##### Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



| | For the fiscal year ended December 31, 2006
| | -------------------------------------------

Commission File
No. 1-14473

LOGO

Sky Financial Group, Inc.

(Exact Name of Registrant as Specified in its Charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Ohio                                                           |  | 34-1372535                          
|(State of Other Jurisdiction of Incorporation or Organization) |  | (IRS Employer Identification Number)



|                                             |  |           
|-------------------------------------------- |  | ----------
|221 South Church Street, Bowling Green, Ohio |  | 43402     
|(Address of Principal Executive Office)      |  | (Zip Code)

(419) 327-6300

(Registrants Telephone Number)

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Securities registered pursuant
to Section 12 (b) of the Act: None

Securities registered pursuant to Section 12 (g) of the Act:

Common Stock, without par value

(Title of class)

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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes  x  No   ̈

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes   ̈  No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x  No   ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive
proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is large accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated
filer  x  Accelerated filer   ̈  Non-accelerated filer   ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes   ̈  No  x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30,
2006, the last business day of the registrants most recently completed second fiscal quarter: $2,353,465,718.

The number of shares outstanding of the
Registrants common stock, without par value was 117,517,372 at February 9, 2007.



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##### Table of Contents

|              |  |                                                                                                             |  |          
|------------- |  | ----------------------------------------------------------------------------------------------------------- |  | ---------
|INDEX         |  |                                                                                                             |  | 10-K Page
|              |  |                                                                                                            
|PART I        |  |                                                                                                             |  |          
|              |  |                                                                                                            
|Item 1.       |  | Business                                                                                                    |  | 3        
|              |  |                                                                                                            
|Item 1A.      |  | Risk Factors                                                                                                |  | 7        
|              |  |                                                                                                            
|Item 1B.      |  | Unresolved Staff Comments                                                                                   |  | 9        
|              |  |                                                                                                            
|Item 2.       |  | Properties                                                                                                  |  | 9        
|              |  |                                                                                                            
|Item 3.       |  | Legal Proceedings                                                                                           |  | 9        
|              |  |                                                                                                            
|Item 4.       |  | Submission of Matters to a Vote of Security Holders                                                         |  | 10       
|              |  |                                                                                                            
|PART II       |  |                                                                                                             |  |          
|              |  |                                                                                                            
|Item 5.       |  | Market for Registrants Common Equity, Related StockholderMatters and Issuer Purchases of Equity Securities |  | 11       
|              |  |                                                                                                            
|Item 6.       |  | Selected Financial Data                                                                                     |  | 12       
|              |  |                                                                                                            
|Item 7.       |  | Managements Discussion and Analysis of FinancialCondition and Results of Operation                         |  | 13       
|              |  |                                                                                                            
|Item 7A.      |  | Quantitative and Qualitative Disclosures About Market Risk                                                  |  | 33       
|              |  |                                                                                                            
|Item 8.       |  | Financial Statements and Supplementary Data                                                                 |  | 34       
|              |  |                                                                                                            
|Item 9.       |  | Changes in and Disagreements with Accountants onAccounting and Financial Disclosure                         |  | 68       
|              |  |                                                                                                            
|Item 9A.      |  | Controls and Procedures                                                                                     |  | 68       
|              |  |                                                                                                            
|Item 9B.      |  | Other Information                                                                                           |  | 70       
|              |  |                                                                                                            
|PART III      |  |                                                                                                             |  |          
|              |  |                                                                                                            
|Item 10.      |  | Directors and Executive Officers of Registrant                                                              |  | 70       
|              |  |                                                                                                            
|Item 11.      |  | Executive Compensation                                                                                      |  | 73       
|              |  |                                                                                                            
|Item 12.      |  | Security Ownership of Certain Beneficial Owners and Management                                              |  | 91       
|              |  |                                                                                                            
|Item 13.      |  | Certain Relationships and Related Transactions                                                              |  | 92       
|              |  |                                                                                                            
|Item 14.      |  | Principal Accounting Fees and Services                                                                      |  | 92       
|              |  |                                                                                                            
|PART IV       |  |                                                                                                             |  |          
|              |  |                                                                                                            
|Item 15.      |  | Exhibits and Financial Statement Schedules                                                                  |  | 93       
|              | 
|Exhibit Index |  | 93                                                                                                         
|              | 
|Signatures    |  | 95                                                                                                         



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##### Table of Contents

PART I

Item 1.Business

Sky Financial Group, Inc. (Sky Financial) is a $17.7 billion financial holding company headquartered in Bowling
Green, Ohio that owns one commercial bank primarily engaged in commercial and consumer banking business at over 330 financial centers and over 400 ATMs located in Ohio, western Pennsylvania, central Indiana, southern Michigan, and northern West
Virginia. Sky Financial also operates businesses relating to insurance, trust and other related financial services.

On December 20,
2006, Sky Financial Group and Huntington Bancshares Incorporated (Huntington) announced the signing of a definitive agreement to merge the two companies in a stock (90%) and cash (10%) transaction valued at approximately $3.6 billion.
Under the terms of the agreement, Sky Financial Group shareholders will receive 1.098 shares of Huntington common stock, on a tax-free basis, and a taxable cash payment of $3.023 for each share of Sky Financial Group. The merger was unanimously
approved by both companies boards of directors and is expected to close early in the 2007 third quarter, pending customary regulatory approvals, as well as the approval of Huntingtons and Sky Financial Groups shareholders.

Since 2005, Sky Financial has completed the following acquisitions:

|n |  | On November 15, 2006, Sky Financial acquired Wells River Bancorp, Inc. and its wholly-owned subsidiary Perpetual Savings Bank, a $71 million bank that operated three
full-service branches in Columbiana County, Ohio.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|n |  | On October 17, 2006, Sky Financial acquired Union Federal Bank of Indianapolis and its parent company, Waterfield Mortgage Company, Inc., Ft. Wayne, Indiana. Sky
Financial purchased Waterfields retail and commercial banking business conducted primarily through Union Federal Bank, which added approximately $2.3 billion in assets. Sky Financial also acquired Waterfield Insurance as a part of the
transaction.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|n |  | On September 30, 2006, Sky Financial acquired Lindig Benefits Consultants located in Worthington, Ohio.
|- |  | -------------------------------------------------------------------------------------------------------

|n |  | On January 3, 2006, Sky Financial acquired the Peter B. Burke Agency, Inc. located in Pittsburgh, Pennsylvania.
|- |  | ---------------------------------------------------------------------------------------------------------------

|n |  | On November 29, 2005, Sky Financial acquired Falls Bank, an $80 million bank that operated two full-service branches in the Akron, Ohio market.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------

|n |  | On October 4, 2005, Sky Financial acquired Becker-McDowell Agency, Inc. and Steiner Insurance Agency, Inc., both located in Wooster, Ohio.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------

|n |  | On August 1, 2005, Sky Financial acquired B.K.M.s Benefit Design Agency of Ohio, Inc., located in Findlay, Ohio.
|- |  | -----------------------------------------------------------------------------------------------------------------

|n |  | On June 1, 2005, Sky Financial acquired Belmont Bancorp, a $297 million bank holding company headquartered in St. Clairsville, Ohio, and its wholly-owned subsidiary,
Belmont National Bank.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Holding Company

Sky
Financials corporate philosophy is to operate as a locally-oriented, community-based financial service organization, augmented by centralized support in select critical areas. This local market orientation is reflected in its financial centers
and regional advisory boards comprised of local business persons, professionals and other community representatives that assist the bank in responding to local banking needs. Sky Financials bank subsidiary concentrates on client service and
business development, while relying upon the support of Sky Financial for operational functions that are not readily visible to clients and those that are critical to risk management. Asset quality review, mortgage banking activities, financial
reporting, investment activities, internal audit, compliance and funds management are among the functions that are overseen at the holding company level.

Sky Financials market area is economically diverse, with a base of manufacturing, service, transportation and agriculture industries, and thus Sky Financial is not dependent upon any single industry or
employer. Similarly, Sky Financials client base is diverse. The company and its subsidiaries are not dependent upon any single industry or upon any single client.

Sky Financials strategic plan includes organically growing loans and deposits from a focused sales and service culture, increasing fee-based income, strengthening organizational synergies to manage operating
costs, maintaining strong asset quality and acquiring financial institutions, branches and financial service businesses. Sky Financial has sought acquisition partners, which have experienced management, and possess either significant market presence
or have potential for improved profitability through financial management, economies of scale and expanded services.

There is significant
competition among commercial banks in Sky Financials market area. As a result of the deregulation of the financial services industry, Sky Financial also competes with other providers of financial services such as savings and loan associations,
credit unions, consumer finance companies, securities firms, insurance companies, insurance agencies, commercial finance and leasing companies, the mutual funds industry, full-service brokerage firms and discount brokerage firms. Some of the
companys competitors, including certain regional bank holding companies, which have made acquisitions in Sky Financials market area, have greater resources than those of Sky Financial, and as such, may have higher lending limits and may
offer other services not available through the companys bank and non-bank subsidiaries. The bank and non-bank subsidiaries compete on the basis of rates of interest charged on loans, the rates of interest paid for funds, the availability of
services and the responsiveness to the needs of its clients.

Sky Financials executive offices are located at 221 South Church Street,
P.O. Box 428, Bowling Green, Ohio, and its telephone number is 419-327-6300.

The Bank Subsidiary

Sky Bank, headquartered in Salineville, Ohio, had total assets of $17.5 billion at December 31, 2006, and operates financial centers in Ohio, western Pennsylvania, southern
Michigan, central Indiana and northern West Virginia. Sky Bank engages in commercial and consumer banking, including the acceptance of a variety of demand, savings and time deposits and the extension of commercial and consumer loans. Perpetual
Savings Bank merged with Sky Bank on December 8, 2006, and Union Federal Bank of Indianapolis was merged into Sky Bank on November 3, 2006.



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The Financial Services Subsidiaries

Sky
Trust, National Association (Sky Trust), a wholly-owned subsidiary of Sky Financial, is headquartered in Pepper Pike, Ohio, and provides a full range of trust and employee benefit services to its commercial and consumer clients.

Sky Insurance, Inc. (Sky Insurance), Maumee, Ohio, is Sky Financials full service insurance agency offering a variety of insurance products and services to
its clients.

Sky Financial has various other subsidiaries that are not significant to the consolidated entity.

Competition

The financial services industry is highly competitive. Sky Financial and its
subsidiaries compete with other local, regional and national financial service providers, such as other financial holding companies, commercial banks, savings associations, credit unions, finance companies, leasing companies, and brokerage and
insurance firms. The financial services industry is likely to become more competitive as further technological advances enable more companies to provide financial services on a more efficient and convenient basis.

Supervision and Regulation

Introduction

Sky Financial, its banking subsidiary and many of its non-banking subsidiaries, are subject to extensive regulation by federal and state agencies. The regulation of bank holding
companies and their subsidiaries is intended primarily for the protection of depositors, federal deposit insurance funds and the banking system as a whole and not for the protection of security holders. Although Sky Financial is recognized as a
financial holding company, most regulations pertaining to bank holding companies also apply to it. As discussed in more detail below, this regulatory environment, among other things, may restrict Sky Financials ability to diversify into
certain areas of financial services, acquire depository institutions in certain states and pay dividends on its capital stock. It may also require Sky Financial to provide financial support to its banking subsidiary, maintain capital balances in
excess of those desired by management and pay higher deposit insurance premiums as a result of the deterioration in the financial condition of depository institutions in general.

Regulatory Agencies

Holding Company. Sky Financial is a financial holding company subject to regulation under the Bank Holding
Company Act of 1956 (BHCA), as amended, and to inspection, examination and supervision by the Board of Governors of the Federal Reserve System under the BHCA.

Subsidiary Bank. Sky Financials banking subsidiary is subject to regulation and examination primarily by the Ohio Division of Financial Institutions and the Federal Reserve Board and secondarily by the Federal Deposit Insurance
Corporation (FDIC).

Financial Services Subsidiaries. Many of Sky Financials financial services subsidiaries also are subject to
regulation by the Federal Reserve Board and other applicable federal and state agencies. Sky Financials insurance subsidiaries are subject to regulation by applicable state insurance regulatory agencies. Other non-bank subsidiaries of Sky
Financial are subject to the laws and regulations of both the federal government and the various states in which they conduct business. Sky Trust, Sky Financials trust services affiliate, is regulated by the Office of the Comptroller of the
Currency (OCC).

Securities and Exchange Commission (SEC) and NASDAQ. Sky Financial is also under the jurisdiction of the SEC and certain state
securities commissions for matters relating to the offering and sale of its securities. Sky Financial is subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended, as administered by the SEC. Sky Financial is listed on the NASDAQ Stock Market under the trading symbol SKYF, and is subject to the rules of NASDAQ for listed companies.

Bank Holding Company Activities

Interstate Banking. Under the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (Riegle-Neal Act), as amended, a bank holding company may acquire banks in states other than its home state, subject to certain limitations. The Riegle-Neal Act also authorizes
banks to merge across state lines, thereby creating interstate branches. Banks are also permitted to acquire and to establish de novo branches in other states where authorized under the laws of those states.

Regulatory Approval. Under the BHCA, prior approval of the Federal Reserve Board is required for the acquisition of more than 5% of the voting stock of any
bank. In determining whether to approve a proposed bank acquisition, federal banking regulators will consider, among other factors, the effect of the acquisition on competition, the public benefits expected to be received from the acquisition, the
projected capital ratios and levels on a post-acquisition basis, and the acquiring institutions record of addressing the credit needs of the communities it serves, including the needs of low and moderate income neighborhoods, consistent with
the safe and sound operation of the bank, under the Community Reinvestment Act of 1977.

Dividend Restrictions

Sky Financial is a legal entity separate and distinct from its subsidiary bank and other subsidiaries. Its principal source of funds to pay dividends on its common stock and
service its debt is from dividends from its subsidiaries, primarily Sky Bank. Various federal and state statutory provisions and regulations limit the amount of dividends that Sky Bank may pay without regulatory approval. Dividends payable by a
state chartered bank are limited to the lesser of the banks undivided profits and the banks retained net income for the current year plus its retained net income for the preceding two years (less any required transfers to capital
surplus) up to the date of any dividend declaration in the current calendar year. As of December 31, 2006, $179,388 was available for distribution to Sky Financial as dividends without prior regulatory approval.

Federal bank regulatory agencies have the authority to prohibit Sky Bank from engaging in unsafe or unsound practices in conducting its business. The payment of
dividends, depending on the financial condition of the bank, could be deemed an unsafe or unsound practice. The ability of Sky Bank to pay dividends in the future is currently influenced, and could be further influenced, by bank regulatory policies
and capital guidelines.



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Holding Company Structure

Transfer of
Funds from Banking Subsidiary. Sky Financials banking subsidiary is subject to restrictions under federal law that limit the transfer of funds or other items of value from this subsidiary to Sky Financial and its non-banking subsidiaries,
including affiliates, whether in the form of loans and other extensions of credit, investments and asset purchases or as other transactions involving the transfer of value from a subsidiary to an affiliate or for the benefit of an affiliate. Unless
an exemption applies, these transactions by a banking subsidiary with a single affiliate are limited to 10% of the subsidiary banks capital and surplus and, with respect to all covered transactions with affiliates in the aggregate, to 20% of
the subsidiary banks capital and surplus. Moreover, loans and extensions of credit to affiliates generally are required to be secured in specified amounts. A banks transactions with its non-bank affiliates are also generally required to
be on arms-length terms.

Source of Strength Doctrine. Under current Federal Reserve Board policy, Sky Financial is expected to act as a
source of financial and managerial strength to its subsidiary bank and, under appropriate circumstances, to commit resources to support such subsidiary bank. This support could be required at times when Sky Financial might not have the resources to
provide it.

Capital loans from Sky Financial to its subsidiary bank are subordinate in right of payment to deposits and certain other indebtedness of
the subsidiary bank. In the event of Sky Financials bankruptcy, any commitment by Sky Financial to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a
priority of payment.

Depositor Preference. The Federal Deposit Insurance Act provides that, in the event of the liquidation or other
resolution of an insured depository institution, the claims of depositors of the institution, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses of the FDIC as a receiver, will
have priority over other general unsecured claims against the institution. If an insured depository institution fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, non-deposit creditors,
including Sky Financial, with respect to any extensions of credit they have made to such insured depository institution.

Liability of Commonly
Controlled Institutions. The deposits of Sky Bank are insured by the FDIC. FDIC-insured depository institutions can be held liable for any loss incurred, or reasonably expected to be incurred, by the FDIC due to the default of an FDIC-insured
depository institution controlled by the same bank holding company, or for any assistance provided by the FDIC to an FDIC-insured depository institution controlled by the same bank holding company that is in danger of default. Default
means generally the appointment of a conservator or receiver. In danger of default means generally the existence of certain conditions indicating that a default is likely to occur in the absence of regulatory assistance.



|                                                                   |  |                                                                                                                                                                                                                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------
|Core (Tier 1) Capital                                            |  | Supplementary (Tier 2) Capital                                                                                                                                                                                                                                  |  | Market Risk (Tier 3) Capital          
|                                                                   |  |                                                                                                                                                                                                                                                                  
|- Common equity                                                    |  | -   Perpetual preferred stock not meeting the Tier 1 definition -   Qualifying mandatory convertible securities -   Qualifying subordinated debt -   Allowances for loan and lease losses, subject to limitations -   Recourse obligation on sold loan portfolios |  | - Qualifying unsecured subordinated debt
|- Retained earnings                                                |  |                                                                                                                                                                                                                                                                   | 
|- Qualifying non-cumulative perpetual                              |  |                                                                                                                                                                                                                                                                   | 
|preferred stock                                                    |  |                                                                                                                                                                                                                                                                   | 
|- A limited amount of qualifying                                   |  |                                                                                                                                                                                                                                                                   | 
|cumulative perpetual stock at the                                  |  |                                                                                                                                                                                                                                                                   | 
|holding company level                                              |  |                                                                                                                                                                                                                                                                   | 
|- Minority interests in equity accounts of                         |  |                                                                                                                                                                                                                                                                   | 
|consolidated subsidiaries                                          |  |                                                                                                                                                                                                                                                                   | 
|- Less goodwill, most intangible assets   and certain other assets |  |                                                                                                                                                                                                                                                                   | 

Sky Financial, like other bank holding companies, currently is required to maintain Tier 1 capital and
total capital (the sum of Tier 1, Tier 2 and Tier 3 capital) equal to at least 4% and 8%, respectively, of its total risk-weighted assets (including various off-balance-sheet items, such as standby letters of credit). For a holding
company to be considered well capitalized for regulatory purposes its Tier 1 and total capital ratios must be 6% and 10% on a risk-adjusted basis, respectively. At December 31, 2006, Sky Financial met both requirements, with
Tier 1 and total capital equal to 10.0% and 12.0% of its respective total risk-weighted assets.

Federal Reserve Board, FDIC and state rules require
Sky Financial to incorporate market and interest rate risk components into its risk-based capital standards. Under these market risk requirements, capital is allocated to support the amount of market risk related to a financial institutions
ongoing trading activities.

The Federal Reserve Board also requires bank holding companies to maintain a minimum leverage ratio (Tier 1
capital to adjusted total assets) of 3% if the holding company has the highest regulatory rating and meets other requirements, or of 3% plus an additional cushion of at least 100 to 200 basis points (one to two percentage points) if the
holding company does not meet these requirements. Sky Financials leverage ratio at December 31, 2006 was 8.5%.

The Federal Reserve Board
may set capital requirements higher than the minimums described above for holding companies whose circumstances warrant it. For example, holding companies experiencing or anticipating significant growth may be expected to maintain capital positions
substantially above the minimum supervisory levels without significant reliance on intangible assets. The Federal Reserve Board has also indicated that it will consider a tangible Tier 1 capital leverage ratio (deducting all intangibles)
and other indications of capital strength in evaluating proposals for expansion or new activities.

Sky Bank is subject to similar risk-based and
leverage capital requirements adopted by the Federal Reserve Board. Sky Financials management believes that Sky Bank meets all capital requirements to which it is subject.

Failure to meet capital requirements could subject a bank to a variety of enforcement remedies, including the termination of deposit insurance by the FDIC, and to
restrictions on its business, which are described under the next paragraph.

Federal Deposit Insurance Corporation Improvement Act of 1991. The
Federal Deposit Insurance Corporation Improvement Act of 1991 (the FDICIA), among other things, identifies five capital categories for insured depository institutions: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized. It requires U.S. federal bank regulatory agencies to implement systems for prompt corrective action for insured depository institutions that do not meet minimum capital
requirements based on these categories. The FDICIA imposes progressively more restrictive constraints on operations, management and capital distributions, depending on the category in which an institution is classified. Unless a bank is well
capitalized, it is subject to restrictions on its ability to



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offer brokered deposits and on other aspects of its operations. The FDICIA generally prohibits a bank from paying any dividend or
making any capital distribution or paying any management fee to its holding company if the bank would thereafter be undercapitalized. An under-capitalized bank must develop a capital restoration plan, and its parent holding company must guarantee
the banks compliance with the plan up to the lesser of 5% of the banks assets at the time it became undercapitalized and the amount needed to comply with the plan.

As of December 31, 2006, Sky Financial believes that its bank subsidiary was well capitalized, based on the prompt corrective action ratios and guidelines
described above. A banks capital category is determined solely for the purpose of applying the prompt corrective action regulations, and the capital category may not constitute an accurate representation of the banks overall financial
condition or prospects for other purposes.

Deposit Insurance Assessments

The FDIC insures the deposits of Sky Financials depository institution subsidiary up to prescribed limits for each depositor. The amount of FDIC assessments paid by each Bank Insurance Fund (BIF) member institution is based on its
relative risk of default as measured by regulatory capital ratios and other factors. Specifically, the assessment rate is based on the institutions capitalization risk category and supervisory subgroup category. An institutions
capitalization risk category is based on the FDICs determination of whether the institution is well capitalized, adequately capitalized or less than adequately capitalized. An institutions supervisory subgroup category is based on the
FDICs assessment of the financial condition of the institution and the probability that FDIC intervention or other corrective action will be required.

The FDIC may increase or decrease the assessment rate schedule on a semi-annual basis. An increase in the assessment rate could have a material adverse effect on Sky Financials earnings, depending on the amount of the increase. The
FDIC is authorized to terminate a depository institutions deposit insurance upon a finding by the FDIC that the institutions financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or
has violated any applicable rule, regulation, order or condition enacted or imposed by the institutions regulatory agency. The termination of deposit insurance for Sky Bank could have a material adverse effect on Sky Financials earnings.

Fiscal and Monetary Policies

Sky Financials business and earnings
are affected significantly by the fiscal and monetary policies of the federal government and its agencies. Sky Financial is particularly affected by the policies of the Federal Reserve Board, which regulates the supply of money and credit in the
United States. Among the instruments of monetary policy available to the Federal Reserve are: (a) conducting open market operations in United States government securities; (b) changing the discount rates of borrowings of depository
institutions; (c) imposing or changing reserve requirements against depository institutions deposits: and (d) imposing or changing reserve requirements against certain borrowing by banks and their affiliates. These methods are used
in varying degrees and combinations to affect directly the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits. For that reason alone, the policies of the Federal Reserve Board have a material
effect on the earnings of Sky Financial.

Privacy Provisions of Gramm-Leach-Bliley Act

Under Gramm-Leach-Bliley Act (GLB Act), federal banking regulators adopted rules that limit the ability of banks and other financial institutions to disclose non-public information about consumers to non-affiliated third
parties. These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to non-affiliated third parties. The privacy provisions of the GLB Act
affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 contains important requirements for public companies in the area of financial disclosure and corporate governance. In accordance
with section 302(a) of the Sarbanes-Oxley Act, written certifications by Sky Financials chief executive officer and chief financial officer are required. These certifications attest that Sky Financials quarterly and annual reports filed
with the SEC do not contain any untrue statement of a material fact. Sky Financial has also implemented a program designed to comply with Section 404 of the Sarbanes-Oxley Act, which includes the identification of significant processes and
accounts, documentation of the design of control effectiveness over process and entity level controls, and testing of the operating effectiveness of key controls. Also, in response to the Sarbanes-Oxley Act, Sky Financial adopted a series of
procedures to improve its corporate governance practices. One of these actions included the formation of a Financial Disclosure Committee whose members include the chief executive officer, the chief financial officer and other Sky Financial
officers. Sky Financial also requires signed certifications from managers who are responsible for internal controls throughout Sky Financial as to the integrity of the information they prepare. These procedures supplement Sky Financials Code
of Ethics policies and procedures that have previously been in place. See Item 9A Controls and Procedures for Sky Financials evaluation of its disclosure controls and procedures.

Future Legislation

Various legislation, including proposals to change substantially the
financial institution regulatory system and to expand or contract the powers of banking institutions and bank holding companies, is from time to time introduced in Congress. This legislation may change banking statutes and the operating environment
of Sky Financial and its subsidiaries in substantial and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks,
savings associations, credit unions and other financial institutions. Sky Financial cannot predict whether any of this potential legislation will be enacted, and if enacted, the effect that it, or any implemented regulations, would have on the
financial condition or results of operations of Sky Financial or any of its subsidiaries.

To the extent that the previous information describes
statutory and regulatory provisions, it is qualified in its entirety by reference to the full text of those provisions. Also, such statutes, regulations and policies are continually under review by Congress and state legislatures and federal and
state regulatory agencies. A change in statutes, regulations or regulatory policies applicable to Sky Financial could have a material effect on the business of Sky Financial.

In addition, see the information contained in Note 21 Regulatory Matters in this Form 10-K.



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##### Table of Contents

Employees

As of December 31, 2006,
Sky Financial and its subsidiaries had approximately 4,369 full-time equivalent employees. Sky Financial and its subsidiaries consider their employee relations to be good. None of the employees are covered by a collective bargaining agreement.

Available Information

Sky Financials Internet address is
www.skyfi.com. We have made available free of charge on or through our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material was electronically filed with, or furnished to the SEC. Materials that Sky Financial files with the SEC may be read and copied at the SECs
Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. This information may also be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the SEC at www.sec.gov. Sky Financial will provide a copy of any of the foregoing documents to stockholders upon request.

Certain Statistical Information Regarding Sky Financial

Certain financial and
statistical information relative to Sky Financial as required under the SECs Industry Guide 3, Statistical Disclosure By Bank Holding Companies, and related discussion is incorporated by specific references from the indicated pages
of this Form 10-K.



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|                                                                                                            |  | Pages
|Financial Ratios                                                                                            |  | 12   
|Net Interest Income; Average Balance Sheets and Related Yields and Rates; Volume and Rate Variance Analysis |  | 16-18
|Loan Portfolio; Under-Performing Assets                                                                     |  | 21-23
|Provision and Allowance for Credit Losses                                                                   |  | 23-24
|Securities                                                                                                  |  | 26-27
|Deposits                                                                                                    |  | 27-28
|Short-Term Borrowings                                                                                       |  | 28   

Item 1A.Risk Factors

Interest Rate Risk

Changes in interest rates could adversely affect our earnings and financial condition.

Our earnings and financial condition are dependent to a large
degree upon net interest income, which is the difference between interest earned from loans and investments and interest paid on deposits and borrowings. The narrowing of interest-rate spreads, meaning the difference between the interest rates
earned on loans and investments and the interest rates paid on deposits and borrowings, could adversely affect our earnings and financial condition.

Interest rates are highly sensitive to many factors, including:



|n |  | The rate of inflation;
|- |  | ----------------------

|n |  | The rate of economic growth;
|- |  | ----------------------------

|n |  | Employment levels;
|- |  | ------------------

|n |  | Monetary policies; and
|- |  | ----------------------

|n |  | Instability in domestic and foreign financial markets.
|- |  | ------------------------------------------------------

Changes in market interest rates will also affect the level of voluntary prepayments on our loans and the receipt of payments on our mortgage-backed securities resulting in the receipt of proceeds that may be reinvested at a lower rate than
the loan or mortgage-backed security being prepaid.

We originate residential loans for sale and for our portfolio. The origination of loans for sale
is designed to meet client financing needs and earn fee income. The origination of loans for sale is highly dependent upon the local real estate market and the level and trend of interest rates. Increasing interest rates may reduce the origination
of loans for sale and consequently the fee income we earn. While our commercial banking, construction and income property business lines are an increasing portion of our activities, high interest rates may reduce our mortgage-banking activities and
thereby our income. In contrast, decreasing interest rates have the effect of causing clients to refinance mortgage loans faster than anticipated. This causes the value of assets related to the servicing rights on loans sold to be lower than
originally anticipated. If this happens, we may need to write down our servicing assets faster, which would accelerate our expense and lower our earnings.

Government Policies

Our business may be adversely affected by changes in government policies.

The earnings of banks and bank holding companies such as Sky Financial are affected by the policies of regulatory authorities, including the Federal Reserve Board, which regulates
the money supply. Among the methods employed by the Federal Reserve Board are open market operations in U.S. Government securities, changes in the discount rate on member bank borrowings, and changes in reserve requirements against member bank
deposits. These methods are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits, and their use may also affect interest rates charged on loans or paid on deposits. The monetary policies
of the Federal Reserve Board have had a significant affect on the operating results of commercial and savings banks in the past and are expected to continue to do so in the future.

The banking industry is highly regulated and changes in federal and state banking regulations as well as policies and administration guidelines may affect Sky
Financials practices and growth prospects.



7



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##### Table of Contents

Credit Risk

Our earnings and
reputation may be adversely affected if we fail to effectively manage our credit risk.

Originating and underwriting loans are integral to the success of our
business. This business requires us to take credit risk, which is the risk of losing principal and interest income because borrowers fail to repay loans.

Collateral values and the ability of borrowers to repay their loans may be affected at any time by factors such as:

n  A downturn in the local economies in which we operate or the national economy;

n  A downturn in one or
more of the business sectors in which our customers operate; or

n  A rapid increase in interest rates.

Competition

Strong competition within our market area may reduce our ability to attract and retain deposits and originate loans.

We face competition both in originating loans and in attracting deposits. Competition in the financial services industry is intense. We compete for clients by offering excellent
service and competitive rates on our loans and deposit products. The type of institutions we compete with include commercial banks, savings institutions, mortgage banking firms, credit unions, finance companies, mutual funds, insurance companies and
brokerage and investment banking firms. As a result of their size and ability to achieve economies of scale, certain of our competitors offer a broader range of products and services than we offer. In addition, to stay competitive in our markets, we
may need to adjust the interest rates on our products to match the rates offered by our competitors, which could adversely affect our net interest margin. As a result, our profitability depends upon our continued ability to successfully compete in
our market areas while achieving our investment objectives.

Economy

Our business may be adversely affected by downturns in the local economies on which we depend.

Our loan portfolio is concentrated primarily in the
northern and central Ohio regions, the southeast Michigan region, the central Indiana region, the western Pennsylvania region and the northern West Virginia region. Our profits depend on providing products and services to clients in these local
regions. An increase in unemployment, a decrease in real estate values or continued increases in interest rates could weaken the local economies in which we operate. Weakness in our market area could depress our earnings and consequently our
financial condition because:

n  Clients may not want or need our products and services;

n  Borrowers may not be able to repay their loans;

n  The value of the collateral securing our loans to borrowers may decline; and

n  The quality of our
loan portfolio may decline.

Integration Risk

We may not be able to
achieve the expected integration and cost savings from our ongoing bank acquisition activities.

We have a long history of acquiring financial institutions and
we expect this acquisition activity to continue in the future. Difficulties may arise in the integration of the business and operations of the financial institutions that agree to merge with and into Sky Financial and its affiliates and, as a
result, we may not be able to achieve the cost savings and synergies that we expect will result from the merger activities. Achieving cost savings is dependent on consolidating certain operational and functional areas, eliminating duplicative
positions and terminating certain agreements for outside services. Additional operational savings are dependent upon the integration of the banking businesses of the acquired financial institution with that of Sky Financial, including the conversion
of the acquired entitys core operating systems, data systems and products to those of Sky Financial and the standardization of business practices. Complications or difficulties in the conversion of the core operating systems, data systems and
products of these other banks to those of Sky Financial may result in the loss of clients, damage to our reputation within the financial services industry, operational problems, one-time costs currently not anticipated by us and/or reduced cost
savings resulting from the merger activities.

Acquisition Risk

We may
have difficulty in the future to continue to grow through acquisitions.

Any future acquisitions or mergers by Sky Financial or its banking subsidiaries are
subject to approval by the appropriate federal and state banking regulators. The banking regulators evaluate a number of criteria in making their approval decisions, such as:



|n | Safety and soundness guidelines;
|- | --------------------------------

|n | Compliance with all laws including the USA Patriot Act of 2001, the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001, the Sarbanes-Oxley Act of 2002 and the
related rules and regulations promulgated under such Act or the Exchange Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act and all other applicable fair lending laws and
other laws relating to discriminatory business practices; and
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|n | Anti-competitive concerns with the proposed transaction.
|- | --------------------------------------------------------

If the banking regulators or a
commenter on our regulatory application raise concerns about any of these criteria at the time a regulatory application is filed, the banking regulators may deny, delay or condition their approval of a proposed transaction.



8



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##### Table of Contents

We have grown, and intend to continue to grow, through acquisitions of banks and other financial
institutions. After these acquisitions, we may experience adverse changes in results of operations of acquired entities, unforeseen liabilities, asset quality problems of acquired entities, loss of key personnel, loss of clients because of change of
identity, difficulties in integrating data processing and operational procedures and deterioration in local economic conditions. These various acquisition risks can be heightened in larger transactions.

Item 1B.Unresolved Staff Comments

None.

Item 2.Properties

Sky Financials executive offices are located in Bowling Green, Ohio. Sky Bank operates over 330 financial
centers, of which substantially all are owned. Also, the information contained in Note 5 Premises and Equipment on page 48 of this Form 10-K is incorporated herein by reference in response to this item.

Item 3.Legal Proceedings

In re Commercial Money Center, Inc. Equipment Lease Litigation in the U. S. District Court for the
Northern District of Ohio, Eastern Division, MDL Case No. 1:02-CV-16000

Between August 2000 and December 2001, Sky Bank and two of its predecessor banks
provided financing to a commercial borrower and its affiliated entities for the purchase of six separate portfolios of commercial lease pools, and a warehouse line of credit to finance lease pools. These loans are secured by assignments of the
payment streams from the underlying leases, surety bonds or insurance policies, and a limited guarantee from the sole member of the commercial borrower.

Upon default of these commercial loans, Sky Bank (and its predecessors) made demand for payment from Illinois Union Insurance Company (IU), RLI Insurance Company (RLI), and Royal Indemnity Company (Royal)
under the relevant surety bonds and insurance policies. IU, RLI, and Royal (collectively, the Sureties) have failed to make the payments required under the surety bonds and insurance policies. As a result, in the spring of 2002, Sky and
its predecessors filed suit against each of the Sureties seeking to enforce Sky Banks rights under the surety bonds and insurance policies issued by the Sureties in connection with the commercial lease pools. Skys complaints claim breach
of contract, bad faith and allege that the Sureties are liable for the payments due to Sky under the terms of the bonds and are estopped from asserting fraud as a defense to paying any claims under the bonds. In October 2002, the suits were
consolidated for pretrial purposes with more than 35 other lawsuits involving similar claims in the United States District Court for the Northern District of Ohio, Eastern Division, under the Federal Multi-district Litigation (MDL)
Rules.

The key defense of the Sureties in denying Sky Banks claims under the surety bonds is that they were fraudulently induced by the
originator of the commercial leases to issue the surety bonds in the first instance. The Sureties have also asserted related defenses that the underlying equipment leases are invalid, usurious, or otherwise unenforceable. Sky Bank believes that none
of these defenses can defeat Sky Banks claims under the surety bonds, which, in the view of Sky Bank, provide for absolute and unconditional guarantees of payment. Moreover, Sky Bank believes that the Sureties are responsible to Sky Bank, as
the Obligee or Named Insured under the bonds, for the underwriting of the lessees and leases, including all issues of fraud, and that the Sureties waived any defense of fraud to claims under the bonds.

On December 21, 2005, Sky Financial sold and assigned to a third party, without recourse, all of its rights and interests in three loans secured by
commercial lease pools and surety bonds issued by Royal. On March 31, 2006, Sky Financial and IU settled in full its litigation pertaining to two loans secured by pools of leases and insurance policies issued by IU. The aggregate principal
balance of the three loans sold to a third party and the two loans which were settled was $14.2 million, and the aggregate proceeds received by Sky Financial in the sale and the settlement was $14.9 million.

With respect to the remaining pool and the warehouse line of credit secured by surety bonds issued by RLI, which has a remaining principal balance of $15.4
million, Sky Financial has amended its complaint and is proceeding with pretrial discovery and motion practice in the MDL court in anticipation of trial.

Sky Financial has reviewed the relevant matters of fact and law with its special counsel and believes that it has substantial and meritorious claims against the remaining Surety. Sky Financial has and will continue
to vigorously assert all the rights and remedies available to it to obtain payment under the bonds. While the ultimate outcome of this matter cannot be determined at this time, Sky Financial management does not believe that the outcome of these
pending legal proceedings will materially effect the consolidated financial position or results of operations of Sky Financial.

American Home Mortgage Corp. v.
Union Federal Bank of Indianapolis, Case No. 06-CV-7864 (JGK) (RLE), U.S. District Court for the Southern District of New York

Prior to its acquisition by
Sky Financial, Waterfield Mortgage Company, Incorporated (Waterfield) sold its mortgage banking business to American Home Mortgage Corp. (American Home). As part of the sale agreement, an escrow in the amount of $55 million
was established and any purchase price adjustment associated with the sale of the mortgage banking business was to be deducted from the escrow. Waterfield and American Home were unable to reach agreement as to the purchase price adjustment, and
American Home filed the captioned lawsuit against Waterfields subsidiary, Union Federal Bank of Indianapolis, for breach of contract, negligent misrepresentation and declaratory and injunctive relief, and has made a claim for relief in excess
of $29 million.

Sky Financial completed its acquisition of Waterfield on October 17, 2006, and as a result, has become a party in
interest in the litigation. Sky Financial, in conjunction with the former shareholders of Waterfield to the extent of their respective interests in the escrow, have filed, inter alia, a motion to dismiss the action as well a motion to substitute the
entity representing Waterfield shareholders in place of Union Federal Bank as the party in interest in the litigation.

After consultation
with special counsel, Sky Financial believes that it has substantial and meritorious defenses and that exposure, if any, should be absorbed by the escrow, and as such is not expected to have a material effect on the consolidated financial position
or results of operations of Sky Financial.



9



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##### Table of Contents

Item 4.Submission of Matters to a Vote of Security Holders

None



Executive Officers of the Registrant

The following table sets forth the names and ages and business experience of each of the executive officers of Sky Financial. Each executive officer of Sky Financial is appointed by the Board of Directors on an annual basis and
serves at the pleasure of the Board.



|                          |  |     |  |                                                                                                                                                                                                                                          |  |               
|------------------------- |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------
|Executive Officer         |  | Age |  | Position With Company or Subsidiary and Experience                                                                                                                                                                                       |  | Officer Since*
|                          |  |     | 
|Marty E. Adams            |  | 54  |  | Chairman, President and Chief Executive Officer of Sky Financial; formerly President and Chief Operating Officer of Sky Financial and President and Chief Executive Officer of Sky Bank.                                                 |  | 1977          
|                          |  |     | 
|Frank J. Koch             |  | 53  |  | Executive Vice President and Senior Credit Officer of Sky Financial, and Senior Credit Officer of Sky Bank.                                                                                                                              |  | 1988          
|                          |  |     | 
|W. Granger Souder, Jr.    |  | 46  |  | Executive Vice President, General Counsel and Secretary of Sky Financial and Secretary of Sky Bank.                                                                                                                                      |  | 1989          
|                          |  |     | 
|Gary M. Small             |  | 46  |  | Corporate Executive Vice President for Community Banking; formerly Executive Vice President and Business Unit Coordinator for National City Bank.                                                                                        |  | 2006          
|                          |  |     | 
|Les V. Starr              |  | 55  |  | Executive Vice President/Operations and Information Technology; formerly Senior Vice President and Director/Information Technology for Michigan National Bank.                                                                           |  | 2002          
|                          |  |     | 
|Kevin T. Thompson         |  | 53  |  | Executive Vice President and Chief Financial Officer of Sky Financial and Treasurer of Sky Bank.                                                                                                                                         |  | 1998          
|                          |  |     | 
|Caren L. Cantrell         |  | 51  |  | Division Executive Vice President and Chief Operations Officer; formerly Senior Vice President of Operations and Information Technology at Commercial Federal Bank; formerly Division EVP/Financial Services
Operations of Sky Bank.     |  | 2005          
|                          |  |     | 
|Zahid Afzal               |  | 44  |  | Division Executive Vice President and Chief Technology Officer; formerly Senior Vice President and Chief Information Officer for Bank of Americas Consumer Banking Division.                                                            |  | 2006          
|                          |  |     | 
|Perry C. Atwood           |  | 52  |  | Senior Vice President, Director of Sales of Sky Financial; formerly Director of Sales of Sky Bank.                                                                                                                                       |  | 2000          
|                          |  |     | 
|Phillip C. Clinard        |  | 57  |  | Senior Vice President/Change Management Officer of Sky Financial; formerly Senior Vice President of Mid Am Bank.                                                                                                                         |  | 1975          
|                          |  |     | 
|Thomas A. Sciorilli       |  | 59  |  | Chief Human Resources Officer of Sky Financial; formerly Senior Vice President/Human Resources and Administration of Penn National Insurance.                                                                                            |  | 2001          
|                          |  |     | 
|Curtis E. Shepherd        |  | 40  |  | Senior Vice President/Marketing and Product Development of Sky Financial; formerly Executive Vice President, Retail and Marketing of Sky BankOhio Bank Region; formerly Senior Vice President of
Marketing of Ohio Bank.                |  | 1997          
|                          |  |     | 
|Richard R. Hollington III |  | 43  |  | Regional President, Greater Cleveland Region; formerly Executive Vice President, Chief Executive Officer of Sky Trust and Corporate Director of Financial Services; formerly Senior Vice
President/Integration Manager of Sky Financial. |  | 1996          
|                          |  |     | 
|John S. Gulas             |  | 48  |  | President and Chief Executive Officer of Sky Trust; formerly Executive Vice President with UMB Financial Corporation; formerly Regional Managing Director of First Union Corporation.                                                    |  | 2005          



|* | Includes period in which executive officer was an officer of a subsidiary or acquired company.
|- | ----------------------------------------------------------------------------------------------



10



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##### Table of Contents

PART II

Item 5.Market for the Registrants Common Equity, Related Stockholder Matters and

Issuer Purchases of Equity Securities

The information contained in Note 2 on page 43 and Note 18 Stock Options on page 59 of this Form 10-K is incorporated herein by reference in response to
this item. There were no repurchases of shares of Sky Financial stock during the fourth quarter of 2006.

Quarterly Common Stock Prices, Dividends and Yields

|                                       |  |        |  |        |  |                    |  |                            |  |               |  
|-------------------------------------- |  | ------ |  | ------ |  | ------------------ |  | -------------------------- |  | ------------- | -
|                                       |  | High   |  | Low    |  | BookValue perShare |  | DividendsDeclaredper Share |  | DividendYield | *
|2006                                   |  |        |  |        |  |                    |  |                            |  |               |  
|Fourth quarter                         |  | $28.54 |  | $24.17 |  | $16.05             |  | $0.25                      |  | 3.97          | %
|Third quarter                          |  | 25.00  |  | 23.80  |  | 15.10              |  | 0.23                       |  | 3.74          |  
|Second quarter                         |  | 26.67  |  | 23.31  |  | 14.47              |  | 0.23                       |  | 3.68          |  
|First quarter                          |  | 28.48  |  | 25.44  |  | 14.41              |  | 0.23                       |  | 3.46          |  
|2005                                   |  |        |  |        |  |                    |  |                            |  |               |  
|Fourth quarter                         |  | $29.87 |  | $26.05 |  | $14.35             |  | $0.23                      |  | 3.26          | %
|Third quarter                          |  | 29.20  |  | 27.38  |  | 14.12              |  | 0.22                       |  | 3.10          |  
|Second quarter                         |  | 29.06  |  | 25.45  |  | 13.97              |  | 0.22                       |  | 3.19          |  
|First quarter                          |  | 28.95  |  | 25.50  |  | 13.31              |  | 0.22                       |  | 3.17          |  
|                                       |  |        |  |        | 
|Stock Information at December 31, 2006 |  |        |  |        |  |                    |  |                            |  |               |  
|                                       |  |        |  |        |  |                    |  | Common Stock               | 
|Shares authorized                      |  |        |  |        |  |                    |  |                            |  | 350,000,000   |  
|Shares issued                          |  |        |  |        |  |                    |  |                            |  | 118,728,460   |  
|Treasury shares                        |  |        |  |        |  |                    |  |                            |  | 1,750,191     |  
|Number of shareholders of record       |  |        |  |        |  |                    |  |                            |  | 20,104        |  
|Closing market price per share         |  |        |  |        |  |                    |  |                            |  | $28.54        |  
|Book value per share                   |  |        |  |        |  |                    |  |                            |  | $16.08        |  
|Stock exchange                         |  |        |  |        |  |                    |  |                            |  | NASDAQ        |  
|Stock symbol                           |  |        |  |        |  |                    |  |                            |  | SKYF          |  

* Calculated on average traded price for the quarter.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

Dividend Restrictions

Sky Financial is a legal entity separate and distinct from its
subsidiary bank and other subsidiaries. Its principal source of funds to pay dividends on its common stock and service its debt is from dividends from its subsidiaries, primarily Sky Bank. Various federal and state statutory provisions and
regulations limit the amount of dividends that Sky Bank may pay without regulatory approval. Dividends payable by a state chartered bank are limited to the lesser of the banks undivided profits and the banks retained net income for the
current year plus its retained net income for the preceding two years (less any required transfers to capital surplus) up to the date of any dividend declaration in the current calendar year. As of December 31, 2006, $179,388 was available for
distribution to Sky Financial as dividends without prior regulatory approval.



11



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##### Table of Contents

Item 6.Selected Financial Data

(Dollars and shares in thousands, except per share data)



|                                                           |  |   |            |   |  |   |            |   |  |   |            |   |  |   |            |   |  |   |            |  
|---------------------------------------------------------- |  | - | ---------- | - |  | - | ---------- | - |  | - | ---------- | - |  | - | ---------- | - |  | - | ---------- | -
|December 31,                                               |  |   | 2006       |   |  |   | 2005       |   |  |   | 2004       |   |  |   | 2003       |   |  |   | 2002       |  
|                                                           |  |   |            |   | 
|Consolidated Statements of Income(1)                       |  |   |            |   |  |   |            |   |  |   |            |   |  |   |            |   |  |   |            |  
|Interest income                                            |  | $ | 1,013,491  |   |  | $ | 830,224    |   |  | $ | 661,943    |   |  | $ | 594,063    |   |  | $ | 576,397    |  
|Interest expense                                           |  |   | 471,945    |   |  |   | 315,572    |   |  |   | 210,632    |   |  |   | 202,820    |   |  |   | 235,162    |  
|Net interest income                                        |  |   | 541,546    |   |  |   | 514,652    |   |  |   | 451,311    |   |  |   | 391,243    |   |  |   | 341,235    |  
|Provision for credit losses                                |  |   | 36,854     |   |  |   | 52,249     |   |  |   | 37,660     |   |  |   | 34,125     |   |  |   | 37,659     |  
|Net interest income after provision for credit losses      |  |   | 504,692    |   |  |   | 426,403    |   |  |   | 413,651    |   |  |   | 357,118    |   |  |   | 303,576    |  
|Non-interest income                                        |  |   | 218,870    |   |  |   | 211,382    |   |  |   | 203,417    |   |  |   | 178,898    |   |  |   | 147,984    |  
|Non-interest expenses                                      |  |   | 438,555    |   |  |   | 400,047    |   |  |   | 356,524    |   |  |   | 307,186    |   |  |   | 253,700    |  
|Income from continuing operations before income taxes      |  |   | 285,007    |   |  |   | 273,738    |   |  |   | 260,544    |   |  |   | 228,830    |   |  |   | 197,860    |  
|Income taxes                                               |  |   | 94,669     |   |  |   | 91,547     |   |  |   | 85,344     |   |  |   | 76,150     |   |  |   | 65,712     |  
|Income from continuing operations                          |  |   | 190,338    |   |  |   | 182,191    |   |  |   | 175,200    |   |  |   | 152,680    |   |  |   | 132,148    |  
|Income (loss) from discontinued operations (net of tax)(2) |  |   |           |   |  |   | 372        |   |  |   | 19,155     |   |  |   | 3,937      |   |  |   | (4,341     | )
|Net income                                                 |  |   | 190,338    |   |  |   | 182,563    |   |  |   | 194,355    |   |  |   | 156,617    |   |  |   | 127,807    |  
|Net income available to common shareholders                |  |   | 190,338    |   |  |   | 182,563    |   |  |   | 194,355    |   |  |   | 156,617    |   |  |   | 127,807    |  
|Per Common Share                                           |  |   |            |   |  |   |            |   |  |   |            |   |  |   |            |   |  |   |            |  
|Basic income from continuing operations                    |  | $ | 1.73       |   |  | $ | 1.71       |   |  | $ | 1.76       |   |  | $ | 1.70       |   |  | $ | 1.58       |  
|Basic income (loss) from discontinued operations           |  |   |           |   |  |   | 0.00       |   |  |   | 0.19       |   |  |   | 0.05       |   |  |   | (0.05      | )
|Basic net income                                           |  |   | 1.73       |   |  |   | 1.71       |   |  |   | 1.95       |   |  |   | 1.75       |   |  |   | 1.53       |  
|Diluted income from continuing operations                  |  |   | 1.72       |   |  |   | 1.69       |   |  |   | 1.74       |   |  |   | 1.69       |   |  |   | 1.57       |  
|Diluted income (loss) from discontinued operations         |  |   |           |   |  |   | 0.00       |   |  |   | 0.19       |   |  |   | 0.04       |   |  |   | (0.05      | )
|Diluted net income                                         |  |   | 1.72       |   |  |   | 1.69       |   |  |   | 1.93       |   |  |   | 1.73       |   |  |   | 1.52       |  
|Cash dividends declared                                    |  |   | 0.94       |   |  |   | 0.89       |   |  |   | 0.85       |   |  |   | 0.81       |   |  |   | 0.77       |  
|Book value at year end                                     |  |   | 16.08      |   |  |   | 14.35      |   |  |   | 13.77      |   |  |   | 10.80      |   |  |   | 9.54       |  
|Weighted average shares outstanding  basic                |  |   | 110,107    |   |  |   | 106,796    |   |  |   | 99,461     |   |  |   | 89,630     |   |  |   | 83,439     |  
|Weighted average shares outstanding  diluted              |  |   | 110,954    |   |  |   | 107,973    |   |  |   | 100,568    |   |  |   | 90,404     |   |  |   | 84,096     |  
|Consolidated Balance Sheets (Year End)                     |  |   |            |   |  |   |            |   |  |   |            |   |  |   |            |   |  |   |            |  
|Total assets                                               |  | $ | 17,726,094 |   |  | $ | 15,683,291 |   |  | $ | 14,944,423 |   |  | $ | 12,946,978 |   |  | $ | 11,050,120 |  
|Securities available for sale                              |  |   | 3,129,960  |   |  |   | 3,097,472  |   |  |   | 3,091,813  |   |  |   | 2,511,369  |   |  |   | 2,247,181  |  
|Loans held for sale                                        |  |   | 20,019     |   |  |   | 24,184     |   |  |   | 9,433      |   |  |   | 28,062     |   |  |   | 77,458     |  
|Loans                                                      |  |   | 12,826,817 |   |  |   | 11,149,222 |   |  |   | 10,616,118 |   |  |   | 8,644,645  |   |  |   | 7,347,988  |  
|Allowance for credit losses                                |  |   | (172,990   | ) |  |   | (144,461   | ) |  |   | (151,389   | ) |  |   | (124,943   | ) |  |   | (106,675   | )
|Deposits                                                   |  |   | 13,220,653 |   |  |   | 10,755,676 |   |  |   | 10,351,591 |   |  |   | 8,515,533  |   |  |   | 7,617,472  |  
|Debt and FHLB advances                                     |  |   | 1,439,080  |   |  |   | 2,125,788  |   |  |   | 1,924,840  |   |  |   | 1,476,564  |   |  |   | 1,065,254  |  
|Total shareholders equity                                 |  |   | 1,880,648  |   |  |   | 1,553,877  |   |  |   | 1,470,955  |   |  |   | 998,576    |   |  |   | 832,433    |  
|Selected Financial Ratios                                  |  |   |            |   |  |   |            |   |  |   |            |   |  |   |            |   |  |   |            |  
|Return on average assets                                   |  |   | 1.18       | % |  |   | 1.21       | % |  |   | 1.43       | % |  |   | 1.29       | % |  |   | 1.29       | %
|Return on average shareholders equity                     |  |   | 11.56      |   |  |   | 12.27      |   |  |   | 15.75      |   |  |   | 17.23      |   |  |   | 17.67      |  
|Dividend payout ratio                                      |  |   | 54.77      |   |  |   | 52.08      |   |  |   | 43.64      |   |  |   | 46.59      |   |  |   | 50.43      |  
|Net interest margin, fully-taxable equivalent              |  |   | 3.69       |   |  |   | 3.73       |   |  |   | 3.69       |   |  |   | 3.70       |   |  |   | 3.90       |  
|Average loans to average deposits                          |  |   | 100.26     |   |  |   | 101.32     |   |  |   | 99.56      |   |  |   | 96.46      |   |  |   | 93.53      |  
|Average equity to average assets                           |  |   | 10.17      |   |  |   | 9.82       |   |  |   | 9.09       |   |  |   | 7.47       |   |  |   | 7.30       |  
|Allowance for credit losses to period-end loans            |  |   | 1.35       |   |  |   | 1.30       |   |  |   | 1.43       |   |  |   | 1.45       |   |  |   | 1.45       |  
|Allowance for credit losses to total non-performing loans  |  |   | 126.13     |   |  |   | 120.88     |   |  |   | 105.32     |   |  |   | 151.30     |   |  |   | 154.07     |  
|Non-performing loans to period-end loans                   |  |   | 1.07       |   |  |   | 1.07       |   |  |   | 1.35       |   |  |   | 0.96       |   |  |   | 0.94       |  
|Net charge-offs to average loans                           |  |   | 0.34       |   |  |   | 0.57       |   |  |   | 0.37       |   |  |   | 0.40       |   |  |   | 0.47       |  



|(1) | The results of operations and financial condition have been affected by the completed acquisitions discussed further in Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operation.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The results of operations for the years ended December 31, 2005, 2004, 2003 and 2002 are presented to reflect discontinued operations. See the Discontinued Operations caption in
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operation.
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##### Table of Contents

Item 7.Managements Discussion and Analysis of

Financial Condition and Results of Operation

(Dollars and shares in thousands, except per share data)



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   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|The following discussion and analysis represents a review of Sky Financial Group, Inc.s (Sky Financial) consolidated financial condition and results of
operations. This review should be read in conjunction with the consolidated financial statements presented elsewhere in this report.  Business Summary  Sky
Financial is a diversified financial holding company with its headquarters located in Bowling Green, Ohio. Sky Financial operates over 330 financial centers and over 400 ATMs serving communities in Ohio, Pennsylvania, Michigan, Indiana and West
Virginia. Sky Financials financial service affiliates include: Sky Bank, commercial and retail banking; Sky Trust, asset management services; and Sky Insurance, retail and commercial insurance agency services. Sky Financial has a specific strategic plan for delivering profitable growth. Sky Financials success is the result of five strategic priorities that
guide decisions and focus corporate resources. These are: 1) Organic Growth; 2) Fee Income; 3) Organizational Synergies; 4) Asset Quality; and 5) Acquisitions. The primary source of Sky Financials revenue is net interest income from loans and deposits, and fee income. Full year average balance sheet growth was again strong in 2006. This growth was a direct result of
Sky Financials acquisitions and organic growth strategy. The net interest margin for 2006 reflected a difficult interest rate environment, primarily in the second half of the year. In addition, the early fourth quarter acquisition of Union
Federal, which had a lower net interest margin, also reduced the net interest margin in 2006. These declines were partially offset by disciplined spread management and interest rate risk management practices as well as the mid-fourth quarter balance
sheet restructuring activities. While higher interest rates continued to limit Skys mortgage banking business, fee income rose overall due particularly to increases in service charges, brokerage and insurance commissions and trust services
income.  Huntington Merger  On December 20, 2006, Sky Financial and Huntington Bancshares Incorporated (Huntington) announced the
signing of a definitive agreement to merge the two companies in a stock (90%) and cash (10%) transaction valued at approximately $3.5 billion. Under the terms of the agreement, Sky Financial shareholders will receive 1.098 shares of Huntington
common stock, on a tax-free basis, and a taxable cash payment of $3.023 for each share of Sky Financial. The merger was unanimously approved
by both companies boards of directors and is expected to close early in the 2007 third quarter, pending customary regulatory approvals, as well as the approval of Huntingtons and Sky Financials shareholders.  Completed Acquisitions 
On November 15, 2006, Sky Financial completed its acquisition of Wells River Bancorp, Inc. (Wells River) and its wholly-owned subsidiary, Perpetual Savings Bank, a $71.3
million bank that operates three full-service branches in Columbiana County. The aggregate purchase price was $10,992, including direct acquisition costs of $24. The acquisition of Wells River expands Sky Financials community banking business
further in the eastern Ohio market. Wells River shareholders received approximately 178 shares of Sky Financial common stock and cash of $6,600. On October 17, 2006, Sky Financial completed its acquisition of Union Federal Bank of Indianapolis (Union Federal) and its parent company, Waterfield Mortgage Company, Inc., Ft. Wayne, Indiana. Sky Financial
purchased Waterfields retail and commercial banking business conducted primarily through Union Federal Bank, which added $2.3 billion in assets. Sky Financial also acquired Waterfield Insurance as part of the acquisition. |  | The aggregate purchase price was $332,195 including direct acquisition costs of $2,369. The acquisition of Union Federal expands Sky Financials Indiana
presence into the growing Indianapolis market with the addition of 42 branches in this area. Waterfield Mortgage shareholders received approximately 7,467 shares of Sky Financial common stock and cash of $136,505. After the close of business on September 30, 2006, Sky Financial acquired Lindig Benefits Consultants located in Worthington, Ohio for 44 shares of Sky
Financial common stock and $104 in cash. On January 3, 2006, Sky Financial acquired the Peter B. Burke Insurance Agency in Pittsburgh,
Pennsylvania for 64 shares of Sky Financial common stock and $206 in cash. On November 29, 2005, Sky Financial completed its acquisition of
Falls Bank, an $80 million bank that operated two full-service branches in the Akron, Ohio market. The aggregate purchase price was $12,273, including direct acquisition costs of $36. The acquisition of Falls Bank expanded Sky Financials
community banking business further into the Akron market. Falls Bank shareholders received 350 shares of Sky Financial common stock and cash of $2,348. On October 4, 2005, Sky Financial acquired Becker- McDowell Agency, Inc. and Steiner Insurance Agency, Inc., both located in
Wooster, Ohio. Becker-McDowell was acquired for 222 shares of Sky Financial common stock and $580 in cash. Steiner Insurance Agency was acquired for 111 shares of Sky Financial common stock and $288 in cash. On August 1, 2005, Sky acquired B.K.M.s Benefit Design Agency of Ohio, Inc., located in Findlay, Ohio for 137 shares of Sky Financial common
stock and $661 in cash. On June 1, 2005, Sky Financial completed its acquisition of Belmont Bancorp, a $297 million bank holding company
headquartered in St. Clairsville, Ohio, and its wholly-owned subsidiary, Belmont National Bank. The aggregate purchase price was $68,431, including direct acquisition costs of $37. Belmont had offices located in Belmont, Harrison and Tuscarawas
counties in Ohio, and Ohio County in West Virginia. Belmont Bancorp shareholders received 1,765 shares of Sky Financial common stock and cash of $18,705. On November 30, 2004, Sky Financial acquired Prospect Bancshares, Inc. and its wholly-owned subsidiary Prospect Bank, a $202 million savings bank headquartered in Worthington, Ohio, for 1,139 shares of Sky
Financial common stock and $17,600 in cash. On July 1, 2004, Sky Financial acquired Second Bancorp Incorporated, a $2.0 billion bank
holding company, and its wholly-owned subsidiaries including The Second National Bank of Warren and the Stouffer-Herzog Insurance Agency, Inc., for 11,953 shares of Sky Financial common stock. Second National Bank was a commercial bank headquartered
in Warren, Ohio and Stouffer-Herzog, a full-service insurance agency, was headquartered in Ashtabula, Ohio. On April 1, 2004, Sky
Financial acquired EOB, Inc. for 177 shares of Sky Financial common stock and $516 in cash. Headquartered in Canton, Ohio, this insurance company specialized in the sales and service of group benefits. On January 5, 2004, Sky Financial acquired Spencer-Patterson Insurance Agency, Inc. a professional liability, personal and commercial insurance agency
headquartered in Findlay, Ohio, for 297 shares of Sky Financial common stock and $793 in cash. All of these acquisitions were accounted for
under the purchase method of accounting and their results of operation have been included in Sky Financials results of operation from the dates of the acquisition.



