##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
  þ
    
    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended December 31, 2005
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
 Commission file Number 000-33243
 Huntington Preferred Capital, Inc.
  Ohio
    
    31-1356967(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)41 S. High Street, Columbus, OH
    
    43287(Address of principal executive offices)
    
    (Zip Code)
 (614) 480-8300
 None
  Noncumulative Exchangeable Preferred Securities, Class C (Liquidation Amount $25.00 each)
 o þ
 o þ
 þ o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer
þ
 o þ
  Documents Incorporated By Reference




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##### 



HUNTINGTON PREFERRED CAPITAL, INC.
  Part I.Item 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    11Item 1B. Unresolved Staff Comments
    
    
    17Item 2. Properties
    
    
    17Item 3. Legal Proceedings
    
    
    17Item 4. Submission of Matters to a Vote of Security Holders
    
    
    17Part II.Item 5. Market for Registrants Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
    
    
    17Item 6. Selected Financial Data
    
    
    18Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    32Item 8. Financial Statements and Supplementary Data
    
    
    32Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    50Item 9A. Controls and Procedures
    
    
    50Item 9B. Other Information
    
    
    50Part III.Item 10. Directors and Executive Officers of the Registrant
    
    
    50Item 11. Executive Compensation
    
    
    50Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    50Item 13. Certain Relationships and Related Transactions
    
    
    50Item 14. Principal Accounting Fees and Services
    
    
    51Part IV.Item 15. Exhibits and Financial Statement Schedules
    
    
    51Signatures
    
    
    52ExhibitsExhibit 21Exhibit 24Exhibit 31(A)Exhibit 31(B)Exhibit 32(A)Exhibit 32(B)Exhibit 99(A)Exhibit 99(B)
  2




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Huntington Preferred Capital, Inc.
 
 Part I
 
 Item 1: Business
 General
  
 3




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General Description of Assets
  Commercial and Commercial Real Estate Loans
    Consumer Loans
  Residential Real Estate Loans
   4




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Geographic Distribution
  Table 1  Total Loan Participation Interests by Geographic Location
 (in thousands of dollars)
    
    
    
    
    
    
    
    
    
    Percentage byAggregate
    
    AggregateNumber
    
    Principal
    
    PrincipalState
    
    of Loans
    
    Balance
    
    BalanceOhio
    
    
    18,094
    
    
    $
    2,434,838
    
    
    
    54.0
    %Michigan
    
    
    9,631
    
    
    
    1,277,467
    
    
    
    28.3Indiana
    
    
    2,384
    
    
    
    384,782
    
    
    
    8.5Kentucky
    
    
    1,916
    
    
    
    228,011
    
    
    
    5.132,025
    
    
    
    4,325,098
    
    
    
    95.9All other locations
    
    
    356
    
    
    
    187,227
    
    
    
    4.1Total loan participation interests
    
    
    32,381
    
    
    $
    4,512,325
    
    
    
    100.0
    %
 Principal Balances
  Table 2  Total Loan Participation Interests by Principal Balances
 (in thousands of dollars)
    
    
    
    
    
    
    
    
    
    Percentage byAggregate
    
    AggregateNumber
    
    Principal
    
    PrincipalSize
    
    of Loans
    
    Balance
    
    BalanceLess than $50,000
    
    
    19,548
    
    
    $
    417,034
    
    
    
    9.2
    %Greater than $50,000 to $100,000
    
    
    5,807
    
    
    
    416,074
    
    
    
    9.2Greater than $100,000 to $250,000
    
    
    3,987
    
    
    
    604,151
    
    
    
    13.4Greater than $250,000 to $500,000
    
    
    1,438
    
    
    
    509,379
    
    
    
    11.3Greater than $500,000 to $1,000,000
    
    
    819
    
    
    
    572,519
    
    
    
    12.7Greater than $1,000,000 to $3,000,000
    
    
    594
    
    
    
    994,666
    
    
    
    22.0Greater than $3,000,000 to $5,000,000
    
    
    126
    
    
    
    483,374
    
    
    
    10.7Greater than $5,000,000 to $10,000,000
    
    
    44
    
    
    
    283,135
    
    
    
    6.3Greater than $10,000,000
    
    
    18
    
    
    
    231,993
    
    
    
    5.2Total loan participation interests
    
    
    32,381
    
    
    $
    4,512,325
    
    
    
    100.0
    %
 Dividend Policy and Restrictions
  5




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Table 3  Capital Ratios for the Bank
 Well-
    
    Adequately-Capitalized
    
    Capitalized
    
    December 31,Minimums
    
    Minimums
    
    2005
    
    2004Tier 1 Risk-Based Capital
    
    
    6.00
    %
    
    
    4.00
    %
    
    
    6.82
    %
    
    
    6.08
    %Total Risk-Based Capital
    
    
    10.00
    
    
    
    8.00
    
    
    
    10.55
    
    
    
    10.16Tier 1 Leverage Ratio
    
    
    5.00
    
    
    
    4.00
    
    
    
    6.21
    
    
    
    5.66
 Conflict of Interests and Related Policies
    Other Management Policies and Programs
 General
  Underwriting Standards
  6




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Asset Acquisition and Disposition Policies
  
    
    are performing, meaning they have no more than two payments past due,
    
    are in accruing status,
    
    are not made to related parties of HPCI, Huntington, or the Bank,
    
    are secured by real property such that they are REIT qualifying, and
    
    have not been previously sold, securitized, or charged-off either in whole or in part.
      7




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Credit Risk Management Policies
  Other Policies
  
    
    invest in the securities of other issuers for the purpose of exercising control over such issuers;
    
    underwrite securities of other issuers;
    
    actively trade in loans or other investments;
    
    offer securities in exchange for property; or
    
    make loans to third parties, including, its officers, directors, or other affiliates.
     8




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Employees
   Servicing
      9




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Competition
  Segment Reporting
  Regulatory Matters
  Formal Regulatory Supervisory Agreements
   Available Information
  10




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Item 1A: Risk Factors
  HPCI relies on the Banks credit underwriting standards and on-going process of credit
assessment. There can be no assurance that the Banks standards and assessments will protect HPCI
from significant credit losses on loans underlying its participation interests.
  The loans underlying HPCIs participation interests are concentrated in Ohio, Indiana,
Kentucky, and Michigan. Adverse conditions in those states, in particular, could negatively
impact HPCIs result of operations and ability to pay dividends.
  The loans underlying participation interests are subject to local economic conditions that
could negatively affect the value of the collateral securing such loans and/or the results of
HPCIs operations.
  
    
    local and other economic conditions affecting real estate and other collateral values;
    
    the continued financial stability of a borrower;
    
    the borrowers ability to make loan principal and interest payments, which may be
adversely affected by job loss, recession, divorce, illness, or personal bankruptcy;
    
    the tenants ability to make lease payments;
    
    the ability of a property to attract and retain tenants, which may be affected by
conditions such as an oversupply of space or a reduction in demand for rental space in
the area, the attractiveness of properties to tenants, competition from other available
space, and the ability of the owner to pay leasing commissions, provide adequate maintenance
and insurance, pay tenant improvement costs, and make other tenant concessions.
  11




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HPCIs concentration in participation interests in commercial real estate loans is subject to
certain risks inherent in the underlying commercial real estate assets.
  A
decline in the Banks capital levels may result in HPCIs preferred securities being subject to a
conditional exchange into Bank preferred securities at a time when the Banks financial condition
is deteriorating. Consequently, the likelihood of dividend payments, as well as the liquidation
preference, taxation, voting rights, and liquidity of securities would be negatively impacted.
  
    
    the Bank becomes undercapitalized;
    
    the OCC, in its sole discretion, anticipates that the Bank will become
undercapitalized in the near term; or
    
    the Bank is placed in conservatorship or receivership.
       12




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Bank regulators may limit HPCIs ability to implement its business plan and may restrict its
ability to pay dividends.
    Dividends are not cumulative; preferred shareholders are not entitled to receive dividends
unless declared by HPCIs board of directors.
  
    
    the amount of distributable funds;
    
    HPCIs financial condition and capital needs;
    
    the impact of current and pending legislation and regulations;
    
    economic conditions;
    
    tax considerations; and
    
    HPCIs continued qualification as a REIT.
  HPCI is dependent, in virtually every phase of its operations, on the diligence and skill of
the officers and employees of the Bank, and its relationship with the Bank may create potential
conflicts of interest.
   13




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HPCIs assets may be used to guarantee certain of the Banks obligations that will have a
preference over the holders of HPCIs preferred securities.
    14




