1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY PERIOD ENDED MARCH 31, 1995
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 130,065,898 shares of Registrant's without par value common stock
outstanding on April 30, 1995.
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PART I. FINANCIAL INFORMATION
1. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------------------------------------------
(in thousands of dollars) MARCH 31, DECEMBER 31, MARCH 31,
1995 1994 1994
----------- ----------- -----------
ASSETS
Cash and due from banks.............................................. $867,842 $885,327 $730,999
Interest bearing deposits in banks................................... 1,117 3,059 710
Trading account securities........................................... 25,558 9,427 6,950
Federal funds sold and securities
purchased under resale agreements............................... 5,800 5,329 21,818
Mortgages held for sale.............................................. 117,404 138,997 626,544
Securities available for sale - at fair value........................ 3,329,176 3,304,493 2,975,267
Investment securities - fair value $453,094 ; $474,147 and
$405,541, respectively......................................... 451,694 475,692 395,827
Total loans (1)...................................................... 12,687,137 12,264,436 11,121,275
Less allowance for loan losses.................................. 199,256 200,492 214,111
----------- ----------- -----------
Net loans............................................................ 12,487,881 12,063,944 10,907,164
----------- ----------- -----------
Premises and equipment............................................... 285,571 288,793 289,111
Customers' acceptance liability...................................... 61,300 53,883 58,312
Accrued income and other assets...................................... 511,228 541,696 474,766
----------- ----------- -----------
TOTAL ASSETS......................................................... $18,144,571 $17,770,640 $16,487,468
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Total deposits (1)................................................... $11,940,846 $11,965,067 $11,687,534
Short-term borrowings................................................ 3,084,605 2,898,201 2,293,193
Bank acceptances outstanding......................................... 61,300 53,883 58,312
Long-term debt....................................................... 1,253,032 1,214,052 805,287
Accrued expenses and other liabilities............................... 325,292 227,617 260,763
----------- ----------- -----------
Total Liabilities............................................... 16,665,075 16,358,820 15,105,089
----------- ----------- -----------
Shareholders' equity
Preferred stock - authorized 6,617,808 shares;
none outstanding
Common stock - without par value; authorized
200,000,000 shares; issued and outstanding
131,120,951 ; 131,119,504 and 104,410,747
shares, respectively....................................... 912,330 912,318 902,107
Less 1,215,779 ; 904,739 and 485,398
treasury shares, respectively.............................. (22,168) (16,577) (11,683)
Capital surplus................................................. 215,237 215,084 216,306
Net unrealized losses on securities available for sale.......... (16,821) (63,289) 8,947
Retained earnings............................................... 390,918 364,284 266,702
----------- ----------- -----------
Total Shareholders' Equity...................................... 1,479,496 1,411,820 1,382,379
----------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........................... $18,144,571 $17,770,640 $16,487,468
=========== =========== ===========
See notes to consolidated financial statements.
(1) See page 7 for detail of total loans and total deposits.
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CONSOLIDATED STATEMENTS OF INCOME
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(in thousands of dollars, except per share amounts) THREE MONTHS ENDED MARCH 31,
Interest and fee income 1995 1994
----------------------------
Loans............................................................... $269,918 $230,797
Investment securities............................................... 8,000 6,865
Securities available for sale....................................... 55,901 51,445
Mortgages held for sale............................................. 2,228 11,957
Trading account..................................................... 400 132
Other............................................................... 655 441
----------- -----------
TOTAL INTEREST INCOME..................................... 337,102 301,637
----------- -----------
Interest Expense
Deposits............................................................ 93,908 67,616
Short-term borrowings............................................... 46,977 21,676
Long-term debt...................................................... 23,168 9,178
----------- -----------
TOTAL INTEREST EXPENSE.................................... 164,053 98,470
----------- -----------
NET INTEREST INCOME....................................... 173,049 203,167
----------- -----------
Provision for loan losses................................................ 4,578 8,464
----------- -----------
NET INTEREST INCOME
AFTER PROVISION FOR LOAN LOSSES...................... 168,471 194,703
----------- -----------
Total non-interest income (1)............................................ 61,815 61,253
Total non-interest expense (1)........................................... 147,046 154,025
----------- -----------
INCOME BEFORE INCOME TAXES................................ 83,240 101,931
Provision for income taxes............................................... 29,385 35,189
----------- -----------
NET INCOME................................................ $53,855 $66,742
=========== ===========
PER COMMON SHARE (2)
Net income.......................................................... $0.41 $0.51
Cash dividends declared............................................. $0.20 $0.16
AVERAGE COMMON SHARES OUTSTANDING........................................ 130,236,851 129,840,298
See notes to consolidated financial statements .
(1) See page 8 for detail of non-interest income and non-interest expense.
(2) Restated for the five-for-four stock split distributed in July 1994.
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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
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(in thousands, except per share amounts) NET UNREALIZED
COMMON COMMON TREASURY TREASURY CAPITAL GAINS (LOSSES) RETAINED
SHARES STOCK SHARES STOCK SURPLUS ON SECURITIES EARNINGS TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended March 31, 1994:
BALANCE, BEGINNING OF PERIOD 104,411 $902,107 (608) ($15,290) $216,168 --- $221,652 $1,324,637
Change in accounting method
for securities 65,548 1,624 67,172
Net income 66,742 66,742
Cash dividends declared
($.16 per share) (20,781) (20,781)
Stock options exercised 88 2,164 138 (1,503) 799
Treasury shares purchased (359) (8,309) (8,309)
Treasury shares sold:
Shareholder dividend reinvestment plan 229 5,718 (773) 4,945
Employee stock purchase plan 165 4,034 (259) 3,775
Change in net unrealized gains (losses)
on securities available for sale (56,601) (56,601)
------- -------- ------ -------- -------- -------- -------- ----------
BALANCE, END OF PERIOD 104,411 $902,107 (485) ($11,683) $216,306 $8,947 $266,702 $1,382,379
======= ======== ====== ======== ======== ======== ======== ==========
Three Months Ended March 31, 1995:
