EXHIBIT 99.1
Published on June 29, 1999
Exhibit 99.1
HUNTINGTON INVESTMENT AND TAX SAVINGS PLAN
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FOR THE YEAR ENDED DECEMBER 31, 1998
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INDEX
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Report of Independent Auditors
Huntington Investment and Tax Savings
Plan Committee
We have audited the accompanying statements of net assets available for benefits
of the Huntington Investment and Tax Savings Plan as of December 31, 1998 and
1997, and the related statements of changes in net assets available for benefits
for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Huntington
Investment and Tax Savings Plan at December 31, 1998 and 1997, and the changes
in its net assets available for benefits for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment purposes as of December 31, 1998, and reportable
transactions for the year then ended, are presented for purposes of complying
with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974, and are
not a required part of the financial statements. The supplemental schedules have
been subjected to the auditing procedures applied in our audits of the financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the financial statements taken as a whole.
s/ Ernst & Young LLP
Columbus, Ohio
June 29, 1999
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HUNTINGTON INVESTMENT AND TAX SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
See notes to financial statements.
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HUNTINGTON INVESTMENT AND TAX SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
See notes to financial statements.
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HUNTINGTON INVESTMENT AND TAX SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
Note 1 - Plan Description and Accounting Policies
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The financial statements of the Huntington Bancshares Investment and Tax Savings
Plan (the "Plan") are presented on the accrual basis and are prepared in
conformity with generally accepted accounting principles, which requires
management to make estimates and assumptions that affect amounts reported in the
financial statements. Actual results could differ from those estimates.
Description of the Plan
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The Plan, formerly the Huntington Stock Purchase and Tax Savings Plan and Trust,
was initially adopted by the Board of Directors of Huntington Bancshares
Incorporated ("Huntington") on September 29, 1977, to be effective January 1,
1978. On August 19, 1992, the Plan was amended and restated, effective January
1, 1987, to comply with the Internal Revenue Code of 1986, as amended. The Plan
was again restated October 13, 1994, with a general effective date of January 1,
1987, to incorporate provisions concerning merged plans. The Plan was again
amended and restated November 19, 1997, effective at April 1, 1998. The
following summary describes the provisions of the Plan in effect as of the Plan
year ending December 31, 1998.
Funding and Vesting
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Eligible employees may enroll on the first day of the month following six months
of employment and attainment of age 21. Participants may elect to make pre-tax
matched contributions of up to 15% of their eligible compensation. Huntington
will make a matching contribution equal to 100% on the first 3% of participant
elective deferrals and 50% on the next 2% of participant elective deferrals.
Employee and employer contributions are fully vested at all times. Prior to
April 1, 1998, Plan assets were invested primarily in Huntington Bancshares
Incorporated Common Stock. Plan participants are now permitted to direct pre-tax
elective deferrals and employer matching contributions to any combination of ten
investment options, including Huntington Bancshares Incorporated Common Stock.
An active participant may change or suspend pre-tax elective deferrals pursuant
to the terms set forth in the Plan document.
Prior to the April 1, 1998 amendment, eligible employees of Huntington and its
participating affiliates could choose between a pre-tax, after-tax, or a
combined pre-tax and after-tax employee contribution. Participants could elect
to make pre-tax matched contributions of up to 6% of their eligible
compensation. Participants could also elect to make after-tax matched
contributions of up to 3% of their eligible compensation, provided the sum of
the participant's pre-tax matched and after-tax non-matched contributions
equaled at least 3% of their eligible compensation. A participant's combined
pre-tax and after-tax matched contributions could not exceed 6% of the
participant's eligible compensation. A participant who designated the maximum 6%
matched contribution could make voluntary "after-tax non-matched" contributions
to the Plan up to an additional 10% of eligible
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compensation. A participant who designated less than a 6% matched contribution
could make after-tax non-matched contributions to the Plan subject to the
following rules. If the pre-tax matched contributions of a participant were less
than 3% of eligible compensation, after-tax contributions were treated first as
after-tax non-matched contributions until the sum of the pre-tax matched
contributions and the after-tax non-matched contributions equaled 3% of eligible
compensation. Thereafter, after-tax contributions were treated as after-tax
matched contributions, up to the limits described above, and then as after-tax
non-matched contributions. Huntington made a matching contribution equal to 75%
of an employee's contribution up to 6% of eligible compensation provided that no
more than 3% of compensation was contributed on an after-tax basis. In addition,
Huntington could make additional matching contributions, up to 25% of pre-tax
and after-tax matched contributions, at the discretion of the Board of
Directors.
Administration
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The Plan administrator is Huntington Bancshares Incorporated. Administration of
the Plan has been delegated by the Plan administrator to a committee of
employees appointed by the Board of Directors of Huntington.