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New, or changes in existing, tax, accounting, and regulatory laws, regulations, rules,
standards, policies, and interpretations could significantly impact HPCIs strategic initiatives,
results of operations, cash flows, financial condition, and ability to pay dividends.
  The extended disruption of Huntingtons vital infrastructure could negatively impact HPCIs
business, results of operations, financial condition, and ability to pay dividends.
  HPCI has no control over changes in interest rates and such changes could negatively impact
its financial condition, results of operations, and ability to pay dividends.
  HPCI could suffer adverse tax consequences if it failed to qualify as a REIT.
  15




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Environmental liabilities associated with real property securing loans underlying HPCIs
participation interests could reduce the fair market value of its participation interests and make
the property more difficult to sell.
  HPCI may redeem the Class C and Class D preferred securities upon the occurrence of certain
special events and holders of such securities may receive a redemption amount that is less than the
then current market price for the securities.
  
    
    a tax event which occurs when HPCI receives an opinion of counsel to the effect
that, as a result of a judicial decision or administrative pronouncement, ruling, or
other action or as a result of certain changes in the tax laws, regulations, or related
interpretations, there is a significant risk that dividends with respect to HPCIs
capital stock will not be fully deductible by HPCI or it will be subject to a
significant amount of additional taxes or governmental charges;
    
    an investment company event which occurs when HPCI receives an opinion of counsel to
the effect that, as a result of certain changes in the applicable laws, regulations, or
related interpretations, there is a significant risk that HPCI will be considered an
investment company under the Investment Company Act of 1940; and
 16




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
    
    a regulatory capital event which occurs when, as a result of certain changes in the
applicable laws, regulations, or related interpretations, there is a significant risk
that HPCIs Class C preferred securities will no longer constitute Tier 1 capital of
the Bank (other than as a result of limitations on the portion of Tier 1 capital that
may consist of minority interests in subsidiaries of the Bank).
  
 Item 1B: Unresolved Staff Comments
  
 Item 2: Properties
  
 Item 3: Legal Proceedings
  
 Item 4: Submission of Matters to a Vote of Security Holders
 
 
 Part II
 
 Item 5: Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
    17




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Item 6: Selected Financial Data
  Table 4  Selected Financial Data
 (in thousands of dollars)
    
    2005
    
    2004
    
    2003
    
    2002
    
    2001STATEMENTS OF INCOME:Interest and fee income
    
    $
    302,743
    
    
    $
    262,215
    
    
    $
    274,401
    
    
    $
    347,754
    
    
    $
    526,445(Reduction in allowance) provision for
credit losses
    
    
    (19,796
    )
    
    
    (31,591
    )
    
    
    (41,219
    )
    
    
    (161
    )
    
    
    48,510Non-interest income
    
    
    9,391
    
    
    
    7,249
    
    
    
    6,901
    
    
    
    6,759
    
    
    
    1,646Non-interest expense
    
    
    17,065
    
    
    
    16,260
    
    
    
    13,886
    
    
    
    13,282
    
    
    
    10,015Net income
    
    
    314,318
    
    
    
    284,542
    
    
    
    308,539
    
    
    
    341,437
    
    
    
    469,540Dividends declared on preferred securities
    
    
    34,634
    
    
    
    20,744
    
    
    
    18,911
    
    
    
    23,814
    
    
    
    21,827Net income applicable
to common shares
    
    
    279,684
    
    
    
    263,798
    
    
    
    289,628
    
    
    
    317,623
    
    
    
    447,713Dividends declared on common stock
    
    
    279,684
    
    
    
    263,798
    
    
    
    289,628
    
    
    
    382,840
    
    
    
    539,170BALANCE SHEET HIGHLIGHTS:At period end:Net loan participation interests
    
    $
    4,454,795
    
    
    $
    4,828,127
    
    
    $
    5,218,536
    
    
    $
    4,893,137
    
    
    $
    5,203,286All other assets
    
    
    899,090
    
    
    
    845,464
    
    
    
    187,442
    
    
    
    623,884
    
    
    
    745,473Total assets
    
    
    5,353,885
    
    
    
    5,673,591
    
    
    
    5,405,978
    
    
    
    5,517,021
    
    
    
    5,948,759Total shareholders equity
    
    
    4,649,461
    
    
    
    5,069,776
    
    
    
    5,405,978
    
    
    
    5,516,351
    
    
    
    5,948,728Average balances:Net loan participation interests
    
    $
    4,664,505
    
    
    $
    5,075,815
    
    
    $
    5,027,857
    
    
    $
    5,098,098
    
    
    $
    6,261,235Total assets
    
    
    5,217,640
    
    
    
    5,530,253
    
    
    
    5,647,772
    
    
    
    6,052,136
    
    
    
    7,044,550Total shareholders equity
    
    
    5,197,654
    
    
    
    5,497,479
    
    
    
    5,643,692
    
    
    
    6,044,404
    
    
    
    7,043,309KEY RATIOS AND STATISTICS:Net interest margin
    
    
    5.84
    %
    
    
    4.74
    %
    
    
    4.77
    %
    
    
    5.82
    %
    
    
    7.46
    %Return on average assets
    
    
    6.02
    
    
    
    5.15
    
    
    
    5.46
    
    
    
    5.64
    
    
    
    6.67Return on average equity
    
    
    6.05
    
    
    
    5.18
    
    
    
    5.47
    
    
    
    5.65
    
    
    
    6.67Dividend payout ratio
    
    
    100.00
    
    
    
    100.00
    
    
    
    100.00
    
    
    
    121.00
    
    
    
    121.00Average shareholders equity to
average assets
    
    
    99.62
    
    
    
    99.41
    
    
    
    99.93
    
    
    
    99.87
    
    
    
    99.98Preferred dividend coverage ratio
    
    
    9.08
    x
    
    
    13.72
    x
    
    
    16.32
    x
    
    
    14.34
    x
    
    
    21.51
    x
 
  18




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Item 7: Managementss Discussion and Analysis of Financial Condition and Results of Operations
 INTRODUCTION
   Forward-looking Statements
    Critical Accounting Policies and Use of Significant Estimates
   19




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Summary Discussion of Results
     Table 5  Loan Participation Interests (1)
 (in thousands of dollars)
    
    2005
    
    
    
    
    
    2004
    
    
    
    
    
    2003
    
    
    
    
    
    2002
    
    
    
    
    
    2001At December 31,Commercial
    
    $
    46,559
    
    
    
    0.9
    %
    
    $
    106,179
    
    
    
    1.9
    %
    
    $
    147,211
    
    
    
    2.7
    %
    
    $
    344,858
    
    
    
    6.3
    %
    
    $
    646,509
    
    
    
    10.9
    %Commercial real estate
    
    
    3,311,275
    
    
    
    61.8
    
    
    
    3,738,930
    
    
    
    65.9
    
    
    
    4,245,092
    
    
    
    78.5
    
    
    
    3,922,467
    
    
    
    71.1
    
    
    
    3,678,061
    
    
    
    61.8Consumer
    
    
    997,094
    
    
    
    18.6
    
    
    
    819,250
    
    
    
    14.4
    
    
    
    622,575
    
    
    
    11.5
    
    
    
    612,357
    
    
    
    11.1
    
    
    
    783,735
    
    
    
    13.2Residential real estate
    
    
    157,397
    
    
    
    2.9
    
    
    
    224,914
    
    
    
    4.0
    
    
    
    288,190
    
    
    
    5.3
    
    
    
    153,808
    
    
    
    2.8
    
    
    
    270,671
    
    
    
    4.6Total
    
    $
    4,512,325
    
    
    
    84.2
    %
    
    $
    4,889,273
    
    
    
    86.2
    %
    
    $
    5,303,068
    
    
    
    98.0
    %
    
    $
    5,033,490
    
    
    
    91.3
    %
    
    $
    5,378,976
    
    
    
    90.5
    %
 (1)
    
    Percentages represent the percentage of each loan category to total assets.
   20




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QUALIFICATION TESTS
    RESULTS OF OPERATIONS
 Interest and Fee Income
  21




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Table 6  Interest and Fee Income
 2005
    
    
    2004
    
    
    2003Average
    
    
    
    
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    
    
    
    
    Average(in millions of dollars)
    
    Balance
    
    
    Income(1)
    
    
    Yield
    
    
    Balance
    
    
    Income(1)
    
    
    Yield
    
    
    Balance
    
    
    Income(1)
    
    
    YieldLoan
participation
interests:Commercial
    
    $
    77.1
    
    
    $
    4.7
    
    
    
    6.05
    %
    
    $
    157.7
    
    
    $
    7.8
    
    
    
    4.97
    %
    
    $
    249.3
    
    
    $
    11.4
    
    
    
    4.53
    %Commercial real
estate
    
    
    3,566.4
    
    
    
    211.1
    
    
    
    5.92
    
    
    
    4,033.5
    
    
    
    183.5
    
    
    
