencies in the accruing loan
portfolios, and the level of non-performing loans. Total unallocated reserves
were 12% at March 31, 2002, versus 11% one year ago.
Huntington's management believes consumer charge-offs may decline both
seasonally and fundamentally in the second and third quarters, reflecting the
higher quality auto loans and leases that have been booked in the last year and
the decline in delinquencies in these portfolios in recent months. Charge-offs
in the commercial portfolio are not expected to be significantly different than
was experienced in the last two quarters.
NON-INTEREST INCOME
Non-interest income before gains from the sale of the Florida operations
and investment securities, was $125.6 million in the first quarter of 2002,
compared with $115.6 million for the same period last year. Excluding Florida,
non-interest income was $115.0 million versus $96.6 million for the respective
periods. The following table reflects non-interest income detail for the three
months ended March 31, 2002 and 2001, excluding the Florida operations and the
net gain from its sale:
NON-INTEREST INCOME
(in thousands of dollars) 2002 2001
-------- -------
Service charges on deposit accounts $ 34,282 $31,143
Mortgage banking 19,644 9,238
Trust services 15,096 13,670
Brokerage and insurance income 14,587 12,232
Bank Owned Life Insurance income 11,676 9,560
Other service charges and fees 9,118 8,415
Other 10,591 12,315
-------- -------
TOTAL NON-INTEREST INCOME BEFORE SECURITIES GAINS, EXCLUDING
FLORIDA 114,994 96,573
Securities gains 457 2,078
-------- -------
TOTAL NON-INTEREST INCOME, EXCLUDING FLORIDA $115,451 $98,651
======== =======
The remainder of the discussion within this "Non-interest Income" section
addresses the information provided in the "Non-interest Income" table above. The
increase in non-interest income was lead by mortgage banking revenue, which was
up 113%. This increase was driven by deliveries of loans in the secondary
market. Service charges on deposit accounts were higher by 10% from the same
three-month period a year ago, primarily due to increased levels of corporate
maintenance fees. Brokerage and insurance revenue was up 19% driven by strong
growth in insurance and investment banking fees, particularly through annuity
sales. In the first quarter of 2002, annuity sales outside of Florida were $129
million, which were 30% above last year's first quarter sales. Revenue from
sales of Huntington's proprietary mutual funds helped drive trust income up 10%.
Other service charges and fees increased 8% over the same period last year
reflecting increased ATM and debit card fees. Other non-interest income declined
over last year's first quarter due to lower revenue from sales of customer
derivative products and lower income from securitization activity.
NON-INTEREST EXPENSE
Non-interest expense, on an operating basis, was $207.4 million in the
first quarter of 2002, and $234.1 million in the same period last year. A
discussion of Huntington's restructuring and special charges can be found in the
beginning of Management's Discussion and Analysis and in the notes to the
unaudited consolidated financial statements. Excluding Florida, non-interest
expense was $189.1 million for the recent quarter, down 2.5% from $193.8 million
in the year-ago quarter. The following table reflects non-interest expense
detail for the three months ended March 31, 2002 and 2001, excluding the Florida
operations and restructuring and special charges:
19
NON-INTEREST EXPENSE
(in thousands of dollars) 2002 2001
-------- --------
Personnel costs $104,320 $ 99,296
Outside data processing and other services 17,097 14,122
Equipment 15,582 17,503
Net occupancy 14,771 15,568
Marketing 7,174 8,832
Telecommunications 5,282 5,952
Professional services 5,242 4,793
Printing and supplies 3,519 4,098
Franchise and other taxes 2,326 2,116
Amortization of intangible assets 251 3,031
Other 13,487 18,506
-------- --------
TOTAL NON-INTEREST EXPENSE, EXCLUDING FLORIDA $189,051 $193,817
======== ========
The remainder of the discussion within this "Non-interest Expense" section
addresses the information provided in the "Non-interest Expense" table above.
Higher personnel costs reflect increases in sales commissions consistent with
the increases in fee income. Increases in processing expenses related to
Huntington's loan and deposit products drove outside data processing and other
services up $3 million. Occupancy and equipment costs decreased 8% for the first
quarter of 2002 compared to the first quarter of 2001 due to lower depreciation
and building maintenance. The $2.8 million reduction in amortization of
intangible assets reflects the implementation of the new accounting standard,
SFAS No. 142. Other non-interest expense for 2001 included a $4.2 million
impairment loss related to PG&E commercial paper and $1.7 million in expenses
incurred in conjunction with the installation of Customer Relationship
Management software.
Huntington's efficiency ratio, which expresses expense as a percentage of
revenue on a tax-equivalent basis, improved to 54.1% for the quarter ended March
31, 2002, from 60.2% for the same period in 2001.
INCOME TAXES
Huntington's provision for income taxes of $127.2 million for the first
quarter of 2002 includes expense of $118.6 million related to the net pre-tax
gain on the sale of the Florida operations and a benefit of $19.7 million
related to the restructuring and special charges. Most of the goodwill relating
to the Florida operations was non-deductible for tax purposes. Huntington's
effective tax rate on operating earnings was 26.8% for the first three months of
2002 versus 27.3% for the same period in 2001.
INTEREST RATE RISK MANAGEMENT
Huntington seeks to achieve consistent growth in net interest income and
net income while managing volatility arising from shifts in interest rates. The
Board of Directors and Asset and Liability Management Committee (ALCO) oversees
financial risk management by establishing broad policies and specific operating
limits that govern a variety of financial risks inherent in Huntington's
operations, including interest rate, liquidity, counterparty, settlement, and
market risks. Market risk is the risk of loss arising from the adverse changes
in the fair value of financial instruments due to changes in interest rates,
exchange rates, and equity prices. Interest rate risk is Huntington's primary
market risk and results from the timing differences in the repricing of assets
and liabilities, changes in relationships between rate indices and the potential
exercise of explicit or embedded options. ALCO regularly monitors Huntington's
interest rate sensitivity position to ensure consistency with approved risk
tolerances.
Interest rate risk management is a dynamic process, encompassing business
flows onto the balance sheet, wholesale investment and funding, and the changing
market and business environment. Effective management of interest rate risk
begins with appropriately diversified investments and funding sources. To
accomplish its overall balance sheet objectives, Huntington regularly accesses a
variety of global markets--money, bond, futures, and options--as well as
numerous trading exchanges. In addition, dealers in over-the-counter financial
instruments provide availability of interest rate swaps as needed.
20
Measurement and monitoring of interest rate risk is an ongoing process.
