SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file Number 0-2525
Huntington Bancshares Incorporated
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(Exact name of registrant as specified in its charter)
Maryland 31-0724920
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Huntington Center, 41 S. High Street, Columbus, OH 43287
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 480-8300
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock - Without Par Value
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of December 31, 1996, was $3,200,586,311. As of January 31, 1997,
141,507,973 shares of common stock without par value were outstanding.
Documents Incorporated By Reference
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Parts I and II of this Form 10-K incorporate by reference certain
information from the registrant's 1996 Annual Report to Shareholders. Part III
of this Form 10-K incorporates by reference certain information from the
registrant's definitive Proxy Statement for the 1997 Annual Shareholders'
Meeting.
Huntington Bancshares Incorporated
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Part I
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ITEM 1: BUSINESS
Huntington Bancshares Incorporated (Huntington), incorporated in
Maryland in 1966, is a multi-state bank holding company headquartered in
Columbus, Ohio. Its subsidiaries conduct a full-service commercial and consumer
banking business, engage in mortgage banking, lease financing, trust services,
discount brokerage services, underwriting credit life and disability insurance,
and issuing commercial paper guaranteed by Huntington, and provide other
financial products and services. At December 31, 1996, Huntington's subsidiaries
had 183 banking offices in Ohio, 43 banking offices in West Virginia, 42 banking
offices in Michigan, 31 banking offices in Florida, 24 banking offices in
Indiana, 15 banking offices in Kentucky, and 1 foreign office in the Cayman
Islands. The Huntington Mortgage Company (a wholly-owned subsidiary) has loan
origination offices throughout the Midwest and East Coast. Foreign banking
activities, in total or with any individual country, are not significant to the
operations of Huntington. At December 31, 1996, Huntington and its subsidiaries
had 7,936 full-time equivalent employees.
Competition in the form of price and service from other banks and
financial companies such as savings and loans, credit unions, finance companies,
and brokerage firms is intense in most of the markets served by Huntington and
its subsidiaries. Mergers between and the expansion of financial institutions
both within and outside Ohio have provided significant competitive pressure in
major markets. Since September 1995, when federal interstate banking legislation
became effective that made it permissible for bank holding companies in any
state to acquire banks in any other state, actual or potential competition in
each of Huntington's markets has been intensified. The same federal legislation
permits further competition through interstate branching beginning in mid-1997,
subject to certain limitations by individual states.
Huntington acquired Peoples Bank of Lakeland (Lakeland), a $551 million
commercial bank headquartered in Lakeland, Florida, on January 23, 1996.
Huntington paid $46.2 million in cash and issued approximately 4.7 million
shares of common stock in exchange for all the common stock of Lakeland. The
transaction was accounted for as a purchase; accordingly, the results of
Lakeland have been included in the consolidated financial statements from the
date of acquisition.
In October 1996, Huntington entered into a merger agreement with
Citi-Bancshares, Inc. (Citi-Bancshares), a $538 million one-bank holding company
headquartered in Leesburg, Florida. Huntington is to exchange a combination of
its common stock and cash for the outstanding common stock of Citi-Bancshares in
a purchase transaction. The acquisition is expected to be completed in the first
quarter of 1997.
REGULATORY MATTERS
GENERAL
As a registered bank holding company, Huntington is subject to the
supervision of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") and is required to file with the Federal Reserve Board
reports and other information regarding its business operations and the business
operations of its subsidiaries. It is also subject to examination by the Federal
Reserve Board and is required to obtain Federal Reserve Board approval prior to
acquiring, directly or indirectly, ownership or control of voting shares of any
bank, if, after such acquisition, it would own or control more than 5% of the
voting stock of such bank. In addition, pursuant to federal law and regulations
promulgated by the Federal Reserve Board, Huntington may only engage in, or own
or control companies that engage in, activities deemed by the Federal Reserve
Board to be so closely related to banking as to be a proper incident thereto.
Under legislation effective September 30, 1996, Huntington may, in most cases,
commence permissible new non-banking business activities de novo with only
subsequent notice to the Federal Reserve Board and may acquire smaller companies
that engage in permissible non-banking activities under an expedited procedure
requiring only 12 business days notice to the Federal Reserve Board.
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Huntington's bank subsidiaries have deposits insured by the Bank
Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation ("FDIC"),
and are subject to supervision, examination, and regulation by the Office of the
Comptroller of the Currency ("OCC") if a national bank, or by state banking
authorities and either the FDIC or the Federal Reserve Board if a
state-chartered bank. Certain deposits of Huntington's bank subsidiaries were
acquired from savings associations and are insured by the Savings Association
Insurance Fund ("SAIF") of the FDIC. Huntington's nonbank subsidiaries are also
subject to supervision, examination, and regulation by the Federal Reserve Board
and examination by applicable federal and state banking agencies. In addition to
the impact of federal and state supervision and regulation, the bank and nonbank
subsidiaries of Huntington are affected significantly by the actions of the
Federal Reserve Board as it attempts to control the money supply and credit
availability in order to influence the economy.