    4.55
    
    
    
    4,066.2
    
    
    
    191.7
    
    
    
    4.65Consumer
    
    
    892.1
    
    
    
    61.0
    
    
    
    6.84
    
    
    
    702.6
    
    
    
    51.4
    
    
    
    7.31
    
    
    
    575.1
    
    
    
    50.8
    
    
    
    8.84Residential real
estate
    
    
    189.2
    
    
    
    10.3
    
    
    
    5.45
    
    
    
    257.8
    
    
    
    13.5
    
    
    
    5.23
    
    
    
    254.4
    
    
    
    14.2
    
    
    
    5.55Total loan
participations
    
    
    4,724.8
    
    
    
    287.1
    
    
    
    6.08
    
    
    
    5,151.6
    
    
    
    256.2
    
    
    
    4.97
    
    
    
    5,145.0
    
    
    
    268.1
    
    
    
    5.16Interest bearing
deposits with The Huntington
National Bank
    
    
    457.4
    
    
    
    15.7
    
    
    
    3.43
    
    
    
    376.3
    
    
    
    6.0
    
    
    
    1.60
    
    
    
    546.3
    
    
    
    6.3
    
    
    
    1.14Total
    
    $
    5,182.2
    
    
    $
    302.8
    
    
    
    5.84
    %
    
    $
    5,527.9
    
    
    $
    262.2
    
    
    
    4.74
    %
    
    $
    5,691.3
    
    
    $
    274.4
    
    
    
    4.77
    %
 (1)
    
    Income includes interest and fees.
  (Reduction in Allowance) Provision for Credit Losses
  Non-Interest Income and Non-Interest Expense
   22




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July 1, 2005
    
    July 1, 2004
    
    January 1, 2004thru
    
    thru
    
    thruDecember 31, 2005
    
    June 30, 2005
    
    June 30, 2004Commercial & Commercial Real Estate
    
    
    0.125
    %
    
    
    0.125
    %
    
    
    0.125
    %Consumer
    
    
    0.650
    %
    
    
    0.750
    %
    
    
    0.320
    %Residential Real Estate
    
    
    0.267
    %
    
    
    0.267
    %
    
    
    0.299
    %
  Income Taxes
  MARKET RISK
     23




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Table 7  Total Loan Participation Interests by Interest Rates
 December 31, 2005
    
    Fixed Rate
    
    Variable Rate(1)Percentage by
    
    
    
    
    
    
    
    
    
    Percentage byAggregate
    
    Aggregate
    
    
    
    
    
    Aggregate
    
    Aggregate(in thousands of
    
    Number
    
    Principal
    
    Principal
    
    Number
    
    Principal
    
    Principaldollars)
    
    of Loans
    
    Balance
    
    Balance
    
    of Loans
    
    Balance
    
    Balanceunder 5.00%
    
    
    1,012
    
    
    $
    75,246
    
    
    
    5.0
    %
    
    
    169
    
    
    $
    64,947
    
    
    
    2.1
    %5.00% to 5.99%
    
    
    5,562
    
    
    
    431,815
    
    
    
    29.0
    
    
    
    936
    
    
    
    426,780
    
    
    
    14.16.00% to 6.99%
    
    
    7,000
    
    
    
    513,784
    
    
    
    34.4
    
    
    
    2,351
    
    
    
    1,688,238
    
    
    
    55.97.00% to 7.99%
    
    
    4,603
    
    
    
    255,189
    
    
    
    17.1
    
    
    
    1,773
    
    
    
    742,617
    
    
    
    24.68.00% to 8.99%
    
    
    3,914
    
    
    
    123,568
    
    
    
    8.3
    
    
    
    525
    
    
    
    84,570
    
    
    
    2.89.00% to 9.99%
    
    
    2,339
    
    
    
    56,476
    
    
    
    3.8
    
    
    
    95
    
    
    
    12,201
    
    
    
    0.410.00% to 10.99%
    
    
    1,084
    
    
    
    23,499
    
    
    
    1.6
    
    
    
    12
    
    
    
    1,658
    
    
    
    0.111.00% to 11.99%
    
    
    384
    
    
    
    7,621
    
    
    
    0.5
    
    
    
    2
    
    
    
    153
    
    
    
    0.012.00% and over
    
    
    618
    
    
    
    3,863
    
    
    
    0.3
    
    
    
    2
    
    
    
    100
    
    
    
    0.0Total
    
    
    26,516
    
    
    $
    1,491,061
    
    
    
    100.0
    %
    
    
    5,865
    
    
    $
    3,021,264
    
    
    
    100.0
    %
 December 31, 2004
    
    Fixed Rate
    
    Variable Rate(1)Percentage by
    
    
    
    
    
    
    
    
    
    Percentage byAggregate
    
    Aggregate
    
    
    
    
    
    Aggregate
    
    Aggregate(in thousands of
    
    Number
    
    Principal
    
    Principal
    
    Number
    
    Principal
    
    Principaldollars)
    
    of Loans
    
    Balance
    
    Balance
    
    of Loans
    
    Balance
    
    Balanceunder 5.00%
    
    
    1,108
    
    
    $
    98,962
    
    
    
    7.5
    %
    
    
    2,087
    
    
    $
    2,185,158
    
    
    
    61.1
    %5.00% to 5.99%
    
    
    4,757
    
    
    
    398,757
    
    
    
    30.3
    
    
    
    2,293
    
    
    
    939,245
    
    
    
    26.36.00% to 6.99%
    
    
    4,990
    
    
    
    351,767
    
    
    
    26.7
    
    
    
    1,456
    
    
    
    289,217
    
    
    
    8.17.00% to 7.99%
    
    
    4,142
    
    
    
    212,507
    
    
    
    16.2
    
    
    
    610
    
    
    
    116,826
    
    
    
    3.38.00% to 8.99%
    
    
    4,178
    
    
    
    134,303
    
    
    
    10.2
    
    
    
    239
    
    
    
    37,489
    
    
    
    1.09.00% to 9.99%
    
    
    2,809
    
    
    
    66,015
    
    
    
    5.0
    
    
    
    58
    
    
    
    5,294
    
    
    
    0.210.00% to 10.99%
    
    
    1,434
    
    
    
    31,183
    
    
    
    2.4
    
    
    
    8
    
    
    
    441
    
    
    
    0.011.00% to 11.99%
    
    
    540
    
    
    
    10,541
    
    
    
    0.8
    
    
    
    1
    
    
    
    17
    
    
    
    0.012.00% and over
    
    
    2,251
    
    
    
    11,490
    
    
    
    0.9
    
    
    
    1
    
    
    
    61
    
    
    
    0.0Total
    
    
    26,209
    
    
    $
    1,315,525
    
    
    
    100.0
    %
    
    
    6,753
    
    
    $
    3,573,748
    
    
    
    100.0
    %
 (1)
    
    The variable rate category includes loan participation interests with variable and adjustable rates.
 CREDIT QUALITY
 Credit Risk
   24




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##### Table of Contents



Table 8  Loan Participation Interests Delinquencies
 Percentage byTotal
    
    Aggregate
    
    AggregateNumber
    
    Principal
    
    Principal(in thousands of dollars)
    
    of Loans
    
    Balance
    
    BalanceCurrent
    
    
    29,348
    
    
    $
    4,171,160
    
    
    
    92.5
    %1 to 30 days past due
    
    
    2,078
    
    
    
    276,300
    
    
    
    6.131 to 60 days past due
    
    
    447
    
    
    
    36,129
    
    
    
    0.861 to 90 days past due
    
    
    219
    
    
    
    10,189
    
    
    
    0.2over 90 days past due(1)
    
    
    289
    
    
    
    18,547
    
    
    
    0.4Total
    
    
    32,381
    
    
    $
    4,512,325
    
    
    
    100.0
    %
 (1)
    
    Includes non-accrual loans.
 Commercial Credit
      25




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##### Table of Contents



Consumer Credit
   Allowances for Credit Losses (ACL)
    Transaction Reserve
   26




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##### Table of Contents



Economic Reserve
      Table 9  Allowances for Credit Loss Activity
 (in thousands of dollars)
    
    2005
    
    2004
    
    2003
    
    2002
    
    2001ALL balance, beginning of period
    
    $
    61,146
    
    
    $
    84,532
    
    
    $
    140,353
    
    
    $
    175,690
    
    
    $
    91,826Allowance of loan participations acquired
    
    
    25,071
    
    
    
    21,201
    
    
    
    45,397
    
    
    
    37,020
    
    
    
    113,291Distribution of participations in Florida-related loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,604
    )Net loan (losses) recoveries
Commercial
    
    
    1,247
    
    
    
    1,594
    
    
    
    (20,973
    )
    
