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, 1997
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, 1997, was $6,030,289,368. As of January 31, 1998,
192,121,780 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 1997 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 1998 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,
selling other insurance products, and issuing commercial paper guaranteed by
Huntington, and provide other financial products and services. At December 31,
1997, Huntington's subsidiaries had 188 banking offices in Ohio, 134 banking
offices in Michigan, 50 banking offices in Florida, 44 banking offices in West
Virginia, 24 banking offices in Indiana, 13 banking offices in Kentucky, and
foreign offices in the Cayman Islands and Hong Kong. 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, 1997, Huntington and its subsidiaries had 9,485 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, subject to certain
limitations by individual states.
On February 28, 1997, Huntington acquired Citi-Bancshares, Inc.
(Citi-Bancshares), a $548 million one-bank holding company headquartered in
Leesburg, Florida for $47.7 million in cash and 2.9 million shares of Huntington
common stock. On October 31, 1997, Huntington acquired The Bank of Winter Park
(Winter Park), a $90 million bank headquartered in Winter Park, Florida, for
approximately 364,000 shares of Huntington common stock. These transactions were
accounted for as purchases; accordingly, the results of Citi-Bancshares and
Winter Park have been included in the consolidated financial statements from the
date of acquisition.
Huntington completed its acquisition of First Michigan Bank Corporation
(First Michigan), a $3.6 billion bank holding company headquartered in Holland,
Michigan, on September 30, 1997, in a transaction accounted for as a pooling of
interests. Huntington issued approximately 32.2 million shares of common stock
to the shareholders of First Michigan based upon an exchange ratio of 1.155
shares of Huntington common stock for each outstanding share of First Michigan
common stock. All financial information reported by Huntington, except dividends
per share, has been restated for the First Michigan acquisition.
In December 1997, Huntington announced the acquisition of sixty banking
offices in Florida to be sold by NationsBank Corporation in connection with the
merger of NationsBank Corporation and Barnett Banks Inc. The branch acquisition
is expected to add $1.6 billion in loans and $2.6 billion in deposits. The
deposit premium, which is subject to final determination based on the deposit
levels at the closing of the transaction, is expected to be $523 million.
Huntington intends to raise $300 million of common equity and will sell an
additional $250 million of trust preferred (capital) securities in connection
with the transaction. The new capital amounts are estimates only and could
change based on Huntington's asset growth, the ultimate deposit premium paid,
and other developments over the next few months. The acquisition is expected to
close in the second quarter of 1998.
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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.
Huntington's two bank subsidiaries have deposits insured by the Bank
Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation ("FDIC").
Its national bank subsidiary is subject to supervision, examination, and
regulation by the Office of the Comptroller of the Currency ("OCC"), and its
state bank subsidiary is subject to such oversight by the state banking
authorities of Ohio and the Federal Reserve Board. Certain deposits of
Huntington's national bank subsidiary were acquired from savings associations
and are insured by the Savings Association Insurance Fund ("SAIF") of the FDIC.
Huntington's nonbank subsidiaries are also subject to supervision, examination,
and regulation by the Federal Reserve Board and examination by applicable
federal and state banking agencies. In addition to the impact of federal and
state supervision and regulation, the bank and nonbank subsidiaries of
Huntington are affected significantly by the actions of the Federal Reserve
Board as it attempts to control the money supply and credit availability in
order to influence the economy.
To the extent that the following information describes statutory or
regulatory provisions, it is qualified in its entirety by reference to such
statutory or regulatory provisions.
HOLDING COMPANY STRUCTURE
Huntington's depository institution 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 a subsidiary bank to its parent corporation
or to any individual nonbank subsidiary of the parent are limited in amount to
10% of the subsidiary bank's capital and surplus and, with respect to such
parent together with all such nonbank subsidiaries of the parent, to an
aggregate of 20% of the subsidiary bank's capital and surplus. Furthermore, such
loans and extensions of credit are required to be secured in specified amounts.