BALANCE, BEGINNING OF PERIOD 131,120 $912,318 (905) ($16,577) $215,084 ($63,289) $364,284 $1,411,820
Net income 53,855 53,855
Cash dividends declared
($.20 per share) (25,986) (25,986)
Stock options exercised 19 337 116 (398) 55
Treasury shares purchased (957) (17,331) (17,331)
Treasury shares sold:
Shareholder dividend reinvestment plan 425 7,780 6 (792) 6,994
Employee stock purchase plan 202 3,623 31 (45) 3,609
Conversion of convertible notes 1 12 12
Change in net unrealized gains (losses)
on securities available for sale 46,468 46,468
------- -------- ------ -------- -------- -------- -------- ----------
BALANCE, END OF PERIOD 131,121 $912,330 (1,216) ($22,168) $215,237 ($16,821) $390,918 $1,479,496
======= ======== ====== ======== ======== ======== ======== ==========
See notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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(in thousands of dollars) THREE MONTHS ENDED MARCH 31,
1995 1994
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OPERATING ACTIVITIES
Net Income.......................................................... $ 53,855 $ 66,742
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses...................................... 4,578 8,464
Provision for other real estate................................ (1,011) (1,755)
Provision for depreciation and amortization.................... 13,288 18,030
Deferred income tax expense.................................... 814 3,001
(Increase) decrease in trading account securities.............. (16,131) 15,014
Decrease in mortgages held for sale............................ 21,593 405,794
Net gains on sales of securities available for sale............ (16) (1,748)
Net gains on calls of investment securities.................... (45) (50)
(Increase) decrease in accrued income receivable............... (3,590) 2,485
Net (increase) decrease in other assets........................ (8,143) 45,503
(Decrease) increase in accrued expenses........................ (3,703) 26,027
Net increase (decrease) in other liabilities................... 76,350 (16,961)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES................ 137,839 570,546
----------- -----------
INVESTING ACTIVITIES
Decrease in interest bearing deposits in banks..................... 1,942 11,900
Proceeds from :
Maturities of investment securities.............................. 5,074 6,584
Maturities of securities available for sale...................... 32,000 183,339
Calls of investment securities................................... 19,017 11,738
Sales and calls of securities available for sale................. 680,228 769,293
Purchases of :
Investment securities............................................ --- (55,452)
Securities available for sale.................................... (664,461) (72,819)
Net loan originations............................................... (419,723) (178,181)
Proceeds from disposal of fixed assets............................. 111 54
Purchases of premises and equipment................................ (4,499) (5,975)
Proceeds from sales of other real estate........................... 18,244 2,690
----------- -----------
NET CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES..... (332,067) 673,171
----------- -----------
FINANCING ACTIVITIES
Decrease in total deposits.......................................... (15,466) (356,611)
Increase (decrease) in short-term borrowings....................... 186,404 (902,270)
Proceeds from issuance of long-term debt........................... 50,000 49,950
Payment of long-term debt........................................... (11,065) (7,477)
Dividends on common stock........................................... (18,992) (15,836)
Acquisition of treasury stock....................................... (17,331) (8,309)
Sales of treasury stock............................................. 3,609 3,775
Proceeds from exercise of stock options............................ 55 799
----------- -----------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES..... 177,214 (1,235,979)
----------- -----------
CHANGE IN CASH AND CASH EQUIVALENTS...................... (17,014) 7,738
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD......... 890,656 745,079
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............... $ 873,642 $ 752,817
=========== ===========
See notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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A. The accompanying unaudited consolidated financial statements reflect
all adjustments (consisting of normal recurring accruals) which are, in the
opinion of management, necessary for a fair presentation of the results for the
interim periods. The Notes to the Consolidated Financial Statements appearing
in Huntington's 1994 Annual Report to Shareholders should be read in conjunction
with these interim financial statements.
B. On January 1, 1995, Huntington adopted Financial Accounting Standards
Board Statement (FAS) No. 114, "Accounting by Creditors for Impairment of a
Loan" as amended by FAS No. 118, "Accounting by Creditors for Impairment of a
Loan - Income Recognition and Disclosures." Under the new standards the 1995
allowance for loan losses related to loans that are identified for evaluation
in accordance with FAS 114 is based on discounted cash flows using the loan's
initial effective interest rate or the fair value of the collateral for
collateral-dependent loans. Prior to 1995, the allowance for loan losses
related to these loans was based on undiscounted cash flows or the fair value
of the collateral for collateral-dependent loans. As permitted by the new FASs,
Huntington continues to apply the cost recovery method in accounting for cash
received on non-accrual loans. Under this method, cash receipts are generally
applied entirely against principal until the loan has been collected in full,
after which time any additional cash receipts are recognized as interest
income.
Under FAS 114, $27.6 million of non-performing loans presented in the
table on page 20 of this report are considered impaired. Included in this
amount is $13.9 million of impaired loans for which the related allowance for
loan losses is $6.9 million and $13.7 million of impaired loans that as a
result of write-downs do not have an allowance for loan losses.
C. Huntington acquired Security National Corporation (Security), a $189
million one-bank holding company headquartered in Maitland, Florida on May 1,
1995. Huntington issued 2.4 million shares of common stock in exchange for all
of Security's common stock in a transaction accounted for as a
pooling-of-interests.
Huntington also expects to consummate the acquisitions of Reliance
Bank of Florida (Reliance), a $98 million bank headquartered in Melbourne,
Florida, and First Seminole Bank (First Seminole), a $51 million bank
headquartered in Lake Mary, Florida, in the second quarter. The Reliance merger
is to be accounted for as a pooling-of-interests, while the acquisition of
First Seminole will be accounted for as a purchase.
Proforma results of operations for these business combinations have
been excluded due to the immaterial impact on Huntington's consolidated
earnings.
D. Per common share amounts have been calculated based on the weighted
average number of common shares outstanding in each period, restated for the
five-for-four stock split distributed in July 1994. The dilutive effects of
unexercised stock options and convertible debentures were not significant for
any period presented.
E. Certain amounts in the prior year's financial statements have been
reclassified to conform with the 1995 presentation. These reclassifications
had no effect on net income.