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##### Table of Contents

Managements Discussion and Analysis of

Financial Condition and Results of Operation

(Dollars and shares in thousands, except per share data)

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 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|Discontinued Operations  On March 31, 2004, Sky Financial completed the sale of its dental financing affiliate, Sky Financial
Solutions. Sky Financial Solutions is reported as a discontinued operation. For the year ended December 31, 2005, Sky Financial recorded additional pre-tax gain of $572 for the adjustment of certain contingencies related to the sale. This gain
was recorded as after-tax income from discontinued operations. The consolidated financial statements for the period ended December 31,
2004 reflects the presentation of Sky Financial Solutions as a discontinued operation. Sky Financial Solutions results of operations included revenues of $39,356 and pre-tax net income of $29,503 for 2004.  Overview  Sky Financials 2006 results from continuing operations continued to show improvement as a result of lower credit losses compared to the previous year, strong performance from
fee-based businesses, a gain on the sale of a business and higher net interest income as a result of acquisitions. These increases were partially offset by net losses on derivative instruments, lower net interest margin compared to the previous year
and balance sheet restructuring in the fourth quarter of 2006. Despite disciplined net interest margin management, a difficult interest rate environment in the second half of 2006 compressed net interest spreads and reduced the net interest margin
for the year compared to the prior year. In addition, the early fourth quarter acquisition of Union Federal, which had a lower net interest margin, also reduced the margin in 2006. These declines were partially offset by the mid-fourth quarter
balance sheet restructuring activities, which should improve the net interest margin going forward. Earnings per diluted share from continuing operations for 2006 were slightly higher than 2005 due to higher net income, partially offset by higher
average shares outstanding as a result of recent acquisitions. Expenses increased associated with acquisition growth, higher merger and integration expenses associated with two acquisitions late in 2006, and additional employee expenses incurred in
the fourth quarter of 2006. Growth in loans and deposits, the continued development of fee-based revenues, and discipline in expense controls
all contributed to the earnings improvement. Also during 2006, Sky Financial sold a portion of its insurance business and realized an after-tax gain of $4,328. Partially offsetting these increases in 2006, Sky Financial restructured its balance
sheet in the fourth quarter in order to strengthen capital ratios, maintain a sound interest rate risk position and enhance the net interest margin. This restructuring resulted in an after-tax charge of $9,617 recorded in the fourth quarter of 2006.
In addition, Sky Financial recorded additional employee expenses during 2006 related to additional incentive compensation for completed acquisitions and the sale of a portion of the insurance business that resulted in after-tax charges of
$2,650. The results for the years 2005 and 2004 reflected significant expansion from the combination of acquisitions and organic growth,
despite the challenges from a competitive industry. The 2005 results reflected growth in loans and deposits, the development of fee-based revenues and discipline in expense control, despite higher provision for credit losses. In 2004, earnings
growth overcame a significant reduction in mortgage banking revenues from previous levels as a result of rising market interest rates. In
2006, net income for Sky Financial was $190,338, or $1.72 per diluted share, up from $182,563 or $1.69 per diluted share in 2005, which was down from $194,355, or $1.93 per diluted share in 2004. Net income for 2005 included $372 of after-tax income
from discontinued operations. Net income for 2004 was increased by after-tax income from discontinued operations of |  | $19,155, or $.19 per diluted share. In 2004, Sky Financial completed the sale of its
dental finance business for an after-tax gain of $20,306, or $.20 per diluted share, which strengthened its liquidity and capital positions and provided greater focus on its core regional financial services businesses. Income from continuing operations for 2006 was $190,338 or $1.72 per diluted share, compared with $182,191 or $1.69 per diluted share in 2005, and $175,200
or $1.74 per diluted share in 2004. Income for the years 2006 and 2005 include expenses for stock options, which reduced earnings by $.03 per diluted share for both years. Income from continuing operations for 2004 does not include expense related
to stock options. In addition, Sky Financials results include the impacts of mergers and acquisitions, which added assets of $2.6 billion in 2006, $0.4 billion in 2005 and $2.2 billion in 2004 as detailed in Note 2 of the financial statements.
Completing the acquisitions and divestitures as well as other organizational changes resulted in pre-tax merger, integration and restructuring charges of $6,575 in 2006, $1,771 in 2005 and $4,542 in 2004, as detailed in Note 16 of the financial
statements. Net interest income increased $26,894 in 2006, mostly due to the growth in assets from acquisitions and organic growth. The growth
in assets was partially offset by a decrease in the net interest margin from 3.73% in 2005 to 3.69% in 2006 as a result of a difficult interest rate environment, primarily in the second half of 2006 and the fourth quarter acquisition of Union
Federal, which had a lower net interest margin. The declines were partially offset by disciplined spread management and interest rate risk management practices. Non-interest income increased $7,488 or 3.5% in 2006. The growth in 2006 was driven by
increases in service charges and fees on deposit accounts, trust service income, brokerage and insurance commissions, and a gain on the sale of an insurance business, which more than offset net securities losses of $21,184, primarily as a result of
the balance sheet restructuring and an impairment on a security in the fourth quarter and net losses on derivative instruments. Provision for credit losses decreased $15,395 primarily due to a decrease in net credit losses as a percent of average
loans to .34% in 2006 from .57% in 2005. The higher net charge-offs in 2005 were primarily from two large commercial credits and the sale of a group of non-performing consumer loans. Non-interest expenses increased in 2006 by $38,508 due to the
acquisitions in 2006, higher stock-based compensation expense for retirement eligible employees, additional compensation expenses incurred related to acquisitions and higher merger and integration expenses in 2006. In 2005, net interest income increased $63,341 over 2004 in part due to the growth in assets as well as an increase in the net interest margin from 3.69% to
3.73% as the benefits from rising short-term rates were partially offset by the flattening of the yield curve. Non-interest income increased $7,965 or 3.9% in 2005 over 2004. The growth in 2005 was driven by increases in service charges and fees on
deposit accounts, trust service income, brokerage and insurance commission and transaction fees partially offset by a decline of $10,907 in net securities gains. Provision for credit losses increased $14,589 primarily due to an increase in net
credit losses as a percent of average loans to .57% in 2005 from .37% in 2004. Non-interest expenses increased in 2005 by $43,523 in part due the adoption of FAS 123(R) and to the acquisitions of Belmont and Falls Banks in 2005 as well as the full
year impact of the 2004 merger transactions partially offset by lower merger, integration and restructuring expenses.



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##### Table of Contents

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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |         |   |      |   |         |      |  |   |         |  | 
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| ------- | - | ---- | - | ------- | ---- |  | - | ------- |  | 
|Business Line Results  Sky Financials continuing operations is managed along two primary business lines: community banking and financial service affiliates. The community banking group is comprised
of Sky Financials commercial bank, Sky Bank, which services businesses and consumers through a regional structure. As discussed previously, Sky Financial acquired Union Federal and Wells River in 2006, Falls Bank and Belmont Bancorp in 2005
and Second Bancorp and Prospect in 2004. Substantially all of the assets of these acquisitions became part of the community banking segment. The
financial service affiliates include Sky Financials current businesses relating to trust and investment management, insurance agency operations and other financial-related services. During 2006, Sky Financial acquired Waterfield Insurance as
part of the acquisition of Waterfield Mortgage, Peter B. Burke Agency, Inc., a full-service agency that specializes in property and casualty insurance and surety services, and Lindig Benefits Consultants, a full-service agency that specializes in
association member benefit programs. During 2005, Sky Financial acquired Becker-McDowell Agency, Inc., an agency that specializes in employee benefits, Steiner Insurance Agency, Inc., an agency that focuses on property and casualty insurance, and
Benefit Design Agency of Ohio, Inc., an agency that specializes in the development, implementation and on-going service of employee benefit programs. During 2004, Sky Financial acquired Spencer-Patterson, an agency that sells professional liability,
personal and commercial insurance, Stouffer-Herzog Insurance Agency, and EOB, Inc., a group benefit insurance agency. Additional information
regarding Sky Financials business lines and the financial measurement methodologies is provided in Note 22 of the consolidated financial statements. Table 1 summarizes Sky Financials business line results for each of the last three
years. |  | The community banking performance ratios remain solid, although negatively impacted mainly by lower net interest margin in 2006
versus 2005 and by higher credit losses in 2005 versus 2004. For 2006, community banking generated a return on assets of 1.29% and efficiency ratio of 50.65% compared to 1.19% and 50.85%, respectively, in 2005 and 1.25% and 50.48%, respectively, in
2004. The efficiency ratio is defined as non-interest expense divided by the sum of fully taxable equivalent net interest income plus non-interest income. The financial service affiliates improved earnings by 13.8% in 2006 after increasing 1% in 2005. In 2006, revenues grew 12%, but were partially offset by higher expenses, both mostly due to three acquisitions in 2006 and the full year
effect of the 2005 acquisitions. The 2005 increase were the result of revenues increasing by 8%, but were offset by higher expenses, both mostly due to three acquisitions in 2005. Parent and other includes the net funding costs of the parent company and all significant shared items of income and expense, including all merger, integration
and restructuring charges and other charges and gains that management does not consider to be part of ongoing operations or expected to recur. The decrease in the 2006 parent and other results of operations from the prior year period relate
primarily to higher interest expenses retained by the parent and higher expenses related to stock compensation as a result of the acceleration of stock option expenses related to retirement eligible participants. The higher interest costs retained
by the parent relates primarily to the issuance of $150,000 of trust preferred securities to fund the Union Federal acquisition in the fourth quarter of 2006. In addition, the following charges and gains were included in the results of operations in
2006: n A balance sheet restructuring that resulted in net after-tax charges of $9,914 ($15,252 before tax). n After-tax net derivative losses of $3,832 ($5,895 before tax), which
included gains of $297 ($457 before tax), which were related to the balance sheet restructuring activities. n After-tax merger, integration and restructuring expenses of $4,274 ($6,575 before tax) associated
with the acquisitions during the year. n After-tax charges totaling $962 ($1,480 before tax) related to additional incentive compensation due to the completion of the Union Federal acquisition and
conversion. n An after-tax net gain of $4,328 ($6,658 before tax) from the sale of an insurance business. n After-tax charges of $1,688 ($2,597 before tax) related to additional
incentive compensation associated with the completion of the sale of the insurance business. n An after-tax charge of $1,093 ($1,681 before tax) from the impairment of an equity security. n An after-tax charge of $549 ($845 before tax) from an adjustment to the amortization of mortgage servicing rights.  The 2005 net loss for parent and other results of operations compared to net income for 2004 relate primarily to higher interest expenses retained by the
parent, additional expenses related to stock compensation and lower gains on the sale of securities.
|Table 1 Business Line Results                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | Net Income (Loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |        
|Year ended December 31,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |         |   | 2005 |   |         | 2004 | 
|Community banking                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | $                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 206,079 |   |      | $ | 178,099 |      |  | $ | 164,266 | 
|Financial service affiliates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 11,259  |   |      |   | 9,890   |      |  |   | 9,774   | 
|Parent and other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | (27,000 | ) |      |   | (5,798  | )    |  |   | 1,160   | 
|Continuing operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | $                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 190,338 |   |      | $ | 182,191 |      |  | $ | 175,200 | 
|The higher community banking net income in 2006 as compared to 2005 is
mainly due to the lower credit losses in the current year and the impact of the acquisition of Union Federal and Wells River in 2006, the full year impact of 2005 acquisitions as well as organic growth. The benefits from higher average earning
assets contributed to a $36,518, or 7.0% increase in net interest income. The higher non-interest income over 2005 was primarily the result from increases in service charges and fees on deposit accounts, partially offset by lower mortgage banking
income. Non-interest expenses increased $24,662, or 7.3% over 2005, primarily due to higher salaries and employee benefits expense. This increase was primarily the result of higher stock-based compensation expense and additional employees due to the
acquisitions in 2006. Community banking net income in 2005 reflected the benefit of the Belmont Bancorp and Falls Bank acquisitions, as well
as the full year affect of acquisitions completed in 2004. The higher community banking net income in 2005 as compared to 2004 is primarily due to higher net interest income as a result of the impact of the acquisitions and organic growth and a
higher net interest margin, partially offset by higher provision for credit losses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 



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##### Table of Contents

Managements Discussion and Analysis of

Financial Condition and Results of Operation

(Dollars and shares in thousands, except per share data)



|                                                                                                                                                                                                                                                 |  |  |  |                                                                                                                                                                                                                                                                  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Net Interest Income  Net interest income, the difference between
interest income earned on interest-earning assets and interest expense incurred on interest-bearing liabilities, is the most significant component of Sky Financials earnings. |  |  |  | Net interest income is affected by changes in the volumes, rates and composition of interest-earning assets and interest-bearing liabilities. Table 2 summarizes net interest income and net interest margin for each of the three years ended December 31, 2006,



|                                                      |  |      |         |   |      |   |         |      |  |   |         |  
|----------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|Table 2 Net Interest Income                           |  |      |         |   |      |   |         |      | 
|Year ended December 31,                               |  | 2006 |         |   | 2005 |   |         | 2004 | 
|Net interest income                                   |  | $    | 541,546 |   |      | $ | 514,652 |      |  | $ | 451,311 |  
|Taxable equivalent adjustments to net interest
income |  |      | 3,153   |   |      |   | 3,263   |      |  |   | 3,372   |  
|Net interest income, fully taxable equivalent         |  | $    | 544,699 |   |      | $ | 517,915 |      |  | $ | 454,683 |  
|Net interest margin                                   |  |      | 3.67    | % |      |   | 3.71    | %    |  |   | 3.66    | %
|Taxable
equivalent adjustment                         |  |      | 0.02    |   |      |   | 0.02    |      |  |   | 0.03    |  
|Net
interest margin, fully taxable equivalent         |  |      | 3.69    | % |      |   | 3.73    | %    |  |   | 3.69    | %



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Sky Financials net interest income, on a fully tax-equivalent basis, of $544,699 in 2006 increased from $517,915 in 2005, which was up from $454,683 in 2004. The growth in net interest income was
mainly due to the increase in average earning assets up 6.4% in 2006 after growing 12.6% in 2005. The 2005 increase was also due to the higher net interest margin in 2005 over 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |  |  | Table 3 reflects the components of Sky Financials net interest income for each of the three years ended December 31, 2006, setting forth: (i) average
assets, liabilities and shareholders equity (ii) interest income earned on interest-earning assets and interest expense incurred on interest-bearing liabilities; (iii) average yields earned on interest-earning assets and average rates incurred
on interest-bearing liabilities; (iv) the net interest rate spread (e.g., the average yield earned on interest-earning assets less the average rate incurred on interest-bearing liabilities); and (v) the net interest margin (e.g., net interest income
divided by average interest-earning assets). Rates are computed on a tax-equivalent basis. Non-accrual loans have been included in the average loan balances. Certain amounts related to brokered deposits from prior year have been reclassified to
conform to current year presentation.
|The increase in average earning assets in both 2006 and 2005 was mostly in loans and reflected solid organic growth in addition to the earning assets acquired
through mergers. In 2006, loans, which are Sky Financials highest yielding assets, comprised 78% of average earning assets in 2006 and 2005 and 77% in 2004. In funding asset growth, Sky Financial emphasizes growth in non-interest-bearing
sources. As a percent of earning assets, interest-bearing liabilities were to 85.6% in 2006, 85.5% in 2005 and 86.0% in 2004. Sky Financial intends to continue to emphasize non-interest bearing liability growth in order to fund asset
growth.                                                                                                                                                                                                                                                                                                                                                                                                 |  |  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | 
|The net interest margin, on a fully tax-equivalent basis, was 3.69% in 2006, down 4 basis points compared to 3.73% in 2005, which was up from 3.69% in 2004. The lower net interest
margin in 2006 from 2005 reflected a difficult interest rate environment in the second half of 2006, which compressed net interest spreads and reduced the net interest margin for the year compared to the prior year, despite disciplined net interest
margin management. In addition, the early fourth quarter acquisition of Union Federal, which had a lower net interest margin, also reduced the margin in 2006. These declines were partially offset by the mid-fourth quarter balance sheet restructuring
activities, which should improve the net interest margin going forward. The higher net interest margin performance in 2005 over 2004 reflected the benefits from rising short-term interest rates and prudent spread and interest rate risk management
practices, despite the effects of the flattened yield curve and increasingly competitive markets. |  |  | 
|During the fourth quarter of 2006, Sky Financial restructured its balance sheet to strengthen capital ratios, maintain a sound interest rate risk position and enhance the
net interest margin following the completion of its recent acquisitions of Union Federal and Wells River. The restructuring actions resulted in a reduction in total assets, which included the sale of $506 million of available-for-sale, fixed-rate
investment securities with an average yield of 3.74% and the elimination of federal funds sold coming from the Union Federal acquisition. With the sale proceeds, Sky Financial paid off $255 million of FHLB advances and $72 million of borrowings,
with a combined average cost of 5.92% and reduced federal funds purchased. In addition to de-leveraging the balance sheet, these actions should improve the net interest margin and increase net interest income.                                                                                                                                                       |  |  | 



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|                                                                 |  |                |            |          |   |           |  |   |                |   |          |   |            |  |   |                |  |          |         |      |  |   |            |  |   |         |  |   |         |  
|---------------------------------------------------------------- |  | -------------- | ---------- | -------- | - | --------- |  | - | -------------- | - | -------- | - | ---------- |  | - | -------------- |  | -------- | ------- | ---- |  | - | ---------- |  | - | ------- |  | - | ------- | -
|                                                                 | 
|Table 3 Three-Year Average Balance Sheet and Net Interest Margin | 
|Year ended December 31,                                          |  |                |            | 2006     |   |           |  |   |                |   | 2005     |   |            |  |   |                |  | 2004     |         |      | 
|                                                                 |  | AverageBalance |            | Interest |   | Rate      |  |   | AverageBalance |   | Interest |   | Rate       |  |   | AverageBalance |  | Interest |         | Rate | 
|Interest-earning assets                                          |  |                |            |          |   |           |  |   |                |   |          |   |            |  |   |                |  |          |         |      |  |   |            |  |   |         |  |   |         |  
|Interest-earningdeposits                                         |  | $              | 26,411     |          | $ | 1,203     |  |   | 4.56           | % |          | $ | 29,957     |  | $ | 680            |  |          | 2.27    | %    |  | $ | 37,187     |  | $ | 472     |  |   | 1.27    | %
|Federal fundssold and other                                      |  |                | 11,374     |          |   | 138       |  |   | 1.21           |   |          |   | 1,284      |  |   | 24             |  |          | 1.84    |      |  |   | 2,573      |  |   | 30      |  |   | 1.17    |  
|Securities                                                       |  |                | 3,193,444  |          |   | 151,697   |  |   | 4.75           |   |          |   | 3,055,905  |  |   | 133,677        |  |          | 4.37    |      |  |   | 2,795,189  |  |   | 121,728 |  |   | 4.35    |  
|Loans and loansheld for sale                                     |  |                | 11,538,928 |          |   | 863,606   |  |   | 7.48           |   |          |   | 10,789,169 |  |   | 699,106        |  |          | 6.48    |      |  |   | 9,493,005  |  |   | 543,085 |  |   | 5.72    |  
|Total interest-earning assets                                    |  | $              | 14,770,157 |          | $ | 1,016,644 |  |   | 6.88           |   |          | $ | 13,876,315 |  | $ | 833,487        |  |          | 6.01    |      |  | $ | 12,327,954 |  | $ | 665,315 |  |   | 5.40    |  
|Assets of discontinuedoperations                                 |  |                |           |          |   |           |  |   |                |   |          |   |           |  |   |                |  |          |         |      |  |   | 215,013    |  |   |         |  |   |         |  
|Non-earning assets                                               |  |                | 1,422,633  |          |   |           |  |   |                |   |          |   | 1,269,383  |  |   |                |  |          |         |      |  |   | 1,028,949  |  |   |         |  |   |         |  
|Total assets                                                     |  | $              | 16,192,790 |          |   |           |  |   |                |   |          | $ | 15,145,698 |  |   |                |  |          |         |      |  | $ | 13,571,916 |  |   |         |  |   |         |  
|Interest-bearing liabilities                                     |  |                |            |          |   |           |  |   |                |   |          |   |            |  |   |                |  |          |         |      |  |   |            |  |   |         |  |   |         |  
|Demand deposits                                                  |  | $              | 390,510    |          | $ | 8,331     |  |   | 2.13           | % |          | $ | 365,825    |  | $ | 5,227          |  |          | 1.43    | %    |  | $ | 298,742    |  | $ | 2,350   |  |   | 0.79    | %
|Savings deposits                                                 |  |                | 3,455,634  |          |   | 72,352    |  |   | 2.09           |   |          |   | 3,703,527  |  |   | 46,665         |  |          | 1.26    |      |  |   | 3,767,873  |  |   | 28,755  |  |   | 0.76    |  
|Time deposits                                                    |  |                | 5,408,434  |          |   | 229,506   |  |   | 4.24           |   |          |   | 4,527,894  |  |   | 145,358        |  |          | 3.21    |      |  |   | 3,729,530  |  |   | 103,529 |  |   | 2.78    |  
|Brokered deposits                                                |  |                | 515,473    |          |   | 22,749    |  |   | 4.41           |   |          |   | 387,708    |  |   | 12,036         |  |          | 3.10    |      |  |   | 306,076    |  |   | 7,130   |  |   | 2.33    |  
|Total interest-bearing deposits                                  |  |                | 9,770,051  |          |   | 332,938   |  |   | 3.41           |   |          |   | 8,984,954  |  |   | 209,286        |  |          | 2.33    |      |  |   | 8,102,221  |  |   | 141,764 |  |   | 1.75    |  
|Short-termborrowings                                             |  |                | 949,308    |          |   | 41,130    |  |   | 4.33           |   |          |   | 857,472    |  |   | 26,687         |  |          | 3.11    |      |  |   | 897,438    |  |   | 18,685  |  |   | 2.08    |  
|Junior subordinateddebentures                                    |  |                | 285,520    |          |   | 21,922    |  |   | 7.68           |   |          |   | 188,734    |  |   | 12,166         |  |          | 6.45    |      |  |   | 174,385    |  |   | 8,695   |  |   | 4.99    |  
|Debt and FHLB advances                                           |  |                | 1,638,733  |          |   | 75,955    |  |   | 4.63           |   |          |   | 1,836,233  |  |   | 67,433         |  |          | 3.67    |      |  |   | 1,427,547  |  |   | 41,488  |  |   | 2.91    |  
|Total interest-bearing liabilities                               |  |                | 12,643,612 |          |   | 471,945   |  |   | 3.73           |   |          |   | 11,867,393 |  |   | 315,572        |  |          | 2.66    |      |  |   | 10,601,591 |  |   | 210,632 |  |   | 1.99    |  
|Liabilities ofdiscontinued operations                            |  |                |           |          |   |           |  |   |                |   |          |   |           |  |   |                |  |          |         |      |  |   | 201,842    |  |   |         |  |   |         |  
|Non-interest-bearing liabilities                                 |  |                | 1,903,046  |          |   |           |  |   |                |   |          |   | 1,790,681  |  |   |                |  |          |         |      |  |   | 1,538,550  |  |   |         |  |   |         |  
|Shareholders equity                                             |  |                | 1,646,132  |          |   |           |  |   |                |   |          |   | 1,487,624  |  |   |                |  |          |         |      |  |   | 1,229,933  |  |   |         |  |   |         |  
|Total liabilitiesand equity                                      |  | $              | 16,192,790 |          |   |           |  |   |                |   |          | $ | 15,145,698 |  |   |                |  |          |         |      |  | $ | 13,571,916 |  |   |         |  |   |         |  
|Net interest income,fully taxable equivalent                     |  |                |            |          |   |           |  | $ | 544,699        |   |          |   |            |  |   |                |  | $        | 517,915 |      |  |   |            |  |   |         |  | $ | 454,683 |  
|Net interest spread                                              |  |                |            |          |   |           |  |   | 3.15           | % |          |   |            |  |   |                |  |          | 3.35    | %    |  |   |            |  |   |         |  |   | 3.41    | %
|Net interest income,fully taxable equivalent to earning assets   |  |                |            |          |   |           |  |   | 3.69           | % |          |   |            |  |   |                |  |          | 3.73    | %    |  |   |            |  |   |         |  |   | 3.69    | %

- Loan fees are included in interest income.



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##### Table of Contents

Managements Discussion and Analysis of

Financial Condition and Results of Operation

(Dollars and shares in thousands, except per share data)



|                                                                                                                                                                                                                                                     |  |  |  |                                                                                                                                                                                                                                                  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Net interest income may also be analyzed by segregating the volume and rate components of interest income and interest expense. Table 4 presents an analysis of increases and decreases in interest income
and expense in terms of changes in volume |  |  |  | and interest rates during the three years ended December 31, 2006. The table is presented on a tax-equivalent basis. Certain amounts related to brokered deposits from prior year have been
reclassified to conform to current year presentation.



|                                                   |  |   |                                                      |   |  |                                                      |         |   |  |   |         |  |   |        |   |  |   |        |  |   |         |  
|-------------------------------------------------- |  | - | ---------------------------------------------------- | - |  | ---------------------------------------------------- | ------- | - |  | - | ------- |  | - | ------ | - |  | - | ------ |  | - | ------- | -
|Table 4 Net Interest Income - Rate/Volume Analysis |  |   |                                                      |  
|Year ended December 31,                            |  |   |                                                      |   |  |                                                      | 2006    |   |  |   |         |  |   |        |   |  |   | 2005   |  |   |         |  
|                                                   |  |   | Change from 2005 in interestincome or expense due to |   |  | Change from 2004 in interest incomeor expense due to |        
|                                                   |  |   | Volume                                               |   |  |                                                      | Rate    |   |  |   | Total   |  |   | Volume |   |  |   | Rate   |  |   | Total   |  
|Interest income attributable to:                   |  |   |                                                      |   |  |                                                      |         |   |  |   |         |  |   |        |   |  |   |        |  |   |         |  
|Interest-bearing deposits                          |  | $ | (81                                                  | ) |  | $                                                    | 604     |   |  | $ | 523     |  | $ | (92    | ) |  | $ | 300    |  | $ | 208     |  
|Federal funds sold                                 |  |   | 186                                                  |   |  |                                                      | (72     | ) |  |   | 114     |  |   | (15    | ) |  |   | 9      |  |   | (6      | )
|Securities                                         |  |   | 6,017                                                |   |  |                                                      | 12,003  |   |  |   | 18,020  |  |   | 11,354 |   |  |   | 595    |  |   | 11,949  |  
|Loans, net                                         |  |   | 48,582                                               |   |  |                                                      | 115,918 |   |  |   | 164,500 |  |   | 74,152 |   |  |   | 81,869 |  |   | 156,021 |  
|Total interest income                              |  |   | 54,704                                               |   |  |                                                      | 128,453 |   |  |   | 183,157 |  |   | 85,399 |   |  |   | 82,773 |  |   | 168,172 |  
|Interest expense attributable to:                  |  |   |                                                      |   |  |                                                      |         |   |  |   |         |  |   |        |   |  |   |        |  |   |         |  
|Deposits:                                          |  |   |                                                      |   |  |                                                      |         |   |  |   |         |  |   |        |   |  |   |        |  |   |         |  
|Interest-bearing demand                            |  |   | 353                                                  |   |  |                                                      | 2,751   |   |  |   | 3,104   |  |   | 528    |   |  |   | 2,349  |  |   | 2,877   |  
|Savings                                            |  |   | (3,123                                               | ) |  |                                                      | 28,810  |   |  |   | 25,687  |  |   | (491   | ) |  |   | 18,401 |  |   | 17,910  |  
|Time                                               |  |   | 28,268                                               |   |  |                                                      | 55,880  |   |  |   | 84,148  |  |   | 22,162 |   |  |   | 19,667 |  |   | 41,829  |  
|Brokered deposits                                  |  |   | 3,966                                                |   |  |                                                      | 6,747   |   |  |   | 10,713  |  |   | 1,902  |   |  |   | 3,004  |  |   | 4,906   |  
|Total deposits                                     |  |   | 29,464                                               |   |  |                                                      | 94,188  |   |  |   | 123,652 |  |   | 24,101 |   |  |   | 43,421 |  |   | 67,522  |  
|Short-term borrowings                              |  |   | 2,858                                                |   |  |                                                      | 11,585  |   |  |   | 14,443  |  |   | (832   | ) |  |   | 8,834  |  |   | 8,002   |  
|Junior subordinated debentures                     |  |   | 6,239                                                |   |  |                                                      | 3,517   |   |  |   | 9,756   |  |   | 715    |   |  |   | 2,756  |  |   | 3,471   |  
|Debt and FHLB advances                             |  |   | (7,253                                               | ) |  |                                                      | 15,775  |   |  |   | 8,522   |  |   | 11,878 |   |  |   | 14,067 |  |   | 25,945  |  
|Total interest expense                             |  |   | 31,308                                               |   |  |                                                      | 125,065 |   |  |   | 156,373 |  |   | 35,862 |   |  |   | 69,078 |  |   | 104,940 |  
|Net interest income                                |  | $ | 23,396                                               |   |  | $                                                    | 3,388   |   |  | $ | 26,784  |  | $ | 49,537 |   |  | $ | 13,695 |  | $ | 63,232  |  



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|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Non-Interest Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Total non-interest income in 2006 increased $7,488 from 2005, which was $7,965 higher than in 2004. The 2006 growth was driven by increases in service charges
and deposit fee income, trust income, transaction fees and brokerage commissions. The continued growth reflects Sky Financials focus on growing its fee-based businesses, in addition to contributions from acquisitions. These increases were
partially offset by the net effect of the following: (1) charges of $19,435 recorded as net securities gains (losses) related to the balance sheet restructuring; (2) a gain of $6,658 related to the sale of an insurance business;
(3) net charges of $5,895 related to derivative losses on swaps; (4) net gains of $4,183 recorded as other income related to the balance sheet restructuring; (5) charges of $1,681 related to securities impairment; and (6) charges
of $845 related to additional amortization expense from mortgage servicing rights. During the second quarter 2006, Sky Financial identified
and corrected immaterial accounting errors related to certain derivative hedging relationships. The misstatements related to Sky Financials interpretation and application of the shortcut method of hedge accounting under Statement
No. 133. Sky Financial determined that these hedges did not qualify for hedge accounting using the shortcut method. As a result, changes in the market value of the derivatives should have been recorded through non-interest income
with no corresponding offset to the hedged item. Sky Financial evaluated the impact of these errors and concluded that the impact was not material to prior |  |  |  | quarterly and annual periods. Accordingly, an adjustment was recorded in the second quarter of 2006 to correct the cumulative impact of these errors. The
cumulative impact of these out-of-period adjustments resulted in a charge to non-interest income in the second quarter of 2006 of $9,930 ($6,603 after-tax), which is included in derivative gains (losses) on swaps in the Consolidated Statements of
Income. During the third and fourth quarters of 2006, Sky Financial terminated the affected swaps and recorded gains of $4,158 recorded as a component of derivative (losses) gains on swaps and other income. One of Sky Financials five strategic priorities is to increase its fee-based revenue. A component of this is to increase total non-interest income as
a percentage of total revenue (net interest income, fully-tax equivalent plus non-interest income). In 2006, Sky Financial acheived solid increases in many fee-based revenues, but was unable to completely offset the balance sheet restructuring
charges and derivative losses as the contribution of non-interest income remained steady at 29% in both 2006 and 2005. This ratio was 31% for 2004.



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##### Table of Contents

|                                             |  |   |         |   |  |   |         |  |   |         |  |             |   |  |             |  
|-------------------------------------------- |  | - | ------- | - |  | - | ------- |  | - | ------- |  | ----------- | - |  | ----------- | -
|Table 5 Non-Interest Income                  |  |   |         |   |  |   |         |  |   |         |  |             |   |  |             |  
|Year ended December 31,                      |  |   | 2006    |   |  |   | 2005    |  |   | 2004    |  | 2006Vs.2005 |   |  | 2005Vs.2004 |  
|Trust services income                        |  | $ | 24,279  |   |  | $ | 21,918  |  | $ | 18,281  |  | 11          | % |  | 20          | %
|Service charges and fees on deposit accounts |  |   | 67,707  |   |  |   | 55,570  |  |   | 47,964  |  | 22          |   |  | 16          |  
|Mortgage banking income                      |  |   | 23,141  |   |  |   | 24,991  |  |   | 24,844  |  | (7          | ) |  | 1           |  
|Brokerage and insurance commissions          |  |   | 67,394  |   |  |   | 59,172  |  |   | 55,820  |  | 14          |   |  | 6           |  
|Net securities (losses) gains                |  |   | (21,184 | ) |  |   | 3,662   |  |   | 14,569  |  | (678        | ) |  | (75         | )
|Derivative (losses) gains on swaps           |  |   | (5,895  | ) |  |   |        |  |   |        |  | (100        | ) |  |            |  
|Net cash settlements on swaps                |  |   | (40     | ) |  |   |        |  |   |        |  | (100        | ) |  |            |  
|Transaction fees                             |  |   | 20,322  |   |  |   | 16,361  |  |   | 13,246  |  | 24          |   |  | 24          |  
|Merchant income                              |  |   | 6,667   |   |  |   | 6,024   |  |   | 6,929   |  | 11          |   |  | (13         | )
|Income from bank-owned life insurance        |  |   | 6,317   |   |  |   | 7,569   |  |   | 6,249   |  | (17         | ) |  | 21          |  
|International fees                           |  |   | 2,529   |   |  |   | 2,366   |  |   | 1,829   |  | 7           |   |  | 29          |  
|Other                                        |  |   | 27,633  |   |  |   | 13,749  |  |   | 13,686  |  | 101         |   |  |            |  
|Total non-interest income                    |  | $ | 218,870 |   |  | $ | 211,382 |  | $ | 203,417 |  | 4           | % |  | 4           | %



|                                |  |   |         |   |  |   |         |   |  |   |         |  
|------------------------------- |  | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|Table 6 Mortgage Banking Income |  |   |         |   |  |   |         |   |  |   |         |  
|Year Ended December 31          |  |   | 2006    |   |  |   | 2005    |   |  |   | 2004    |  
|Origination and sales revenue   |  | $ | 18,531  |   |  | $ | 22,246  |   |  | $ | 25,572  |  
|Mortgage loan servicing income  |  |   | 15,616  |   |  |   | 15,326  |   |  |   | 13,784  |  
|Amortization expense            |  |   | (10,986 | ) |  |   | (13,600 | ) |  |   | (13,669 | )
|Impairment recapture (charges)  |  |   | (20     | ) |  |   | 1,019   |   |  |   | (843    | )
|Total                           |  | $ | 23,141  |   |  | $ | 24,991  |   |  | $ | 24,844  |  



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Mortgage banking income decreased $1,850 in 2006 after increasing $147 in 2005. On a component basis, in 2006 origination and sales revenue decreased $3,715,
mortgage loan servicing income increased $290 and amortization and impairment charges decreased $2,614. The decline in mortgage banking income in 2006 versus 2005 related to a decrease in volume that was mostly offset by a shift from origination and
sales revenue to increased servicing income and a decrease in amortization expense. In addition, a net decline of $1,039 relating to impairment recapture (charges) from 2005 also contributed to the overall decline. The overall stable mortgage
banking income in 2005 versus 2004 related to a slight decrease in volume but a shift from origination and sales revenue to increased servicing income and a decrease in amortization expense along with an net improvement of $1,862 in impairment
recapture (charges) over 2004. The overall increase in mortgage interest rates in 2006 led to an anticipated slow down in prepayment rates on mortgages, which added to the value of the servicing rights and lowered the amortization expense. During
2006, Sky Financial recorded impairment charges of $20 as compared to impairment recapture of $1,019 in 2005. Brokerage and insurance
commissions increased $8,222 or 14% in 2006 and $3,352 or 6% in 2005. Commissions on insurance products were up over 15% in 2006 and 5% in 2005 from organic growth of the core business and acquisitions. Property and casualty revenue was up over 22%
year-over-year and revenue for employee benefits and life insurance products increased over 28% for the same period. Sky Financial acquired Waterfield Insurance, Peter B. Burke Insurance Agency and Lindig Benefits Consultants in 2006. In 2005, Sky
Financial acquired Becker-McDowell Agency, Inc., Steiner Insurance Agency, Inc. and B.K.M.s Benefit Design Agency of Ohio, Inc. |  | Service charges and fees on deposit accounts increased $12,137 in 2006 and $7,606 in 2005. The increase in both years reflected the
benefits from growth in deposit accounts, both organic and through acquisition, and fee structure modifications. The organic growth in deposit accounts was largely driven by Sky Financials sales and service process, successful sales campaigns
targeted to grow retail and commercial deposits and continued emphasis on cross-selling to broaden client relationships. Trust income, which continued to be impacted by changes in the equity markets as well as growth from acquisitions and new
business, increased $2,361 or 11% in 2006 after increasing $3,637 or 20% in 2005. Trust assets under management rose to $5.7 billion at year-end 2006, up from $4.8 billion at year-end 2005 and $4.3 billion at the end of 2004. The 2006 growth was
from both organic growth and acquisitions with approximately $306 million coming with the Union Federal acquisition. For the year 2006, Sky
Financial realized net losses on the sales and impairment of securities of $21,184 compared with net gains of $3,662 in 2005 and $14,569 in 2004. The 2006 net losses included $19,435 related to the balance sheet restructuring and a loss of $1,681
related to the impairment of a security. In 2005, the gains included $1,523 from the liquidation of approximately $10,299 of impaired investments. The gains in 2004 included $9,278 from the sale of bank equity holdings. Other income for 2006 increased $17,399, which included an increase in transaction fees, the gain on the sale of an insurance business, the gains recorded
as part of the early extinguishment of debt and higher gains on the sales of loans.



19



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##### Table of Contents

Managements Discussion and Analysis of

Financial Condition and Results of Operation

(Dollars and shares in thousands, except per share data)

Non-Interest Expense



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Total non-interest expense increased $38,508 or 10% in 2006 compared with an increase of $43,523 or 12% in 2005. In 2006, the acquisitions of Union Federal and Wells River as well as the full-year impact
of the 2005 merger transactions contributed to the increase. In addition, higher merger, integration and restructuring expenses and incentive compensation in 2006 related primarily to the Union Federal acquisition and conversion as well as
additional employee costs incurred related to the sale of a portion of the insurance business also contributed to the increase. In 2005, the acquisitions of Belmont and Falls Bank as well as the full year impact of the 2004 merger transactions
contributed to the increase in non-interest expenses partially offset by lower merger, integration and restructuring expenses. In addition, the adoption of FAS 123(R) for stock compensation for the full year of 2005 increased expense in 2005 over
2004. The efficiency ratio, which measures total non-interest expenses, including merger, integration and restructuring charges, as a |  | percent of total revenues, was 57.43% in 2006, 54.85% in 2005 and 54.17% in 2004. The efficiency ratio is defined as non-interest expense divided by the sum of
fully taxable equivalent net interest income plus non-interest income. As an active acquirer over the last three years, Sky Financials
expenses have increased each year for expenses to complete and integrate the new mergers into Sky Financials regional financial services delivery structure. These expenses are included in merger, integration and restructuring expenses and are
more thoroughly described in Note 16 to the financial statements. In addition, acquisitions have increased Sky Financials intangible assets and amortization of intangible assets expense. Non-interest expense includes costs, other than interest, that are incurred in the operations of Sky Financial. Table 7 summarizes the components of Sky
Financials non-interest expense.



|                                              |  |   |         |  |   |         |  |   |         |  |             |   |  |             |  
|--------------------------------------------- |  | - | ------- |  | - | ------- |  | - | ------- |  | ----------- | - |  | ----------- | -
|Table 7 Non-Interest Expense                  |  |   |         |  |   |         |  |   |         |  |             |   |  |             |  
|Year ended December 31,                       |  |   | 2006    |  |   | 2005    |  |   | 2004    |  | 2006Vs.2005 |   |  | 2005Vs.2004 |  
|Salaries and employee benefits                |  | $ | 243,281 |  | $ | 214,555 |  | $ | 193,611 |  | 13          | % |  | 11          | %
|Occupancy and equipment expense               |  |   | 72,560  |  |   | 68,402  |  |   | 59,096  |  | 6           |   |  | 16          |  
|Merger, integration and restructuring expense |  |   | 6,575   |  |   | 1,771   |  |   | 4,542   |  | 271         |   |  | (61         | )
|State franchise taxes                         |  |   | 1,300   |  |   | 3,981   |  |   | 3,255   |  | (67         | ) |  | 22          |  
|Printing and supplies                         |  |   | 6,092   |  |   | 6,734   |  |   | 6,054   |  | (10         | ) |  | 11          |  
|Legal and other professional fees             |  |   | 12,245  |  |   | 11,644  |  |   | 9,426   |  | 5           |   |  | 24          |  
|Telephone                                     |  |   | 8,360   |  |   | 8,401   |  |   | 7,608   |  | 0           |   |  | 10          |  
|Loan costs                                    |  |   | 8,672   |  |   | 8,837   |  |   | 7,827   |  | (2          | ) |  | 13          |  
|Marketing                                     |  |   | 13,623  |  |   | 12,818  |  |   | 11,269  |  | 6           |   |  | 14          |  
|Amortization of intangible assets             |  |   | 15,803  |  |   | 14,887  |  |   | 10,979  |  | 6           |   |  | 36          |  
|Other                                         |  |   | 50,044  |  |   | 48,017  |  |   | 42,857  |  | 4           |   |  | 12          |  
|Total non-interest expense                    |  | $ | 438,555 |  | $ | 400,047 |  | $ | 356,524 |  | 10          | % |  | 12          | %



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Salaries and employee benefits increased $28,726 or 13% in 2006 and $20,944 or 11% in 2005. The increases in 2006 and 2005 were primarily due to higher
staffing levels, mainly from acquisitions, annual merit increases, rising costs for health and retirement benefits and higher stock-based compensation. In addition, the 2006 increases include $1,480 related to additional incentive compensation
related to the completion of the Union Federal acquisition and conversion and an additional $2,597 related to additional compensation expenses related to the sale of a portion of the insurance business. Sky Financial supports performance-based
compensation and maintains commission and incentive plans, which cover all employees, with incentives related to profitability, growth, asset quality and client service. Performance-based compensation increased in 2006 and 2005. The 2006 and 2005
increases included $8,026 and $5,237 of stock-based compensation expense related to restricted stock and stock options. The impacts are further discussed in Note 1 to the consolidated financial statements. Sky Financials full-time equivalent
employees were 4,369 at December 31, 2006, up from 4,117 at December 31, 2005 and 4,001 at December 31, 2004. In 2006, salaries, wages and incentives increased $19,965 or 12% and employee benefits rose $8,761 or 17%. In 2005, the
increases were $13,513 or 9% and $7,430 or 17%, respectively. Occupancy and equipment expenses increased $4,158 or 6% in 2006 and $9,306 or
16% in 2005. Occupancy expenses increased $2,726 or 8% in 2006 and $6,324 or 24% in 2005 as Sky Financial increased the number of financial centers to |  | 330 at December 31, 2006 from 290 at December 31, 2005 and 280 at year-end 2004. The additional offices resulted from Sky Financials
acquisitions and the opening of seven new offices in 2006 and four in 2005. In addition, higher building rental expenses, higher real estate taxes, higher utility cost and higher repairs and maintenance cost all contributed to the increase.
Equipment expenses grew $1,432 or 4% in 2006 and $2,982 or 9% in 2005 as a result of higher costs for service agreements and ATM processing expenses, which are mostly volume related. Merger, integration and restructuring charges were $6,575 in 2006, $1,771 in 2005 and $4,542 in 2004. The 2006 restructuring charges included $5,555 related to the Union Federal acquisition, $816 for the
Wells River acquisition, $102 related to acquisitions by Sky Insurance and $102 related to prior year acquisitions. The 2005 restructuring charges included $1,168 related to the Belmont acquisition and $224 for the Falls Bank transaction. Additional
charges of $379 were recorded in 2005 for costs associated with the acquisition of Union Federal. In 2004, restructuring charges included $3,597 related to the acquisition of Second National, $786 related to the acquisition of Prospect, and $159 of
costs primarily associated with the divestiture of Sky Financial Solutions. State franchise taxes decreased $2,681 or 67% in 2006 and
increased $726 or 22% in 2005. The 2006 decrease was primarily the result of a $2,355 state franchise tax benefit related to prior year refunds recorded in the third quarter of 2006. Legal and other professional fees were up $601 in 2006 over 2005 due to higher legal fees in connection with aggressive loan collection efforts.



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##### Table of Contents

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Amortization of intangible assets increased $916 in 2006 from the 2005 amounts due to the fourth quarter addition of $21,532 in core deposit intangibles and the addition of
$684 in customer relationship intangibles in 2006. Partially offsetting the additional amortization from these additional intangibles is the reduced amortization of core deposit intangibles from prior acquisitions as the amortization is higher in
the first few years. Amortization |  | in 2005 increased $3,908 over 2004 due to the addition of $7.9 million in core deposit intangibles in 2005 and a full year of amortization related to 2004
acquisitions. The other non-interest expense in 2006 was stable as compared to 2005 with marketing expenses increasing 6%, which was more than
offset by the cost control initiatives during the year.



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Loan Portfolio Sky Financials loan portfolio at December 31, 2006 totaled $12.8 billion, up from $11.1 billion at
December 31, 2005 and $10.6 billion at December 31, 2004. The growth in total loans of 15% in 2006 and 5% in 2005 included the impact from acquisitions, which added loans of $1.4 billion and $.2 billion in 2006 and 2005, respectively, and
from Sky Financials emphasis on organic loan growth, which has focused on commercial lending, non-residential mortgages and home equity loans within residential mortgages. Commercial, financial and agricultural loans comprised 31% of the total loan portfolio at December 31, 2006. This loan category includes loans to a wide
variety of businesses, small and large, across many industries and regions. Sky Financials commercial lending policy requires each loan to have viable repayment sources. Commercial loans are evaluated for the adequacy of repayment sources at the time of approval and are regularly reviewed for any possible deterioration in the
ability of the borrower to repay the loan. In certain instances, collateral is required to provide an additional source of repayment in the event of default by a commercial borrower. The structure of the collateral package, including the type and
amount of the collateral, varies from loan to loan depending on the financial strength of the borrower, the amount and terms of the loan, and the collateral available to be pledged by the borrower. Credit risk for commercial loans arises from
borrowers lacking the ability or willingness to repay the loan, and in the case of secured loans, by a shortfall in the collateral value in relation to the outstanding loan balance in the event of a default and subsequent liquidation of
collateral. Residential mortgage loans were 29% of the total loan portfolio at December 31, 2006. The residential mortgage portfolio contains
loans to consumers secured by residential mortgages. Sky Financials residential mortgage lending policy requires each loan to have viable repayment sources. Residential mortgage loans are evaluated for the adequacy of these repayment sources
at the time of approval, including credit scores, debt-to-income ratios, and collateral values. Credit risk for residential mortgage loans arises from borrowers lacking the ability or willingness to repay the loan, and by a shortfall in the value of
the residential mortgages in relation to the outstanding loan balance in the event of a default and subsequent liquidation of the real estate collateral. The residential mortgage portfolio includes both conforming and nonconforming mortgage loans. Conforming mortgage loans represent loans originated in accordance with underwriting standards set forth by the
government-sponsored entities (GSEs) of Federal National Mortgage Association (FNMA), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Government National Mortgage Association (GNMA), who serve as the primary purchasers of loans
sold in the secondary mortgage market by mortgage lenders. These loans are generally collateralized by one-to-four-family residential real estate, have loan-to-collateral value ratios of 80% or less, and are made to borrowers in good credit
standing. The right to service the loans and receive servicing fee income is generally retained when conforming loans are sold. |  | Included in the residential
mortgage portfolio are home equity loans, which consist mainly of revolving lines of credit to consumers which are secured by residential real estate. Home equity lines are generally governed by the same lending policies and subject to credit risk
as described above for residential real estate loans. Construction loans totaled 6% of Sky Financials total loans at December 31, 2006.
Construction loans are mainly to individuals for the construction of their residences and, from time to time, to established builders and developers for the construction of residential homes without an underlying sales contract. Construction loans
to individuals are structured to be converted to permanent loans at the end of the construction phase, which typically runs from six months to one year. Substantially all of these loans are in Sky Financials local markets. Residential
construction loans are generally under-written pursuant to the same guidelines used for originating permanent residential mortgage loans. Terms and rates typically match residential mortgage loans, except that during the construction phase the
borrower pays interest only. The application process for construction loans includes a submission of the plans and costs of the project to be constructed. Non-residential mortgage loans comprised 27% of total loans at December 31, 2006. The non-residential real estate portfolio contains mortgage loans to developers and owners of commercial real estate. Development lending activities in
commercial real estate are based primarily on relationships with developers who are active in Sky Financials local markets. Commercial real estate loans are governed by the same lending policies and subject to credit risk as described for
commercial loans. Installment and credit cards loans were 6% of the total loans at December 31, 2006. This portfolio includes installment
loans used by clients to purchase automobiles, boats, recreational vehicles, automobile leases and student loans. These consumer loans are generally governed by the same lending policies as described for residential real estate. Credit risk for
installment loans arises from borrowers lacking the ability or willingness to repay the loan, and in the case of secured loans, by a shortfall in the value of the collateral in relation to the outstanding loan balance in the event of a default and
subsequent liquidation of collateral. Credit card loans include the outstanding balances on open-ended credit card accounts and unsecured personal and business lines of credit. Credit card loans are typically unsecured and are generally governed by
the same lending policies and subject to credit risk as described for residential real estate and consumer loans. Real estate loans, including
construction and mortgage loans, approximated 63% of total loans at December 31, 2006 and 2005. Commercial loans comprise 31% of the total loan
portfolio for both 2006 and 2005. As part of its commercial loan portfolio, Sky Financial engages in financing pools of loans with a specialty consumer finance company. This relationship currently has over 300 pools in this portfolio type. These
pools are made up of almost exclusively 1-4 family residential mortgage loans located throughout the country that have some type of impairment associated with them. In addition, Sky Financial participated in a small portfolio of shared national
credits.



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##### Table of Contents

Managements Discussion and Analysis of

Financial Condition and Results of Operation

(Dollars and shares in thousands, except per share data)



|                                                                                                                                                                  |  |                                                                                                                                                                                                    
|----------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|These individual credit relationships total less than one-half of one percent of the total loan portfolio with the businesses located in our current market area. |  | As of December 31, 2006, Sky Financial did not have any loan concentrations that exceeded 10% of total loans. Sky Financial monitors the levels of market segments
contained in the loan portfolio.



|                                             |  |   |            |   |  |   |            |   |  |   |            |   |  |   |           |   |  |   |           |  
|-------------------------------------------- |  | - | ---------- | - |  | - | ---------- | - |  | - | ---------- | - |  | - | --------- | - |  | - | --------- | -
|Table 8 Loan Portfolio                       |  |   |            |   |  |   |            |   |  |   |            |   |  |   |           |   |  |   |           |  
|December 31,                                 |  |   | 2006       |   |  |   | 2005       |   |  |   | 2004       |   |  |   | 2003      |   |  |   | 2002      |  
|Real estate loans:                           |  |   |            |   |  |   |            |   |  |   |            |   |  |   |           |   |  |   |           |  
|Construction                                 |  | $ | 823,327    |   |  | $ | 601,814    |   |  | $ | 848,072    |   |  | $ | 491,086   |   |  | $ | 410,955   |  
|Residential mortgage                         |  |   | 3,737,726  |   |  |   | 2,916,248  |   |  |   | 2,898,875  |   |  |   | 2,045,317 |   |  |   | 1,614,048 |  
|Non-residential mortgage                     |  |   | 3,451,926  |   |  |   | 3,500,482  |   |  |   | 3,498,746  |   |  |   | 2,896,116 |   |  |   | 2,290,053 |  
|Commercial, financial and agricultural loans |  |   | 4,031,549  |   |  |   | 3,423,470  |   |  |   | 2,562,738  |   |  |   | 2,441,225 |   |  |   | 2,168,545 |  
|Installment and credit card loans            |  |   | 782,289    |   |  |   | 707,208    |   |  |   | 807,687    |   |  |   | 770,901   |   |  |   | 864,387   |  
|Total loans                                  |  | $ | 12,826,817 |   |  | $ | 11,149,222 |   |  | $ | 10,616,118 |   |  | $ | 8,644,645 |   |  | $ | 7,347,988 |  
|Real estate loans:                           |  |   |            |   |  |   |            |   |  |   |            |   |  |   |           |   |  |   |           |  
|Construction                                 |  |   | 6.4        | % |  |   | 5.4        | % |  |   | 8.0        | % |  |   | 5.7       | % |  |   | 5.6       | %
|Residential mortgage                         |  |   | 29.2       |   |  |   | 26.2       |   |  |   | 27.3       |   |  |   | 23.7      |   |  |   | 22.0      |  
|Non-residential mortgage                     |  |   | 26.9       |   |  |   | 31.4       |   |  |   | 33.0       |   |  |   | 33.5      |   |  |   | 31.2      |  
|Commercial, financial and agricultural loans |  |   | 31.4       |   |  |   | 30.7       |   |  |   | 24.1       |   |  |   | 28.2      |   |  |   | 29.5      |  
|Installment and credit card loans            |  |   | 6.1        |   |  |   | 6.3        |   |  |   | 7.6        |   |  |   | 8.9       |   |  |   | 11.7      |  
|Total loans                                  |  |   | 100.0      | % |  |   | 100.0      | % |  |   | 100.0      | % |  |   | 100.0     | % |  |   | 100.0     | %



|                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                    
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The 2005 loan categories have been reclassified to conform to the current year presentation. In 2006, Sky Financial changed the method of classifying certain loans which resulted in a decrease to loans
classified as construction and an increase in non-residential real estate and commercial, financial and agricultural loans. |  | Table 9 shows the amount of commercial, financial and agricultural loans and real estate construction loans outstanding as of December 31, 2006, which based on the
remaining scheduled repayments of principal, are due in the periods indicated. Also, the amounts due after one year are classified according to their sensitivity to changes in interest rates.



|                                                                   |  |   |              |  |   |                        |  |   |                  |  |   |          
|------------------------------------------------------------------ |  | - | ------------ |  | - | ---------------------- |  | - | ---------------- |  | - | ---------
|Table 9 Loan Maturity and Price Sensitivity                        |  |   |              |  |   |                        |  |   |                  |  |   |          
|December 31, 2006                                                  |  |   | Due In1 Year |  |   | Due In1 Year - 5 Years |  |   | Due After5 Years |  |   | Total    
|Commercial, financial and agricultural                             |  | $ | 1,773,402    |  | $ | 1,942,112              |  | $ | 316,035          |  | $ | 4,031,549
|Construction                                                       |  |   | 233,780      |  |   | 330,552                |  |   | 258,995          |  |   | 823,327  
|Total                                                              |  | $ | 2,007,182    |  | $ | 2,272,664              |  | $ | 575,030          |  | $ | 4,854,876
|Total due after one year:                                          |  |   |              |  |   |                        |  |   |                  |  |   |          
|Fixed rate commercial, financial, agricultural and construction    |  |   |              |  | $ | 359,346                |  | $ | 72,345           |  | $ | 431,691  
|Variable rate commercial, financial, agricultural and construction |  |   |              |  |   | 1,913,319              |  |   | 502,684          |  |   | 2,416,003
|Total                                                              |  |   |              |  | $ | 2,272,664              |  | $ | 575,030          |  | $ | 2,847,694

Actual maturities of loans will differ from the contractual maturities presented in the table above because of prepayments,
rollovers and renegotiation of payment terms, among other factors.



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Under-Performing Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Residential mortgage, installment and other consumer loans are collectively evaluated for impairment. Individual commercial loans exceeding size thresholds established by management are evaluated for
impairment. Impaired loans are recorded at the loans fair value by the establishment of a specific allowance where necessary. The fair value of the collateral-dependent loans is determined by the fair value of the underlying collateral. The
fair value of noncollateral-dependent loans is determined by discounting expected future interest and principal payments at the loans effective interest rate. At December 31, 2006, impaired loans were $79,335 compared with $75,955 at
December 31, 2005; the increase was due primarily to the 15% increase in total loans at year-end 2006 compared to year-end 2005, partially offset by the resolution and sale of certain non-accrual loans secured by pools of commercial
leases. |  | Non-accrual loans are comprised principally of loans 90 days past due as well as certain loans, which are current but where serious doubt exists as to the ability of the borrower
to comply with the repayment terms. Interest previously accrued and not yet paid on non-accrual loans is reversed or charged against the allowance for credit losses during the period in which the loan is placed in a non-accrual status, except where
Sky Financial has determined that such loans are adequately secured as to principal and interest. Interest earned thereafter is included in income only to the extent that it is received in cash. In certain cases, interest received may be credited
against principal outstanding under the cost recovery method.



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|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Non-accrual loans increased $18,081 from $119,030 at December 31, 2005 to $137,111 at year-end 2006. The increase in non-accrual loans
in 2006 was due primarily to the increase in total loans during 2006, including non-accrual loans from acquisitions. For the year ended December 31, 2006, the amount of interest income that would have been recorded under the original loan terms
for total loans classified as non-accrual and restructured was $12,664. The amount actually collected and recorded, as interest income for these loans, was $2,975, which included $1,033 of interest from the collection of previously recorded
non-accrual loans that were secured by pools of commercial leases. At December 31, 2006, loans secured by pools of commercial leases on
non-accrual status were $15,435 down from $20,400 at year-end 2005. The reduction in these loans is due to cash collections and settlements on the loans during the year. These loans are guaranteed by surety bonds issued by a creditworthy insurance
company. Sky is engaged in litigation with this insurance company to enforce their payment obligations, as are a number of other banks nationwide.
These non-accrual loans are currently reflected in the consolidated balance sheet at the amount of the unpaid balance, under contractual terms. After consultation with its counsel as to the strength of its position, Sky Financial believes that the
credits are well secured and that the prospects for recovery of its balance, net of reserves, is probable. |  |  |  | At December 31, 2006, non-performing assets were $158,822, an increase from $136,985 at the prior year-end. The increase included
higher non-performing loans, which at year-end 2006, totaled $137,153 or 1.07% of total loans outstanding, compared with $119,509 or 1.07%, of total loans outstanding at year-end 2005. Loans now performing, but where some concerns exist as to the ability of the borrower to comply with present loan repayment terms (defined as loans rated
substandard or worse, but excluding non-accrual and restructured loans), approximated $113,395 and $140,220 at December 31, 2006 and 2005, respectively, and are being closely monitored by management and the boards of directors of Sky Financial
and its subsidiaries. The classification of these loans, however, does not imply that management expects losses on each of these loans, but believes that a higher level of scrutiny is prudent under the circumstances. The decrease in loans where some concern exists is indicative of the increased focus on credit quality and stricter credit standards in loan categories. These
loans require close monitoring despite the fact that they are performing according to their terms. Such classifications relate to specific concerns relating to each individual borrower and do not relate to any concentrated risk elements common to
all loans in this group.



|                                                                     |  |   |         |   |  |   |         |   |  |   |         |   |  |   |        |   |  |   |        |  
|-------------------------------------------------------------------- |  | - | ------- | - |  | - | ------- | - |  | - | ------- | - |  | - | ------ | - |  | - | ------ | -
|Table 10Under-Performing Assets                                      |  |   |         |   |  |   |         |   |  |   |         |   |  |   |        |   |  |   |        |  
|December 31,                                                         |  |   | 2006    |   |  |   | 2005    |   |  |   | 2004    |   |  |   | 2003   |   |  |   | 2002   |  
|Non-accrual loans                                                    |  | $ | 137,111 |   |  | $ | 119,030 |   |  | $ | 143,207 |   |  | $ | 81,979 |   |  | $ | 66,034 |  
|Restructured loans                                                   |  |   | 42      |   |  |   | 479     |   |  |   | 541     |   |  |   | 599    |   |  |   | 3,203  |  
|Total non-performing loans                                           |  |   | 137,153 |   |  |   | 119,509 |   |  |   | 143,748 |   |  |   | 82,578 |   |  |   | 69,237 |  
|Other real estate owned                                              |  |   | 21,669  |   |  |   | 17,476  |   |  |   | 10,055  |   |  |   | 10,441 |   |  |   | 4,178  |  
|Non-performing investments                                           |  |   |        |   |  |   |        |   |  |   | 11,705  |   |  |   |       |   |  |   |       |  
|Total non-performing assets                                          |  | $ | 158,822 |   |  | $ | 136,985 |   |  | $ | 165,508 |   |  | $ | 93,019 |   |  | $ | 73,415 |  
|Loans 90 days or more past due and still accruing interest           |  | $ | 23,988  |   |  | $ | 27,987  |   |  | $ | 16,243  |   |  | $ | 13,841 |   |  | $ | 12,458 |  
|Non-performing loans to total loans                                  |  |   | 1.07    | % |  |   | 1.07    | % |  |   | 1.35    | % |  |   | 0.96   | % |  |   | 0.94   | %
|Non-performing assets to total loans plus other real estate owned    |  |   | 1.24    |   |  |   | 1.23    |   |  |   | 1.56    |   |  |   | 1.07   |   |  |   | 1.00   |  
|Allowance for credit losses to total non-performing loans            |  |   | 126.13  |   |  |   | 120.88  |   |  |   | 105.32  |   |  |   | 151.30 |   |  |   | 154.07 |  
|Loans 90 days or more past due and not on non-accrual to total loans |  |   | 0.19    |   |  |   | 0.25    |   |  |   | 0.15    |   |  |   | 0.16   |   |  |   | 0.16   |  



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Provision and Allowance for Credit Losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|The provision for credit losses represents the charge to income necessary to adjust the allowance for credit losses to an amount that represents managements assessment of the estimated probable
credit losses inherent in Sky Financials loan portfolio that have been incurred at each balance sheet date. All lending activity contains associated risks of loan losses. Sky Financial recognizes these credit risks as a necessary element of
its business activity. To assist in identifying and managing potential loan losses, Sky Financial maintains a loan review function that continuously evaluates individual credit relationships as well as overall loan portfolio conditions. One of the
primary objectives of this loan review function is to make recommendations to management as to both specific loss reserves and overall portfolio loss reserves. |  |  |  | The provision for credit losses for 2006 was $36,854 compared with $52,249 for 2005 and $37,660 in 2004. The lower provision in 2006 for credit losses represented a return to Sky
Financials historical trend for net charge-offs as compared to the 2005 levels. The 2005 change in the provision for credit losses was attributable to higher levels of net charge-offs mostly related to several large commercial relationships
and growth in the loan portfolio, partially offset by an overall reduction in the credit risk profile facilitated by a reduction in non-accrual loans.