To the extent that the following information describes statutory or
regulatory provisions, it is qualified in its entirety by reference to such
statutory or regulatory provisions.
HOLDING COMPANY STRUCTURE
Huntington's depository institution subsidiaries are subject to
affiliate transaction restrictions under federal law which limit the transfer of
funds by the subsidiary banks to the parent and any nonbank subsidiaries of the
parent, whether in the form of loans, extensions of credit, investments, or
asset purchases. Such transfers by any subsidiary bank to its parent corporation
or to any nonbank subsidiary of the parent are limited in amount to 10% of the
institution's capital and surplus and, with respect to such parent and all such
nonbank subsidiaries of the parent, to an aggregate of 20% of any such
institution's capital and surplus. Furthermore, such loans and extensions of
credit are required to be secured in specified amounts. In addition, all
affiliate transactions must be conducted on terms and under circumstances that
are substantially the same as such transactions with unaffiliated entities.
Under applicable regulations, at December 31, 1996, approximately $185.5 million
was available for loans to Huntington from its subsidiary banks.
The Federal Reserve Board has a policy to the effect that a bank
holding company is expected to act as a source of financial and managerial
strength to each of its subsidiary banks and to commit resources to support each
such subsidiary bank. Under the source of strength doctrine, the Federal Reserve
Board may require a bank holding company to make capital injections into a
troubled subsidiary bank, and may charge the bank holding company with engaging
in unsafe and unsound practices for failure to commit resources to such a
subsidiary bank. This capital injection may be required at times when Huntington
may not have the resources to provide it. Any loans by a holding company to any
of its subsidiary banks are subordinate in right of payment to deposits and to
certain other indebtedness of such subsidiary bank. Moreover, in the event of a
bank holding company's bankruptcy, any commitment by such holding company to a
federal bank regulatory agency to maintain the capital of a subsidiary bank will
be assumed by the bankruptcy trustee and entitled to a priority of payment.
In 1989, the United States Congress passed comprehensive financial
institutions legislation known as the Financial Institutions Reform, Recovery,
and Enforcement Act ("FIRREA"). Among other things, FIRREA established a new
principle of liability on the part of depository institutions insured by the
FDIC for any losses incurred by, or reasonably expected to be incurred by, the
FDIC after August 9, 1989, in connection with (i) the default of a commonly
controlled FDIC-insured depository institution, or (ii) any assistance provided
by the FDIC to a commonly controlled FDIC-insured depository institution in
danger of default. "Default" is defined generally as the appointment of a
conservator or receiver and "in danger of default" is defined generally as the
existence of certain conditions indicating that a "default" is likely to occur
in the absence of regulatory assistance. Accordingly, in the event that any
insured bank subsidiary of Huntington causes a loss to the FDIC, other bank
subsidiaries of Huntington could be required to compensate the FDIC by
reimbursing to it the amount of such loss, and such reimbursement could cause a
loss of Huntington's investment in such other subsidiaries.
Federal law permits the OCC to order the pro rata assessment of
shareholders of a national bank whose capital stock has become impaired, by
losses or otherwise, to relieve a deficiency in such national bank's capital
stock. This statute also provides for the enforcement of any such pro rata
assessment of shareholders of such national bank to cover such impairment of
capital stock by sale, to the extent necessary, of the capital stock of any
assessed shareholder failing to pay the assessment. Similarly, the laws of
certain states provide for such assessment and sale with respect to the
subsidiary banks chartered
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by such states. Huntington, as the sole shareholder of its subsidiary banks, is
subject to such provisions. Moreover, under legislation that became effective
August 10, 1993, the claims of a receiver of an insured depository institution
for administrative expenses and the claims of holders of deposit liabilities of
such an institution are accorded priority over the claims of general unsecured
creditors of such an institution, including the holders of the institution's
note obligations, in the event of a liquidation or other resolution of such
institution. As a result of such legislation, claims of a receiver for
administrative expenses and claims of holders of deposit liabilities of
Huntington's depository subsidiaries (including the FDIC, as the subrogee of
such holders) would receive priority over the holders of notes and other senior
debt of such subsidiaries in the event of a liquidation or other resolution and
over the interests of Huntington as sole shareholder of its subsidiaries.
DIVIDEND RESTRICTIONS
Dividends from subsidiary banks are a significant source of funds for
payment of dividends to Huntington's shareholders. There are, however, statutory
limits on the amount of dividends that Huntington's depository institution
subsidiaries can pay to Huntington without regulatory approval.