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FINANCIAL REVIEW
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LOAN PORTFOLIO COMPOSITION
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(in thousands of dollars) MARCH 31, DECEMBER 31, MARCH 31,
1995 1994 1994
----------- ------------ -----------
Commercial................................................................. $3,880,320 $3,610,892 $3,462,109
Tax-free................................................................... 55,709 58,006 69,469
Real Estate
Construction.......................................................... 325,736 304,769 307,565
Commercial............................................................ 1,422,673 1,378,398 1,271,222
Residential........................................................... 1,612,247 1,624,367 1,406,196
Consumer................................................................... 4,713,666 4,641,946 4,092,007
Lease financing............................................................ 676,786 646,058 512,707
----------- ----------- -----------
TOTAL LOANS........................................................... $12,687,137 $12,264,436 $11,121,275
=========== =========== ===========
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DEPOSIT COMPOSITION
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(in thousands of dollars) MARCH 31, DECEMBER 31, MARCH 31,
1995 1994 1994
----------- ------------ -----------
Demand deposits
Non-interest bearing.................................................. $2,068,690 $2,169,095 $1,969,913
Interest bearing...................................................... 2,448,218 2,646,785 2,740,762
Savings deposits........................................................... 2,129,848 2,227,406 2,579,637
Certificates of deposit of $100,000 or more................................ 718,780 605,763 603,483
Other domestic time deposits............................................... 4,303,904 3,909,061 3,399,639
Foreign time deposits...................................................... 271,406 406,957 394,100
----------- ----------- -----------
TOTAL DEPOSITS........................................................ $11,940,846 $11,965,067 $11,687,534
=========== =========== ===========
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FINANCIAL REVIEW
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ANALYSIS OF NON-INTEREST INCOME
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(in thousands of dollars) THREE MONTHS ENDED
MARCH 31, PERCENT
1995 1994 CHANGE
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Service charges on deposit accounts .................................. $22,365 $18,566 20.46 %
Mortgage banking ..................................................... 10,606 17,073 (37.88)
Trust services ....................................................... 8,055 8,128 (0.90)
Credit card fees ..................................................... 7,978 6,933 15.07
Investment product sales ............................................. 1,699 1,873 (9.29)
Securities gains...................................................... 61 1,798 (96.61)
Other ................................................................ 11,051 6,882 60.58
-------- --------
TOTAL NON-INTEREST INCOME .......................................... $61,815 $61,253 0.92 %
======== ========
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ANALYSIS OF NON-INTEREST EXPENSE
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(in thousands of dollars) THREE MONTHS ENDED
MARCH 31, PERCENT
1995 1994 CHANGE
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Salaries ............................................................. $55,500 $57,079 (2.77)%
Commissions .......................................................... 1,674 3,081 (45.67)
Employee benefits .................................................... 15,537 16,435 (5.46)
Net occupancy ........................................................ 10,527 10,115 4.07
Equipment ............................................................ 9,703 9,499 2.15
FDIC insurance ....................................................... 6,391 6,531 (2.14)
Credit card .......................................................... 6,197 5,657 9.55
Printing and supplies ................................................ 3,531 3,466 1.88
Advertising .......................................................... 3,011 4,188 (28.10)
Legal and loan collection ............................................ 2,026 1,401 44.61
Other ................................................................ 32,949 36,573 (9.91)
-------- --------
TOTAL NON-INTEREST EXPENSE ........................................... $147,046 $154,025 (4.53)%
======== ========
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2. Management's Discussion and Analysis
OVERVIEW
Huntington reported net income of $53.9 million, or $.41 per share,
for the first quarter of 1995 compared with $66.7 million, or $.51 per share,
for the same period last year. Returns on average assets (ROA) and average
equity (ROE) were 1.23% and 15.11%, respectively, for the most recent quarter.
For the comparable period in 1994, ROA was 1.60% and ROE was 19.26%.
The substantially higher interest rates and competitive market
environment that presented challenges in the final six months of 1994 continued
to compress the net interest margin and adversely impact fee income from
mortgage banking activities and retail investment product sales. Strong loan
growth, coupled with reduced operating costs, enabled Huntington to lessen the
effects of these external pressures.
Total assets were $18.1 billion at March 31, 1995, up slightly from
December 31, 1994, and an increase of 10.1% from one year ago. Loan volumes
continue to be solid, as average total loans increased to $12.5 billion for the
first quarter of the year, compared with $12.0 billion for the final quarter of
1994 and $11.0 billion for the same period last year. Conversely, rising
interest rates have curtailed residential loan production at Huntington's
mortgage banking subsidiary, resulting in a substantial decrease in mortgages
held for sale over the past twelve months.
Total deposits at the most recent quarter end are relatively flat
compared with both December 31 and March 31, 1994. The mix of deposits has
changed, as retail customers have shifted their investment preferences, opting
for the higher yields available through certificates of deposit. Huntington's
short-term borrowings and long-term debt both increased from a year ago,
principally as a result of issuing short and medium term notes through its lead
subsidiary, The Huntington National Bank.
Shareholders' equity was $1.5 billion at March 31, 1995, an increase
of 7.0% from the end of the first quarter of 1994. Huntington's regulatory
capital ratios, including those of its banking and thrift subsidiaries, show
continued strength and exceed the minimum levels established for
well-capitalized institutions.
NET INTEREST INCOME
For the three months ended March 31, 1995, Huntington reported net
interest income of $173.0 million, compared with $203.2 million for the same
period last year. The net interest margin, on a fully tax equivalent (FTE)
basis, was 4.27% in the quarter just ended and 5.31% in the first three months
of 1994. The reduced level of net interest income and lower margin were the
result of rising interest rates, which increased Huntington's funding costs
more rapidly than its yields on earning assets. Competitive pressures on loan
and deposit pricing, as well as actions taken by management to reduce earnings
sensitivity to rising rates, also put downward pressure on the net interest
margin. In the near term, management anticipates the margin will fall slightly
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from current levels, and the potential for further downward pressure exists if
Huntington chooses to increase balance sheet leverage via the purchase of
additional investment securities.
INTEREST RATE RISK MANAGEMENT
The principal objective of asset/liability management is to maximize
shareholder value in a manner consistent with prudent balance sheet management.
Huntington seeks to achieve consistent growth in net interest income and net
income while managing volatility arising from shifts in interest rates. This is
accomplished with the oversight of the Asset/Liability Management Committee
(ALCO), which is comprised of key members of executive management. ALCO
establishes policies and operating limits that govern the management of market
risk as well as ensure maintenance of adequate liquidity. Both on- and
off-balance sheet strategies and programs are regularly reviewed and monitored
by ALCO to confirm their consistency with Huntington's operating objectives as
well as to evaluate their appropriateness in light of changing market and
business conditions.
Actively and effectively managing interest rate risk requires the use
of a variety of financial instruments and funding sources. On-balance sheet
investment and funding vehicles, along with off-balance sheet financial
instruments such as interest rate swaps, interest rate caps/floors, and
financial futures represent the primary means by which Huntington responds to
the balance sheet mismatches created by customer loan and deposit preferences
and to changing market conditions. These activities are closely monitored by
ALCO.
Over the past year, Huntington has undertaken several strategies to
protect earnings against rising rates. These have included the sale of over $2
billion of intermediate term fixed rate securities which have been subsequently
replaced with variable rate instruments or other investments of shorter
duration, the issuance of term fixed-rate retail and wholesale liabilities, and
the adjustment of interest rate swap and other off-balance sheet positions.
These initiatives significantly changed Huntington's interest rate risk
exposure and resulted in a balance sheet position at the end of 1994 and as of
the most recent quarter end which is generally neutral to changes in interest
rates.
Huntington monitors its interest rate risk exposure by measuring the
amount that net interest income will change over a twelve to twenty-four month
period given a directional shift in interest rates. The net interest
income-at-risk estimation is determined using multiple interest rate and
balance sheet scenarios to provide management a framework for evaluating its
risk tolerance under various market conditions.
At March 31, 1995, the results of Huntington's internal interest
sensitivity analysis indicate that a 100 basis point increase in the federal
funds rate (assuming a 25 basis point increase per quarter) and corresponding
changes in other market rates reflected in Huntington's interest rate forecast
would result in a change in annual net interest income ranging between an
increase of .7% and a decrease of .3%. This represents a reduction from one
year ago, at which time the equivalent exposure was a decrease of 2.5-3.0%.
Assuming a gradual 200 basis point increase in rates, the sensitivity analysis
indicates a change in net interest income ranging between an increase of .4%
and a decrease of 1.6%. A decline in rates of 200 basis points is
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expected to reduce net interest income by approximately 1%, reflecting the
presumption that certain core deposits, whose rates have not repriced upward
over the past 300 basis point increase in short-term rates, will not reprice
downward in a falling rate environment. Huntington uses a range in measuring
its "at-risk" position because of varying assumptions regarding the volume and
rate behaviors of certain loans and core deposits under the rising rate
scenarios.