    
    (29,686
    )
    
    
    (32,959
    )Commercial real estate
    
    
    (5,175
    )
    
    
    (5,032
    )
    
    
    (13,525
    )
    
    
    (21,599
    )
    
    
    (7,574
    )Consumer
    
    
    (4,362
    )
    
    
    (5,458
    )
    
    
    (22,999
    )
    
    
    (20,911
    )
    
    
    (18,800
    )Residential real estate
    
    
    (231
    )
    
    
    (335
    )
    
    
    (2,502
    )
    
    
    
    
    
    
    Total net loan losses
    
    
    (8,521
    )
    
    
    (9,231
    )
    
    
    (59,999
    )
    
    
    (72,196
    )
    
    
    (59,333
    )(Reduction in) provision for ALL
    
    
    (19,228
    )
    
    
    (35,356
    )
    
    
    (41,219
    )
    
    
    (161
    )
    
    
    48,510Economic Reserve transfer to AULPC
    
    
    (938
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ALL balance, end of period
    
    $
    57,530
    
    
    $
    61,146
    
    
    $
    84,532
    
    
    $
    140,353
    
    
    $
    175,690AULPC balance, beginning of period
    
    $
    3,765
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (Reduction in) provision for AULPC
    
    
    (568
    )
    
    
    3,765
    
    
    
    
    
    
    
    
    
    
    
    Economic Reserve transfer from ALL
    
    
    938
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AULPC balance, end of period
    
    $
    4,135
    
    
    $
    3,765
    
    
    $
    
    
    
    $
    
    
    
    $
    Total Allowances for Credit Losses
    
    $
    61,665
    
    
    $
    64,911
    
    
    $
    84,532
    
    
    $
    140,353
    
    
    $
    175,690ALL as a % of total participation interests
    
    
    1.27
    %
    
    
    1.25
    %
    
    
    1.59
    %
    
    
    2.79
    %
    
    
    3.27
    %ACL as a % of total participation interests
    
    
    1.37
    
    
    
    1.33
    
    
    
    1.59
    
    
    
    2.79
    
    
    
    3.27
 27




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##### Table of Contents



Table 10  Allowance for Credit Losses by Product (1)
 At
December 31,(in thousands of dollars)
    
    2005
    
    2004
    
    2003
    
    2002
    
    2001Commercial
    
    $
    635
    
    
    
    1.0
    %
    
    $
    9,148
    
    
    
    2.2
    %
    
    $
    25,375
    
    
    
    2.8
    %
    
    $
    75,264
    
    
    
    6.9
    %
    
    $
    103,119
    
    
    
    12.0
    %Commercial real estate
    
    
    48,303
    
    
    
    73.4
    
    
    
    44,105
    
    
    
    76.4
    
    
    
    47,561
    
    
    
    80.1
    
    
    
    26,605
    
    
    
    77.8
    
    
    
    33,886
    
    
    
    68.4Consumer
    
    
    800
    
    
    
    22.1
    
    
    
    1,614
    
    
    
    16.8
    
    
    
    8,096
    
    
    
    11.7
    
    
    
    9,979
    
    
    
    12.2
    
    
    
    17,030
    
    
    
    14.6Residential real estate
    
    
    7,792
    
    
    
    3.5
    
    
    
    6,279
    
    
    
    4.6
    
    
    
    3,500
    
    
    
    5.4
    
    
    
    2,883
    
    
    
    3.1
    
    
    
    1,766
    
    
    
    5.0Unallocated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,622
    
    
    
    
    
    
    
    19,889
    
    
    
    Total ALL
    
    
    57,530
    
    
    
    100.0
    %
    
    
    61,146
    
    
    
    100.0
    %
    
    
    84,532
    
    
    
    100.0
    %
    
    
    140,353
    
    
    
    100.0
    %
    
    
    175,690
    
    
    
    100.0
    %AULPC
    
    
    4,135
    
    
    
    
    
    
    
    3,765
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    61,665
    
    
    
    100.0
    %
    
    $
    64,911
    
    
    
    100.0
    %
    
    $
    84,532
    
    
    
    100.0
    %
    
    $
    140,353
    
    
    
    100.0
    %
    
    $
    175,690
    
    
    
    100.0
    %
 
 (1)
    
    Percentages represent the percentage of each loan category to total loan participation interests. Net Charge-offs
  Table 11  Net Charge-offs (1)
 (In thousands of dollars)
    
    2005
    
    
    
    
    
    
    2004
    
    
    
    
    
    
    2003
    
    
    
    
    
    
    2002
    
    
    
    
    
    
    2001Commercial
    
    $
    (1,247
    )
    
    
    (1.62
    )%
    
    $
    (1,594
    )
    
    
    (1.01
    )%
    
    $
    20,973
    
    
    
    8.41
    %
    
    $
    29,686
    
    
    
    5.90
    %
    
    $
    32,959
    
    
    
    5.88
    %Commercial real estate
    
    
    5,175
    
    
    
    0.15
    
    
    
    5,032
    
    
    
    0.12
    
    
    
    13,525
    
    
    
    0.33
    
    
    
    21,599
    
    
    
    0.56
    
    
    
    7,574
    
    
    
    0.18Consumer
    
    
    4,362
    
    
    
    0.49
    
    
    
    5,458
    
    
    
    0.78
    
    
    
    22,999
    
    
    
    4.00
    
    
    
    20,911
    
    
    
    3.00
    
    
    
    18,800
    
    
    
    1.76Residential real estate
    
    
    231
    
    
    
    0.12
    
    
    
    335
    
    
    
    0.13
    
    
    
    2,502
    
    
    
    0.98
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Net Charge-offs
    
    $
    8,521
    
    
    
    0.18
    
    
    $
    9,231
    
    
    
    0.18
    
    
    $
    59,999
    
    
    
    1.17
    
    
    $
    72,196
    
    
    
    1.37
    
    
    $
    59,333
    
    
    
    0.93
 
 (1)
    
    Percentages represent the percentage in each loan category to average loan participation interests. 28




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##### Table of Contents



Non-Performing Assets (NPAs)
   Table 12  Non-Performing Assets
 At December 31,(in thousands of dollars)
    
    2005
    
    2004
    
    2003
    
    2002
    
    2001Participation interests in non-accrual loansCommercial
    
    $
    147
    
    
    $
    425
    
    
    $
    5,176
    
    
    $
    57,112
    
    
    $
    156,874Commercial Real Estate
    
    
    20,746
    
    
    
    6,990
    
    
    
    12,987
    
    
    
    32,979
    
    
    
    32,492Consumer (1)
    
    
    2,799
    
    
    
    2,692
    
    
    
    
    
    
    
    
    
    
    
    Residential Real Estate
    
    
    2,923
    
    
    
    4,205
    
    
    
    4,157
    
    
    
    6,455
    
    
    
    8,232Total Non-Performing Assets
    
    $
    26,615
    
    
    $
    14,312
    
    
    $
    22,320
    
    
    $
    96,546
    
    
    $
    197,598NPAs as a % of total participation interests
    
    
    0.59
    %
    
    
    0.29
    %
    
    
    0.42
    %
    
    
    1.92
    %
    
    
    3.67
    %ALL as a % of NPAs
    
    
    216
    
    
    
    427
    
    
    
    379
    
    
    
    145
    
    
    
    89ACL as a % of NPAs
    
    
    232
    
    
    
    454
    
    
    
    379
    
    
    
    145
    
    
    
    89
 
 (1)
    
    At September 30, 2004, HPCI adopted a new policy of placing
consumer home equity loan participations on non-accrual status when they exceed
180 days past due. Prior practice was to continue to accrue interest until
collection or resolution of the loan participations. Such loan participations
were previously classified as accruing loans past due 90 days or more.     29




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##### Table of Contents



OFF-BALANCE SHEET ARRANGEMENTS
  LIQUIDITY AND CAPITAL RESOURCES
       30




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##### Table of Contents



RESULTS FOR THE FOURTH QUARTER
 Table 13  Quarterly Statements of Income
 2005
    
    
    2004
    
    

4Q05
vs 4Q04(in thousands of dollars)
    
    Fourth
    
    
    Third
    
    
    Second
    
    
    First
    
    
    Fourth
    
    
    $Chg
    
    
    %ChgInterest and fee incomeInterest on loan participation interests:Commercial
    
    $
    982
    
    
    $
    1,006
    
    
    $
    1,264
    
    
    $
    1,380
    
    
    $
    1,679
    
    
    $
    (697
    )
    
    
    (41.5
    )%Commercial real estate
    
    
    55,053
    
    
    
    54,013
    
    
    
    51,982
    
    
    
    48,753
    
    
    
    46,931
    
    
    
    8,122
    
    
    