23



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##### Table of Contents

Managements Discussion and Analysis of

Financial Condition and Results of Operation

(Dollars and shares in thousands, except per share data)



|                                                                     |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         |  
|-------------------------------------------------------------------- |  | - | ------- | - |  | - | ------- | - |  | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|Table 11 Allowance for Credit Losses                                 |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         |  
|Year Ended December 31,                                              |  |   | 2006    |   |  |   | 2005    |   |  |   | 2004    |   |  |   | 2003    |   |  |   | 2002    |  
|Balance at beginning of the year                                     |  | $ | 144,461 |   |  | $ | 151,389 |   |  | $ | 124,943 |   |  | $ | 106,675 |   |  | $ | 92,831  |  
|Loans charged-off:                                                   |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         |  
|Real estate                                                          |  |   | (20,546 | ) |  |   | (21,612 | ) |  |   | (9,534  | ) |  |   | (10,021 | ) |  |   | (7,898  | )
|Commercial, financial and agricultural loans                         |  |   | (13,657 | ) |  |   | (26,786 | ) |  |   | (15,293 | ) |  |   | (9,615  | ) |  |   | (9,042  | )
|Installment and credit card                                          |  |   | (15,029 | ) |  |   | (22,480 | ) |  |   | (18,750 | ) |  |   | (21,554 | ) |  |   | (19,700 | )
|Other loans                                                          |  |   | (409    | ) |  |   | (248    | ) |  |   | (58     | ) |  |   | (373    | ) |  |   | (860    | )
|Total charge-offs                                                    |  |   | (49,640 | ) |  |   | (71,126 | ) |  |   | (43,635 | ) |  |   | (41,563 | ) |  |   | (37,500 | )
|Recoveries:                                                          |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         |  
|Real estate                                                          |  |   | 2,158   |   |  |   | 1,983   |   |  |   | 2,649   |   |  |   | 1,320   |   |  |   | 1,011   |  
|Commercial, financial and agricultural loans                         |  |   | 1,270   |   |  |   | 1,860   |   |  |   | 1,646   |   |  |   | 2,197   |   |  |   | 995     |  
|Installment and credit card                                          |  |   | 7,124   |   |  |   | 5,189   |   |  |   | 4,403   |   |  |   | 5,126   |   |  |   | 4,795   |  
|Other loans                                                          |  |   | 389     |   |  |   | 309     |   |  |   |        |   |  |   | 4       |   |  |   | 2       |  
|Total recoveries                                                     |  |   | 10,941  |   |  |   | 9,341   |   |  |   | 8,698   |   |  |   | 8,647   |   |  |   | 6,803   |  
|Net loans charged-off                                                |  |   | (38,699 | ) |  |   | (61,785 | ) |  |   | (34,937 | ) |  |   | (32,916 | ) |  |   | (30,697 | )
|Provision charged to operating expense                               |  |   | 36,854  |   |  |   | 52,249  |   |  |   | 37,660  |   |  |   | 34,125  |   |  |   | 37,659  |  
|Allowance for acquired institutions / sold portfolio                 |  |   | 30,379  |   |  |   | 2,887   |   |  |   | 23,723  |   |  |   | 17,059  |   |  |   | 6,882   |  
|Transfer to allowance for unfunded commitments and letters of credit |  |   | (5      | ) |  |   | (279    | ) |  |   |        |   |  |   |        |   |  |   |        |  
|Balance at the end of the year                                       |  | $ | 172,990 |   |  | $ | 144,461 |   |  | $ | 151,389 |   |  | $ | 124,943 |   |  | $ | 106,675 |  
|Net charge-offs to average loans outstanding                         |  |   | 0.34    | % |  |   | 0.57    | % |  |   | 0.37    | % |  |   | 0.40    | % |  |   | 0.47    | %
|Allowance for credit losses to total loans                           |  |   | 1.35    |   |  |   | 1.30    |   |  |   | 1.43    |   |  |   | 1.45    |   |  |   | 1.45    |  
|Allowance for credit losses to total non-performing loans            |  |   | 126.13  |   |  |   | 120.88  |   |  |   | 105.32  |   |  |   | 151.30  |   |  |   | 154.07  |  



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|At December 31, 2006 and 2005, an allowance for unfunded commitments and letters of credit of $490 and $279, respectively, was
included in accrued interest payable and other liabilities. As a result of the Union Federal and Wells River acquisitions, Sky Financial
transferred $29,892 and $487 of allowance for credit losses, respectively. Sky Financial maintains an allowance for credit losses at a level
adequate to absorb managements estimate of probable losses inherent in the loan portfolio. The allowance is comprised of a general allowance, a specific allowance for identified problem loans and an unallocated allowance. The general allowance is determined by applying estimated loss factors to the credit exposures from outstanding loans. For construction, commercial and
commercial real estate loans, loss factors are applied based on internal risk grades of these loans. For residential real estate, installment, credit card and other loans, loss factors are applied on a portfolio basis. Loss factors are based on Sky
Financials historical loss experience and are reviewed for modification on a quarterly basis, along with other factors affecting the collectibility of the loan portfolio. |  | Specific allowances are established for all classified loans, where management has determined that, due to identified significant conditions, it is probable that Sky
Financial will be unable to collect all amounts due according to the contractual terms of the loan agreement. The unallocated allowance recognizes the estimation risk associated with the allocated general and specific allowances and incorporates
managements evaluation of existing conditions that are not included in the allocated allowance determinations. These conditions are reviewed quarterly by management and include general economic conditions, credit quality trends, recent
acquisitions, and internal loan review and regulatory examination findings.



24



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##### Table of Contents

|                                                       |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         |  
|------------------------------------------------------ |  | - | ------- | - |  | - | ------- | - |  | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|Table 12 Allocation of the Allowance for Credit
Losses |  |   |         |   |  |   |         |   |  |   |         |   | 
|December 31,                                           |  |   | 2006    |   |  |   | 2005    |   |  |   | 2004    |   |  |   | 2003    |   |  |   | 2002    |  
|Specific                                               |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         |  
|Construction                                           |  | $ | 30      |   |  | $ |        |   |  | $ |        |   |  | $ |        |   |  | $ |        |  
|Real estate                                            |  |   | 3,748   |   |  |   | 2,541   |   |  |   | 3,860   |   |  |   | 4,185   |   |  |   | 2,689   |  
|Commercial, financial and agricultural                 |  |   | 5,429   |   |  |   | 5,122   |   |  |   | 4,054   |   |  |   | 2,738   |   |  |   | 3,468   |  
|Sub-total                                              |  |   | 9,207   |   |  |   | 7,663   |   |  |   | 7,914   |   |  |   | 6,923   |   |  |   | 6,157   |  
|General                                                |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         |  
|Construction                                           |  |   | 9,059   |   |  |   | 5,605   |   |  |   | 4,720   |   |  |   | 2,295   |   |  |   | 2,257   |  
|Real estate                                            |  |   | 57,272  |   |  |   | 54,238  |   |  |   | 54,833  |   |  |   | 42,485  |   |  |   | 33,382  |  
|Commercial, financial and agricultural                 |  |   | 51,093  |   |  |   | 43,922  |   |  |   | 46,441  |   |  |   | 37,229  |   |  |   | 29,052  |  
|Installment and credit card                            |  |   | 24,480  |   |  |   | 21,846  |   |  |   | 26,936  |   |  |   | 26,519  |   |  |   | 25,754  |  
|Sub-total                                              |  |   | 141,904 |   |  |   | 125,611 |   |  |   | 132,930 |   |  |   | 108,528 |   |  |   | 90,445  |  
|Total allocated                                        |  |   | 151,111 |   |  |   | 133,274 |   |  |   | 140,844 |   |  |   | 115,451 |   |  |   | 96,602  |  
|Unallocated                                            |  |   | 21,879  |   |  |   | 11,187  |   |  |   | 10,545  |   |  |   | 9,492   |   |  |   | 10,073  |  
|Total                                                  |  | $ | 172,990 |   |  | $ | 144,461 |   |  | $ | 151,389 |   |  | $ | 124,943 |   |  | $ | 106,675 |  
|Percent of loans in each category to total loans       |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         |   |  |   |         |  
|Construction                                           |  |   | 6.4     | % |  |   | 5.4     | % |  |   | 8.0     | % |  |   | 5.7     | % |  |   | 5.6     | %
|Real estate                                            |  |   | 56.1    |   |  |   | 57.6    |   |  |   | 60.3    |   |  |   | 57.2    |   |  |   | 53.2    |  
|Commercial, financial and agricultural                 |  |   | 31.4    |   |  |   | 30.7    |   |  |   | 24.1    |   |  |   | 28.2    |   |  |   | 29.5    |  
|Installment and credit card                            |  |   | 6.1     |   |  |   | 6.3     |   |  |   | 7.6     |   |  |   | 8.9     |   |  |   | 11.7    |  
|Total                                                  |  |   | 100.0   | % |  |   | 100.0   | % |  |   | 100.0   | % |  |   | 100.0   | % |  |   | 100.0   | %



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|At December 31, 2006, the allowance for credit losses was $172,990 or 1.35% of total loans outstanding, and 126% of total non-performing loans compared to
an allowance at December 31, 2005 of $144,461 or 1.30% of total loans outstanding, and 121% of total non-performing loans. At year-end 2006, the allocated portion of the allowance for credit losses was $151,111 compared with $133,274 at
year-end 2005. The increase in the allowance in 2006 was attributable to an overall increase in total loans including the allowance from acquired
institutions. The decrease in the allowance in 2005 was attributable to an overall reduction in the credit risk profile facilitated by a reduction in non-accrual loans and loans requiring a specific reserve allocation. At year-end 2006, the unallocated portion of the allowance for credit losses was $21,879 compared with $11,187 at year-end 2005 and $10,545 at year-end 2004.
The increase in 2006 was mainly due to the unallocated allowance acquired from Union Federal. Net charge-offs decreased to $38,699 compared with
$61,785 in 2005 and $34,937 in 2004, mainly due to higher charge-offs in 2005 related to several large commercial relationships, the sale of a pool of non-performing real estate loans and the increased size of the loan portfolio. The 2006 net
charge-offs were in line with Sky Financials historical trend. Net charge-offs as a percentage of average loans outstanding decreased in 2006 to .34% from .57% in 2005 and .37% in 2004. |  | Securities  The investment portfolio at Sky Financial is used as a
management tool to maintain acceptable levels of liquidity and exposure to changes in market interest rates. The portfolio yield is maximized once these criteria are satisfied. In recent years, the portfolio has shifted to include a greater
percentage of mortgage-backed securities. Mortgage-backed securities offer monthly principal and interest and may be used as collateral in a variety of financial transactions to secure sources of wholesale funding. The market for agency
mortgage-backed securities is large and liquid. It is the practice of Sky Financial to purchase mortgage-backed securities with average expected lives of two-to-five years. Because this type of security may extend or contract, a pre-purchase
analysis is completed. Most securities purchased have structures that limit changes to duration as market rates change. The following table documents the fair value of the available for sale portfolio by product.



25



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##### Table of Contents

Managements Discussion and Analysis of

Financial Condition and Results of Operation

(Dollars and shares in thousands, except per share data)



|                                                 |  |   |                      |  |   |           |  |   |          
|------------------------------------------------ |  | - | -------------------- |  | - | --------- |  | - | ---------
|Table 13 Securities                              |  |   |                      |  |   |           |  |   |          
|                                                 |  |   | Estimated Fair Value
|December 31,                                     |  |   | 2006                 |  |   | 2005      |  |   | 2004     
|U.S. Treasury                                    |  | $ | 200                  |  | $ | 301       |  | $ | 207      
|U.S. government agencies and corporations        |  |   | 65,927               |  |   | 191,273   |  |   | 152,266  
|Obligations of states and political subdivisions |  |   | 43,555               |  |   | 7,690     |  |   | 16,561   
|Corporate and other securities                   |  |   | 4,950                |  |   | 24,111    |  |   | 51,699   
|Mortgage-backed securities                       |  |   | 2,785,018            |  |   | 2,698,074 |  |   | 2,706,552
|Total debt securities available for sale         |  |   | 2,899,650            |  |   | 2,921,449 |  |   | 2,927,285
|Marketable equity securities available for sale  |  |   | 36,599               |  |   | 31,459    |  |   | 29,865   
|FHLB, FRB & Bankers Bank stock(1)               |  |   | 193,711              |  |   | 144,564   |  |   | 134,663  
|Total securities                                 |  | $ | 3,129,960            |  | $ | 3,097,472 |  | $ | 3,091,813



|(1) | Certain securities such as FHLB, FRB, and Bankers Bank stock are carried at amortized cost.
|--- | --------------------------------------------------------------------------------------------



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|In 2006, total securities increased by $32,488. Although the net change was minimal, the impact of growth from acquisitions for the year was offset by a
significant decrease in the investment portfolio due to Sky Financial completing a balance sheet restructuring in the fourth quarter of 2006. The reduction in assets included the sale of available-for-sale, fixed-rate investment securities with a
book value totaling $505,629 with an average yield of 3.74%, and the elimination of federal funds sold coming from the Union Federal acquisition. The balance sheet restructuring was designed to strengthen capital ratios, maintain a sound interest
rate risk position and enhance the net interest margin following the completion of the acquisitions of Union Federal and Wells River. This balance sheet restructuring resulted in realized losses on sales of securities of $19,435 recorded as a
component of net securities gains (losses). During the year, Sky purchased $1,029,908 in securities. Maturities, calls and principal
repayments totaled $564,450 and sales of investments totaled $833,282 that resulted in a net loss of $19,503, including the restructuring mentioned above. In order to achieve liquidity and interest rate risk management objectives, the available for sale investment portfolio along with wholesale funding and interest rate derivatives (e.g., interest rate swaps, caps and floors) provides the
company with the ability to manage liquidity and interest rate risk as the broader balance sheet and market conditions warrant. From time to time adjustments in holdings of various types of investments may be necessary to maintain prudent
positioning of the total balance sheet. The management team through the Asset Liability Committee reviews potential adjustments monthly. Of
the securities sold, $18,999 were corporate trust preferred issues that were sold due to managements decision to minimize risk by liquidating these investments. A net gain of $242 was recognized on these sales. Due to the length of time it had remained below market value, a common stock with a carrying value totaling $9,065 was written down to market value
resulting in a loss of $1,681. Other investments consisting primarily of equity and mortgage-backed securities in the amount of $3,903 were sold
during the year for a net loss of $298. In addition to the securities sold above, a combined total of $324,197 in securities was sold during
the integration of Union Federal and Wells River into Sky Financial. These investments were liquidated because they did not conform to the extension risk parameters of the broader securities portfolio. To complete the restructuring process, proceeds
from the sales were used to reinvest in securities that better fit the parameters of Sky Financials portfolio. |  |  |  | In 2005, total securities available for sale only increased by $5,659 as the impact of growth was not significant and liquidity and
interest rate risk management factors were mostly stable throughout the year. During 2005, $722,371 in securities were purchased, while principal from maturities, calls and payments totaled $627,290 and sales totaled $127,667. The portfolio contains mortgage-backed securities and, to a limited extent, other securities, that have uncertain cash flow characteristics. The variable
cash flows present additional risk to Sky Financial in the form of prepayment or extension risk primarily caused by changes in market interest rates. This additional risk is generally rewarded in the form of higher yields. Sky Financial utilizes a variety of tools to monitor and minimize this risk. All securities must pass a stress test at the time of purchase estimating how
the security would perform in various interest rate environments. Additionally, the corporate investment policy defines certain types of high-risk securities ineligible for purchase, including securities that may not return full principal to Sky
Financial. It is also the practice of Sky Financial to minimize premiums paid on mortgage securities to avoid yield reduction if prepayments accelerate. Mortgage securities were at a discount to par value of .21% as of December 2006 compared to a
premium to par value of .30% in December 2005. These policies help to ensure that there will be no material impact from these investments to the financial statements due to changes in market interest rates, which may shorten the average life of the
portfolio. Expected maturities of individual securities will differ from contractual maturities because issuers may have the right to call or
prepay obligations with or without call or prepayment penalties. Mortgage-backed securities are presented in the table based on current prepayment assumptions. The weighted average yields on income from tax-exempt obligations of state and political
subdivisions have been adjusted to a tax equivalent basis. Table 14 shows (at amortized cost) the contractual maturities and weighted average yields of Sky Financials securities as of December 31, 2006.



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|                                                                                |  |               |         |       |           |   |        |            |           |  |               |        |  |       |         |  |        |   |       |   |         |  |      |  
|------------------------------------------------------------------------------- |  | ------------- | ------- | ----- | --------- | - | ------ | ---------- | --------- |  | ------------- | ------ |  | ----- | ------- |  | ------ | - | ----- | - | ------- |  | ---- | -
|Table 14 Maturity Distribution of Debt Securities Portfolio
(At Amortized Cost) | 
|                                                                                |  | Within 1 Year |         |       | 1-5 Years |   |        | 5-10 Years |           |  | Over 10 Years |       
|December 31, 2006                                                               |  | Amount        |         | Yield |           |   | Amount |            | Yield     |  |               | Amount |  | Yield |         |  | Amount |   | Yield |  
|U.S. Treasury                                                                   |  | $             | 99      |       | 5.01      | % |        | $          | 100       |  | 5.49          | %      |  | $     |        |  |       |   |       | $ |        |  |     |  
|U.S. government agencies and corporations                                       |  |               | 2,999   |       | 2.48      |   |        |            | 62,623    |  | 4.55          |        |  |       |        |  |       |   |       |   | 1,345   |  | 5.12 | %
|Obligations of states and political subdivisions                                |  |               | 13,298  |       | 9.52      |   |        |            | 13,569    |  | 7.67          |        |  |       | 7,933   |  | 8.38   | % |       |   | 8,673   |  | 8.75 |  
|Corporate and other securities                                                  |  |               | 200     |       | 4.79      |   |        |            | 1,000     |  | 4.20          |        |  |       | 250     |  | 4.52   |   |       |   | 3,500   |  | 9.30 |  
|Mortgage-backed securities                                                      |  |               | 646,779 |       | 4.76      |   |        |            | 1,574,948 |  | 4.94          |        |  |       | 517,020 |  | 5.02   |   |       |   | 90,758  |  | 5.27 |  
|Total debt securities available for sale                                        |  | $             | 663,375 |       | 4.85      | % |        | $          | 1,652,240 |  | 4.95          | %      |  | $     | 525,203 |  | 5.07   | % |       | $ | 104,276 |  | 5.70 | %



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Sky Financial evaluates its securities portfolio for other-than-temporary impairment throughout the year. Each investment, which has an indicative market value
less than the book value is reviewed on a monthly basis by management. Management considers at a minimum the following factors that, both individually or in combination, could indicate that the decline is other-than-temporary: 1) the length of time
and extent to which the market value has been less than book value; 2) the financial condition and near-term prospects of the issuer; or 3) the intent and ability of Sky Financial to retain the investment in the issuer for a period of time
sufficient to allow for any anticipated recovery in market value. Among the factors that are considered in determining intent and ability is a review of capital adequacy, interest rate risk profile and liquidity at Sky Financial. An impairment is recorded against individual securities if the review described above concludes that the decline in value is |  |  |  | other-than-temporary. In the fourth quarter of 2006, Sky Financial determined that an investment in a corporate equity security with a book value of $9,065 and
a fair value at the end of the year of $7,384 was impaired. The fair value of the equity security had been below Sky Financials cost for the security in excess of a year and Sky Financial was unable to forecast the near-term recovery of the
value of the security. As a result, Sky Financial recorded an other-than-temporary impairment of $1,681 related to this security. The
following table documents the amount of securities by type that are currently carried above fair market value. It also indicates the amount of securities that have been below market value for more than one year. In addition, the table indicates the
anticipated recovery period that represents the market consensus on the duration of the investments based on market assumptions.



|                                                 |  |   |           |  |   |            |  |   |                       |   |  |   |                       |  |   |            |  |   |                       |   |  |                                   
|------------------------------------------------ |  | - | --------- |  | - | ---------- |  | - | --------------------- | - |  | - | --------------------- |  | - | ---------- |  | - | --------------------- | - |  | ----------------------------------
|Table 15 Securities (Gross Unrealized Losses)    |  |   |           |  |   |           
|                                                 |  |   |           |  |   | Total      |  |   |                       |   |  |   | Greater than one year
|December 31, 2006                                |  |   | BookValue |  |   | FairMarket |  |   | GrossUnrealizedLosses |   |  |   | BookValue             |  |   | FairMarket |  |   | GrossUnrealizedLosses |   |  | AnticipatedRecoveryPeriod in years
|U. S. Treasury                                   |  | $ | 99        |  | $ | 99         |  | $ |                      |   |  | $ |                      |  | $ |           |  | $ |                      |   |  |                                  
|U. S. government agencies and corporations       |  |   | 66,967    |  |   | 65,927     |  |   | (1,040                | ) |  |   | 66,967                |  |   | 65,927     |  |   | (1,040                | ) |  | 3.4                               
|Obligations of states and political subdivisions |  |   | 3,186     |  |   | 3,170      |  |   | (16                   | ) |  |   | 479                   |  |   | 473        |  |   | (6                    | ) |  | 2.8                               
|Corporate and other securities                   |  |   | 1,000     |  |   | 1,000      |  |   |                      |   |  |   |                      |  |   |           |  |   |                      |   |  |                                  
|Mortgage-backed securities                       |  |   | 2,046,972 |  |   | 1,998,737  |  |   | (48,235               | ) |  |   | 1,722,121             |  |   | 1,675,480  |  |   | (46,641               | ) |  | 3.0                               
|Total debt securities for sale                   |  |   | 2,118,224 |  |   | 2,068,933  |  |   | (49,291               | ) |  |   | 1,789,567             |  |   | 1,741,880  |  |   | (47,687               | ) |  | 3.1                               
|Marketable equity securities available for sale  |  |   | 337       |  |   | 280        |  |   | (57                   | ) |  |   | 337                   |  |   | 280        |  |   | (57                   | ) |  |                                  
|Total securities                                 |  | $ | 2,118,561 |  | $ | 2,069,213  |  | $ | (49,348               | ) |  | $ | 1,789,904             |  | $ | 1,742,160  |  |   | (47,744               | ) |  | 3.1                               



|                                                                                                                                                                                                                                                                                                                                                                                          |  |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|There are no securities of any single issuer where the aggregate carrying value of such securities exceed 10% of shareholders equity, except those of the U.S. Treasury, U.S. Government agencies and
substantially all mortgage-backed securities issued by Federal Home Loan Mortgage Corporation, Federal National Mortgage Association and Government National Mortgage Association. |  |  |  | Funding Sources  Sky Financial obtains its funding through a variety of sources. Retail deposits are gathered from individuals and businesses within the local communities served by the banking affiliate. Deposits encompass the full range of
banking products including checking, savings and time deposits. In addition, Sky Financial obtains funds under a number of borrowing arrangements. The banking affiliate is a member of the Federal Home Loan Bank and may obtain both overnight and term
advances. The banking affiliate also obtains funds through securities sold under repurchase agreements and federal funds lines. The parent company maintains a line of credit with a group of non-affiliated banks.



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##### Table of Contents

Managements Discussion and Analysis of

Financial Condition and Results of Operation

(Dollars and shares in thousands, except per share data)



|                                     |  |   |                             |  |                   |            |  |   |            |  |      |   |  |      |   |  |      |  
|------------------------------------ |  | - | --------------------------- |  | ----------------- | ---------- |  | - | ---------- |  | ---- | - |  | ---- | - |  | ---- | -
|Table 16 Funding Sources             |  |   |                             |  |                   |            |  |   |           
|                                     |  |   | Average Amounts Outstanding |  | Average Rate Paid |           
|Year Ended December 31,              |  |   | 2006                        |  |                   | 2005       |  |   | 2004       |  | 2006 |   |  | 2005 |   |  | 2004 |  
|Non-interest-bearing demand deposits |  | $ | 1,723,417                   |  | $                 | 1,641,264  |  | $ | 1,402,627  |  |      |   |  |      |   |  |      |  
|Interest-bearing demand deposits     |  |   | 390,510                     |  |                   | 365,825    |  |   | 298,742    |  | 2.13 | % |  | 1.43 | % |  | 0.79 | %
|Savings deposits                     |  |   | 3,455,634                   |  |                   | 3,703,527  |  |   | 3,767,873  |  | 2.09 |   |  | 1.26 |   |  | 0.76 |  
|Time deposits                        |  |   | 5,408,434                   |  |                   | 4,527,894  |  |   | 3,729,530  |  | 4.24 |   |  | 3.20 |   |  | 2.75 |  
|Brokered deposits                    |  |   | 515,473                     |  |                   | 387,708    |  |   | 306,076    |  | 4.41 |   |  | 3.10 |   |  | 2.33 |  
|Total deposits                       |  |   | 11,493,468                  |  |                   | 10,626,218 |  |   | 9,504,848  |  |      |   |  |      |   |  |      |  
|Short-term borrowings                |  |   | 949,308                     |  |                   | 857,472    |  |   | 897,438    |  | 4.33 |   |  | 3.11 |   |  | 2.08 |  
|Junior subordinated debentures       |  |   | 285,520                     |  |                   | 188,734    |  |   | 174,385    |  | 7.68 |   |  | 6.45 |   |  | 4.99 |  
|Debt and FHLB advances               |  |   | 1,638,733                   |  |                   | 1,836,233  |  |   | 1,427,547  |  | 4.63 |   |  | 3.67 |   |  | 2.91 |  
|Total funding sources                |  | $ | 14,367,029                  |  | $                 | 13,508,657 |  | $ | 12,004,218 |  |      |   |  |      |   |  |      |  

Table 17 is a schedule of maturities of time deposits in denominations of $100,000 or more as of
December 31, 2006 and 2005:



|                                                       |  |   |           |  |   |          
|------------------------------------------------------ |  | - | --------- |  | - | ---------
|Table 17 Maturity of Time Deposits of $100,000 or More |  |   |           |  |   |          
|December 31,                                           |  |   | 2006      |  |   | 2005     
|Three months or less                                   |  | $ | 805,338   |  | $ | 486,086  
|Three through six months                               |  |   | 481,247   |  |   | 381,298  
|Six through twelve months                              |  |   | 408,713   |  |   | 287,970  
|Over twelve months                                     |  |   | 215,847   |  |   | 431,845  
|Total                                                  |  | $ | 1,911,145 |  | $ | 1,587,199

Short-Term Borrowings



|                                                                                                                                                                      |  |  |  |                                                                                                            
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | -----------------------------------------------------------------------------------------------------------
|Table 18 sets forth certain information relative to borrowed funds with original maturities of less than one year. Included in these borrowed funds are federal funds |  |  |  | purchased, advances from the FHLB, securities sold under agreements to repurchase and bank lines of credit.



|                                                                                                                                    |  |   |           |   |  |   |           |   |  |   |           |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | - | --------- | - |  | - | --------- | - |  | - | --------- | -
|Table 18 Short-Term Borrowings                                                                                                      |  |   |           |   |  |   |           |   |  |   |           |  
|December 31,                                                                                                                        |  |   | 2006      |   |  |   | 2005      |   |  |   | 2004      |  
|Balance at period-end                                                                                                               |  | $ | 1,120,074 |   |  | $ | 1,426,660 |   |  | $ | 1,282,644 |  
|Weighted average interest rate at period-end                                                                                        |  |   | 4.34      | % |  |   | 3.63      | % |  |   | 2.01      | %
|Maximum outstanding at any month-end during the year                                                                                |  | $ | 1,695,607 |   |  | $ | 1,426,660 |   |  | $ | 1,286,337 |  
|Average amount outstanding                                                                                                          |  |   | 1,271,401 |   |  |   | 1,250,694 |   |  |   | 1,109,910 |  
|Weighted average rates during the year                                                                                              |  |   | 3.89      | % |  |   | 2.82      | % |  |   | 1.25      | %
|For further information on the securities sold under agreements to repurchase, see Note 8 of the Consolidated Financial
Statements. | 



28



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##### Table of Contents

Contractual Obligations and Commitments

|                                                                                                                                                                                                                                                                                                                |  |  |  |                                                                                                                                                                                                                                                                           
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Table 19 presents, as of December 31, 2006, Sky Financials significant fixed
and determinable contractual obligations by payment date. The payment amounts represent those amounts due to the recipient and do not include any unamortized premiums or discounts or other similar carrying amount adjustments. |  |  |  | Deposits without a stated maturity have been placed in the one year and less category for this presentation based on the clients ability to withdraw on a daily basis. However, from a practical
standpoint, these deposits provide a stable long-term source of funding.



|                                                                        |  |   |                 |  |   |                   |  |   |                    |  |   |                |  |   |           
|----------------------------------------------------------------------- |  | - | --------------- |  | - | ----------------- |  | - | ------------------ |  | - | -------------- |  | - | ----------
|Table 19 Contractual Obligations(1)                                     |  |   |                 |  |   |                   |  |   |                    |  |   |                |  |   |           
|Note                                                                    |  |   | One Yearor Less |  |   | One toThree Years |  |   | Three toFive Years |  |   | Over FiveYears |  |   | Total     
|Deposits without a stated maturity                                      |  | $ | 6,267,297       |  | $ |                  |  | $ |                   |  | $ |               |  | $ | 6,267,297 
|Certificates of deposit                                                 |  |   | 4,905,152       |  |   | 825,969           |  |   | 138,235            |  |   | 51,020         |  |   | 5,920,376 
|Brokered deposits                                                       |  |   | 891,380         |  |   | 145,861           |  |   |                   |  |   |               |  |   | 1,037,241 
|Federal funds purchased and securities sold under repurchase agreements |  |   | 810,074         |  |   | 139,000           |  |   | 30,000             |  |   |               |  |   | 979,074   
|Bank lines of credit                                                    |  |   | 35,000          |  |   |                  |  |   |                   |  |   |               |  |   | 35,000    
|Debt and FHLB advances                                                  |  |   | 653,245         |  |   | 122,770           |  |   | 152,243            |  |   | 125,392        |  |   | 1,053,650 
|Operating leases                                                        |  |   | 11,869          |  |   | 18,183            |  |   | 13,702             |  |   | 21,734         |  |   | 65,488    
|Junior subordinated debentures                                          |  |   |                |  |   |                  |  |   |                   |  |   | 334,764        |  |   | 334,764   
|Total                                                                   |  | $ | 13,574,017      |  | $ | 1,251,783         |  | $ | 334,180            |  | $ | 532,910        |  | $ | 15,692,890



|(1) | In the banking industry, interest-bearing obligations are principally utilized to fund interest-bearing assets. As such, interest charges on related contractual obligations were excluded from
reported amounts as the potential cash outflows would have corresponding cash inflows from interest-bearing assets.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                   |                                                                                                        |   |           |  |   |           | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | - | --------- |  | - | --------- | 
|Sky Financial obtains its funding from a variety of sources including retail and commercial deposits,
securities sold under agreement to repurchase, federal funds purchased, FHLB advances, and debt securities offered by Sky Financial. By utilizing a mixture of these funding sources, Sky Financial is able to manage its contractual repayment
dates.  Sky Financial also enters into derivative contracts under which it
is required to either receive cash or pay cash to counterparties depending on changes in interest rates. Derivative contracts are carried at their fair value on the consolidated balance sheet with the fair value representing the net present value of
expected future cash receipts or payments based on market interest rates as of the balance sheet date. The contracts are primarily interest rate swaps and cash is settled quarterly. Because the derivative contracts recorded on the balance sheet at
December 31, 2006 do not represent amounts that will ultimately be received or paid under these contracts, they are excluded from the table above. |                                                                                                                                                                                                                                                                                                                   | A schedule of significant off-balance sheet commitments at December 31, 2006, is included in Table 20.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Table 20 Significant Commitments                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                   |                                                                                                        |   | 2006      |  |   | 2005     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Commitments to extend credit                                                                                                                                                                                                                                                                                      |                                                                                                        | $ | 3,904,904 |  | $ | 3,498,243
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Standby letters of credit                                                                                                                                                                                                                                                                                         |                                                                                                        |   | 268,988   |  |   | 299,427  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Letters of credit                                                                                                                                                                                                                                                                                                 |                                                                                                        |   | 863       |  |   | 1,704    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | These commitments are extended to
clients in the normal course of business and are subject to the same credit policies as making on-balance sheet commitments. Because many of the commitments are expected to expire without being drawn upon, the total amounts do not represent future
cash flow requirements.



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Liquidity Management  Management of liquidity is of continuing importance to the banking industry. The liquidity of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows of deposits and to take
advantage of interest rate market opportunities. The ability of a financial institution to meet its current financial obligations is a function of balance sheet structure, the ability to liquidate assets and the availability of alternative sources
of funds. To meet the needs of the clients and manage the risk of the bank, financial institutions have developed innovative ways to meet client needs while at the same time managing both liquidity and interest rate risk. This is being done
primarily through liquidity management and the balance of deposit growth and alternative sources of borrowing.  Certificates of deposit provide Sky Financial with a dependable source of funding. However, market pricing can be highly competitive and this source of funds
must be prudently managed. As of December 31, 2006, a total of $5,175,600 of time deposits will mature in the next twelve months. The maturities are reasonably disbursed across the year and there are no unusual concentrations of individual
clients. At Sky Financial, time deposit maturities are monitored through the corporate Asset/ Liability Committee (ALCO). Maturing balances are summarized by month, as well as original term and current rate. Heavy matu- |  |  |  | rity periods are monitored closely and proactive marketing plans are created that address both the client and Sky Financials needs and preferences.
Regional management along with funds management meets weekly to discuss general economic and market conditions. During this meeting, each region reports the results of the prior weeks pricing and promotional efforts. Each region then
determines its rates for the coming week. Regional pricing allows Sky Financial to attract deposits at the most efficient cost available. Time deposit maturities are monitored and the percent retained is reported monthly to ALCO.  Management of Sky Financial is confident that a significant portion of the scheduled
maturities will be retained in 2007. In the unlikely event that these are not retained by Sky Financial, a minimum liquidity ratio has been established at 10% of non-collateralized liabilities. This 10% ratio consists of readily marketable
securities and unused borrowing capacity. At least 8% of the assets must be in unencumbered marketable assets. In addition, Sky Financial has a standing contingent liquidity management plan that prioritizes the steps needed to compensate for
temporary disruptions in liquidity. In addition to maintaining a stable core deposit base, Sky Financials banking subsidiary maintains
adequate liquidity primarily through the use of investment securities, unused



29



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##### Table of Contents

Managements Discussion and Analysis of

Financial Condition and Results of Operation

(Dollars and shares in thousands, except per share data)



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|borrowing capacity, security repurchase agreements and federal funds purchased. At December 31, 2006, securities with maturities of one year or less totaled $16,578. In addition, the mortgage-backed securities provide an estimated cash
flow of approximately $646,779 over a twelve-month timeframe. The banking subsidiary is a member of the Federal Home Loan Bank (FHLB). The FHLB provides a reliable source of funds with a wide variety of terms and structures. As of December 31,
2006, the banking subsidiary had total credit availability with the FHLB of $1,943,666, of which, $903,645 was outstanding. Sky Financial is a
holding company and does not conduct operations. Its primary sources of liquidity are borrowings from outside sources and dividends received from its subsidiaries. For the banking subsidiary, regulatory approval is required in order to pay dividends
in excess of the subsidiarys earnings retained for the current year plus retained net profits for the prior two years. At December 31, 2006, $179,388 was available for distribution to Sky Financial as dividends without prior regulatory
approval. Sky Financial maintains a $100,000 line of credit with a group of unaffiliated banks that expires May 25, 2007. It is anticipated
that the line will be renewed. As of December 31, 2006, Sky Financial had a $35,000 outstanding balance on the line of credit. The
corporation manages liquidity risk in accordance with established policies primarily through the ALCO. Management has increased its monitoring of liquidity levels and has implemented strategies to increase liquidity. Strategies implemented in 2005
and 2006 include new retail, deposit retention and growth initiatives, an increased portfolio of a laddered maturity of brokered CDs and additional federal funds lines. As part of the Union Federal acquisition, Sky Financial acquired over $700,000
of brokered deposits with a higher liquidity risk due to the nature of the deposits. Management will continue to monitor the liquidity risk associated with these deposits and implement strategies to mitigate the risk associated with these
deposits.  Capital Resources  Shareholders equity at year-end 2006 totaled $1,880,648 compared to $1,553,877 at December 31, 2005,
an increase of 21%. The increase was primarily due to net retained earnings (net income less dividends) of $86,080, the issuance of $200,566 of common stock for acquisitions and the exercise of stock options. The Federal Reserve Board has established risk-based capital guidelines that must be observed by financial holding companies and banks. Sky Financial has
consistently maintained the regulatory capital ratios of the corporation and its bank above well capitalized requirements. Under capital adequacy guidelines, Sky Financial and Sky Bank must meet specific quantitative measures of their
assets, liabilities and certain off-balance sheet items as determined under regulatory accounting practices. Sky Financials and Sky Banks capital amounts and classifications are subject to qualitative judgments by the regulators about
components, risk weighting and other factors. Management believes, as of December 31, 2006, Sky Financial and Sky Bank meet all capital adequacy requirements for which they are subject. At December 31, 2006, Sky Financials and Sky
Banks ratio of total capital to risk-weighted assets as defined by the regulatory framework for prompt corrective action were 12.0% and 12.0%. The capital position is managed through changes to balance sheet size and composition, issuance of
debt and equity instruments, treasury stock activities, dividend policies and retention of earnings. During 2005 the Federal Reserve Board issued
a final rule revising the existing capital standards, which limit the inclusion of restricted core capital elements, including perpetual preferred stock and Trust preferred securities. The rule will be phased in for |  |  |  | the quarter-ended March 31, 2009. On
December 5, 2006, the Federal Reserve Board published a draft interagency notice of proposed rulemaking regarding potential revisions to the existing risk-based capital framework. These changes would apply to banks, bank holding companies, and
savings associations. The new rules known as Basel IA will be optional for organizations not required to adopt the Basel II advanced capital framework required only for the largest, most complex banks. The potential modifications to the U.S. risk-based capital standards under Basel IA include: n  Allow banking organizations other than the advanced Basel II organizations to elect to adopt Basel IA or remain subject to the existing risk-based capital rules. n  Use loan-to-value ratios to determine risk-weights for most residential mortgages. n  Increase the number of risk weight categories to which credit exposures may be
assigned. n  Expand the use of external credit ratings for certain externally-rated exposures. n  Expand the range of collateral and guarantors that may qualify an exposure for
lower risk weights. n  Increase the credit conversion factors for certain commitments with an original maturity of less than one year. n  Assess a risk-based capital charge to reflect the risks in securitizations with early amortization provisions that are backed by revolving exposures. n  Remove the 50 percent limit on the risk weight that applies to certain derivative contracts.  Sky Financial will continue to monitor these potential changes to the risk-based capital standards and will make the necessary changes to ensure that it remains
well-capitalized. Sky Financials strategic plans include continued growth through acquisitions, which can potentially impact Sky
Financials capital position. Sky Financial may issue additional common stock in conjunction with future acquisitions in order maintain its well capitalized status. As of December 31, 2006, Sky Financial has $335,294 of capital securities with wholly-owned unconsolidated subsidiaries, which are considered to be Tier I
capital for regulatory purposes. Under the Federal Reserve Boards regulatory framework, certain capital securities offered by wholly-owned unconsolidated trust preferred entities of Sky Financial are currently included as Tier I
regulatory capital. The new rule continues to allow this inclusion limiting the Tier I inclusion to 25% of core capital for entities that are not internationally active. Amounts in excess of the 25% limit are eligible for inclusion in Tier II
capital.  Market Risk Management  Market risk is the risk that a financial institutions earnings and capital, or its ability to meet its
business objectives, will be adversely affected by movements in market rates or prices such as interest rates, foreign exchange rates, equity prices, credit spreads and/or commodity prices. Within Sky Financial, the dominant market risk exposure is
changes in interest rates. The negative effect of this exposure is felt through the net interest spread, mortgage banking revenues and the market values of various assets and liabilities. Sky Financial manages market risk through its ALCO at both the subsidiary and consolidated levels. The committee assesses interest rate risk exposure through
three primary measurements: rate sensitive assets divided by rate sensitive liabilities (or Gap ratios), interest rate shock simulations of net interest income at risk, and economic value of equity risk simulation. Sky Financial also utilizes interest rate swaps and caps to effectively modify its liability interest rate repricing to more effectively match the repricing
characteristics of its assets. At December 31, 2006, the fair value of Sky Financials derivative



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##### Table of Contents

arrangements aggregated $(335) on contracts with notional amounts of $630,903. Sky Financial monitors and manages its rate sensitivity position to maximize net interest income, while minimizing the risk due to changes in interest rates. Sky Financial also uses a rate sensitivity gap analysis to manage its interest rate risk. The difference between a financial
institutions interest rate sensitive assets (e.g., assets that will mature or reprice within a specific time period) and interest rate sensitive liabilities (e.g. liabilities that will mature or reprice within the same time period) is commonly
referred to as its interest rate sensitivity gap or gap. An institution having more interest rate sensitive assets than interest rate sensitive liabilities within a given time period is said to have a positive
gap, which generally means that if interest rates increase, a companys net interest income will increase and if interest rates decrease, its net interest income will decrease. An institution having more interest rate sensitive
liabilities than interest rate assets within a given time period is said to have a negative gap, which generally means that if interest rates increase, a companys net interest income will decrease and if interest rates decrease,
its net interest income will increase. The current policy imposes limits at the six-month and 12-month time periods that is measured in terms
of the ratio of cumulative rate sensitive assets divided by rate sensitive liabilities. Table 21 presents the gap position of Sky Financial at December 31, 2006 and 2005.  Table 21 Gap PositionYear-end


Year-end


ALCO Guidelines2006


2005


Max


MinSix month

95.0
%

102.5
%

125
%

95
%One year

90.0
%

98.2
%

125
%

90
% The interest rate shock simulation analysis measures the potential effect on earnings that an
instantaneous parallel change in general interest rates could have on net interest income and economic value of equity. Sky Financial applies hypothetical interest rate shocks up 200 and 100 basis points and down 100 and 200 basis points to its
financial instruments based on the assumed cash flows. The economic value of equity measures the price risk of the entire balance sheet by discounting expected cash flows of all assets and liabilities and netting the result. This provides a
longer-term view of the interest rate risk profile of the company that is focused on the current economic value of assets and liabilities that make up the balance sheet at a static point in time. The shock then examines how the economic value of the
company would change if market rates were different. As demonstrated in Table 22, as of December 31, 2006, the projected volatility of net interest income and economic value of equity due to the hypothetical changes in market rates are within
ALCO guidelines.  Table 22 Rate Shock AnalysisYear-end


Year-end


ALCO2006


2005


GuidelinesOne year net interestincome change+200 Basis points

0.4
%

1.8
%

(10.0
)%+100 Basis points

0.3


1.0


(5.0
)-100 Basis points

(0.7
)

(2.0
)

(5.0
)-200 Basis points

(4.5
)

(5.8
)

(10.0
)Net present value ofequity change+200 Basis points

(13.4
)%

(11.3
)%

(15.0
)%+100 Basis points

(6.3
)

(5.2
)

(10.0
)-100 Basis points

3.7


3.2


(10.0
)-100 Basis points

5.4


3.6


(15.0
)


The proceeding analysis is based on numerous assumptions, including relative levels of market interest rates, instantaneous and parallel shifts in the yield curve, loan prepayments and reactions of depositors to changes in interest rates,
and should not be relied upon as being indicative of actual or future results. Further, the analysis does not necessarily contemplate all actions Sky Financial may undertake in response to changes in interest rates. Effects of Inflation The assets and liabilities of Sky Financial are primarily monetary
in nature and are more directly affected by the fluctuation in interest rates than inflation. Movement in interest rates is a result of the perceived changes in inflation as well as monetary and fiscal policies. Interest rates and inflation do not
necessarily move with the same velocity or within the same period; therefore, a direct relationship to the inflation rate cannot be shown. The financial information presented in this report has been prepared in accordance with generally accepted
accounting principles, which require that Sky Financial measure financial position and operating results primarily in terms of historical dollars. Critical
Accounting Policies and Estimates The accounting and reporting policies of Sky Financial are in accordance with accounting principles generally accepted within
the United States of America and conform to general practices within the banking industry. Accounting and reporting policies for the allowance for credit losses and mortgage servicing rights are deemed critical because they involve the use of
estimates and require significant management judgments. Application of assumptions different from those used by management could result in material changes in Sky Financials financial position or results of operations. Account - Allowance for Credit Losses Balance Sheet Reference - Allowance for
Credit Losses Income Statement Reference - Provision for Credit Losses Description The allowance for credit losses is an amount that management believes will be adequate to absorb probable incurred losses in existing
loans taking into consideration such factors as past loss experience, changes in the nature and volume of the portfolio, overall portfolio quality, loan concentrations, specific problem loans and current economic conditions that affect the
borrowers ability to pay. Determination of the allowance is inherently subjective due to the aforementioned reasons. Loan losses are charged-off against the allowance when management believes that the full collectibility of the loan is
unlikely. Recoveries of amounts previously charged-off are credited to the allowance. Allowances established to provide for losses under commitments to extend credit, or recourse provisions under loan sales agreements or servicing agreements are
classified with other liabilities. A loan is considered impaired when it is probable that not all principal and interest amounts will be collected
according to the loan contract. Residential mortgage, installment and other consumer loans are collectively evaluated for impairment. Individual commercial loans exceeding size thresholds established by management are evaluated for impairment.
Impaired loans are recorded at the loans fair value by the establishment of a specific allowance where necessary. The fair value of collateral-dependent loans is determined by the fair value of the underlying collateral. The fair value of
noncollateral-dependent loans is determined by discounting expected future interest and principal payments at the loans effective interest rate.




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##### Table of Contents

Managements Discussion and Analysis of

Financial Condition and Results of Operation

(Dollars and shares in thousands, except per share data)



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Sky Financial maintains the allowance for credit losses at a level adequate to absorb managements estimate of probable losses
inherent in the loan portfolio. The allowance is comprised of a general allowance, a specific allowance for identified problem loans and an unallocated allowance, which represent estimations done pursuant to either FAS No. 5 Accounting for
Contingencies, or FAS No. 114, Accounting by Creditors for Impairment of a Loan. The general allowance is determined by applying
estimated loss factors to the credit exposures from outstanding loans. For construction, commercial and commercial real estate loans loss factors are applied based on internal risk grades of these loans. Many factors are considered when these grades
are assigned to individual loans such as current and past delinquency, financial statements of the borrower, current net realizable value of collateral and the general economic environment and specific economic trends affecting the portfolio. For
residential real estate, installment, credit card and other loans, loss factors are applied on a portfolio basis. Loss factors are based on Sky Financials historical loss experience and are reviewed for modification on a quarterly basis, along
with other factors affecting the collectibility of the loan portfolio. Specific allowances are established for all classified loans, where
management has determined that, due to identified significant conditions, it is probable that Sky Financial will be unable to collect all amounts due according to the contractual terms of the loan agreement. The unallocated allowance recognizes the
estimation risk associated with the allocated general and specific allowances and incorporates managements evaluation of existing conditions that are not included in the allocated allowance determinations. These conditions are reviewed
quarterly by management and include general economic conditions, credit quality trends and internal loan review and regulatory examination findings. Management believes that it uses the best information available to determine the adequacy of the allowance for loan losses. However, future adjustments to the allowance may be necessary and the results of operations could be significantly
and adversely affected if circumstances differ substantially from the assumptions used in making the determinations.  Account - Mortgage Servicing Rights  Balance Sheet Reference
- Other Assets  Income Statement Reference - Mortgage Banking Income  Description  The cost of mortgage loans sold or securitized is allocated between the mortgage servicing rights and the mortgage loans based on the relative fair values of each. The fair value
of the mortgage servicing rights is determined by using a discounted cash flow model, which estimates the present value of the future net cash flows of the servicing portfolio based on various factors, such as servicing costs, expected prepayment
speeds and discount rates, about which management must make assumptions based on future expectations. Mortgage servicing rights are amortized in
proportion to, and over the period of, estimated net servicing income. Management periodically evaluates mortgage servicing rights for impairment by stratifying the loans in the servicing portfolio primarily based on loan type, interest rate and
region of origination. Impairment is measured by estimating the fair value of each stratum, taking into consideration the estimated level of prepayments based upon current industry expectations. An impairment allowance for a stratum is recorded
when, and in an amount which, its fair value is less than its carrying value. |  | The value of mortgage servicing rights is subject to prepayment risk. Future expected net cash flows from servicing a loan in our
servicing portfolio will not be realized if the loan pays off earlier than anticipated. Moreover, because most loans within our servicing portfolio do not contain penalty provisions for early payoff, we will not receive a corresponding economic
benefit if the loan pays off earlier than expected. Mortgage servicing rights represent the discounted present value of the future net cash flows we expect to receive from our servicing portfolio.  New Accounting Pronouncements  In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans (an amendment of FASB Statements No. 87, 88, 106, and 132R) (FAS 158), requires an employer to: (a) recognize in its statement of
financial position an asset for a plans overfunded status or a liability for a plans underfunded status; (b) measure a plans assets and its obligations that determine its funded status as of the end of the employers fiscal
year (with limited exceptions); and (c) recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur. Those changes will be reported in comprehensive income of a business entity. The
requirement by FAS 158 to recognize the funded status of a benefit plan and the disclosure requirements of FAS 158 are effective as of the end of the fiscal year ending after December 15, 2006 for entities with publicly traded equity
securities. The requirement to measure plan assets and benefit obligations as of the date of the employers fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The adoption of FAS
158 did not have a material effect on the financial position of the company at December 31, 2006. In September 2006, the FASB issued
Statement of Financial Accounting Standards No. 157, Fair Value Measurements (FAS 157). FAS 157 enhances existing guidance for measuring assets and liabilities using fair value. Prior to the issuance of FAS 157, guidance for applying fair
value was incorporated in several accounting pronouncements. FAS 157 provides a single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the use of fair value to measure assets and
liabilities. FAS 157 also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and sets out a fair value hierarchy with the highest priority being quoted prices in active markets. Under FAS 157, fair value
measurements are disclosed by level within that hierarchy. While FAS 157 does not add any new fair value measurements, it does change current practice. Changes to practice include: (1) a requirement for an entity to include its own credit standing
in the measurement of its liabilities; (2) a modification of the transaction price presumption; (3) a prohibition on the use of block discounts when valuing large blocks of securities for broker-dealers and investment companies; and (4) a
requirement to adjust the value of restricted stock for the effect of the restriction even if the restriction lapses within one year. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and
interim periods within those fiscal years. Sky Financial has not determined the impact of adopting FAS 157 on its financial statements. In July
2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109 (FIN 48), which clarifies the accounting for uncertainty in tax positions. This
Interpretation requires that Sky Financial recognize in the financial statements, the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The provisions of
FIN 48 are effective as of the beginning of the 2007 fiscal year, with the cumulative effect of the change in



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##### Table of Contents

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|accounting principle recorded as an adjustment to opening retained earnings. The cumulative change in accounting
recorded directly to retained earnings and the effect on 2007 income from operations is not material. In March 2006, the FASB issued Statement of
Financial Accounting Standards No. 156, Accounting for Servicing of Financial Assets: an amendment of FASB Statement No. 140 (FAS 140 and FAS 156). FAS 140 establishes, among other things, the accounting for all separately recognized
servicing assets and servicing liabilities. This Statement amends FAS 140 to require that all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable. This Statement permits, but does not
require, the subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value. Under this Statement, an entity can elect subsequent fair value measurement to account for its separately recognized servicing
assets and servicing liabilities. Adoption of this Statement is required as of the beginning of the first fiscal year that begins after September 15, 2006. Sky Financial adopted FAS 156 on January 1, 2007 and did not elect the fair value
measurement option. In February 2006, the FASB issued Statement of Financial Accounting Standards No. 155, Accounting for Certain HybridFinancial Instruments: an amendment of FASB Statements No. 133 and 140 (FAS 155). FAS 155 permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation,
clarifies which interest-only strips and principal-only strips are not subject to the requirements of Statement 133, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding
derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and amends Statement 140 to
eliminate the prohibition on a qualifying special purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. FAS 155 is effective for all financial
instruments acquired or issued after the beginning of an entitys first fiscal year that begins after September 15, 2006. Sky Financial does not expect the adoption of FAS 155 to have a material effect on the results of operations or the
statement of condition. |  | Forward Looking Statements This report includes forward-looking statements by Sky Financial relating to such matters as anticipated operating results, credit quality expectations,
prospects for new lines of business, technological developments, economic trends (including interest rates), acquisition, reorganization and divestiture transactions and similar matters. Such statements are based upon the current beliefs and
expectations of Sky Financials management and are subject to risks and uncertainties. While Sky Financial believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could
prove to be inaccurate, and accordingly, actual results and experience could differ materially from the anticipated results or other expectations expressed by Sky Financial in its forward-looking statements. Factors that could cause actual results
or experience to differ from results discussed in the forward-looking statements include, but are not limited to: economic conditions; volatility and direction of market interest rates; capital investment in and operating results of non-banking
business ventures of Sky Financial; governmental legislation and regulation; material unforeseen changes in the financial condition or results of operations of Sky Financials clients; client reaction to and unforeseen complications with
respect to Sky Financials integration of acquisitions; difficulties in realizing expected cost savings from acquisitions; difficulties associated with data conversions in acquisitions; and other risks identified from time-to-time in Sky
Financials other public documents on file with the Securities and Exchange Commission. This report also contains certain forward-looking statements about the benefits of the merger between Huntington and Sky Financial Group, which are subject
to numerous assumptions, risks, and uncertainties. Actual results could differ materially from those contained or implied by such statements for a variety of factors including: the businesses of Huntington and Sky Financial Group may not be
integrated successfully or such integration may take longer to accomplish than expected; the expected cost savings and any revenue synergies from the merger may not be fully realized within the expected timeframes; disruption from the merger may
make it more difficult to maintain relationships with clients, associates, or suppliers; the required governmental approvals of the merger may not be obtained on the proposed terms and schedule; Huntington and/or Sky Financials stockholders
may not approve the merger; and other factors described in Huntingtons registration statement on Form S-4 regarding the merger. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements, and the
purpose of this paragraph is to secure the use of the safe harbor provisions.

Item 7A.Quantitative and Qualitative

Disclosures About Market Risk



|                                                                                                                        |  |                                                                                                                                
|----------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------
|The information contained under the caption Managements Discussion and Analysis of Financial Condition and Results of |  | Operations - Market Risk Management on page 30 of this Form 10-K is incorporated herein by reference in response to this item.



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##### Table of Contents

Item 8.Financial Statements and Supplementary Data

Report of Independent Registered

Public Accounting Firm

To the Board of Directors and Shareholders of

Sky Financial Group, Inc.

Bowling Green, Ohio



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|We have audited the accompanying consolidated balance sheets of Sky Financial Group, Inc. and subsidiaries (the Company) as of December 31,
2006 and 2005, and the related consolidated statements of income, changes in stockholders equity, and cash flows for each of the three years in the period ended December 31, 2006. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits
in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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, such consolidated financial statements present fairly, in all material respects, the financial position of Sky Financial Group, Inc. and subsidiaries at December 31, 2006 and 2005, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America. |  | As discussed in Note 1 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 123
(R), Share-Based Payment, in 2005. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the effectiveness of the Companys internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 22, 2007 expressed an unqualified opinion on managements assessment of the effectiveness of the Companys internal control over financial reporting and an
unqualified opinion on the effectiveness of the Companys internal control over financial reporting.  LOGO  Deloitte & Touche LLP Cleveland, Ohio February 22, 2007



34



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##### Table of Contents

Consolidated Balance Sheets

(Dollars and shares
in thousands, except per share data)





|                                                                                                          |  |   |            |   |  |   |            |  
|--------------------------------------------------------------------------------------------------------- |  | - | ---------- | - |  | - | ---------- | -
|December 31,                                                                                              |  |   | 2006       |   |  |   | 2005       |  
|Assets                                                                                                    |  |   |            |   |  |   |            |  
|Cash and due from banks                                                                                   |  | $ | 345,858    |   |  | $ | 318,114    |  
|Interest-earning deposits with financial institutions                                                     |  |   | 12,245     |   |  |   | 15,037     |  
|Federal funds sold                                                                                        |  |   | 40,000     |   |  |   |           |  
|Loans held for sale                                                                                       |  |   | 20,019     |   |  |   | 24,184     |  
|Securities                                                                                                |  |   | 3,129,960  |   |  |   | 3,097,472  |  
|Total loans                                                                                               |  |   | 12,826,817 |   |  |   | 11,149,222 |  
|Less allowance for credit losses                                                                          |  |   | (172,990   | ) |  |   | (144,461   | )
|Net loans                                                                                                 |  |   | 12,653,827 |   |  |   | 11,004,761 |  
|Premises and equipment, net                                                                               |  |   | 206,145    |   |  |   | 166,797    |  
|Goodwill                                                                                                  |  |   | 728,260    |   |  |   | 521,862    |  
|Core deposit and other intangibles, net                                                                   |  |   | 73,442     |   |  |   | 67,077     |  
|Accrued interest receivable and other assets                                                              |  |   | 516,338    |   |  |   | 467,987    |  
|Total assets                                                                                              |  | $ | 17,726,094 |   |  | $ | 15,683,291 |  
|Liabilities                                                                                               |  |   |            |   |  |   |            |  
|Deposits                                                                                                  |  |   |            |   |  |   |            |  
|Non-interest-bearing deposits                                                                             |  | $ | 1,953,658  |   |  | $ | 1,734,113  |  
|Interest-bearing deposits                                                                                 |  |   | 11,266,995 |   |  |   | 9,021,563  |  
|Total deposits                                                                                            |  |   | 13,220,653 |   |  |   | 10,755,676 |  
|Securities sold under repurchase agreements and federal funds purchased                                   |  |   | 978,661    |   |  |   | 1,053,244  |  
|Debt and Federal Home Loan Bank advances                                                                  |  |   | 1,103,786  |   |  |   | 1,940,989  |  
|Junior subordinated debentures owed to unconsolidated subsidiary trusts                                   |  |   | 335,294    |   |  |   | 184,799    |  
|Accrued interest payable and other liabilities                                                            |  |   | 207,052    |   |  |   | 194,706    |  
|Total liabilities                                                                                         |  | $ | 15,845,446 |   |  | $ | 14,129,414 |  
|Shareholders Equity                                                                                      |  |   |            |   |  |   |            |  
|Common stock, no par value; 350,000 shares authorized; 118,728 and 110,207 shares issued in 2006 and 2005 |  |   | 1,442,507  |   |  |   | 1,221,571  |  
|Retained earnings                                                                                         |  |   | 516,626    |   |  |   | 430,710    |  
|Treasury stock; 1,750 and 1,899 shares in 2006 and 2005                                                   |  |   | (47,303    | ) |  |   | (51,418    | )
|Accumulated other comprehensive loss                                                                      |  |   | (31,182    | ) |  |   | (46,986    | )
|Total shareholders equity                                                                                |  |   | 1,880,648  |   |  |   | 1,553,877  |  
|Total liabilities and shareholders equity                                                                |  | $ | 17,726,094 |   |  | $ | 15,683,291 |  

The accompanying notes are an integral part of the consolidated financial statements.