In addition, all affiliate transactions must be conducted on terms and under
circumstances that are substantially the same as such transactions with
unaffiliated entities. Under applicable regulations, at December 31, 1997,
approximately $172.5 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 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.
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Comprehensive financial institutions legislation known as the Financial
Institutions Reform, Recovery, and Enforcement Act ("FIRREA") established, among
other things, a 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 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 either
insured bank subsidiary of Huntington causes a loss to the FDIC, the other bank
subsidiary of Huntington could be required to compensate the FDIC by reimbursing
to it the amount of such loss.
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, Ohio banking law
provides for pro rata assessment of shares to restore an Ohio bank's paid-in
capital. Huntington, as the sole shareholder of its subsidiary banks, is subject
to such provisions. Moreover, the claims of a receiver of an insured depository
institution for administrative expenses and the claims of holders of deposit
liabilities of such an institution are accorded priority over the claims of
general unsecured creditors of such an institution, including the holders of the
institution's note obligations, in the event of a liquidation or other
resolution of such institution. As a result of such legislation, claims of a
receiver for administrative expenses and claims of holders of deposit
liabilities of Huntington's depository 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. In the year ended December
31, 1997, Huntington declared cash dividends to its shareholders of
approximately $128.0 million. 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 1998 of approximately $48.8 million plus an additional amount
equal to their net profits during 1998.
If, in the opinion of the applicable regulatory authority, a bank under
its jurisdiction is engaged in or is about to engage in an unsafe or unsound
practice (which, depending on the financial condition of the bank, could include
the payment of dividends), such authority may require, after notice and hearing,
that such bank cease and desist from such practice. The Federal Reserve Board
and the OCC have issued policy statements 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, neither of Huntington's banks will be
required to pay deposit insurance premiums during 1998. However, both 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.
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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. Both of Huntington's subsidiary banks are 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 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 or purchased mortgage servicing rights
("MSRs"), and purchased credit card relationships ("PCCRs"), provided that, in
the aggregate, the total amount of MSRs 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 MSRs and PCCRs that a bank holding company may
include in its capital is limited to the lesser of (i) 90% of such assets' fair
market value (as determined under the guidelines), or (ii) 100% of such assets'
book value, each determined quarterly. Identifiable intangible assets (i.e.,
intangible assets other than goodwill) other than MSRs 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. In August 1997, the federal regulatory agencies
proposed, in light of the issuance of Financial Accounting Standard No. 125
("FAS 125") by the Financial Accounting Standards Board, that the limit on
inclusion in capital of mortgage servicing assets ("MSAs", currently designated
MSRs), when combined with PCCRs, be raised from 50 percent to 100 percent of
Tier 1 capital, and that all nonmortgage servicing assets and other intangible
assets (other than PCCRs) be deducted from Tier 1 capital. The 90 percent limit
on includable MSRs and PCCRs, and the 25 percent of Tier 1 capital sublimit on
PCCRs, would remain in place. The federal regulatory agencies have indicated
that the proposed changes are expected to become final in the first part of
1998.
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.
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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, 1997, 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% 8.83%
Total Risk-Based Capital Ratio 8.00% 11.68%
Tier I Leverage Ratio 3.00% 7.77%
As of December 31, 1997, both of Huntington's bank subsidiaries had capital in
excess of the minimum requirements.
The risk-based capital standards of the Federal Reserve Board, the OCC,
and the FDIC specify that evaluations by the banking agencies of a bank's
capital adequacy will include an assessment of the exposure to declines in the
economic value of the bank's capital due to changes in interest rates. These
banking agencies issued a joint policy statement on interest rate risk
describing prudent methods for monitoring such risk that rely principally on
internal measures of exposure and active oversight of risk management activities
by senior management.
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") substantially revised the bank regulatory and funding provisions of
the Federal Deposit Insurance Act and made revisions to several other federal
banking statutes. Among other things, FDICIA requires federal banking regulatory
authorities to take "prompt corrective action" with respect to depository
institutions that do not meet minimum capital requirements. For these purposes,
FDICIA establishes five capital tiers: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized.