Two key elements used in this process are Huntington's income simulation model
and its net present value model. The income simulation model estimates the
amount that net interest income will change over a twelve to twenty-four month
period given adverse changes in interest rates. The net present value model, or
Economic Value of Equity (EVE), is used to discern levels of risk in
Huntington's balance sheet that may not be determined in its income simulation
model. These two models have limitations but complement each other and together
these models portray the magnitude of exposure to interest rate risk.
Assumptions used in these models are inherently uncertain, but management
believes that these models provide a reasonably accurate estimate of
Huntington's interest rate risk exposure.
The income simulation model used by Huntington incorporates a gradual
change in the shape of the forward yield curve and captures all major assets,
liabilities, and off-balance sheet financial instruments, accounting for
significant variables that are believed to be affected by interest rates. These
include prepayment speeds on mortgages and consumer installment loans, cash
flows of loans and deposits, principal amortization on revolving credit
instruments, and balance sheet growth assumptions. The model also captures
embedded options, e.g. interest rate caps/floors or call options, and accounts
for changes in rate relationships, as various rate indices lead or lag changes
in market rates.
The forward yield curve at March 31, 2002 implied a 150 basis point
increase in short-term interest rates by the end of March 2003. The results of
Huntington's recent sensitivity analysis indicated that net interest income
would be 0.8% lower during the next twelve months if interest rates were 100
basis points higher at the end of that period than implied by forward rates at
March 31, 2002, or 250 basis points higher than current market rates. Net
interest income was estimated to be 1.7% lower if rates were 200 basis points
higher than the yield curve, or 350 basis points overall. Conversely, if rates
were 100 and 200 basis points lower than the yield curve, net interest income
would be 0.8% and 1.5% higher, respectively. The sale of the assets and
liabilities in the Florida franchise increased the interest rate sensitivity of
net interest income modestly, but the repositioning of the balance sheet in
anticipation of the sale ensured that the resulting level remained below the
management limit of 2%.
The EVE simulation model used by Huntington measures the level of risk in
the balance sheet that might not have been accounted for in the income
simulation model due to that model's limited time horizon. The EVE is defined as
the discounted present value of asset cash flows and derivative cash flows,
minus the discounted value of liability cash flows. The timing and variability
of balance sheet cash flows are critical assumptions, along with assumptions
regarding the speed of loan and security prepayments and the assumed behavior of
zero-maturity deposits.
The sensitivity of the EVE to changes in interest rates is estimated by
calculating the EVE under alternative interest rate scenarios. Unlike the
analysis of net interest income at risk, which is based on assumed changes in
interest rates over time, the EVE analysis is based on assumed immediate shifts
in interest rates. In addition, the EVE analysis does not reflect assumed
changes to the balance sheet that would arise from new business. These estimates
reflect the characteristics of the balance sheet at March 31, 2002. At this
date, an immediate increase of 100 basis points was estimated to reduce the EVE
by 1.8%. A 200 basis point increase was estimated to reduce the EVE by 4.0%. The
EVE was estimated to increase by 1.2% in response to a 100 basis point decrease
in rates and decrease by 1.5% in response to a 200 basis point decrease.
CREDIT RISK
Huntington's exposure to credit risk is managed through the use of
consistent underwriting standards that emphasize "in-market" lending while
avoiding highly leveraged transactions as well as excessive industry and other
concentrations. The credit administration function employs extensive risk
management techniques, including forecasting, to ensure that loans adhere to
corporate policy and problem loans are promptly identified. These procedures
provide executive management with the information necessary to implement policy
adjustments where necessary, and take corrective actions on a proactive basis.
Non-performing assets (NPAs) consist of loans that are no longer accruing
interest, loans that have been renegotiated based upon financial difficulties of
the borrower, and real estate acquired through foreclosure. Commercial and real
estate loans are placed on non-accrual status and stop accruing interest when
collection of principal or interest is in doubt or generally when the loan is 90
days past due. When interest accruals are suspended, accrued interest income is
reversed with current year accruals charged to earnings and prior year amounts
generally
21
charged off as a credit loss. Consumer loans are not placed on non-accrual
status; rather they are charged off in accordance with regulatory statutes,
which is generally no more than 120 days.
Total NPAs were $225.5 million at March 31, 2002, down slightly from
$227.5 million at December 31, 2001. NPAs were $124.9 million at the end of
March 2001. A majority of the increase over last year occurred in the
manufacturing and service sectors. As of the same dates, NPAs as a percent of
total loans and other real estate were 1.17%, 1.05%, and 0.60%. This ratio
increased during the first quarter of 2002 as expected as a result of the sale
of $6.5 million of NPAs included in the sale of the Florida operations. The rate
of NPAs to total assets attributable to the Florida operations was lower than
Huntington's. Management does not expect any significant changes in NPAs in the
next two quarters but does feel that it is at or near the peak for this credit
cycle.
Loans past due ninety days or more but continuing to accrue interest
decreased to $61.7 million from $91.6 million at December 31, 2001, and from
$102.7 million at March 31, 2001. This represented .32%, .42% and .49% of total
loans, respectively.
CAPITAL
Capital is managed at each subsidiary based upon the respective risks and
growth opportunities, as well as regulatory requirements. Huntington places
significant emphasis on the maintenance of strong capital, which promotes
investor confidence, provides access to the national markets under favorable
terms, and enhances business growth and acquisition opportunities. Huntington
also recognizes the importance of managing capital and continually strives to
maintain an appropriate balance between capital adequacy and returns to
shareholders.
Shareholders' equity at March 31, 2002 increased $17.5 million during the
first quarter of 2002 from December 31, 2001, and $28.7 million from March 31,
2001. These increases were largely the result of earnings and reduced dividends,
offset by higher stock held in treasury. Appreciation or depreciation in the
unrealized fair value of the available-for-sale securities portfolio also
impacted changes in shareholders' equity. Cash dividends declared were $0.16 a
share in the first quarter of 2002, down from $0.20 a share for the same period
in 2001.
Average shareholders' equity was relatively flat for the first quarter of
2002 when compared to the first and fourth quarter of 2001. Huntington's ratio
of average equity to average assets in the recent quarter was 8.93% versus 8.46%
a year ago. Tangible equity to assets, which excludes the unrealized losses on
securities available for sale and intangible assets, was 9.03% and 6.01% at the
end of March 2002 and 2001, respectively. The increase is the direct result of
the sale of the Florida operations. Assuming Huntington continues its share
repurchase program as discussed below, this ratio will decline. Huntington has
indicated it intends to maintain a minimum tangible common equity ratio of
6.50%.