35



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##### Table of Contents

Consolidated Statements of Income

(Dollars in
thousands, except per share data)





|                                                      |  |   |           |   |  |   |         |  |   |        
|----------------------------------------------------- |  | - | --------- | - |  | - | ------- |  | - | -------
|For The Years Ended December 31,                      |  |   | 2006      |   |  |   | 2005    |  |   | 2004   
|Interest Income                                       |  |   |           |   |  |   |         |  |   |        
|Loans, including fees                                 |  | $ | 860,699   |   |  | $ | 695,969 |  | $ | 543,085
|Securities                                            |  |   |           |   |  |   |         |  |   |        
|Taxable                                               |  |   | 150,993   |   |  |   | 133,317 |  |   | 118,035
|Nontaxable                                            |  |   | 458       |   |  |   | 234     |  |   | 321    
|Federal funds sold and other                          |  |   | 1,341     |   |  |   | 704     |  |   | 502    
|Total interest income                                 |  |   | 1,013,491 |   |  |   | 830,224 |  |   | 661,943
|Interest Expense                                      |  |   |           |   |  |   |         |  |   |        
|Deposits                                              |  |   | 332,938   |   |  |   | 209,286 |  |   | 141,764
|Borrowed funds                                        |  |   | 139,007   |   |  |   | 106,286 |  |   | 68,868 
|Total interest expense                                |  |   | 471,945   |   |  |   | 315,572 |  |   | 210,632
|Net interest income                                   |  |   | 541,546   |   |  |   | 514,652 |  |   | 451,311
|Provision for credit losses                           |  |   | 36,854    |   |  |   | 52,249  |  |   | 37,660 
|Net interest income after provision for credit losses |  |   | 504,692   |   |  |   | 462,403 |  |   | 413,651
|Non-Interest Income                                   |  |   |           |   |  |   |         |  |   |        
|Trust services income                                 |  |   | 24,279    |   |  |   | 21,918  |  |   | 18,281 
|Service charges and fees on deposit accounts          |  |   | 67,707    |   |  |   | 55,570  |  |   | 47,964 
|Mortgage banking income                               |  |   | 23,141    |   |  |   | 24,991  |  |   | 24,844 
|Brokerage and insurance commissions                   |  |   | 67,394    |   |  |   | 59,172  |  |   | 55,820 
|Net securities (losses) gains                         |  |   | (21,184   | ) |  |   | 3,662   |  |   | 14,569 
|Derivative losses on swaps                            |  |   | (5,895    | ) |  |   |        |  |   |       
|Net cash settlements on swaps                         |  |   | (40       | ) |  |   |        |  |   |       
|Other income                                          |  |   | 63,468    |   |  |   | 46,069  |  |   | 41,939 
|Total non-interest income                             |  |   | 218,870   |   |  |   | 211,382 |  |   | 203,417
|Non-Interest Expenses                                 |  |   |           |   |  |   |         |  |   |        
|Salaries and employee benefits                        |  |   | 243,281   |   |  |   | 214,555 |  |   | 193,611
|Occupancy and equipment expense                       |  |   | 72,560    |   |  |   | 68,402  |  |   | 59,096 
|Merger, integration and restructuring expense         |  |   | 6,575     |   |  |   | 1,771   |  |   | 4,542  
|Amortization expense                                  |  |   | 15,803    |   |  |   | 14,887  |  |   | 10,979 
|Other operating expense                               |  |   | 100,336   |   |  |   | 100,432 |  |   | 88,296 
|Total non-interest expenses                           |  |   | 438,555   |   |  |   | 400,047 |  |   | 356,524
|Income from continuing operations before income taxes |  |   | 285,007   |   |  |   | 273,738 |  |   | 260,544
|Income taxes                                          |  |   | 94,669    |   |  |   | 91,547  |  |   | 85,344 
|Income from continuing operations                     |  |   | 190,338   |   |  |   | 182,191 |  |   | 175,200
|Income from discontinued operations                   |  |   |           |   |  |   |         |  |   |        
|(net of tax of $200 and $10,348 respectively)         |  |   |          |   |  |   | 372     |  |   | 19,155 
|Net Income                                            |  | $ | 190,338   |   |  | $ | 182,563 |  | $ | 194,355
|Basic Earnings Per Common Share                       |  |   |           |   |  |   |         |  |   |        
|Income from continuing operations                     |  | $ | 1.73      |   |  | $ | 1.71    |  | $ | 1.76   
|Income from discontinued operations                   |  |   |          |   |  |   | 0.00    |  |   | 0.19   
|Net Income                                            |  | $ | 1.73      |   |  | $ | 1.71    |  | $ | 1.95   
|Diluted Earnings Per Common Share                     |  |   |           |   |  |   |         |  |   |        
|Income from continuing operations                     |  | $ | 1.72      |   |  | $ | 1.69    |  | $ | 1.74   
|Income from discontinued operations                   |  |   |          |   |  |   | 0.00    |  |   | 0.19   
|Net Income                                            |  | $ | 1.72      |   |  | $ | 1.69    |  | $ | 1.93   

The accompanying notes are an integral part of the consolidated financial statements.



36



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##### Table of Contents

Consolidated Statements of Changes in Shareholders Equity

(Dollars and shares in thousands, except per share data)



|                                                            |  |              |  |                |   |  |             |           |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   |           |  
|----------------------------------------------------------- |  | ------------ |  | -------------- | - |  | ----------- | --------- | - | ---------------- | - | -------- | ------------- |  | - | ------------------------------------------ | - |  | ----- | ------- | - |  | - | --------- | -
|                                                            |  | CommonShares |  | TreasuryShares |   |  | CommonStock |           |   | RetainedEarnings |   |          | TreasuryStock |  |   | AccumulatedOtherComprehensiveIncome (Loss) |   |  | Total |        
|Balance, December 31, 2003                                  |  | 92,485       |  | 42             |   |  | $           | 764,860   |   |                  | $ | 234,000  |               |  | $ | (742                                       | ) |  | $     | 458     |   |  | $ | 998,576   |  
|Comprehensive income                                        |  |              |  |                |   |  |             |           |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   |           |  
|Net income                                                  |  |              |  |                |   |  |             |           |   |                  |   | 194,355  |               |  |   |                                            |   |  |       |         |   |  |   | 194,355   |  
|Other comprehensive loss                                    |  |              |  |                |   |  |             |           |   |                  |   |          |               |  |   |                                            |   |  |       | (7,395  | ) |  |   | (7,395    | )
|Total comprehensive income                                  |  |              |  |                |   |  |             |           |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   | 186,960   |  
|Cash dividends ($.85 per share)                             |  |              |  |                |   |  |             |           |   |                  |   | (84,814  | )             |  |   |                                            |   |  |       |         |   |  |   | (84,814   | )
|Treasury shares acquired                                    |  |              |  | 68             |   |  |             |           |   |                  |   |          |               |  |   | (1,588                                     | ) |  |       |         |   |  |   | (1,588    | )
|Shares issued for stock option exercises                    |  | 872          |  |                |   |  |             | 19,929    |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   | 19,929    |  
|Shares issued to acquire EOB, Inc.                          |  | 177          |  |                |   |  |             | 4,558     |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   | 4,558     |  
|Shares issued to acquire Second Bancorp                     |  | 11,953       |  |                |   |  |             | 310,645   |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   | 310,645   |  
|Shares issued to acquire Spencer-Patterson Insurance Agency |  | 297          |  |                |   |  |             | 7,637     |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   | 7,637     |  
|Shares issued to acquire Prospect Bancshares                |  | 1,139        |  |                |   |  |             | 29,052    |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   | 29,052    |  
|Fractional shares and other items                           |  | 29           |  | 3              |   |  |             |           |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   |          |  
|Balance, December 31, 2004                                  |  | 106,952      |  | 113            |   |  |             | 1,136,681 |   |                  |   | 343,541  |               |  |   | (2,330                                     | ) |  |       | (6,937  | ) |  |   | 1,470,955 |  
|Comprehensive income                                        |  |              |  |                |   |  |             |           |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   |           |  
|Net income                                                  |  |              |  |                |   |  |             |           |   |                  |   | 182,563  |               |  |   |                                            |   |  |       |         |   |  |   | 182,563   |  
|Other comprehensive loss                                    |  |              |  |                |   |  |             |           |   |                  |   |          |               |  |   |                                            |   |  |       | (40,049 | ) |  |   | (40,049   | )
|Total comprehensive income                                  |  |              |  |                |   |  |             |           |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   | 142,514   |  
|Cash dividends ($.89 per share)                             |  |              |  |                |   |  |             |           |   |                  |   | (95,070  | )             |  |   |                                            |   |  |       |         |   |  |   | (95,070   | )
|Treasury shares acquired                                    |  |              |  | 1,911          |   |  |             |           |   |                  |   |          |               |  |   | (52,407                                    | ) |  |       |         |   |  |   | (52,407   | )
|Treasury shares issued for restricted stock awards          |  |              |  | (133           | ) |  |             | (3,531    | ) |                  |   |          |               |  |   | 3,531                                      |   |  |       |         |   |  |   |          |  
|Restricted stock forfeited                                  |  |              |  | 5              |   |  |             |           |   |                  |   |          |               |  |   | (127                                       | ) |  |       |         |   |  |   | (127      | )
|Shares issued for stock option exercises                    |  | 657          |  |                |   |  |             | 13,773    |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   | 13,773    |  
|Stock based compensation expense                            |  |              |  |                |   |  |             | 5,237     |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   | 5,237     |  
|Shares issued to acquire Belmont Bancorp                    |  | 1,765        |  |                |   |  |             | 49,689    |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   | 49,689    |  
|Shares issued to acquire EOB, Inc.                          |  | 13           |  |                |   |  |             | 336       |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   | 336       |  
|Shares issued to acquire Benefits Design Agency             |  | 137          |  |                |   |  |             | 3,902     |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   | 3,902     |  
|Shares issued to acquire Steiner Insurance Agency           |  | 111          |  |                |   |  |             | 3,178     |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   | 3,178     |  
|Shares issued to acquire Becker-McDowell Agency             |  | 222          |  |                |   |  |             | 6,351     |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   | 6,351     |  
|Shares issued to acquire Falls Bank                         |  | 350          |  |                |   |  |             | 9,890     |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   | 9,890     |  
|Fractional shares and other items                           |  |              |  | 3              |   |  |             | (3,935    | ) |                  |   | (324     | )             |  |   | (85                                        | ) |  |       |         |   |  |   | (4,344    | )
|Balance, December 31, 2005                                  |  | 110,207      |  | 1,899          |   |  |             | 1,221,571 |   |                  |   | 430,710  |               |  |   | (51,418                                    | ) |  |       | (46,986 | ) |  |   | 1,553,877 |  
|Comprehensive income                                        |  |              |  |                |   |  |             |           |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   |           |  
|Net income                                                  |  |              |  |                |   |  |             |           |   |                  |   | 190,338  |               |  |   |                                            |   |  |       |         |   |  |   | 190,338   |  
|Other comprehensive income                                  |  |              |  |                |   |  |             |           |   |                  |   |          |               |  |   |                                            |   |  |       | 15,804  |   |  |   | 15,804    |  
|Total comprehensive income                                  |  |              |  |                |   |  |             |           |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   | 206,142   |  
|Cash dividends ($.94 per share)                             |  |              |  |                |   |  |             |           |   |                  |   | (104,258 | )             |  |   |                                            |   |  |       |         |   |  |   | (104,258  | )
|Treasury shares issued for restricted stock awards          |  |              |  | (157           | ) |  |             | (4,266    | ) |                  |   |          |               |  |   | 4,266                                      |   |  |       |         |   |  |   |          |  
|Restricted stock forfeited                                  |  |              |  | 8              |   |  |             | 151       |   |                  |   |          |               |  |   | (151                                       | ) |  |       |         |   |  |   |          |  
|Stock based compensation expense                            |  |              |  |                |   |  |             | 8,026     |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   | 8,026     |  
|Shares issued for stock option exercises                    |  | 768          |  |                |   |  |             | 16,459    |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   | 16,459    |  
|Shares issued to acquire Peter B. Burke Agency              |  | 64           |  |                |   |  |             | 1,777     |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   | 1,777     |  
|Shares issued to acquire Lindig Benefit Consultants         |  | 44           |  |                |   |  |             | 1,101     |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   | 1,101     |  
|Shares issued to acquireWaterfield Mortgage Company, Inc.   |  | 7,467        |  |                |   |  |             | 193,320   |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   | 193,320   |  
|Shares issued to acquire Wells River Bancorp, Inc.          |  | 178          |  |                |   |  |             | 4,368     |   |                  |   |          |               |  |   |                                            |   |  |       |         |   |  |   | 4,368     |  
|Fractional shares and other items                           |  |              |  |                |   |  |             |           |   |                  |   | (164     | )             |  |   |                                            |   |  |       |         |   |  |   | (164      | )
|Balance, December 31, 2006                                  |  | 118,728      |  | 1,750          |   |  | $           | 1,442,507 |   |                  | $ | 516,626  |               |  | $ | (47,303                                    | ) |  | $     | (31,182 | ) |  | $ | 1,880,648 |  

The accompanying notes are an integral part of the consolidated financial statements.



37



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##### Table of Contents

Consolidated Statements of Cash Flows

(Dollars
in thousands)



|                                                                                                  |  |      |            |   |      |   |            |      |  |   |            |  
|------------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|For The Years Ended December 31,                                                                  |  | 2006 |            |   | 2005 |   |            | 2004 | 
|Operating Activities                                                                              |  |      |            |   |      |   |            |      |  |   |            |  
|Net income                                                                                        |  | $    | 190,338    |   |      | $ | 182,563    |      |  | $ | 194,355    |  
|Net earnings of discontinued operations                                                           |  |      |           |   |      |   | (372       | )    |  |   | (19,155    | )
|Adjustments to reconcile income from continuing operations to net cash from operating activities: |  |      |            |   |      |   |            |      |  |   |            |  
|Depreciation, amortization and accretion                                                          |  |      | 23,592     |   |      |   | 28,578     |      |  |   | 22,633     |  
|Stock-based compensation expense                                                                  |  |      | 8,026      |   |      |   | 5,237      |      |  |   |           |  
|Net losses (gains) on sales of assets                                                             |  |      | 11,112     |   |      |   | (16,715    | )    |  |   | (14,751    | )
|Net gain on the sale of a business                                                                |  |      | (6,658     | ) |      |   |           |      |  |   |           |  
|Provision for credit losses                                                                       |  |      | 36,854     |   |      |   | 52,249     |      |  |   | 37,660     |  
|Proceeds from sales of loans held for sale                                                        |  |      | 938,858    |   |      |   | 1,101,314  |      |  |   | 1,128,777  |  
|Disbursements on originations of loans held for sale                                              |  |      | (925,102   | ) |      |   | (1,080,056 | )    |  |   | (1,110,148 | )
|Derivative losses on swaps                                                                        |  |      | 5,895      |   |      |   |           |      |  |   |           |  
|Tax benefits from tax deductions in excess of the compensation cost recognized                    |  |      | (1,811     | ) |      |   | (2,643     | )    |  |   |           |  
|Net change in other liabilities                                                                   |  |      | (18,913    | ) |      |   | 21,388     |      |  |   | (20,483    | )
|Net change in other assets                                                                        |  |      | (28,198    | ) |      |   | (14,683    | )    |  |   | 21,118     |  
|Net cash provided by operating activities of continuing operations                                |  |      | 233,993    |   |      |   | 276,860    |      |  |   | 240,036    |  
|Net cash used for operating activities of discontinued operations                                 |  |      |           |   |      |   |           |      |  |   | (3,560     | )
|Investing Activities                                                                              |  |      |            |   |      |   |            |      |  |   |            |  
|Net decrease (increase) in interest-earning deposits with financial institutions                  |  |      | 419,792    |   |      |   | 20,745     |      |  |   | (3,232     | )
|Net (increase) decrease in federal funds sold                                                     |  |      | (40,000    | ) |      |   | 13,480     |      |  |   |           |  
|Securities:                                                                                       |  |      |            |   |      |   |            |      |  |   |            |  
|Proceeds from maturities and payments                                                             |  |      | 563,947    |   |      |   | 627,290    |      |  |   | 754,932    |  
|Proceeds from sales                                                                               |  |      | 842,471    |   |      |   | 127,667    |      |  |   | 225,923    |  
|Purchases                                                                                         |  |      | (1,029,908 | ) |      |   | (722,371   | )    |  |   | (1,052,584 | )
|Proceeds from sales of non-mortgage loans                                                         |  |      | 364,117    |   |      |   | 255,560    |      |  |   | 99,115     |  
|Net increase in loans                                                                             |  |      | (688,496   | ) |      |   | (672,758   | )    |  |   | (608,005   | )
|Purchases of premises and equipment                                                               |  |      | (23,236    | ) |      |   | (27,485    | )    |  |   | (20,401    | )
|Proceeds from sales of premises and equipment                                                     |  |      | 1,118      |   |      |   | 5,466      |      |  |   | 20,053     |  
|Proceeds from sales of other real estate                                                          |  |      | 14,574     |   |      |   | 15,300     |      |  |   | 12,975     |  
|Net cash paid from breakage of derivative instruments                                             |  |      | (4,744     | ) |      |   |           |      |  |   |           |  
|Proceeds from sale of discontinued operations, net of cash sold                                   |  |      |           |   |      |   |           |      |  |   | 68,207     |  
|Net cash (paid) received in acquisitions and divestitures                                         |  |      | (37,039    | ) |      |   | (7,358     | )    |  |   | 23,170     |  
|Net cash provided by (used for) investing activities of continuing operations                     |  |      | 382,596    |   |      |   | (364,464   | )    |  |   | (479,847   | )
|Net cash used for investing activities of discontinued operations                                 |  |      |           |   |      |   |           |      |  |   | (26,126    | )
|Financing Activities                                                                              |  |      |            |   |      |   |            |      |  |   |            |  
|Net increase in deposit accounts                                                                  |  |      | 621,765    |   |      |   | 124,940    |      |  |   | 336,125    |  
|Net (decrease) increase in federal funds and repurchase agreements                                |  |      | (73,757    | ) |      |   | 12,361     |      |  |   | (49,874    | )
|Net (decrease) increase in short-term FHLB advances                                               |  |      | (577,702   | ) |      |   | 200,000    |      |  |   | (106,500   | )
|Net increase (decrease) in borrowings under bank lines of credit                                  |  |      | 35,000     |   |      |   |           |      |  |   | (61,000    | )
|Proceeds from issuance of junior subordinated debt to unconsolidated subsidiary trust             |  |      | 154,640    |   |      |   |           |      |  |   |           |  
|Repayment of junior subordinated debt to unconsolidated subsidiary trust                          |  |      | (32,000    | ) |      |   |           |      |  |   | (16,000    | )
|Proceeds from issuance of debt and long-term FHLB advances                                        |  |      | 69,979     |   |      |   | 218,775    |      |  |   | 265,723    |  
|Repayment of debt and long-term FHLB advances                                                     |  |      | (703,242   | ) |      |   | (253,140   | )    |  |   | (100,087   | )
|Cash dividends and fractional shares paid                                                         |  |      | (99,987    | ) |      |   | (93,659    | )    |  |   | (80,731    | )
|Proceeds from issuance of common stock                                                            |  |      | 14,648     |   |      |   | 13,773     |      |  |   | 19,929     |  
|Treasury stock purchases                                                                          |  |      |           |   |      |   | (52,407    | )    |  |   | (1,588     | )
|Tax benefits from tax deductions in excess of the compensation cost recognized                    |  |      | 1,811      |   |      |   | 2,643      |      |  |   |           |  
|Other items                                                                                       |  |      |           |   |      |   | 25         |      |  |   |           |  
|Net cash (used for) provided by financing activities of continuing operations                     |  |      | (588,845   | ) |      |   | 173,311    |      |  |   | 205,997    |  
|Net cash provided by financing activities of discontinued
operations                              |  |      |           |   |      |   |           |      |  |   | 31,129     |  
|Net increase (decrease) in cash and due from banks                                                |  |      | 27,744     |   |      |   | 85,707     |      |  |   | (32,371    | )
|Cash and due from banks at beginning of year                                                      |  |      | 318,114    |   |      |   | 232,407    |      |  |   | 264,778    |  
|Cash and due from banks at end of year                                                            |  | $    | 345,858    |   |      | $ | 318,114    |      |  | $ | 232,407    |  
|Supplemental Disclosures                                                                          |  |      |            |   |      |   |            |      |  |   |            |  
|Interest paid                                                                                     |  | $    | 465,995    |   |      | $ | 315,455    |      |  | $ | 206,023    |  
|Income taxes paid                                                                                 |  |      | 109,808    |   |      |   | 76,216     |      |  |   | 70,220     |  
|Value of shares issued for acquisitions                                                           |  |      | 200,566    |   |      |   | 73,346     |      |  |   | 351,892    |  
|Transfer of loans to other real estate                                                            |  |      | 15,403     |   |      |   | 22,091     |      |  |   | 11,172     |  

Non-cash activity related to the acquisitions included the purchase of assets with a fair value of $2,590,510 and the
assumption of liabilities of $2,243,905 in 2006; the purchase of assets with a fair value of $438,505 and the assumption of liabilities of $342,622 in 2005; and the purchase of assets with a fair value of $2,494,497 and the assumption of liabilities
of $2,135,005 in 2004.

The accompanying notes are an integral part of the consolidated financial statements.



38



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##### Table of Contents

Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except per share data)





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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 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|Note 1 Summary of Significant Accounting Policies  Sky Financial Group, Inc. (Sky Financial) is a financial holding company headquartered in Bowling Green, Ohio that owns and operates Sky Bank, which is primarily engaged in the
commercial and consumer banking business in Ohio, Pennsylvania, Indiana, Michigan and West Virginia. Sky Financial also operates businesses relating to insurance, brokerage, trust and other financial-related services.  Basis of Presentation 
The accounting and reporting policies followed by Sky Financial conform to accounting principles generally accepted in the United States of America (U.S. GAAP) and to general
practices within the financial services industry. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. Actual results could differ from those estimates. The allowance for credit losses, fair values of financial instruments, mortgage servicing rights and status of contingencies are particularly
subject to change.  Consolidation  The consolidated financial statements of Sky Financial include the accounts of Sky Bank, Sky Trust, N.A. (Sky
Trust), Sky Insurance, Inc. (Sky Insurance), and various other insignificant subsidiaries. On March 31, 2004, Sky Financial Solutions, Inc. (SFS) was sold and is included in the consolidated financial statements and related notes as
discontinued operations. All significant intercompany transactions and accounts have been eliminated in consolidation.  Securities  Sky Financial classifies its securities as held to
maturity, trading or available for sale. Securities classified as available for sale are those that management intends to sell or that could be sold for liquidity, investment management or similar reasons, even if there is not a present intention to
make such a sale. Equity securities that have a readily determinable fair value are also classified as available for sale. Securities classified as available for sale are carried at estimated fair value with unrealized appreciation or depreciation
recorded, net of tax, in other comprehensive income. Securities classified as held to maturity are stated at cost, adjusted for amortization of premiums and accretion of discounts. Securities classified as held to maturity are those that management
has the positive intent and ability to hold to maturity. Trading securities are acquired for sale in the near term and are carried at fair value, with unrealized holding gains and losses reflected in earnings. Sky Financial held no trading
securities or securities classified as held to maturity during any period presented. Certain restricted equity securities, such as stock of the Federal Home Loan Bank of Cincinnati, are carried at cost. Amortization of premiums and accretion of
discounts are recorded in interest income using the interest method over the period to maturity, which is sometimes estimated. Gains and losses on security sales are calculated using the specific identification method to determine the
securitys cost. Purchases and sales of securities are recognized on a trade-date basis.  Derivative Financial Instruments  Sky Financials hedging policies permit the
use of interest rate swaps, caps and floors to manage interest rate risk or to hedge specified assets and liabilities. Sky Financial does not use derivative financial instruments for trading purposes. Interest rate swaps were entered into as cash
flow and fair value hedges for the purpose of modifying the interest rate characteristics of certain borrowings. |  | The interest rate swaps involve no exchange of principal either at inception or upon maturity; rather, it involves the periodic exchange of interest
payments arising from an underlying notional value. Interest rate caps were entered into as cash flow hedges for purposes of modifying the interest rate characteristics of federal funds purchased. Derivative instruments are recorded at their fair values. If derivative instruments are designated as hedges of fair values, both the change in the fair value
of the hedge and the hedged item are included in current earnings. Fair value adjustments related to cash flow hedges are recorded in other comprehensive income (loss), net of tax and reclassified to earnings when the hedged transaction is reflected
in earnings. Ineffective portions of hedges are reflected in earnings as they occur. Ineffectiveness is recorded as derivative gains (losses) on swaps as a component of non-interest income. During 2005, Sky Financial began a program to provide clients the ability to swap from variable to fixed interest rates on commercial loans. Under these
agreements, Sky Financial enters into a variable rate loan agreement with a client in addition to a swap agreement. This swap agreement effectively swaps the clients variable rate loan into a fixed rate loan. Sky Financial then enters into a
corresponding swap agreement with a third party in order to offset its exposure on the variable to fixed rate swap on the commercial loan. These arrangements are not designated as hedges under Financial Accounting Standards (FAS) No. 133,
Accounting for Derivatives and Hedging Activities, as amended. Accordingly, the interest rate swaps with both the clients and third parties are carried at fair value while the changes in fair value offset each other in the income
statement.  Loans  Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff
are carried at the outstanding principal amount, net of any loan origination and commitment fees and costs, and any premiums or discounts arising at the time of purchase or business acquisition. Interest is recorded when earned and includes
amortization of any deferred loan origination fees, commitment fees, costs, premiums and discounts. When collection of the loan or interest becomes doubtful, the loan is placed on nonaccrual status and all accrued and unpaid interest relating to
previous years and any remaining fees are charged against the allowance for credit losses. Current years accrued and unpaid interest is reversed against interest income. Payments on nonaccrual loans are recorded as principal reductions until
repayment of the loan and interest is reasonably assured and the loan is returned to accrual status. Loan origination, commitment fees and costs and premium and discounts are amortized over the contractual life of the loan as an adjustment to the
related loans yield using the interest method.  Loans Held for Sale  Certain residential mortgage loans are originated for sale in the secondary mortgage loan market. Additionally,
certain other loans are periodically identified to be sold. These loans are classified as loans held for sale and carried at the lower of cost or estimated fair value. Fair value is determined on the basis of rates quoted in the respective secondary
market for the type of loan held for sale. Loans are generally sold at a premium or discount from the carrying amount of the loans. Such premium or discount is recognized at the date of sale. Fixed commitments may be used at the time loans are
originated or identified for sale to mitigate interest rate risk. The fair value of fixed commitments to originate and sell loans held for sale was not material.



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Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except per share data)

Note 1Summary of Significant Accounting Policies (continued)



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Mortgage Servicing Rights  Mortgage servicing rights (MSRs) are stated at cost less accumulated amortization. The cost of mortgage loans sold or securitized is allocated between the mortgage servicing rights
and the cost of the mortgage based on the relative fair values of each. The fair value of the mortgage servicing rights is determined by using a discounted cash flow model, which estimates the present value of the future net cash flows of the
servicing portfolio based on various factors, such as servicing costs, expected prepayment speeds and discount rates, about which management must make assumptions based on future expectations. Sky Financial does not use the fair value option for accounting for mortgage servicing rights. MSRs are amortized in proportion to, and over the period of,
estimated net servicing income. Management periodically evaluates MSRs for impairment by stratifying the loans in the servicing portfolio primarily based on loan type, coupon rate and region. Impairment is measured by estimating the fair value of
each stratum, taking into consideration the estimated level of prepayments based upon current market expectations. An impairment allowance for a stratum is recorded when its fair value is less than its carrying value, and the impairment is deemed by
management to be temporary. Amortization and impairments are charged to mortgage banking income. Recoveries of impairment reduce the allowance and increase income. MSRs are also reviewed for other-than-temporary impairment. Other-than-temporary impairment exists when the recoverability of a recorded valuation allowance is determined to be remote taking into consideration historical and
projected interest rates and loan pay-off activity. When this situation occurs, the unrecoverable portion of the valuation allowance is applied as a direct write-down to the carrying value of the MSRs. Unlike a valuation allowance, a direct
write-down permanently reduces the carrying value of the MSR and the valuation allowance, precluding subsequent recoveries.  Allowance for Credit Losses  The allowance for credit losses is an amount that management believes will be adequate to absorb probable incurred losses in existing loans, taking into consideration such factors as past loss experience, changes in the nature and volume of
the portfolio, overall portfolio quality, loan concentrations, specific problem loans and current economic conditions that affect the borrowers ability to pay. Determination of the allowance is inherently subjective due to the aforementioned
reasons. Changes in estimates are recorded currently through provision for credit losses. Loan losses are charged-off against the allowance when management believes that the full collectibility of the loan is unlikely. Recoveries of amounts
previously charged-off are credited to the allowance. Allowances established to provide for losses under commitments to extend credit or recourse provisions under loan sales agreements or servicing agreements are classified within other
liabilities. A loan is considered impaired when it is probable that not all principal and interest amounts will be collected according to the loan
contract. Residential mortgage, installment and other consumer loans are evaluated by portfolio for impairment. Individual commercial loans exceeding size thresholds established by management are evaluated for impairment, while the balance of the
portfolio is evaluated collectively. Impaired loans are recorded at the loans fair value by the establishment of a specific allowance where necessary. The fair value of collateral-dependent loans is generally determined by the fair value of
the underlying collateral. The fair value of noncollateral-dependent loans is determined by discounting expected future interest and principal payments at the loans effective interest rate. |  | Sky Financial maintains the allowance for credit losses at a level adequate to absorb managements estimate of probable losses
inherent in the loan portfolio. The allowance is comprised of a general allowance, a specific allowance for identified problem loans and an unallocated allowance representing estimations done pursuant to either FAS No. 5, Accounting for
Contingencies, or FAS No. 114, Accounting by Creditors for Impairment of a Loan. The general allowance is determined by applying
estimated loss factors to the credit exposures from outstanding loans. For construction, commercial and commercial real estate loans, loss factors are applied based on internal risk grades of these loans. Many factors are considered when these
grades are assigned to individual loans such as current and past delinquency, financial statements of the borrower, current net realizable value of collateral and the general economic environment and specific economic trends affecting the portfolio.
For residential real estate, installment, credit card and other loans, loss factors are applied on a portfolio basis. Loss factors are based on Sky Financials historical loss experience and are reviewed for modification on a quarterly basis,
along with other factors affecting the collectibility of the loan portfolio. Specific allowances are established for all classified loans, where
management has determined that, due to identified significant conditions, it is probable that Sky Financial will be unable to collect all amounts due according to the contractual terms of the loan agreement. The unallocated allowance recognizes the
estimation risk associated with the allocated general and specific allowances and incorporates managements evaluation of existing conditions that are not included in the allocated allowance determinations. These conditions are reviewed
quarterly by management and include general economic conditions, credit quality trends, recent acquisitions and internal loan review and regulatory examination findings.  Foreclosed Assets  Assets acquired through or instead of loan foreclosure are initially recorded in other assets at the lower of the loan balance or fair value less estimated selling costs when
acquired, establishing a new cost basis. If fair value declines, a valuation allowance is recorded through expense. Costs related to the development and improvement of foreclosed assets are capitalized. Costs related to holding and maintaining the
property are charged to expense.  Premises and Equipment  Premises and equipment are stated at cost less accumulated depreciation, which is computed primarily using the
straight-line method over the estimated useful life of the owned asset and, for leasehold improvements, generally over the lesser of the remaining term of the lease facility or the estimated economic life of the improvement. The useful lives range
from three to 10 years for equipment, furniture and fixtures and 10 to 40 years for buildings and improvements. Maintenance and repairs are charged to expense as incurred, while major improvements are capitalized and amortized to operating expense
over the identified useful life. The adjusted cost of the specific assets sold or disposed of is used to compute gains or losses on disposal. These assets are reviewed for impairment when events indicate their carrying value may not be recoverable.
If management determines an impairment exists, the asset is reduced with an offsetting charge to expense.  Bank-Owned Life Insurance  Sky Financial has purchased life insurance polices on
certain key employees. These policies are recorded in other assets at their cash surrender value, or the amount that can be realized. Income from these policies and changes in the cash surrender value are recorded in other
income.



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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Resell and Repurchase Agreements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |  |  | change in deferred tax assets and liabilities, net of amounts recorded through acquisitions and amounts recorded in accumulated other comprehensive
income. Deferred income taxes are provided using the current tax rate for differences between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes.  Stock Dividends and Treasury Stock  Shares of Sky Financial stock may be acquired for reissuance in connection with stock option plans, for stock
dividend declarations and for general corporate purposes. The treasury shares acquired are recorded at cost. The fair value of shares issued in stock dividends is transferred from retained earnings to common stock, to the extent of available
retained earnings. Any excess of fair value over available retained earnings is considered a return of capital and thus is transferred from common stock.  Stock-Based Compensation  In 2005, Sky Financial adopted FAS No. 123(R), Share-Based Payment. Sky adopted FAS 123(R) using the modified retrospective method for interim periods. As a result, the results of operations for the full years of 2006 and 2005 include
expense related to stock options, while the 2004 results of operations does not include expense related to stock options. Sky Financial maintains
a restricted stock plan for eligible employees. Compensation expense for restricted share awards is recognized ratably over the period of service, usually the restricted period, based upon the fair value of the stock on the date of grant.
The following table illustrates the total stock compensation expense recorded in salaries and employee benefits expense for the years ended December 31,
2006 and 2005:
|Securities purchased under agreements to resell and securities sold under agreements to repurchase are generally treated as collateralized financing transactions and are recorded at the amounts at which
the securities were acquired or sold plus accrued interest. The fair value of collateral either received from or provided to a third party is continually monitored and additional collateral is obtained or is requested to be returned to Sky Financial
as deemed appropriate.                                             |  |  | 
|Intangible Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  | 
|Core deposit intangible assets are amortized on an accelerated basis over their estimated useful lives, which average 10 to 12 years. Goodwill is not amortized, but rather reviewed for impairment on an
annual basis or more frequently if impairment indicators exist. Customer relationship intangibles are recorded for Sky Financials acquisitions of insurance agencies. These customer relationship intangibles are generally amortized on an
accelerated basis over their estimated useful life, which average 8 to 12 years. |  |  | 
|Merger, Integration and Restructuring Expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |  | 
|Merger, integration and restructuring expenses primarily represent professional fees, severance and other personnel related costs, lease terminations, valuation adjustments for certain premises, equipment
and other assets and integration costs related to mergers and acquisitions. (See Note 16.)                                                                                                                                                                                                                                 |  |  | 
|Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |  | 
|Sky Financial utilizes an asset and liability approach for financial accounting and reporting of income taxes. The provision for income taxes is the sum of taxes currently payable and the                                                                                                                                                                                                                                                                                                                                             |  |  | 



|                         |  |   |       |  |   |      
|------------------------ |  | - | ----- |  | - | -----
|                         |  |   | 2006  |  |   | 2005 
|Stock option expense     |  | $ | 5,248 |  | $ | 4,107
|Restricted stock expense |  |   | 2,778 |  |   | 1,130
|Total expense            |  | $ | 8,026 |  | $ | 5,237
|Tax benefit              |  | $ | 2,809 |  | $ | 1,833



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Sky Financial uses the Black-Scholes option pricing model for all grant date estimations of fair value under FAS 123 and FAS 123(R) and will continue to use this model, as Sky
Financial believes that its stock options have characteristics for which the Black-Scholes model provides an acceptable measure of fair value. For all of Sky Financials option plans, options are issued to employees and directors at-the-money.
The expected term of an option represents the period of time that Sky Financial expects the options granted to be outstanding. Sky Financial bases this estimate on a number of factors, including vesting period, historical data, expected volatility
and blackout periods. The expected volatility used in the option pricing calculation is estimated considering both historical and implied volatility. Sky Financial believes that historical volatility alone is not a good predictor of the expected
volatility. Given the absence of traded |  |  |  | options in Sky Financial shares and the effects of significant merger activity on the historical volatility, the expected volatility assumption for Sky
Financial options incorporates both the historical volatility and an estimated implied volatility. The expected dividend yield represents the expected dividend rate that will be paid out on the underlying shares during the expected term of the
option, taking into account any expected dividend increases. Sky Financials options do not permit option holders to receive dividends and therefore the expected dividend yield was factored into the calculation. The risk-free rate is assumed to
be a short-term treasury rate on the date of grant, such as a U.S. Treasury zero-coupon issue with a term equal to the expected term of the option. Stock option expense was computed with the following weighted average assumptions as of the grant dates:



|                                |  |      |   |  |      |   |  |      |  
|------------------------------- |  | ---- | - |  | ---- | - |  | ---- | -
|                                |  | 2006 |   |  | 2005 |   |  | 2004 |  
|Risk-free interest rate         |  | 4.55 | % |  | 3.70 | % |  | 3.20 | %
|Expected option life (years)    |  | 6.00 |   |  | 6.00 |   |  | 7.00 |  
|Expected stock price volatility |  | 20   | % |  | 22   | % |  | 23   | %
|Dividend yield                  |  | 3.68 | % |  | 3.17 | % |  | 3.34 | %



|                                                                                                                                                                                      |  |                                                                                                               
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------
|Prior to the adoption of FAS 123(R), forfeitures were recognized as they occurred. The cumulative effect of adopting FAS 123(R), which includes the impact of changing from
the prior |  | method of recognizing forfeitures as they occur to estimating forfeitures at the grant date, was not material.



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Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except
per share data)

Note 1Summary of Significant Accounting Policies (continued)



In accordance with Sky Financials stock option and restricted shares plans, employee participants age 55 or older are eligible to retire, which has the effect of immediately vesting all non-vested options and restricted
shares. Prior to the adoption of FAS 123(R), Sky Financials accounting policy was to recognize compensation cost over the contractual vesting period with no acceleration based on retirement age. Compensation cost for all awards granted prior
to the adoption of FAS 123(R) continue to be recognized over the contractual vesting period and any remaining unrecognized compensation cost will be accelerated when an employee actually retires. Compensation cost for awards granted or modified
after the adoption of FAS 123(R) will be recognized over a period to the date an employee first becomes eligible for retirement. In accordance with this change in policy, stock option


expense for 2006 and 2005 included expense of $447 and $403, respectively, for stock options that were granted to retirement eligible participants prior to the
adoption of FAS 123(R) that are continuing to be expensed over the contractual terms of the option. Prior to the adoption of FAS 123(R), employee
compensation expense under stock option plans was accounted for under the intrinsic value method. No stock-based compensation cost was reflected in net income, as all options granted had an exercise price equal to or greater than the market price of
the underlying common stock at grant date. The following table illustrates the effect on 2004 net income and earnings per share if expense was measured using the fair value recognition provisions of FAS No. 123, Accounting for Stock
Options.




|                                                                                                                          |  |      |         |  
|------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | -
|                                                                                                                          |  | 2004 |        
|Net income as reported                                                                                                    |  | $    | 194,355 |  
|Deduct: total stock-based compensation expense determinedunder fair-value-based method for all awards, net
of tax benefit |  |      | (3,514  | )
|Pro forma net income                                                                                                      |  | $    | 190,841 |  
|Basic earnings per share as reported                                                                                      |  | $    | 1.95    |  
|Pro forma basic earnings per share                                                                                        |  |      | 1.92    |  
|Diluted earnings per share as reported                                                                                    |  |      | 1.93    |  
|Pro forma diluted earnings per share                                                                                      |  |      | 1.90    |  

Statement of Cash Flows Sky Financial considers cash on hand, deposits maintained with the Federal Reserve Bank and cash due from other banks, all of
which are included in the caption cash and due from banks, as cash for purposes of the Statement of Cash Flows. Sky Financial reports net cash flows for federal funds sold and purchased, interest-bearing deposits with other financial
institutions, client loan transactions, deposit transactions, repurchase agreements and short-term borrowings. Comprehensive Income Comprehensive income consists of net income and other comprehensive income. Other comprehensive income (loss) includes unrealized gains and losses on securities available for sale,
adjustments related to cash flow hedges and adjustments to pension liabilities that are also recognized as separate components of equity. Non-Bank Revenue
Recognition Trust service revenues include fees for services such as asset management, record keeping, retirement services and estate management. Income is
recognized on an accrual basis at the time the related services are performed. Brokerage and insurance revenues include commission and fees relating
to the sales of policies and investments as well as fees for related insurance services. Commission income is recognized as of the effective date of the insurance policy with a reserve established for policy cancellations. Contingent
performance-based commissions from insurance companies are recognized when earned and no contingencies remain. New Accounting Pronouncements In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 158, Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans (an amendment of FASB Statements


No. 87, 88, 106, and 132R)(FAS 158), requires an employer to:
(a) recognize in its statement of financial position an asset for a plans overfunded status or a liability for a plans underfunded status; (b) measure a plans assets and its obligations that determine its funded status as
of the end of the employers fiscal year (with limited exceptions); and (c) recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur. Those changes will be reported in
comprehensive income of a business entity. The requirement by FAS 158 to recognize the funded status of a benefit plan and the disclosure requirements of FAS 158 are effective as of the end of the fiscal year ending after December 15, 2006 for
entities with publicly traded equity securities. The requirement to measure plan assets and benefit obligations as of the date of the employers fiscal year-end statement of financial position is effective for fiscal years ending after
December 15, 2008. The adoption of FAS 158 did not have a material effect on the financial position of the company at December 31, 2006. In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements(FAS 157). FAS 157 enhances existing guidance for measuring assets
and liabilities using fair value. Prior to the issuance of FAS 157, guidance for applying fair value was incorporated in several accounting pronouncements. FAS 157 provides a single definition of fair value, together with a framework for measuring
it, and requires additional disclosure about the use of fair value to measure assets and liabilities. FAS 157 also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and sets out a fair value hierarchy with
the highest priority being quoted prices in active markets. Under FAS 157, fair value measurements are disclosed by level within that hierarchy. While FAS 157 does
not add any new fair value measurements, it does change current practice. Changes to practice include: (1) a requirement for an entity to include its own credit standing in the measurement of its liabilities; (2) a modification of the
transaction price presumption; (3) a prohibition on the use of block discounts when valuing large blocks of securities for broker-dealers and investment companies; and (4) a requirement




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to adjust the value of restricted stock for the effect of the restriction, even if the restriction lapses within one year. FAS 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Sky Financial has not determined the impact of adopting FAS 157 on its financial statements. In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes: An Interpretation of FASB Statement No. 109(FIN 48), which clarifies the accounting for uncertainty in tax positions. This Interpretation requires that Sky Financial recognize in the financial statements, the impact of a tax position, if that position is more likely than not to be
sustained on audit, based on the technical merits of the position. The provisions of FIN 48 are effective as of the beginning of our 2007 fiscal year, with the cumulative effect of the change in accounting principle recorded as an adjustment to
opening retained earnings. The cumulative change in accounting recorded directly to retained earnings and the effect on 2007 income from operations is not material. In March 2006, the FASB issued Statement of Financial Accounting Standards No. 156, Accounting for Servicing of Financial Assets: An Amendment of FASB Statement No. 140 (FAS 140 and FAS 156). FAS 140
establishes, among other things, the accounting for all separately recognized servicing assets and servicing liabilities. This Statement amends FAS 140 to require that all separately recognized servicing assets and servicing liabilities be initially
measured at fair value, if practicable. This Statement permits, but does not require, the subsequent measurement of separately recognized servicing


assets and servicing liabilities at fair value. Under this Statement, an entity can elect subsequent fair value measurement to account for its separately recognized
servicing assets and servicing liabilities. Adoption of this Statement is required as of the beginning of the first fiscal year that begins after September 15, 2006. Sky Financial adopted FAS 156 on January 1, 2007 and did not elect the
fair value measurement option. In February 2006, the FASB issued Statement of Financial Accounting Standards No. 155, Accounting for Certain
Hybrid Financial Instruments: An Amendment of FASB Statements No. 133 and 140(FAS 155). FAS 155 permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require
bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of Statement 133, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are
freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and amends Statement
140 to eliminate the prohibition on a qualifying special purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. FAS 155 is effective for all financial
instruments acquired or issued after the beginning of an entitys first fiscal year that begins after September 15, 2006. Sky Financial does not expect the adoption of FAS 155 to have a material effect on the results of operations or the
statement of condition.


---

Note 2Mergers, Acquisitions, Business Formations and
Divestitures



Huntington Merger On December 20, 2006, Sky Financial and Huntington Bancshares
Incorporated (Huntington) announced the signing of a definitive agreement to merge the two companies in a stock (90%) and cash (10%) transaction valued at approximately $3.5 billion. Under the terms of the agreement, Sky Financial Group
shareholders will receive 1.098 shares of Huntington common stock, on a tax-free basis, and a taxable cash payment of $3.023 for each share of Sky Financial Group. The merger was unanimously approved by both companies boards of directors and is expected to close early in the 2007 third quarter, pending customary regulatory approvals, as well as the approval of Huntingtons and
Sky Financial Groups shareholders. Community Banking Acquisitions Wells River On November 15, 2006, Sky Financial completed its acquisition of Wells River Bancorp, Inc. (Wells River) and its wholly-owned
subsidiary, Perpetual Savings Bank, a $71.3 million bank that operates three full-service branches in Ohios Columbiana County. The aggregate purchase price was $10,992, including direct acquisition costs of $24. The acquisition of Wells River
expands Sky Financials community banking business further in the eastern Ohio market. Wells River shareholders received approximately 178 shares of Sky Financial common stock and cash of $6,600. The total purchase price for Wells River has
been allocated to the tangible and identifiable intangible assets and liabilities based upon their respective fair values. Such allocations have not been finalized and as such, the allocation of the purchase consideration included in the
accompanying Consolidated Balance Sheet at December 31, 2006, is preliminary.


Union Federal On October 17, 2006, Sky Financial completed its acquisition of Union Federal Bank of Indianapolis (Union Federal) and its parent company, Waterfield Mortgage Company, Inc.,
Ft. Wayne, Indiana. Sky Financial purchased Waterfields retail and commercial banking business conducted primarily through Union Federal Bank, which added approximately $2.3 billion in assets. The aggregate purchase price was $332,195
including direct acquisition costs of approximately $2,369. Waterfield shareholders received $136,505 in cash and 7,467 shares of Sky Financial common stock. The acquisition of Union Federal Bank expands Sky Financials Indiana presence into
the growing Indianapolis market with the addition of 42 branches in this area. Sky Financial also acquired Waterfield Insurance as part of the acquisition. The total purchase price for Union Federal has been allocated to the tangible and
identifiable intangible assets and liabilities based upon their respective fair values. Such allocations have not been finalized and as such, the allocation of the purchase consideration included in the accompanying Consolidated Balance Sheet at
December 31, 2006, is preliminary. Falls Bank On November 29,
2005, Sky Financial completed its acquisition of Falls Bank, an $80 million bank that operates two full-service branches in the Akron, Ohio market. The aggregate purchase price was $12,273, including direct acquisition costs of $36. The acquisition
of Falls Bank expanded Sky Financials community banking business further into the Akron market. Falls Bank shareholders received 350 shares of Sky Financial common stock and cash of $2,348. The total purchase price for Falls Bank has been
allocated to the tangible and identifiable intangible assets and liabilities based upon their respective fair values.






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##### Table of Contents

Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except
per share data)

Note 2Mergers, Acquisitions, Business Formations and Divestitures (continued)



Belmont Bancorp On June 1, 2005, Sky Financial completed its acquisition of Belmont Bancorp (Belmont), a $297 million bank holding
company headquartered in St. Clairsville, Ohio, and its wholly-owned subsidiary, Belmont National Bank. The aggregate purchase price was $68,431, including direct acquisition costs of $37. Belmonts offices located in Belmont, Harrison and
Tuscarawas counties in Ohio, and Ohio County in West Virginia expanded Sky Financials community banking business further into these markets. Belmont Bancorp shareholders received approximately 1,765 shares of Sky Financial common stock and
cash of $18,705. The total purchase price for Belmont has been allocated to the tangible and identifiable intangible assets and liabilities based upon their respective fair values. Prospect Bancshares On November 30, 2004, Sky Financial acquired Prospect Bancshares, Inc. (Prospect), a $202 million bank holding
company headquartered in Worthington, Ohio, and its wholly-owned subsidiary Prospect Bank, by acquiring all of the outstanding capital stock of Prospect Bancshares for an aggregate purchase price of $46,754, including direct acquisition costs of
$77. Prospect Bancshares shareholders received approximately 1,139 shares of Sky Financial common stock and cash of $17,600.


Second Bancorp On July 1, 2004, Sky Financial acquired Second Bancorp Incorporated (Second Bancorp), a $2.0 billion bank holding company headquartered in Warren, Ohio, and its wholly-owned
subsidiary Second National Bank of Warren by acquiring all of the outstanding capital stock of Second Bancorp for an aggregate purchase price of $312,738, including direct acquisition costs of $2,093. Second Bancorp shareholders received
approximately 11,953 shares of Sky Financial common stock. The acquisitions complement Sky Financials operations in its regional banking
structure by enhancing its presence in these areas. The value of the common stock issued for each of the acquisitions was determined based on the market price of Sky Financials common stock on the date that the final terms of the acquisitions
were agreed to and announced. The results of operations for the acquired institutions have been included in the consolidated financial statements since the date of acquisition. The following table presents the allocation of the purchase price,
including direct acquisition costs, for the Wells River, Union Federal, Falls Bank, Belmont, Prospect and Second acquisitions to assets acquired and liabilities assumed, based on their fair values:




|                                   |  |             |        |               |   |           |  |         |        |          |   |         |  |   |         |  |   |          
|---------------------------------- |  | ----------- | ------ | ------------- | - | --------- |  | ------- | ------ | -------- | - | ------- |  | - | ------- |  | - | ---------
|                                   |  | Wells River |        | Union Federal |   | Falls     |  | Belmont |        | Prospect |   | Second 
|Cash and interest-earning deposits |  | $           | 1,561  |               | $ | 505,329   |  | $       | 1,764  |          | $ | 13,540  |  | $ | 3,985   |  | $ | 44,683   
|Loans                              |  |             | 48,571 |               |   | 1,323,935 |  |         | 65,519 |          |   | 161,955 |  |   | 196,533 |  |   | 1,293,733
|Securities available for sale      |  |             | 18,502 |               |   | 389,081   |  |         | 4,233  |          |   | 92,640  |  |   | 1,105   |  |   | 519,029  
|Premises and equipment             |  |             | 1,465  |               |   | 36,572    |  |         | 2,763  |          |   | 8,784   |  |   | 4,134   |  |   | 18,955   
|Core deposit intangible assets     |  |             | 917    |               |   | 20,615    |  |         | 778    |          |   | 7,155   |  |   | 2,140   |  |   | 31,449   
|Goodwill                           |  |             | 4,747  |               |   | 212,227   |  |         | 6,563  |          |   | 33,589  |  |   | 31,082  |  |   | 245,120  
|Other assets                       |  |             | 523    |               |   | 25,172    |  |         | 4,644  |          |   | 19,418  |  |   | 4,032   |  |   | 98,440   
|Total assets acquired              |  |             | 76,286 |               |   | 2,512,931 |  |         | 86,264 |          |   | 337,081 |  |   | 243,011 |  |   | 2,251,409
|Deposits                           |  |             | 58,459 |               |   | 1,786,026 |  |         | 53,496 |          |   | 229,135 |  |   | 169,986 |  |   | 1,251,801
|Debt                               |  |             | 6,473  |               |   | 364,854   |  |         | 17,551 |          |   | 34,961  |  |   | 15,790  |  |   | 646,315  
|Other liabilities                  |  |             | 362    |               |   | 29,856    |  |         | 2,944  |          |   | 4,554   |  |   | 10,558  |  |   | 40,555   
|Total liabilities acquired         |  |             | 65,294 |               |   | 2,180,736 |  |         | 73,991 |          |   | 268,650 |  |   | 196,334 |  |   | 1,938,671
|Net assets acquired                |  | $           | 10,992 |               | $ | 332,195   |  | $       | 12,273 |          | $ | 68,431  |  | $ | 46,677  |  | $ | 312,738  

The following (unaudited) pro forma consolidated results of operations have been prepared as if the acquisitions of Wells
River and Union Federal occurred as of the beginning of each period presented, with Falls Bank and Belmont being presented as of January 1, 2005:



|                                                      |  |      |         |      |   |        
|----------------------------------------------------- |  | ---- | ------- | ---- | - | -------
|December 31,                                          |  | 2006 |         | 2005
|Net interest income                                   |  | $    | 579,061 |      | $ | 555,461
|Income from continuing operations                     |  |      | 188,103 |      |   | 175,180
|Income from continuing operations per share - Basic   |  |      | 1.62    |      |   | 1.52   
|Income from continuing operations per share - Diluted |  |      | 1.61    |      |   | 1.52   
|Net income                                            |  |      | 188,103 |      |   | 175,552
|Net income per share  Basic                          |  |      | 1.62    |      |   | 1.52   
|Net income per share  Diluted                        |  |      | 1.61    |      |   | 1.50   



The pro forma results for 2005 included losses of $22,512 from the sale of investment securities recorded by Union Federal and approximately $800 of merger costs
recorded by Belmont. Sky Financial recorded pre-tax merger, integration and restructuring charges totaling $6,575, $1,771 and $4,542 during 2006,
2005 and 2004, respectively,


related to the acquisitions noted above. See Note 16 for additional discussion. The pro forma information presented is for informational purposes only and is not
indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time, nor is it intended to be a projection.




44



---

##### Table of Contents

Financial Service Affiliate Acquisitions On September 30, 2006, Sky
Financial acquired Lindig Benefits Consultants located in Worthington, Ohio for 44 shares of Sky Financial common stock and $104 in cash. On
January 3, 2006, Sky Financial acquired the Peter B. Burke Insurance Agency in Pittsburgh, Pennsylvania for 64 shares of Sky Financial common stock and $206 in cash. On October 4, 2005, Sky Financial acquired Becker- McDowell Agency, Inc. and Steiner Insurance Agency, Inc., both located in Wooster, Ohio. Becker-McDowell was acquired for 222 shares of Sky Financial common stock and $580
in cash. Steiner Insurance Agency was acquired for 111 shares of Sky Financial common stock and $288 in cash. On August 1, 2005, Sky acquired
B.K.M.s Benefit Design


Agency of Ohio, Inc., located in Findlay, Ohio for 137 shares of Sky Financial common stock and $661 in cash. On July 1, 2004, Sky Financial acquired Stouffer-Herzog Insurance Agency in conjunction with the purchase of Second Bancorp, as previously discussed. On April 1, 2004, Sky Financial acquired EOB, Inc., a group benefit insurance agency headquartered in Canton, Ohio, for 177 shares of Sky
Financial common stock and $516 in cash. On January 5, 2004, Sky Financial acquired Spencer-Patterson Insurance Agency, a full-service
professional liability, personal and commercial agency headquartered in Findlay, Ohio, for 297 shares of Sky Financial common stock and $793 in cash. Disclosure of pro forma results of the acquisitions of the financial services affiliates is immaterial to Sky Financials consolidated financial statements.




|                                   |  |                     |  |                    |  |              |              |           |   |               |  |             
|---------------------------------- |  | ------------------- |  | ------------------ |  | ------------ | ------------ | --------- | - | ------------- |  | ------------
|Entity                             |  | Location            |  | Date               |  | Total Assets |              | Cash Paid |   | Shares Issued
|Wells River Bancorp                |  | Wellsville, OH      |  | November 15, 2006  |  | $            | 71.3 million |           | $ | 6.6 million   |  | 0.2 million 
|Waterfield Mortgage Company, Inc.  |  | Ft. Wayne, IN       |  | October, 17, 2006  |  |              | 2.3 billion  |           |   | 136.5 million |  | 7.5 million 
|Lindig Benefits Consultants        |  | Worthington, OH     |  | September 30, 2006 |  |              | 0.1 million  |           |   | 0.1 million   |  | 0.1 million 
|Peter B. Burke Insurance Agency    |  | Pittsburgh, PA      |  | January 3, 2006    |  |              | 1.5 million  |           |   | 0.2 million   |  | 0.1 million 
|Falls Bank                         |  | Stow, OH            |  | November 29, 2005  |  |              | 80.3 million |           |   | 2.3 million   |  | 0.4 million 
|Becker-McDowell Agency, Inc.       |  | Wooster, OH         |  | October 4, 2005    |  |              | 0.4 million  |           |   | 0.58 million  |  | 0.2 million 
|Steiner Insurance Agency, Inc.     |  | Wooster, OH         |  | October 4, 2005    |  |              | 0.5 million  |           |   | 0.29 million  |  | 0.1 million 
|Benefit Design Agency, Inc.        |  | Findlay, OH         |  | August 1, 2005     |  |              |             |           |   | 0.66 million  |  | 0.1 million 
|Belmont Bancorp                    |  | St. Clairsville, OH |  | June 1, 2005       |  |              | 0.3 billion  |           |   | 18.7 million  |  | 1.7 million 
|Prospect Bancshares, Inc.          |  | Worthington, OH     |  | November 30, 2004  |  |              | 0.2 billion  |           |   | 17.6 million  |  | 1.1 million 
|Second Bancorp Incorporated        |  | Warren, OH          |  | July 1, 2004       |  |              | 2.0 billion  |           |   |              |  | 12.0 million
|EOB, Inc.                          |  | Canton, OH          |  | April 1, 2004      |  |              | 0.2 million  |           |   | 0.52 million  |  | 0.2 million 
|Spencer Patterson Insurance Agency |  | Findlay, OH         |  | January 5, 2004    |  |              | 0.3 million  |           |   | 0.79 million  |  | 0.3 million 



Business Divestitures In 2006, Sky Financial sold a portion of its insurance business
related primarily to wholesale insurance and realized a pre-tax gain of $6,658.


On March 31, 2004, Sky Financial completed the sale
of Sky Financial Solutions, its dental financing affiliate. The sale resulted in a $31.2 million pre-tax gain. See Note 26.




---

Note 3Securities

The estimated fair values and
unrealized gains and losses of securities at year-end are as follows:



|                                                 |  |                     |           |                       |   |                        |  |   |               |   |  |   |          
|------------------------------------------------ |  | ------------------- | --------- | --------------------- | - | ---------------------- |  | - | ------------- | - |  | - | ---------
|                                                 |  | Estimated FairValue |           | GrossUnrealized Gains |   | GrossUnrealized Losses |  |   | AmortizedCost
|2006                                             |  |                     |           |                       |   |                        |  |   |               |   |  |   |          
|U.S. Treasury                                    |  | $                   | 200       |                       | $ | 1                      |  | $ |              |   |  | $ | 199      
|U.S. government agencies and corporations        |  |                     | 65,927    |                       |   |                       |  |   | (1,040        | ) |  |   | 66,967   
|Obligations of states and political subdivisions |  |                     | 43,555    |                       |   | 98                     |  |   | (16           | ) |  |   | 43,473   
|Corporate and other securities                   |  |                     | 4,950     |                       |   |                       |  |   |              |   |  |   | 4,950    
|Mortgage-backed securities                       |  |                     | 2,785,018 |                       |   | 3,748                  |  |   | (48,235       | ) |  |   | 2,829,505
|Total debt securities available for sale         |  |                     | 2,899,650 |                       |   | 3,847                  |  |   | (49,291       | ) |  |   | 2,945,094
|Marketable equity securities available for sale  |  |                     | 36,599    |                       |   | 514                    |  |   | (57           | ) |  |   | 36,142   
|FHLB, FRB & Bankers Bank stock(1)               |  |                     | 193,711   |                       |   |                       |  |   |              |   |  |   | 193,711  
|Total securities                                 |  | $                   | 3,129,960 |                       | $ | 4,361                  |  | $ | (49,348       | ) |  | $ | 3,174,947
|2005                                             |  |                     |           |                       |   |                        |  |   |               |   |  |   |          
|U.S. Treasury                                    |  | $                   | 301       |                       | $ | 2                      |  | $ |              |   |  | $ | 299      
|U.S. government agencies and corporations        |  |                     | 191,273   |                       |   | 13                     |  |   | (4,077        | ) |  |   | 195,337  
|Obligations of states and political subdivisions |  |                     | 7,690     |                       |   | 83                     |  |   | (2            | ) |  |   | 7,609    
|Corporate and other securities                   |  |                     | 24,111    |                       |   | 584                    |  |   | (35           | ) |  |   | 23,562   
|Mortgage-backed securities                       |  |                     | 2,698,074 |                       |   | 766                    |  |   | (66,007       | ) |  |   | 2,763,315
|Total debt securities available for sale         |  |                     | 2,921,449 |                       |   | 1,448                  |  |   | (70,121       | ) |  |   | 2,990,122
|Marketable equity securities available for sale  |  |                     | 31,459    |                       |   | 748                    |  |   | (1,128        | ) |  |   | 31,839   
|FHLB, FRB & Bankers Bank stock(1)               |  |                     | 144,564   |                       |   |                       |  |   |              |   |  |   | 144,564  
|Total securities                                 |  | $                   | 3,097,472 |                       | $ | 2,196                  |  | $ | (71,249       | ) |  | $ | 3,166,525



|(1) | Certain securities such as FHLB, FRB, and Bankers Bank stock are carried at amortized cost.
|--- | --------------------------------------------------------------------------------------------



45



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##### Table of Contents

Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except per share data)



Note 3Securities (continued) Sky Financial evaluates its securities portfolio for other-than-temporary impairment throughout the year. Each investment, which has an indicative market value less than the book
value, is reviewed on a monthly basis by management. Management considers, at a minimum, the following factors that, both individually or in combination, could indicate that the decline is other-than- temporary: 1) the length of time and extent to
which the market value has been less than book value; 2) the financial condition and near-term prospects of the issuer; or 3) the intent and ability of Sky Financial to retain the investment in the issuer for a period of time sufficient to allow for
any anticipated recovery in market value. Among the factors that are considered in determining intent and ability is a review of capital adequacy, interest rate risk profile and liquidity at Sky Financial.