Interest rate swaps are the principal off-balance sheet vehicles used
by Huntington for asset/liability management. In addition to the transactional
efficiencies afforded by a swap structure, which is less costly to execute than
a comparable cash instrument, the overall swap strategy has enabled Huntington
to lower the costs of raising wholesale liabilities and has allowed management
to synthetically alter, or customize, the repricing characteristics of selected
on-balance sheet financial instruments. Financial futures and interest rate
caps/floors, as well as forward delivery contracts purchased in connection with
mortgage banking activities, are also integral to asset/liability management.
These off-balance sheet financial instruments are often more attractive than
the use of cash securities or other on-balance sheet alternatives because,
though they provide similar protection against interest rate movements, they
require less capital and may not impede liquidity.
The notional amount of off-balance sheet positions used by Huntington
for purposes other than interest rate risk management, consisting principally
of transactions entered into on behalf of customers for which the related
interest rate risk is countered by offsetting third party contracts, was $693
million at March 31, 1995. Total credit exposure from such contracts was $6.9
million at the most recent quarter end. These separate activities, which are
accounted for at fair value, are not a significant part of Huntington's
operations. Accordingly, they have been excluded from the discussion of
off-balance sheet financial instruments and the related tables which follow.
In the first quarter of 1995, interest rate swaps and other
off-balance sheet financial instruments used for asset/liability management
purposes decreased interest income by $4.5 million and increased interest
expense by $7.0 million. For the same period last year, these products
increased interest income by $15.1 million and decreased interest expense by
$9.2 million. Included in the preceding amounts is amortization of deferred
gains and losses from previously terminated contracts, which
(decreased)/increased net interest income by $(3.9) million and $6.8 million,
respectively, in 1995 and 1994. Expressed in terms of the net interest margin,
the effect of the off-balance sheet portfolio was a reduction of 28 basis
points for the most recent quarter and an addition of 63 basis points for the
first three months of 1994.
The following table illustrates the approximate market values,
estimated maturities, and weighted average rates of the interest rate swaps
used by Huntington in its interest rate risk management program. The valuation
of interest rate swap contracts is largely a function of the financial market's
expectations regarding the future direction of interest rates. Since year end,
expectations regarding the future direction of interest rates have shifted,
with the marketplace now anticipating relatively stable rates over the next
year versus the expectations which prevailed at the end of 1994 for
significantly higher rates. Consequently, the net unrealized loss decreased
considerably from $268.9 million at December 31, 1994, to $140.9 million at the
end of March 1995. The market values at the most recent quarter end are not
necessarily indicative of the future
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impact of the swaps on net interest income. This will depend, in large part, on
the shape of the yield curve as well as interest rate levels. Management has
made no assumptions with respect to future changes in interest rates for
purposes of the variable rate information and the indexed amortizing swap
maturities presented below.
Average Average Rate
Notional Maturity Market -----------------
(dollars in millions) Value (years) Value Receive Pay
- -----------------------------------------------------------------------------------------------
March 31, 1995:
ASSET CONVERSION SWAPS
Receive fixed-generic $ 1,583 3.34 ($14.3) 6.49% 6.26%
Receive fixed-amortizing 894 2.65 ( 48.7) 5.23 6.31
------- ------
TOTAL ASSET CONVERSION SWAPS $ 2,477 3.09 ($63.0) 6.04% 6.28%
======= ======
LIABILITY CONVERSION SWAPS
Receive fixed-generic $ 700 5.26 ($26.9) 5.51% 6.40%
Receive fixed-amortizing 564 2.57 ( 28.4) 5.21 6.31
Pay fixed-generic 2,459 1.17 ( 1.7) 6.19 6.76
------- ------
TOTAL LIABILITY CONVERSION SWAPS $ 3,723 2.15 ($57.0) 5.92% 6.62%
======= ======
BASIS PROTECTION SWAPS $ 700 1.82 ($20.9) 5.98% 6.34%
======= ======
The portfolio of amortizing swaps consists of contracts with notional
values that are indexed to certain market interest rates, primarily the London
inter-bank offered rate (LIBOR) or Constant Maturity U.S. Treasury yields
(CMT). To a much lesser degree, other contracts are amortized based upon the
prepayment experience of a specified pool of mortgage loans. As market interest
rates change, the amortization of the notional values will also change,
generally slowing as rates increase and accelerating when rates fall. Basis
swaps are contracts which provide for both parties to receive floating rates of
interest according to different indices. All receive and pay amounts
applicable to Huntington's basis swaps are determined by LIBOR, the prime rate,
or other indices common to the banking industry. The basis swaps have embedded
written periodic caps and, in some cases, purchased periodic floors. Also,
embedded in the receive fixed-generic swaps is $250 million of written caps.
The notional values of the swap portfolio represent contractually
determined amounts on which calculations of interest payments to be exchanged
are based. These notional values do not represent direct credit exposures. At
March 31, 1995, Huntington's credit risk from interest rate swaps and other
off-balance sheet financial instruments used for asset/liability management
purposes was $35.9 million, which is significantly less than the notional value
of the contracts, and represents the sum of the aggregate fair value of
positions that have become favorable to Huntington and any accrued interest
receivable due from counterparties. In order to minimize the risk that a swap
counterparty will not satisfy its interest payment obligation under the terms
of the contract, Huntington performs credit reviews on all counterparties,
restricts the number of counterparties used to a select group of high quality
institutions, obtains collateral, and enters into formal netting arrangements.
Huntington has never experienced any past due amounts from
12
13
a swap counterparty and does not anticipate non-performance in the future by
any such counterparties.
The following table summarizes activity in the interest rate swap
portfolio used for asset/liability management purposes during the first three
months of 1995 and 1994:
Asset Liability Basis
Conversion Conversion Protection
----------------------------------------
(in millions)
Balance at December 31, 1994 $2,508 $3,332 $1,000
Additions --- 525 ---
Maturities/Amortization (31) (100) (300)
Terminations --- (34) ---
------ ------ ------
Balance at March 31, 1995 $2,477 $3,723 $ 700
====== ====== ======
Balance at December 31, 1993 $2,281 $1,821 $2,800
Additions 75 100 200
Maturities/Amortization (219) --- ---
Terminations (300) --- (250)
------ ------ ------
Balance at March 31, 1994 $1,837 $1,921 $2,750
====== ====== ======
Terminations reflect the decisions made by ALCO to modify, refine, or
change balance sheet management strategies, as a result of either a change in
overall interest rate risk tolerances or changes in balance sheet composition.
At March 31, 1995, Huntington had deferred approximately $69.0 million of net
realized losses from terminated interest rate swaps, which are to be amortized
as yield adjustments over the remaining term of the original contracts, as
presented below.