The federal banking regulatory agencies have adopted regulations to
implement the prompt corrective action provisions of FDICIA. Among other things,
the regulations define the relevant capital measures for the five capital
categories. An institution is deemed to be "well capitalized" if it has a total
risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of
6% or greater, and a Tier I leverage ratio of 5% or greater and is not subject
to a regulatory order, agreement, or directive to meet and maintain a specific
capital level for any capital measure. An institution is deemed to be
"adequately capitalized" if it has a total risk-based capital ratio of 8% or
greater, a Tier 1 risk-based capital ratio of 4% or greater, and, generally, a
Tier I leverage ratio of 4% or greater and the institution does not meet the
definition of a "well capitalized" institution. An institution that does not
meet one or more of the "adequately capitalized" tests is deemed to be
"undercapitalized". If the institution has a total risk-based capital ratio that
is less than 6%, a Tier 1 risk-based capital ratio that is less than 3%, or a
Tier I leverage ratio that is less than 3%, it is deemed to be "significantly
undercapitalized". Finally, an institution is deemed to be "critically
undercapitalized" if it has a ratio of tangible equity (as defined in the
regulations) to total assets that is equal to or less than 2%.
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FDICIA generally prohibits a depository institution from making any
capital distribution (including payment of a cash dividend) or paying any
management fee to its holding company if the depository institution would
thereafter be undercapitalized. Undercapitalized institutions are subject to
growth limitations and are required to submit a capital restoration plan. If any
depository institution subsidiary of a holding company is required to submit a
capital restoration plan, the holding company would be required to provide a
limited guarantee regarding compliance with the plan as a condition of approval
of such plan by the appropriate federal banking agency. If an undercapitalized
institution fails to submit an acceptable plan, it is treated as if it is
significantly undercapitalized. Significantly undercapitalized institutions may
be subject to a number of requirements and restrictions, including orders to
sell sufficient voting stock to become adequately capitalized, requirements to
reduce total assets, and cessation of receipt of deposits from correspondent
banks. Critically undercapitalized institutions may not, beginning 60 days after
becoming critically undercapitalized, make any payment of principal or interest
on their subordinated debt. In addition, critically undercapitalized
institutions are subject to appointment of a receiver or conservator within 90
days of becoming critically undercapitalized.
Under FDICIA, a depository institution that is not well capitalized is
generally prohibited from accepting brokered deposits and offering interest
rates on deposits higher than the prevailing rate in its market. Huntington
expects that the FDIC's brokered deposit rule will not adversely affect the
ability of its depository institution subsidiaries to accept brokered deposits.
Under the regulatory definition of brokered deposits, Huntington's depository
subsidiaries had $485 million of brokered deposits at December 31, 1997.
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.
INTERSTATE BRANCHING AND CONSOLIDATIONS
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
("Riegle-Neal") provides for nationwide interstate banking and branching. Under
the law, interstate acquisitions of banks or bank holding companies in any state
by bank holding companies in any other state became permissible as of September
29, 1995, and interstate branching and consolidations of existing bank
subsidiaries in different states became permissible as of June 1, 1997.
Huntington availed itself of the interstate branching and consolidation
authority by merging all of its other bank subsidiaries, except The Huntington
State Bank, its state bank subsidiary in Ohio, into its lead national bank
subsidiary, The Huntington National Bank, headquartered in Columbus, Ohio, on
June 30, 1997. Future bank acquisitions, if any, in states where Huntington
formerly had a separate bank subsidiary, will not require compliance with
Riegle-Neal entry provisions.