An impairment is recorded against individual securities if the review described above concludes that the decline in value is other than temporary. In fourth quarter
of 2006, Sky Financial determined that an investment in a corporate equity security with a book value of $9,065 and a fair value at the end of the year of $7,384 was impaired. The fair value of the equity security had been below Sky Financials
cost for the security in excess of a year and Sky Financial was unable to forecast the near-term recovery of the value of the security. As a result, Sky Financial recorded an other-than-temporary impairment of $1,681 related to this security. The fair values of investments with an amortized cost in excess of their fair value at December 31, 2006 and 2005 are as follows:




|                                                 |  |                     |           |                       |                  |         |                     |       |                       |           |  |                     |         |                       |  |   |           |  |   |         |  
|------------------------------------------------ |  | ------------------- | --------- | --------------------- | ---------------- | ------- | ------------------- | ----- | --------------------- | --------- |  | ------------------- | ------- | --------------------- |  | - | --------- |  | - | ------- | -
|                                                 |  | Less than 1 year    |           |                       | More than 1 year |         |                     | Total |                      
|                                                 |  | Aggregate FairValue |           | GrossUnrealizedLosses |                  |         | Aggregate FairValue |       | GrossUnrealizedLosses |           |  | Aggregate FairValue |         | GrossUnrealizedLosses | 
|December 31, 2006                                |  |                     |           |                       |                  |         |                     |       |                       |           |  |                     |         |                       |  |   |           |  |   |         |  
|U.S. Treasury                                    |  | $                   | 99        |                       | $                |        |                     |       | $                     |          |  | $                   |        |                       |  | $ | 99        |  | $ |        |  
|U.S. government agencies and corporations        |  |                     |          |                       |                  |        |                     |       |                       | 65,927    |  |                     | (1,040  | )                     |  |   | 65,927    |  |   | (1,040  | )
|Obligations of states and political subdivisions |  |                     | 2,697     |                       |                  | (9      | )                   |       |                       | 473       |  |                     | (7      | )                     |  |   | 3,170     |  |   | (16     | )
|Corporate and other securities                   |  |                     | 1,000     |                       |                  |        |                     |       |                       |          |  |                     |        |                       |  |   | 1,000     |  |   |        |  
|Mortgage-backed securities                       |  |                     | 323,257   |                       |                  | (1,594  | )                   |       |                       | 1,675,480 |  |                     | (46,641 | )                     |  |   | 1,998,737 |  |   | (48,235 | )
|Total debt securities available for sale         |  |                     | 327,053   |                       |                  | (1,603  | )                   |       |                       | 1,741,880 |  |                     | (47,688 | )                     |  |   | 2,068,933 |  |   | (49,291 | )
|Marketable equity securities available for sale  |  |                     |          |                       |                  |        |                     |       |                       | 280       |  |                     | (57     | )                     |  |   | 280       |  |   | (57     | )
|Total securities                                 |  | $                   | 327,053   |                       | $                | (1,603  | )                   |       | $                     | 1,742,160 |  | $                   | (47,745 | )                     |  | $ | 2,069,213 |  | $ | (49,348 | )
|December 31, 2005                                |  |                     |           |                       |                  |         |                     |       |                       |           |  |                     |         |                       |  |   |           |  |   |         |  
|U.S. Treasury                                    |  | $                   | 198       |                       | $                |        |                     |       | $                     |          |  | $                   |        |                       |  | $ | 198       |  | $ |        |  
|U.S. government agencies and corporations        |  |                     | 62,965    |                       |                  | (831    | )                   |       |                       | 108,375   |  |                     | (3,246  | )                     |  |   | 171,340   |  |   | (4,077  | )
|Obligations of states and political subdivisions |  |                     | 478       |                       |                  | (2      | )                   |       |                       |          |  |                     |        |                       |  |   | 478       |  |   | (2      | )
|Corporate and other securities                   |  |                     |          |                       |                  |        |                     |       |                       | 5,500     |  |                     | (35     | )                     |  |   | 5,500     |  |   | (35     | )
|Mortgage-backed securities                       |  |                     | 1,292,396 |                       |                  | (19,633 | )                   |       |                       | 1,205,736 |  |                     | (46,374 | )                     |  |   | 2,498,132 |  |   | (66,007 | )
|Total debt securities available for sale         |  |                     | 1,356,037 |                       |                  | (20,466 | )                   |       |                       | 1,319,611 |  |                     | (49,655 | )                     |  |   | 2,675,648 |  |   | (70,121 | )
|Marketable equity securities available for sale  |  |                     | 7,451     |                       |                  | (1,128  | )                   |       |                       |          |  |                     |        |                       |  |   | 7,451     |  |   | (1,128  | )
|Total securities                                 |  | $                   | 1,363,488 |                       | $                | (21,594 | )                   |       | $                     | 1,319,611 |  | $                   | (49,655 | )                     |  | $ | 2,683,099 |  | $ | (71,249 | )



The estimated fair value of debt securities at December 31, 2006, by contractual maturity, are shown in the accompanying table. Expected maturities will likely
differ from contractual maturities because some issuers have the right to call or prepay obligations with or without call or prepayment penalties.  Estimated Fair ValueDue in one year or less

$
16,578Due after one year through five years


131,669Due after five years through ten years


515,553Due after ten years through fifteen years


1,197,807Due after fifteen years through twenty years


348,802Due after twenty years


689,241Total debt securities available for sale

$
2,899,650 The gross realized gains and losses from the sales of securities are as follows:  2006

2005

2004Gross realized gains on sales

$
439

$
5,002

$
16,866Gross realized losses on sales


19,942


1,340


2,297 The gross realized losses on sales do not include the $1,681 of losses related to the impairment discussed above.


During the fourth quarter of 2006, Sky Financial restructured its balance sheet to strengthen capital ratios, maintain a sound interest rate risk position
and enhance the net interest margin following the completion of its recent acquisitions of Union Federal and Wells River. The restructuring actions resulted in a reduction in total assets, which included the sale of $505,629 of available-for-sale,
fixed-rate investment securities with an average yield of 3.74% and the elimination of federal funds sold coming from the Union Federal acquisition. With the sale proceeds, Sky Financial paid off $254,702 of FHLB advances and $72,000 of borrowings,
with a combined average cost of 5.92% and reduced federal funds purchased. In addition to de-leveraging the balance sheet, these actions should improve the net interest margin and increase net interest income in the upcoming quarters. This balance
sheet restructuring resulted in realized losses on sales of securities of $19,435 recorded as a component of net securities gains (losses) and net gains of $4,183 recorded as other income related to the extinguishment of the debt and related
derivative instruments. Securities pledged to secure public deposits and repurchase agreements totaled $2,086,820 and $2,080,838 at December 31,
2006 and 2005, respectively.




46



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##### Table of Contents

Note 4Loans and Allowance for Credit Losses

The loan portfolio at year-end was as follows:



|                                       |  |      |            |      |   |           
|-------------------------------------- |  | ---- | ---------- | ---- | - | ----------
|                                       |  | 2006 |            | 2005
|Real estate loans:                     |  |      |            |      |   |           
|Construction                           |  | $    | 823,327    |      | $ | 601,814   
|Residential mortgage                   |  |      | 3,737,726  |      |   | 2,916,248 
|Non-residential mortgage               |  |      | 3,451,926  |      |   | 3,500,482 
|Commercial, financial and agricultural |  |      | 4,031,549  |      |   | 3,423,470 
|Installment and credit card loans      |  |      | 782,289    |      |   | 707,208   
|Total loans                            |  | $    | 12,826,817 |      | $ | 11,149,222



The 2005 loan categories have been reclassified to conform to the current year presentation. In 2006, Sky Financial changed the method of classifying certain loans, which resulted
in a decrease in loans classified as construction and an increase in non-residential real estate and commercial, financial and agricultural loans. Most of Sky Financials business activity is conducted through Sky Bank with clients in the respective local areas of the bank. These areas encompass parts of eastern Ohio, western Ohio, central Indiana, southeastern Michigan, western
Pennsylvania and northern West Virginia. Sky Banks loan portfolio is diversified, consisting of commercial, residential, agribusiness, consumer and small business loans. In Sky Banks loan portfolio, no significant industry concentrations
exist and amounts related to highly-leveraged transactions are not significant. Total loans include overdrafts of $7,309 and $5,596 at December 31, 2006 and 2005, respectively. Sky Financial evaluates each clients creditworthiness on a case-by-case basis. The amount of collateral obtained is based on managements evaluation of
the client. Collateral held relating to commercial, financial, agricultural and commercial mortgages varies, but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties. Loans on which
the accrual of interest has been discontinued totaled $137,111 and $119,030 at December 31, 2006 and 2005, respectively. In conjunction with the
Union Federal acquisition on October 17, 2006, Sky Financial acquired loans approximating $1,359,926. Union Federals allowance for credit losses at the acquisition date of October 17, 2006 was $36,017. Sky Financial determined that
certain loans acquired in the Union Federal acquisition had evidence of deterioration of credit quality and it was probable that all contractual required payments would not be collected on these loans. Sky Financial determined that 47 loans with a
book value totaling approximately $13,591 and with a fair value of $7,466 were within the guidelines set forth under SOP 03-3. These loans have been recorded by Sky Financial at their fair value and the allowance for credit losses was reduced by
$6,125. Accordingly, Sky Financial recorded $29,892 of


allowance for credit losses on loans not subject to SOP 03-3 related to the Union Federal acquisition. The amount of interest income recorded on these loans during 2006 was not material. In conjunction with the Wells River acquisition on November 15, 2006, Sky Financial acquired loans approximating $49,000 and determined that the entire $487 of
allowance for credit losses was not subject to SOP 03-3. The remaining loans acquired from the Belmont acquisition in 2005 that were being accounted
for under SOP 03-3 were not material at December 31, 2006. There were no loans acquired from Falls Bank that were accounted for under SOP 03-3. In the normal course of business, Sky Financial has made loans to certain directors, executive officers and their affiliates. Loan activity relating to these individuals for 2006 is as follows:  Aggregate balance - December 31, 2005


$
41,723New loans










79,901Repayments










(58,875
)Other changes










(5,975
)Aggregate balance - December 31, 2006


$
56,774Activity in the allowance for credit
losses was as follows:2006


2005


2004Balance at beginning of year

$
144,461


$
151,389


$
124,943Provision for credit losses


36,854



52,249



37,660Loans charged-off


(49,640
)


(71,126
)


(43,635
)Recoveries


10,941



9,341



8,698Allowance for acquired institutions/sold portfolio


30,379



2,887



23,723Transfer to allowance for unfunded commitments and letters of credit


(5
)


(279
)


Balance at end of year

$
172,990


$
144,461


$
151,389


Information regarding impaired loans is as follows:



|                                                                      |  |      |        |      |   |       
|--------------------------------------------------------------------- |  | ---- | ------ | ---- | - | ------
|For The Years Ended December 31,                                      |  | 2006 |        | 2005
|Year-end impaired loans with no allowance for credit losses allocated |  | $    | 25,839 |      | $ | 24,303
|Year-end impaired loans with allowance for credit losses allocated    |  |      | 53,496 |      |   | 51,652
|Year-end allowance for credit losses allocated to impaired loans      |  |      | 13,416 |      |   | 9,044 
|Average investment in impaired loans during the year                  |  |      | 86,497 |      |   | 84,168
|Cash-basis interest income recognized during the year                 |  |      | 1,949  |      |   | 1,459 



47



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##### Table of Contents

Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except
per share data)

Note 5Premises and Equipment

Premises and equipment as
of year-end are summarized as follows:



|                                               |  |      |          |   |      |   |          |  
|---------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                               |  | 2006 |          |   | 2005 |  
|Land, buildings and improvements               |  | $    | 226,373  |   |      | $ | 186,154  |  
|Equipment, furniture and fixtures              |  |      | 169,839  |   |      |   | 163,840  |  
|Construction in process                        |  |      | 4,920    |   |      |   | 3,662    |  
|Total premises and equipment                   |  |      | 401,132  |   |      |   | 353,656  |  
|Less accumulated depreciation and amortization |  |      | (194,987 | ) |      |   | (186,859 | )
|Premises and equipment, net                    |  | $    | 206,145  |   |      | $ | 166,797  |  



Included in premises and equipment are buildings, land and land improvements that secure capitalized leases with a cost of $1,784 and $3,368, less accumulated
amortization and depreciation of $1,734 and $3,194 at December 31, 2006 and 2005, respectively. Depreciation expense was $19,658 in 2006, $20,647 in 2005 and $20,967 in 2004. Rental payments for land


and buildings are accounted for as operating lease expense. Total rent expense amounted to $16,873 in 2006, $15,347 in 2005 and $11,217 in 2004. Minimum future rentals
under operating leases are as follows: 2007, $11,869; 2008, $9,874; 2009, $8,309; 2010, $7,316; 2011, $6,386; 2012 and thereafter, $21,734.




---

Note 6Goodwill and Intangible Assets

Net goodwill activity by segment was as follows:



|                             |  |                   |  |                               |   |  |         
|---------------------------- |  | ----------------- |  | ----------------------------- | - |  | --------
|                             |  | Community Banking |  | Financial Services Affiliates |   |  | Total   
|Balance at December 31, 2003 |  | $152,282          |  | $33,577                       |   |  | $185,859
|Net change                   |  | 276,220           |  | 13,179                        |   |  | 289,399 
|Balance at December 31, 2004 |  | $428,502          |  | $46,756                       |   |  | $475,258
|Net change                   |  | 33,069            |  | 13,535                        |   |  | 46,604  
|Balance at December 31, 2005 |  | $461,571          |  | $60,291                       |   |  | $521,862
|Net change                   |  | 216,807           |  | (10,409                       | ) |  | 206,398 
|Balance at December 31, 2006 |  | $678,378          |  | $49,882                       |   |  | $728,260



In 2006, as part of the sale of the portion of the insurance business discussed in Note 2, Sky Financial reduced the goodwill of the Financial Services Affiliates
by $13,179. Goodwill is reviewed annually for impairment or more frequently if impairment indicators exist. Sky Financial completed this review
during the second quarter of 2006 and determined that goodwill was not impaired. Other intangible assets at December 31, 2006 and 2005 were
$73,442 and $67,077, respectively, net of accumulated amortization of $20,418 and $15,885, respectively. These assets consist primarily of core deposits intangibles and customer relationship intangibles. The core deposit intangibles at December 31, 2006 and 2005 were $69,989 and $63,335, respectively, net of accumulated amortization of $19,445 and $15,583,
respectively. The customer relationship intangibles at December 31, 2006 and 2005 were $3,453 and $3,742, respectively, net of accumulated amortization of $973 and $302, respectively.


During 2006, Sky Financial recorded additional intangible
assets of $22,216 related to core deposit intangibles and customer relationships. This total amount will be amortized over a weighted average period of approximately eleven years. Of this total, $21,532 related to core deposit intangibles that will
be amortized over a weighted average period of approximately eleven years. Also included in this total is $684 of customer relationship intangibles that will be amortized over a weighted-average period of approximately eight years. Amortization expense related to the intangible assets was $15,803, $14,887 and $10,979 during 2006, 2005 and 2004, respectively. For the years ending 2007 through
2011, the estimated future amortization expense will be approximately $17,592, $16,161, $13,610, $11,758 and $10,411, respectively.




48



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##### Table of Contents

Note 7Interest-Bearing Deposits

Total
interest-bearing deposits as presented on the balance sheet are comprised of the following classifications at year-end (certain amounts from prior year have been reclassified to conform to current year presentation):



2006

2005Interest-bearing demand

$
398,147

$
327,587Savings, including MMDA


3,915,492


3,422,487Brokered deposits


1,034,412


345,184Time In denominations under
$100,000


4,007,799


3,339,106In denominations of $100,000 or more


1,911,145


1,587,199Total interest-bearing deposits

$
11,266,995

$
9,021,563


At December 31, 2006, the scheduled maturities of timedeposits are as follows:2007

$
4,905,1082008


643,3092009


182,1182010


103,6282011


34,338Thereafter


50,443$
5,918,944




---

Note 8Securities Sold Under Repurchase Agreements and Federal Funds Purchased



Sky Financial has retail repurchase agreements with
clients within its local market areas, as well as federal funds purchased from other banks. These borrowings are collateralized with securities owned by Sky Bank and held in its safekeeping accounts at independent correspondent banks.


Sky Financial also has repurchase
agreements with brokerage firms that are in possession of the underlying securities. The securities are returned to Sky Financial at the maturity of the agreements. The following table summarizes certain information relative to these borrowings:




|                                                           |  |      |           |   |      |   |           |  
|---------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                                           |  | 2006 |           |   | 2005 |  
|Outstanding at year-end                                    |  | $    | 978,661   |   |      | $ | 1,053,244 |  
|Weighted average interest rate at year-end                 |  |      | 4.41      | % |      |   | 3.96      | %
|Maximum amount outstanding as of any month-end             |  | $    | 1,368,972 |   |      | $ | 1,053,224 |  
|Average amount outstanding                                 |  |      | 957,165   |   |      |   | 857,472   |  
|Approximate weighted average interest rate during the year |  |      | 4.38      | % |      |   | 3.09      | %

Included in the above as of December 31, 2006, are repurchase agreements in excess of one year as
summarized below:



|                                                  |  |   |         |                                                        |     |                                                  |    
|------------------------------------------------- |  | - | ------- | ------------------------------------------------------ | --- | ------------------------------------------------ | ---
|                                                  |  |   |         | Weighted Average Life in YearsBased on Stated Maturity |     | Weighted AverageLife in YearsBased on Call Dates
|Stated maturity in 2008                           |  | $ | 139,000 |                                                        | 1.5 |                                                  | 1.5
|Stated maturity in 2011                           |  |   | 30,000  |                                                        | 4.1 |                                                  | 4.1
|Total repurchase agreements in excess of one year |  | $ | 169,000 |                                                        | 2.0 |                                                  | 2.0



The weighted average rate on repurchase agreements in excess of one year was 7.12% at December 31, 2006 and 5.57% at December 31, 2005


At December 31, 2005, repurchase agreements in excess of
one year were $311,806 with a weighted average life based on stated maturity of 2.3 years and a weighted average life based on call dates of 2.1 years.




---

Note 9Debt and Federal Home Loan Bank Advances

Sky Financials debt and Federal Home Loan Bank (FHLB) advances are comprised of the following at December 31:



|                                                                                 |  |      |           |      |   |          
|-------------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | ---------
|                                                                                 |  | 2006 |           | 2005
|Borrowings under FHLB line of credit at weighted interest rate of 4.96% for 2006 |  | $    | 903,645   |      | $ | 1,775,583
|Borrowings under bank line of credit                                             |  |      | 35,000    |      |   |         
|Subordinated note at 7.08%, due January 2008                                     |  |      | 50,000    |      |   | 50,000   
|Subordinated note at 6.125%, due October 2012                                    |  |      | 65,000    |      |   | 65,000   
|Subordinated note at 5.35%, due April 2013                                       |  |      | 50,000    |      |   | 50,000   
|Junior subordinated debentures owed to unconsolidated subsidiary trusts          |  |      | 335,294   |      |   | 184,799  
|Capital lease obligation and other items                                         |  |      | 141       |      |   | 406      
|Total                                                                            |  | $    | 1,439,080 |      | $ | 2,125,788



49



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##### Table of Contents

Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except per share data)

Note 9Debt and Federal Home Loan Bank Advances (continued)



Lines of Credit Sky Financial maintains a credit facility with a group of financial institutions in the form of a short-term line of
credit. This line of credit is subject to renewal on an annual basis. The commitment on the line was $100,000 in 2006 and 2005. Interest on advances taken on the facility is accrued at either a formula based on the London Interbank Offering Rate
(LIBOR), or a formula based on the federal funds rate. Sky Financial may elect the interest rate method to be applied to amounts outstanding. The agreement provides for a quarterly fee of .150% on the commitment amount of the credit facility. The
agreement contains covenants that require Sky Financial, among other things, to maintain an acceptable level of capital and asset quality as defined by the agreement. The average amount outstanding in 2006 was $288 with an average cost of 5.83%,
compared to $578, with an average cost of 3.56% in 2005. FHLB Advances FHLB advances are collateralized by all shares of FHLB stock owned by the subsidiary bank and by 100% of the subsidiary banks qualified residential mortgage loans. The subsidiary bank may increase its borrowing capacity by pledging
securities. Based on the carrying amount of FHLB stock owned by the subsidiary bank, total FHLB advances are limited to approximately $1,943,666, subject to the availability of qualified residential mortgage loans for pledging.


Junior Subordinated Debentures Owed to Unconsolidated Subsidiary Trusts Beginning in 1997, Sky Financial has issued obligated mandatorily redeemable
capital securities through fully-consolidated subsidiaries. The trust preferred entities were formed for the purpose of issuing capital securities to third parties and investing the proceeds from the sale of such securities solely in junior
subordinated debentures of Sky Financial. The debentures held by each trust are the sole assets of that trust. Distributions on the capital securities issued by each trust are payable semi-annually or quarterly at a rate per annum equal to the
interest rate being earned by the trust on the debentures held by that trust. The borrowings are redeemable after a certain date at their stated face values or at a premium if redemption occurs before that date. During the second quarter of 2006, Sky Financial issued $150,000 of trust preferred securities in advance of the fourth quarter acquisition of Union Federal Bank.
In addition, as part of the acquisition, Sky Financial acquired the Waterfield Capital Trust I and Waterfield Capital Trust II. As part of its balance sheet restructuring in the fourth quarter, Sky Financial redeemed junior subordinated debentures
with a par value of $32,000 related to the Second Bancorp Capital Trust I. The following table summarizes the issuance date, par value, interest
rate, redemption price, redemption date and hedged average rate for the junior subordinated debentures at December 31, 2006:




|                                 |  |                    |  |           |        |              |          |   |                 |        |   |                 |                  |                   |      |  
|-------------------------------- |  | ------------------ |  | --------- | ------ | ------------ | -------- | - | --------------- | ------ | - | --------------- | ---------------- | ----------------- | ---- | -
|Unconsolidated Subsidiary Trusts |  | Issuance Date      |  | Par Value |        | InterestRate |          |   | RedemptionPrice |        |   | Redemption Date |                  | HedgedAverageRate |     
|Sky Financial Capital Trust IV   |  | June 30, 2006      |  | $         | 75,000 |              | Variable |   |                 | 100.00 | % |                 | July 1, 2011     |                   | 6.49 | %
|Sky Financial Capital Trust III  |  | April 6, 2006      |  |           | 75,000 |              | Variable |   |                 | 100.00 |   |                 | June 30, 2011    |                   | 6.43 |  
|Sky Financial Capital Trust II   |  | September 25, 2003 |  |           | 30,000 |              | Variable |   |                 | 100.00 |   |                 | October 8, 2008  |                   | N/A  |  
|Prospect Trust I                 |  | March 27, 2003     |  |           | 6,000  |              | Variable |   |                 | 100.00 |   |                 | April 7, 2008    |                   | N/A  |  
|Waterfield Capital Trust II      |  | July 11, 2002      |  |           | 10,000 |              | Variable |   |                 | 100.00 |   |                 | July 7, 2007     |                   | N/A  |  
|Waterfield Capital Trust I       |  | April 10, 2002     |  |           | 20,000 |              | Variable |   |                 | 100.00 |   |                 | April 22, 2007   |                   | N/A  |  
|Sky Financial Capital Trust I    |  | March 31, 2000     |  |           | 60,000 |              | 9.34     | % |                 | 104.67 |   |                 | May 1, 2010      |                   | N/A  |  
|Mid Am Capital Trust             |  | June 30, 1997      |  |           | 23,600 |              | 10.20    |   |                 | 105.10 |   |                 | June 1, 2007     |                   | N/A  |  
|First Western Capital Trust      |  | February 11, 1997  |  |           | 25,000 |              | 9.88     |   |                 | 104.94 |   |                 | February 1, 2007 |                   | N/A  |  

Debt obligations related to unconsolidated subsidiary trust follows:



|                                                                              |  |      |         |      |   |        
|----------------------------------------------------------------------------- |  | ---- | ------- | ---- | - | -------
|                                                                              |  | 2006 |         | 2005
|Interest at 9.88%, due February 2027                                          |  | $    | 25,774  |      | $ | 26,393 
|Interest at 10.20%, due June 2027                                             |  |      | 24,451  |      |   | 24,245 
|Interest at 9.34%, due May 2030                                               |  |      | 61,856  |      |   | 63,502 
|Interest at 9.00%, due December 2031                                          |  |      |        |      |   | 33,374 
|Interest at 9.09% (variable), due April 2032                                  |  |      | 20,949  |      |   |       
|Interest at 9.02% (variable), due October 2032                                |  |      | 10,413  |      |   |       
|Interest at 8.63% (variable), due April 2033                                  |  |      | 6,283   |      |   | 6,357  
|Interest at 8.32% (variable), due October 2033                                |  |      | 30,928  |      |   | 30,928 
|Interest at 6.77% (variable), due June 2036                                   |  |      | 77,320  |      |   |       
|Interest at 6.77% (variable), due June 2036                                   |  |      | 77,320  |      |   |       
|Total junior subordinated debentures owed to unconsolidated subsidiary
trusts |  | $    | 335,294 |      | $ | 184,799





Other At December 31, 2006, required annual principal payments on debt and FHLB
advances are presented in the following table:  2007

$ 653,3252008

28,6962009

104,1022010

159,3582011

28,913Thereafter

464,686Total

$1,439,080




50



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##### Table of Contents

Note 10Derivative Instruments and Hedging Activities



Sky Financials hedging policies permit the use of interest rate swaps, caps and floors to manage interest rate risk or to hedge specified assets and liabilities. Sky Financial uses derivative instruments, primarily
interest rate swaps, to manage interest rate risk on certain liabilities by hedging either the fair value of certain fixed-rate debt or the cash flow variability associated with certain variable rate debt. The derivative instruments and hedging relationships have been designated and qualify as either fair value or cash flow hedges. To qualify for hedge accounting
under Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, the effectiveness of each hedging relationship is assessed both at hedge inception and at each reporting
period thereafter. Also, at the end of each reporting period, ineffectiveness in the hedging relationships is measured as the difference between the change in fair value of the derivative instruments and the change in fair value of either the hedged
items (fair value hedges) or expected cash flows (cash flow hedges). Ineffectiveness, if any, is recorded as derivative gains (losses) on swaps as a component of non-interest income. Accounting Correction During the second quarter 2006, Sky Financial identified and corrected immaterial accounting errors related to
certain derivative hedging relationships. The misstatements related to Sky Financials interpretation and application of the shortcut method of hedge accounting under Statement No. 133. Sky Financial determined that these
hedges did not qualify for hedge accounting using the shortcut method. As a result, changes in the market value of the derivatives should have been recorded through non-interest income with no corresponding offset to the hedged item. Sky
Financial evaluated the impact of these errors and concluded that the impact was not material to prior quarterly and annual periods. Accordingly, an adjustment was recorded in the second quarter of 2006 to correct the cumulative impact of these
errors. The cumulative impact of these out-of-period adjustments resulted in a charge to non-interest income in the second quarter of 2006 of $9,930
($6,603 after tax), which is included in derivative gains (losses) on swaps in the Consolidated Statements of Income. During the third quarter of
2006, Sky Financial redesignated the affected derivatives related to the convertible advances from the Federal Home Loan Bank of Cincinnati as hedges using the long-haul method of hedge accounting and then in the fourth quarter, these derivatives
were terminated. The breakage of these instruments with a total notional value of $205,000 resulted in a gain of $930 ($605 after-tax). Included in this gain is $457 related to recording ineffectiveness on the swaps and was recorded as derivative
gains on swaps and the remaining $473 was recorded as a component of other income. The swaps related to the junior subordinated debentures owed to unconsolidated
subsidiary trust were not redesignated as hedges and Sky Financial terminated the swaps. The breakage of these instruments during the third quarter of 2006 with a total notional value of $108,600 resulted in a gain of $3,228 ($2,098 after-tax)
recorded as derivative gains on swaps.


Fair Value Hedges - Interest Rate Swaps Sky Financial uses interest rate swap agreements
to hedge a portion of its fixed rate borrowings. The interest rate swaps effectively convert the fixed rate of interest on $284,150 of advances from the Federal Home Loan Bank of Cincinnati (FHLB) and $130,000 of wholesale repurchase agreements to
variable rates based on LIBOR plus a spread as defined in the agreements. Sky Financial also uses interest rate swap agreements to hedge long-term fixed rate commercial loans. At December 31, 2006, Sky Financial had $18,153 of such agreements.
The commercial loan swaps effectively convert the fixed rate of interest on these commercial loans to a variable rate based on LIBOR plus a spread as defined in the agreements. The interest rate swaps involve no exchange of principal either at
inception or maturity and have maturities identical to the commercial loans. The arrangements have been designated as fair value hedges and both the change in the fair value of the hedges and the hedged transactions are reflected in earnings. The
hedging arrangements of the advances from the FHLB, the wholesale repurchase agreements and the long-term fixed rate commercial loans are considered highly effective, and changes in the fair value of the interest rate swaps exactly offset the
corresponding changes in the hedged items. As a result, the changes in the fair value do not result in an impact on net income. During 2006, Sky
Financial recorded income of $984 related to the ineffectiveness of the swaps of the convertible advances from the FHLB that is recorded as deriavative gains (losses) on swaps. Cash Flow Hedges In the first quarter of 2006, Sky Financial entered into two interest rate swaps that fix the rate on $150,000 of
variable rate borrowings on junior subordinated debentures owed to unconsolidated subsidiary trusts. As part of its financing of the fourth quarter acquisition of Union Federal Bank, Sky Financial borrowed $150,000 under junior subordinated
debentures in the second quarter. Under the terms of the arrangement, Sky Financial pays a fixed rate of interest and receives a variable rate based on LIBOR. Hedge effectiveness is assessed on a quarterly basis using the long-haul method. The
effective portion of the change in the swaps fair value is recorded in other comprehensive income, net of tax. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as
interest payments are made on the variable-rate subordinated notes. The change in net unrealized losses on cash flow hedges reflects a reclassification of $200 of net unrealized gains from accumulated other comprehensive income to interest expense
during 2006. During 2007, Sky Financial estimates that $266 of unrealized gains will be reclassified. Interest Rate Caps During 2002, Sky Financial entered into two interest rate cap arrangements, and paid $1,456 to hedge its interest risk on $48,600 of federal funds purchased. The interest rate caps
are designed to offset the impact of changes in the federal fund purchased rate above the weighted average stated rate of 5.90%, and, as such, are considered to be highly effective. Any changes in the intrinsic values are recorded in other
comprehensive income. The changes in the time values of the interest rate caps, which are excluded from the assessment of hedge effectiveness, increased interest expense by $219 in 2006 and 2005 and $220 in 2004. No deferred gains or losses in
accumulated other comprehensive income at December 31, 2006 are expected to be reclassified to income from continuing operations in 2007.




51



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##### Table of Contents

Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except
per share data)

Note 10Derivative Instruments and Hedging Activities (continued)

The following table presents the contract/notional and fair value amounts of all derivative transactions at December 31, 2006 and 2005:



|                                     |  |                 |         |            |   |        |            |  |      |               |  |      |                |  |     
|------------------------------------ |  | --------------- | ------- | ---------- | - | ------ | ---------- |  | ---- | ------------- |  | ---- | -------------- |  | ----
|                                     |  | Notional Amount |         | Fair Value |   |        | Fixed Rate |  |      | Variable Rate |  |      | Maturity Years
|At December 31, 2006                 |  |                 |         |            |   |        |            |  |      |               |  |      |                |  |     
|Designated hedging instruments       |  |                 |         |            |   |        |            |  |      |               |  |      |                |  |     
|Fair value hedges                    |  | $               | 432,303 |            | $ | 13     |            |  | 4.65 | %             |  | 4.74 | %              |  | 1.00
|Cash flow hedges                     |  |                 | 150,000 |            |   | (405   | )          |  | 6.46 |               |  | 6.72 |                |  | 4.50
|Interest rate caps                   |  |                 | 48,600  |            |   | 57     |            |  |     |               |  |     |                |  | 1.92
|Total derivative hedging instruments |  | $               | 630,903 |            | $ | (335   | )          |  |      |               |  |      |                |  |     
|At December 31, 2005                 |  |                 |         |            |   |        |            |  |      |               |  |      |                |  |     
|Designated hedging instruments       |  |                 |         |            |   |        |            |  |      |               |  |      |                |  |     
|Fair value hedges                    |  | $               | 362,415 |            | $ | (2,981 | )          |  | 6.94 | %             |  | 6.52 | %              |  | 9.64
|Interest rate caps                   |  |                 | 48,600  |            |   | 168    |            |  |     |               |  |     |                |  | 2.92
|Total derivative hedging instruments |  | $               | 411,015 |            | $ | (2,813 | )          |  |      |               |  |      |                |  |     



Interest Rate Swaps on Behalf of Clients Sky Financial has entered into several
commercial loan swaps in order to provide commercial loan clients the ability to swap from variable to fixed interest rates. Under these agreements, Sky Financial enters into a variable rate loan agreement with a client in addition to a swap
agreement. This swap agreement effectively swaps the clients variable rate loan into a fixed rate loan. Sky Financial then enters into a corresponding swap agreement with a third party in order to swap its


exposure on the variable to fixed rate swap on the commercial loan. At December 31, 2006 and 2005, Sky Financial had $159,371 and $65,138, respectively, of
notional amount of such agreements. As the interest rate swaps with the clients and third parties are not designated as hedges under FAS No. 133, the instruments are marked to market in earnings. As the interest rate swaps are structured to
offset each other, there was no net impact to earnings in 2006 and 2005 related to these swaps.




---

Note 11Income Taxes

Income taxes consisted of the following:



|                                 |  |      |        |      |   |        |  |   |       
|-------------------------------- |  | ---- | ------ | ---- | - | ------ |  | - | ------
|                                 |  | 2006 |        | 2005 |   | 2004  
|Current                          |  |      |        |      |   |        |  |   |       
|Federal                          |  | $    | 86,772 |      | $ | 84,891 |  | $ | 75,407
|State and local                  |  |      | 852    |      |   | 390    |  |   | 541   
|                                 |  |      | 87,624 |      |   | 85,281 |  |   | 75,948
|Deferred                         |  |      |        |      |   |        |  |   |       
|Federal                          |  |      | 6,847  |      |   | 6,258  |  |   | 9,378 
|State and local                  |  |      | 198    |      |   | 8      |  |   | 18    
|                                 |  |      | 7,045  |      |   | 6,266  |  |   | 9,396 
|Total provision for income taxes |  | $    | 94,669 |      | $ | 91,547 |  | $ | 85,344



52



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Note 11Income Taxes (continued)

The sources of gross
deferred tax assets and liabilities were as follows at December 31 (certain amounts related to basis diference on acquired assets from prior years have been reclassified to conform to current year presentation):



|                                                   |  |      |         |   |      |   |         |      |  |   |         |  
|-------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                   |  | 2006 |         |   | 2005 |   |         | 2004 | 
|Items giving rise to deferred tax assets:          |  |      |         |   |      |   |         |      |  |   |         |  
|Allowance for loan losses in excess of tax reserve |  | $    | 61,579  |   |      | $ | 48,923  |      |  | $ | 52,949  |  
|Intangible assets                                  |  |      | 4,397   |   |      |   | 4,846   |      |  |   | 5,182   |  
|Deferred compensation                              |  |      | 10,373  |   |      |   | 11,412  |      |  |   | 10,928  |  
|Net deferred loan fees and costs                   |  |      | 5,900   |   |      |   | 7,075   |      |  |   | 5,737   |  
|Interest on non-accrual loans                      |  |      | 6,756   |   |      |   | 7,299   |      |  |   | 5,220   |  
|Post-retirement benefits                           |  |      | 1,237   |   |      |   | 1,430   |      |  |   | 1,592   |  
|Net operating loss carryforward                    |  |      | 5,837   |   |      |   | 12,128  |      |  |   | 11,722  |  
|Cash flow hedge                                    |  |      | 393     |   |      |   | 109     |      |  |   | 604     |  
|Unrealized loss on securities available for sale   |  |      | 15,475  |   |      |   | 23,806  |      |  |   | 3,323   |  
|Pension liability                                  |  |      | 922     |   |      |   | 1,385   |      |  |   |        |  
|Accrued stock-based compensation                   |  |      | 4,331   |   |      |   | 1,744   |      |  |   |        |  
|Merger, integration and restructuring expense      |  |      |        |   |      |   |        |      |  |   | 863     |  
|Depreciation                                       |  |      | 146     |   |      |   | 440     |      |  |   |        |  
|Basis difference on acquired assets                |  |      | 2,516   |   |      |   | 127     |      |  |   | 35      |  
|Other                                              |  |      | 5,960   |   |      |   | 2,434   |      |  |   | 2,214   |  
|                                                   |  |      | 125,822 |   |      |   | 123,158 |      |  |   | 100,369 |  
|Items giving rise to deferred tax liabilities:     |  |      |         |   |      |   |         |      |  |   |         |  
|FHLB stock dividends                               |  |      | (22,238 | ) |      |   | (16,529 | )    |  |   | (13,947 | )
|Mortgage servicing rights                          |  |      | (12,529 | ) |      |   | (13,356 | )    |  |   | (14,218 | )
|Depreciation                                       |  |      |        |   |      |   |        |      |  |   | (3,621  | )
|Purchase accounting adjustments                    |  |      | (21,161 | ) |      |   | (9,678  | )    |  |   | (4,765  | )
|Other                                              |  |      | (885    | ) |      |   | (1,144  | )    |  |   | (914    | )
|                                                   |  |      | (56,813 | ) |      |   | (40,707 | )    |  |   | (37,465 | )
|Net deferred tax asset                             |  | $    | 69,009  |   |      | $ | 82,451  |      |  | $ | 62,904  |  



Total federal income tax expense differs from the expected amounts computed by applying the statutory


federal tax rate of 35% to income before taxes. The reasons for this difference are as follows:




|                                                                                       |  |      |        |   |      |         |   |      |   |        |   |  |         |   |  |   |        |   |  |         |  
|-------------------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | ------- | - | ---- | - | ------ | - |  | ------- | - |  | - | ------ | - |  | ------- | -
|                                                                                       |  | 2006 |        |   | 2005 |         |   | 2004 |  
|                                                                                       |  |      | Amount |   |      | TaxRate |   |      |   | Amount |   |  | TaxRate |   |  |   | Amount |   |  | TaxRate |  
|Income tax expense based upon the federal statutory rate on income before income taxes |  | $    | 99,752 |   |      | 35.0    | % |      | $ | 95,808 |   |  | 35.0    | % |  | $ | 91,190 |   |  | 35.0    | %
|Bank-owned life insurance earnings                                                     |  |      | (2,211 | ) |      | (0.8    | ) |      |   | (2,610 | ) |  | (1.0    | ) |  |   | (2,055 | ) |  | (0.8    | )
|Tax exempt income                                                                      |  |      | (1,771 | ) |      | (0.6    | ) |      |   | (1,911 | ) |  | (0.7    | ) |  |   | (1,831 | ) |  | (0.7    | )
|Deductible ESOP dividends                                                              |  |      | (1,097 | ) |      | (0.4    | ) |      |   | (1,074 | ) |  | (0.4    | ) |  |   | (924   | ) |  | (0.4    | )
|Dividend exclusions                                                                    |  |      | (131   | ) |      | (0.0    | ) |      |   | (119   | ) |  | (0.0    | ) |  |   | (494   | ) |  | (0.2    | )
|Other, net                                                                             |  |      | 127    |   |      | 0.0     |   |      |   | 1,453  |   |  | 0.5     |   |  |   | (542   | ) |  | (0.2    | )
|                                                                                       |  | $    | 94,669 |   |      | 33.2    | % |      | $ | 91,547 |   |  | 33.4    | % |  | $ | 85,344 |   |  | 32.7    | %



Tax (benefit) expense attributable to securities gains and losses totaled $(6,826), $1,281 and $5,099 in 2006, 2005 and 2004, respectively. For the years ended 2006, 2005, and 2004, the tax benefit associated with stock option exercises directly to paid in capital was $1,745, $2,660, and $3,175,
respectively.


At December 31,
2006, the Company had unused net operating losses and general business tax credits expiring from 2018 to 2024. Sky Financial anticipates all net operating losses and general business credits will be fully utilized.




53



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##### Table of Contents

Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except per share data)

Note 12Other Comprehensive Income (Loss)

Other comprehensive income (loss) consisted of the following:



|                                                                  |  |      |        |   |      |   |         |      |  |   |         |  
|----------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                  |  | 2006 |        |   | 2005 |   |         | 2004 | 
|Other comprehensive income (loss)                                 |  |      |        |   |      |   |         |      |  |   |         |  
|Securities available for sale:                                    |  |      |        |   |      |   |         |      |  |   |         |  
|Unrealized gains (losses) arising during period                   |  | $    | 2,882  |   |      | $ | (55,055 | )    |  | $ | (6,018  | )
|Reclassification adjustment for losses (gains) included in income |  |      | 21,184 |   |      |   | (3,662  | )    |  |   | (14,569 | )
|Cash flow hedge derivatives:                                      |  |      |        |   |      |   |         |      |  |   |         |  
|Change in fair value on cash flow hedge derivatives               |  |      | (812   | ) |      |   | 380     |      |  |   | 8,598   |  
|Amounts reclassified to income from discontinued operations       |  |      |       |   |      |   |        |      |  |   | 616     |  
|Pension liability and other                                       |  |      | 1,060  |   |      |   | (3,277  | )    |  |   |        |  
|Total                                                             |  |      | 24,314 |   |      |   | (61,614 | )    |  |   | (11,373 | )
|Tax effect                                                        |  |      | (8,510 | ) |      |   | 21,565  |      |  |   | 3,978   |  
|Total other comprehensive (loss) income                           |  | $    | 15,804 |   |      | $ | (40,049 | )    |  | $ | (7,395  | )

Accumulated other comprehensive income (loss) consisted of the following:



|                                  |  |                             |         |   |                          |   |        |                 |  |   |                                             |   |  |   |         |  
|--------------------------------- |  | --------------------------- | ------- | - | ------------------------ | - | ------ | --------------- |  | - | ------------------------------------------- | - |  | - | ------- | -
|                                  |  | SecuritiesAvailablefor Sale |         |   | PensionLiabilityAndOther |   |        | Cash FlowHedges |  |   | Accumulated OtherComprehensiveIncome (Loss) |  
|December 31, 2003                 |  | $                           | 6,662   |   |                          | $ |       |                 |  | $ | (6,204                                      | ) |  | $ | 458     |  
|Other comprehensive income (loss) |  |                             |         |   |                          |   |        |                 |  |   |                                             |   |  |   |         |  
|Pre-tax                           |  |                             | (20,587 | ) |                          |   |       |                 |  |   | 9,214                                       |   |  |   | (11,373 | )
|Tax effect                        |  |                             | 7,204   |   |                          |   |       |                 |  |   | (3,226                                      | ) |  |   | 3,978   |  
|Total                             |  |                             | (13,383 | ) |                          |   |       |                 |  |   | 5,988                                       |   |  |   | (7,395  | )
|December 31, 2004                 |  |                             | (6,721  | ) |                          |   |       |                 |  |   | (216                                        | ) |  |   | (6,937  | )
|Other comprehensive income (loss) |  |                             |         |   |                          |   |        |                 |  |   |                                             |   |  |   |         |  
|Pre-tax                           |  |                             | (58,717 | ) |                          |   | (3,277 | )               |  |   | 380                                         |   |  |   | (61,614 | )
|Tax effect                        |  |                             | 20,551  |   |                          |   | 1,147  |                 |  |   | (133                                        | ) |  |   | 21,565  |  
|Total                             |  |                             | (38,166 | ) |                          |   | (2,130 | )               |  |   | 247                                         |   |  |   | (40,049 | )
|December 31, 2005                 |  |                             | (44,887 | ) |                          |   | (2,130 | )               |  |   | 31                                          |   |  |   | (46,986 | )
|Other comprehensive income (loss) |  |                             |         |   |                          |   |        |                 |  |   |                                             |   |  |   |         |  
|Pre-tax                           |  |                             | 24,066  |   |                          |   | 1,060  |                 |  |   | (812                                        | ) |  |   | 24,314  |  
|Tax effect                        |  |                             | (8,423  | ) |                          |   | (371   | )               |  |   | 284                                         |   |  |   | (8,510  | )
|Total                             |  |                             | 15,643  |   |                          |   | 689    |                 |  |   | (528                                        | ) |  |   | 15,804  |  
|December 31, 2006                 |  | $                           | (29,244 | ) |                          | $ | (1,441 | )               |  | $ | (497                                        | ) |  | $ | (31,182 | )



54



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##### Table of Contents

Note 13Earnings Per Common Share



Basic earnings per share is computed by dividing net
income by the weighted average number of shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of shares determined for the basic computation plus the dilutive effect of potential common
shares issuable under stock options and restricted shares.


Basic and diluted earnings per share computations were as
follows:




|                                                       |  |      |         |      |   |         |  |   |        
|------------------------------------------------------ |  | ---- | ------- | ---- | - | ------- |  | - | -------
|                                                       |  | 2006 |         | 2005 |   | 2004   
|Numerator                                              |  |      |         |      |   |        
|Income from continuing operations                      |  | $    | 190,338 |      | $ | 182,191 |  | $ | 175,200
|Income from discontinued operations                    |  |      |        |      |   | 372     |  |   | 19,155 
|Net income                                             |  | $    | 190,338 |      | $ | 182,563 |  | $ | 194,355
|Denominator                                            |  |      |         |      |   |         |  |   |        
|Weighted-average common shares outstanding (basic)     |  |      | 110,107 |      |   | 106,796 |  |   | 99,461 
|Dilutive effect of stock options and restricted shares |  |      | 847     |      |   | 1,177   |  |   | 1,107  
|Weighted-average common shares outstanding (diluted)   |  |      | 110,954 |      |   | 107,973 |  |   | 100,568
|Basic Earnings Per Common Share                        |  |      |         |      |   |         |  |   |        
|Income from continuing operations                      |  | $    | 1.73    |      | $ | 1.71    |  | $ | 1.76   
|Income from discontinued operations                    |  |      |        |      |   | 0.00    |  |   | 0.19   
|Net income                                             |  | $    | 1.73    |      | $ | 1.71    |  | $ | 1.95   
|Diluted Earnings Per Common Share                      |  |      |         |      |   |         |  |   |        
|Income from continuing operations                      |  | $    | 1.72    |      | $ | 1.69    |  | $ | 1.74   
|Income from discontinued operations                    |  |      |        |      |   | 0.00    |  |   | 0.19   
|Net income                                             |  | $    | 1.72    |      | $ | 1.69    |  | $ | 1.93   

Weighted shares under option of 2,171 in 2006, 291 in 2005 and 38 in 2004 were excluded from the diluted earnings per share
calculation, as they were anti-dilutive.



---

Note 14Fair Values of Financial Instruments

The following table shows carrying values and the related estimated fair values of financial instruments
at year-end. Items that are not financial instruments are not included.



|                                                                        |  |                 |             |   |                     |   |             |                 |  |   |                     |   |  |   |             |  
|----------------------------------------------------------------------- |  | --------------- | ----------- | - | ------------------- | - | ----------- | --------------- |  | - | ------------------- | - |  | - | ----------- | -
|                                                                        |  | 2006            |             |   | 2005                |  
|                                                                        |  | CarryingAmounts |             |   | Estimated FairValue |   |             | CarryingAmounts |  |   | Estimated FairValue |  
|Financial Assets:                                                       |  |                 |             |   |                     |   |             |                 |  |   |                     |   |  |   |             |  
|Cash and due from banks                                                 |  | $               | 345,858     |   |                     | $ | 345,858     |                 |  | $ | 318,114             |   |  | $ | 318,114     |  
|Interest-bearing deposits with financial institutions                   |  |                 | 12,245      |   |                     |   | 12,245      |                 |  |   | 15,037              |   |  |   | 15,037      |  
|Federal funds sold                                                      |  |                 | 40,000      |   |                     |   | 40,000      |                 |  |   |                    |   |  |   |            |  
|Securities available for sale                                           |  |                 | 3,129,960   |   |                     |   | 3,129,960   |                 |  |   | 3,097,472           |   |  |   | 3,097,472   |  
|Loans held for sale and loans, net of the allowance for credit losses   |  |                 | 12,673,846  |   |                     |   | 12,578,959  |                 |  |   | 11,028,945          |   |  |   | 10,933,216  |  
|Interest receivable                                                     |  |                 | 87,103      |   |                     |   | 87,103      |                 |  |   | 67,910              |   |  |   | 67,910      |  
|Financial Liabilities:                                                  |  |                 |             |   |                     |   |             |                 |  |   |                     |   |  |   |             |  
|Deposits                                                                |  |                 | (13,220,653 | ) |                     |   | (13,227,861 | )               |  |   | (10,755,676         | ) |  |   | (10,738,870 | )
|Securities sold under repurchase agreements and federal funds purchased |  |                 | (978,661    | ) |                     |   | (973,751    | )               |  |   | (1,053,244          | ) |  |   | (1,048,656  | )
|Debt, FHLB advances and junior subordinated debentures                  |  |                 | (1,439,000  | ) |                     |   | (1,476,120  | )               |  |   | (2,125,382          | ) |  |   | (2,157,825  | )
|Interest payable                                                        |  |                 | (34,754     | ) |                     |   | (34,754     | )               |  |   | (28,804             | ) |  |   | (28,804     | )
|Derivative Financial Instruments:                                       |  |                 |             |   |                     |   |             |                 |  |   |                     |   |  |   |             |  
|Interest rate swaps                                                     |  |                 | (392        | ) |                     |   | (392        | )               |  |   | (2,981              | ) |  |   | (2,981      | )
|Interest rate caps                                                      |  |                 | 57          |   |                     |   | 57          |                 |  |   | 168                 |   |  |   | 168         |  



For purposes of the above disclosures of estimated fair value, the following assumptions were used: the carrying values for cash and due from banks,
interest-bearing deposits with financial institutions and federal funds sold were considered to approximate fair value; the estimated fair value for securities was based on quoted market values for the individual securities


or for equivalent securities; the estimated fair value for loans was based on estimates of the rate Sky Financial would charge for similar loans at December 31,
2006 and 2005, applied over estimated payment periods; the estimated fair value for demand and




55



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##### Table of Contents

Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except
per share data)

Note 14Fair Values of Financial Instruments (continued)



savings deposits was based on their carrying value; the estimated fair value for certificates of deposit and borrowings was based on estimates of the rate Sky Financial would pay on such obligations at December 31, 2006
and 2005, applied for the time period until maturity. The fair value of interest rate swaps and caps represents the estimated amount the company would receive or pay to terminate the agreements, considering current interest rates, as well as the
current creditworthiness of the counterparties. The capital lease obligations of $80 and $302 at December 31, 2006 and 2005 are not included in the carrying amounts or the estimated fair value. The estimated fair value of commitments was not
material. While these estimates of fair values are based on managements judgment of appropriate factors, there is no assurance that, if Sky
Financial had disposed of such items at December


31, 2006 or 2005, the estimated fair values would necessarily have been
achieved at that date, because market values may differ depending on various circumstances. The estimated fair values at December 31, 2006 and 2005 should not necessarily be considered to apply at subsequent dates. In addition, other assets and liabilities of Sky Financial that are not defined as financial instruments were excluded from the above disclosures, such as mortgage
servicing rights and life insurance contracts. In addition, non-financial instruments typically not recognized in financial statements (but which may have value) were not included in the above disclosures. These include, among other items, the
estimated earning power of core deposit accounts, the value of a trained work force, client goodwill and similar items.




---

Note 15Other Income and Other Operating Expense

The
following is a summary of other income and other operating expense:



|                                      |  |      |         |      |   |         |  |   |       
|------------------------------------- |  | ---- | ------- | ---- | - | ------- |  | - | ------
|                                      |  | 2006 |         | 2005 |   | 2004   
|Other Income                          |  |      |         |      |   |         |  |   |       
|Transaction fees                      |  | $    | 20,322  |      | $ | 16,361  |  | $ | 13,246
|Merchant income                       |  |      | 6,667   |      |   | 6,024   |  |   | 6,929 
|Income from bank-owned life insurance |  |      | 6,317   |      |   | 7,569   |  |   | 6,249 
|International fees                    |  |      | 2,529   |      |   | 2,366   |  |   | 1,829 
|Other                                 |  |      | 27,633  |      |   | 13,749  |  |   | 13,686
|Total other income                    |  | $    | 63,468  |      | $ | 46,069  |  | $ | 41,939
|Other Operating Expense               |  |      |         |      |   |         |  |   |       
|Marketing                             |  | $    | 13,623  |      | $ | 12,818  |  | $ | 11,269
|Legal and other professional fees     |  |      | 12,245  |      |   | 11,644  |  |   | 9,426 
|Loan costs                            |  |      | 8,672   |      |   | 8,837   |  |   | 7,827 
|Telephone                             |  |      | 8,360   |      |   | 8,401   |  |   | 7,608 
|Printing and supplies                 |  |      | 6,092   |      |   | 6,734   |  |   | 6,054 
|State franchise taxes                 |  |      | 1,300   |      |   | 3,981   |  |   | 3,255 
|Other                                 |  |      | 50,044  |      |   | 48,017  |  |   | 42,857
|Total other operating expense         |  | $    | 100,336 |      | $ | 100,432 |  | $ | 88,296



---

Note 16Merger, Integration and Restructuring Expenses



In 2006, Sky Financial recorded merger, integration and
restructuring charges totaling $6,575 ($4,274 after-tax or $.04 per diluted share). Merger, integration and restructuring charges of $5,555 ($3,611 after-tax or $.03 per diluted share) related to the acquisition of Union Federal Bank. Included were
data processing and conversion costs of $3,104, severance and other related employee costs of $703, professional fees and other costs of $1,708 and lease and contract termination costs of $40. Costs of $816 ($530 after-tax) were related to the Wells
River acquisition. These charges consisted of data processing and conversion expense of $667, severance and other related employee costs of $117 and professional fees and other costs of $32. Costs of $102 ($ 66 after-tax) were related to
acquisitions by Sky Insurance. These charges consisted of data processing and conversion costs of $65 and professional fees and other costs of $37. Costs of $102 ($67 after-tax) were also incurred related to prior year acquisitions. During 2006, a total of 190 positions were eliminated as part of integrating the acquisitions, which involved


172 positions from Union Federal Bank and 18 positions from Wells River. Of this total, 72 employees from Union Federal Bank and seven from Wells River accepted
outside employment. The remaining 100 employees from Union Federal Bank and 11 from Wells River Bancorp were involuntarily terminated with severance. In 2005, Sky Financial recorded merger, integration and restructuring charges totaling $1,771 ($1,151 after-tax or $.01 per diluted share). Merger, integration and restructuring charges of
$1,168 ($759 after-tax or $.01 per diluted share) related to the acquisition of Belmont Bancorp. Included were data processing and conversion costs of $222, severance and other related employee costs of $401, professional fees and other costs of
$463 and lease and contract termination costs of $82. Costs of $224 ($146 after-tax) were related to the Falls Bank acquisition. These charges consisted of data processing and conversion expense of $45 and professional fees and other costs of $179.
In addition to the above costs for acquisitions, Sky Financial recorded $379 ($246 after-tax) for professional and other costs related to the pending acquisition of Union Federal.


56



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##### Table of Contents

Note 16Merger, Integration and Restructuring Expenses (continued)



During 2005, a total of 73 positions were
eliminated as part of integrating the acquisitions, which involved 66 positions from Belmont Bancorp and seven positions from Falls Bank. Of this total, two Falls Bank employees accepted transfers to other positions. Additionally, 16 employees from
Belmont Bancorp and two from Falls Bank accepted outside employment. The remaining 50 employees from Belmont Bancorp and three from Falls Bank were involuntarily terminated with severance. In 2004, Sky Financial recorded merger, integration and restructuring charges totaling $4,542 ($2,952 after-tax or $.03 per diluted share). Merger, integration and
restructuring charges of $3,597 ($2,338 after-tax or $.02 per diluted share) related to the acquisition of Second Bancorp. Included were data processing and conversion costs of $669, severance and other related employee costs of $839, professional
fees and other costs of $1,953 and lease and contract termination costs of $136. Costs of $786 ($511 after-tax or $.01 per diluted share) were related to the Prospect Bancshares acquisition. These


charges consisted of severance and other related employee costs of $89, data processing and conversion expense of $203, and professional fees and other costs of $494.
The remaining $159 ($103 after-tax or $.00 per diluted share) of costs are primarily related to the divestiture of Sky Financial Solutions. During
2004, a total of 323 positions were eliminated as part of acquisitions, which involved 304 positions from Second Bancorp and 19 positions from Prospect Bancshares. Of this total, 139 employees accepted transfers to other positions, which consisted
of 125 from Second Bancorp and 14 from Prospect Bancshares. Additionally, 40 employees from Second Bancorp and three from Prospect Bancshares accepted outside employment. The remaining 139 employees from Second Bancorp and two from Prospect
Bancshares were involuntarily terminated with severance. The following is a summary of category activity in the merger, integration and restructuring
liabilities for 2006 and 2005.




|                                  |  |                                   |   |  |                 |   |  |                           |   |  |                               |   |  |           |  
|--------------------------------- |  | --------------------------------- | - |  | --------------- | - |  | ------------------------- | - |  | ----------------------------- | - |  | --------- | -
|                                  |  | Employee Severanceand Termination |   |  | ConversionCosts |   |  | Lease/ContractTermination |   |  | Professional Fees/Other Costs |   |  | Total     |  
|Balance as of January 1, 2005     |  | $  2,504                          |   |  | $              |   |  | $    690                  |   |  | $    130                      |   |  | $   3,324 |  
|Accruals charged to expense       |  | 401                               |   |  | 267             |   |  | 82                        |   |  | 1,021                         |   |  | 1,771     |  
|Accruals from purchase accounting |  | 1,852                             |   |  |                |   |  | 835                       |   |  | 15                            |   |  | 2,702     |  
|Cash payments                     |  | (3,810                            | ) |  | (225            | ) |  | (419                      | ) |  | (1,034                        | ) |  | (5,488    | )
|Balance as of December 31, 2005   |  | 947                               |   |  | 42              |   |  | 1,188                     |   |  | 132                           |   |  | 2,309     |  
|Accruals charged to expense       |  | 819                               |   |  | 3,854           |   |  | 40                        |   |  | 1,862                         |   |  | 6,575     |  
|Accruals from purchase accounting |  | 5,285                             |   |  |                |   |  | 3,916                     |   |  |                              |   |  | 9,201     |  
|Cash payments                     |  | (5,365                            | ) |  | (3,795          | ) |  | (4,481                    | ) |  | (1,994                        | ) |  | (15,635   | )
|Balance as of December 31, 2006   |  | $  1,686                          |   |  | $    101        |   |  | $    663                  |   |  | $                            |   |  | $   2,450 |  

Sky Financial expects to pay a majority of the

remainder of the accrued costs over the next one to two

years.



---

Note 17Employee Benefits The primary retirement plan of Sky is the Sky Financial Group
Inc., Profit Sharing, 401(K) and ESOP Plan. Sky Financial also has a non-qualified supplemental retirement plan for certain individuals. The Profit
Sharing portion of the plan provides for contributions by Sky Financial as determined on a year-by-year basis. These contributions were 4%, 4.5% and 4% of eligible employee compensation in 2006, 2005 and 2004, respectively. Under the 401(k) portion
of the plan, employees may contribute a percentage of their eligible compensation with a company match equal to 100% of the first 3% of the participants deferral contribution and 50% of the next 2% of the participants deferral
contribution to a maximum match of 4%. Employees may contribute to this plan upon employment. Employer matching contributions commence immediately upon entering the
401(k) and are 100% vested at all times. Expenses related to this portion of the plan were $5,216, $5,863 and $3,981 in 2006, 2005 and 2004, respectively. The ESOP (Employee Stock Ownership Plan) portion of the plan provides for an annual employer
contribution equal to 3% of eligible employees annual compensation. Expense related to this portion of the plan were $3,912, $3,909, and $2,986 in 2006, 2005 and 2004. Total shares of Sky Financial common stock held by the Profit Sharing, 401(K) and Employee Stock Ownership Plan as of December 31, 2006 were 3,343.


Supplemental Retirement Plan This plan replaces retirement benefits not allowed under Sky Financials qualified retirement plans because of eligible compensation limitations under current tax law. Sky Financials contribution under the plan is
determined by multiplying the excess of employees eligible compensation over the IRS established limitation by the contribution level established by the Board of Directors for Sky Financials qualified plans. The contribution rates were 11%, 11.5% and 11% for all three portions of the retirement plan in 2006, 2005 and 2004, respectively. Expenses related to this plan
were $197, $243 and $306 in 2006, 2005 and 2004. Frozen Pension Plans In
connection with Sky Financials acquisition of Second National and Three Rivers, Sky Financial sponsors two funded, defined benefit pension plans for eligible employees who are 21 years of age with one or more years of service. The Second
National plan was frozen during the fourth quarter of 2004. Because this was contemplated in the Second National acquisition, a curtailment gain was considered in arriving at the benefit obligation and prepaid pension cost recorded at the
acquisition date. Sky Financial expects to make contributions of $179 to the plan in 2007. Benefits paid to retirees are based on age at retirement, years of credited service and average compensation. The Three Rivers plan was frozen during
the fourth quarter of 2002. Sky Financial does not expect to make any contributions to the plan in 2007.