Amortizing In
------------------------------------------------------
1995 1996 1997 Total
---- ---- ---- -----
(in millions)
MARCH 31, 1995:
Deferred gains $ 10.8 $ 7.8 $ 1.3 $ 19.9
Deferred losses (31.1) (41.3) (16.5) (88.9)
-------- ------ ------ ------
Net losses $(20.3) $(33.5) $(15.2) $(69.0)
====== ====== ====== ======
NON-INTEREST INCOME
During the first three months of 1995, non-interest income, exclusive
of securities transactions, increased $2.3 million, or 3.9%, relative to the
first quarter 1994 results. Service charges on deposits and credit card fees
showed the most significant increases from the corresponding period of last
year. Various components of other non-interest income were also up when
comparing the two periods, including trading account profits and income from
various fee
13
14
based initiatives. Huntington also recognized a gain of approximately $800,000
on the sale of an other real estate property during the most recent quarter.
Results for the initial three months of 1994 were adversely impacted by a $1.1
million lower of cost or market adjustment on an interest rate floor linked to
purchased mortgage servicing rights. The combined effect of these factors
offset a 37.9% reduction in mortgage banking income.
The major components of mortgage banking income were as follows:
First Quarter
-------------------------
1995 1994
------- -------
(in thousands)
Net servicing fees $ 4,563 $ 5,365
Fee income 837 5,594
Gain on sale of
servicing rights 4,190 4,398
Other 1,016 1,716
------- -------
$10,606 $17,073
======= =======
The decrease in fee income which is apparent from the above table is
the result of a significant drop in mortgage loan production from approximately
$1.0 billion in the first three months of 1994 to $162.9 million in the quarter
just ended. Though origination volumes were down considerably during 1994
compared with the unprecedented levels achieved the preceding year, the
decline was much more pronounced in the second half of the year as
substantially higher interest rates curtailed production industry-wide.
Accordingly, mortgage loan originations in the first quarter of last year were
still relatively strong.
Net servicing fees in the first three months of 1995 were
approximately 15% less than the amount reported in the corresponding period of
last year, principally because of sales of servicing rights over the past
twelve months. This decrease was offset, in part, by reduced amortization of
excess mortgage servicing rights (EMSRs), which resulted from a decline in the
level of mortgage loan prepayments. A summary of the servicing portfolio
follows:
As of March 31,
1995 1994
---- ----
(in thousands of dollars)
Loan principal, including temporary subservicing
of $598,703 and $2,026,738, respectively $5,526,837 $8,619,494
Weighted average:
Coupon rate 8.17% 7.88%
Contractual maturity 21 yrs. 22 yrs.
14
15
Huntington sold "bulk" servicing rights of $349.6 million in the most recent
quarter versus $627.8 million in the same quarter a year ago.
NON-INTEREST EXPENSE
Non-interest expense declined 4.5% when comparing the first quarter
1995 results with the same period of 1994. This decrease is primarily
attributable to reduced personnel costs, much of which related to Huntington's
recent restructuring of its mortgage banking operation. The slower mortgage
market which precipitated staff reductions also resulted in a drop in various
components of other non-interest expense such as amortization of purchased
mortgage servicing rights (PMSRs).
ASSET QUALITY
Huntington's exposure to credit risk is actively managed through the
use of underwriting standards which emphasize "in- market" lending to
established borrowers. Highly leveraged transactions and industry or other
concentrations are avoided. Huntington's management also employs extensive
monitoring procedures to ensure the adequacy of the allowance for loan losses
(ALL), including timely reviews of specific credits, monthly analysis of
delinquencies, assessment of current economic conditions, and other relevant
factors.
Huntington's asset quality remains among the best of the largest
banking companies in the country. Non-performing loans, which represent only
.41% of total loans at the most recent quarter end, were as follows:
March 31, December 31, March 31,
1995 1994 1994
--------- ------------ ---------
(in millions)
Commercial $19.2 $21.0 $30.8
Construction 3.7 4.6 23.1
Commercial real estate 20.6 10.1 7.5
Residential mortgage 8.6 8.7 6.3
Consumer .2 .1 .4
----- ----- -----
Total $52.3 $44.5 $68.1
===== ===== =====
Net charge-offs as a percentage of average total loans continued their
downward trend to .19% (annualized) in the first three months of the year,
compared with .24% for all of 1994. These strong credit quality measures
enabled Huntington to reduce the provision for loan losses in the first quarter
of 1995 versus the same period last year. The ALL as a percentage of total
loans was 1.57% as of March 31, 1995, compared with a ratio of 1.93% one year
ago. Huntington believes this decrease is appropriate, as the ratio of the ALL
to non-performing loans remains strong at 381%, up from 314% at the end of the
first quarter of 1994.
15
16
In addition to the improvements in credit quality referred to above,
net other real estate (ORE) has declined $39.1 million during the past twelve
months to $26.5 million at March 31, 1995. Huntington's management continues to
aggressively pursue the sale of its ORE to further reduce non-performing
assets.
CAPITAL
Huntington's capital position continues to be strong. Shareholders'
equity at the most recent quarter end was approximately $1.5 billion, an
increase of 7.0% from March 31, 1994. Average equity to average assets was
8.11% in the first three months of 1995, and was relatively flat with the ratio
of 8.29% reported for the same period last year. At March 31, 1995, the Tier 1
and total risk-based capital ratios were 9.46% and 13.41%, respectively, and
exceeded the corresponding minimum levels to be considered "well capitalized"
of 6% and 10%, respectively. Huntington's Tier 1 leverage ratio of 7.76% also
exceeded the minimum regulatory requirement of 5%.
On April 27, 1995, the Board of Directors authorized Huntington to
repurchase up to 10.0 million additional shares of its common stock. The new
authorization represents a continuation of the August 1987 Common Stock
Repurchase Program and provides that the shares will be reserved for reissue in
connection with Huntington's benefit plans (e.g., dividend reinvestment,
employee stock purchase, etc.) as well as for other corporate purposes. It is
expected that 5.0 million shares of the most recent authorization, plus the 1.9
million shares remaining at March 31 that were previously authorized, will be
repurchased by the end of the current year. The other 5.0 million shares will
be repurchased as needed in 1996.
NEW ACCOUNTING STANDARDS
As more fully discussed in Note B. to the unaudited consolidated
financial statements, Huntington adopted Financial Accounting Standards Board
Statement (FAS) No. 114, "Accounting by Creditors for Impairment of a Loan" as
amended by FAS No. 118, "Accounting by Creditors for Impairment of a Loan-Income
Recognition and Disclosures" effective January 1, 1995. The adoption of the new
FASs did not have a material effect on Huntington's financial statements.
The FASB has also issued an Exposure Draft (ED) dated June 1994,
"Accounting for Mortgage Servicing Rights and Excess Servicing Receivables and
for Securitization of Mortgage Loans", that would amend certain provisions of
FAS No. 65, which currently governs the accounting for mortgage banking
activities. The most significant change proposed in the ED involves the
recognition of rights to service loans for others as separate assets,
regardless of whether purchased or originated with the positive intent to
resell. A final statement from the FASB is expected in the second quarter of
1995, the provisions of which are expected to be applied prospectively to
transactions subsequent to the date of adoption. Because a final pronouncement
has not yet been issued, Huntington is unable to determine the potential
effects of the accounting change.