Huntington's subsidiary banks may not, without prior regulatory
approval, pay a dividend in an amount greater than such banks' undivided
profits. In addition, the prior approval of the OCC is required for the payment
of a dividend by a national bank if the total of all dividends declared by the
bank in a calendar year would exceed the total of its net income for the year
combined with its retained net income for the two preceding years. Under these
provisions and in accordance with the above-described formula, Huntington's
subsidiary banks could, without regulatory approval, declare dividends to
Huntington in 1997 of approximately $87.8 million plus an additional amount
equal to their net profits during 1997. In the year ended December 31, 1996,
Huntington declared cash dividends to its shareholders of approximately $111.1
million.
If, in the opinion of the applicable regulatory authority, a bank under
its jurisdiction is engaged in or is about to engage in an unsafe or unsound
practice (which, depending on the financial condition of the bank, could include
the payment of dividends), such authority may require, after notice and hearing,
that such bank cease and desist from such practice. The Federal Reserve Board,
the OCC, and the FDIC have issued policy statements which provide that insured
banks and bank holding companies should generally only pay dividends out of
current operating earnings.
FDIC INSURANCE
Under current FDIC practices, none of Huntington's banks will be
required to pay deposit insurance premiums during 1997. However, each of
Huntington's banks will be required to make payments for the servicing of
obligations of the Financing Corporation ("FICO") issued in connection with the
resolution of savings and loan associations, so long as such obligations remain
outstanding.
CAPITAL REQUIREMENTS
The Federal Reserve Board has issued risk-based capital ratio and
leverage ratio guidelines for bank holding companies such as Huntington. The
risk-based capital ratio guidelines establish a systematic analytical framework
that makes regulatory capital requirements more sensitive to differences in risk
profiles among banking organizations, takes off-balance sheet exposures into
explicit account in assessing capital adequacy, and minimizes disincentives to
holding liquid, low-risk assets. Under the guidelines and related policies, bank
holding companies must maintain capital sufficient to meet both a risk-based
asset ratio test and a leverage ratio test on a consolidated basis. The
risk-based ratio is determined by allocating assets and specified off-balance
sheet commitments into four weighted categories, with higher weighting being
assigned to categories perceived as representing greater risk. A bank holding
company's capital (as described below) is then divided by total risk weighted
assets to yield the risk-based ratio. The leverage ratio is determined by
relating core capital (as described below) to total assets adjusted as specified
in the guidelines. Each of Huntington's subsidiary banks is subject to
substantially similar capital requirements adopted by applicable regulatory
agencies.
Generally, under the applicable guidelines, a financial institution's
capital is divided into two tiers. "Tier 1", or core capital, includes common
equity, noncumulative perpetual preferred stock (excluding auction rate issues),
and minority interests in equity accounts of consolidated subsidiaries, less
goodwill
4
and, with certain limited exceptions, all other intangible assets. Bank holding
companies, however, may include cumulative preferred stock in their Tier 1
capital, up to a limit of 25% of such Tier 1 capital. "Tier 2", or supplementary
capital, includes, among other things, cumulative and limited-life preferred
stock, hybrid capital instruments, mandatory convertible securities, qualifying
subordinated debt, and the allowance for loan and lease losses, subject to
certain limitations. "Total capital" is the sum of Tier 1 and Tier 2 capital.
The Federal Reserve Board and the other federal banking regulators
require that all intangible assets, with certain limited exceptions, be deducted
from Tier 1 capital. Under the Federal Reserve Board's rules, the only types of
intangible assets that may be included in (i.e., not deducted from) a bank
holding company's capital are originated mortgage servicing rights ("OMSRs"),
readily marketable purchased mortgage servicing rights ("PMSRs") and purchased
credit card relationships ("PCCRs"), provided that, in the aggregate, the total
amount of OMSRs/PMSRs and PCCRs included in capital does not exceed 50% of Tier
1 capital. PCCRs are subject to a separate sublimit of 25% of Tier 1 capital.
The amount of OMSRs/PMSRs and PCCRs that a bank holding company may include in
its capital is limited to the lesser of (i) 90% of such assets' fair market
value (as determined under the guidelines), or (ii) 100% of such assets' book
value, each determined quarterly. Identifiable intangible assets (i.e.,
intangible assets other than goodwill) other than OMSRs/PMSRs and PCCRs,
including core deposit intangibles, acquired on or before February 19, 1992 (the
date the Federal Reserve Board issued its original proposal for public comment),
generally will not be deducted from capital for supervisory purposes, although
they will continue to be deducted for purposes of evaluating applications filed
by bank holding companies.
Under the risk-based guidelines, financial institutions are required to
maintain a risk-based ratio (total capital to risk-weighted assets) of 8%, of
which 4% must be Tier 1 capital. The appropriate regulatory authority may set
higher capital requirements when an institution's circumstances warrant.