    17.3Consumer
    
    
    16,268
    
    
    
    15,465
    
    
    
    14,687
    
    
    
    13,925
    
    
    
    13,208
    
    
    
    3,060
    
    
    
    23.2Residential real estate
    
    
    2,341
    
    
    
    2,420
    
    
    
    2,647
    
    
    
    2,896
    
    
    
    3,069
    
    
    
    (728
    )
    
    
    (23.7
    )Total loan participation interest income
    
    
    74,644
    
    
    
    72,904
    
    
    
    70,580
    
    
    
    66,954
    
    
    
    64,887
    
    
    
    9,757
    
    
    
    15.0Fees from loan participation interests
    
    
    320
    
    
    
    539
    
    
    
    491
    
    
    
    629
    
    
    
    605
    
    
    
    (285
    )
    
    
    (47.1
    )Interest on deposits with The Huntington National Bank
    
    
    7,200
    
    
    
    4,439
    
    
    
    2,570
    
    
    
    1,473
    
    
    
    3,736
    
    
    
    3,464
    
    
    
    92.7Total interest and fee income
    
    
    82,164
    
    
    
    77,882
    
    
    
    73,641
    
    
    
    69,056
    
    
    
    69,228
    
    
    
    12,936
    
    
    
    18.7(Reduction in allowance) provision for credit losses
    
    
    (4,409
    )
    
    
    (8,106
    )
    
    
    (3,840
    )
    
    
    (3,441
    )
    
    
    (13,153
    )
    
    
    8,744
    
    
    
    66.5Interest income after (reduction in allowance)provision for for credit losses
    
    
    86,573
    
    
    
    85,988
    
    
    
    77,481
    
    
    
    72,497
    
    
    
    82,381
    
    
    
    4,192
    
    
    
    5.1Non-interest income:Rental income
    
    
    1,590
    
    
    
    1,590
    
    
    
    1,591
    
    
    
    1,591
    
    
    
    1,591
    
    
    
    (1
    )
    
    
    (0.1
    )Collateral fees
    
    
    976
    
    
    
    907
    
    
    
    965
    
    
    
    181
    
    
    
    177
    
    
    
    799
    
    
    
    N.M.Total non-interest income
    
    
    2,566
    
    
    
    2,497
    
    
    
    2,556
    
    
    
    1,772
    
    
    
    1,768
    
    
    
    798
    
    
    
    45.1Non-interest expense:Servicing costs
    
    
    2,730
    
    
    
    2,717
    
    
    
    2,899
    
    
    
    2,864
    
    
    
    2,735
    
    
    
    (5
    )
    
    
    (0.2
    )Depreciation
    
    
    1,045
    
    
    
    1,086
    
    
    
    1,102
    
    
    
    1,137
    
    
    
    1,235
    
    
    
    (190
    )
    
    
    (15.4
    )Loss on disposal of fixed assets
    
    
    4
    
    
    
    45
    
    
    
    388
    
    
    
    145
    
    
    
    155
    
    
    
    (151
    )
    
    
    (97
    )Other
    
    
    288
    
    
    
    205
    
    
    
    169
    
    
    
    241
    
    
    
    170
    
    
    
    118
    
    
    
    69.4Total non-interest expense
    
    
    4,067
    
    
    
    4,053
    
    
    
    4,558
    
    
    
    4,387
    
    
    
    4,295
    
    
    
    (228
    )
    
    
    (5.3
    )Income before provision for income taxes
    
    
    85,072
    
    
    
    84,432
    
    
    
    75,479
    
    
    
    69,882
    
    
    
    79,854
    
    
    
    5,218
    
    
    
    6.5Provision for income taxes
    
    
    251
    
    
    
    173
    
    
    
    25
    
    
    
    98
    
    
    
    58
    
    
    
    193
    
    
    
    N.M.Net income
    
    $
    84,821
    
    
    $
    84,259
    
    
    $
    75,454
    
    
    $
    69,784
    
    
    $
    79,796
    
    
    $
    5,025
    
    
    
    6.3Dividends declared on preferred securities
    
    
    (10,050
    )
    
    
    (9,023
    )
    
    
    (8,256
    )
    
    
    (7,305
    )
    
    
    (6,208
    )
    
    
    (3,842
    )
    
    
    (61.9
    )Net income applicable to
common shares(1)
    
    $
    74,771
    
    
    $
    75,236
    
    
    $
    67,198
    
    
    $
    62,479
    
    
    $
    73,588
    
    
    $
    1,183
    
    
    
    1.6
    %
 
 (1)
    
    All of HPCIs common stock is owned by Huntington, HCF, HPCII, and Holdings and therefore, net income per share is not presented.     31




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##### 



Item 7A: Quantitative and Qualitative Disclosures about Market Risk
  
 Item 8: Financial Statements and Supplementary Data
  PageReport of Management
    
    
    33Report of Independent Registered Public Accounting Firm
    
    
    35Consolidated Balance Sheets
    
    
    36Consolidated Statements of Income
    
    
    37Consolidated Statement of Changes in Shareholders Equity
    
    
    38Consolidated Statements of Cash Flows
    
    
    39Notes to Consolidated Financial Statements
    
    
    40
  32




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##### Table of Contents



Report of Management
   Report on Managements Assessment of Internal Control Over Financial Reporting
 Internal ControlIntegrated Framework
 By:
    
    /s/ Donald R. Kimble

Donald R. Kimble
    
    
    
    By:
    
    /s/ Thomas P. Reed

Thomas P. ReedPresident
    
    
    
    
    
    Vice President(Principal Executive Officer)
    
    
    
    
    
    (Principal Financial and Accounting Officer)
  33




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 Internal ControlIntegrated Framework
    Internal ControlIntegrated Framework Internal ControlIntegrated Framework
  
   34




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
    Internal ControlIntegrated Framework
 
 
 35




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##### Table of Contents



Huntington Preferred Capital, Inc.
 
 Consolidated Balance Sheets
 December 31,
    
    December 31,(in thousands of dollars, except share data)
    
    2005
    
    2004AssetsCash and interest bearing deposits with The Huntington National Bank
    
    $
    810,102
    
    
    $
    800,253Due from The Huntington National Bank
    
    
    46,321
    
    
    
    175Loan participation interests:Commercial
    
    
    46,559
    
    
    
    106,179Commercial real estate
    
    
    3,311,275
    
    
    
    3,738,930Consumer
    
    
    997,094
    
    
    
    819,250Residential real estate
    
    
    157,397
    
    
    
    224,914Total loan participation interests
    
    
    4,512,325
    
    
    
    4,889,273Allowance for loan losses
    
    
    (57,530
    )
    
    
    (61,146
    )Net loan participation interests
    
    
    4,454,795
    
    
    
    4,828,127Premises and equipment
    
    
    21,683
    
    
    
    26,635Accrued income and other assets
    
    
    20,984
    
    
    
    18,401Total assets
    
    $
    5,353,885
    
    
    $
    5,673,591Liabilities and shareholders equityLiabilitiesAllowance for unfunded loan participation commitments
    
    $
    4,135
    
    
    $
    3,765Dividends and distributions payable
    
    
    700,000
    
    
    
    600,000Other liabilities
    
    
    290
    
    
    
    50Total liabilities
    
    
    704,425
    
    
    
    603,815Shareholders equityPreferred securities, Class A, 8.000% noncumulative,
non-exchangeable; $1,000 par and liquidation value per share;
1,000 shares authorized, issued and outstanding
    
    
    1,000
    
    
    
    1,000Preferred securities, Class B, variable-rate noncumulative and
conditionally exchangeable; $1,000 par and liquidation
value per share; authorized 500,000 shares; 400,000
shares issued and outstanding
    
    
    400,000
    
    
    
    400,000Preferred securities, Class C, 7.875% noncumulative and
conditionally exchangeable; $25 par and liquidation
value; 2,000,000 shares authorized, issued, and outstanding
    
    
    50,000
    
    
    
    50,000Preferred securities, Class D, variable-rate noncumulative and
conditionally exchangeable; $25 par and liquidation
value; 14,000,000 shares authorized, issued, and outstanding
    
    
    350,000
    
    
    
    350,000Preferred securities, $25 par, 10,000,000 shares
authorized; no shares issued or outstanding
    
    
    
    
    
    
    Common stock  without par value; 14,000,000 shares authorized,
issued and outstanding
    
    
    3,848,460
    
    
    
    4,268,776Retained earnings
    
    
    
    
    
    
    Total shareholders equity
    
    
    4,649,460
    
    
    
    5,069,776Total liabilities and shareholders equity
    
    $
    5,353,885
    
    
    $
    5,673,591
 See notes to consolidated financial statements.
 36




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##### Table of Contents



Huntington Preferred Capital, Inc.
 