OTHER DEVELOPMENTS
The Riegle Community Development and Regulatory Improvement Act of 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
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
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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 1997 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 N/A 26, 27
Net Interest Earnings Analysis N/A 26, 27
Change in Net Interest Income Due to
Changes in Average Volume and
Interest Rates 2 15
Investment Securities:
Book Value of Investments 7 20
Maturity Distribution and Yields 7 20
Securities Available for Sale:
Book Value of Investments 8 21
Maturity Distribution and Yields 8 21
Loan Portfolio:
Types of Loans 3 16
Maturities and Sensitivities to
Changes in Interest Rates 4 16
Non-accrual, Past Due and
Renegotiated Loans 12 23, 35
Potential Problem Loans 22
Loan Concentrations 3 16
Summary of Loan Loss Experience:
Allowance for Loan Losses 5 18, 19
Allocation of Allowance for Loan Losses 6 19
Deposits:
Average Balances N/A 26, 27
Large CD Maturities 10 23
Return on Equity and Assets 1 14
Short-Term Borrowings 11 23
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 eighteen-story office building in Charleston, West Virginia;
a three-story office building located in Holland, Michigan; 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.
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ITEM 3: LEGAL PROCEEDINGS
Information required by this item is set forth in Note 13 of Notes to
Consolidated Financial Statements on page 41 of the 1997 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, 1998,
Huntington had 34,987 shareholders of record.
Information regarding the high and low sale prices of Huntington Common
Stock and cash dividends declared on such shares, as required by this item, is
set forth in a table entitled "Market Prices, Key Ratios and Statistics, Non
Performing Assets (Quarterly Data)" on page 28 of the 1997 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 10 and 22
of Notes to Consolidated Financial Statements on pages 39 and 46, respectively,
of the 1997 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 14 of
Huntington's 1997 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 14 - 24 of
Huntington's 1997 Annual Report to Shareholders, and is incorporated herein by
reference.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Information required by this item is set forth on pages 20 through 22
of Huntington's 1997 Annual Report of Shareholders, and is incorporated herein
by reference.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item is set forth on page 30 (report of
independent auditors) and pages 31 through 48 (consolidated financial
statements) of Huntington's 1997 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
--------
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 26
and 27, and under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance" on page 31, of Huntington's 1998 Proxy Statement, and is
incorporated herein by reference.
9
ITEM 11: EXECUTIVE COMPENSATION
Information required by this item is set forth under the caption
"Executive Compensation" on pages 10 through 25, and under the caption
"Compensation of Directors" on pages 6 and 7, of Huntington's 1998 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 7 through 9, of Huntington's 1998 Proxy
Statement, and is incorporated herein by reference.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is set forth under the caption
"Transactions With Directors and Executive Officers" on pages 9 and 10, and
under the caption "Compensation Committee Interlocks and Insider Participation"
on pages 19 and 20 of Huntington's 1998 Proxy Statement, and is incorporated
herein by reference.
Part IV
-------
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8- K
(a) The following documents are filed as part of this report:
(1) The report of independent auditors and consolidated financial
statements appearing in Huntington's 1997 Annual Report to Shareholders on the
pages indicated below are incorporated by reference in Item 8:
Annual
Report Page
-----------
Report of Independent Auditors 30
Consolidated Balance Sheets as of 31
December 31, 1997 and 1996
Consolidated Statements of Income 32
for the years ended December 31,
1997, 1996, and 1995
Consolidated Statements of Changes 33
in Shareholders' Equity for the years
ended December 31, 1997, 1996, and 1995
Consolidated Statements of Cash Flows 34
for the years ended December 31,
1997, 1996, and 1995
Notes to Consolidated Financial Statements 35-48
(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.
10
(3) The exhibits required by this item are listed in the Exhibit Index
on pages 13 through 15 of this Form 10-K. The management contracts and
compensation plans or arrangements required to be filed as exhibits to this Form
10-K are listed as Exhibits 10(a) through 10(s) in the Exhibit Index.
(b) During the quarter ended December 31, 1997, Huntington filed two Current
Reports on Form 8-K. The first Report, dated September 30, 1997, was filed under
Items 2, 5, and 7, and concerned Huntington's results of operations for the
quarter ended September 30, 1997, and the completion of Huntington's acquisition
of First Michigan Bank Corporation. Also included in that report were certain
required pro forma financial information. That report was amended by a Current
Report on Form 8-K/A, also dated September 30, 1997, and filed under Items 5 and
7, for the purpose of including certain required historical financial
information of First Michigan Bank Corporation.