Under the leverage guidelines, financial institutions are required to
maintain a leverage ratio (Tier 1 capital to adjusted total assets, as specified
in the guidelines) of at least 3%. The 3% minimum ratio is applicable only to
financial institutions that meet certain specified criteria, including excellent
asset quality, high liquidity, low interest rate exposure, and the highest
regulatory rating. Financial institutions not meeting these criteria are
required to maintain a leverage ratio which exceeds 3% by a cushion of at least
100 to 200 basis points.
The guidelines also provide that financial institutions experiencing
internal growth or making acquisitions will be expected to maintain strong
capital positions substantially above the minimum supervisory level.
Furthermore, the Federal Reserve Board's guidelines indicate that the Federal
Reserve Board will continue to consider a "tangible Tier 1 leverage ratio" in
evaluating proposals for expansion or new activities. The tangible Tier 1
leverage ratio is the ratio of an institution's Tier 1 capital, less all
intangibles, to total assets, less all intangibles.
Failure to meet applicable capital guidelines could subject the
financial institution to a variety of enforcement remedies available to the
federal regulatory authorities, including limitations on the ability to pay
dividends, the issuance by the regulatory authority of a capital directive to
increase capital, and the termination of deposit insurance by the FDIC, as well
as to the measures described below under "Federal Deposit Insurance Corporation
Improvement Act of 1991" as applicable to undercapitalized institutions.
As of December 31, 1996, the Tier 1 risk-based capital ratio, total
risk-based capital ratio, and Tier I leverage ratio for Huntington were as
follows:
Requirement Huntington
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Tier 1 Risk-Based Capital Ratio 4.00% 7.84%
Total Risk-Based Capital Ratio 8.00% 11.31%
Tier I Leverage Ratio 3.00% 6.66%
As of December 31, 1996, each of Huntington's bank subsidiaries had capital in
excess of the minimum requirements.
5
The Federal Reserve Board, the OCC, and the FDIC jointly announced a
final rule in August 1995, revising their risk-based capital standards to
specify that evaluations by the banking agencies of a bank's capital adequacy
will include an assessment of the exposure to declines in the economic value of
the bank's capital due to changes in interest rates. The final rule did not,
however, codify a measurement framework for assessing the level of a bank's
interest rate exposure. Instead, the banking agencies issued for comment a joint
policy statement describing a measurement process. After extended consideration
of such measurement process, the banking agencies concluded that adoption of a
standardized, accurate supervisory model was not feasible, and in June 1996,
issued a joint policy statement on interest rate risk describing prudent methods
for monitoring such risk that rely principally on internal measures of exposure
and active oversight of risk management activities by senior management.
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
In December 1991, Congress enacted the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), which substantially revised the
bank regulatory and funding provisions of the Federal Deposit Insurance Act and
made revisions to several other federal banking statutes.
Among other things, FDICIA requires federal banking regulatory
authorities to take "prompt corrective action" with respect to depository
institutions that do not meet minimum capital requirements. For these purposes,
FDICIA establishes five capital tiers: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized.
The federal banking regulatory agencies have adopted regulations to
implement the prompt corrective action provisions of FDICIA. Among other things,
the regulations define the relevant capital measures for the five capital
categories. An institution is deemed to be "well capitalized" if it has a total
risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of
6% or greater, and a Tier I leverage ratio of 5% or greater and is not subject
to a regulatory order, agreement, or directive to meet and maintain a specific
capital level for any capital measure. An institution is deemed to be
"adequately capitalized" if it has a total risk-based capital ratio of 8% or
greater, a Tier 1 risk-based capital ratio of 4% or greater, and, generally, a
Tier I leverage ratio of 4% or greater and the institution does not meet the
definition of a "well capitalized" institution. An institution that does not
meet one or more of the "adequately capitalized" tests is deemed to be
"undercapitalized". If the institution has a total risk-based capital ratio that
is less than 6%, a Tier 1 risk-based capital ratio that is less than 3%, or a
Tier I leverage ratio that is less than 3%, it is deemed to be "significantly
undercapitalized". Finally, an institution is deemed to be "critically
undercapitalized" if it has a ratio of tangible equity (as defined in the
regulations) to total assets that is equal to or less than 2%.