 Consolidated Statements of Income
 Year EndedDecember 31,(in thousands of dollars)
    
    2005
    
    2004
    
    2003Interest and fee incomeInterest on loan participation interests:Commercial
    
    $
    4,632
    
    
    $
    7,810
    
    
    $
    11,042Commercial real estate
    
    
    209,801
    
    
    
    182,047
    
    
    
    185,750Consumer
    
    
    60,345
    
    
    
    50,543
    
    
    
    49,523Residential real estate
    
    
    10,304
    
    
    
    13,474
    
    
    
    14,095Total loan participation interest income
    
    
    285,082
    
    
    
    253,874
    
    
    
    260,410Fees from loan participation interests
    
    
    1,979
    
    
    
    2,337
    
    
    
    7,736Interest on deposits with The Huntington National Bank
    
    
    15,682
    
    
    
    6,004
    
    
    
    6,255Total interest and fee income
    
    
    302,743
    
    
    
    262,215
    
    
    
    274,401Reduction in allowances for credit losses
    
    
    (19,796
    )
    
    
    (31,591
    )
    
    
    (41,219
    )Interest income after reduction in allowance for credit losses
    
    
    322,539
    
    
    
    293,806
    
    
    
    315,620Non-interest income:Rental income
    
    
    6,362
    
    
    
    6,503
    
    
    
    6,183Collateral fees
    
    
    3,029
    
    
    
    746
    
    
    
    718Total non-interest income
    
    
    9,391
    
    
    
    7,249
    
    
    
    6,901Non-interest expense:Servicing costs
    
    
    11,210
    
    
    
    9,923
    
    
    
    7,559Depreciation and amortization
    
    
    4,370
    
    
    
    5,273
    
    
    
    5,527Loss on disposal of fixed assets
    
    
    582
    
    
    
    218
    
    
    
    336Other
    
    
    903
    
    
    
    846
    
    
    
    464Total non-interest expense
    
    
    17,065
    
    
    
    16,260
    
    
    
    13,886Income before provision for income taxes
    
    
    314,865
    
    
    
    284,795
    
    
    
    308,635Provision for income taxes
    
    
    547
    
    
    
    253
    
    
    
    96Net income
    
    $
    314,318
    
    
    $
    284,542
    
    
    $
    308,539Dividends declared on preferred securities
    
    
    (34,634
    )
    
    
    (20,744
    )
    
    
    (18,911
    )Net income applicable to common shares
    
    $
    279,684
    
    
    $
    263,798
    
    
    $
    289,628
 See notes to consolidated financial statements.
 37




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##### Table of Contents



Huntington Preferred Capital, Inc.
 
 Consolidated Statements of Changes in Shareholders Equity
 Preferred, Class A
    
    Preferred, Class B
    
    Preferred, Class C(in thousands)
    
    Shares
    
    Securities
    
    Shares
    
    Securities
    
    Shares
    
    SecuritiesBalance, January 1, 2003
    
    
    1
    
    
    $
    1,000
    
    
    
    400
    
    
    $
    400,000
    
    
    
    2,000
    
    
    $
    50,000Comprehensive Income:Net incomeTotal comprehensive incomeBalance, December 31, 2003
    
    
    1
    
    
    $
    1,000
    
    
    
    400
    
    
    $
    400,000
    
    
    
    2,000
    
    
    $
    50,000Comprehensive Income:Net incomeTotal comprehensive incomeBalance, December 31, 2004
    
    
    1
    
    
    $
    1,000
    
    
    
    400
    
    
    $
    400,000
    
    
    
    2,000
    
    
    $
    50,000Comprehensive Income:Net incomeTotal comprehensive incomeBalance, December 31, 2005
    
    
    1
    
    
    $
    1,000
    
    
    
    400
    
    
    $
    400,000
    
    
    
    2,000
    
    
    $
    50,000
 Preferred, Class D
    
    
    Preferred
    
    
    Common
    
    
    Retained(in thousands)
    
    Shares
    
    
    Securities
    
    
    Shares
    
    
    Securities
    
    
    Shares
    
    
    Stock
    
    
    Earnings
    
    
    TotalBalance, January 1, 2003
    
    
    14,000
    
    
    $
    350,000
    
    
    
    
    
    
    $
    
    
    
    
    14,000
    
    
    $
    4,715,351
    
    
    $
    
    
    
    $
    5,516,351Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    308,539
    
    
    
    308,539Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    308,539Dividends declared on Class A preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (80
    )
    
    
    (80
    )Dividends declared on Class B preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,910
    )
    
    
    (4,910
    )Dividends declared on Class C preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,938
    )
    
    
    (3,938
    )Dividends declared on Class D preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,983
    )
    
    
    (9,983
    )Dividends declared on common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (289,628
    )
    
    
    (289,628
    )Return of capital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (110,373
    )
    
    
    
    
    
    
    (110,373
    )Balance, December 31, 2003
    
    
    14,000
    
    
    $
    350,000
    
    
    
    
    
    
    $
    
    
    
    
    14,000
    
    
    $
    4,604,978
    
    
    $
    
    
    
    $
    5,405,978Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    284,542
    
    
    
    284,542Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    284,542Dividends declared on Class A preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (80
    )
    
    
    (80
    )Dividends declared on Class B preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,887
    )
    
    
    (5,887
    )Dividends declared on Class C preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,938
    )
    
    
    (3,938
    )Dividends declared on Class D preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,839
    )
    
    
    (10,839
    )Dividends declared on common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (263,798
    )
    
    
    (263,798
    )Return of capital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (336,202
    )
    
    
    
    
    
    
    (336,202
    )Balance, December 31, 2004
    
    
    14,000
    
    
    $
    350,000
    
    
    
    
    
    
    $
    
    
    
    
    14,000
    
    
    $
    4,268,776
    
    
    $
    
    
    
    $
    5,069,776Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    314,318
    
    
    
    314,318Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    314,318Dividends declared on Class A preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (80
    )
    
    
    (80
    )Dividends declared on Class B preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,296
    )
    
    
    (13,296
    )Dividends declared on Class C preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,938
    )
    
    
    (3,938
    )Dividends declared on Class D preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,320
    )
    
    
    (17,320
    )Dividends declared on common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (279,684
    )
    
    
    (279,684
    )Return of capital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (420,316
    )
    
    
    
    
    
    
    (420,316
    )Balance, December 31, 2005
    
    
    14,000
    
    
    $
    350,000
    
    
    
    
    
    
    $
    
    
    
    
    14,000
    
    
    $
    3,848,460
    
    
    $
    
    
    
    $
    4,649,460
 See notes to consolidated financial statements.
 38




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##### Table of Contents



Huntington Preferred Capital, Inc.
 
 Consolidated Statements of Cash Flows
 Year EndedDecember 31,(in thousands of dollars)
    
    2005
    
    2004
    
    2003Operating activitiesNet Income
    
    $
    314,318
    
    
    $
    284,542
    
    
    $
    308,539Adjustments to reconcile net income to net
cash provided by operating activities:Reduction of allowances for credit losses
    
    
    (19,796
    )
    
    
    (31,591
    )
    
    
    (41,219
    )Depreciation and amortization
    
    
    4,370
    
    
    
    5,273
    
    
    
    5,527Deferred income tax expense (benefit)
    
    
    178
    
    
    
    (1,307
    )
    
    
    (84
    )Loss on disposal of fixed assets
    
    
    582
    
    
    
    218
    
    
    
    336(Increase) decrease in due from The Huntington National Bank
    
    
    (24,404
    )
    
    
    13,477
    
    
    
    (6,212
    )Increase (decrease) in other liabilities
    
    
    239
    
    
    
    50
    
    
    
    (670
    )Other, net
    
    
    (1,150
    )
    
    
    2,936
    
    
    
    22,002Net cash provided by operating activities
    
    
    274,337
    
    
    
    273,598
    
    
    
    288,219Investing activitiesParticipation interests acquired
    
    
    (2,885,454
    )
    
    
    (4,273,356
    )
    
    
    (5,967,359
    )Sales and repayments of loans underlying
participation interests
    
    
    3,255,600
    
    
    
    4,696,670
    
    
    
    5,687,784Proceeds from the sale of fixed assets
    
    
    
    
    
    
    
    
    
    
    99Net cash provided by (used for) investing activities
    
    
    370,146
    
    
    
    423,314
    
    
    
    (279,476
    )Financing activitiesDividends paid on preferred securities
    
    
    (34,634
    )
    
    
    (20,744
    )
    
    
    (18,911
    )Dividends paid on common stock
    
    
    (263,798
    )
    
    
    
    
    
    
    (289,628
    )Return of capital to common shareholders
    
    
    (336,202
    )
    
    
    