16
17
- --------------------------------------------------------------------------------
CONSOLIDATED FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------
(in thousands of dollars, except per share amounts)
----------- ----------- -----------
THREE MONTHS ENDED MARCH 31, 1995 1994 %CHANGE
----------- ----------- -----------
NET INCOME........................................... $53,855 $66,742 (19.3)%
PER COMMON SHARE AMOUNTS (1)........................
Net income...................................... $0.41 $0.51 (19.6)
Cash dividends declared......................... $0.20 $0.16 25.0
AVERAGE SHARES OUTSTANDING (1)...................... 130,236,851 129,840,298 0.3
KEY RATIOS
Return on:
Average total assets............................ 1.23% 1.60% (23.1)
Average shareholders' equity.................... 15.11% 19.26% (21.5)
Efficiency ratio..................................... 62.85% 58.71% 7.1
Average equity/average assets........................ 8.11% 8.29% (2.2)
NET INTEREST MARGIN.................................. 4.27% 5.31% (19.6)
- ----------------------------------------------------- ----------- ----------- -----------
AT MARCH 31, 1995 1994 %CHANGE
----------- ----------- -----------
Total Loans.......................................... $12,687,137 $11,121,275 14.1 %
Total Deposits....................................... $11,940,846 $11,687,534 2.2
Total Assets......................................... $18,144,571 $16,487,468 10.1
Shareholders' Equity................................. $1,479,496 $1,382,379 7.0
Period-End Shares Outstanding (1).................... 129,905,172 129,906,686 -
Shareholders' Equity Per Common Share (1)............ $11.39 $10.64 7.0
Total Risk-Adjusted Assets........................... $14,756,421 $12,878,406 14.6
Tier 1 Risk-Based Capital Ratio...................... 9.46% 10.01% (5.5)
Total Risk-Based Capital Ratio....................... 13.41% 14.41% (6.9)
Tier 1 Leverage Ratio................................ 7.76% 7.54% 2.9
(1) Restated for the five-for-four stock split distributed in July 1994.
17
18
F I N A N C I A L R E V I E W
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT SECURITIES - AMORTIZED COST & FAIR VALUES BY MATURITY AT MARCH 31, 1995 AND DECEMBER 31, 1994
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands of dollars) MARCH 31, 1995 December 31, 1994
- ---------------------------------------------------------------------------------------------------------------------------
AMORTIZED COST FAIR VALUE Amortized Cost Fair Value
- ---------------------------------------------------------------------------------------------------------------------------
U.S. Treasury
Under 1 year............................. $150 $150 $150 $150
-------- -------- -------- --------
Total................................. 150 150 150 150
-------- -------- -------- --------
Federal agencies
Mortgage-backed securities
1-5 years................................ 360 342 371 344
6-10 years............................... 4,592 4,643 4,812 4,806
Over 10 years............................ 3,006 3,062 3,130 3,133
-------- -------- -------- --------
Total................................. 7,958 8,047 8,313 8,283
-------- -------- -------- --------
Other agencies
1-5 years................................ 108,975 108,125 101,774 99,446
6-10 years............................... 195,786 194,423 207,043 205,358
Over 10 years............................ 433 346 433 350
-------- -------- -------- --------
Total................................. 305,194 302,894 309,250 305,154
-------- -------- -------- --------
Total U.S. Treasury and Federal agencies...... 313,302 311,091 317,713 313,587
-------- -------- -------- --------
States and political subdivisions
Under 1 year............................. 46,849 47,574 56,361 57,080
1-5 years................................ 62,111 64,490 72,812 74,975
6-10 years............................... 19,115 19,331 18,433 18,059
Over 10 years............................ 6,005 6,377 6,043 6,196
-------- -------- -------- --------
Total................................. 134,080 137,772 153,649 156,310
-------- -------- -------- --------
Other
Under 1 year............................. 1,505 1,504 1,508 1,508
1-5 years................................ - - 5 5
6-10 years............................... 1,000 1,000 1,504 1,424
Over 10 years............................ 1,807 1,727 1,313 1,313
-------- -------- -------- --------
Total................................. 4,312 4,231 4,330 4,250
-------- -------- -------- --------
Total Investment Securities................... $451,694 $453,094 $475,692 $474,147
======== ======== ======== ========
18
19
F I N A N C I A L R E V I E W
- ---------------------------------------------------------------------------------------------------------------------------
SECURITIES AVAILABLE FOR SALE - AMORTIZED COST & FAIR VALUES BY MATURITY AT MARCH 31, 1995 AND DECEMBER 31, 1994
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands of dollars) MARCH 31, 1995 December 31, 1994
- ---------------------------------------------------------------------------------------------------------------------------
AMORTIZED COST FAIR VALUE Amortized Cost Fair Value
- ---------------------------------------------------------------------------------------------------------------------------
U.S. Treasury
Under 1 year.............................. $25,510 $25,421 $25,399 $25,320
1-5 years................................. 644,499 639,025 662,106 643,100
6-10 years................................ 171,301 153,910 166,909 147,671
---------- ---------- ---------- ----------
Total.................................. 841,310 818,356 854,414 816,091
---------- ---------- ---------- ----------
Federal agencies
Mortgage-backed securities
Under 1 year.............................. 367 372 - -
1-5 years................................. 19,153 19,038 17,727 16,922
6-10 years................................ 424,887 428,585 369,061 362,716
Over 10 years............................. 135,301 136,171 114,742 110,119
---------- ---------- ---------- ----------
Total.................................. 579,708 584,166 501,530 489,757
---------- ---------- ---------- ----------
Other agencies
Under 1 year.............................. 354,001 353,869 531,082 526,617
1-5 years................................. 780,265 786,698 506,740 499,748
6-10 years................................ 318,886 310,888 382,849 369,404
Over 10 years............................. 263,138 255,728 323,451 304,660
---------- ---------- ---------- ----------
Total.................................. 1,716,290 1,707,183 1,744,122 1,700,429
---------- ---------- ---------- ----------
Total U.S. Treasury and Federal agencies....... 3,137,308 3,109,705 3,100,066 3,006,277
---------- ---------- ---------- ----------
Other
Under 1 year.............................. 1,713 1,718 - -
1-5 years................................. 71,474 74,316 95,410 94,887
6-10 years................................ 100,409 100,365 165,422 164,087
Over 10 years............................. 36,223 36,360 32,854 32,818
Marketable equity securities.............. 8,359 6,712 8,359 6,424
---------- ---------- ---------- ----------
Total.................................. 218,178 219,471 302,045 298,216
---------- ---------- ---------- ----------
Total Securities Available for Sale............ $3,355,486 $3,329,176 $3,402,111 $3,304,493
========== ========== ========== ==========
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- --------------------------------------------------------------------------------
FINANCIAL REVIEW
- --------------------------------------------------------------------------------------------------------------------------------
LOAN LOSS EXPERIENCE
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands of dollars) 1995 1994
-------------------------------------------------------------------
I Q IV Q III Q II Q I Q
-------------------------------------------------------------------
ALLOWANCE FOR LOAN LOSSES, BEGINNING OF PERIOD ........... $200,492 $205,964 $212,479 $214,111 $211,835
Loan losses .............................................. (9,768) (14,602) (12,613) (8,932) (9,975)
Recoveries of loans previously charged off ............... 3,954 5,249 4,985 4,081 3,787
Provision for loan losses ................................ 4,578 2,488 1,113 3,219 8,464
Allowance of assets acquired ............................. - 1,393 - - -
-------- -------- -------- -------- --------
ALLOWANCE FOR LOAN LOSSES, END OF PERIOD ................. $199,256 $200,492 $205,964 $212,479 $214,111
======== ======== ======== ======== ========
AS A % OF AVERAGE TOTAL LOANS
Net loan losses -- annualized .......................... 0.19% 0.31% 0.26% 0.17% 0.23%
Provision for loan losses -- annualized ................ 0.15% 0.08% 0.04% 0.11% 0.31%
Allowance for loan losses as a % of total loans .......... 1.57% 1.63% 1.73% 1.83% 1.93%
Net loan loss coverage (1) ............................... 15.10x 8.71x 11.27x 21.41x 17.84x
(1) Income before taxes and the provision for loan losses to net loan losses.