FDICIA generally prohibits a depository institution from making any
capital distribution (including payment of a cash dividend) or paying any
management fee to its holding company if the depository institution would
thereafter be undercapitalized. Undercapitalized institutions are subject to
growth limitations and are required to submit a capital restoration plan. If any
depository institution subsidiary of a holding company is required to submit a
capital restoration plan, the holding company would be required to provide a
limited guarantee regarding compliance with the plan as a condition of approval
of such plan by the appropriate federal banking agency. If an undercapitalized
institution fails to submit an acceptable plan, it is treated as if it is
significantly undercapitalized. Significantly undercapitalized institutions may
be subject to a number of requirements and restrictions, including orders to
sell sufficient voting stock to become adequately capitalized, requirements to
reduce total assets, and cessation of receipt of deposits from correspondent
banks. Critically undercapitalized institutions may not, beginning 60 days after
becoming critically undercapitalized, make any payment of principal or interest
on their subordinated debt. In addition, critically undercapitalized
institutions are subject to appointment of a receiver or conservator within 90
days of becoming critically undercapitalized.
Under FDICIA, a depository institution that is not well capitalized is
generally prohibited from accepting brokered deposits and offering interest
rates on deposits higher than the prevailing rate in its market. Huntington
expects that the FDIC's brokered deposit rule will not adversely affect the
ability of its depository institution subsidiaries to accept brokered deposits.
Under the regulatory definition of brokered deposits, as of December 31, 1996,
Huntington's depository subsidiaries had an insignificant amount of brokered
deposits.
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FDICIA, as amended, directs that each federal banking regulatory agency
prescribe standards, by regulation or guideline, for depository institutions
relating to internal controls, information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth,
compensation, asset quality, earnings, and stock valuation. The Federal Reserve
Board has adopted a regulation in the form of guidelines covering most of these
items, and the other federal banking regulatory agencies are expected to adopt
identical regulations. Huntington believes that the regulation and guidelines
will not have a material effect on the operations of its depository institution
subsidiaries.
INTERESTATE BRANCHING AND CONSOLIDATIONS
The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, enacted in September 1994, provides for nationwide interstate banking and
branching. Under the law, interstate acquisitions of banks or bank holding
companies in any state by bank holding companies in any other state became
permissible as of September 29, 1995. Interstate branching and consolidations of
existing bank subsidiaries in different states will be permissible beginning
June 1, 1997. The permissibility of consolidations and branching may be
accelerated by "opt-ins" by individual states. A state may also, until June 1,
1997, adopt legislation to "opt-out" of interstate branching and consolidations,
but in that event the state's own banks become ineligible to branch into, or
consolidate their operations in, other states.
Subject to obtaining all necessary regulatory approvals, Huntington
presently intends to merge all of its subsidiary banks, except The Huntington
State Bank, into its principal bank, The Huntington National Bank, headquartered
in Columbus, Ohio, and to consolidate all of its active subsidiary holding
companies into Huntington, as soon as practicable after June 1, 1997. The merger
of Huntington's national bank subsidiary in Florida and of Huntington's
subsidiary holding company for that national bank into The Huntington National
Bank and Huntington, respectively, may be deferred pending receipt of a private
letter ruling from the Internal Revenue Service to the effect that such mergers
will not adversely impact the characterization of Huntington's pending
acquisition of Citi-Bancshares as a tax-free reorganization.
OTHER DEVELOPMENTS
The Riegle Community Development and Regulatory Improvement Act of
1994, also enacted in September 1994, made several changes in existing law
affecting bank holding companies, including a reduction in the minimum
post-approval antitrust review waiting period for depository institution mergers
and acquisitions, and the substitution of a notice for an application when a
bank holding company proposes to engage in, or acquire a company to engage in,
nonbank activities.
The Economic Growth and Regulatory Paperwork Reduction Act of 1996,
enacted in September 1996, provided, in addition to arrangements for the
recapitalization of the SAIF, regulatory relief for bank holding companies in
several significant areas. Bank holding companies that also owned savings
associations and were therefore subject to regulation by the Office of Thrift
Supervision ("OTS") as savings and loan holding companies were relieved of such
duplicate regulation, and neither future acquisitions of savings associations by
bank holding companies nor mergers of savings associations into banks will any
longer require application to and approval by OTS. Acquisitions by
well-capitalized and well-managed bank holding companies of companies engaging
in permissible nonbanking activities (other than savings associations) may now
be made with only 12 days prior notice to the Federal Reserve Board, and de novo
engagement in such activities by such bank holding companies may be commenced
without prior notice to the Federal Reserve Board. The same legislation gave
regulatory relief to banks in regard to corporate governance, branching,
disclosure, and other operational areas.