Risk-based capital guidelines established by the Federal Reserve Board set
minimum capital requirements and require institutions to calculate risk-based
capital ratios by assigning risk weightings to assets and off-balance sheet
items, such as interest rate swaps, loan commitments, and securitizations. These
guidelines further define "well-capitalized" levels for Tier 1, total capital,
and leverage ratio purposes at 6%, 10%, and 5%, respectively. At the recent
quarter-end, Huntington's Tier 1 risk-based capital ratio was 10.26%, total
risk-based capital ratio was 13.40%, and the leverage ratio was 9.72%.
Huntington's bank subsidiary also had regulatory capital ratios in excess of the
levels established for well-capitalized institutions.
In February 2002, Huntington's Board of Directors authorized a new share
repurchase program for up to 22 million shares and cancelled an earlier
authorization. Repurchased shares will be reserved for reissue in connection
with Huntington's dividend reinvestment and employee benefit plans as well as
for acquisitions and other corporate purposes. Through the end of April 2002,
Huntington repurchased approximately 4.4 million shares of its common stock
through open market and privately negotiated transactions.
LINES OF BUSINESS
Below is a brief description of each line of business and a discussion of
the business segment results. The financial information by line of business for
the quarters ended March 31, 2002 and 2001 can be found in the notes to the
unaudited consolidated financial statements. Regional Banking, Dealer Sales, and
the Private Financial Group are Huntington's major business lines. During the
first quarter of 2002, Huntington's management combined the internal reporting
of Retail Banking and Corporate Banking into one segment, Regional Banking,
reflecting the decentralized management structure in these businesses. The
fourth
22
segment includes the impact of Huntington's Treasury function and other
unallocated assets, liabilities, revenue, and expense. Line of business results
are determined based upon Huntington's business profitability reporting system
which assigns balance sheet and income statement items to each of the business
segments. This process is designed around Huntington's organizational and
management structure and, accordingly, the results are not necessarily
comparable with similar information published by other financial institutions.
In the first quarter of 2002, changes were made to the methodologies utilized
for certain balance sheet and income statement allocations performed by
Huntington's business profitability reporting system. The prior quarters have
not been restated for these changes. Huntington's management reviews financial
results on an operating basis, which excludes the impact of the net gain on the
sale of its Florida operations and restructuring and special charges. Discussion
regarding Huntington's lines of business performance also exclude operating
results of its Florida operations for all periods presented.
The following table reconciles operating earnings by line of business to
operating earnings, excluding Florida operations for the periods indicated.
Refer to note 7 in the notes to the unaudited consolidated financial statements
for a reconciliation of reported earnings to operating earnings by line of
business.
FOR THE THREE MONTHS ENDED MARCH 31, 2002
INCOME STATEMENTS Regional Dealer Treasury/ Huntington
(in thousands of dollars) Banking Sales PFG Other Consolidated
------- ------- ------- --------- ------------
Operating earnings $38,951 $ 6,939 $ 8,965 $ 22,601 $ 77,456
Florida operations net income (loss) 762 794 (23) (3,590) (2,057)
------- ------- ------- -------- --------
Operating earnings, excluding Florida
operations $38,189 $ 6,145 $ 8,988 $ 26,191 $ 79,513
======= ======= ======= ======== ========
FOR THE THREE MONTHS ENDED MARCH 31, 2001
INCOME STATEMENTS Regional Dealer Treasury/ Huntington
(in thousands of dollars) Banking Sales PFG Other Consolidated
------- ------- ------- --------- ------------
Operating earnings $57,667 $23,318 $ 4,167 $(17,286) $ 67,866
Florida operations net income (loss) 5,570 1,384 794 (9,062) (1,314)
------- ------- ------- -------- --------
Operating earnings, excluding Florida
operations $52,097 $21,934 $ 3,373 $ (8,224) $ 69,180
======= ======= ======= ======== ========
REGIONAL BANKING
Regional Banking provides products and services to retail, business
banking, and corporate customers. This segment's products include home equity
loans, first mortgage loans, installment loans, business loans, personal and
business deposit products, as well as investment and insurance services. These
products and services are offered through Huntington's traditional banking
network, Direct Bank, and Web Bank. Regional Banking also represents the
middle-market and large corporate banking relationships which use a variety of
banking products and services including, but not limited to, commercial loans,
international trade, and cash management. Huntington's capital markets division
also provides alternative financing solutions for larger business clients,
including privately placed debt, syndicated commercial lending, and the sale of
interest rate protection products.
Regional Banking's operating earnings, net of tax, was $38.2 million in
the first quarter of 2002, compared with $52.1 million for the same period a
year ago. The lower interest rate environment along with a 7% decline in loan
fees offset by strong deposit growth in the recent quarter caused net interest
income to decline 13%. This interest rate environment, however, helped to push
non-interest income up 26% as mortgage banking income nearly doubled over the
first quarter of last year. Deposit growth, particularly in demand deposits,
helped to keep services charges steady when compared to levels for the same
period a year earlier. The 20% growth in residential mortgage loans from the
year-ago quarter, primarily from refinancing activity, continued to provide
cross-selling opportunities resulting in significant growth in home equity loans
and personal lines of credit (13%). Growth in commercial loans declined 4% over
last year, while construction and commercial real estate loans showed a 13%
increase. This loan growth helped offset the negative impact of lower interest
rates. The provision expense, which covered charge-offs, was $24.4 million for
the first quarter of 2002, compared with $14.5 million for the first quarter
last year excluding losses related to the Florida operations. Net charge-offs
for the first quarter of 2002 were 79 basis points versus 34 basis points in the
first quarter of 2001. Non-interest expense increased due to higher commissions
that were consistent with the increases in fee income. In addition, increases in
outside services expense, equipment and occupancy expenses, marketing expense,
and professional fees helped drive non-interest expenses up $7.3 million, or 5%.
23
This segment contributed 48% of Huntington's operating earnings, excluding
results for the Florida operations, for the first quarter of 2002 and comprised
63% of its total loan portfolio and 99% of its core deposits.
DEALER SALES
Dealer Sales product offerings pertain to the automobile lending sector
and include indirect consumer loans and leases, as well as floor plan financing.
The consumer loans and leases comprise the vast majority of the business and
involve the financing of vehicles purchased or leased by individuals through
dealerships.