The second Report, dated December 8, 1997, was filed under Item 5 and
concerned Huntington's intention to purchase sixty banking offices and
associated deposit and loan products from NationsBank Corporation as a result of
the Barnett Banks Inc. merger into NationsBank Corporation.
(c) The exhibits to this Form 10-K begin on page 13.
(d) See Item 14(a)(2) above.
11
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 18th day of
February, 1998.
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 18th day of February, 1998.
/s/Don M. Casto, III /s/George A. Skestos
- ------------------------------ ------------------------------
Don M. Casto, III George A. Skestos
Director Director
/s/Don Conrad /s/Lewis R. Smoot, Sr.
- ------------------------------ ------------------------------
Don Conrad Lewis R. Smoot, Sr.
Director Director
/s/Patricia T. Hayot /s/Timothy P. Smucker
- ------------------------------ ------------------------------
Patricia T. Hayot Timothy P. Smucker
Director Director
/s/Wm. J. Lhota /s/Zuheir Sofia
- ------------------------------ ------------------------------
Wm. J. Lhota Zuheir Sofia
Director Director
/s/Robert H. Schottenstein
- ------------------------------ ------------------------------
Robert H. Schottenstein William J. Williams
Director Director
12
Exhibit Index
- -------------
2(a). Purchase and Assumption Agreement, dated December 8, 1997, between
NationsBank Corporation and Huntington Bancshares
Incorporated.
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.
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). Reserved.
(d). Executive Agreement, dated January 22, 1997, between Huntington
Bancshares Incorporated and Frank Wobst -- previously filed as
Exhibit 10(d) to Annual Report on Form 10-K for the year ended
December 31, 1996, and incorporated herein by reference.
(e). Executive Agreement, dated January 22, 1997, between Huntington
Bancshares Incorporated and Zuheir Sofia -- previously filed
as Exhibit 10(e) to Annual Report on Form 10-K for the year
ended December 31, 1996, and incorporated herein by reference.
(f). Reserved.
(g). Form of Executive Agreement for certain executive officers--
previously filed as Exhibit 10(g) to Annual Report on Form
10-K for the year ended December 31, 1996, and incorporated
herein by reference.
(h). Schedule identifying material details of Executive Agreements,
substantially similar to 10(g).
13
(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). Long-Term Incentive Compensation Plan, as amended and effective for
performance cycles beginning on or after January 1, 1996 --
previously filed as Exhibit 10(j)(2) to Annual Report on Form
10-K for the year ended December 31, 1996, and incorporated
herein by reference.
(k)(1). 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.
(k)(2). Third Amendment to Supplemental Executive Retirement Plan
(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 -- previously filed as
Exhibit (m)(5) to Annual Report on Form 10-K for the year
ended December 31, 1996, and incorporated herein by reference.
(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 -- previously filed as Exhibit 10(n)(3) to Annual
Report on Form 10-K for the year ended December 31, 1996, and
incorporated herein by reference.
(n)(4). Amended and Restated 1994 Stock Option Plan -- previously filed as
Exhibit 10(r) to Annual Report on Form 10-K for the year ended
December 31, 1996, and incorporated herein by reference.
(o)(1). The Huntington Supplemental Stock Purchase and Tax Savings Plan and
Trust (as amended and restated as of February 9, 1990) --
previously filed as Exhibit 4(a) to Registration Statement on
Form S-8, Registration No. 33-44208, filed with the Securities
and Exchange Commission on November 26, 1991, and incorporated
herein by reference.
(o)(2). First Amendment to The Huntington Supplemental Stock Purchase and
Tax Savings Plan and Trust.
14
(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.
(r). 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.
13. Portions of Huntington's 1997 Annual Report to Shareholders.
21. Subsidiaries of the Registrant.
23(a). Consent of Ernst & Young, LLP, Independent Auditors.
23(b). Consent of BDO Seidman, LLP, Independent Auditors.
27. Financial Data Schedule.
99. Accountant's Report, BDO Seidman, LLP.
15