GUIDE 3 INFORMATION
Information required by Industry Guide 3 relating to statistical
disclosure by bank holding companies is set forth in Huntington's 1996 Annual
Report to Shareholders, and is incorporated herein by reference:
Table Page
Distribution of Assets, Liabilities and Shareholders'
Equity; Interest Rates and Interest Differential:
Average Balance Sheet 18, 19
Net Interest Earnings Analysis 18, 19
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Change in Net Interest Income Due to
Changes in Average Volume and
Interest Rates 2 9
Investment Securities:
Book Value of Investments 7 12
Maturity Distribution and Yields 7 12
Securities Available for Sale:
Book Value of Investments 8 13
Maturity Distribution and Yields 8 13
Loan Portfolio:
Types of Loans 3 10
Maturities and Sensitivities to
Changes in Interest Rates 4 10
Non-accrual, Past Due and
Renegotiated Loans 12 16, 28
Potential Problem Loans 16
Loan Concentrations 3 10
Summary of Loan Loss Experience:
Allowance for Loan Losses 5 10, 11
Allocation of Allowance for Loan Losses 6 11
Deposits:
Average Balances 18, 19
Large CD Maturities 10 15
Return on Equity and Assets 1 8
Short-Term Borrowings 11 15
ITEM 2: PROPERTIES
The headquarters of Huntington and its lead subsidiary, The Huntington
National Bank, are located in the Huntington Center, a thirty-seven story office
building located in Columbus, Ohio. Of the building's total office space
available, Huntington occupies approximately 39 percent. The original lease term
is 25 years, expiring in 2009, with renewal options for up to 50 years with no
purchase option. The Huntington National Bank has an equity interest in the
entity that owns the building. In addition to these headquarters, Huntington's
other major properties consist of a thirteen-story and a twelve-story office
building, both of which are located adjacent to the Huntington Center; a
twenty-one story office building, known as the Huntington Building, located in
Cleveland, Ohio; an office building in Lakeland, Florida; The Huntington
Mortgage Company's building, located in the greater Columbus area; an office
complex located in Troy, Michigan; and two data processing and operations
centers located in Ohio. Of these properties, Huntington owns the thirteen-story
and twelve-story office buildings, the building in Lakeland, Florida, The
Huntington Mortgage Company building, the building in Troy, Michigan, and the
operations centers located in Cleveland and Columbus. All of the other major
properties are held under long-term leases.
ITEM 3: LEGAL PROCEEDINGS
Information required by this item is set forth in Note 12 of Notes to
Consolidated Financial Statements on page 33 of the 1996 Annual Report to
Shareholders, and is incorporated herein by reference.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
Part II
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ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The common stock of Huntington Bancshares Incorporated is traded on the
NASDAQ National Market System under the symbol "HBAN". The stock is listed as
"HuntgBcshr" or "HuntBanc" in most newspapers. As of January 31, 1997,
Huntington had 29,342 shareholders of record.
8
Information regarding the high and low sale prices of Huntington Common
Stock and cash dividends declared on such shares, as required by this item, is
set forth in a table entitled "Market Prices, Key Ratios and Statistics, Non
Performing Assets (Quarterly Data)" on page 21 of the 1996 Annual Report to
Shareholders, and is incorporated herein by reference. Information regarding
restrictions on dividends, as required by this item, is set forth under "Item 1:
Business-Regulatory Matters-Dividend Restrictions" above and in Notes 8 and 17
of Notes to Consolidated Financial Statements on pages 31 and 35, respectively,
of the 1996 Annual Report to Shareholders, and is incorporated herein by
reference.
ITEM 6: SELECTED FINANCIAL DATA
Information required by this item is set forth in Table 1 on page 8 of
Huntington's 1996 Annual Report to Shareholders, and is incorporated herein by
reference.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information required by this item is set forth on pages 8 - 17 of
Huntington's 1996 Annual Report to Shareholders, and is incorporated herein by
reference.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item is set forth on page 23 (report of
independent auditors) and pages 24 through 40 (consolidated financial
statements) of Huntington's 1996 Annual Report to Shareholders, and is
incorporated herein by reference.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
Part III
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ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this item is set forth under the captions
"Class I Directors," "Class II Directors," and "Class III Directors" on pages 3
through 5, under the caption "Executive Officers of the Corporation" on pages 28
through 30, and under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance" on page 34, of Huntington's 1997 Proxy Statement, and is
incorporated herein by reference.
ITEM 11: EXECUTIVE COMPENSATION
Information required by this item is set forth under the caption
"Executive Compensation" on pages 11 through 27, and under the caption
"Compensation of Directors" on pages 6 through 8, of Huntington's 1997 Proxy
Statement, and is incorporated herein by reference.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is set forth under the caption
"Ownership of Voting Stock" on pages 9 through 11, of Huntington's 1997 Proxy
Statement, and is incorporated herein by reference.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is set forth under the caption
"Transactions With Directors and Executive Officers" on page 11 of Huntington's
1997 Proxy Statement, and is incorporated herein by reference.
9
Part IV
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ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8- K
(a) The following documents are filed as part of this report:
(1) The report of independent auditors and consolidated financial
statements appearing in Huntington's 1996 Annual Report to Shareholders on the
pages indicated below are incorporated by reference in Item 8:
Annual
Report Page
-----------
Report of Independent Auditors 23
Consolidated Balance Sheets as of 24
December 31, 1996 and 1995
Consolidated Statements of Income 25
for the years ended December 31,
1996, 1995, and 1994
Consolidated Statements of Changes 26
in Shareholders' Equity for the years
ended December 31, 1996, 1995, and 1994
Consolidated Statements of Cash Flows 27
for the years ended December 31,
1996, 1995, and 1994
Notes to Consolidated Financial Statements 28-40
(2) Huntington is not filing separately financial statement schedules
because of the absence of conditions under which they are required or because
the required information is included in the consolidated financial statements or
the notes thereto.