    
    
    
    (110,373
    )Net cash used for financing activities
    
    
    (634,634
    )
    
    
    (20,744
    )
    
    
    (418,912
    )Change in cash and cash equivalents
    
    
    9,849
    
    
    
    676,168
    
    
    
    (410,169
    )Cash and cash equivalents at beginning of year
    
    
    800,253
    
    
    
    124,085
    
    
    
    534,254Cash and cash equivalents at end of period
    
    $
    810,102
    
    
    $
    800,253
    
    
    $
    124,085Supplemental information:Income taxes paid
    
    $
    40
    
    
    $
    1,886
    
    
    $
    611Dividends and return of capital declared, not paid
    
    
    700,000
    
    
    
    600,000
    
    
    
    Change in loan participation activity due from Huntington
National Bank
    
    
    21,742
    
    
    
    
    
    
    
    
 See notes to consolidated financial statements.
 39




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##### Table of Contents



Notes to the Consolidated Financial Statements
 Note 1  Significant Accounting Policies
 Basis of Presentation:
 Business:
 Use of Estimates:
 Due from The Huntington National Bank :
 Loan participation interests:
  40




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##### Table of Contents



Accounting for Nonrefundable
Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Cost of Leases
  Allowances for Credit Losses (ACL):
 Accounting by Creditors for Impairment of a Loan Accounting for Contingencies
 Transaction Reserve
   41




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##### Table of Contents



Economic Reserve
     Premises and Equipment:
 Net Income per Share:
 Income Taxes:
 Statement of Cash Flows:
 42




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##### Table of Contents



Note 2  New Accounting Pronouncements
 Accounting for Certain Loans or Debt Securities Acquired
in a Transfer
 Accounting for Conditional Asset Retirement Obligations Accounting for Asset Retirement Obligations
 Accounting Changes and Error
Corrections  a replacement of APB Opinion No. 20 and FASB Statement No. 3 Accounting Changes Reporting Accounting Changes in Interim Financial Statements
 Note 3  Loan Participation Interests
  (in thousands of dollars)
    
    2005
    
    2004Commercial
    
    $
    46,559
    
    
    $
    106,179Commercial real estate
    
    
    3,311,275
    
    
    
    3,738,930Consumer
    
    
    997,094
    
    
    
    819,250Residential real estate
    
    
    157,397
    
    
    
    224,914Total Loan Participation Interests
    
    $
    4,512,325
    
    
    $
    4,889,273
  43




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##### Table of Contents



Participations in Non-Performing Loans and Past Due Loans
  (in thousands of dollars)
    
    2005
    
    2004Commercial
    
    $
    147
    
    
    $
    425Commercial real estate
    
    
    20,746
    
    
    
    6,990Consumer
    
    
    2,799
    
    
    
    2,692Residential real estate
    
    
    2,923
    
    
    
    4,205Total Participations in Non-Accrual Loans
    
    $
    26,615
    
    
    $
    14,312Participations in Accruing Loans Past Due 90 Days or More
    
    $
    3,188
    
    
    $
    11,686
  Note 4  Allowances for Credit Losses (ACL)
   (in thousands of dollars)
    
    2005
    
    2004
    
    2003ALL balance, beginning of period
    
    $
    61,146
    
    
    $
    84,532
    
    
    $
    140,353Allowance of loan participations acquired
    
    
    25,071
    
    
    
    21,201
    
    
    
    45,397Net loan losses
    
    
    (8,521
    )
    
    
    (9,231
    )
    
    
    (59,999
    )Reduction in ALL
    
    
    (19,228
    )
    
    
    (35,356
    )
    
    
    (41,219
    )Economic reserve transfer to AULPC
    
    
    (938
    )
    
    
    
    
    
    
    ALL balance, end of period
    
    $
    57,530
    
    
    $
    61,146
    
    
    $
    84,532AULPC balance, beginning of period
    
    $
    3,765
    
    
    $
    
    
    

    $
    (Reduction in) provision for AULPC
    
    
    (568
    )
    
    
    3,765
    
    
    
    Economic reserve transfer from ALL
    
    
    938
    
    
    
    
    
    
    
    AULPC balance, end of period
    
    $
    4,135
    
    
    $
    3,765
    
    
    $
    Total ACL
    
    $
    61,665
    
    
    $
    64,911
    
    
    $
    84,532Recorded Balance of Impaired Loans, at end of year(1):With specific reserves assigned to the loan balances
    
    $
    15,038
    
    
    $
    6,047
    
    
    $
    18,162With no specific reserves assigned to the loan balances
    
    
    7,816
    
    
    
    7,169
    
    
    
    Total
    
    $
    22,854
    
    
    $
    13,216
    
    
    $
    18,162Average Balance of Impaired Loans for the Year (1)
    
    $
    13,863
    
    
    $
    10,074
    
    
    $
    39,866Allowance for Loan Losses on Impaired Loans (1)
    
    
    4,802
    
    
    
    3,617
    
    
    
    5,583
 
 (1)
    
    Includes impaired commercial and commercial real estate loans. A loan is
impaired when it is probable that Huntington will be unable to collect all amounts due
according to the contractual terms of the loan agreement. The amount of interest recognized on
impaired loans while they were considered impaired was less than $0.1 million in 2005 and $0.2
million in 2004. There was no interest recognized in 2003 on impaired loans while they were
considered impaired.
  44




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##### Table of Contents



Note 5  Premises and Equipment
  (in thousands of dollars)
    
    2005
    
    2004Land and land improvements
    
    $
    365
    
    
    $
    365Buildings
    
    
    533
    
    
    
    533Leasehold improvements
    
    
    101,056
    
    
    
    103,235Total premises and equipment
    
    
    101,954
    
    
    
    104,133Accumulated depreciation and amortization
    
    
    (80,271
    )
    
    
    (77,498
    )Net Premises and Equipment
    
    $
    21,683
    
    
    $
    26,635
  Note 6  Dividends
   i.e.
 i.e.
 45




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##### Table of Contents



(in thousands of dollars)
    
    2005
    
    2004
    
    2003Class A preferred securities
    
    $
    80
    
    
    $
    80
    
    
    $
    80Class B preferred securities
    
    
    13,296
    
    
    
    5,887
    
    
    
    4,910Class C preferred securities
    
    
    3,938
    
    
    
    3,938
    
    
    
    3,938Class D preferred securities
    
    
    17,320
    
    
    
    10,839
    
    
    
    9,983Total preferred dividends declared
    
    $
    34,634
    
    
    $
    20,744
    
    
    $
    18,911
   Note 7  Related Party Transactions
    July 1, 2005
    
    July 1, 2004
    
    January 1, 2004thru
    
    thru
    
    thruDecember 31, 2005
    
    June 30, 2005
    
    June 30, 2004Commercial & Commercial Real Estate
    
    
    0.125
    %
    
    
    0.125
    %
    
    
    0.125
    %Consumer
    
    
    0.650
    %
    
    
    0.750
    %
    
    
    0.320
    %Residential Real Estate
    
    
    0.267
    %
    
    
    0.267
    %
    
    
    0.299
    %
   46




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##### Table of Contents



Number ofCommon
    
    Number of Preferred SecuritiesShareholder:
    
    Shares
    
    Class A
    
    Class B
    
    Class C
    
    Class DHeld by related parties:HPCII
    
    
    4,550,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    HCF
    
    
    6,580,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Holdings
    
    
    2,851,333
    
    
    
    895
    
    
    
    
    
    
    
    
    
    
    
    14,000,000HPC Holdings-II, Inc.
    