Operating earnings for this segment were $6.1 million for the three months
ended March 31, 2002. This compares with $21.9 million in the first quarter of
2001. Net charge-offs in this segment's loan portfolios in the comparable
periods were 165 basis points versus 103 basis points, which drove the provision
for loan losses higher by $11.0 million. A 4% growth in auto lease and indirect
lending portfolios along with slightly wider margins in the recent quarter over
last year's first quarter helped to keep the net interest income steady. Non-
interest income declined primarily due to lower revenue from securitization
related activities. Non-interest expense increased due to the higher level of
premium expense relating to policies covering auto lease residual values.
Dealer Sales contributed 8% of Huntington's operating earnings for the
first three months of 2002, excluding results from the Florida operations, and
comprised 32% of its outstanding loans.
PRIVATE FINANCIAL GROUP
PFG provides an array of products and services designed to meet the needs
of Huntington's higher wealth customers. Revenue is derived through the sale of
personal trust, asset management, investment advisory, brokerage, insurance, and
deposit and loan products and services.
Operating earnings were $9.0 million for the first quarter of 2002,
representing an increase of 228% from $3.4 million for the year-ago quarter. Net
interest income was down $1.5 million in the recent quarter despite higher loan
balances over the same period last year. The loan growth was particularly strong
in personal credit lines and residential mortgage loans. Non-interest income was
up $2.5 million largely from increases in fees from Huntington Funds. Non-
interest expense declined $7.7 million as the first quarter of 2001 included the
PG&E impairment loss related to activities in The Huntington National Bank's
Money Market Mutual Fund.
This segment represented 11% of Huntington's quarterly operating earnings,
excluding results of the Florida operations, and 4% of total loans.
TREASURY / OTHER
The Treasury/Other segment absorbs unassigned assets, liabilities, equity,
revenue, and expense that cannot be directly assigned or allocated to one of
Huntington's lines of business. Furthermore, Huntington uses a match-funded
transfer pricing system to allocate interest income and interest expense to its
business segments. This approach consolidates the interest rate risk management
of Huntington into its Treasury Group. As part of its overall interest rate risk
and liquidity management strategy, the Treasury Group administers an investment
portfolio of approximately $2.9 billion. Revenue and expense associated with
these activities remain within the Treasury Group. Additionally, amortization
expense of intangible assets is also a significant component of Treasury/Other.
This segment showed operating income of $26.2 million for the first
quarter of 2002, compared with an operating loss of $8.2 million for the quarter
ended March 31, 2001. The effects from a balance sheet repositioning and the
widening of spreads favorably affected net interest income for the comparable
three-month periods. Non-interest income increased $6.3 million, primarily due
to the increase in Bank Owned Life Insurance income. Non-interest expense was
down $9.0 million due in part to lower amortization of intangibles arising from
the implementation of SFAS No. 142. This segment included the reconciling items
to the statutory tax rate of 35% in Income taxes.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and qualitative disclosures for the current period are found
on page 20 of this report, which includes changes in market risk exposures from
disclosures presented in Huntington's 2001 Annual Report.
24
FINANCIAL REVIEW
SECURITIES AVAILABLE FOR SALE - AMORTIZED COST & FAIR VALUES BY MATURITY AT
MARCH 31, 2002 AND DECEMBER 31, 2001
(in thousands of dollars) MARCH 31, 2002 DECEMBER 31, 2001
-------------------------- --------------------------
AMORTIZED Amortized
COST FAIR VALUE Cost Fair Value
---------- ---------- ---------- ----------
U.S. Treasury
Under 1 year $ 1,194 $ 1,299 $ 696 $ 711
1-5 years 33,386 33,452 31,399 31,563
6-10 years 4,451 4,565 6,420 6,833
Over 10 years 412 416 413 433
---------- ---------- ---------- ----------
Total 39,443 39,732 38,928 39,540
---------- ---------- ---------- ----------
Federal agencies
Mortgage-backed securities
1-5 years 52,313 52,463 77,975 77,734
6-10 years 95,406 97,004 99,049 100,954
Over 10 years 705,391 709,638 651,187 662,674
---------- ---------- ---------- ----------
Total 853,110 859,105 828,211 841,362
---------- ---------- ---------- ----------
Other agencies
1-5 years 896,381 907,990 918,023 940,845
6-10 years 81,714 82,938 77,515 78,925
Over 10 years 427,868 432,190 414,485 421,407
---------- ---------- ---------- ----------
Total 1,405,963 1,423,118 1,410,023 1,441,177
---------- ---------- ---------- ----------
Total U.S. Treasury and Federal
Agencies 2,298,516 2,321,955 2,277,162 2,322,079
---------- ---------- ---------- ----------
Other
Under 1 year 13,137 13,140 11,315 11,374
1-5 years 36,280 37,157 198,776 199,812
6-10 years 36,997 36,916 35,832 35,823
Over 10 years 238,320 236,797 176,524 174,715
Retained interest in securitizations 173,220 173,220
Marketable equity securities 52,509 50,641 104,395 105,776
---------- ---------- ---------- ----------
Total 550,463 547,871 526,842 527,500
---------- ---------- ---------- ----------
Total Securities Available for Sale $2,848,979 $2,869,826 $2,804,004 $2,849,579
========== ========== ========== ==========
25
CONSOLIDATED FINANCIAL HIGHLIGHTS
(in thousands, except per share amounts)
FOR THE THREE MONTHS ENDED MARCH 31, 2002 2001 % CHANGE
----------- ----------- -----------
NET INCOME (1) $ 77,456 $ 67,866 14.1 %
PER COMMON SHARE AMOUNTS
Net income
Basic $ 0.31 $ 0.27 14.4
Diluted $ 0.31 $ 0.27 13.9
Cash dividends declared $ 0.16 $ 0.20 (20.0)
AVERAGE COMMON SHARES OUTSTANDING-DILUTED 251,953 251,510 0.2
KEY RATIOS
Return on:
Average total assets 1.18% 0.97% 21.6
Average shareholders' equity 13.26% 11.53% 15.0
Efficiency ratio 55.7% 62.0% (10.0)
Average equity/average assets 8.93% 8.46% 5.6
Net interest margin 4.14% 3.93% 5.3
(1) Income component excludes after-tax impact of the $56.8 million gain on
sale of Florida operations and $36.5 million restructuring and special
charges in 1Q '02.