(3) The exhibits required by this item are listed in the Exhibit Index
on pages 12 through 14 of this Form 10-K. The management contracts and
compensatory plans or arrangements required to be filed as exhibits to this Form
10-K are listed as Exhibits 10(a) through 10(s) in the Exhibit Index.
(b) During the quarter ended December 31, 1996, Huntington filed one Current
Report on Form 8-K. The report was dated October 9, 1996. The information
contained therein was filed under report item number five, "Other Events", and
contained Huntington's press release to announce the results of operations for
the quarter ended September 30, 1996.
(c) The exhibits to this Form 10-K begin on page 12.
(d) See Item 14(a)(2) above.
10
Signatures
- ----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized, on the 19th day of
February, 1997.
HUNTINGTON BANCSHARES INCORPORATED
----------------------------------
(Registrant)
By: /s/Frank Wobst By: /s/Gerald R. Williams
---------------------------------- ----------------------
Frank Wobst Gerald R. Williams
Director, Chairman and Executive Vice President and
Chief Executive Officer Chief Financial Officer
(Principal Executive Officer) (Principal Financial Officer and
Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 19th day of February, 1997.
/s/George A. Skestos
- ---------------------- ------------------------------
Don M. Casto, III George A. Skestos
Director Director
/s/Don Conrad /s/Lewis R. Smoot, Sr.
- ---------------------- ------------------------------
Don Conrad Lewis R. Smoot, Sr.
Director Director
/s/Patricia T. Hayot /s/Timothy P. Smucker
- ---------------------- ------------------------------
Patricia T. Hayot Timothy P. Smucker
Director Director
/s/W. Lee Hoskins /s/Zuheir Sofia
- ---------------------- ------------------------------
W. Lee Hoskins Zuheir Sofia
Director Director
/s/Wm. J. Lhota /s/William J. Williams
- ---------------------- ------------------------------
Wm. J. Lhota William J. Williams
Director Director
11
Exhibit Index
- -------------
3(i)(a). Articles of Restatement of Charter, Articles of Amendment to
Articles of Restatement of Charter, and Articles Supplementary
-- previously filed as Exhibit 3(i) to Annual Report on Form
10-K for the year ended December 31, 1993, and incorporated
herein by reference.
(i)(b). Articles of Amendment to Articles of Restatement of Charter --
previously filed as Exhibit 3(i)(b) to Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 1996, and
incorporated herein by reference.
(ii). Bylaws -- previously filed as Exhibit 3(b) to Annual Report on Form
10-K for the year ended December 31, 1987, and incorporated
herein by reference.
4(a). Instruments defining the Rights of Security Holders -- reference is
made to Articles V, VIII and X of Articles of Restatement of
Charter, as amended and supplemented. Instruments defining the
rights of holders of long-term debt will be furnished to the
Securities and Exchange Commission upon request.
(b). Rights Plan, dated February 22, 1990, between Huntington Bancshares
Incorporated and The Huntington Trust Company, National
Association -- previously filed as Exhibit 1 to Registration
Statement on Form 8-A, filed with the Securities and Exchange
Commission on February 22, 1990, and incorporated herein by
reference.
(c). Amendment No. 1 to the Rights Agreement, dated August 16, 1995,
previously filed as Exhibit 4(b) to Form 8-K, dated August
16, 1995, and incorporated herein by reference.
10. Material contracts:
(a). Employment Agreement, dated April 25, 1996, between Huntington
Bancshares Incorporated and Frank Wobst --previously filed as
Exhibit 10(a) to Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1996, and incorporated herein
by reference.
(b). Employment Agreement, dated September 16, 1991, between Huntington
Bancshares Incorporated and Zuheir Sofia --previously filed as
Exhibit 10(b) to Annual Report on Form 10-K for the year ended
December 31, 1991, and incorporated herein by reference.
(c)(1). Employment Agreement, dated September 16, 1991, between Huntington
Bancshares Incorporated and W. Lee Hoskins -- previously
filed as Exhibit 10(c) to Annual Report on Form 10-K for the
year ended December 31, 1991, and incorporated herein by
reference.