57



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##### Table of Contents

Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except
per share data)

Note 17Employee Benefits (continued)



The following table sets forth the benefit
obligation, fair value of plan assets and the funded status of Sky Financials plans; amounts recognized in Sky Financials


financial statements; and the principal weighted average assumptions used at December 31, 2006 and 2005:




|                                                                                          |  |      |        |   |      |   |        |      |  |   |        |  
|----------------------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                          |  |      |        |   | 2006 |   |        | 2005 | 
|Change in Benefit Obligation                                                              |  |      |        |   |      |   |        |      |  |   |        |  
|Benefit obligation at beginning of period                                                 |  |      |        |   |      | $ | 26,561 |      |  | $ | 25,100 |  
|Service cost                                                                              |  |      |        |   |      |   | 89     |      |  |   | 123    |  
|Interest cost                                                                             |  |      |        |   |      |   | 1,425  |      |  |   | 1,440  |  
|Benefits paid                                                                             |  |      |        |   |      |   | (1,827 | )    |  |   | (1,353 | )
|Expected expenses                                                                         |  |      |        |   |      |   | (89    | )    |  |   | (123   | )
|Actuarial (gain) loss                                                                     |  |      |        |   |      |   | (472   | )    |  |   | 1,374  |  
|Benefit obligation at end of period                                                       |  |      |        |   |      | $ | 25,687 |      |  | $ | 26,561 |  
|Change in Plan Assets                                                                     |  |      |        |   |      |   |        |      |  |   |        |  
|Fair value of plan assets at beginning of period                                          |  |      |        |   |      | $ | 20,718 |      |  | $ | 21,106 |  
|Actual return on plan assets, net of expenses                                             |  |      |        |   |      |   | 2,339  |      |  |   | 909    |  
|Employer contributions                                                                    |  |      |        |   |      |   | 179    |      |  |   | 179    |  
|Benefits paid                                                                             |  |      |        |   |      |   | (1,827 | )    |  |   | (1,353 | )
|Expected expenses                                                                         |  |      |        |   |      |   | (89    | )    |  |   | (123   | )
|Fair value of plan assets at end of period                                                |  |      |        |   |      | $ | 21,320 |      |  | $ | 20,718 |  
|Funded Status                                                                             |  |      |        |   |      |   |        |      |  |   |        |  
|Funded status at the end of year                                                          |  |      |        |   |      | $ | (4,367 | )    |  | $ | (5,843 | )
|Amounts recognized in the Consolidated Balance Sheet consist of accrued benefit liability |  |      |        |   |      | $ | (4,367 | )    |  | $ | (5,843 | )
|                                                                                          |  |      |       
|Amounts recognized in accumulated other comprehensive loss as of December 31 follow:      |  |      |        |   |      |   |        |      |  |   |        |  
|                                                                                          |  |      |        |   | 2006 |   |        | 2005 | 
|Prior service cost                                                                        |  |      |        |   |      | $ |       |      |  | $ |       |  
|Transition obligation                                                                     |  |      |        |   |      |   |       |      |  |   |       |  
|Net loss                                                                                  |  |      |        |   |      |   | (2,633 | )    |  |   | (3,957 | )
|Total                                                                                     |  |      |        |   |      | $ | (2,633 | )    |  | $ | (3,957 | )
|                                                                                          |  |      |        |   |      |   |        |      |  |   |        |  
|                                                                                          |  | 2006 |        |   | 2005 |   |        | 2004 | 
|Components of Net Periodic Benefit Cost                                                   |  |      |        |   |      |   |        |      |  |   |        |  
|Service cost                                                                              |  | $    | 89     |   |      | $ | 123    |      |  | $ | 508    |  
|Interest cost                                                                             |  |      | 1,425  |   |      |   | 1,440  |      |  |   | 864    |  
|Expected return on plan assets                                                            |  |      | (1,721 | ) |      |   | (1,797 | )    |  |   | (1,105 | )
|Recognized actuarial loss (gain)                                                          |  |      | 60     |   |      |   | 41     |      |  |   | (15    | )
|Net periodic benefit cost                                                                 |  | $    | (147   | ) |      | $ | (193   | )    |  | $ | 252    |  
|Weighted-average assumptions at December 31                                               |  |      |        |   |      |   |        |      |  |   |        |  
|Discount rate                                                                             |  |      | 5.60   | % |      |   | 5.60   | %    |  |   | 5.90   | %
|Expected return on assets                                                                 |  |      | 8.20   |   |      |   | 8.19   |      |  |   | 8.00   |  



During 2007, Sky Financial expects to reclassify $46 of net loss included as a component of accumulated other comprehensive income into net periodic benefit costs. The accumulated benefit obligation for all plans was $25,687 and exceeded the fair value of plan assets for all years presented. Sky Financial expects to make the following benefit payments, which reflect expected future service:  Year

Pension Benefits2007

$
1,0952008


1,1802009


1,1872010


1,2062011


1,2862012 through 2016


8,535


The expected long-term rate of return on the plans assets reflects the average rate of earnings expected on the funds invested by each plan to provide for plan benefits. Management considers the long-term historical returns of the
assets within the portfolio and adjusts the rate, as necessary, for expected future returns on the assets in the plans in determining the rate. The
plans asset allocations at December 31, 2006 by asset category are as follows:  TargetAllocation


Percent of PensionPlan AssetsEquity securities

60
%

70
%Debt securities

40


26Cash




4Total

100
%

100
%




58



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##### Table of Contents

Note 17Employee Benefits (continued)



Managements investment allocation is
managed to provide an acceptable level of return to fund future benefit payments as well as provide liquidity to pay current benefits while minimizing the overall market risk to the plans. Management believes that its current investment allocation meets these goals and does not anticipate significant changes to the investment allocation in the near
future. Management has provided the external investment managers with general guidelines for them to make decisions regarding the nature and timing of investment decisions. The investment policy does not allow for significant changes in previously
approved investments or in the use of derivatives in the investment strategy. Other Plans of Merged Affiliates Sky Financial, as part of its overall employee benefits design, settles plans of merged affiliates through consolidation into existing plans or termination of the
plan. Perpetual Savings Bank participated in a multiple employer plan. On December 31, 2006, Sky Financial terminated its participation in the multiple employer plan. Perpetual Savings Banks multiple employer defined benefit plan which
was frozen as of February 1, 2005 continues to be frozen as of the acquisition date. On January 1, 2007 Sky merged the Waterfield Group Savings and Investment Plan into the Sky Financial Group Inc., Profit Sharing, 401(k) and ESOP Plan.


On January 1, 2006 the following plans of acquired entities were merged into the Sky Financial Group Inc., Profit Sharing, 401(k) and ESOP Plan;  n
Belmont National Bank 401(k) Profit Sharing Plan n
Benefits Design Agency of Ohio 401(k) Retirement Savings Plan n
Becker-McDowell Agency, Inc. 401(k) Plan n
Steiner Insurance Agency, Inc. 401(k) Employee Savings Plan n
Cuyahoga Falls Bank Savings Bank 401(k) Profit Sharing Plan Sky sponsored
two 401(k) plans as the result of its 2004 acquisitions of Second National Bank and Prospect Bank. These plans were merged into Skys Profit Sharing, 401(k) and ESOP Plan in January of 2005. Sky also sponsored three 401(k) plans as a result of
prior acquisitions of Pennsylvania Capital Bank, Eastern Ohio Benefits and Meyer and Eckenrode. Eastern Ohio Benefits and Meyer and Eckenrode were merged into Skys Profit Sharing, 401(k) and ESOP Plan in January of 2005. Pennsylvania Capital
Bank 401(k) was terminated in 2006. Sky Financial pays health insurance premiums for certain employees after retirement. Sky Financial accrues the
costs of retirees health and other post-retirement benefits during the working career of active employees. The expense and liability under this plan are not material in any period presented.




---

Note 18Stock Options



Options to purchase Sky Financials stock have been granted to directors, officers and employees under various stock option plans. The Sky Financial Group, Inc. 2002 Stock Option and Stock Appreciation Rights Plan was
approved by Sky Financials shareholders in 2002. Under the 2002 plan, options may be granted to purchase a maximum of 2.0 million common shares, or 2.5% of the number of issued and outstanding common shares at the time of adoption of the
plan, adjusted for all subsequent stock dividends, splits and stock-for-stock acquisitions. The Sky Financial Group, Inc. 1998 Stock Option Plan for
Employees and the Amended and Restated Sky Financial Group, Inc. 1998 Stock Option Plan for Directors were approved by Sky Financials shareholders in 1998. Under these plans, options may be granted to purchase a maximum of 6.5 million
common shares, or 7.5% of the number of issued and outstanding common shares at the time of the adoption of the plans, adjusted for all subsequent stock dividends, splits and stock-for-stock acquisitions.


Under both the 2002 and 1998 plans, options expire 10 years after the date of grant and are issued at an option price no less than the market price of Sky
Financials stock on the date of grant. Certain individuals, including directors, may also elect to receive options, determined under a formula, in lieu of a portion of their salary or director fees, as applicable. Options granted to directors
are fully vested and immediately exercisable at the time of grant. Options granted to officers and other key employees are generally exercisable at 40% after two years and in annual 20% increments thereafter, except for options received in lieu of
salary, which are immediately exercisable. The Sky Financial Group, Inc. 2004 Restricted Stock Plan was approved by Sky Financials shareholders
in 2004. Under this plan, a total of 800,000 of authorized, but unissued shares of common stock shall be available. Compensation expense for restricted share awards is recognized ratably over the period of service, usually the restricted period,
based upon the fair value of the stock on the date of grant.


A summary of the stock option activity in the plans is as follows:



|                                                           |  |        |   |      |                              |       |        |       |   |                              |   |        |  |       |                              |  |   |      
|---------------------------------------------------------- |  | ------ | - | ---- | ---------------------------- | ----- | ------ | ----- | - | ---------------------------- | - | ------ |  | ----- | ---------------------------- |  | - | -----
|                                                           |  | 2006   |   | 2005 |                              | 2004 
|                                                           |  | Shares |   |      | WeightedAverageExercisePrice |       | Shares |       |   | WeightedAverageExercisePrice |   | Shares |  |       | WeightedAverageExercisePrice
|Outstanding at beginning of year                           |  | 6,972  |   |      | $                            | 21.48 |        | 7,131 |   |                              | $ | 20.45  |  | 6,802 |                              |  | $ | 18.82
|Granted                                                    |  | 1,026  |   |      |                              | 25.74 |        | 764   |   |                              |   | 27.84  |  | 1,344 |                              |  |   | 25.45
|Exercised                                                  |  | (745   | ) |      |                              | 18.88 |        | (762  | ) |                              |   | 17.70  |  | (907  | )                            |  |   | 15.52
|Forfeited                                                  |  | (111   | ) |      |                              | 24.89 |        | (161  | ) |                              |   | 24.37  |  | (108  | )                            |  |   | 21.52
|Outstanding at end of year                                 |  | 7,132  |   |      |                              | 22.30 |        | 6,972 |   |                              |   | 21.48  |  | 7,131 |                              |  |   | 20.45
|Options exercisable at end of year                         |  | 5,356  |   |      |                              | 21.30 |        | 4,963 |   |                              |   | 20.38  |  | 4,870 |                              |  |   | 19.78
|Weighted average fair value of options granted during year |  |        |   |      | $                            | 4.54  |        |       |   |                              | $ | 5.24   |  |       |                              |  | $ | 4.80 



The total intrinsic value of options exercised during the years ended December 31, 2006, 2005, and 2004, was $5,590, $7,805, and $9,920, respectively.


The total fair value of shares vested was $4,604 in 2006, $3,413 in 2005, and $4,382 in 2004.




59



---

##### Table of Contents

Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except per share data)

Note 18Stock Options (continued)

Options outstanding at year-end 2006 were as follows:



|                          |  |             |        |                                                   |      |             |   |                                |  |                                                   |       |  |     
|------------------------- |  | ----------- | ------ | ------------------------------------------------- | ---- | ----------- | - | ------------------------------ |  | ------------------------------------------------- | ----- |  | ----
|                          |  | Outstanding |        |                                                   |      | Exercisable
|Range of Exercise Prices  |  | Number      |        | Weighted AverageRemaining ContractualLife (Years) |      | Number      |   | Weighted AverageExercise Price |  | Weighted AverageRemaining ContractualLife (Years)
|$10.74 to $ 15.85         |  |             | 182    |                                                   | 3.44 |             |   | 182                            |  | $                                                 | 15.36 |  | 3.44
|$15.85 to $ 19.89         |  |             | 2,311  |                                                   | 4.63 |             |   | 2,069                          |  |                                                   | 18.04 |  | 4.45
|$19.90 to $ 25.00         |  |             | 2,064  |                                                   | 4.77 |             |   | 1,910                          |  |                                                   | 22.40 |  | 4.63
|$25.01 to $ 30.00         |  |             | 2,575  |                                                   | 7.80 |             |   | 1,195                          |  |                                                   | 26.07 |  | 7.34
|Outstanding at year-end   |  |             | 7,132  |                                                   | 5.78 |             |   | 5,356                          |  | $                                                 | 21.30 |  | 5.12
|Aggregate intrinsic value |  | $           | 44,485 |                                                   |      |             | $ | 38,794                         |  |                                                   |       |  |     



A summary of Sky Financials nonvested restricted shares as of December 31, 2006 and 2005 and changes during the years ended December 31, 2006 and
2005 were as follows:  Shares


WeightedAverageGrantDate FairValueNonvested at January 1, 2005




$
Granted

133



27.80Vested

(2
)


27.80Forfeited

(5
)


27.80Nonvested at December 31, 2005

126


$
27.80Granted

157



26.35Vested

(6
)


27.19Forfeited

(8
)


27.04Nonvested at December 31, 2006

269


$
26.99


As of December 31, 2006, there was $8,976 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the plans. That cost
is expected to be recognized over a weighted-average period of 2.1 years. Sky Financial maintains a Stock Appreciation Rights (SAR) plan under which
SARs were granted in tandem with stock options until 1998. Expense (income) related to the SARs was $(143) in 2006, $(40) in 2005 and $72 in 2004.




---

Note 19Other Financial Instruments



Credit Commitments and Letters of Credit  Sky Financial is a party
to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its clients located primarily within its local business areas. These instruments include commitments to extend credit, standby
letters of credit and international commercial letters of credit. Sky Financials exposure to credit loss in the event of non-performance by the
other party to the financial instrument for commitments to extend credit, standby letters of credit and letters of credit is represented by the contractual amount of those instruments. Sky Financial uses the same credit policies in making
commitments and conditional obligations as it does in extending loans to clients. Financial instruments whose contract amounts represent credit risk at
December 31 are presented below:  2006

2005Commitments to extend credit

$
3,904,904

$
3,498,243Standby letters of credit


268,988


299,427Letters of credit


863


1,704 The majority of the unfunded commitments at December 31, 2006 and 2005 are variable rate commitments,
with approximately 21% or $889,000 and 20% or $755,000 having fixed rates in 2006 and 2005, respectively.


Commitments to extend credit are agreements to lend to a
client as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates ranging from one to five years, variable interest rates tied to the prime rate and U.S. Treasury bill rates and
may require payment of a fee. Because many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Standby letters of credit are conditional commitments issued by Sky Financial to guarantee the performance of a client to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements, including bond financing and similar transactions. The expiration date of substantially all standby letters of credit extend for a period ranging from thirty days to seven years. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending
loan facilities to clients. Sky Financial holds marketable securities, certificates of deposits, real estate, inventory and equipment as collateral supporting those commitments for which collateral is deemed necessary. Letters of credit are instruments used to facilitate trade, most commonly international trade, by substituting Sky Financials credit for that of a commercial
importing company. The terms are generally one to three months. The letters of credit are primarily unsecured.




60



---

##### Table of Contents

Note 20Mortgage Banking Activities



Sky Financial conducts mortgage banking operations through
its banking subsidiary. The primary activity relates to the origination and sale of fixed and variable rate residential mortgages in the secondary market. Sky Financial normally retains the servicing of the loans it sells. Loans are primarily
originated in Sky Financials community banking market areas of Ohio, Pennsylvania, Michigan, Indiana and West Virginia.


Mortgage banking income, a component of non-interest
income, includes gain on sales of loans held for sale during 2006, 2005 and 2004 of $18,531, $22,246 and $25,572, respectively. The following table
summarizes information relating to Sky Financials mortgage banking activity as of December 31:




|                                                                  |  |      |           |   |      |   |           |  
|----------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                                                  |  | 2006 |           |   | 2005 |  
|Amounts held in agency accounts                                   |  | $    | 10,824    |   |      | $ | 10,316    |  
|Amounts held in escrow accounts                                   |  |      | 40,937    |   |      |   | 38,337    |  
|Mortgage banking receivables for advanced funds                   |  |      | 4,136     |   |      |   | 4,711     |  
|Unpaid mortgage loan principal for loans serviced for investors   |  |      | 6,192,499 |   |      |   | 6,142,027 |  
|Mortgage servicing rights, net of accumulated amortization        |  | $    | 35,330    |   |      | $ | 37,651    |  
|Allowance for impairment of capitalized mortgage servicing rights |  |      | (27       | ) |      |   | (7        | )
|Net mortgage servicing rights                                     |  | $    | 35,303    |   |      | $ | 37,644    |  



In 2006, Sky Financial sold certain servicing rights on mortgages that had an outstanding principal balance of $65,616 and realized no net gain or loss on the sale.
In 2005, Sky Financial sold certain servicing rights on mortgages that had an outstanding principal balance of $25,599 and realized a net gain of approximately $22 on the sale. In 2004, Sky Financial sold certain servicing rights on mortgages that
had an outstanding principal balance of $388,398 with a net gain of $1,020. At December 31, 2006, Sky Financial had firm commitments for the sale of approximately $42,317 of mortgage loans. The fair value of these commitments is not material. Mortgage Servicing Rights:  2006


2005Balance at beginning of year

$
37,644


$
39,654Originations


8,439



10,509Acquired in acquisitions


226



62Amortization


(10,986
)


(13,600
)Impairment (charges) recoveries


(20
)


1,019Carrying value at end of year

$
35,303


$
37,644Fair value at end of year

$
60,262


$
58,679Impairment Reserve:2006


2005Balance at beginning of year

$
7


$
1,026Impairment charges (recoveries)


20



(1,019
)Balance at end of year

$
27


$
7


The key economic assumptions used to estimate the value of the mortgage service rights at December 31, 2006 and 2005 are presented in the table that follows. A
sensitivity analysis of the current fair value to immediate 10% and 20% adverse changes in those assumptions as of December 31, 2006 is also presented. These sensitivities are hypothetical. Changes in fair value based on a 10% variation in
assumptions generally cannot be extrapolated because the relationship of the change in the assumption to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of the mortgage service
rights is calculated independently without changing any other assumption. In reality, changes in one factor may result in changes in another (for example, changes in mortgage interest rates, which drive changes in prepayment rate estimates, could
result in changes in the discount rates), which might magnify or counteract the sensitivities.  2006


2005Weighted-average constant prepayment rate


16.88
%

17.66
%Weighted-average life (in years)


6.4


6.3Weighted-average discount rate


10.22
%

11.00
%Prepayment rate:Decline in fair value from 10% adverse change

$
2,796Decline in fair value from 20% adverse change


5,443Discount rate:Decline in fair value from 10% adverse change


2,103Decline in fair value from 20% adverse change


4,119




61



---

##### Table of Contents

Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except per share data)

Note 21Regulatory Matters

Capital Maintenance Requirements



Sky Financial and Sky Bank must observe capital guidelines
established by federal and state regulatory authorities. Failure to meet specified minimum capital requirements can result in certain mandatory actions by primary regulators of Sky Financial and Sky Bank that could have a material effect on Sky
Financials financial condition or results of operations. Under capital adequacy guidelines, Sky Financial and Sky Bank must meet specific quantitative measures of their assets, liabilities and certain off-balance-sheet items as determined
under regulatory accounting practices. Sky Financials and Sky Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Management believes,
as of December 31, 2006, that Sky Financial and Sky Bank meet all capital adequacy requirements to which they are subject.


Sky Financial and Sky Bank have been notified by their
respective regulators that, as of the most recent regulatory examinations, each is regarded as well-capitalized under the regulatory framework for prompt corrective action. Such determinations have been made evaluating Sky Financial and Sky Bank
under Tier 1, total capital and leverage ratios. There are no conditions or events since these notifications that management believes have changed any of the well-capitalized categorizations of Sky Financial and Sky Bank. Sky Financial and Sky Banks capital ratios are presented in the following table:




|                                       |  |        |           |       |                                              |   |        |                                                                        |           |  |     |        |  |       |           |  |      |  
|-------------------------------------- |  | ------ | --------- | ----- | -------------------------------------------- | - | ------ | ---------------------------------------------------------------------- | --------- |  | --- | ------ |  | ----- | --------- |  | ---- | -
|                                       |  | Actual |           |       | Minimum Requiredfor Capital AdequacyPurposes |   |        | Required to beWell-CapitalizedUnder PromptCorrective ActionRegulations |          
|                                       |  | Amount |           | Ratio |                                              |   | Amount |                                                                        | Ratio     |  |     | Amount |  | Ratio |          
|December 31, 2006                      |  |        |           |       |                                              |   |        |                                                                        |           |  |     |        |  |       |           |  |      |  
|Total capital to risk-weighted assets  |  |        |           |       |                                              |   |        |                                                                        |           |  |     |        |  |       |           |  |      |  
|Sky Financial                          |  | $      | 1,728,756 |       | 12.1                                         | % |        | $                                                                      | 1,145,890 |  | 8.0 | %      |  | $     | 1,432,362 |  | 10.0 | %
|Sky Bank                               |  |        | 1,674,968 |       | 12.0                                         |   |        |                                                                        | 1,121,830 |  | 8.0 |        |  |       | 1,401,038 |  | 10.0 |  
|Tier 1 capital to risk-weighted assets |  |        |           |       |                                              |   |        |                                                                        |           |  |     |        |  |       |           |  |      |  
|Sky Financial                          |  | $      | 1,430,069 |       | 10.0                                         | % |        | $                                                                      | 572,945   |  | 4.0 | %      |  | $     | 859,417   |  | 6.0  | %
|Sky Bank                               |  |        | 1,432,087 |       | 10.2                                         |   |        |                                                                        | 560,415   |  | 4.0 |        |  |       | 840,623   |  | 6.0  |  
|Tier 1 capital to average assets       |  |        |           |       |                                              |   |        |                                                                        |           |  |     |        |  |       |           |  |      |  
|Sky Financial                          |  | $      | 1,430,069 |       | 8.5                                          | % |        | $                                                                      | 674,074   |  | 4.0 | %      |  | $     | 842,592   |  | 5.0  | %
|Sky Bank                               |  |        | 1,432,087 |       | 8.7                                          |   |        |                                                                        | 655,936   |  | 4.0 |        |  |       | 819,920   |  | 5.0  |  
|December 31, 2005                      |  |        |           |       |                                              |   |        |                                                                        |           |  |     |        |  |       |           |  |      |  
|Total capital to risk-weighted assets  |  |        |           |       |                                              |   |        |                                                                        |           |  |     |        |  |       |           |  |      |  
|Sky Financial                          |  | $      | 1,461,147 |       | 11.5                                         | % |        | $                                                                      | 1,013,831 |  | 8.0 | %      |  | $     | 1,267,289 |  | 10.0 | %
|Sky Bank                               |  |        | 1,376,814 |       | 11.2                                         |   |        |                                                                        | 987,953   |  | 8.0 |        |  |       | 1,234,942 |  | 10.0 |  
|Tier 1 capital to risk-weighted assets |  |        |           |       |                                              |   |        |                                                                        |           |  |     |        |  |       |           |  |      |  
|Sky Financial                          |  | $      | 1,181,251 |       | 9.3                                          | % |        | $                                                                      | 506,916   |  | 4.0 | %      |  | $     | 760,374   |  | 6.0  | %
|Sky Bank                               |  |        | 1,160,318 |       | 9.4                                          |   |        |                                                                        | 493,977   |  | 4.0 |        |  |       | 740,965   |  | 6.0  |  
|Tier 1 capital to average assets       |  |        |           |       |                                              |   |        |                                                                        |           |  |     |        |  |       |           |  |      |  
|Sky Financial                          |  | $      | 1,181,251 |       | 8.0                                          | % |        | $                                                                      | 593,486   |  | 4.0 | %      |  | $     | 741,857   |  | 5.0  | %
|Sky Bank                               |  |        | 1,160,318 |       | 7.9                                          |   |        |                                                                        | 587,832   |  | 4.0 |        |  |       | 734,790   |  | 5.0  |  

Restrictions on Subsidiary Dividends Dividends paid by Sky Financial are mainly provided for by dividends from its subsidiaries. However, certain
restrictions exist regarding the ability of Sky Bank to transfer funds to Sky Financial in the form of cash dividends, loans or advances.


Regulatory approval is required in order to pay dividends
in excess of Sky Banks earnings retained for the current year plus retained net profits since January 1, 2002. As of December 31, 2006, $179,388 was available for distribution to Sky Financial as dividends without prior regulatory
approval.




---

Note 22Line of Business Reporting



Sky Financial manages and operates two major lines of business: community banking and financial service affiliates. Community banking includes lending and related services to
businesses and consumers, mortgage banking and deposit-gathering. Other financial services consist of non-banking companies currently engaged in trust and wealth management, insurance and other financial-related services.


The reported line of business results reflect the
underlying operating performance within the business units. Parent and Other is comprised of the parent company and several smaller business units. It includes the net funding cost of the parent company and intercompany eliminations. Expenses for
centrally-provided services and support are allocated based principally upon estimated usage of services. All merger, integration and restructuring charges and other charges and gains that management does not consider to be reflective of ongoing
operations or expected to recur are included in parent and other. Substantially all of Sky Financials assets are part of the community banking line of business.




62



---

##### Table of Contents

Note 22Line of Business Reporting

Selected segment information is included in the following table:



|                                                             |  |                  |            |   |                            |   |         |                 |  |   |                   |   |  |   |           
|------------------------------------------------------------ |  | ---------------- | ---------- | - | -------------------------- | - | ------- | --------------- |  | - | ----------------- | - |  | - | ----------
|                                                             |  | CommunityBanking |            |   | FinancialServiceAffiliates |   |         | Parent andOther |  |   | ConsolidatedTotal
|2006                                                         |  |                  |            |   |                            |   |         |                 |  |   |                   |   |  |   |           
|Net interest income                                          |  | $                | 558,529    |   |                            | $ | 495     |                 |  | $ | (17,478           | ) |  | $ | 541,546   
|Provision for credit losses                                  |  |                  | 36,854     |   |                            |   |        |                 |  |   |                  |   |  |   | 36,854    
|Net interest income after provision                          |  |                  | 521,675    |   |                            |   | 495     |                 |  |   | (17,478           | ) |  |   | 504,692   
|Non-interest income                                          |  |                  | 149,515    |   |                            |   | 85,078  |                 |  |   | (15,723           | ) |  |   | 218,870   
|Non-interest expense                                         |  |                  | 360,201    |   |                            |   | 65,521  |                 |  |   | 12,833            |   |  |   | 438,555   
|Income (loss) before income taxes                            |  |                  | 310,989    |   |                            |   | 20,052  |                 |  |   | (46,034           | ) |  |   | 285,007   
|Income tax expense (benefit)                                 |  |                  | 104,910    |   |                            |   | 8,793   |                 |  |   | (19,034           | ) |  |   | 94,669    
|Net income (loss)(Note 1)                                    |  | $                | 206,079    |   |                            | $ | 11,259  |                 |  | $ | (27,000           | ) |  | $ | 190,338   
|Intersegment revenues (expense)                              |  | $                | (26,102    | ) |                            | $ | (2,845  | )               |  | $ | 28,947            |   |  | $ |          
|Average assets                                               |  | $                | 16,000,643 |   |                            | $ | 103,129 |                 |  | $ | 89,018            |   |  | $ | 16,192,790
|Depreciation and amortization                                |  | $                | 33,179     |   |                            | $ | 1,666   |                 |  | $ | 615               |   |  | $ | 35,460    
|2005                                                         |  |                  |            |   |                            |   |         |                 |  |   |                   |   |  |   |           
|Net interest income                                          |  | $                | 522,011    |   |                            | $ | 400     |                 |  | $ | (7,759            | ) |  | $ | 514,652   
|Provision for credit losses                                  |  |                  | 52,249     |   |                            |   |        |                 |  |   |                  |   |  |   | 52,249    
|Net interest income after provision                          |  |                  | 469,762    |   |                            |   | 400     |                 |  |   | (7,759            | ) |  |   | 462,403   
|Non-interest income                                          |  |                  | 134,583    |   |                            |   | 75,750  |                 |  |   | 1,049             |   |  |   | 211,382   
|Non-interest expense                                         |  |                  | 335,539    |   |                            |   | 58,543  |                 |  |   | 5,965             |   |  |   | 400,047   
|Income (loss) from continuing operations before income taxes |  |                  | 268,806    |   |                            |   | 17,607  |                 |  |   | (12,675           | ) |  |   | 273,738   
|Income tax expense (benefit) from continuing operations      |  |                  | 90,707     |   |                            |   | 7,717   |                 |  |   | (6,877            | ) |  |   | 91,547    
|Net income from continuing operations(Note
2)                |  | $                | 178,099    |   |                            | $ | 9,890   |                 |  | $ | (5,798            | ) |  | $ | 182,191   
|Intersegment revenues (expense)                              |  | $                | (22,873    | ) |                            | $ | (2,492  | )               |  | $ | 25,365            |   |  | $ |          
|Average assets                                               |  | $                | 14,942,031 |   |                            | $ | 88,376  |                 |  | $ | 115,291           |   |  | $ | 15,145,698
|Depreciation and amortization                                |  | $                | 33,343     |   |                            | $ | 1,120   |                 |  | $ | 1,071             |   |  | $ | 35,534    
|2004                                                         |  |                  |            |   |                            |   |         |                 |  |   |                   |   |  |   |           
|Net interest income                                          |  | $                | 454,494    |   |                            | $ | 567     |                 |  | $ | (3,750            | ) |  | $ | 451,311   
|Provision for credit losses                                  |  |                  | 37,425     |   |                            |   | 235     |                 |  |   |                  |   |  |   | 37,660    
|Net interest income after provision                          |  |                  | 417,069    |   |                            |   | 332     |                 |  |   | (3,750            | ) |  |   | 413,651   
|Non-interest income                                          |  |                  | 124,277    |   |                            |   | 70,184  |                 |  |   | 8,956             |   |  |   | 203,417   
|Non-interest expense                                         |  |                  | 293,884    |   |                            |   | 53,731  |                 |  |   | 8,909             |   |  |   | 356,524   
|Income (loss) from continuing operations before income taxes |  |                  | 247,462    |   |                            |   | 16,785  |                 |  |   | (3,703            | ) |  |   | 260,544   
|Income tax expense (benefit) from continuing operations      |  |                  | 83,196     |   |                            |   | 7,011   |                 |  |   | (4,863            | ) |  |   | 85,344    
|Net income (loss) from continuing operations(Note
3)         |  | $                | 164,266    |   |                            | $ | 9,774   |                 |  | $ | 1,160             |   |  | $ | 175,200   
|Intersegment revenues (expense)                              |  | $                | (25,243    | ) |                            | $ | (2,360  | )               |  | $ | 27,603            |   |  | $ |          
|Average assets                                               |  | $                | 13,132,668 |   |                            | $ | 95,900  |                 |  | $ | 131,988           |   |  | $ | 13,360,556
|Depreciation and amortization                                |  | $                | 29,861     |   |                            | $ | 1,120   |                 |  | $ | 965               |   |  | $ | 31,946    

Note 1 - The parent and other segment for 2006 includes the following charges and gains: (1) A balance sheet
restructuring that resulted in net after-tax charges of $9,914 ($15,252 before tax); (2) After-tax net derivative losses of $3,832 ($5,895 before tax), of which included gains of $297 ($457 before tax) which were related to the balance sheet
restructuring activities; (3) After-tax merger, integration and restructuring expenses of $4,274 ($6,575 before tax) associated with the acquisitions during the year; (4) After-tax charges totaling $962 ($1,480 before tax) related to
additional incentive compensation due to the completion of the Union Federal acquisition and conversion; (5) After-tax charges of $1,688 ($2,597 before tax) related to additional incentive compensation associated with the completion of the
insurance sale; (6) An after-tax net gain of $4,328 ($6,658 before tax) from the sale of an insurance business; (7) An after-tax charge of $1,093 ($1,681 before tax) from the impairment of an equity security; and (8) An after-tax
charge of $549 ($845 before tax) from an adjustment to the amortization of mortgage servicing rights.

Note 2 - The parent and other segment for 2005 includes
after-tax merger, integration and restructuring expenses of $1,151 ($1,771 before tax).

Note 3 - The parent and other segment for 2004 includes after-tax merger,
integration and restructuring expenses of $2,952 ($4,542 before tax).



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Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except per share data)

Note 23Condensed Parent Company Financial Information

Condensed Parent Company Balance Sheets



|                                                                                  |  |      |         |   |      |   |           |      |  |   |           |  
|--------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|December 31,                                                                      |  |      |         |   | 2006 |   |           | 2005 | 
|Assets                                                                            |  |      |         |   |      |   |           |      |  |   |           |  
|Cash and due from banks                                                           |  |      |         |   |      | $ | 56,884    |      |  | $ | 44,160    |  
|Securities                                                                        |  |      |         |   |      |   | 10,651    |      |  |   | 17,987    |  
|Investment in bank subsidiaries                                                   |  |      |         |   |      |   | 2,037,590 |      |  |   | 1,530,237 |  
|Investment in non-bank subsidiaries                                               |  |      |         |   |      |   | 270,796   |      |  |   | 272,896   |  
|Receivable from subsidiaries                                                      |  |      |         |   |      |   | 22,794    |      |  |   | 25,725    |  
|Premises and equipment                                                            |  |      |         |   |      |   | 5,851     |      |  |   | 6,300     |  
|Other assets                                                                      |  |      |         |   |      |   | 66,347    |      |  |   | 59,576    |  
|Total assets                                                                      |  |      |         |   |      | $ | 2,470,913 |      |  | $ | 1,956,881 |  
|Liabilities                                                                       |  |      |         |   |      |   |           |      |  |   |           |  
|Debt                                                                              |  |      |         |   |      | $ | 472,125   |      |  | $ | 285,936   |  
|Other liabilities                                                                 |  |      |         |   |      |   | 118,140   |      |  |   | 117,068   |  
|Total liabilities                                                                 |  |      |         |   |      |   | 590,265   |      |  |   | 403,004   |  
|Shareholders Equity                                                              |  |      |         |   |      |   | 1,880,648 |      |  |   | 1,553,877 |  
|Total liabilities and shareholders equity                                        |  |      |         |   |      | $ | 2,470,913 |      |  | $ | 1,956,881 |  
|                                                                                  |  |      |        
|Condensed Parent Company Statements of Income                                     |  |      |         |   |      |   |           |      |  |   |           |  
|For years ended December 31,                                                      |  | 2006 |         |   | 2005 |   |           | 2004 | 
|Income                                                                            |  |      |         |   |      |   |           |      |  |   |           |  
|Dividends from bank subsidiaries                                                  |  | $    | 100,000 |   |      | $ | 104,301   |      |  | $ | 88,000    |  
|Dividends from non-bank subsidiaries                                              |  |      | 21,866  |   |      |   | 18,572    |      |  |   | 14,055    |  
|Management fees                                                                   |  |      | 29,257  |   |      |   | 25,630    |      |  |   | 26,998    |  
|Other income                                                                      |  |      | 2,534   |   |      |   | 2,799     |      |  |   | 10,866    |  
|Total income                                                                      |  |      | 153,657 |   |      |   | 151,302   |      |  |   | 139,919   |  
|Expenses                                                                          |  |      |         |   |      |   |           |      |  |   |           |  
|Interest expense                                                                  |  |      | 28,960  |   |      |   | 18,762    |      |  |   | 15,560    |  
|Salaries and employee benefits                                                    |  |      | 20,875  |   |      |   | 16,113    |      |  |   | 18,243    |  
|Occupancy and equipment expense                                                   |  |      | 2,039   |   |      |   | 2,441     |      |  |   | 2,457     |  
|Merger, integration and restructuring expense                                     |  |      | 60      |   |      |   | 379       |      |  |   | (21       | )
|Other operating expense                                                           |  |      | 10,591  |   |      |   | 11,293    |      |  |   | 9,999     |  
|Total expenses                                                                    |  |      | 62,525  |   |      |   | 48,988    |      |  |   | 46,238    |  
|Income before income taxes and equity in undistributed net income of subsidiaries |  |      | 91,132  |   |      |   | 102,314   |      |  |   | 93,681    |  
|Income tax benefit                                                                |  |      | (12,963 | ) |      |   | (8,735    | )    |  |   | (375      | )
|Income before equity in undistributed net income of subsidiaries                  |  |      | 104,095 |   |      |   | 111,049   |      |  |   | 94,056    |  
|Equity in undistributed net income of bank subsidiaries                           |  |      | 91,257  |   |      |   | 60,796    |      |  |   | 80,396    |  
|Equity in undistributed net income of non-bank subsidiaries                       |  |      | (5,014  | ) |      |   | 10,718    |      |  |   | 19,903    |  
|Net Income                                                                        |  | $    | 190,338 |   |      | $ | 182,563   |      |  | $ | 194,355   |  



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Note 23Condensed Parent Company Financial Information (continued)

Condensed Parent Company Statements of Cash Flows



|                                                                           |  |      |          |   |      |   |          |      |  |   |          |  
|-------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|For years ended December 31,                                               |  | 2006 |          |   | 2005 |   |          | 2004 | 
|Operating Activities                                                       |  |      |          |   |      |   |          |      |  |   |          |  
|Net income                                                                 |  | $    | 190,338  |   |      | $ | 182,563  |      |  | $ | 194,355  |  
|Adjustments to reconcile net income to net cash from operating activities: |  |      |          |   |      |   |          |      |  |   |          |  
|Equity in undistributed net income of bank subsidiaries                    |  |      | (91,257  | ) |      |   | (60,796  | )    |  |   | (80,396  | )
|Equity in undistributed net income of non-bank subsidiaries                |  |      | 5,014    |   |      |   | (10,718  | )    |  |   | (19,903  | )
|Depreciation and amortization                                              |  |      | 141      |   |      |   | 1,108    |      |  |   | 1,068    |  
|Stock-based compensation expense                                           |  |      | 2,307    |   |      |   | 2,300    |      |  |   |         |  
|Net loss (gain) on sales of assets                                         |  |      | 49       |   |      |   | (1,039   | )    |  |   | (5,598   | )
|Net change in other assets and liabilities                                 |  |      | (5,762   | ) |      |   | (36,612  | )    |  |   | 8,779    |  
|Net cash from operating activities                                         |  |      | 100,830  |   |      |   | 76,806   |      |  |   | 98,305   |  
|Investing Activities                                                       |  |      |          |   |      |   |          |      |  |   |          |  
|Capital return (contributions) to non-bank subsidiaries                    |  |      |         |   |      |   |         |      |  |   | 8,000    |  
|Loan to subsidiary                                                         |  |      |         |   |      |   |         |      |  |   | (9,880   | )
|Collection of loans from subsidiaries                                      |  |      |         |   |      |   |         |      |  |   | 62,359   |  
|Securities:                                                                |  |      |          |   |      |   |          |      |  |   |          |  
|Proceeds from maturities and payments                                      |  |      | 2,189    |   |      |   | 4,379    |      |  |   | 9,000    |  
|Proceeds from sales                                                        |  |      | 4,834    |   |      |   | 9,941    |      |  |   | 17,699   |  
|Purchases                                                                  |  |      |         |   |      |   | (2,000   | )    |  |   | (6,881   | )
|Purchases of premises and equipment                                        |  |      | (258     | ) |      |   | (235     | )    |  |   | (867     | )
|Net cash received from breakage of derivative instruments                  |  |      | 373      |   |      |   |         |      |  |   |         |  
|Net cash paid in acquisitions                                              |  |      | (125,641 | ) |      |   | (7,358   | )    |  |   | (14,406  | )
|Net cash provided by (used in) investing activities                        |  |      | (118,503 | ) |      |   | 4,727    |      |  |   | 65,024   |  
|Financing Activities                                                       |  |      |          |   |      |   |          |      |  |   |          |  
|Proceeds from issuance of debt                                             |  |      | 154,640  |   |      |   |         |      |  |   | 63,550   |  
|Repayment of debt                                                          |  |      | (72,000  | ) |      |   |         |      |  |   | (40,059  | )
|Borrowing (repayment) of short-term line of credit                         |  |      | 35,000   |   |      |   |         |      |  |   | (61,000  | )
|Proceeds from issuance of common stock                                     |  |      | 16,459   |   |      |   | 13,773   |      |  |   | 19,929   |  
|Cash dividends and fractional shares paid                                  |  |      | (104,119 | ) |      |   | (93,659  | )    |  |   | (80,731  | )
|Treasury stock purchases                                                   |  |      |         |   |      |   | (52,407  | )    |  |   | (1,588   | )
|Other items                                                                |  |      | 417      |   |      |   |         |      |  |   | (1,214   | )
|Net cash used in financing activities                                      |  |      | 30,397   |   |      |   | (132,293 | )    |  |   | (101,113 | )
|Net change in cash and due from banks                                      |  |      | 12,724   |   |      |   | (50,760  | )    |  |   | 62,216   |  
|Cash and due from banks at beginning of year                               |  |      | 44,160   |   |      |   | 94,920   |      |  |   | 32,704   |  
|Cash and due from banks at end of year                                     |  | $    | 56,884   |   |      | $ | 44,160   |      |  | $ | 94,920   |  



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Notes to Consolidated Financial Statements

(Dollars and shares in thousands, except per share data)

Note 24Other Matters



Legal Matters In re Commercial Money Center, Inc. Equipment Lease Litigation in the U. S. District Court for the Northern District of
Ohio, Eastern Division, MDL Case No. 1:02-CV-16000 Between August 2000 and December 2001, Sky Bank and two of its predecessor banks provided financing to a
commercial borrower and its affiliated entities for the purchase of six separate portfolios of commercial lease pools, and a warehouse line of credit to finance lease pools. These loans are secured by assignments of the payment streams from the
underlying leases, surety bonds or insurance policies, and a limited guarantee from the sole member of the commercial borrower. Upon default of these
commercial loans, Sky Bank (and its predecessors) made demand for payment from Illinois Union Insurance Company (IU), RLI Insurance Company (RLI), and Royal Indemnity Company (Royal) under the relevant surety
bonds and insurance policies. IU, RLI, and Royal (collectively, the Sureties) have failed to make the payments required under the surety bonds and insurance policies. As a result, in the spring of 2002, Sky Financial and its predecessors
filed suit against each of the Sureties seeking to enforce Sky Banks rights under the surety bonds and insurance policies issued by the Sureties in connection with the commercial lease pools. Sky Financials complaints claim breach of
contract, bad faith and allege that the Sureties are liable for the payments due to Sky Financial under the terms of the bonds and are estopped from asserting fraud as a defense to paying any claims under the bonds. In October, 2002, the suits were
consolidated for pretrial purposes with more than 35 other lawsuits involving similar claims in the United States District Court for the Northern District of Ohio, Eastern Division, under the Federal Multi-district Litigation (MDL)
Rules. The key defense of the Sureties in denying Sky Banks claims under the surety bonds is that they were fraudulently induced by the
originator of the commercial leases to issue the surety bonds in the first instance. The Sureties have also asserted related defenses that the underlying equipment leases are invalid, usurious, or otherwise unenforceable. Sky Bank believes that none
of these defenses can defeat Sky Banks claims under the surety bonds, which, in the view of Sky Bank, provide for absolute and unconditional guarantees of payment. Moreover, Sky Bank believes that the Sureties are responsible to Sky Bank, as
the Obligee or Named Insured under the bonds, for the underwriting of the lessees and leases, including all issues of fraud, and that the Sureties waived any defense of fraud to claims under the bonds. On December 21, 2005, Sky Financial sold and assigned to a third party, without recourse, all of its rights and interests in
three loans secured by commercial lease pools and surety bonds issued by Royal. On March 31, 2006, Sky Financial and IU settled in full its litigation pertaining to two loans secured by pools of leases and insurance policies issued by IU. The
aggregate principal balance of the three loans sold to a third party and the two loans which were settled was $14.2 million, and the aggregate proceeds received by Sky Financial in the sale and the settlement was $14.9 million.


With respect to the remaining pool and the warehouse line of credit secured by surety bonds issued by RLI, which has a remaining principal balance of $15.4 million,
Sky Financial has amended its complaint and is proceeding with pretrial discovery and motion practice in the MDL court in anticipation of trial. Sky
Financial has reviewed the relevant matters of fact and law with its special counsel and believes that it has substantial and meritorious claims against the remaining Surety. Sky Financial has and will continue to vigorously assert all the rights
and remedies available to it to obtain payment under the bonds. While the ultimate outcome of this matter cannot be determined at this time, Sky Financial management does not believe that the outcome of these pending legal proceedings will
materially effect the consolidated financial position or results of operations of Sky Financial. American Home Mortgage Corp. v. Union Federal Bank of
Indianapolis, Case No. 06-CV-7864 (JGK) (RLE), U.S. District Court for the Southern District of New York Prior to its acquisition by Sky Financial,
Waterfield Mortgage Company, Incorporated (Waterfield) sold its mortgage banking business to American Home Mortgage Corp. (American Home). As part of the sale agreement, an escrow in the amount of $55 million was established
and any purchase price adjustment associated with the sale of the mortgage banking business was to be deducted from the escrow. Waterfield and American Home were unable to reach agreement as to the purchase price adjustment, and American Home filed
the captioned lawsuit against Waterfields subsidiary, Union Federal Bank, for breach of contract, negligent misrepresentation and declaratory and injunctive relief, and has made a claim for relief in excess of $29 million. Sky Financial completed its acquisition of Waterfield on October 17, 2006, and as a result, has become a party in interest in the litigation. Sky Financial, in
conjunction with the former shareholders of Waterfield to the extent of their respective interests in the escrow, have filed, inter alia, a motion to dismiss the action as well a motion to substitute the entity representing Waterfield shareholders
in place of Union Federal Bank as the party in interest in the litigation. After consultation with special counsel, Sky Financial believes that it
has substantial and meritorious defenses and that exposure, if any, should be absorbed by the escrow, and as such is not expected to have a material effect on the consolidated financial position or results of operations of Sky Financial. Cash and Due from Banks Sky Financials subsidiary bank is required to have cash
on hand or on deposit with the Federal Reserve Bank to meet its regulatory reserve requirements. The reserve requirements at December 31, 2006 and 2005 was $86,638 and $59,109, respectively. These balances do not earn interest. Treasury Shares Included in treasury shares at December 31, 2006 and 2005 are 9 and
11, respectively, of shares held in rabbi trusts for certain employees of Sky Financial.




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Note 25Quarterly Financial Information (Unaudited)



|                                    |  |       |         |        |   |         |  |        |         |  |   |        
|----------------------------------- |  | ----- | ------- | ------ | - | ------- |  | ------ | ------- |  | - | -------
|                                    |  | First |         | Second |   | Third   |  | Fourth
|2006                                |  |       |         |        |   |         |  |        |         |  |   |        
|Total interest income               |  | $     | 234,044 |        | $ | 243,146 |  | $      | 254,134 |  | $ | 282,167
|Net interest income                 |  |       | 132,836 |        |   | 133,220 |  |        | 131,979 |  |   | 143,511
|Provision for credit losses         |  |       | 7,154   |        |   | 9,476   |  |        | 9,445   |  |   | 10,779 
|Net income(1)                       |  |       | 50,640  |        |   | 45,073  |  |        | 54,569  |  |   | 40,056 
|Earnings per common share:          |  |       |         |        |   |         |  |        |         |  |   |        
|Basic                               |  |       | 0.47    |        |   | 0.42    |  |        | 0.50    |  |   | 0.35   
|Diluted                             |  |       | 0.46    |        |   | 0.41    |  |        | 0.50    |  |   | 0.35   
|2005                                |  |       |         |        |   |         |  |        |         |  |   |        
|Total interest income               |  | $     | 191,594 |        | $ | 203,029 |  | $      | 212,358 |  | $ | 223,243
|Net interest income                 |  |       | 124,007 |        |   | 128,000 |  |        | 130,419 |  |   | 132,226
|Provision for credit losses         |  |       | 30,823  |        |   | 5,894   |  |        | 8,725   |  |   | 6,807  
|Income from continuing operations   |  |       | 30,719  |        |   | 47,786  |  |        | 50,345  |  |   | 53,341 
|Income from discontinued operations |  |       |        |        |   |        |  |        |        |  |   | 372    
|Net income(2)                       |  |       | 30,719  |        |   | 47,786  |  |        | 50,345  |  |   | 53,713 
|Basic earnings per share:           |  |       |         |        |   |         |  |        |         |  |   |        
|Income from continuing operations   |  |       | 0.29    |        |   | 0.45    |  |        | 0.47    |  |   | 0.49   
|Income from discontinued operations |  |       |        |        |   |        |  |        |        |  |   | 0.00   
|Net income                          |  |       | 0.29    |        |   | 0.45    |  |        | 0.47    |  |   | 0.50   
|Diluted earnings per share:         |  |       |         |        |   |         |  |        |         |  |   |        
|Income from continuing operations   |  |       | 0.29    |        |   | 0.45    |  |        | 0.46    |  |   | 0.49   
|Income from discontinued operations |  |       |        |        |   |        |  |        |        |  |   | 0.00   
|Net income                          |  |       | 0.29    |        |   | 0.45    |  |        | 0.46    |  |   | 0.49   



|(1) | The first, second, third and fourth quarters of 2006 reflect the impact of merger, integration and restructuring charges after tax of $117, $237, $612 and $3,309, respectively.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The second, third and fourth quarters of 2005 reflect the impact of merger, integration and restructuring charges after tax of $670, $79 and $402, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



---

Note 26Sale of Sky Financial Solutions, Inc. and
Presentation as Discontinued Operations



On March 31, 2004, Sky Financial completed the sale of its dental financing affiliate, Sky Financial Solutions (SFS). SFS is reported as a discontinued
operation. For the year ended December 31, 2005, Sky Financial recorded additional pretax gain of $572 for the adjustment of certain contingencies related to the sale. This gain was recorded as after tax income from discontinued operations. SFS
results of operations for 2004 included revenues of $39,356 and pre-tax net income of $29,503. SFS was sold to MB1NA on March 31, 2004 for
$84,716. The closing equity of SFS was $50,242, resulting in an initial gain of $34,474. Sky Financial incurred an additional $3,234 in professional fees and other contractual obligations related to the transaction for a final calculated pre-tax
gain of $31,240.


Separately, in 2004 Sky Financial recorded merger, integration and restructuring costs of $346 related primarily to employee costs. A separate asset transfer agreement included $115,975 in Sky Bank portfolio loans, which represent unique products offered by Sky Bank to accommodate SFS clients.
These loans were sold to MBNA at par value. The SFS sales agreement contains a contingency based upon future charge-offs that may result in an
adjustment to increase or decrease the sales price in future periods. Based on historical experience and expected future performance, management does not believe that this provision will have a significant impact on future earnings, cash flows or
financial position.




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Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

Item 9A.Controls and Procedures

Sky Financials management carried out an evaluation, under the supervision and with the
participation of the chief executive officer and the chief financial officer, of the effectiveness of the design and operation of Sky Financials disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Exchange Act) as of December 31, 2006, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the chief executive officer along with the chief financial officer concluded that Sky Financials disclosure controls and
procedures as of December 31, 2006, are effective in timely alerting them to material information relating to Sky Financial (including its consolidated subsidiaries) required to be included in Sky Financials periodic filings under the
Exchange Act.

For purposes of this section, the term disclosure controls and procedures means controls and other procedures of an issuer that are
designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the
Commissions rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the
Act is accumulated and communicated to the issuers management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Managements Report on Internal Control Over Financial Reporting

The
management of Sky Financial Group is responsible for establishing and maintaining adequate internal control over financial reporting. Sky Financials internal control over financial reporting is a process designed under the supervision of the
companys chief executive officer and chief financial officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the companys financial statements for external reporting purposes in
accordance with U.S. generally accepted accounting principles.

Sky Financials management assessed the effectiveness of the companys
internal control over financial reporting as of December 31, 2006 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on the
assessment, management determined that, as of December 31, 2006, the companys internal control over financial reporting is effective, based on those criteria. Managements assessment of the effectiveness of the companys
internal control over financial reporting as of December 31, 2006 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing on page 69.



|                                                |  |                                                     
|----------------------------------------------- |  | ----------------------------------------------------
|LOGO                                            |  | LOGO                                                
|Marty E. Adams                                  |  | Kevin T. Thompson                                   
|Chairman, President and Chief Executive Officer |  | Executive Vice President and Chief Financial Officer
|February 22, 2007                               |  | February 22, 2007                                   

Changes in Internal Control over Financial Reporting

There have not been any changes in Sky Financials internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) that occurred during Sky Financials most recent fiscal quarter that have
materially affected, or are reasonably likely to materially affect, Sky Financials internal control over financial reporting.



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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Sky Financial Group, Inc.

Bowling Green, Ohio

We have audited managements assessment, included in the accompanying Managements Report on Internal Control Over Financial Reporting, that Sky Financial Group, Inc.
and subsidiaries (the Company) maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial
reporting. Our responsibility is to express an opinion on managements assessment and an opinion on the effectiveness of the Companys internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting,
evaluating managements assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinions.

A companys internal control over financial reporting is a process designed by, or under the supervision of,
the companys principal executive and principal financial officers, or persons performing similar functions, and effected by the companys board of directors, management, and other personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial
statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper
management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future
periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, managements assessment that the Company maintained effective internal control over financial reporting as of December 31, 2006, is fairly
stated, in all material respects, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated financial statements as of and for the year ended December 31, 2006 of the Company and our report dated February 22, 2007 expressed an unqualified opinion on those financial statements and included an explanatory paragraph
regarding the adoption of Statement of Financial Accounting Standards No. 123 (R), Share-Based Payment, in 2005.

LOGO



|                     
|---------------------
|Deloitte & Touche LLP
|Cleveland, Ohio      
|February 22, 2007    



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Item 9B.Other Information

None

PART III

Item 10.Directors and Executive Officers of Registrant

Directors - Unless otherwise indicated, the business experience and
principal occupations indicated for each director has extended for five or more years.



|                        |  |     |  |                                                                                                                                                                                           |  |                                                                      
|----------------------- |  | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------
|Name                    |  | Age |  | Certain Biographical Information                                                                                                                                                          |  | Period of Service as a Director                                      
|                        |  |     | 
|Marty E. Adams          |  | 54  |  | Chairman, President and CEO, Sky Financial Group, Inc.                                                                                                                                    |  | Director since 1998; Director of subsidiaryor predecessor since 1984 
|                        |  |     | 
|George N. Chandler II   |  | 69  |  | Retired Vice President, Cleveland-Cliffs, Inc., a producer of iron ore pellets and iron ore. Mr. Chandler is the uncle of Richard R. Hollington III, an executive officer of the Company. |  | Director since 1998; Director of subsidiary or predecessor since 1997
|                        |  |     | 
|Robert C. Duvall, CPA   |  | 64  |  | Retired; formerly Vice President/Finance and Director of Wampum Hardware Co., an explosives distributor; formerly Director of Nobel Insurance LTD.                                        |  | Director since 1999; Director of subsidiary or predecessor since 1995
|                        |  |     | 
|Marylouise Fennell, RSM |  | 65  |  | Partner, Gallagher Fennell Higher Education Services, consultants to Presidents and Boards of Trustees of colleges and universities.                                                      |  | Director since 2002; Director of subsidiary or predecessor since 1994
|                        |  |     | 
|D. James Hilliker       |  | 59  |  | Vice President, Better Food Systems, Inc, a company that owns and operates Wendys restaurant franchises.                                                                                 |  | Director since 1998; Director of subsidiary or predecessor since 1995
|                        |  |     | 
|Fred H. Johnson III     |  | 45  |  | President and CEO, Summitcrest, Inc., a company that operates Angus cattle farms.                                                                                                         |  | Director since 1998; Director of subsidiary or predecessor since 1987
|                        |  |     | 
|Jonathan A. Levy        |  | 46  |  | Partner, Redstone Investments, a real estate development, acquisition and management firm. Mr. Levy serves as the Companys Lead Director.                                                |  | Director since 1999; Director of subsidiary or predecessor since 1996
|                        |  |     | 
|Gerard P. Mastroianni   |  | 51  |  | President, Alliance Ventures, a real estate holding company.                                                                                                                              |  | Director since 1998; Director of subsidiary or predecessor since 1996
|                        |  |     | 
|Gregory L. Ridler       |  | 60  |  | Retired Chairman, Mahoning Valley Region, Sky Bank; formerly President & CEO, Mahoning National Bank of Youngstown, which was acquired by the Company.                                    |  | Director since 1999; Director of subsidiary or predecessor since 1988
|                        |  |     | 
|Emerson J. Ross, Jr.    |  | 65  |  | Retired Manager, Corporate Community Relations, Owens Corning, a manufacturer of building materials and composite products.                                                               |  | Director since 1998; Director of subsidiary or predecessor since 1988
|                        |  |     | 
|C. Gregory Spangler     |  | 66  |  | Honorary Chairman, Spangler Candy Company, a manufacturer of candy products.                                                                                                              |  | Director since 1998; Director of subsidiary or predecessor since 1993
|                        |  |     | 
|Joseph N. Tosh II       |  | 65  |  | Retired Regional Chairman of Sky Bank, a subsidiary of the Company.                                                                                                                       |  | Director since 1998; Director of subsidiary or predecessor since 1986
|                        |  |     | 
|R. John Wean III        |  | 58  |  | Co-owner & President of Specialties la Cote Basque, a wholesale French bread bakery.                                                                                                      |  | Director since 2004; Director of subsidiary or predecessor since 1987



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Officers - Unless otherwise indicated, the officer has served in the position indicated for five or more years.



|                         |  |     |  |                                                                        
|------------------------ |  | --- |  | -----------------------------------------------------------------------
|Name                     |  | Age |  | Title                                                                  
|                         |  |    
|Marty E. Adams           |  | 54  |  | Chairman, President and CEO, Sky Financial Group, Inc.                 
|                         |  |    
|Richard R Hollington III |  | 43  |  | EVP/Corporate Director of Financial Services, Sky Financial Group, Inc.
|                         |  |    
|Frank J. Koch            |  | 53  |  | EVP/Senior Credit Officer, Sky Financial Group, Inc.                   
|                         |  |    
|W. Granger Souder, Jr.   |  | 46  |  | EVP/General Counsel and Corporate Secretary, Sky Financial Group, Inc. 
|                         |  |    
|Gary M. Small            |  | 46  |  | EVP/Community Banking, Sky Financial Group, Inc. since March 1, 2006   
|                         |  |     |  | Previously, EVP and Business Unit Integration Coordinator (2004-05) and
|                         |  |     |  | EVP and Branch Network Executive (2000-04), National City Corporation, 
|                         |  |     |  | Cleveland, OH                                                          
|                         |  |    
|Les V. Starr             |  | 55  |  | EVP/Operations and Information Technology, Sky Financial Group, Inc.   
|                         |  |    
|Kevin T. Thompson        |  | 53  |  | EVP/Chief Financial Officer, Sky Financial Group, Inc.                 
|                         |  |    
|Perry C Atwood           |  | 52  |  | SVP/Director of Sales, Sky Financial Group, Inc.                       
|                         |  |    
|Phillip C. Clinard       |  | 57  |  | SVP/Director of Change Management Office, Sky Financial Group, Inc.    
|                         |  |    
|Thomas A. Sciorilli      |  | 59  |  | SVP/Chief Human Resources Officer, Sky Financial Group, Inc.           
|                         |  |    
|Curtis E. Shepherd       |  | 40  |  | SVP/Director of Marketing, Sky Financial Group, Inc.                   
|                         |  |    
|John S. Gulas            |  | 48  |  | President and CEO, Sky Trust, N.A. since August 8, 2005                
|                         |  |     |  | Previously, EVP and Chief Fiduciary Officer, UMB, Kansas City, MO,     
|                         |  |     |  | January 2002-2005                                                      
|                         |  |    
|Zahid Afzal              |  | 44  |  | EVP/Chief Technology Officer, Sky Bank since March 13, 2006            
|                         |  |     |  | Previously, SVP - Consumer Banking CIO, Bank of America, Charlotte, NC,
|                         |  |     |  | April 2002-2006                                                        
|                         |  |    
|Caren L. Cantrell        |  | 51  |  | EVP/Chief Operations Officer, Sky Bank since December, 2005            
|                         |  |     |  | Previously, SVP-Director of Operations and Information Technology      
|                         |  |     |  | (April 2005-Dec 2005), and SVP-Director of Operations (Aug 2004 -      
|                         |  |     |  | March 2005), Commercial Federal Bank, Omaha, NE. EVP/Chief             
|                         |  |     |  | Operations Officer (June 2002 - July 2004) and SVP/Strategic Process   
|                         |  |     |  | Improvement (Aug 2000 - May 2002), Sky Bank.                           

Section 16(a) Beneficial ownership Reporting Compliance

Under Section 16(a) of the Securities Exchange Act of 1934, members of the Board of Directors, certain executive officers of the Company and its subsidiaries and holders of
more than 10% of the Companys common stock file periodic reports with the Securities and Exchange Commission disclosing their beneficial ownership of common stock. During 2006, and based solely upon a review of such reports, the Company
believes that all filing requirements under Section 16(a) were complied with on a timely basis.

Ethics Policy and Code of Ethics

Sky Financials Ethics Policy, which is applicable to all directors, officers and employees of the company, and its Code of Ethics for Senior Financial Officers, which is
applicable to the principal executive officer, the principal financial officer and the principal accounting officer, are each available on the Investor Relations section of the companys website (www.skyfi.com). A copy of the Ethics Policy and
Code of Ethics is also available in print to share owners upon request, addressed to the Corporate Secretary at Sky Financial Group, 221 South Church Street, Bowling Green, OH 43402. Sky Financial intends to post amendments to or waivers from its
Code of Ethics on its website.

Meetings and Committees

The Board of
Directors of the Company held twelve regular meetings and one special meeting in 2006. Each incumbent director attended at least 75% of the aggregate of the total meetings of the Board of Directors and the total number of meetings held by all
committees of the Board on which the directors served in 2006. The Board of Directors schedules regular executive sessions, at which management is not in attendance, following each regularly scheduled meeting of the Board. Although the Company does
not have a formal policy with respect to Board member attendance at annual meetings of shareholders, each member is encouraged to attend. All Board members attended the 2006 annual meeting of shareholders.



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To assist in carrying out its responsibilities, the Board of Directors has established five standing committees, which are
described below:

Executive Committee

The members of the Executive
Committee of the Board of Directors are Marty E. Adams, Gerard P. Mastroianni, Gregory L. Ridler, Emerson J. Ross, Jr., C. Gregory Spangler and Jonathan A. Levy, who serves as chairperson. The Executive Committee met two times in 2006. Under the
terms of the Companys Code of Regulations and the Executive Committee Charter, which are available on the Companys website, the Executive Committee is authorized to act on behalf of the Board of Directors in the oversight of the business
and affairs of the Company while the Board of Directors is not in session, subject to certain limitations.