26
FINANCIAL REVIEW
LOAN LOSS EXPERIENCE
2002 2001
--------- ------------------------------------------------------------
(in thousands) 1Q 4Q 3Q 2Q 1Q
--------- --------- --------- --------- ---------
ALLOWANCE FOR LOAN LOSSES, BEGINNING OF PERIOD $ 410,572 $ 360,446 $ 352,243 $ 301,777 $ 297,880
Loan losses (67,527) (66,808) (49,386) (75,472) (35,649)
Recoveries of loans previously charged off 11,746 10,662 9,643 10,007 7,556
--------- --------- --------- --------- ---------
Net loan losses (55,781) (56,146) (39,743) (65,465) (28,093)
--------- --------- --------- --------- ---------
Allowance of assets sold (22,297) -- -- -- --
Allowance of securitized loans (2,222) (2,003) (1,613) (1,564) (1,474)
Provision for loan losses (1) 55,781 108,275 49,559 117,495 33,464
--------- --------- --------- --------- ---------
ALLOWANCE FOR LOAN LOSSES, END OF PERIOD $ 386,053 $ 410,572 $ 360,446 $ 352,243 $ 301,777
========= ========= ========= ========= =========
AS A % OF AVERAGE TOTAL LOANS
Net loan losses--annualized 1.11% 1.04% 0.74% 1.25% 0.55%
Net loan losses--annualized excluding losses on
exited portfolios for which reserves were
previously established 1.04% 0.98% 0.61% 0.73% 0.55%
Provision for loan losses--annualized 1.11% 1.07% 0.92% 0.87% 0.66%
Allowance for loan losses as a % of total loans 2.00% 1.90% 1.67% 1.67% 1.45%
Net loan loss coverage (2) 2.90x 2.87x 3.81x 3.89x 4.51x
(1) Includes the impact of restructuring and special charges in 4Q '01 and 2Q
'01.
(2) Income before taxes (excluding gain on sale of Florida operations and
restructuring and special charges) and the provision for loan losses to
net loan losses.
27
FINANCIAL REVIEW
NON-PERFORMING ASSETS AND PAST DUE LOANS
2002 2001
--------- --------------------------------------------------------------
(in thousands) 1Q 4Q 3Q 2Q 1Q
--------- --------- --------- --------- ---------
Non-accrual loans:
Commercial $ 162,959 $ 159,637 $ 148,177 $ 116,044 $ 62,716
Commercial real estate 43,295 48,360 40,882 26,870 34,893
Residential mortgage 11,896 11,836 11,666 11,868 11,949
--------- --------- --------- --------- ---------
Total Non-accrual Loans 218,150 219,833 200,725 154,782 109,558
Renegotiated loans 1,268 1,276 1,286 1,290 1,297
--------- --------- --------- --------- ---------
TOTAL NON-PERFORMING LOANS 219,418 221,109 202,011 156,072 110,855
Other real estate, net 6,112 6,384 8,050 9,913 14,031
--------- --------- --------- --------- ---------
TOTAL NON-PERFORMING ASSETS $ 225,530 $ 227,493 $ 210,061 $ 165,985 $ 124,886
========= ========= ========= ========= =========
Non-performing loans as a
% of total loans 1.13% 1.02% 0.94% 0.74% 0.53%
Non-performing assets as a
% of total loans and other real estate 1.17% 1.05% 0.97% 0.79% 0.60%
Allowance for loan losses as a % of
non-performing loans 176% 186% 178% 226% 272%
Allowance for loan losses and other real
estate as a % of non-performing assets 171% 180% 171% 211% 239%
Accruing loans past due 90 days or more $ 61,746 $ 91,635 $ 92,791 $ 67,077 $ 102,658
NON-PERFORMING ASSETS
2002 2001
--------- --------------------------------------------------------------
(in thousands) 1Q 4Q 3Q 2Q 1Q
--------- --------- --------- --------- ---------
NON-PERFORMING ASSETS, BEGINNING OF PERIOD $ 227,493 $ 210,061 $ 165,985 $ 124,886 $ 105,397
New non-performing assets 74,446 85,986 94,990 95,037(2) 53,869
Loan losses (26,072) (34,580) (12,480) (13,188) (7,243)
Payments (37,663) (28,315) (34,219) (19,332) (24,973)
Sales (8,925)(1) (4,131) (3,331) (21,306)(2) (1,892)
Other (3,749) (1,528) (884) (112) (272)
--------- --------- --------- --------- ---------
NON-PERFORMING ASSETS, END OF PERIOD $ 225,530 $ 227,493 $ 210,061 $ 165,985 $ 124,886
========= ========= ========= ========= =========
(1) Includes $6.5 million related to the sale of Florida operations.
(2) Includes $14.9 million related to PG&E.
28
QUARTERLY NET INTEREST MARGIN ANALYSIS
(in millions of dollars)
AVERAGE BALANCES
-------------------------------------------------------
2002 2001
------- -------------------------------------------
Fully Tax Equivalent Basis (1) FIRST FOURTH THIRD SECOND FIRST
------- ------- ------- ------- -------
ASSETS
Interest bearing deposits in banks $ 34 $ 14 $ 5 $ 5 $ 5
Trading account securities 5 8 8 39 48
Federal funds sold and securities purchased
under resale agreements 62 86 86 93 164
Loans held for sale 381 433 344 420 240
Securities:
Taxable 2,713 2,720 2,896 3,368 3,606
Tax exempt 101 108 140 201 248
------- ------- ------- ------- -------
Total Securities 2,814 2,828 3,036 3,569 3,854
------- ------- ------- ------- -------
Loans:
Commercial 6,045 6,491 6,681 6,741 6,678
Real Estate
Construction 1,455 1,492 1,388 1,303 1,263
Commercial 2,364 2,397 2,346 2,294 2,324
Consumer
Auto Leases - Indirect 3,166 3,229 3,243 3,222 3,117
Auto Loans - Indirect 2,730 2,903 2,806 2,575 2,499
Home Equity Lines 2,365 2,489 2,372 2,271 2,189
Residential Mortgage 1,021 892 854 942 960
Other Loans 1,326 1,619 1,658 1,673 1,674
------- ------- ------- ------- -------
Total Consumer 10,608 11,132 10,933 10,683 10,439
------- ------- ------- ------- -------
Total Loans 20,472 21,512 21,348 21,021 20,704
------- ------- ------- ------- -------
Allowance for loan losses 415 393 358 316 307
------- ------- ------- ------- -------
Net loans (2) 20,057 21,119 20,990 20,705 20,397
------- ------- ------- ------- -------
Total earning assets 23,768 24,881 24,827 25,147 25,015
------- ------- ------- ------- -------
Cash and due from banks 819 876 910 910 952
All other assets 2,372 2,613 2,609 2,608 2,579
------- ------- ------- ------- -------
TOTAL ASSETS $26,544 $27,977 $27,988 $28,349 $28,239
======= ======= ======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Core deposits
Non-interest bearing deposits $ 3,041 $ 3,406 $ 3,341 $ 3,252 $ 3,213
Interest bearing demand deposits 5,148 5,519 5,096 4,799 4,597
Savings deposits 3,097 3,388 3,472 3,547 3,505
Other domestic time deposits 5,015 5,923 5,940 5,718 5,950
------- ------- ------- ------- -------
Total core deposits 16,301 18,236 17,849 17,316 17,265
------- ------- ------- ------- -------
Domestic time deposits of $100,000 or more 1,052 1,199 1,262 1,294 1,368
Brokered time deposits and negotiable CDs 302 109 120 118 167
Foreign time deposits 270 230 257 377 267
------- ------- ------- ------- -------
Total deposits 17,925 19,774 19,488 19,105 19,067
------- ------- ------- ------- -------
Short-term borrowings 1,998 1,907 2,140 2,759 2,504
Medium-term notes 1,967 1,863 1,990 2,005 2,240
Subordinated notes and other long-term debt,
including preferred capital securities 1,233 1,183 1,184 1,180 1,171
------- ------- ------- ------- -------
Total interest bearing liabilities 20,082 21,321 21,461 21,797 21,769
------- ------- ------- ------- -------
All other liabilities 1,051 889 811 897 869
Shareholders' equity 2,370 2,361 2,375 2,403 2,388
------- ------- ------- ------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $26,544 $27,977 $27,988 $28,349 $28,239
======= ======= ======= ======= =======
(1) Fully tax equivalent yields are calculated assuming a 35% tax rate.