(c)(2). Notice of Non-Renewal and Amendment of September 16, 1991
Employment Agreement between Huntington Bancshares
Incorporated and W. Lee Hoskins.
(d). Executive Agreement, dated January 22, 1997, between Huntington
Bancshares Incorporated and Frank Wobst.
(e). Executive Agreement, dated January 22, 1997, between Huntington
Bancshares Incorporated and Zuheir Sofia.
(f). Executive Agreement, dated September 16, 1991, between Huntington
Bancshares Incorporated and W. Lee Hoskins -- previously filed
as Exhibit 10(h) to Annual Report on Form 10-K for the year
ended December 31, 1991, and incorporated herein by reference.
(g). Form of Executive Agreement for certain executive officers.
(h). Schedule identifying material details of Executive Agreements,
substantially similar to 10(g).
12
(i). Huntington Bancshares Incorporated Incentive Compensation Plan --
previously filed as Exhibit 10(i) to Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1995, and
incorporated herein by reference.
(j)(1). Long-Term Incentive Compensation Plan, as amended and effective for
performance cycles beginning on or after January 1, 1992 --
previously filed as Exhibit 10(j) to Annual Report on Form
10-K for the year ended December 31, 1993, and incorporated
herein by reference.
(j)(2). Long-Term Incentive Compensation Plan, as amended and effective for
performance cycles beginning on or after January 1, 1996.
(k). Supplemental Executive Retirement Plan -- previously filed as
Exhibit 10(g) to Annual Report on Form 10-K for the year ended
December 31, 1987, and incorporated herein by reference
(l). Deferred Compensation Plan and Trust for Directors -- reference is
made to Exhibit 4(a) of Post-Effective Amendment No. 2 to
Registration Statement on Form S-8, Registration No. 33-10546,
filed with the Securities and Exchange Commission on January
28, 1991, and incorporated herein by reference.
(m)(1). 1983 Stock Option Plan -- reference is made to Exhibit 4A of
Registration Statement on Form S-8, Registration No. 2-89672,
filed with the Securities and Exchange Commission on February
27, 1984, and incorporated herein by reference.
(m)(2). 1983 Stock Option Plan -- Second Amendment -- previously filed as
Exhibit 10(j)(2) to Annual Report on Form 10-K for the year
ended December 31, 1987, and incorporated herein by
reference.
(m)(3). 1983 Stock Option Plan -- Third Amendment -- previously filed as
Exhibit 10(j)(3) to Annual Report on Form 10-K for the year
ended December 31, 1987, and incorporated herein by
reference.
(m)(4). 1983 Stock Option Plan -- Fourth Amendment -- previously filed as
Exhibit (m)(4) to Annual Report on Form 10-K for the year
ended December 31, 1993, and incorporated herein by
reference.
(m)(5). 1983 Stock Option Plan -- Fifth Amendment.
(n)(1). 1990 Stock Option Plan -- reference is made to Exhibit 4(a) of
Registration Statement on Form S-8, Registration No.
33-37373, filed with the Securities and Exchange Commission
on October 18, 1990, and incorporated herein by reference.
(n)(2). First Amendment to Huntington Bancshares Incorporated 1990 Stock
Option Plan -- previously filed as Exhibit 10(q)(2) to Annual
Report on Form 10-K for the year ended December 31, 1991, and
incorporated herein by reference.
(n)(3). Second Amendment to Huntington Bancshares Incorporated 1990 Stock
Option Plan.
(o). The Huntington Supplemental Stock Purchase and Tax Savings Plan and
Trust (as amended and restated as of February 9, 1990) --
previously filed as Exhibit 4(a) to Registration Statement on
Form S-8, Registration No. 33-44208, filed with the Securities
and Exchange Commission on November 26, 1991, and incorporated
herein by reference.
(p). Deferred Compensation Plan and Trust for Huntington Bancshares
Incorporated Directors -- reference is made to Exhibit 4(a) of
Registration Statement on Form S-8, Registration No. 33-41774,
filed with the Securities and Exchange Commission on July 19,
1991, and incorporated herein by reference.
(q). Huntington Bancshares Incorporated Retirement Plan For Outside
Directors, previously filed as Exhibit 10(t) to Annual Report
on Form 10-K for the year ended December 31, 1992, and
incorporated herein by reference.
13
(r). Amended and Restated 1994 Stock Option Plan.
(s). Huntington Supplemental Retirement Income Plan -- previously filed
as Exhibit 10(s) to Annual Report on Form 10-K for the year
ended December 31, 1994, and incorporated herein by reference.
11. Statement re: Computation of Earnings Per Share.
13. Portions of Huntington's 1996 Annual Report to Shareholders.
21. Subsidiaries of the Registrant.
23. Consent of Independent Auditors.
27. Financial Data Schedule.
14