    
    
    
    
    
    
    
    
    
    400,000
    
    
    
    
    
    
    
    Huntington
    
    
    18,667
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total held by related parties
    
    
    14,000,000
    
    
    
    895
    
    
    
    400,000
    
    
    
    
    
    
    
    14,000,000Other shareholders
    
    
    
    
    
    
    105
    
    
    
    
    
    
    
    2,000,000
    
    
    
    Total shares outstanding
    
    
    14,000,000
    
    
    
    1,000
    
    
    
    400,000
    
    
    
    2,000,000
    
    
    
    14,000,000
      /
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##### Table of Contents



Note 8
 Quarterly Results of Operations ( Unaudited )
  (in thousands of dollars)
    
    Fourth
    
    Third
    
    Second
    
    First2005Interest and fee income
    
    $
    82,164
    
    
    $
    77,882
    
    
    $
    73,641
    
    
    $
    69,056Reduction in allowance for credit losses
    
    
    (4,409
    )
    
    
    (8,106
    )
    
    
    (3,840
    )
    
    
    (3,441
    )Non-interest income
    
    
    2,566
    
    
    
    2,497
    
    
    
    2,556
    
    
    
    1,772Non-interest expense
    
    
    4,067
    
    
    
    4,053
    
    
    
    4,558
    
    
    
    4,387Income before provision for income taxes
    
    
    85,072
    
    
    
    84,432
    
    
    
    75,479
    
    
    
    69,882Provision for income taxes
    
    
    251
    
    
    
    173
    
    
    
    25
    
    
    
    98Net income
    
    
    84,821
    
    
    
    84,259
    
    
    
    75,454
    
    
    
    69,784Dividends declared on preferred securities
    
    
    (10,050
    )
    
    
    (9,023
    )
    
    
    (8,256
    )
    
    
    (7,305
    )Net income applicable to common shares
    
    $
    74,771
    
    
    $
    75,236
    
    
    $
    67,198
    
    
    $
    62,4792004Interest and fee income
    
    $
    69,228
    
    
    $
    65,291
    
    
    $
    63,946
    
    
    $
    63,750Reduction in allowance for credit losses
    
    
    (13,153
    )
    
    
    (6,874
    )
    
    
    (9,301
    )
    
    
    (2,263
    )Non-interest income
    
    
    1,768
    
    
    
    1,770
    
    
    
    2,045
    
    
    
    1,666Non-interest expense
    
    
    4,295
    
    
    
    4,389
    
    
    
    3,945
    
    
    
    3,631Income before provision for income taxes
    
    
    79,854
    
    
    
    69,546
    
    
    
    71,347
    
    
    
    64,048Provision for income taxes
    
    
    58
    
    
    
    88
    
    
    
    84
    
    
    
    23Net income
    
    
    79,796
    
    
    
    69,458
    
    
    
    71,263
    
    
    
    64,025Dividends declared on preferred securities
    
    
    (6,208
    )
    
    
    (5,406
    )
    
    
    (4,488
    )
    
    
    (4,642
    )Net income applicable to common shares
    
    $
    73,588
    
    
    $
    64,052
    
    
    $
    66,775
    
    
    $
    59,383
 Note 9  Fair Value of Financial Instruments
  Cash and interest-bearing deposits, and due from The Huntington National Bank
 Loan participation interests
 Note 10  Commitments and Contingencies
  48




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##### Table of Contents



Note 11  Formal Regulatory Supervisory Agreements
   Note 12  Segment Reporting
  49




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##### Table of Contents



Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A: Controls and Procedures
 Disclosure Controls and Procedures
  Internal Controls Over Financial Reporting
  Changes in Internal Control Over Financial Reporting
  
 Item 9B: Other Information
  
 Part III
 
 Item 10: Directors and Executive Officers of the Registrant
  
 Item 11: Executive Compensation
  
 Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  
 Item 13: Certain Relationships and Related Transactions
  50




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##### Table of Contents



Item 14: Principal Accounting Fees and Services
  
 Part IV
 
 Item 15: Exhibits and Financial Statement Schedules
 (a)
    
    The following documents are filed as part of this report:
 (1)
    
    The report of independent registered public accounting firm and consolidated financial
statements appearing in Item 8.(2)
    
    HPCI 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 53 and 54 of this
Form 10-K.
 (b)
    
    The exhibits to this Form 10-K begin on page 55.(c)
    
    See Item 15 (a) (2) above.
 51




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##### Table of Contents



Signatures
  
 By:
    
    /s/ Donald R. Kimble
    
    
    
    By:
    
    /s/ Thomas P. ReedDonald R. Kimble
    
    
    
    
    
    Thomas P. ReedPresident and Director
    
    
    
    
    
    Vice President and Director(Principal Executive Officer)
    
    
    
    
    
    (Principal Financial and Accounting Officer)
  Richard A. Cheap *

Richard A. Cheap
    
    DirectorStephen E. Dutton *

Stephen E. Dutton
    
    DirectorR. Larry Hoover *

R. Larry Hoover
    
    DirectorEdward J. Kane *

Edward J. Kane
    
    DirectorRoger E. Kephart *

Roger E. Kephart
    
    DirectorJames D. Robbins *

James D. Robbins
    
    DirectorKaren D. Roggenkamp *

Karen D. Roggenkamp
    
    Director/s/ Donald R. Kimble

Donald R. Kimble
  52




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##### Table of Contents



Exhibit Index
  3. (i).
    
    Amended and Restated Articles of Incorporation (previously filed as Exhibit 3(a)(ii) to
Amendment No. 4 to Registration Statement of Form S-11 (File No. 333-61182), filed with the
Securities and Exchange Commission on October 12, 2001, and incorporated herein by reference.)3. (ii).
    
    Code of Regulations (previously filed as Exhibit 3(b) to the Registrants Registration
Statement of Form S-11 (File No. 333-61182), filed with the Securities and Exchange Commission
on May 17, 2001, and incorporated herein by reference.)4.
    
    Specimen of certificate representing Class C preferred securities, previously filed as
Exhibit 4 to the Registrants Amendment No. 1 to Registration Statement of Form S-11 (File No.
333-61182), filed with the Securities and Exchange Commission on May 31, 2001, and
incorporated herein by reference.10.(a).
    
    Third Amended and Restated Loan Participation Agreement, dated May 12, 2005, between The
Huntington National Bank and Huntington Preferred Capital Holdings, Inc. (previously filed as
Exhibit 10(a) to Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, and
incorporated herein by reference).(b).
    
    Third Amended and Restated Loan Subparticipation Agreement, dated May 12, 2005, between
Huntington Preferred Capital Holdings, Inc. and Huntington Preferred Capital, Inc.
(previously filed as Exhibit 10(b) to Quarterly Report on Form 10-Q for the quarter ended
March 31, 2005, and incorporated herein by reference).(c).
    
    Second Amended and Restated Loan Participation Agreement, dated May 12, 2005, between The
Huntington National Bank and Huntington Preferred Capital, Inc. (previously filed as Exhibit
10(c) to Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, and
incorporated herein by reference).(d).
    
    Subscription Agreement, dated October 15, 2001, for the Class C preferred securities
between Huntington Preferred Capital, Inc., The Huntington National Bank, and Huntington
Preferred Capital Holdings, Inc. (previously filed as Exhibit 10(f) to Annual Report on Form
10-K for the year ended December 31, 2001, and incorporated herein by reference).(e).
    
    Subscription Agreement, dated October 15, 2001, for the Class D preferred securities
between Huntington Preferred Capital, Inc., The Huntington National Bank, and Huntington
Preferred Capital Holdings, Inc. (previously filed as Exhibit 10(g) to Annual Report on Form
10-K for the year ended December 31, 2001, and incorporated herein by reference).(f).
    
    Leasehold Improvements Lease dated August 12, 2004 between HPCLI, Inc. and The Huntington
National Bank (previously filed as Exhibit 10(a) to Quarterly Report on Form 10-Q for the
quarter ended June 30, 2004, and incorporated herein by reference).(g).
    
    Amended and Restated Agreement
dated June 1, 2005 between Huntington Preferred Capital,
Inc. and The Huntington National Bank to govern the terms on which Huntington Preferred Capital
Inc. may pledge certain of its assets as collateral for the Huntington National Banks
borrowings from the Federal Home Loan Bank of Cincinnati under a secured revolving loan
facility (previously filed as Exhibit 99.1 to Form 8-K
dated June 1, 2005, and incorporated herein by reference).(h).
    
    Limited Waiver of Contract Provision, dated August 11, 2005, with Huntington Preferred
Capital Holdings, Inc., Huntington Preferred Capital, Inc., and The Huntington National
Bank (previously filed as Exhibit 10(e) to Quarterly Report on Form 10-Q for the quarter
ended June 30, 2005, and incorporated herein by reference).14.
    
    Code of Business Conduct and Ethics dated January 14, 2003 and revised on February 14, 2006
and Financial Code of Ethics for Chief Executive Officer and Senior Financial Officers,
adopted January 18, 2003 and
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##### Table of Contents



revised on April 19, 2005, as applicable to all of its affiliated companies, and ratified by
HPCIs Board of Directors on March 25, 2004, are available on Huntington Bancshares
Incorporateds website at http://www.investquest.com/iq/h/hban/main/cg/cg.htm.21.
    
    List of Subsidiaries.24.
    
    Power of Attorney.31.(a).
    
    Rule 13a-14(a) Certification  Chief Executive Officer.31.(b).
    
    Rule 13a-14(a) Certification  Chief Financial Officer.32.(a).
    
    Section 1350 Certification  Chief Executive Officer.32.(b).
    
    Section 1350 Certification  Chief Financial Officer.99.(a).
    
    Opinion of Ernst & Young LLP, Independent Registered Public Accounting Firm.99.(b).
    
    Consolidated Financial Statements of Huntington Bancshares Incorporated as of and for the year ended December 31, 2005.
 54