- --------------------------------------------------------------------------------------------------------------------------------
NON-PERFORMING ASSETS AND PAST DUE LOANS
(Quarter-End) 1995 1994
-------------------------------------------------------------------
(in thousands of dollars) I Q IV Q III Q II Q I Q
-------------------------------------------------------------------
Non-accrual loans ........................................ $40,723 $41,929 $40,313 $61,015 $60,060
Renegotiated loans ....................................... 11,550 2,550 13,547 5,737 8,048
-------- -------- -------- -------- --------
TOTAL NON-PERFORMING LOANS ............................... 52,273 44,479 53,860 66,752 68,108
-------- -------- -------- -------- --------
Other real estate, net ................................... 26,525 51,909 51,558 59,157 65,664
-------- -------- -------- -------- --------
TOTAL NON-PERFORMING ASSETS .............................. $78,798 $96,388 $105,418 $125,909 $133,772
======== ======== ======== ======== ========
NON-PERFORMING LOANS AS A
% OF TOTAL LOANS ....................................... 0.41% 0.36% 0.45% 0.57% 0.61%
NON-PERFORMING ASSETS AS A
% OF TOTAL LOANS AND OTHER REAL ESTATE ................. 0.62% 0.78% 0.88% 1.08% 1.20%
ALLOWANCE FOR LOAN LOSSES AS A % OF
NON-PERFORMING LOANS ................................... 381.18% 450.76% 382.41% 318.31% 314.37%
ALLOWANCE FOR LOAN LOSSES AND OTHER REAL
ESTATE AS A % OF NON-PERFORMING ASSETS ................. 235.43% 193.13% 181.70% 160.22% 152.27%
ACCRUING LOANS PAST DUE 90 DAYS OR MORE .................. $19,771 $20,877 $24,182 $23,464 $19,601
======== ======== ======== ======== ========
20
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- --------------------------------------------------------------------------------
CONSOLIDATED AVERAGE BALANCES AND INTEREST RATES (QUARTERLY DATA)
- --------------------------------------------------------------------------------------------------------------------------------
Fully Tax Equivalent Basis (1) 1ST QUARTER 1995 4TH QUARTER 1994
(in millions of dollars) ---------------------- ---------------------
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE RATE BALANCE RATE
---------------------- ---------------------
ASSETS
Interest bearing deposits in banks............................................ $2 7.17 % $2 8.80 %
Trading account securities.................................................... 27 6.68 15 6.21
Federal funds sold and securities purchased under resale agreements........... 36 6.86 115 4.91
Mortgages held for sale....................................................... 106 8.42 135 6.75
Securities available for sale................................................. 3,385 6.63 2,977 6.33
Investment securities......................................................... 458 8.09 475 8.09
Loans
Commercial............................................................... 3,750 8.54 3,562 8.75
Tax-free................................................................. 56 10.77 59 10.28
Real Estate
Construction........................................................ 315 8.57 302 7.82
Mortgage............................................................ 3,021 8.17 2,905 8.06
Consumer................................................................. 4,665 8.58 4,578 8.24
Lease Financing......................................................... 660 7.24 620 7.24
------- -------
Total Loans......................................................... 12,467 8.41 12,026 8.29
Allowance for loan losses........................................... 201 205
------- -------
Net loans........................................................... 12,266 8.72 11,821 8.60
------- -------
Total earning assets................................................ 16,481 8.30 % 15,745 8.11 %
------- -------
Cash and due from banks....................................................... 761 770
All other assets.............................................................. 787 759
------- -------
TOTAL ASSETS.................................................................. $17,828 $17,069
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits
Non-interest bearing..................................................... $2,044 $2,127
Interest bearing......................................................... 2,517 2.38 % 2,652 2.30 %
Savings deposits.............................................................. 2,092 2.62 2,171 2.43
Certificates of deposit of $100,000 or more................................... 665 5.59 581 4.88
Other domestic time deposits.................................................. 4,106 5.14 3,678 4.62
Foreign time deposits......................................................... 274 6.31 296 5.41
------- -------
Total deposits........................................................... 11,698 3.94 11,505 3.50
------- -------
Short-term borrowings......................................................... 3,132 6.00 2,797 5.06
Long-term debt................................................................ 1,245 7.44 1,138 8.19
------- -------
Interest bearing liabilities............................................. 14,031 4.71 % 13,313 4.23 %
------- -------
All other liabilities......................................................... 308 220
Shareholders' equity.......................................................... 1,445 1,409
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $17,828 $17,069
======= =======
Net interest rate spread...................................................... 3.59% 3.88%
Impact of non-interest bearing funds on margin................................ 0.68% 0.66%
NET INTEREST MARGIN........................................................... 4.27% 4.54%
(1) Fully tax equivalent yields are calculated assuming a 35% tax rate.