(2) Net loan rate includes loan fees, whereas individual loan components above
are shown exclusive of fees.
29
QUARTERLY NET INTEREST MARGIN ANALYSIS
(IN MILLIONS OF DOLLARS)
AVERAGE RATES (3)
-------------------------------------------------------
2002 2001
------- -------------------------------------------
Fully Tax Equivalent Basis (1) FIRST FOURTH THIRD SECOND FIRST
------- ------- ------- ------- -------
ASSETS
Interest bearing deposits in banks 2.02% 2.09% 3.75% 5.09% 5.24%
Trading account securities 2.79 3.59 3.83 5.15 5.52
Federal funds sold and securities purchased
under resale agreements 1.43 2.18 3.20 4.21 5.78
Loans held for sale 6.51 6.64 7.18 6.96 7.19
Securities:
Taxable 6.43 6.62 6.71 6.26 6.72
Tax exempt 7.76 7.81 7.38 7.26 7.55
------- ------- ------- ------- -------
Total Securities 6.48 6.66 6.75 6.32 6.77
------- ------- ------- ------- -------
Loans:
Commercial 5.39 5.86 6.92 7.44 8.19
Real Estate
Construction 4.91 5.50 6.62 7.43 8.31
Commercial 6.62 6.85 7.54 7.92 8.40
Consumer
Auto Leases - Indirect 6.62 6.58 6.67 6.71 6.90
Auto Loans - Indirect 8.03 8.24 8.45 8.70 8.83
Home Equity Lines 5.12 6.22 7.00 8.04 8.93
Residential Mortgage 6.57 7.17 7.54 7.72 7.91
Other Loans 8.88 9.09 9.19 9.13 9.19
------- ------- ------- ------- -------
Total Consumer 6.92 7.34 7.65 7.94 8.25
------- ------- ------- ------- -------
Total Loans 6.29 6.71 7.34 7.75 8.25
------- ------- ------- ------- -------
Allowance for loan losses
------- ------- ------- ------- -------
Net loans (2) 6.77 7.22 7.87 8.31 8.74
------- ------- ------- ------- -------
Total earning assets 6.71% 7.12% 7.70% 7.98% 8.39%
------- ------- ------- ------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Core deposits
Non-interest bearing deposits
Interest bearing demand deposits 1.80% 2.00% 2.74% 2.87% 3.29%
Savings deposits 1.87 2.11 3.00 3.42 3.85
Other domestic time deposits 4.99 5.19 5.52 5.83 6.01
------- ------- ------- ------- -------
Total core deposits 2.46 2.68 3.20 3.42 3.73
------- ------- ------- ------- -------
Domestic time deposits of $100,000 or more 3.05 4.68 4.82 5.33 5.97
Brokered time deposits and negotiable CDs 2.48 3.55 4.42 5.57 6.37
Foreign time deposits 1.91 1.99 3.39 4.11 5.45
------- ------- ------- ------- -------
Total deposits 2.49 2.80 3.32 3.58 3.94
------- ------- ------- ------- -------
Short-term borrowings 2.36 2.65 3.69 4.37 5.37
Medium-term notes 3.43 4.58 6.12 6.59 6.64
Subordinated notes and other long-term debt,
including preferred capital securities 4.14 4.96 5.19 5.96 6.81
------- ------- ------- ------- -------
Total interest bearing liabilities 3.04% 3.51% 4.23% 4.62% 5.12%
------- ------- ------- ------- -------
Net interest rate spread 3.67% 3.61% 3.47% 3.36% 3.27%
Impact of non-interest bearing funds on margin 0.47% 0.50% 0.57% 0.61% 0.66%
------- ------- ------- ------- -------
NET INTEREST MARGIN 4.14% 4.11% 4.04% 3.97% 3.93%
======= ======= ======= ======= =======
(1) Fully tax equivalent yields are calculated assuming a 35% tax rate.
(2) Net loan rate includes loan fees, whereas individual loan components above
are shown exclusive of fees.
(3) Loan and deposit average rates include impact of applicable derivatives.