Employee and Employer contributions to participants' accounts in the Plan are
invested pursuant to the participants' investment direction elections on file at
the time the contributions are allocated to the participants' accounts. Plan
assets are held in mutual funds or Huntington Bancshares Incorporated Common
Stock by the trust division of The Huntington National Bank (the "Plan
Trustee"), a wholly-owned subsidiary of Huntington. The Plan Trustee purchases
and sells shares of these mutual funds or Huntington Bancshares Incorporated
Common Stock on the open market at market prices. Additionally, the Plan Trustee
may directly purchase from and sell to, Huntington at market prices shares of
Huntington Bancshares Incorporated Common Stock.
Trustee and most administrative fees are paid from the general assets of
Huntington. However, participants are charged a nominal amount for
administration of the Plan.
Distributions and Withdrawals
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Distributions from the Plan are paid in cash. A participant may request that the
portion of his or her account that is invested in the Huntington Bancshares
Incorporated Common Stock Fund be distributed in shares of Huntington Bancshares
Incorporated Common Stock with cash paid in lieu of any fractional shares.
Distributions and withdrawals are reported at market value.
Participants are permitted to take distributions and withdrawals from their
accounts in the Plan under the circumstances set forth in the Plan document.
Generally, participants may request withdrawal of funds in their account
attributable to: (i) rollover contributions; (ii) after-tax contributions; and
(iii) pre-April 1, 1998 Employer contributions that have been in the
participants' accounts for at least 24 months.
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Employee pre-tax elective deferrals and post April 1, 1998, Employer matching
contributions are subject to special withdrawal rules and generally may not be
withdrawn from the Plan prior to a participant's death, disability, termination
of employment, or attainment of age 59 1/2. Certain distributions of Employee
pre-tax deferrals may be made, however, in the event a participant requests a
distribution due to financial hardship as defined by the Plan. Participants
should refer to the Summary Plan Description for a complete summary of the Plan
provisions.
Participants may withdraw up to 100% of their account balances in the Plan for
any reason after they have reached age 59 1/2.
Dividends and Interest Income
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Dividends are recognized as of the record date. Interest is recorded on an
accrual basis when earned.
Investments
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Subsequent to April 1, 1998, the separate investment options offered by the Plan
are as follows:
Huntington Bancshares Incorporated Common Stock Fund: This fund is invested
primarily in Huntington Bancshares Incorporated Common Stock. A small percentage
of this fund (usually 1% or less) is invested in a money market fund to maintain
liquidity for Plan distributions and participant fund reallocations. Unit values
are assigned to participants.
Huntington Money Market Fund: This fund seeks to provide safety of principal and
interest, a reasonable rate of interest income, little or no fluctuation of
principal, and liquidity. Investments typically include short-term debt
securities, including commercial paper, certificates of deposit, bankers
acceptances and government securities.
Bond Fund of America: This fund seeks to provide as high a level of current
income as is consistent with the preservation of capital by investing primarily
in bonds. The fund invests substantially all of its assets in marketable
corporate debt securities, U.S. government securities, mortgage-related
securities, other asset-backed securities and cash or money market instruments.
Normally, at least 65% of the fund assets will be invested in bonds.
Vanguard Wellington Fund: This fund seeks to conserve capital and to provide
moderate long-term growth and moderate income by investing in stocks, bonds and
money market instruments. The fund invests 60% to 70% of its assets in
dividend-paying stocks of large and medium sized companies. The remaining 30% to
40% of assets are invested in high-quality longer-term corporate bonds, with
some investment in Treasury, government agency and mortgage backed bonds.
Huntington Income-Equity Trust Fund: This fund seeks to achieve current income
and moderate appreciation of both capital and income by investing in
income-producing securities, such as stocks of companies having the potential to
pay attractive dividends.
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Vanguard Index 500 Fund: This fund seeks to mirror, as closely as possible, the
performance of the Standard and Poor's 500 Composite Stock Price Index, which
emphasizes stocks of large U.S. companies. Accordingly, the fund invests in
stocks which are included in the Standard and Poor's 500 Composite Stock Price
Index.
MFS Massachusetts Investors Fund: This fund seeks to provide current income and
long-term growth of capital and income. Investments include stocks and other
equity securities of companies emphasizing above average growth potential.
Neuberger & Berman Partners Trust Fund: This fund is designed to achieve
long-term capital growth by investing in common stocks of established medium to
large capitalization companies.
Franklin Small Cap Growth I Fund: This fund seeks long-term growth of capital by
investing in common stocks of smaller capitalization companies.
EuroPacific Growth Fund: This fund seeks long-term growth of capital by
investing in securities of companies domiciled outside of the United States,
usually located in Europe and the Pacific Basin. However, the fund may invest in
securities of developing countries as well.