21
22
- --------------------------------------------------------------------------------------------------
3RD QUARTER 1994 2ND QUARTER 1994 1ST QUARTER 1994
---------------------- ------------------------ ------------------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE RATE BALANCE RATE BALANCE RATE
---------------------- ------------------------ ------------------------
$3 7.46 % $3 8.58 % $6 6.65 %
17 6.61 12 6.64 13 5.09
188 4.48 117 3.76 40 3.44
214 7.74 417 7.19 708 6.75
2,553 5.98 2,788 6.26 3,469 5.98
498 8.09 480 8.15 399 8.96
3,511 8.47 3,519 8.18 3,410 8.39
62 9.87 67 10.09 69 9.50
275 8.02 289 7.63 325 7.55
2,822 8.04 2,736 7.75 2,675 7.78
4,440 8.12 4,243 8.15 3,996 8.33
574 7.26 534 7.38 495 7.55
------- ------- -------
11,684 8.17 11,388 8.02 10,970 8.16
212 216 216
------- ------- -------
11,472 8.48 11,172 8.37 10,754 8.51
------- ------- -------
15,158 7.98 % 15,205 7.91 % 15,605 7.86 %
------- ------- -------
737 735 720
781 792 842
------- ------- -------
$16,465 $16,516 $16,951
======= ======= =======
$2,061 $2,096 $2,181
2,695 2.21 % 2,744 2.16 % 2,763 2.15 %
2,264 2.23 2,336 2.02 2,358 1.93
589 4.38 599 3.86 658 3.80
3,553 4.23 3,474 4.02 3,385 3.91
199 4.66 306 3.82 344 3.38
------- ------- -------
11,359 3.18 11,555 2.97 11,689 2.88
------- ------- -------
2,519 4.30 2,468 3.58 2,733 3.22
938 6.99 831 6.44 800 4.59
------- ------- -------
12,756 3.68 % 12,758 3.31 % 13,041 3.06 %
------- ------- -------
242 270 324
1,406 1,392 1,405
------- ------- -------
$16,465 $16,516 $16,951
======= ======= =======
4.30% 4.60% 4.80%
0.59% 0.53% 0.51%
4.89% 5.13% 5.31%
22
23
- ----------------------------------------
SELECTED QUARTERLY INCOME STATEMENT DATA
- -----------------------------------------------------------------------------------------------------------------
1995 1994
-------- ----------------------------------------------------
(in thousands of dollars) I Q IV Q III Q II Q I Q
- -----------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME...................... $337,102 $318,875 $301,724 $297,485 $301,637
TOTAL INTEREST EXPENSE..................... 164,053 141,625 118,173 105,403 98,470
-------- -------- -------- -------- --------
NET INTEREST INCOME........................ 173,049 177,250 183,551 192,082 203,167
Provision for loan losses.................. 4,578 2,488 1,113 3,219 8,464
-------- -------- -------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES................ 168,471 174,762 182,438 188,863 194,703
-------- -------- -------- -------- --------
Service charges on deposit accounts ....... 22,365 19,417 19,628 19,225 18,566
Mortgage banking .......................... 10,606 8,630 9,246 15,418 17,073
Trust services ............................ 8,055 6,686 6,732 6,902 8,128
Credit card fees .......................... 7,978 9,728 9,451 7,933 6,933
Investment product sales .................. 1,699 1,307 1,694 1,750 1,873
Securities gains (losses).................. 61 (55) 648 203 1,798
Other ..................................... 11,051 9,012 9,999 10,553 6,882
-------- -------- -------- -------- --------
TOTAL NON-INTEREST INCOME ................. 61,815 54,725 57,398 61,984 61,253
-------- -------- -------- -------- --------
Salaries .................................. 55,500 54,314 57,740 57,535 57,079
Commissions ............................... 1,674 1,523 3,547 2,624 3,081
Employee benefits ......................... 15,537 13,091 13,388 15,244 16,435
Net occupancy ............................. 10,527 9,962 10,593 9,621 10,115
Equipment ................................. 9,703 10,151 9,651 9,491 9,499
FDIC insurance ............................ 6,391 6,218 5,992 6,530 6,531
Credit card ............................... 6,197 7,281 7,382 6,219 5,657
Printing and supplies ..................... 3,531 3,911 3,734 3,710 3,466
Advertising ............................... 3,011 4,152 2,684 4,296 4,188
Legal and loan collection ................. 2,026 3,370 1,719 1,808 1,401
Other ..................................... 32,949 36,498 38,531 33,117 36,573
-------- -------- -------- -------- --------
TOTAL NON-INTEREST EXPENSE ................ 147,046 150,471 154,961 150,195 154,025
-------- -------- -------- -------- --------
INCOME BEFORE INCOME TAXES ................ 83,240 79,016 84,875 100,652 101,931
Provision for income taxes ................ 29,385 26,520 28,973 33,199 35,189
-------- -------- -------- -------- --------
NET INCOME ................................ $53,855 $52,496 $55,902 $67,453 $66,742
======== ======== ======== ======== ========
PER COMMON SHARE (1)
Net income .............................. $0.41 $0.41 $0.43 $0.52 $0.51
Cash dividends declared ................. $0.20 $0.20 $0.20 $0.16 $0.16
FULLY TAX EQUIVALENT MARGIN:
Net Interest Income ....................... $173,049 $177,250 $183,551 $192,082 $203,167
Tax Equivalent Adjustment (2) ............. 1,885 2,042 2,211 2,545 2,707
-------- -------- -------- -------- --------
Tax Equivalent Net Interest Income ........ $174,934 $179,292 $185,762 $194,627 $205,874
======== ======== ======== ======== ========
(1) Restated for the five-for-four stock split distributed in July 1994.
(2) Calculated assuming a 35% tax rate.
23
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PART II. OTHER INFORMATION
In accordance with the instructions to Part II, the other specified items in
this part have been omitted because they are not applicable or the information
has been previously reported.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3. (i) Articles of Restatement of Charter,
Articles of Amendment to Articles of
Restatement of Charter, and Articles
Supplementary -- previously filed as
Exhibit 3(i) to Annual Report on Form 10-K
for the year ended December 31, 1993, and
incorporated herein by reference.
(ii) By Laws -- previously filed as Exhibit
3(b) to Annual Report on Form 10-K for the
year ended December 31, 1987, and
incorporated herein by reference.
4. Instruments defining the Rights of Security
Holders:
Reference is made to Articles Fifth, Eighth
and Tenth of Articles of Restatement of
Charter, previously filed as Exhibit 3(i) of
Form 10-K for the year ended December 31,
1993, and incorporated herein by reference.
Also, reference is made to Rights Plan, dated
February 22, 1990, previously filed as
Exhibit 1 to Registration Statement on Form
8-A, and incorporated herein by reference.
Instruments defining the rights of holders
of long-term debt will be furnished to the
Securities and Exchange Commission upon
request.
10. Material contracts:
(i) Huntington Bancshares Incorporated
Incentive Compensation Plan
11. Computation of Earnings Per Share
27. Financial Data Schedule
(b) Reports on Form 8-K
1. A report on Form 8-K, dated January 11, 1995,
was filed under report item numbers 5 and 7,
concerning Huntington's results of operations
for the fourth quarter and the year ended
December 31, 1994.
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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
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(Registrant)
Date: May 15, 1995 /s/ Ralph K. Frasier
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Ralph K. Frasier
General Counsel and Secretary
Date: May 15, 1995 /s/ John D. Van Fleet
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John D. Van Fleet
Senior Vice President, Corporate
Controller, and Principal
Accounting Officer (Chief
Accounting Officer)