30
SELECTED QUARTERLY INCOME STATEMENT DATA
2002 2001
-------- -----------------------------------------
(in thousands of dollars, except per share amounts) (1) FIRST FOURTH THIRD SECOND FIRST
-------- -------- -------- -------- --------
TOTAL INTEREST INCOME $393,595 $443,751 $478,834 $498,959 $517,975
TOTAL INTEREST EXPENSE 150,770 188,513 229,047 250,926 274,851
-------- -------- -------- -------- --------
NET INTEREST INCOME 242,825 255,238 249,787 248,033 243,124
Provision for loan losses 55,781 58,275 49,559 45,777 33,464
-------- -------- -------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 187,044 196,963 200,228 202,256 209,660
-------- -------- -------- -------- --------
Service charges on deposit accounts 38,530 42,753 41,719 40,673 38,907
Mortgage banking 19,565 15,768 14,616 18,733 10,031
Brokerage and insurance income 18,792 20,966 19,912 19,388 18,768
Trust services 15,501 15,321 15,485 15,178 14,314
Bank Owned Life Insurance income 11,676 9,560 9,560 9,561 9,560
Other service charges and fees 10,632 12,552 12,350 12,217 11,098
Other 10,931 16,088 15,755 14,956 12,968
-------- -------- -------- -------- --------
TOTAL NON-INTEREST INCOME BEFORE SECURITIES GAINS 125,627 133,008 129,397 130,706 115,646
Securities gains 457 89 1,059 2,747 2,078
-------- -------- -------- -------- --------
TOTAL NON-INTEREST INCOME 126,084 133,097 130,456 133,453 117,724
-------- -------- -------- -------- --------
Personnel costs 114,285 118,143 120,767 122,068 117,662
Outside data processing and other services 18,439 17,992 17,375 17,671 16,654
Net occupancy 17,239 19,950 19,266 18,188 19,780
Equipment 16,949 20,593 20,151 19,844 19,972
Marketing 7,003 6,345 6,921 7,852 9,939
Telecommunications 6,018 6,793 6,859 7,207 7,125
Professional services 5,401 6,235 5,912 6,763 4,969
Printing and supplies 3,837 4,293 4,450 4,565 5,059
Franchise and other taxes 2,328 2,893 2,470 2,246 2,120
Amortization of intangible assets 1,376 10,100 10,114 10,435 10,576
Other 14,511 14,017 14,605 16,457 20,234
-------- -------- -------- -------- --------
TOTAL NON-INTEREST EXPENSE 207,386 227,354 228,890 233,296 234,090
-------- -------- -------- -------- --------
INCOME BEFORE INCOME TAXES 105,742 102,706 101,794 102,413 93,294
Income taxes 28,286 27,214 26,134 27,909 25,428
-------- -------- -------- -------- --------
NET INCOME $ 77,456 $ 75,492 $ 75,660 $ 74,504 $ 67,866
======== ======== ======== ======== ========
PER COMMON SHARE
Net Income - Diluted $ 0.31 $ 0.30 $ 0.30 $ 0.30 $ 0.27
Cash Dividends Declared $ 0.16 $ 0.16 $ 0.16 $ 0.20 $ 0.20
FULLY TAX EQUIVALENT MARGIN:
Net Interest Income $242,825 $255,238 $249,787 $248,033 $243,124
Tax Equivalent Adjustment (2) 1,169 1,292 1,442 1,616 2,002
-------- -------- -------- -------- --------
Tax Equivalent Net Interest Income $243,994 $256,530 $251,229 $249,649 $245,126
======== ======== ======== ======== ========
(1) Income component excludes after-tax impact of the $56.8 million gain on
sale of Florida operations in 1Q '02 and restructuring and special charges
($36.5 million in 1Q '02; $9.8 million in 4Q '01; $33.0 million in 3Q '01;
$72.1 million in 2Q '01).
(2) Calculated assuming a 35% tax rate.
31
SELECTED QUARTERLY INCOME STATEMENT DATA, EXCLUDING FLORIDA OPERATIONS
2002 2001
-------- -----------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)(1) FIRST FOURTH THIRD SECOND FIRST
-------- -------- -------- -------- --------
TOTAL INTEREST INCOME $369,521 $392,978 $427,654 $447,218 $466,098
TOTAL INTEREST EXPENSE 136,420 156,382 197,742 222,410 247,580
-------- -------- -------- -------- --------
NET INTEREST INCOME 233,101 236,596 229,912 224,808 218,518
Provision for loan losses 50,595 54,281 46,027 41,937 29,709
-------- -------- -------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 182,506 182,315 183,885 182,871 188,809
-------- -------- -------- -------- --------
Service charges on deposit accounts 34,282 35,220 33,593 32,650 31,143
Mortgage banking 19,644 15,049 13,859 17,672 9,238
Brokerage and insurance income 14,587 15,066 13,943 13,185 12,232
Trust services 15,096 14,679 14,816 14,431 13,670
Bank Owned Life Insurance income 11,676 9,560 9,560 9,561 9,560
Other service charges and fees 9,118 9,582 9,547 9,383 8,415
Other 10,591 15,135 14,722 13,979 12,315
-------- -------- -------- -------- --------
TOTAL NON-INTEREST INCOME BEFORE SECURITIES GAINS 114,994 114,291 110,040 110,861 96,573
Securities gains 457 89 1,059 2,747 2,078
-------- -------- -------- -------- --------
TOTAL NON-INTEREST INCOME 115,451 114,380 111,099 113,608 98,651
-------- -------- -------- -------- --------
Personnel costs 104,320 100,076 101,866 103,707 99,296
Outside data processing and other services 17,097 15,414 14,650 15,100 14,122
Net occupancy 14,771 15,251 14,481 13,755 15,568
Equipment 15,582 18,117 17,580 17,363 17,503
Marketing 7,174 5,305 5,717 6,807 8,832
Telecommunications 5,282 5,647 5,728 5,964 5,952
Professional services 5,242 6,069 5,754 6,481 4,793
Printing and supplies 3,519 3,511 3,693 3,688 4,098
Franchise and other taxes 2,326 2,885 2,439 2,229 2,116
Amortization of intangible assets 251 2,555 2,569 2,890 3,031
Other 13,487 12,599 12,577 14,459 18,506
-------- -------- -------- -------- --------
TOTAL NON-INTEREST EXPENSE 189,051 187,429 187,054 192,443 193,817
-------- -------- -------- -------- --------
INCOME BEFORE INCOME TAXES 108,906 109,266 107,930 104,036 93,643
Income taxes 29,393 28,999 27,394 27,463 24,463
-------- -------- -------- -------- --------
NET INCOME $ 79,513 $ 80,267 $ 80,536 $ 76,573 $ 69,180
======== ======== ======== ======== ========
NET INCOME PER COMMON SHARE - DILUTED $ 0.32 $ 0.32 $ 0.32 $ 0.30 $ 0.28
FULLY TAX EQUIVALENT MARGIN:
Net Interest Income $233,101 $236,596 $229,912 $224,808 $218,518
Tax Equivalent Adjustment (2) 1,169 1,292 1,442 1,616 2,002
-------- -------- -------- -------- --------
Tax Equivalent Net Interest Income $234,270 $237,888 $231,354 $226,424 $220,520
======== ======== ======== ======== ========
(1) Income component excludes after-tax impact of the $56.8 million gain on
sale of Florida operations in 1Q '02 and restructuring and special charges
($36.5 million in 1Q '02; $9.8 million in 4Q '01; $33.0 million in 3Q '01;
$72.1 million in 2Q '01).