Audit Committee

The Company has a standing Audit Committee as defined in Section 3(a)(58)(A) of the Securities and Exchange Act of 1934. The members of the Audit Committee of the Board of
Directors are Robert C. Duvall, Fred H. Johnson III and C. Gregory Spangler, who serves as chairperson. The Audit Committee met eleven times in 2006. Under the terms of the Audit Committee Charter, which is available on the Companys website,
the oversight functions of the Audit Committee include: (i) the appointment of the Companys Independent Registered Public Accounting Firm; (ii) the review of the independent audit plan and the results of the auditing engagement;
(iii) the review of the internal audit plan and results of the internal audits; (iv) the review of the adequacy of the Companys financial reporting procedures; and (v) the review of the adequacy of the Companys system of
internal control. The Companys securities are listed on the NASDAQ National Market, and all members of the Audit Committee have been deemed by the Board of Directors to meet the independence standards of Rule 4200(a)(15) of the National
Association of Securities Dealers, Inc. and Rule 10A-3 of the Securities Exchange Act. The Board of Directors has determined that Mr. Duvall, an independent director and licensed CPA, satisfies the requirements of a Financial Expert
as defined in Item 401(h)(2) of Regulation S-K and satisfies the definition of financially sophisticated under Rule 4350(d) of the National Association of Securities Dealers, Inc.

Risk Management Committee

The members of the Risk Management Committee of the Board of
Directors are George N. Chandler II, Jonathan A. Levy and Gregory L. Ridler, who serves as chairperson. The Risk Management Committee met five times in 2006. Under the terms of the Risk Management Committee Charter, which is available on the
Companys website, the Risk Management Committee is responsible for reviewing the adequacy of systems and procedures controlling risk throughout the Company and its subsidiaries, including credit risk, liquidity risk, market risk, legal risk,
reputation risk and operational risk.

Governance and Nominating Committee

The members of the Governance and Nominating Committee of the Board of Directors are Joseph N. Tosh II, R. John Wean III and Emerson J. Ross, Jr., who serves as chairperson. The Governance and Nominating Committee met six times in 2006.
Under the terms of the Governance and Nominating Committee Charter, which is available on the Companys website, the Committee is responsible for making independent recommendations to the Board of Directors as to best practices for Board
governance, evaluation of Board performance and succession planning. The Committee further serves as the Companys nominating committee, and is responsible for developing and implementing a process and guidelines for the selection of
individuals for nomination to the Board of Directors and considering incumbent directors for nomination for re-election. The Governance and Nominating Committee considers shareholder nominations for directors in accordance with procedures contained
in the Companys Code of Regulations. The Board of Directors of the Company has determined that each member of the Governance and Nominating Committee meets the independence standards of Rule 4200(a)(15) of the National Association of
Securities Dealers, Inc.

Process for Selection and Nomination of Directors

The Governance and Nominating Committee is responsible for the selection of the final slate of nominees for election to the Board of Directors. Those nominees recommended by the Committee are then submitted to the Board of Directors for
approval. In making its annual recommendation, the Governance and Nominating Committee determines the appropriate qualifications, skills and characteristics necessary for the Board of Directors in the context of the strategic direction of the
Company. Current directors are annually assessed through a Board self-assessment and peer evaluation process. The results of the assessment are used to determine Board member effectiveness, including whether to consider a member for re-nomination.
In making its recommendations and selections, the Committee considers a variety of factors, including the candidates integrity, independence, qualifications, skills, experience (including experiences in finance and banking), familiarity with
accounting rules and practices, and compatibility with existing members of the Board. Other than the foregoing, there are no stated minimum criteria for nominees, although the Committee may consider such other factors as it may deem are in the best
interest of the Company and its shareholders, which may change from time-to-time. The Committee will consider candidates for nomination as a director, which are recommended by shareholders, directors and other sources, including the community and
the Companys subsidiary and regional boards. The Committee has the prerogative to employ and pay third-party search firms.

Compensation Committee

The Compensation Committee of the Board of Directors (the Committee) consists of Mr. Mastroianni, Mr. Hilliker, and Ms. Fennell.
Mr. Mastroianni serves as the chairman of our Committee. The Committee reviews and recommends to the board policies, practices and procedures relating to the compensation of the Companys chief executive officer, senior management team and
directors and the establishment and administration of any new incentive compensation plans. The Committee has authority to administer the Companys Annual Incentive Plan, 1998 Directors Stock Option Plan, 1998 Employee Stock Option Plan, 2002
Stock Option Plan, 2004 Restricted Stock Plan, and make policy recommendations from time to time with respect to the Companys benefit plans. The Companys board of directors has determined that Mr. Mastroianni, Mr. Hilliker and
Ms. Fennell, meet the independence requirements under the Sarbanes-Oxley Act of 2002, The Nasdaq Stock Market, Inc. and the rules and regulations of the SEC. In addition, each of Mr. Mastroianni, Mr. Hilliker and Ms.



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Fennell, is an outside director, as that term is defined in Section 162(m) of the Internal Revenue Code, and is a
non-employee director within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934.

The Committee meets at least quarterly. The Committee
met four times during 2006.

Compensation Committees Processes and Procedures for Consideration and Determination of Executive Compensation

Authority and Responsibilities. The Committee administers the Companys executive compensation program, including the oversight of executive compensation policies
and decisions, administration of the Annual Incentive Plan applicable to executive officers and administration of the Companys equity incentive plans. In particular, the Committee exercises all power and authority of the Board in the
administration and interpretation of the Companys benefit plans, including establishing guidelines, selecting participants in the plans, approving grants and awards, and exercise of other power and authority required and permitted under the
plans. The Committee also reviews and approves executive officer (including Chief Executive Officer) compensation, including, as applicable, salary, bonus and incentive compensation levels, deferred compensation, executive perquisites, equity
compensation (including awards to induce employment), severance arrangements and other forms of executive officer compensation. The Committees membership is determined annually by the full Board and includes only independent directors. The
Committee meets at least quarterly during the year.

The Committees responsibilities are reflected in its Charter, a copy of which is available
on the Companys website, www.skyfi.com. The Committee reviews the Charter annually and recommends any proposed changes to the Board. Pursuant to its Charter, the Committees functions also include reviewing and approving contractual
relationships between the Company or its subsidiaries and any officer or director relating to employment, severance, retirement or compensation; and producing the Committees report on executive compensation to be included in the Companys
proxy statements.

Delegation. From time to time the Committee may delegate authority to fulfill various functions of administering the
Companys plans to employees of the Company. Specifically, the Committee has delegated certain responsibilities with respect to the Companys employee retirement and welfare benefit plans to the Sky Benefits Committee consisting of the
Companys general counsel, chief financial officer, chief human resources officer and other officers. The Sky Benefits Committee reports to the Committee on the performance of the retirement plan assets and other plan matters once each year.

The Committee also has delegated to Companys CEO the authority to make awards to new employees of up to an aggregate of 30,000 stock options
under the 2002 Stock Option Plan, or up to an aggregate of 6,000 shares of restricted stock, or a combination thereof.

Independent Compensation Consultant

In addition, the Committee has authority to engage the services of outside advisers to assist the Committee. In 2006, the Committee engaged Compensation
Consulting Consortium (3C) as an independent compensation consulting firm. 3C has advised and assisted the Committee and management for many years. 3C is engaged at the direction of the Committee. A representative of 3C attended several
of the Committees meetings in 2006 and reported directly to the Committee during these meetings.

3C provided benchmarking information on the
amount and form of executive compensation, as discussed in detail under Compensation Committee Decision-Making Process on page 77. The Committees instruction to 3C as to the nature and scope of its assignment were to assist in the
selection of peer group companies review relevant proxy and survey data in accordance to a defined methodology, and to obtain competitive external market total compensation data. For three years, directors compensation was analyzed by The
Organizational Consulting Group. The Companys human resources department performed the analysis in 2006.

Compensation Committee Interlocks and Insider
Participation

None of the members of Committee at any time has been one of our officers or employees. None of our executive officers currently serves, or in the
past year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers who serve on our board or Compensation Committee.

Item 11.Executive Compensation

Compensation Discussion and Analysis

The following discuss the material factors involved in the Companys decisions regarding the compensation of the Named Executive Officers (as defined on page 79) during 2006
(the NEOs). As discussed elsewhere in this Report, the Company entered into an Agreement and Plan of Merger with Huntington Bancshares Incorporated as of December 20, 2006 (the Merger Agreement or the
Merger). Because of the Merger, a few changes in compensation occurred during 2006. Additionally, the Companys compensation plans and programs have been operated in a semi-frozen basis for 2007, in anticipation of the Merger. That
is, payments are being made and benefits accrued, but no new awards or changes to the compensation plans, policies and arrangements are being made (in accordance with the Merger Agreement), other than as described below.

The specific amounts paid or payable to the NEOs are disclosed in the tables and narrative beginning on page 78 of this Annual Report on Form 10-K. The following discussion
cross-references those specific tabular and narrative disclosures where appropriate.



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Compensation Overview

Compensation
Philosophy and Objectives

We believe that, in order to manage and grow a well run financial services organization, it is necessary to establish compensation
programs and related opportunities that are attractive, motivating and rewarding to executives, to managers and to a high quality staff. These programs and opportunities have to be balanced with their cost to Sky and its shareholders. In order to
arrive at the balance, Sky has established the following compensation philosophy and guidelines for its overall compensation program:



| | 1. | In order to attract and retain highly qualified management, provide short term (annual) incentives that vary directly with Skys annual financial performance and provide long-term
incentives tied directly to Skys stock price.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2. | Wherever possible, establish performance-based compensation focused on individual results, team results, as well as contributions to Skys overall performance.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. | Link and align the wealth creation interests of management and shareholders by utilizing Sky stock or options as a material component to the compensation program.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4. | Position target compensation opportunities at approximately the 50th percentile of the relevant external labor market and provide upside opportunity based on performance above the 50th
percentile and downside risk also based on performance below the 50th percentile, except that the Company targets the 60th percentile for the Regional President position.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Each pay element is intended to generally match, in cost and type, the programs offered to similar positions in similar organizations that are deemed representative of Skys peer group as described below. The total of all
pay elements are calibrated to generally reward at target levels consistent with the external market place but actual performance determines the actual aggregate value.

The annual and long-term incentive plans are highly performance sensitive in that they could result in no economic value to the participant or the values could increase above the expected target value if performance is higher
than expected. For Skys executives these two components represent over 50% of the total compensation opportunity level, which is intentional as a majority of the compensation, is tied directly to Skys operational performance and share
performance.

Each of the elements of Skys compensation and benefit programs are discussed and illustrated below. Unless otherwise stated, all
plan elements are accrued as an expense and are deductible to Sky as compensation expense.

Components of Executive Compensation

Total compensation for executives is comprised of base salaries, annual cash incentive awards, long-term equity awards, retirement saving plan contributions, severance protection,
and other benefits and perquisites. When we determine compensation levels for the NEOs and other executive officers, we review compensation survey data from independent sources to ensure that our total compensation program is competitive. We look at
compensation data from companies in the financial services industry, by using publicly available peer company disclosures, as well as from companies in a broad cross-section of industries available from reputable compensation surveys. We target
overall compensation levels competitive with our industry comparison peer group. The various components of executive compensation reflect the following policies:

Base Salary

The purpose the base salary program is to pay for the qualifications, experience, and marketability of the position consistent with
market practices. A pay range for each position is anchored around the 50th percentile of the labor market with a minimum established at 80% of the 50th percentile and maximum rate established at 120% of the 50th percentile. Individual pay within
the range is determined by individual performance, job proficiency, and contributions over a period of years.

Pay adjustments are tied directly to
Skys Performance Appraisal process, which evaluates the employee on a series of criteria resulting in rating from 1 to 5. This process is used for all Sky employees including the NEOs. Pay adjustments, which are typically made annually, are
tied directly to the rating. In addition to these performance-based base pay adjustments, it is periodically necessary to make additional market adjustments in those instances where market base salary levels move faster than anticipated or where
additional duties and responsibilities are added to the job.

The base salary levels for all Sky Named Executives are currently within +/- 10% of the
50th percentile of the base salaries of peers in other similar-sized financial organizations. In 2006, an overall budget of 4.0% was established and base pay increases ranging from 4.0% to 9.4% were provided to the NEOs.

The amount of an NEOs base salary is the reference point for much of the other compensation. For example, the relative ranges of potential annual incentive
awards from executive to executive are proportionate to the NEOs respective base salaries. In addition, base salary is one component of the contribution formula under the Companys retirement plans and the key component in the
Companys severance and change in control arrangements.

Annual Incentive

The purpose of the annual incentive program is to focus executives on achieving and possibly exceeding annual performance objectives, which can vary, based on business need. In 2006, the performance expectations were established around the
following measures: earnings per share, demand deposit growth, loan growth, net loan losses, and services per household. These goals were selected as strong indicators of overall performance and are an integral part of Skys business strategy,
plan and culture.

Each component of the annual incentive program has a separate measurement for threshold, target and maximum payout levels. The
threshold amount represents the minimum result necessary to generate an incentive award. The target amount represents an achievable goal with a relatively high degree of difficulty to attain, consistent with the Companys annual profit plan.
The maximum amount represents outstanding results beyond those contained in the annual profit plan. Linkage exists between the components of performance measures, inasmuch as performance below a threshold amount will result in a reduction of the
payout of other measures. The Compensation Committee retains the flexibility to make discretionary adjustments up or down based on performance that does not conveniently fit into an annual incentive plan. This discretion is not used to change the
targets under the plan, only the rewards. For example, this discretion, in the past, has been used to recognize contributions that led or will lead to significant value to Sky based on work on an acquisition.



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The targeted annual incentive opportunity is 50% of actual base salary level for all NEOs except the CEO, who
has a target of 70%. For 2006, the target core operating earnings per share was $1.85 ($1.99 maximum), the target services per household was 176,572 (185,334 maximum), the targeted demand deposits was $1.81 billion ($1.96 billion maximum), the
targeted total loans was $11.76 billion ($11.99 billion maximum), and the target loan losses was $30.76 million ($23.07 million maximum).

In 2006,
Mr. Adams (140%), Mr. Thompson (100%), Koch (100%) and Souder (100%) each received a modified payout equal to their maximum incentive payout for their work in mergers and acquisitions, including the acquisition of Union Federal
Bank. Mr. Starr and other officers received a modified incentive payout for 2006 for similar work.

Ordinarily, payments to NEOs and other
covered employees under the Annual Incentive Plan are made in the first quarter of the following fiscal year. However, the Annual Incentive Plan payment amounts for the 2006 fiscal year for Messrs. Adams, Thompson, and Souder were accelerated into
2006. This was done to try to minimize the adverse tax effects to the Company and the executives of Code Section 280G on these payments and any payments made under applicable employment agreements due to the Merger.

Long-Term Incentive

The purpose of the long-term incentive plan is to align the
interests of the NEOs and other executives with shareholders by providing them the opportunity to benefit from share price increases in the future through option grants under the 1998 Directors Stock Option Plan, the 1998 Employee Stock Option Plan,
the 2002 Stock Option Plan and to provide actual ownership through restricted stock grants under the 2004 Restricted Stock Plan. Opportunities under the plans are intended to match prevailing market practices for similar positions in similar
organizations. Other factors, however, that are considered in making grants include managing the pools of options and restricted stock available under shareholder approved plans over a multi-year period of time, the most recent performance of the
Company and the individual, and the expected future growth and contributions of the individual.

In order to effectively manage the number of shares
approved by shareholders under the 1998 Directors Stock Option Plan, the 1998 Employee Stock Option Plan, the 2002 Stock Option Plan and the 2004 Restricted Stock Plan, and to meet the dual aims of (i) rewarding participants for increasing
share prices and (ii) creating an ownership culture at Sky, NEOs and other participants are allowed to elect the receipt of options and restricted stock according to guidelines established each year by the Committee. In general, if a choice is
allowed, the choices are 25% of the grant value in restricted stock and 75% in stock options or vice versa, or 50% in restricted stock and 50% in stock options. In some cases, certain classes of officers are only given one choice.

In 2006, the Committee established the value of one restricted share to be equal to 5 stock options using the relationship between the present value of the stock
option as determined using the Black-Scholes option pricing model and the share value on the date of grant. Restricted stock award recipients also receive dividends on their restricted shares during the restriction period.

All long-term grants and awards to non-Directors have a five year vesting period with 40% of the grant vesting on the second anniversary of the grant and then 20%
vesting on each successive grant anniversary. The purpose of the vesting is to limit awards under the plans to only those NEOs and other participants who make a long-term commitment to Sky and to make it difficult for a competitor to hire away Sky
talent.

Grants under the 1998 Directors Stock Option Plan, by comparison, are fully vested at grant. Mr. Adams, who is also Chairman of the
Board, has received all of his option grants from this plan and as a result is fully vested in these options on the date of grant.

In 2006, the
Committee took into consideration the market pay practices of Skys peers, historical long-term grant values for the NEOs, the performance of Sky, a general assessment of the contributions of the individual NEOs, the available shares and
projected lives of the 1998 Directors Stock Option Plan, the 1998 Employee Stock Option Plan, 2002 Stock Options and 2004 Restricted Stock Plans, and the projected grant values in making its recommendations. The Committee also sought input from the
Chief Executive Officer on his views of the grants for his direct reports.

Finally, the accounting and tax treatment of stock options and restricted
stock grants is different from cash-based payments. For awards under the 1998 Directors Stock Option Plan, the 1998 Employee Stock Option Plan, the 1998 Employee Stock Option Plan, the 2002 Stock Option Plan, Sky accrues an expense equal to the
Black-Scholes value on the date of grant pro-ratably over the vesting period. Sky will receive a tax deduction equal to the difference in the share price and the exercise price on the option exercise date. For awards under the 2004 Restricted Stock
Plan, Sky accrues an expense for the restricted stock grant, which is fixed on the value at the date of grant pro-ratably over the vesting period. Sky will receive a tax deduction equal to the value of stock at each vesting date equal to the vested
percentage and stock value on that date. Sky also receives a tax deduction for all dividends paid on restricted stock that is not yet vested.

Stock Ownership
Guidelines

The Board of Directors has requested that the Companys NEOs and other senior management employees meet minimum stock ownership requirements that
are consistent with industry standards. Accordingly, Sky maintains stock ownership requirements for its management staff according the following schedule:

Chief Executive Officer: 3 times annual base salary level

Executive Vice President: 2 times annual base salary level

Senior Vice President and Regional President: 1 times annual base salary level

Management has seven years from date-of-hire or implementation of this policy (whichever is longer) to meet these share ownership requirements.

Retirement and Other Post-Employment Benefits

Consistent with Skys desire to provide plans that allow employees to maintain the standard of
living they have built during their working career, Sky maintains a Non-Qualified Retirement Plan for NEOs and other senior officers. The Non-Qualified Retirement Plan mirrors the construct and design of Sky qualified Profit Sharing, 401(k) and ESOP
Plan, as the Non-Qualified Retirement Plan is an extension of qualified Profit Sharing, 401(k) and ESOP Plan for cash compensation above the IRS earnings limit. In 2006, this limit was $220,000. For example, NEOs and other participants in the
Non-Qualified Retirement Plan could receive a Company contribution equal to 3% of their cash compensation above the earnings limit under the ESOP portion of Non-Qualified Retirement Plan; a Company matching contribution of 100% of the first 3%
contributed by the participant and 50% of the next 2% contributed above the wage limit under the 401(k) supplemental portion of the Non-Qualified Retirement Plan; and, depending on actual profit levels, a supplemental Company contribution equal to
0% to 8% (the same as provided under the qualified Profit Sharing, 401(k) and ESOP Plan) of the participants cash compensation above the earnings limit under the supplemental profit sharing portion of the Non-Qualified Retirement Plan.



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All contribution amounts are based on the NEOs base salary and annual (non-equity) incentive bonus. The
Non-Qualified Retirement Plan is described in more detail on page 84, below the Nonqualified Deferred Compensation Table.

In addition, as described
in more detail beginning on page 85, each of our NEOs receives certain benefits in the event of termination of employment and change in control scenarios.

Other
Benefits and Perquisites

While the value of benefits including health and welfare, retirement, disability, vacation and the like are not required to be reported
in the tables that follow, these benefits are important to a comprehensive view of the Skys total compensation and benefit program. All Sky employees, including the NEOs, participate in the same comprehensive benefit program, which is intended
to provide financial protection to employees based on health and retirement needs as well as providing for well deserved time off. Sky also provides a disability insurance program to all employees including NEOs. However, Sky requires the NEOs to
recognize the premiums paid as taxable income, which would allow the disability benefit, if paid, to be tax-free. Sky provides executives with additional income (gross-up) to offset the additional taxes owed on premiums. This allows the disability
benefit to replace a greater portion of the NEOs income in the event of disability, as these plans have a maximum pay limit of $15,000, which is materially below the income of the NEOs in the program.

Sky also provides certain perquisites and special benefits to its executives. In the case of Mr. Adams, Sky provides him with company car and all related
expenses in order to assist him in visiting clients and offices across Skys multiple regions. Mr. Adams as Chairman of the Board receives, like all Board members, an annual retainer of $12,600 but does not receive any Board meeting or
Committee meeting fees. In addition, Mr. Adams and Sky participate in a corporate owned life insurance policy where Mr. Adams beneficiaries receive a death benefit equal to three times his base salary and Sky is reimbursed for all
premiums it has paid on the policy. Because financial services is a relationship-driven business, Sky pays country club dues for (i) Mr. Adams at Muirfield Village and Youngstown Country Clubs, (ii) Mr. Souder at Inverness
Club, and (iii) Mr. Koch at the Salem Golf Club, to provide a facility to entertain Sky clients, members of the management staff, and executives and Board members of potential acquisition candidates.

Tax and Accounting Treatment of Compensation

As discussed above, the Company considered
the tax and accounting treatment of stock options and restricted stock in comparison to cash compensation in determining the long-term incentive portion of the NEOs compensation.

Section 162(m) of the Internal Revenue Code limits the deductibility for federal income tax purposes of certain compensation paid in any year by a publicly
held corporation to its chief executive officer and its four other highest compensated officers to $1 million per executive (the $1 million cap). The $1 million cap does not apply to performance-based compensation as defined
under Section 162(m). It is intended that awards made under our 1998 Directors Stock Option Plan and 2002 Stock Option Plan are not subject to the $1 million cap due to the performance-based exception under Section 162(m). In 2006,
Mr. Adams base salary and annual incentive payment amounts exceeded the $1 million cap and, thus, was not fully deductible. The other NEOs did not exceed the $1 million cap. Although the Committee seeks to design compensation programs and make
awards that will be deductible under Section 162(m), in order to retain flexibility, the Committee has not adopted a formal policy that all compensation paid to the NEOs must be deductible.

Other provisions of the Internal Revenue Code also can affect the Companys compensation decisions. Under Code Section 280G, a 20% excise tax is imposed
upon NEOs and other executive officers who receive excess payments upon a change in control of a public corporation to the extent the payments received by them exceed an amount approximating three times their average annual compensation.
The excise tax applies to all payments over one times annual compensation, determined by a five year average. A company also loses its tax deduction for excess payments. Our employment and change of control agreements do not provide for
gross-up payments, except for Mr. Adams. However, because the loss of deductibility would increase the expense to the Company, we have restructured payments that could become due upon the Merger under his agreement, so that they do
not become excess payments.

In addition, the Internal Revenue Code was recently amended to provide a surtax under Section 409A with
respect to various features of deferred compensation arrangements of publicly-held corporations, mostly for compensation deferred on or after January 1, 2005. We have made the appropriate changes to our Non-Qualified Retirement Plans and
employment agreements to help ensure there are no adverse affects on the Company or executive officers as a result of these Code amendments. We do not expect these changes to have a material tax or financial consequence on the Company.

The Company has calculated and discussed with the Committee the accounting treatment and tax impact to the Company and the executives of each of its cash and
equity compensation awards and agreements. The Company also calculates and monitors the FAS 123R accounting expense related to equity-based compensation. To date, the FAS 123R expense has not been a significant factor in setting or changing equity
compensation grant practices except insofar as the general parity of treatment of restricted stock and stock options under FAS 123R was a consideration in the Companys decision to grant restricted stock in lieu of stock options.

Timing of Awards

The Company has always made awards under the 1998 Directors Stock
Option Plan, the 1998 Employee Stock Option Plan, the 2002 Stock Option Plan, the 2004 Restricted Stock Plan and their predecessor plans in the first quarter of each fiscal year following the approval of the grants by the Board of Directors. The
exercise price for stock options is established as the closing share price on the day of the Board meeting where approval is given. The Company has not timed the award of stock options or other equity-based compensation to coincide with the release
of favorable or unfavorable information about the Company. The Company does not intend to time the award of stock options or other equity-based compensation to coincide with the release of favorable or unfavorable information about the Company in
the future.

Termination and Change in Control Terms

The Company has
employment agreements with each of the NEOs. The employment agreements provide both Sky and the executives a mutual understanding of performance expectations, pay opportunities and employment terms. The employment agreements discuss the nature and
changes in the employment relationship including performing on-going services and how retirement, disability, voluntary and involuntary terminations are handled.

In addition, the employment agreements provide for severance payments in the event of employment termination following a change in control of the Company. The purpose of the change in control severance policy is to help
participants seek to maximize the value of Skys



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shares without concern about losing their job. In addition, it requires an acquiring company to negotiate pro-actively new employment agreements with participants. All
of the NEOs are covered by these agreements and the maximum cost of these CIC payments for each named executive is as follows:



|                                       |  |               
|-------------------------------------- |  | --------------
|M. Adams, Chairman, CEO, and President |  | $14.19 million
|K. Thompson, EVP and CFO               |  | 2.02 million  
|G. Souder, EVP and General Counsel     |  | 1.55 million  
|L. Starr, EVP Operations and IT        |  | 1.18 million  
|F. Koch, EVP and Chief Credit Officer  |  | 0.87 million  

All change in control provisions, except for Mr. Adams, are double-trigger meaning that benefits are
paid only in the event of a change in control and involuntary employment termination. Mr. Adams can leave voluntarily during the 30 day period beginning one year after a change in control and receive benefits. This provision, which is unique to
Mr. Adams, reflects his long service to Sky and the practical likelihood that if Sky were acquired, Mr. Adams role as Chairman and CEO would end. (Mr. Adams would also receive benefits if he was terminated without cause or left for Good
Reason before the beginning of the 30-day window period.) Mr. Adams change in control agreement could be subject to the 280G limit resulting in a larger portion of the benefit being subject to a 20% excise tax and a loss of most of the
tax deduction of the payment to Sky or an acquiror. Mr. Adams agreement would require Sky or an acquiror to provide additional cash compensation-a gross-up-to Mr. Adams to reimburse him for the excise tax as well as any additional income
taxes owed by Mr. Adams due to this reimbursement. In connection with the Merger with Huntington, Mr. Adams will be entitled to receive an amount in value of approximately $8,371,311, which is approximately equal to the cash severance that
is payable to Mr. Adams upon a termination without cause of for Good Reason, which will be paid to Mr. Adams as follows: (i) $4 million will be paid in lump sum within 30 days of the Merger, and (ii) Huntington will grant
Mr. Adams an award of restricted stock with a fair market value, as of the grant date, equal to approximately $4,371,311, which is the balance of that amount. The restricted stock will vest in equal monthly installments until December 31,
2009.

In connection with the merger, Huntington agreed to make certain payments to Mr. Koch, Mr. Thompson and Mr. Souder within 30
days of completion of the Merger. Mr. Koch will be paid $717,000, which is the cash severance that is payable to him upon a Termination of Employment (as defined in his employment agreement) as of immediately following completion of
the merger, using Payment Period (as defined in his employment agreement) of 24 months, and Messrs. Thompson and Souder will be paid $1,853,800 and $1,429,220, respectively, which amounts are the cash severance that are payable to them
as if their employment was terminated other than for cause, death or disability or due to good reason (each, as defined in their employment agreements) as of immediately following completion of the merger. In
addition, the 2006 fiscal year bonuses paid or payable to Messrs. Thompson and Souder will be used in lieu of their target bonuses for purposes of determining their cash severance. These payments will not affect Mr. Kochs,
Mr. Thompsons or Mr. Souders other rights under their existing employment agreements with Sky. Prior to the completion of the merger, Sky will amend the employment agreements to reflect the foregoing.

Compensation Committee Decision-Making Process

The Committee is comprised of three
independent, non-executive Board members whose responsibilities are, per its charter, the establishment of the compensation philosophy; the assessment of the design of Sky compensation and benefit programs; the monitoring of external market pay
levels and practices; review and approval of incentive award opportunities, actual payments and grants; and, review and recommendations for broader Board of Director approval related to proposed implementation or material changes to pay or benefit
programs.

In arriving at its decisions, the Committee seeks input from outside compensation and benefit experts, management (especially from the CEO
and the Chief Human Resources Officer), shareholders, and other Board members. In addition, the recent performance of Sky, future business plans and individual contributions are factored in the pay decision making process. The Committee retains the
services of 3C (Compensation Consulting Consortium) as its advisor on compensation related issues. 3C reports directly to the Committee.

In gauging
the external market place, the Committee reviews published survey information on pay and benefit levels of positions in the financial service industry from leading compensation and benefit survey houses. In addition, the Committee tracks the pay and
performance levels of a select group of financial organizations that are similar in size, scope and profitability of Sky. The list of primary peers utilized in 2006 is as follows:



|                                  |  |                
|--------------------------------- |  | ---------------
|Associated Banc-Corp              |  | Green Bay, WI  
|BOK Financial Corporation         |  | Tulsa, OK      
|Citizens Banking Corp             |  | Flint, MI      
|Commerce Bancorp, Inc.            |  | Cherry Hill, NJ
|Commerce Bancshares, Inc.         |  | Kansas City, MO
|Cullen/Frost Bankers, Inc.        |  | San Antonio, TX
|First Merit Corporation           |  | Akron, OH      
|Fulton Financial Corporation      |  | Lancaster, PA  
|Hibernia Corporation              |  | New Orleans, LA
|Mercantile Bankshares Corporation |  | Baltimore, MD  
|North Fork Bancorporation, Inc.   |  | Melville, NY   
|TCF Financial Corporation         |  | Wayzata, MN    
|Trustmark Corporation             |  | Jackson, MS    
|Valley National Bancorp           |  | Wayne, NJ      

These financial services firms range in size from approximately one-half of Skys asset level to two times Skys
asset level and are generally strong performing organizations measured by profitability level.



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This list changes from time-to-time as peers become acquired or acquire companies that materially changes their
size or as Skys size changes. As a general principle, the Committee retains the right not to pay incentives or cancel unvested restricted stock and option grants in the event of financial restatement or fraud. The Committee would also seek to
recover cash incentive payments made under erroneous financial reporting or to adjust future opportunities or payments in order to recapture these payments or awards.

Executive Compensation

The following table shows information concerning the annual compensation for services to the Company in all capacities of the
Chief Executive Officer, Chief Financial Officer and the three other executive officers of the Company (collectively the Named Executive Officers) during the last completed year.

Summary Compensation Table



|                                                               |  |      |   |  |         |         |   |        |    |   |              |   |         |               |  |   |                                       |   |  |                                                                     |           |   |                        |    |   |                    |   |         |   |  |   |           |  
|-------------------------------------------------------------- |  | ---- | - |  | ------- | ------- | - | ------ | -- | - | ------------ | - | ------- | ------------- |  | - | ------------------------------------- | - |  | ------------------------------------------------------------------- | --------- | - | ---------------------- | -- | - | ------------------ | - | ------- | - |  | - | --------- | -
|Name and Principal Position                                    |  | Year |   |  | Salary1 |         |   | Bonus2 |    |   | StockAwards3 |   |         | OptionAwards3 |  |   | Non-EquityIncentive PlanCompensation4 |   |  | Change
inPension Valueand NonqualifiedDeferredCompensationEarnings5 |           |   | All OtherCompensation6 |    |   | TotalCompensation7 |  
|(a)                                                            |  | (b   | ) |  |         | (c      | ) |        | (d | ) |              |   | (e      | )             |  |   | (f                                    | ) |  |                                                                     | (g        | ) |                        | (h | ) |                    |   | (i      | ) |  |   | (j        | )
|Marty E. Adams Chairman, President and Chief Executive Officer |  | 2006 |   |  | $       | 805,433 |   |        |   |   |              | $ | 609,239 |               |  | $ | 209,797                               |   |  | $                                                                   | 1,109,967 |   |                        |   |   |                    | $ | 301,329 |   |  | $ | 3,035,766 |  
|                                                               |  |      |   |  |         |         |   |        |    |   |              |   |         |               |  |   |                                       |   |  |                                                                     |           |   |                        |    |   |                    |   |         |   |  |   |          
|                                                               |  |      |   |  |         |         |   |        |    |   |              |   |         |               |  |   |                                       |   |  |                                                                     |           |   |                        |    |   |                    |   |         |   |  |   |          
|                                                               |  |      |   |  |         |         |   |        |    |   |              |   |         |               |  |   |                                       |   |  |                                                                     |           |   |                        |    |   |                    |   |         |   |  |   |          
|                                                               |  |      |   |  |         |         |   |        |    |   |              |   |         |               |  |   |                                       |   |  |                                                                     |           |   |                        |    |   |                    |   |         |   |  |   |          
|Kevin T. Thompson EVP, Chief Financial Officer                 |  | 2006 |   |  | $       | 305,547 |   |        |   |   |              | $ | 55,237  |               |  | $ | 42,922                                |   |  | $                                                                   | 305,547   |   |                        |   |   |                    | $ | 82,924  |   |  | $ | 792,177   |  
|                                                               |  |      |   |  |         |         |   |        |    |   |              |   |         |               |  |   |                                       |   |  |                                                                     |           |   |                        |    |   |                    |   |         |   |  |   |          
|                                                               |  |      |   |  |         |         |   |        |    |   |              |   |         |               |  |   |                                       |   |  |                                                                     |           |   |                        |    |   |                    |   |         |   |  |   |          
|Frank J. Koch EVP, Senior Credit Officer                       |  | 2006 |   |  | $       | 237,287 |   |        |   |   |              | $ | 35,923  |               |  | $ | 36,007                                |   |  | $                                                                   | 237,287   |   |                        |   |   |                    | $ | 62,215  |   |  | $ | 608,719   |  
|                                                               |  |      |   |  |         |         |   |        |    |   |              |   |         |               |  |   |                                       |   |  |                                                                     |           |   |                        |    |   |                    |   |         |   |  |   |          
|                                                               |  |      |   |  |         |         |   |        |    |   |              |   |         |               |  |   |                                       |   |  |                                                                     |           |   |                        |    |   |                    |   |         |   |  |   |          
|W. Granger Souder, Jr. EVP, General Counsel & Secretary        |  | 2006 |   |  | $       | 236,115 |   |        |   |   |              | $ | 35,243  |               |  | $ | 22,792                                |   |  | $                                                                   | 236,115   |   |                        |   |   |                    | $ | 70,524  |   |  | $ | 600,788   |  
|                                                               |  |      |   |  |         |         |   |        |    |   |              |   |         |               |  |   |                                       |   |  |                                                                     |           |   |                        |    |   |                    |   |         |   |  |   |          
|                                                               |  |      |   |  |         |         |   |        |    |   |              |   |         |               |  |   |                                       |   |  |                                                                     |           |   |                        |    |   |                    |   |         |   |  |   |          
|                                                               |  |      |   |  |         |         |   |        |    |   |              |   |         |               |  |   |                                       |   |  |                                                                     |           |   |                        |    |   |                    |   |         |   |  |   |          
|Les V. Starr EVP,Operations and Information Technology         |  | 2006 |   |  | $       | 226,874 |   |        |   |   |              | $ | 53,829  |               |  | $ | 70,395                                |   |  | $                                                                   | 100,393   |   |                        |   |   |                    | $ | 34,818  |   |  | $ | 486,309   |  
|                                                               |  |      |   |  |         |         |   |        |    |   |              |   |         |               |  |   |                                       |   |  |                                                                     |           |   |                        |    |   |                    |   |         |   |  |   |          
|                                                               |  |      |   |  |         |         |   |        |    |   |              |   |         |               |  |   |                                       |   |  |                                                                     |           |   |                        |    |   |                    |   |         |   |  |   |          



|(1) | The amounts set out in column (a) reflect the base salary earned by each NEO during the year. See page 74 of this Annual Report on Form 10-K for a discussion of how base salary was
determined and its interrelationship with the other components of our executive compensation plan.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Payments under the Companys Annual Incentive Plan are reported in the Non-Equity Plan column (g), not the Bonus column (d), in accordance with SEC requirements.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The values noted in columns (e) and (f) represent the value of stock option and restricted stock awards based on the FAS 123R value recognized for financial statement purposes to
the NEO in 2006, which includes amounts that were awarded prior to 2006. See page 59 for a description of the 1998 Directors Stock Option Plan, the 1998 Employee Stock Option Plan, the 2002 Stock Option Plan and the 2004 Restricted Stock Plan. The
following table contains awards by year of grant, which comprise the totals of columns (e) and (f).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                  |  |      |         |      |   |         |  |       |        |  |   |        
|----------------- |  | ---- | ------- | ---- | - | ------- |  | ----- | ------ |  | - | -------
|                  |  | 2006 |         | 2005 |   | 2004    |  | Total
|Marty E. Adams    |  |      |         |      |   |         |  |       |        |  |   |        
|Stock Options     |  | $    | 209,797 |      | $ |        |  |       |       |  | $ | 209,797
|Stock Awards      |  |      | 378,708 |      |   | 230,532 |  |       |       |  |   | 609,239
|Total:            |  | $    | 588,505 |      | $ | 230,532 |  |       |       |  | $ | 819,036
|                  |  |      |         |     
|Kevin T. Thompson |  |      |         |      |   |         |  |       |        |  |   |        
|Stock Options     |  | $    | 10,471  |      | $ | 11,471  |  | $     | 20,980 |  | $ | 42,922 
|Stock Awards      |  |      | 33,522  |      |   | 21,715  |  |       |       |  |   | 55,237 
|Total:            |  | $    | 43,993  |      | $ | 33,186  |  | $     | 20,980 |  | $ | 98,159 



78



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The following table contains awards by year of grant, which comprise the totals of columns (e) and (f). (continued)



|                  |  |      |        |      |   |        |  |       |        |  |   |        
|----------------- |  | ---- | ------ | ---- | - | ------ |  | ----- | ------ |  | - | -------
|                  |  | 2006 |        | 2005 |   | 2004   |  | Total
|Frank J. Koch     |  |      |        |      |   |        |  |       |        |  |   |        
|Stock Options     |  | $    | 8,805  |      | $ | 12,257 |  | $     | 14,945 |  | $ | 36,007 
|Stock Awards      |  |      | 28,189 |      |   | 7,734  |  |       |       |  |   | 35,923 
|Total:            |  | $    | 36,994 |      | $ | 19,991 |  | $     | 14,945 |  | $ | 71,929 
|W. Granger Souder |  |      |        |      |   |        |  |       |        |  |   |        
|Stock Options     |  | $    | 3,761  |      | $ | 4,086  |  | $     | 14,945 |  | $ | 22,792 
|Stock Awards      |  |      | 12,041 |      |   | 23,202 |  |       |       |  |   | 35,243 
|Total:            |  | $    | 15,802 |      | $ | 27,288 |  | $     | 14,945 |  | $ | 58,035 
|Les V. Starr      |  |      |        |      |   |        |  |       |        |  |   |        
|Stock Options     |  | $    | 43,194 |      | $ | 12,257 |  | $     | 14,945 |  | $ | 70,395 
|Stock Awards      |  |      | 46,095 |      |   | 7,734  |  |       |       |  |   | 53,829 
|Total:            |  | $    | 89,289 |      | $ | 19,991 |  | $     | 14,945 |  | $ | 124,224

The assumptions underlying the Black-Scholes valuation of the Stock Options/Restricted Stock awarded can be found on page
41.



|(4) | See page 74 for a description of the Annual Incentive Plan.
|--- | -----------------------------------------------------------

|(5) | The Company does not maintain any defined benefit or actuarial pension plans for NEOs. The Company does not pay or provide any above-market earnings on deferred compensation.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | The values noted in column (i) reflect the value provided by Company-paid life insurance, tax-gross-up payments for disability insurance, Company matching, profit sharing and ESOP
contributions received under the Sky Financial Group, Inc. Profit Sharing, 401(k) and ESOP Plan, Company matching, profit sharing and ESOP contributions received under the Sky Financial Group, Inc. Non-Qualified Retirement Plan, and perquisites, and
are detailed as follows:
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table provides a detailed accounting of the benefits and perquisites included in the All
Other Compensation column of the Summary Compensation Table shown on page 78:

Other Compensation Table



|                       |  |      |  |                       |       |                             |   |              |  |                                                        |  |                                                            |        |                            |   |                              |  |       |        |  |   |        |  |   |        
|---------------------- |  | ---- |  | --------------------- | ----- | --------------------------- | - | ------------ |  | ------------------------------------------------------ |  | ---------------------------------------------------------- | ------ | -------------------------- | - | ---------------------------- |  | ----- | ------ |  | - | ------ |  | - | -------
|                       |  | Year |  | LifeInsurancePremiums |       | DisabilityInsurancePremiums |   | TaxGross-Ups |  | QualifiedPlanMatching,Profit Shareand ESOPContribution |  | Non-QualifiedPlanMatching,Profit Shareand ESOPContribution |        | DividendsonRestrictedStock |   | Perquisitesand OtherBenefits |  | Total
|Marty E. Adams         |  | 2006 |  | $                     | 3,112 |                             | $ | 9,296        |  | 2,780                                                  |  | $                                                          | 24,200 |                            | $ | 206,433                      |  | $     | 38,985 |  | $ | 16,523 |  | $ | 301,329
|Kevin T. Thompson      |  | 2006 |  | $                     | 1,088 |                             | $ | 1,249        |  | 514                                                    |  | $                                                          | 24,200 |                            | $ | 51,270                       |  | $     | 4,602  |  |   |       |  | $ | 82,924 
|Frank J. Koch          |  | 2006 |  | $                     | 1,172 |                             | $ | 925          |  | 374                                                    |  | $                                                          | 24,200 |                            | $ | 29,103                       |  | $     | 2,529  |  | $ | 3,912  |  | $ | 62,215 
|W. Granger Souder, Jr. |  | 2006 |  | $                     | 480   |                             | $ | 921          |  | 374                                                    |  | $                                                          | 24,200 |                            | $ | 33,795                       |  | $     | 3,964  |  | $ | 6,789  |  | $ | 70,524 
|Les V. Starr           |  | 2006 |  | $                     | 2,084 |                             | $ | 885          |  | 360                                                    |  | $                                                          | 24,200 |                            | $ | 5,365                        |  | $     | 1,925  |  |   |       |  | $ | 34,818 

The Named Executive Officers receive various perquisites provided by or paid for by the Company pursuant to Company policies
or individual agreements with the executive. SEC rules require disclosure of the perquisites and other personal benefits, securities or property for a Named Executive Officer unless the amount of that type of compensation is less than $10,000 in the
aggregate.



79



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##### Table of Contents

Perquisites Table



|                       |  |                  |        |                            |   |                                                    |  |   |       
|---------------------- |  | ---------------- | ------ | -------------------------- | - | -------------------------------------------------- |  | - | ------
|Name                   |  | Country ClubDues |        | CompanyProvidedAutomobiles |   | Total PerquisitesIncluded in AllOther Compensation
|(a)                    |  | (b)              |        | (c)                        |   | (d)                                               
|Marty E. Adams         |  | $                | 15,132 |                            | $ | 1,391                                              |  | $ | 16,523
|Kevin T. Thompson      |  |                  |       |                            |   |                                                   |  |   |      
|Frank J. Koch          |  | $                | 3,912  |                            |   |                                                   |  | $ | 3,912 
|W. Granger Souder, Jr. |  | $                | 6,789  |                            |   |                                                   |  | $ | 6,789 
|Les V. Starr           |  |                  |       |                            |   |                                                   |  |   |      

Footnotes to the Perquisites Table: Column (c)-The valuation of the company provided automobiles was
calculated as follows: current year depreciation expense for the Company owned automobile plus all costs incurred related to the automobile (including, but not limited to, the cost of insurance, gas, car washes, repairs, and registration and
inspection fees) less the Companys mileage reimbursement allowance for business miles driven by employees who use their own automobile for business purposes. The valuation for all other perquisites shown above is the actual cost to the
Company.



|(7) | The values noted in column (j) reflect the dollar value of the NEOs total compensation for 2006 (e.g., the sum of columns (c) through (i)).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------

The foregoing Summary Compensation Table and its sub-tables do not include certain fringe benefits generally made available on a non-discriminatory basis to all of our salaried
employees such as group health insurance, dental insurance, vision insurance, life insurance, accidental death and dismemberment insurance and long-term disability insurance, which we consider to be ordinary and incidental business costs and
expenses.

Supplemental Narrative

Employment Agreements

The Company entered into an employment agreement with Mr. Adams on March 1, 2004, in replacement of an employment agreement from 1998. The agreement is for an initial
three-year term and automatically renews for an additional one year upon each anniversary of the agreement commencing with the first such anniversary, unless either party gives the other advance notice that it does not intend to renew the agreement.
The agreement provides for an initial base salary of $725,000 for Mr. Adams, which may not be reduced during the term of the agreement. Mr. Adams is eligible to receive an annual target bonus under the Companys management incentive
program equal to at least 50% of such base salary. The agreement also provides for long-term incentive equity-based compensation equal to at least 50% of such base salary. Long-term incentive equity-based compensation in excess of that level shall
vary based upon the Companys and Mr. Adams annual performance. The agreement also provides for the participation in certain benefit plans and programs on a basis no less favorable than any other senior executive of the Company.

Citizens Bancshares, Inc., the Companys predecessor, entered into an employment agreement with Mr. Koch, which was assumed by the Company
as a result of the 1998 merger that formed Sky Financial. The agreement is automatically extended for additional two-year periods on each anniversary of the agreement, unless the Company gives notice of non-renewal. The agreement provides for a base
salary at least equal to the annual salary paid in the preceding year, a bonus at the discretion of the Company, and participation in the Companys profit sharing, health and welfare plans on a basis consistent with other Company executives. In
the event of the termination of the executives employment by the Company without cause (as defined in the agreement), the officer is entitled to the continuation of base salary and discretionary bonus compensation for the remainder
of the term of the agreement, in addition to the continuation of participation in the Companys profit sharing and health and welfare benefit plans on a basis consistent with other Company executives for the remainder of the term. The agreement
further contains non-competition and confidentiality provisions.

The Company has entered into employment agreements with Messrs. Thompson, Souder,
and Starr, which are identical in all material respects. The agreements provide for at-will employment with no specified term. They provide for a specified minimum base salary, which may not be reduced during the period of employment, and for
incentive compensation, benefits and perquisites consistent with those to which similarly situated officers are entitled under the Companys benefit plans.



80



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##### Table of Contents

Grants of Plan-Based Awards



|                       |  |            |  |                                                               |         |                                                       |   |                                                          |  |                                                                |           |                                                 |   |                    |   |  |   |  |        |  |        |  |   |      
|---------------------- |  | ---------- |  | ------------------------------------------------------------- | ------- | ----------------------------------------------------- | - | -------------------------------------------------------- |  | -------------------------------------------------------------- | --------- | ----------------------------------------------- | - | ------------------ | - |  | - |  | ------ |  | ------ |  | - | -----
|                       |  |            |  | Estimated Future Payouts Under Non-Equity Incentive Plans1, 2 |         | Estimated Future Payouts UnderEquity Incentive Plans3 |   | All OtherStockAwards:Numbers of Shares of Stock or Units |  | All
OtherOptionAwards:Numbers of Securities Underlying Options |           | Exerciseor BasePrice
of Option Awards ($/Share)
|Name                   |  | Grant Date |  | Threshold ($) or (#)                                          |         | Target ($) or (#)                                     |   | Maximum ($) or (#)                                       |  | Threshold ($) or (#)                                           |           | Target ($) or (#)                               |   | Maximum ($) or (#) |   |  |  
|                       |  |            |  |                                                               |         |                                                       |   |                                                          | 
|Marty E. Adams         |  |            |  |                                                               |         |                                                       |   |                                                          |  |                                                                |           |                                                 |   |                    |   |  |   |  |        |  |        | 
|                       |  | 1/1/2006   |  | $                                                             | 277,492 |                                                       | $ | 554,983                                                  |  | $                                                              | 1,109,967 |                                                 |  |                    |  |  |  |  |       |  |       |  |   |     
|                       |  | 2/16/2006  |  |                                                               |        |                                                       |   |                                                         |  |                                                                |          |                                                 |  |                    |  |  |  |  | 25,500 |  | 42,500 |  | $ | 26.34
|Kevin T. Thompson      |  |            |  |                                                               |         |                                                       |   |                                                          |  |                                                                |           |                                                 |   |                    |   |  |   |  |        |  |        | 
|                       |  | 1/1/2006   |  | $                                                             | 76,387  |                                                       | $ | 152,774                                                  |  | $                                                              | 305,547   |                                                 |  |                    |  |  |  |  |       |  |       |  |   |     
|                       |  | 2/16/2006  |  |                                                               |        |                                                       |   |                                                         |  |                                                                |          |                                                 |  |                    |  |  |  |  | 3,750  |  | 6,250  |  | $ | 26.34
|Frank J. Koch          |  |            |  |                                                               |         |                                                       |   |                                                          |  |                                                                |           |                                                 |   |                    |   |  |   |  |        |  |        | 
|                       |  | 1/1/2006   |  | $                                                             | 59,322  |                                                       | $ | 118,644                                                  |  | $                                                              | 237,287   |                                                 |  |                    |  |  |  |  |       |  |       |  |   |     
|                       |  | 2/16/2006  |  |                                                               |        |                                                       |   |                                                         |  |                                                                |          |                                                 |  |                    |  |  |  |  | 2,625  |  | 4,375  |  | $ | 26.34
|W. Granger Souder, Jr. |  |            |  |                                                               |         |                                                       |   |                                                          |  |                                                                |           |                                                 |   |                    |   |  |   |  |        |  |        | 
|                       |  | 1/1/2006   |  | $                                                             | 59,029  |                                                       | $ | 118,058                                                  |  | $                                                              | 236,115   |                                                 |  |                    |  |  |  |  | 2,625  |  |       |  |   |     
|                       |  | 2/16/2006  |  |                                                               |        |                                                       |   |                                                         |  |                                                                |          |                                                 |  |                    |  |  |  |  |       |  |       |  |   |     
|Les V. Starr           |  |            |  |                                                               |         |                                                       |   |                                                          |  |                                                                |           |                                                 |   |                    |   |  |   |  |        |  |        | 
|                       |  | 1/1/2006   |  | $                                                             | 56,719  |                                                       | $ | 113,437                                                  |  | $                                                              | 226,874   |                                                 |  |                    |  |  |  |  |       |  |       |  |   |     
|                       |  | 2/16/2006  |  |                                                               |        |                                                       |   |                                                         |  |                                                                |          |                                                 |  |                    |  |  |  |  | 1,750  |  | 8,750  |  | $ | 26.34



|(1) | Non-Equity Incentive Awards were made under the Companys Annual Incentive Plan. On December 22, 2006, awards were paid to Messrs. Thompson, Souder and Koch at the maximum level. On
February 9, 2007, an award was paid to Mr, Starr at slightly below the target level.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The applicable levels of potential payout under the Annual Incentive Plan must be reported in these columns, even though the amount already has been paid.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Stock Options were awarded under the Companys 1998 Directors Stock Option Plan and 2002 Stock Option Plan. The values of these awards are reported seperately on the Summary Compensation
Table.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Supplemental Narrative

Annual Incentive Plan

The Annual Incentive Plan for 2006 is based upon the Companys short term performance as measured by certain financial ratios tied to the Companys
strategic objectives. Specifically, rewards under the plan are tied to four key performance measures: Client Service Quality, Asset Quality, Profitability and Growth. The Annual Incentive Plan provides for a Target incentive award for
Mr. Adams of 70% of base salary, with a maximum of up to 140% of base salary and a Target incentive award for the other NEOs of 50% of base salary, with a maximum of up to 100%. Payouts are based on base salary only. Blue Skies awards, bonuses,
commissions, skill-based pay, and short-term disability earnings are excluded.

Performance goals may be set in any of five general categories:

|n | Corporate goals, which reflect measured results for the corporation and therefore emphasize teamwork and cooperation among all participants.
|- | --------------------------------------------------------------------------------------------------------------------------------------------

|n | Regional goals, which reflect the measured results for a region and therefore focus on results of a specific region.
|- | --------------------------------------------------------------------------------------------------------------------

|n | District goals, which reflect the measured results for a district and therefore focus on results of a specific district.
|- | ------------------------------------------------------------------------------------------------------------------------

|n | Group goals, which reflect the measured results for a group and therefore focus on results of a specific group.
|- | ---------------------------------------------------------------------------------------------------------------

|n | Individual goals, which reflect the measured personal results by a single participant.
|- | --------------------------------------------------------------------------------------

Each
participants total opportunity can be based on any of the above types of goals selected by the CEO, at his sole discretion. The Compensation Committee sets the goals for the CEO. The mix and weighting of the types of goals and/or their use in
determining awards need not be the same for all participants or any group of participants.

Goals will have three general levels of achievement. Award
opportunities for results achieved between these levels will be interpolated. All goals and opportunity levels shall be reviewed and established in light of existing economic conditions and the companys then existing strategic objectives so
that the program retains its purpose of motivating and rewarding employees for producing those realistic, focused results.



|n | Program Threshold describes the minimum result necessary to generate an incentive award.
|- | ------------------------------------------------------------------------------------------

|n | Program Target describes a stretch goal that is set in conjunction with the companys business plan.
|- | ------------------------------------------------------------------------------------------------------

|n | Program Maximum describes outstanding results for which the maximum available incentive awards will be payable.
|- | -----------------------------------------------------------------------------------------------------------------

Linkage has been created between the goals to ensure concentration on all of the performance measures. Performance below threshold of any goal will offset total payout.

For the NEOs other than the CEO, goals may be adjusted during the fiscal year by the CEO, at his sole discretion for circumstances such as
restructuring, acquisitions, and general ledger reclassifications. The CEO also may adjust forecasts if unforeseen negative events affecting performance should occur. Changes to goals are infrequent. The approval of the CEO is required to make any
changes. The CEO also reserves the right to adjust the credit on unusual transactions (windfalls), in his sole discretion, to reflect more appropriately the amount of effort involved. For the CEO, such decisions are made by the
Compensation Committee.



81



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##### Table of Contents

1998 Directors Stock Option Plan

Under
the Companys 1998 Directors Stock Option Plan, as amended, 2% of the Companys outstanding common stock is reserved for issuance for awards to Directors. In 2006, we issued options for shares of our common stock under this plan to
Mr. Adams, which were vested immediately Mr. Adams is the only employee who has received stock options under this plan, due to his position as Chairman of the Board of Directors.

1998 Employee Stock Option Plan

Under the Companys 1998 Employee Stock Option
Plan, 5 1/2% of the Companys outstanding common stock is reserved for issuance of awards to employees.

In 2006, we issued options for the
shares of our common stock under our 1998 Employee Option Plan to Messrs. Thompson, Koch, Souder and Starr, each as indicated in the table on page 82. The options granted to Messrs. Thompson, Koch, Souder and Starr vest in installments over a period
of five years. All options would become fully vested and exercisable upon the Merger.

2002 Stock Option Plan

Under our 2002 Stock Option Plan, 2,046,178 shares of our common stock were reserved for issuance in connection with stock options and/or stock appreciation rights awards that may
be granted under the plan. As of December 31, 2006, 1,479,805 shares of common stock remain available for awards.

2004 Restricted Stock Plan

Under our 2004 Restricted Stock Plan, 800,000 shares of our common stock have been reserved for issuance in connection with restricted stock awards that may be granted under the
plan. As of December 31, 2006, 722,408 shares of common stock remain available for awards.

In 2006, we issued restricted stock under our 2004
Restricted Stock Plan to Messrs. Adams, Thompson Koch, Souder and Starr as indicated in the table on page 82. The restricted stock granted to Messrs. Adams, Thompson, Koch, Souder and Starr vests in installments over a period of five years. All
restricted stock would become fully vested upon the Merger.