Participant Notes Receivable
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In conjunction with the merger of First Michigan Bank Corporation into
Huntington, the First Michigan Bank Corporation Cash Option Plan (the "First
Michigan Plan") merged into the Plan effective as of April 1, 1998. The loan
fund represents the transfer of the outstanding participant loan balances in the
First Michigan Plan to the Plan. While the Plan does not allow participants to
take loans against their account balances, participants with outstanding loans
in the First Michigan Plan at the time of its merger into the Plan are permitted
to repay outstanding loans. The First Michigan Plan was amended in 1997 to
discontinue participant loans. Therefore, no loans were made from the First
Michigan Plan during 1998. Each loan, by its terms, must be repaid within 5
years, unless it is a loan for a participant's principal residence. The loans
bear interest at a market rate fixed at the date of origination. Principal and
interest is paid by participants through payroll deductions authorized by the
participant currently employed by Huntington. Individuals terminated from
employment repay principal and interest on an installment basis.
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Plan Funds
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The following summarizes balances of the Plan's funds at December 31, 1998:
* - Indicates party-in-interest to the Plan.
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Statements Of Changes In Net Assets Available For Benefits
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The following summarizes the changes in net assets available for benefits by
fund for the year ended December 31, 1998:
* - Indicates party-in-interest to the Plan.
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Note 2 - Cash and Cash Equivalents
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Cash and cash equivalents primarily represent funds temporarily invested in the
Huntington Money Market Fund to provide liquidity for fund reallocations and
distributions from the Huntington Bancshares Incorporated Common Stock Fund.
Note 3 - Federal Income Taxes
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The Plan has received a determination letter from the Internal Revenue Service
dated June 13, 1995, stating that the Plan is qualified under Section 401(a) of
the Internal Revenue Code (the "Code") and, therefore, the related trust is
exempt from taxation. The Plan is required to operate in conformity with the
Code to maintain its qualification. The Plan Administrator believes the Plan is
being operated in compliance with the applicable requirements of the Code and,
therefore, believes that the Plan is qualified and the related trust is tax
exempt.
Note 4 - Net Realized and Unrealized (Depreciation) Appreciation of Investments
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During each of the three years in the period ended December 31, 1998, the Plan's
investments, including investments bought, sold, as well as held during the
year, (depreciated)/appreciated in market value as follows:
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Note 5 - Plan Mergers
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During 1998, approximately $47.3 million was transferred to the Plan as a result
of the previous acquisition of First Michigan Bank Corporation, Holland,
Michigan. In addition, approximately $.2 million was transferred to the Plan as
a result of the previous acquisition of the Bank of Winter Park, Winter Park,
Florida.
Note 6 - Terminated Participants
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Included in net assets available for benefits are amounts allocated to
individuals who have withdrawn from the Plan. Amounts allocated to these
participants were $1,620,153 at December 31, 1998. There were no amounts
allocated at December 31, 1997.
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Note 7 - Party-In-Interest Transactions
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The Plan held the following party-in-interest investments (at fair value) at
December 31:
Costs and expenses incurred in administering the Plan paid by Huntington,
including brokerage commissions and fees in connection with each purchase of
securities, totaled $894,357, $735,545, and $540,450 for 1998, 1997, and 1996,
respectively.
Note 8 - Year 2000 (Unaudited)
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The Year 2000 problem is the result of many existing computer programs using
only the last two-digits, as opposed to four digits, to indicate the year. Such
computer systems may be unable to recognize a year that begins with "20" instead
of "19". If not corrected, many computer programs could cause systems failures
or other computer errors, leading to possible disruptions in operations or
creation of erroneous results.
Huntington, in an enterprise-wide effort, is taking steps to ensure that its
internal systems are secure from such failure and that its current products will
perform. Huntington's Year 2000 Plan addresses all systems, software, hardware,
and infrastructure components, including those of the Plan. Huntington, on
behalf of the Plan, prioritized the various systems that could be affected by
the Year 2000, including those maintained by the Plan's third party vendors,
suppliers, and service providers. Efforts to ensure compliance of core systems
deemed critical have been substantially completed. In addition, Huntington is
presently working with the Plan's business partners and suppliers to ensure the
potential problem is adequately addressed. None of the costs associated with
compliance efforts have been or will be borne by the Plan.
The Year 2000 problem is unique in that it has never previously occurred; thus,
it is not possible to completely foresee or quantify the overall or any specific
financial or operational impacts to Huntington, the Plan, or to third parties
which provide critical services to the Plan.
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Supplemental Schedule 27(a)
HUNTINGTON INVESTMENT AND TAX SAVINGS PLAN
ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1998
* Indicates party-in-interest to the Plan.
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Supplemental Schedule 27(d)
HUNTINGTON INVESTMENT AND TAX SAVINGS PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1998
There were no category (i), (ii), or (iv) reportable transactions during the
year ended December 31, 1998.
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