(2) Calculated assuming a 35% tax rate.
32
HUNTINGTON BANCSHARES INCORPORATED
STOCK SUMMARY, KEY RATIOS AND STATISTICS, AND CAPITAL DATA
QUARTERLY COMMON STOCK SUMMARY
2002 2001
------- -------------------------------------
1Q 4Q 3Q 2Q 1Q
------- ------- ------- ------- -------
High $20.310 $17.490 $19.280 $17.000 $18.000
Low 16.660 14.510 15.150 13.875 12.625
Close 19.700 17.190 17.310 16.375 14.250
Cash dividends declared $ 0.16 $ 0.16 $ 0.16 $ 0.20 $ 0.20
Note: Stock price quotations were obtained from NASDAQ
KEY RATIOS AND STATISTICS
2002 2001
MARGIN ANALYSIS - AS A % ------- -------------------------------------------------
OF AVERAGE EARNING ASSETS (1) 1Q 4Q 3Q 2Q 1Q
------- ------- ------- ------- -------
Interest Income 6.71% 7.12% 7.70% 7.98% 8.39%
Interest Expense 2.57% 3.01% 3.66% 4.01% 4.46%
------- ------- ------- ------- -------
Net Interest Margin 4.14% 4.11% 4.04% 3.97% 3.93%
====== ======= ======= ======= =======
RETURN ON (2)
Average total assets 1.18% 1.07% 1.07% 1.05% 0.97%
Average shareholders' equity 13.26% 12.68% 12.64% 12.43% 11.53%
Efficiency Ratio (2) 55.7% 55.8% 57.5% 58.6% 62.0%
Efficiency Ratio, excluding Florida (2) 54.1% 52.5% 54.0% 56.2% 60.2%
Effective tax rate 26.75% 26.50% 25.67% 27.25% 27.26%
CAPITAL DATA
2002 2001
------- -------------------------------------------------
1Q 4Q 3Q 2Q 1Q
(in millions of dollars) ------- ------- ------- ------- -------
Total Risk-Adjusted Assets $24,935 $27,896 $27,757 $27,375 $27,230
Tier 1 Risk-Based Capital Ratio 10.26% 7.24% 6.97% 7.01% 7.19%
Total Risk-Based Capital Ratio 13.40% 10.29% 10.13% 10.20% 10.31%
Tier 1 Leverage Ratio 9.72% 7.41% 7.10% 6.96% 7.12%
Tangible Equity/Asset Ratio 9.03% 6.04% 5.96% 5.97% 6.01%
(1) Presented on a fully tax equivalent basis assuming a 35% tax rate.
(2) Income component excludes the impact of the gain on sale of Florida
operations and restructuring and special charges.
33
PART II. OTHER INFORMATION
In accordance with the instructions to Part II, the other specified items in
this part have been omitted because they are not applicable or the information
has been previously reported.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4. Instruments defining the Rights of Security Holders:
Reference is made to Articles Fifth, Eighth and Tenth of
Articles of Restatement of Charter, as amended and
supplemented, previously filed as exhibit 3(i) to annual
report on form 10-K for the year ended December 31, 1993
and exhibit 3(i)(c) to quarterly report on form 10-Q for
the quarter ended March 31, 1998, and incorporated
herein by reference. Also, reference is made to Rights
Plan, dated February 22, 1990, previously filed as
Exhibit 1 to Registration Statement on Form 8-A, and
incorporated herein by reference and to Amendment No. 1
to the Rights Agreement, dated as of August 16, 1995,
previously filed as Exhibit 4(b) to Form 8-K filed with
the Securities and Exchange Commission on August 28,
1995, and incorporated herein by reference. Instruments
defining the rights of holders of long-term debt will be
furnished to the Securities and Exchange Commission upon
request.
10. Material contracts:
(a) * Fourth Amendment to Huntington Bancshares
Incorporated 1990 Stock Option Plan.
(b) * Fifth Amendment to Huntington Bancshares
Incorporated 1990 Stock Option Plan.
(c) * First Amendment to the Amended and Restated
Huntington Bancshares Incorporated 1994 Stock
Option Plan.
(d) * Second Amendment to the Amended and Restated
Huntington Bancshares Incorporated 1994 Stock
Option Plan.
(e) * Third Amendment to the Amended and Restated
Huntington Bancshares Incorporated 1994 Stock
Option Plan.
(f) * Severance Agreement and Release and Waiver of
All Claims made by and between Huntington
Bancshares Incorporated and Ronald J. Seiffert,
Vice Chairman.
(g) * First Amendment to the Amended and Restated 1999
Incentive Compensation Plan
(h) * First Amendment to the 2001 Stock and Long-term
Incentive Plan
34
(i) * Second Amendment to the 2001 Stock and Long-term
Incentive Plan
99. Earnings to Fixed Charges
(b) Reports on Form 8-K
1. A report on Form 8-K, dated January 18, 2002, was filed
under report item numbers 5 and 7, concerning
Huntington's results of operations for the fourth
quarter and year ended December 31, 2001.
2. A report on Form 8-K, dated January 31, 2002, was filed
under report item numbers 5 and 7, concerning
Huntington's presentation at the Salomon Smith Barney
Financial Services Equity Conference.
3. A report on Form 8-K, dated February 15, 2002, was filed
under report item numbers 2 and 7, regarding the
completion of Huntington's sale of its Florida
operations to SunTrust Banks, Inc.
4. A report on Form 8-K, dated February 19, 2002, was filed
under report item numbers 5 and 7, announcing that the
board of directors has authorized a new share repurchase
program for up to 22 million shares.
5. A report on Form 8-K, dated March 27, 2002, was filed
under report item numbers 5 and 7, announcing the
resignation of Ronald J. Seiffert, Vice Chairman.
* Denotes management contract or compensatory plan or arrangement.
35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Huntington Bancshares Incorporated
----------------------------------
(Registrant)
Date: May 15, 2002 /s/ Richard A. Cheap
------------------------------------------
Richard A. Cheap
General Counsel and Secretary
Date: May 15, 2002 /s/ Michael J. McMennamin
------------------------------------------
Michael J. McMennamin
Vice Chairman, Chief Financial Officer and
Treasurer (Principal Financial Officer)
36