Outstanding Equity Awards at Year-End



|                  |  |            |  |      |  |                                                            |  |                                                               |  |                                                                                    |  |                         |  |                      |  |                                                     |  |                                                            |  |                                                                                               |  |                                                                                                              
|----------------- |  | ---------- |  | ---- |  | ---------------------------------------------------------- |  | ------------------------------------------------------------- |  | ---------------------------------------------------------------------------------- |  | ----------------------- |  | -------------------- |  | --------------------------------------------------- |  | ---------------------------------------------------------- |  | --------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------
|                  |  |            |  |      |  |                                                            |  | Option Awards                                                 |  |                                                                                    |  |                         |  | Stock Awards        
|Name              |  | Grant Date |  | Plan |  | Number ofSecuritiesUnderlyingUnexercisedOptionsExercisable |  | Number ofSecuritiesUnderlyingUnexercisedOptionsUnexercisable1 |  | EquityIncentivePlan Awards:Number ofSecuritiesUnderlyingUnexercisedUnearnedOptions |  | OptionExercisePrice ($) |  | OptionExpirationDate |  | Numberof sharesor units ofstockthat havenot vested2 |  | Marketvalue ofshares orunits ofstock thathave notvested($) |  | EquityIncentivePlan Awards:Number ofunearnedshares,
units or other rightsthat have not vested |  | EquityIncentivePlan Awards:Market orpayout valueof
unearnedshares, units or other righ ts that havenot vested
|Marty E. Adams    |  |            |  |      |  |                                                            |  |                                                               |  |                                                                                    |  |                         |  |                      |  |                                                     |  |                                                            |  |                                                                                              
|                  |  | 1/1/1998   |  | CB01 |  | 1,552                                                      |  |                                                              |  |                                                                                   |  | 27.05                   |  | 1/1/2008             |  |                                                    |  |                                                           |  |                                                                                              |  |                                                                                                             
|                  |  | 1/1/1998   |  | CB01 |  | 1,552                                                      |  |                                                              |  |                                                                                   |  | 27.05                   |  | 1/1/2008             |  |                                                    |  |                                                           |  |                                                                                              |  |                                                                                                             
|                  |  | 11/18/1998 |  | 98EG |  | 53,240                                                     |  |                                                              |  |                                                                                   |  | 23.67                   |  | 11/17/2008           |  |                                                    |  |                                                           |  |                                                                                              |  |                                                                                                             
|                  |  | 12/30/1998 |  | 98EE |  | 11,691                                                     |  |                                                              |  |                                                                                   |  | 21.38                   |  | 12/29/2008           |  |                                                    |  |                                                           |  |                                                                                              |  |                                                                                                             
|                  |  | 12/30/1999 |  | 98EE |  | 15,030                                                     |  |                                                              |  |                                                                                   |  | 18.30                   |  | 12/29/2009           |  |                                                    |  |                                                           |  |                                                                                              |  |                                                                                                             
|                  |  | 1/19/2000  |  | 98EG |  | 44,000                                                     |  |                                                              |  |                                                                                   |  | 17.22                   |  | 1/18/2010            |  |                                                    |  |                                                           |  |                                                                                              |  |                                                                                                             
|                  |  | 9/20/2000  |  | 98EG |  | 17,600                                                     |  |                                                              |  |                                                                                   |  | 15.45                   |  | 9/20/2010            |  |                                                    |  |                                                           |  |                                                                                              |  |                                                                                                             
|                  |  | 12/29/2000 |  | 98EE |  | 9,850                                                      |  |                                                              |  |                                                                                   |  | 16.75                   |  | 12/29/2010           |  |                                                    |  |                                                           |  |                                                                                              |  |                                                                                                             
|                  |  | 3/21/2001  |  | 98NE |  | 50,000                                                     |  |                                                              |  |                                                                                   |  | 16.80                   |  | 3/21/2011            |  |                                                    |  |                                                           |  |                                                                                              |  |                                                                                                             
|                  |  | 12/31/2001 |  | 98NE |  | 8,042                                                      |  |                                                              |  |                                                                                   |  | 20.34                   |  | 12/31/2011           |  |                                                    |  |                                                           |  |                                                                                              |  |                                                                                                             
|                  |  | 3/20/2002  |  | 98NE |  | 75,000                                                     |  |                                                              |  |                                                                                   |  | 21.99                   |  | 3/19/2012            |  |                                                    |  |                                                           |  |                                                                                              |  |                                                                                                             
|                  |  | 2/19/2003  |  | 98NE |  | 75,000                                                     |  |                                                              |  |                                                                                   |  | 19.82                   |  | 2/18/2013            |  |                                                    |  |                                                           |  |                                                                                              |  |                                                                                                             
|                  |  | 3/17/2004  |  | 98NE |  | 133,000                                                    |  |                                                              |  |                                                                                   |  | 25.45                   |  | 3/17/2014            |  |                                                    |  |                                                           |  |                                                                                              |  |                                                                                                             
|                  |  | 2/16/2005  |  | 98NE |  | 38,750                                                     |  |                                                              |  |                                                                                   |  | 27.80                   |  | 2/16/2015            |  |                                                    |  |                                                           |  |                                                                                              |  |                                                                                                             
|                  |  | 2/16/2006  |  | 98NE |  | 42,500                                                     |  |                                                              |  |                                                                                   |  | 26.34                   |  | 2/16/2016            |  |                                                    |  |                                                           |  |                                                                                              |  |                                                                                                             
|                  |  | 2/16/2005  |  | 05RS |  |                                                           |  |                                                              |  |                                                                                   |  |                        |  |                     |  | 23,250                                              |  | 663,555                                                    |  |                                                                                              |  |                                                                                                             
|                  |  | 2/16/2006  |  | 05RS |  |                                                           |  |                                                              |  |                                                                                   |  |                        |  |                     |  | 25,500                                              |  | 727,770                                                    |  |                                                                                              |  |                                                                                                             
|Total             |  |            |  |      |  | 576,807                                                    |  |                                                              |  |                                                                                   |  |                        |  |                     |  | 48,750                                              |  | 1,391,325                                                  |  |                                                                                              |  |                                                                                                             
|Kevin T. Thompson |  |            |  |      |  |                                                            |  |                                                               |  |                                                                                    |  |                         |  |                      |  |                                                     |  |                                                            |  |                                                                                              
|                  |  | 3/20/2002  |  | 98EG |  |                                                           |  | 4,380                                                         |  |                                                                                   |  | 21.99                   |  | 3/19/2012            |  |                                                    |  |                                                           |  |                                                                                              |  |                                                                                                             
|                  |  | 11/14/2002 |  | 98EG |  |                                                           |  |                                                              |  |                                                                                   |  | 18.70                   |  | 11/13/2012           |  |                                                    |  |                                                           |  |                                                                                              |  |                                                                                                             
|                  |  | 2/19/2003  |  | 98EG |  |                                                           |  | 8,760                                                         |  |                                                                                   |  | 19.82                   |  | 2/18/2013            |  |                                                    |  |                                                           |  |                                                                                              |  |                                                                                                             
|                  |  | 3/17/2004  |  | 98EG |  |                                                           |  | 13,140                                                        |  |                                                                                   |  | 25.45                   |  | 3/17/2014            |  |                                                    |  |                                                           |  |                                                                                              |  |                                                                                                             
|                  |  | 2/16/2005  |  | 98EG |  |                                                           |  | 10,950                                                        |  |                                                                                   |  | 27.80                   |  | 2/16/2015            |  |                                                    |  |                                                           |  |                                                                                              |  |                                                                                                             
|                  |  | 2/16/2006  |  | 98EG |  |                                                           |  | 6,250                                                         |  |                                                                                   |  | 26.34                   |  | 2/16/2016            |  |                                                    |  |                                                           |  |                                                                                              |  |                                                                                                             
|                  |  | 2/16/2005  |  | 05RS |  |                                                           |  |                                                              |  |                                                                                   |  |                        |  |                     |  | 2,190                                               |  | 62,503                                                     |  |                                                                                              |  |                                                                                                             
|                  |  | 2/16/2006  |  | 05RS |  |                                                           |  |                                                              |  |                                                                                   |  |                        |  |                     |  | 3,750                                               |  | 107,025                                                    |  |                                                                                              |  |                                                                                                             
|Total             |  |            |  |      |  |                                                           |  | 43,480                                                        |  |                                                                                   |  |                        |  |                     |  | 5,940                                               |  | 169,528                                                    |  |                                                                                              |  |                                                                                                             



82



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##### Table of Contents

Outstanding Equity Awards at Year-End (continued)



|                       |  |              |  |      |  |                                                            |  |                                                                |  |                                                                                   |  |                         |  |                      |  |                                                   |  |                                                             |  |                                                                                         |  |                                                                                                       
|---------------------- |  | ------------ |  | ---- |  | ---------------------------------------------------------- |  | -------------------------------------------------------------- |  | --------------------------------------------------------------------------------- |  | ----------------------- |  | -------------------- |  | ------------------------------------------------- |  | ----------------------------------------------------------- |  | --------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------
|Option Awards          |  | Stock Awards
|Name                   |  | Grant Date   |  | Plan |  | Number ofSecuritiesUnderlyingUnexercisedOptionsExercisable |  | Number ofSecuritiesUnderlyingUnexercisedOptionsUnexercisable 1 |  | EquityIncentivePlanAwards:Number ofSecuritiesUnderlyingUnexercisedUnearnedOptions |  | OptionExercisePrice ($) |  | OptionExpirationDate |  | Numberofsharesor unitsof stockthathavenotvested 2 |  | Marketvalue ofshares orunits ofstock thathave notvested ($) |  | EquityIncentivePlanAwards:Numberofunearnedshares,units
orotherrightsthat havenot vested |  | EquityIncentivePlanAwards:Market orpayoutvalue ofunearnedshares,units orotherrights
thathavenot vested
|Frank J. Koch          |  |              |  |      |  |                                                            |  |                                                                |  |                                                                                   |  |                         |  |                      |  |                                                   |  |                                                             |  |                                                                                        
|                       |  | 1/1/1998     |  | CB01 |  | 700                                                        |  |                                                               |  |                                                                                  |  |                         |  |                      |  |                                                   |  |                                                             |  |                                                                                         |  |                                                                                                       
|                       |  | 1/1/1998     |  | CB01 |  | 700                                                        |  |                                                               |  |                                                                                  |  | 27.05                   |  | 1/1/2008             |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 12/30/1998   |  | 98EE |  | 3,741                                                      |  |                                                               |  |                                                                                  |  | 27.05                   |  | 12/29/2008           |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 9/20/2000    |  | 98EG |  | 4,400                                                      |  |                                                               |  |                                                                                  |  | 15.45                   |  | 9/20/2010            |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 12/29/2000   |  | 98EE |  | 3,582                                                      |  |                                                               |  |                                                                                  |  | 16.75                   |  | 12/29/2010           |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 12/31/2001   |  | 98EE |  | 3,446                                                      |  |                                                               |  |                                                                                  |  | 20.34                   |  | 12/31/2011           |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 3/20/2002    |  | 98EG |  | 12,480                                                     |  | 3,120                                                          |  |                                                                                  |  | 21.99                   |  | 3/19/2012            |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 2/19/2003    |  | 98EG |  | 9,360                                                      |  | 6,240                                                          |  |                                                                                  |  | 19.82                   |  | 2/18/2013            |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 3/17/2004    |  | 98EG |  | 6,240                                                      |  | 9,360                                                          |  |                                                                                  |  | 25.45                   |  | 3/17/2014            |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 2/16/2005    |  | 98EG |  |                                                           |  | 11,700                                                         |  |                                                                                  |  | 27.80                   |  | 2/16/2015            |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 2/16/2006    |  | 98EG |  |                                                           |  | 4,375                                                          |  |                                                                                  |  | 26.34                   |  | 2/16/2016            |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 2/16/2005    |  | 05RS |  |                                                           |  |                                                               |  |                                                                                  |  |                        |  |                     |  | 780                                               |  | 22,261                                                      |  |                                                                                        |  |                                                                                                      
|                       |  | 2/16/2006    |  | 05RS |  |                                                           |  |                                                               |  |                                                                                  |  |                        |  |                     |  | 2,625                                             |  | 74,918                                                      |  |                                                                                        |  |                                                                                                      
|Total                  |  |              |  |      |  | 44,649                                                     |  | 34,795                                                         |  |                                                                                  |  |                        |  |                     |  | 3,405                                             |  | 97,179                                                      |  |                                                                                        |  |                                                                                                      
|W. Granger Souder, Jr. |  |              |  |      |  |                                                            |  |                                                                |  |                                                                                   |  |                         |  |                      |  |                                                   |  |                                                             |  |                                                                                        
|                       |  | 12/30/1998   |  | 98EE |  | 3,697                                                      |  |                                                               |  |                                                                                  |  | 21.38                   |  | 12/29/2008           |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 12/30/1999   |  | 98EE |  | 4,782                                                      |  |                                                               |  |                                                                                  |  | 18.30                   |  | 12/29/2009           |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 12/29/2000   |  | 98EE |  | 597                                                        |  |                                                               |  |                                                                                  |  | 16.75                   |  | 12/29/2010           |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 12/31/2001   |  | 98EE |  | 1,148                                                      |  |                                                               |  |                                                                                  |  | 20.34                   |  | 12/31/2011           |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 3/20/2002    |  | 98EG |  | 12,480                                                     |  | 3,120                                                          |  |                                                                                  |  | 21.99                   |  | 3/19/2012            |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 11/14/2002   |  | 98EG |  | 1,385                                                      |  |                                                               |  |                                                                                  |  | 18.70                   |  | 11/13/2012           |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 2/19/2003    |  | 98EG |  | 9,360                                                      |  | 6,240                                                          |  |                                                                                  |  | 19.82                   |  | 2/18/2013            |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 3/17/2004    |  | 98EG |  | 6,240                                                      |  | 9,360                                                          |  |                                                                                  |  | 25.45                   |  | 3/17/2014            |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 2/16/2005    |  | 98EG |  |                                                           |  | 3,900                                                          |  |                                                                                  |  | 27.80                   |  | 2/16/2015            |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 2/16/2006    |  | 98EG |  |                                                           |  | 4,375                                                          |  |                                                                                  |  | 26.34                   |  | 2/16/2016            |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 2/16/2005    |  | 05RS |  |                                                           |  |                                                               |  |                                                                                  |  |                        |  |                     |  | 2,340                                             |  | 66,784                                                      |  |                                                                                        |  |                                                                                                      
|                       |  | 2/16/2006    |  | 05RS |  |                                                           |  |                                                               |  |                                                                                  |  |                        |  |                     |  | 2,625                                             |  | 74,918                                                      |  |                                                                                        |  |                                                                                                      
|Total                  |  |              |  |      |  | 39,688                                                     |  | 26,995                                                         |  |                                                                                  |  |                        |  |                     |  | 4,965                                             |  | 141,701                                                     |  |                                                                                        |  |                                                                                                      
|Les V. Starr           |  |              |  |      |  |                                                            |  |                                                                |  |                                                                                   |  |                         |  |                      |  |                                                   |  |                                                             |  |                                                                                        
|                       |  | 4/1/2002     |  | 98EG |  | 12,000                                                     |  | 3,000                                                          |  |                                                                                  |  | 22.29                   |  | 3/31/2012            |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 2/19/2003    |  | 98EG |  | 9,360                                                      |  | 6,240                                                          |  |                                                                                  |  | 19.82                   |  | 2/18/2013            |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 3/17/2004    |  | 98EG |  | 6,240                                                      |  | 9,360                                                          |  |                                                                                  |  | 25.45                   |  | 3/17/2014            |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 2/16/2005    |  | 98EG |  |                                                           |  | 11,700                                                         |  |                                                                                  |  | 27.80                   |  | 2/16/2015            |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 2/16/2006    |  | 98EG |  |                                                           |  | 8,750                                                          |  |                                                                                  |  | 26.34                   |  | 2/16/2016            |  |                                                  |  |                                                            |  |                                                                                        |  |                                                                                                      
|                       |  | 2/16/2005    |  | 05RS |  |                                                           |  |                                                               |  |                                                                                  |  |                        |  |                     |  | 780                                               |  | 22,261                                                      |  |                                                                                        |  |                                                                                                      
|                       |  | 2/16/2006    |  | 05RS |  |                                                           |  |                                                               |  |                                                                                  |  |                        |  |                     |  | 1,750                                             |  | 49,945                                                      |  |                                                                                        |  |                                                                                                      
|Total                  |  |              |  |      |  | 27,600                                                     |  | 39,050                                                         |  |                                                                                  |  |                        |  |                     |  | 2,530                                             |  | 72,206                                                      |  |                                                                                        |  |                                                                                                      



|(1) | Unexercisable options vest according to the following schedule: 40% on the second anniversary of the date of grant, and an additional 20% vesting on each of the third, fourth and fifth
anniveraries of the date of grant. All outstanding awards would become fully vested upon the consummation of the Merger.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Unvested shares of restricted stock vest according to the following schedule: 40% on the second anniversary of the date award, and an additional 20% vesting on each of the third, fourth and
fifth anniversary of the date of award. All outstanding awards would become fully vested upon the consumation of the Merger.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Option Exercises and Stock Vested



|                        |  |                                      |  |                           |           |                                     |   |                          |  
|----------------------- |  | ------------------------------------ |  | ------------------------- | --------- | ----------------------------------- | - | ------------------------ | -
|                        |  | Option Awards                        |  | Stock Awards             
|Name                    |  | Number of SharesAcquired on Exercise |  | Value Realizedon Exercise |           | Number of SharesAcquired on Vesting |   | Value Realizedon Vesting
|Marty E. Adams1         |  | 5,828                                |  | $                         | 166,215   |                                     |  |                          | 
|Kevin T. Thompson2      |  | 130,154                              |  |                           | 3,691,193 |                                     |  |                          | 
|Frank J. Koch2          |  | 53,762                               |  |                           | 1,532,623 |                                     |  |                          | 
|W. Granger Souder, Jr.2 |  | 58,388                               |  |                           | 1,655,259 |                                     |  |                          | 
|Les V. Starr            |  |                                     |  |                           |          |                                     |  |                          | 

|(1) | The awards were made under the 1998 Directors Stock Option Plan, as amended.
|--- | ----------------------------------------------------------------------------

|(2) | The awards were made under the 1998 Employee Stock Option Plan and the 2002 Stock Option Plan.
|--- | ----------------------------------------------------------------------------------------------

Pension Benefits

The Company does not maintain a qualified or non-qualified pension plan.

Non-Qualified Deferred Compensation1



|                       |  |                                   |         |                                    |   |                             |  |                                    |        |                               |   |  |   |          
|---------------------- |  | --------------------------------- | ------- | ---------------------------------- | - | --------------------------- |  | ---------------------------------- | ------ | ----------------------------- | - |  | - | ---------
|                       |  | ExecutiveContributionsin Last FY2 |         | RegistrantContributionsin Last FY3 |   | AggregateEarningsin LastFY4 |  | AggregateWithdrawals/Distributions |        | AggregateBalance at atLast FY
|Marty E. Adams         |  | $                                 | 177,132 |                                    | $ | 206,433                     |  | $                                  | 35,410 |                               |  |  | $ | 1,950,894
|Kevin T. Thompson      |  |                                   | 21,188  |                                    |   | 51,270                      |  |                                    | 10,743 |                               |  |  |   | 465,594  
|Frank J. Koch          |  |                                   | 85,091  |                                    |   | 29,103                      |  |                                    | 37,947 |                               |  |  |   | 241,223  
|W. Granger Souder, Jr. |  |                                   | 11,913  |                                    |   | 33,795                      |  |                                    | 81,926 |                               |  |  |   | 488,635  
|Les V. Starr           |  |                                   | 20,227  |                                    |   | 5,365                       |  |                                    | 11,776 |                               |  |  |   | 460,759  



|(1) | All contributions are under the Sky Financial Group, Inc. Non-Qualified Retirement Plan I or the Sky Financial Group, Inc. Non-Qualified Retirement Plan II, described below.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Note that the amount of each NEOs contributions also is included in either the Salary or the Non-Equity Incentive Compensation column of the Summary Compensation
Table on page 78. The contribution is made from and reduces the NEOs Salary or Non-Equity Incentive Compensation.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

It is not in
addition to those amounts.

|(3) | Note that the amount of the Registrants contributions also is included in the All Other Compensation column of the Summary Compensation Table on page 78. These contributions
are not in addition to the amount reported there.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | The Plan does not provide for above-market interest.
|--- | ----------------------------------------------------

Supplemental Narrative

Sky maintains the Sky Financial Group, Inc. Non-Qualified Retirement Plan I, and the Sky Financial Group, Inc. Non-Qualified Retirement Plan II for NEOs and other
employees who want to contribute in excess of the IRS limits. These two Non-Qualified Plans are nearly identical, except that Plan I was frozen to qualify for grandfather treatment under Code Section 409A and Plan II was drafted to comply with Code
Section 409A.

Non-Qualified Retirement Plans I and II each mirror the construct and design of the qualified Sky Financial Group, Inc. Profit Sharing,
401(k) and ESOP Plan, as the Non-Qualified Retirement Plans are an extension of the qualified plan for an NEOs cash compensation above the IRS earnings limit. In 2006, this limit was $220,000. For example, NEOs and other participants in the
Non-Qualified Retirement Plans could receive a Company contribution equal to 3% of their cash compensation above the earnings limit under the ESOP portion of Non-Qualified Retirement Plan; a Company matching contribution of 100% of the first 3%
contributed by the participant and 50% of the next 2% contributed above the wage limit under the 401(k) supplemental portion of the Non-Qualified Retirement Plan; and, depending on actual profit levels, a supplemental Company contribution equal to
0% to 8% (the same as provided under the qualified Profit Sharing, 401(k) and ESOP Plan) of the participants cash compensation above the earnings limit under the supplemental profit sharing portion of the Non-Qualified Retirement Plan.

Under the Plans, Company contributions are based on Compensation, which means a participants salary and bonus payable in any
calendar year. Under the Plans, Bonus means the additional cash remuneration payable to a participant annually pursuant to the Annual Incentive Plan. Under the Plans, the NEOs (and other participants) can elect to make pre-tax
contributions above the IRS limits ($15,000 for 2006) from their Additional Remuneration, which means the Bonus and any additional cash remuneration payable to a participant annually pursuant to a performance compensation program or any
other plan, program or arrangement under which the Company pays an amount of cash remuneration to a participant above such participants salary.

All Sky contributions, as well as deferral contributions elected by the participants are deemed invested, according to the participants direction, in the same fund choices as are made available under Skys qualified Profit
Sharing, 401(k) and ESOP Plan. These contributions and the investment earnings, if any, do not result in taxable income to the participants until they receive a distribution, generally following the participants retirement or other termination
of employment. A portion of the Sky and participant contributions are held in a rabbi trust, under which the entire balance remains subject to the claims of Skys general creditors. Under these plans, Sky accrues a liability equal to the plan
balances and receives a tax deduction only when payments are made out of these plans, which are anticipated to be at retirement typically. Sky is subject to income taxes on income earned on these investments as well as capital gains treatment when
sold.



84



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##### Table of Contents

The ESOP contribution equals 3% of cash compensation above the IRS wage limit of $220,000 and is paid in Sky Stock.
The 401(k) provides a 100% match on the first 3% of cash compensation deferred and a 50% match on the next 2% of cash compensation deferred, or 4% of cash compensation taking into account all compensation. There is also a profit sharing contribution
and the amount varies directly with Sky profits and can range from 0% to 8% of cash compensation above the IRS wage limit of $220,000. The Non-Qualified Plans provide investment alternatives in the following catagories: Sky stock, large cap, small
cap, income and growth funds.

Potential Payments Upon Termination or Change In Control

The Companys Named Executive Officers are each a party to an employment agreement that provides for certain salary and benefits upon termination of employment under various scenarios. The agreements are all described more
fully in the narrative and tables below.

The tables below set forth the estimated current value of benefits that could be paid to each of our Named
Executive Officers upon various termination events, which would only be known at the time that the benefits become payable. The tables reflect the amounts that could be payable under the various arrangements if the event in question occurred as of
December 31, 2006.

The Named Executive Officers employment agreements do not provide for any additional payments or benefits under a
voluntary termination of employment by the executive or involuntary termination by the Company for cause. Under those scenarios, the Named Executive Officers are only entitled to their accrued and unpaid obligations, such as salary and unused
vacation. The following tables contain common information about the Companys employment aggreements and benefit plans, and policies, as well as, assumptions used by the Company in arriving at the amounts contained in the tables.

Marty E. Adams

The following table shows the potential payments upon termination or
change in control for Marty Adams, our Chairman, President, and is Chief Executive Officer. A description of the employment agreement with Mr. Adams providing the benefits specified in the table below and on page 88.

Potential Payments Upon Termination or Change In Control  Marty E. Adams



|                                              |  |            |        |                               |   |                                           |  |                                 |            |                                                   |   |         |  |             |           |  |   |           |  |   |          
|--------------------------------------------- |  | ---------- | ------ | ----------------------------- | - | ----------------------------------------- |  | ------------------------------- | ---------- | ------------------------------------------------- | - | ------- |  | ----------- | --------- |  | - | --------- |  | - | ---------
|ExecutiveBenefits andPaymentsUpon Termination |  | Retirement |        | Change inControl -Termination |   | Change inControl -ConstructiveTermination |  | Change inControl -NoTermination |            | Good Reasonor InvoluntaryNot for CauseTermination |   | Death6  |  | Disability7
|Compensation:                                 |  |            |        |                               |   |                                           |  |                                 |            |                                                   |   |         |  |             |           |  |   |           |  |   |          
|Base Continuation                             |  |            |       |                               | $ | 2,394,000                                 |  | $                               | 2,394,000  |                                                   | $ |        |  | $           | 1,725,996 |  | $ | 1,596,000 |  | $ | 1,596,000
|Incentive Compensation1                       |  |            |       |                               |   | 3,329,901                                 |  |                                 | 3,329,901  |                                                   |   |        |  |             | 1,208,197 |  |   |          |  |   |         
|Long-Term Incentive                           |  |            |       |                               |   | 2,647,410                                 |  |                                 | 2,647,410  |                                                   |   |        |  |             | 862,998   |  |   |          |  |   |         
|Restricted Stock:                             |  |            |        |                               |   |                                           |  |                                 |            |                                                   |   |         |  |             |           |  |   |           |  |   |          
|Vesting Accelerated2                          |  |            |       |                               |   | 162,760                                   |  |                                 | 162,760    |                                                   |   | 162,760 |  |             |          |  |   |          |  |   |         
|Benefits and Perquisites:                     |  |            |        |                               |   |                                           |  |                                 |            |                                                   |   |         |  |             |           |  |   |           |  |   |          
|Post-Termination Health Care3                 |  | $          | 46,903 |                               |   | 19,510                                    |  |                                 | 19,510     |                                                   |   |        |  |             | 14,066    |  |   |          |  |   | 53,967   
|Supplemental Disability                       |  |            |        |                               |   |                                           |  |                                 |            |                                                   |   |         |  |             |           |  |   |           |  |   |          
|Insurance Premiums                            |  |            |       |                               |   | 36,228                                    |  |                                 | 36,228     |                                                   |   |        |  |             | 26,119    |  |   |          |  |   |         
|Non-Qualified                                 |  |            |        |                               |   |                                           |  |                                 |            |                                                   |   |         |  |             |           |  |   |           |  |   |          
|Retirement Plan4                              |  |            |       |                               |   | 691,899                                   |  |                                 | 691,899    |                                                   |   |        |  |             | 498,837   |  |   |          |  |   |         
|Split Dollar Life Insurance5                  |  |            |       |                               |   | 9,336                                     |  |                                 | 9,336      |                                                   |   |        |  |             | 6,731     |  |   |          |  |   |         
|280G Tax Gross-Up                             |  |            |       |                               |   | 4,896,931                                 |  |                                 | 4,896,931  |                                                   |   |        |  |             |          |  |   |          |  |   |         
|Total:                                        |  | $          | 46,903 |                               | $ | 14,187,975                                |  | $                               | 14,187,975 |                                                   | $ | 162,760 |  | $           | 4,342,944 |  | $ | 1,596,000 |  | $ | 1,649,967



|(1) | In the event that the Company terminates Mr. Adams employment without Cause or if he terminates his employment for Good Reason (each as defined in the employment
agreement and described below), he is entitled to receive the annual bonus for the remaining two years of his employment agreement. If Mr. Adams were terminated for any other reason, he is entitled to receive the bonus due in February 2007
because he was employed on December 31, 2006.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Mr. Adams award agreement under the 2004 Restricted Stock Plan provides for full vesting upon a change in control. These figures were calculated according to the rules applicable
to change in control payments under code section 2806.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | In the event the Company terminates Mr. Adams without Cause or if he terminates his employment for Good Reason, he is entitled to an amount sufficient to pay premiums for medical,
health, disability and life insurance for the remaining two years of his employment agreement. In the case of termination for any other reason, Mr. Adams is not entitled to any additional amounts.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Based on his years of service, Mr. Adams is 100% vested in his benefit under this plan. The amounts reflected represent additional benefit plan contributions he is entitled to receive
under his employment agreement. Upon termination of employment for any reason, Mr. Adams would be entitled to receive a lump sum distribution of his entire account balance under this plan on the first of the month following six months from his
termination of employment. In the case of a change in control that does not result in termination, no benefit is immediately payable.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | The Company maintains a split dollar life insurance policy with Mr. Adams through a third-party insurance company. The Company is the owner of the policy. However, an endorsement exists
that entitles Mr. Adams to receive a death benefit equal to the lesser of three times his base annual salary, or $3 million. If Mr. Adams is terminated following a Change in Control, he can continue the face amount of the policy (minus the
cash surrender value) equal to the greater of the amount set forth in the split dollar policy endorsement or three times his base annual salary, but no greater than $3 million.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Mr. Adams employment agreement provides that if he dies, the Company will provide his base salary and health benefits for two years.
|--- | -------------------------------------------------------------------------------------------------------------------------------------

|(7) | Mr. Adams employment agreement provides that, if he is terminated due to disability, he will continue to receive for two years, his base salary plus health benefits.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Kevin T. Thompson

The following table
shows the potential payments upon termination or change in control for Kevin Thompson, our Executive Vice President, Chief Financial Officer. A description of the employment agreement with Mr. Thompson providing the benefits specified in the
table below are described in more detail beginning on page 89.

Potential Payments Upon Termination or Change In Control  Kevin T. Thompson



|                                                 |  |            |  |                               |           |                                           |   |                                 |  |                                                 |         |       |   |            |  |   |  |  
|------------------------------------------------ |  | ---------- |  | ----------------------------- | --------- | ----------------------------------------- | - | ------------------------------- |  | ----------------------------------------------- | ------- | ----- | - | ---------- |  | - |  | -
|Executive Benefits and Payments Upon Termination |  | Retirement |  | Change inControl -Termination |           | Change inControl -ConstructiveTermination |   | Change inControl -NoTermination |  | GoodReason orInvoluntaryNot forCauseTermination |         | Death |   | Disability
|Compensation:                                    |  |            |  |                               |           |                                           |   |                                 |  |                                                 |         |       |   |            |  |   |  |  
|Salary Continuation                              |  |           |  | $                             | 926,900   |                                           | $ | 926,900                         |  | $                                               |        |       | $ | 465,000    |  |  |  | 
|Bonus Through                                    |  |            |  |                               |           |                                           |   |                                 |  |                                                 |         |       |   |            |  |   |  |  
|Termination Date                                 |  |           |  |                               | N         |                                           |   | N                               |  |                                                 |        |       |   | N          |  | N |  | N
|Incentive Compensation                           |  |           |  |                               | 926,900   |                                           |   | 926,900                         |  |                                                 |        |       |   | 232,500    |  |  |  | 
|Restricted Stock:                                |  |            |  |                               |           |                                           |   |                                 |  |                                                 |         |       |   |            |  |   |  |  
|Vesting Accelerated1                             |  |           |  |                               | 21,088    |                                           |   | 21,088                          |  |                                                 | 21,088  |       |   |           |  |  |  | 
|Stock Options:                                   |  |            |  |                               |           |                                           |   |                                 |  |                                                 |         |       |   |            |  |   |  |  
|Vesting Accelerated1                             |  |           |  |                               | 103,927   |                                           |   | 103,927                         |  |                                                 | 103,927 |       |   |           |  |  |  | 
|Benefits and Perquisites:                        |  |            |  |                               |           |                                           |   |                                 |  |                                                 |         |       |   |            |  |   |  |  
|Post-Termination Health Care                     |  |           |  |                               | 12,109    |                                           |   | 12,109                          |  |                                                 |        |       |   | 12,109     |  |  |  | 
|Outplacement Services                            |  |           |  |                               | 25,000    |                                           |   | 25,000                          |  |                                                 |        |       |   | 25,000     |  |   |  |  
|Total:                                           |  |           |  | $                             | 2,015,924 |                                           | $ | 2,015,924                       |  | $                                               | 125,015 |       | $ | 734,609    |  |  |  | 



|(1) | Mr. Thompsons award agreement under the 1998 Employee Stock Option Plan and the 2004 Restricted Stock Plan provide for full vesting upon a change in control. These figures were
calculated according to the rules applicable to change in control payments under code section 2806.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

W. Granger Souder, Jr

The following table shows the potential payments upon termination or change in control for W. Granger Souder, Jr. our Executive Vice President, General Counsel and Secretary. A
description of the employment agreement with Mr. Souder providing the benefits specified in the table below are described in more detail beginning on page 89.

Potential Payments Upon Termination or Change In Control  W. Granger Souder, Jr.



|                                                 |  |            |  |                               |           |                                           |   |                                 |  |                                                 |        |       |   |            |  |   |  |  
|------------------------------------------------ |  | ---------- |  | ----------------------------- | --------- | ----------------------------------------- | - | ------------------------------- |  | ----------------------------------------------- | ------ | ----- | - | ---------- |  | - |  | -
|Executive Benefits and Payments Upon Termination |  | Retirement |  | Change inControl -Termination |           | Change inControl -ConstructiveTermination |   | Change inControl -NoTermination |  | GoodReason orInvoluntaryNot forCauseTermination |        | Death |   | Disability
|Compensation:                                    |  |            |  |                               |           |                                           |   |                                 |  |                                                 |        |       |   |            |  |   |  |  
|Salary Continuation                              |  |           |  | $                             | 714,610   |                                           | $ | 714,610                         |  | $                                               |       |       | $ | 358,500    |  |  |  | 
|Bonus Through                                    |  |            |  |                               |           |                                           |   |                                 |  |                                                 |        |       |   |            |  |   |  |  
|Termination Date                                 |  |           |  |                               | N         |                                           |   | N                               |  |                                                 |       |       |   | N          |  | N |  | N
|Incentive Compensation                           |  |           |  |                               | 714,610   |                                           |   | 714,610                         |  |                                                 |       |       |   | 179,250    |  |  |  | 
|Restricted Stock:                                |  |            |  |                               |           |                                           |   |                                 |  |                                                 |        |       |   |            |  |   |  |  
|Vesting Accelerated1                             |  |           |  |                               | 16,631    |                                           |   | 16,631                          |  |                                                 | 16,631 |       |   |           |  |  |  | 
|Stock Options:                                   |  |            |  |                               |           |                                           |   |                                 |  |                                                 |        |       |   |            |  |   |  |  
|Vesting Accelerated1                             |  |           |  |                               | 63,309    |                                           |   | 63,309                          |  |                                                 | 63,309 |       |   |           |  |  |  | 
|Benefits and Perquisites:                        |  |            |  |                               |           |                                           |   |                                 |  |                                                 |        |       |   |            |  |   |  |  
|Post-Termination Health Care                     |  |           |  |                               | 15,221    |                                           |   | 15,221                          |  |                                                 |       |       |   | 15,221     |  |  |  | 
|Outplacement Services                            |  |           |  |                               | 25,000    |                                           |   | 25,000                          |  |                                                 |       |       |   | 25,000     |  |  |  | 
|Total:                                           |  |           |  | $                             | 1,549,381 |                                           | $ | 1,549,381                       |  | $                                               | 79,940 |       | $ | 577,971    |  |  |  | 



|(1) | Mr. Souders award agreement under the 1998 Employee Stock Option Plan and the 2004 Restricted Stock Plan provide for full vesting upon a change in control. These figures were
calculated according to the rules applicable to change in control payments under code section 2806.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Les V. Starr

The following table shows
the potential payments upon termination or change in control for Les V. Starr, our Executive Vice President, Operations and Information Technology. A description of the employment agreement with Mr. Starr providing the benefits specified in the
table below are described in more detail beginning on page 89.

Potential Payments Upon Termination or Change In Control  Les V. Starr



|                                                 |  |            |  |                               |           |                                           |   |                                  |  |                                                 |         |       |   |            |  |   |  |  
|------------------------------------------------ |  | ---------- |  | ----------------------------- | --------- | ----------------------------------------- | - | -------------------------------- |  | ----------------------------------------------- | ------- | ----- | - | ---------- |  | - |  | -
|Executive Benefits and Payments Upon Termination |  | Retirement |  | Change inControl -Termination |           | Change inControl -ConstructiveTermination |   | Change inControl -No Termination |  | GoodReason orInvoluntaryNot forCauseTermination |         | Death |   | Disability
|Compensation:                                    |  |            |  |                               |           |                                           |   |                                  |  |                                                 |         |       |   |            |  |   |  |  
|Salary Continuation                              |  |           |  | $                             | 687,700   |                                           | $ | 687,700                          |  | $                                               |        |       | $ | 345,000    |  |  |  | 
|Bonus Through                                    |  |            |  |                               |           |                                           |   |                                  |  |                                                 |         |       |   |            |  |   |  |  
|Termination Date                                 |  |           |  |                               | N         |                                           |   | N                                |  |                                                 |        |       |   | N          |  | N |  | N
|Incentive Compensation                           |  |           |  |                               | 343,850   |                                           |   | 343,850                          |  |                                                 |        |       |   | 172,500    |  |   |  |  
|Restricted Stock:                                |  |            |  |                               |           |                                           |   |                                  |  |                                                 |         |       |   |            |  |   |  |  
|Vesting Accelerated1                             |  |           |  |                               | 9,281     |                                           |   | 9,281                            |  |                                                 | 9,281   |       |   |           |  |  |  | 
|Stock Options:                                   |  |            |  |                               |           |                                           |   |                                  |  |                                                 |         |       |   |            |  |   |  |  
|Vesting Accelerated1                             |  |           |  |                               | 105,100   |                                           |   | 105,100                          |  |                                                 | 105,100 |       |   |           |  |  |  | 
|Benefits and Perquisites:                        |  |            |  |                               |           |                                           |   |                                  |  |                                                 |         |       |   |            |  |   |  |  
|Post-Termination Health Care                     |  |           |  |                               | 13,603    |                                           |   | 13,603                           |  |                                                 |        |       |   | 13,603     |  |  |  | 
|Outplacement Services                            |  |           |  |                               | 25,000    |                                           |   | 25,000                           |  |                                                 |        |       |   | 25,000     |  |  |  | 
|Total:                                           |  |           |  | $                             | 1,184,533 |                                           | $ | 1,184,533                        |  | $                                               | 114,381 |       | $ | 556,103    |  |  |  | 



|(1) | Mr. Starrs award agreement under the 1998 Employee Stock Option Plan and the 2004 Restricted Stock Plan provide for full vesting upon a change in control. These figures were
calculated according to the rules applicable to change in control payments under code section 2806.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Frank J. Koch

The following table shows the potential payments upon termination or change in control for Frank Koch, our Executive Vice President, Chief Credit Officer. A description of the
employment agreement with Mr. Koch providing the benefits specified in the table below are described in more detail beginning on page 89.

Potential Payments
Upon Termination or Change In Control  Frank J. Koch



|                                             |  |            |  |                               |         |                                           |   |                                  |  |                                                   |        |       |   |            |  |   |  |  
|-------------------------------------------- |  | ---------- |  | ----------------------------- | ------- | ----------------------------------------- | - | -------------------------------- |  | ------------------------------------------------- | ------ | ----- | - | ---------- |  | - |  | -
|ExecutiveBenefits andPaymentsUponTermination |  | Retirement |  | Change inControl -Termination |         | Change inControl -ConstructiveTermination |   | Change inControl - NoTermination |  | Good Reasonor InvoluntaryNot for CauseTermination |        | Death |   | Disability
|Compensation:                                |  |            |  |                               |         |                                           |   |                                  |  |                                                   |        |       |   |            |  |   |  |  
|Salary Continuation                          |  |           |  | $                             | 478,000 |                                           | $ | 478,000                          |  | $                                                 |       |       | $ | 478,000    |  |  |  | 
|Bonus Through                                |  |            |  |                               |         |                                           |   |                                  |  |                                                   |        |       |   |            |  |   |  |  
|Termination Date                             |  |           |  |                               | N       |                                           |   | N                                |  |                                                   |       |       |   | N          |  | N |  | N
|Incentive Compensation                       |  |           |  |                               | 239,000 |                                           |   | 239,000                          |  |                                                   |       |       |   | 239,000    |  |   |  |  
|Restricted Stock:                            |  |            |  |                               |         |                                           |   |                                  |  |                                                   |        |       |   |            |  |   |  |  
|Vesting Accelerated1                         |  |           |  |                               | 13,018  |                                           |   | 13,018                           |  |                                                   | 13,018 |       |   |           |  |  |  | 
|Stock Options:                               |  |            |  |                               |         |                                           |   |                                  |  |                                                   |        |       |   |            |  |   |  |  
|Vesting Accelerated1                         |  |           |  |                               | 84,008  |                                           |   | 84,008                           |  |                                                   | 84,008 |       |   |           |  |  |  | 
|Benefits and Perquisites:                    |  |            |  |                               |         |                                           |   |                                  |  |                                                   |        |       |   |            |  |   |  |  
|Post-Termination Health Care                 |  |           |  |                               | 18,137  |                                           |   | 18,137                           |  |                                                   |       |       |   | 18,137     |  |  |  | 
|Non-Qualified Retirement Plan2               |  |           |  |                               | 38,766  |                                           |   | 38,766                           |  |                                                   |        |       |   | 38,766     |  |   |  |  
|Total:                                       |  |           |  | $                             | 870,929 |                                           | $ | 870,929                          |  | $                                                 | 97,026 |       | $ | 773,903    |  |  |  | 



|(1) | Mr. Kochs award agreement under the 1998 Employee Stock Option Plan and the 2004 Restricted Stock Plan provide for full vesting upon a change in control. These figures were
calculated according to the rules applicable to change in control payments under code section 2806.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Based on his years of service, Mr. Koch is 100% vested in his benefit under this plan. The amounts reflected represent additional benefit plan contributions he is entitled to receive
under his employment agreement. Upon termination of employment for any reason, Mr. Koch would be entitled to receive a lump sum distribution of his entire account balance under this plan on the first of the month following six months from his
termination of employment. In the case of a change in control that does not result in termination, no benefit is immediately payable.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Employment Agreement with Mr. Adams

In addition to the terms of Mr. Adams employment agreement described in the narrative accompanying the Summary Compensation Table, Mr. Adams employment agreement provides for payment of certain benefits under certain
termination and change in control scenarios. The agreement provides that, in the event of termination of employment for any reason, the Company shall pay Mr. Adams in lump sum an amount equal to the unpaid base salary, any short term and long
term incentive compensation payable and any benefit payments due Mr. Adams through the date of termination. The agreement also provides for the payment upon his termination for any reason other than for Cause or without Good Reason (each as
defined in the agreement and below), of an amount equal to the targeted annual bonus prorated for the remainder of the year in which termination occurs.

In addition to those payments, in the event that Mr. Adams employment is terminated either prior to or within two years following a change in control of the Company (as defined in the agreement and below), either by
the Company without Cause or by the executive for Good Reason, the Company shall pay Mr. Adams an amount equal to the greater of (i) the sum of Mr. Adams annual base salary plus targeted annual bonus (Annual Cash
Compensation) multiplied by the number of whole and partial years remaining in the employment term as it existed immediately preceding termination, or (ii) three times Annual Cash Compensation. Welfare benefit continuation will be
provided for the remainder of the term, or if longer, three years. If such termination occurs during the two-year period following a change in control, Mr. Adams would receive the greater of the termination payment described above,
or three times the sum of (x) his highest annual rate of base salary, (y) his highest supplemental matching contributions and (z) his highest annual bonus and long-term compensation paid or awarded during the three-year period
immediately prior to the date of termination, and continued welfare benefits for the longer of three years or the remaining period of the term as it existed immediately prior to termination. Upon any such termination, all stock options granted after
the effective time shall vest and become immediately exercisable in full.

If any payments pursuant to the agreement or otherwise would be subject to
any excise tax under the Internal Revenue Code, the Company will provide an additional payment such that Mr. Adams retains a net amount equal to the payments he would have received if such excise tax had not applied.

The agreement contains a covenant not to compete and related provisions that restrict Mr. Adams ability to compete with the Company during the term of
the agreement and for a period of one year following termination under certain circumstances.

Definitions

Cause, as defined in Mr. Adams employment agreement, means: (i) the willful and continued failure to substantially perform his duties to the detriment
of the Company (other than due to physical or mental illness), after a written demand for substantial performance is delivered to Mr. Adams by the Board; or (ii) willful engaging in gross misconduct materially and demonstrably injurious to
the Company. No act or failure to act by Mr. Adams shall be considered willful unless done or omitted to be done by him in bad faith and without reasonable belief that his action or omission was in the best interests of the Company.

The employment agreement defines Good Reason as the Companys: (i) removal of Mr. Adams from, or failure to re-appoint him
to, his position as Chairman and/or his position as Chief Executive Officer of the Company, except in connection with the Companys termination of Mr. Adams for Cause, or removal of Mr. Adams as Chairman in order to comply with
statutory or regulatory requirements; (ii) failure to comply the employment agreement in any material respect; (iii) giving notice to Mr. Adams that it does not intend to renew the employment agreement; or (iv) imposing any
requirement that Mr. Adams be based anywhere more than thirty miles from the Companys office where he is located at the effective time of the agreement.

During the two year period following a Change in Control, Good Reason also shall include, without Mr. Adams consent, the Companys: (i) assignment to Mr. Adams of any duties or
responsibilities (including reporting responsibilities) inconsistent in any material and adverse respect with his duties and responsibilities with the Company immediately prior to such Change in Control (including any diminution of such duties or
responsibilities), removal of Mr. Adams from, or failure to reappoint Mr. Adams to, his position as Chairman, President, and Chief Executive Officer, or the removal of Mr. Adams from such position, thereafter; (ii) reduction in
Mr. Adams rate of annual base salary or short-term incentive compensation or long-term incentive compensation opportunities as in effect immediately prior to such Change in Control or as the same may be increased from time to time
thereafter; (iii) failure to continue in effect any employee benefit plan, compensation plan, welfare benefit plan or material fringe benefit plan in which he is participating immediately prior to the Change in Control, or the taking of any
action that would adversely affect Mr. Adams participation in or reduce his benefits under any such plan, unless Mr. Adams is permitted to participate in other plans providing Mr. Adams with substantially equivalent aggregate
benefits, or provide Mr. Adams with paid vacation in accordance with the most favorable plans in effect for Mr. Adams immediately prior to such Change in Control; or (iv) refusal to continue to permit Mr. Adams to engage in
activities not directly related to the business of the Company, which Mr. Adams was permitted to engage in prior to the Change in Control; (v) purported termination of Mr. Adams employment; or (vi) failure of to obtain the
assumption agreement from any successor as contemplated in Mr. Adams employment agreement.

Termination of employment by Mr. Adams for
any reason other than retirement during the 30 day period commencing one year after the date of a Change in Control also shall constitute Good Reason.

Pursuant to the agreement, Change in Control shall be deemed to have taken place if at anytime following the effective time of the agreement: (i) individuals who constitute the Board immediately after the Effective Time
cease for any reason to constitute at least a majority of the Board; (ii) any person (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934 (the Exchange Act), directly or indirectly, of
securities of the Company representing 25% or more of the combined voting power of the Companys then outstanding securities; (iii) the consummation of a merger, consolidation, statutory share exchange or similar form of corporate
transaction involving the Company or any of its Subsidiaries that requires the approval of the Companys stockholders (a Business Combination), unless immediately following such Business Combination: (A) more than 60% of the
total voting power of the corporation resulting from such Business Combination or (y) the ultimate parent corporation that directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of the
Surviving Company is represented by Company Voting Securities; or (iv) the Companys stockholders approve a plan of complete liquidation or dissolution of the Company or a sale of substantially all of the Companys assets or deposits.

The Merger, if consummated, will constitute a Change in Control.



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Employment Agreements with Messrs. Thompson, Souder and Starr

We have entered into employment agreements with Messrs. Thompson, Souder and Starr with substantially similar terms. The agreements provide for at-will employment with no specified term. They provide for a specified minimum
base salary, which may not be reduced during the period of employment, and for incentive compensation, benefits and perquisites consistent with those to which similarly situated officers are entitled under the Companys benefit plans.

Pursuant to the employment agreements, if the Company terminates the NEOs employment for any reason other than for Cause, death, or disability,
or if the NEO terminates employment for Good Reason, the NEO is entitled to the following compensation: (a) continuation of base salary for eighteen months or in the event of a termination within six months of a Change in Control, a lump sum
equal to the product of 2.99 times the base salary amount; (b) bonus compensation under the Companys short-term incentive plan, if any, for 2006; (c) lump sum amount equal to the NEOs annual target amount under the
Companys short-term incentive plan, or in the event of a termination within six months of a Change in Control, a lump sum amount equal to the product of 2.99 times the NEOs target amount; (d) outplace-ment services, at a
provider of NEOs choice, up to a cost of $25,000; and (e) continuation of NEOs medical, dental, and life insurance benefits for the lesser of eighteen months or until the NEO begins new full-time employment. The above payments are
contingent upon the executive signing a mutual general release. In the event that the Company terminates the NEOs employment for Cause, death or disability or if the NEO voluntarily terminates his employment other than for Good Reason, the NEO
is only entitled to his earned salary and vested plan benefits up to and including the date of termination. The agreements also require the NEOs to abide by restrictive covenants relating to non-disclosure, as well as non-competition and
non-solicitation for one year following termination of employment. In the case of Mr. Thompson and Mr. Souder, as part of the merger with Huntington, the actual 2006 bonuses will be used in lieu of target for purposes of
calculating severance in clause (c) above.

Cause as defined in each agreement means: (a) the commission by the employee of an
act or series of acts intended to cause and which results in material damage to the Companys property, operations or business prospects; or (b) the employees gross misconduct, fraud, misappropriation of funds, or commission of a
felony; or (c) the employees willful failure to perform his duties or the lawful and ethical directions, which failure has not been cured in all material respects within twenty days after the Company gives written notice thereof to the
employee; or (d) the employees material breach of any provision of his employment agreement, which breach has not been cured in all material respects within twenty days after the Company gives written notice thereof to the employee.

The agreements define Good Reason as: (a) a material diminution of the duties, authority, responsibility level, or employment
position of the employee; (b) a reduction, in the employees base salary from the amount specified in their employment agreement; (c) a material reduction of more than ten percent in the employees target incentive compensation
as set forth in their employment agreement, except in the event that such reduction applies uniformly to all other employees with positions at the same level within the Company as that of the position of the employee; (d) any change in the
employees principal place of work, which would increase the employees commute by thirty-five miles or more from the employees current principal place of work, or (e) a material breach by the Company of its obligations under
the employees employment agreement. The agreements provide that Good Reason is not effective until the expiration of ten business days following written notice to the Company of the employees grounds for claiming Good Reason and that any
action or inaction, which is remedied by the Company within ten business days following such written notice, shall not constitute Good Reason.

Change in Control means: (a) the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its subsidiaries that requires the approval of the
Companys stockholders, whether for such transaction or the issuance of securities in the transaction, unless immediately following such transaction: (i) more than sixty percent of the total voting power of (x) the company resulting
from such transaction or (y) if applicable, the ultimate parent company thereof, is represented by voting securities that were outstanding immediately prior to such transaction (or, if applicable, is represented by shares into which such
Company voting securities were converted pursuant to such transaction; (ii) no person (other than any employee benefit plan or related trust sponsored or maintained by the Company resulting from such transaction or the parent thereof is or
becomes the beneficial owner, directly or indirectly, of 25% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Company resulting from such transaction or the parent thereof; and (iii) at
least fifty percent of the members of the board of directors of the Company resulting from such transaction or the parent thereof following the consummation of the transaction were directors of the Company at the time of the Board of Directors
approval of the execution of the initial agreement providing for such transaction; or (b) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or a sale of all or substantially all of the
Companys assets or deposits. Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than twenty-five percent of the Company voting
securities as a result of the acquisition of Company voting securities by the Company, which reduces the number of Company voting securities outstanding; provided, however, that if after such acquisition by the Company, such person becomes the
beneficial owner of additional Company voting securities that increases the percentage of outstanding Company voting securities beneficially owned by such person, a Change in Control of the Company shall then occur.

The Merger, if consummated, will constitute a Change in Control.

Employment
Agreement with Mr. Koch

Mr. Kochs employment agreement provides that, upon a change in control, the Company must continue to employ Mr. Koch
until the earlier of age 65 or twenty-four months after the date of the change in control. During this period, Mr. Koch is entitled to: (i) a monthly salary of at least equal to his highest base salary for any month of the previous twelve
months preceding the change-in-control and, during each subsequent year, an annual salary at least equal to his salary for the preceding year plus any increases calculated in a manner in which other pay increases are calculated for other executives,
(ii) annual bonus equal to the greater of (a) his last annual bonus or (b) his annual bonus of the preceding year; (iii) all existing plans or through equivalent plans at least the types and amounts of group insurance coverage
benefits, including life, health, disability, hospitalization, and surgical benefits, and health care benefits for Mr. Kochs family; and (iv) participation in the profit sharing plan on the same basis as all other employees. In the
event of a termination of Mr. Koch for any reason other than for cause, during this period, the Company must pay: (i) monthly salary equal to the greater of his highest salary for any month during the twelve months preceding the
change-in-control and his termination of employment, (ii) profit sharing plan and trust contributions on the same basis as all other employees, provided continued participation is possible under the terms and provisions of the plan and
(iii) the greater of the average of the annual bonuses received by Mr. Koch during the three calendar years preceding the change in control and the termination of employment. Mr. Kochs compensation will be deducted by any amount
he received during the year pur-



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suant to the long-term disability policy. Mr. Koch may elect, within sixty days after the date of termination, to receive a single lump sum payment in an amount
equal to the present value of the total unpaid amount due to him if there is a termination as a result of a change in control. Following a change in control, if Mr. Koch ceases to be employed for any reason, except misconduct, he and or his
spouse shall receive health care benefits equal to the greater of the benefits to which he was entitled to before his termination or immediately preceding the change in control until Mr. Koch reaches normal retirement age. If, following a
change in control, the Company requires Mr. Koch to relocate his office more than seventy miles from Salem, Ohio or forty miles from Salineville, Ohio, relocation expenses not to exceed $5,000 will be paid by the Company.

For purposes of Mr. Kochs employment agreement, Change in Control means: (i) any person, partnership, corporation, or other entity
becomes a beneficial owner, directly or indirectly, of shares of voting stock representing at least 20% or more of the Company issued and outstanding voting stock; or (ii) one-half or more of the membership of the Board consists of members not
recommended for membership by the Company or the Board. The, merger, if consumated, will constitute a Change in Control. A termination by Mr. Koch for cause means: (i) the Companys request that Mr. Koch resigns or
retire; (ii) a change in location of Mr. Kochs place of employment or office to a site more than seventy miles from Salem, Ohio, city limits or forty miles from Salineville, Ohio, city limits; (iii) or the breach by the Company
of any provision of Mr. Kochs employment agreement.

Compensation Committee Report

The Compensation Committee of the Board (the Committee) has reviewed and discussed the Compensation Discussion and Analysis on pages 73 through 90 of this Annual Report on Form 10-K with the Companys
management and, based on such review and discussions, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Companys Annual Report on Form 10-K for the Companys fiscal year ended
December 31, 2006.

Gerard P. Mastroianni, Chairman

D. James Hilliker

Marylouise Fennell

Director Compensation



|                      |  |                              |        |               |   |                |  |              |        |                                      |       |                                                                   |   |                       |   |                   |   |  |   |        
|--------------------- |  | ---------------------------- | ------ | ------------- | - | -------------- |  | ------------ | ------ | ------------------------------------ | ----- | ----------------------------------------------------------------- | - | --------------------- | - | ----------------- | - |  | - | -------
|Name                  |  | Fees Earnedor Paid in Cash 1 |        | StockAwards 2 |   | OptionAwards 3 |  | StockAwards4 |        | Non-EquityIncentive PlanCompensation |       | Change inPension ValueandNonqualifiedDeferredCompensationEarnings |   | All OtherCompensation |   | TotalCompensation
|George N. Chandler II |  | $                            | 26,550 |               | $ | 13,170         |  | $            | 37,200 |                                      | 2,634 |                                                                   |  |                       |  |                   |  |  | $ | 76,920 
|Robert C. Duvall      |  |                              | 30,050 |               |   | 13,170         |  |              | 37,200 |                                      | 2,634 |                                                                   |  |                       |  |                   |  |  |   | 80,420 
|Marylouise Fennell    |  |                              | 22,375 |               |   | 39,510         |  |              | 12,400 |                                      | 7,902 |                                                                   |  |                       |  |                   |  |  |   | 74,285 
|D. James Hilliker     |  |                              | 26,050 |               |   | 26,340         |  |              | 24,800 |                                      | 5,268 |                                                                   |  |                       |  |                   |  |  |   | 77,190 
|Fred H. Johnson III   |  |                              | 29,050 |               |   | 13,170         |  |              | 37,200 |                                      | 2,634 |                                                                   |  |                       |  |                   |  |  |   | 79,420 
|Jonathon A. Levy      |  |                              | 29,750 |               |   | 24,496         |  |              | 69,192 |                                      | 4,899 |                                                                   |  |                       |  |                   |  |  |   | 123,438
|Gerard P. Mastroianni |  |                              | 30,450 |               |   | 27,920         |  |              | 26,288 |                                      | 5,584 |                                                                   |  |                       |  |                   |  |  |   | 84,658 
|Thomas J. OShane     |  |                              | 20,825 |               |   | 13,170         |  |              | 37,200 |                                      | 2,634 |                                                                   |  |                       |  |                   |  |  |   | 71,195 
|Gregory L. Ridler     |  |                              | 31,750 |               |   | 41,881         |  |              | 13,144 |                                      | 8,376 |                                                                   |  |                       |  |                   |  |  |   | 86,775 
|Emerson J. Ross Jr.   |  |                              | 32,050 |               |   | 41,881         |  |              | 13,144 |                                      | 8,376 |                                                                   |  |                       |  |                   |  |  |   | 87,075 
|C. Gregory Spangler   |  |                              | 36,850 |               |   | 41,881         |  |              | 13,144 |                                      | 8,376 |                                                                   |  |                       |  |                   |  |  |   | 91,875 
|Joseph N. Tosh II     |  |                              | 27,050 |               |   | 39,510         |  |              | 12,400 |                                      | 7,902 |                                                                   |  |                       |  |                   |  |  |   | 78,960 
|R. John Wean III      |  |                              | 27,050 |               |   | 26,340         |  |              | 24,800 |                                      | 5,268 |                                                                   |  |                       |  |                   |  |  |   | 78,190 



|(1) | Includes annual retainer fees, Board and committee meeting attendance fees and committee chair fees.
|--- | ----------------------------------------------------------------------------------------------------

|(2) | Represents the values of restricted stock awards based upon the FAS 123R value recognized for financial statement reporting purposes to the director in 2006, which includes amounts that were
awarded prior to 2006.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Represents the grant date fair value of the 2006 Option Awards using $4.96 per share, calculated using the Black-Scholes model and the assumptions described on page 41 of this Form 10-K,
which is the same as the FAS 123R value recognized for financial statement reporting purposes to the director in 2006.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Represents the full grant date fair value of the 2006 Stock Awards calculated using the Black-Sholes model and the assumptions described on page 41 of this Form 10-K.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

The aggregate Restricted Stock and Stock Options outstanding, and the respective FAS 123R value recognized for financial statement
purposes, for each person in the table set forth above as of December 31, 2006 is as follows:



|                      |  |                                  |  |                                    
|--------------------- |  | -------------------------------- |  | -----------------------------------
|Name                  |  | AggregateOutstandingStockOptions |  | AggregateOutstandingRestrictedStock
|George N. Chandler II |  | 57,204                           |  | 1,000                              
|Robert C. Duvall      |  | 70,836                           |  | 1,000                              
|Marylouise Fennell    |  | 21,000                           |  | 3,000                              
|D. James Hilliker     |  | 75,895                           |  | 2,000                              
|Fred H. Johnson III   |  | 59,322                           |  | 1,000                              
|Jonathon A. Levy      |  | 102,367                          |  | 1,860                              
|Gerard P. Mastroianni |  | 80,038                           |  | 1,590                              
|Gregory L. Ridler     |  | 58,890                           |  | 2,650                              
|Emerson J. Ross Jr.   |  | 59,991                           |  | 3,180                              
|C. Gregory Spangler   |  | 76,692                           |  | 2,650                              
|Joseph N. Tosh II     |  | 76,009                           |  | 2,500                              
|R. John Wean III      |  | 10,000                           |  | 2,000                              



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##### Table of Contents

General Description of Director Compensation

All directors of the Company receive as compensation for their service annual retainers of $12,600. In addition, non-employee directors receive a fee of $1,050 for each board meeting attended ($525 for each teleconference meeting) and a fee
of $1,000 for each committee meeting attended ($500 for teleconference meeting). Committee chairmen receive an additional $600 for each committee meeting attended ($300 for teleconference meetings). In addition, under our 2002 Stock Option Plan, for
the fiscal year ended December 31, 2006, each continuing non-employee director received a long-term equity award comprised of a mix of stock options and restricted stock. Options granted to continuing non-employee directors have ten-year terms
and become exercisable in full immediately following the date of the grant. Employee directors receive separate compensation for Board service. The Governance Committee annually reviews the compensation of non-employee directors. Director
compensation is set by the Board, based upon the recommendation of the Governance Committee.

Item 12.Security Ownership of Certain Beneficial Owners and Management

Generally, under the rules of the Securities and Exchange
Commission, a person is deemed to be the beneficial owner of a security with respect to which such person, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power (which includes power to vote or
direct the voting of, such security) or investment power (which includes power to dispose of or direct the disposition of such security). In addition, a person is deemed to be the beneficial owner of a security if he or she has the right to acquire
such voting or investment power over the security within 60 days, for example, through the exercise of a stock option.

The following table shows the
beneficial ownership of the Companys common stock as of December 31, 2006, by: (i) each person who is the beneficial owner of more than five percent of the outstanding shares of the Companys common stock; (ii) each
director of the Company; (iii) each executive officer named in the Summary Compensation Table and; (iv) all directors and named executive officers as a group.



|                                                                                      |  |                                                                     |  |                                    |  
|------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------- |  | ---------------------------------- | -
|                                                                                      |  | Amount and Nature of BeneficialOwnership as of December 31, 20061,2 |  | Percent of Class(if 1% or Greater) |  
|Five Percent Holders                                                                  |  |                                                                     |  |                                    |  
|Sky Trust, National Association 30050 Chagrin Blvd. Suite 150 Pepper Pike, Ohio 44124 |  | 8,594,3683                                                          |  | 7.36                               | %
|                                                                                      | 
|                                                                                      | 
|                                                                                      | 
|Directors and Named Executive Officers                                                |  |                                                                     |  |                                    |  
|Marty E. Adams                                                                        |  | 825,185                                                             |  | 0.71                               |  
|George N. Chandler II                                                                 |  | 690,4134                                                            |  | 0.59                               |  
|Robert C. Duvall                                                                      |  | 162,647                                                             |  | 0.14                               |  
|Marylouise Fennell                                                                    |  | 25,891                                                              |  | 0.02                               |  
|D. James Hilliker                                                                     |  | 169,947                                                             |  | 0.15                               |  
|Fred H. Johnson III                                                                   |  | 230,390                                                             |  | 0.20                               |  
|Frank J. Koch                                                                         |  | 68,454                                                              |  | 0.06                               |  
|Jonathan A. Levy                                                                      |  | 146,973                                                             |  | 0.13                               |  
|Gerard P. Mastroianni                                                                 |  | 117,378                                                             |  | 0.10                               |  
|Gregory L. Ridler                                                                     |  | 104,828                                                             |  | 0.09                               |  
|Emerson J. Ross, Jr.                                                                  |  | 87,166                                                              |  | 0.07                               |  
|W. Granger Souder, Jr.                                                                |  | 59,549                                                              |  | 0.05                               |  
|C. Gregory Spangler                                                                   |  | 100,026                                                             |  | 0.09                               |  
|Les V. Starr                                                                          |  | 31,973                                                              |  | 0.03                               |  
|Kevin T. Thompson                                                                     |  | 23,120                                                              |  | 0.02                               |  
|Joseph N. Tosh II                                                                     |  | 326,5645                                                            |  | 0.28                               |  
|R. John Wean III                                                                      |  | 22,919                                                              |  | 0.02                               |  
|All directors and executive officers as a group                                       |  | 3,193,423                                                           |  | 2.74                               | %



|(1) | Includes shares held in the name of spouses, minor children, certain relatives, trusts, estates and certain affiliated companies as to which beneficial ownership may be disclaimed.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The amounts shown represent the total shares owned outright by such individuals, shares issuable upon the exercise of currently vested but unexercised stock options, and shares of Restricted
Stock. Specifically, vested but unexercised options entitle the following individuals to acquire the indicated number of shares: Mr. Adams, 576,808; Mr. Chandler, 57,203; Mr. Duvall, 70,836; Ms. Fennell, 21,000;
Mr. Hilliker, 75,894; Mr. Johnson, 59,321; Mr. Koch, 44,649; Mr. Levy, 102,366; Mr. Mastroianni, 80,037; Mr. Ridler, 58,889; Mr. Ross, 59,991; Mr. Souder, 39,686; Mr. Spangler, 76,691; Mr. Starr,
27,600; Mr. Tosh, 76,007; Mr. Wean, 10,000; and all directors and named executive officers as a group, 1,436,984. Furthermore, the amounts shown reflect unvested shares of Restricted Stock, to which the holders are entitled to dividend and
voting rights in the following amounts: Mr. Adams, 48,750; Mr. Chandler, 1,000; Mr. Duvall, 1,000; Ms. Fennell, 3,000; Mr. Hilliker, 2,000; Mr. Johnson, 1,000; Mr. Koch, 3,405; Mr. Levy, 1,860;
Mr. Mastroianni, 1,590; Mr. Ridler, 2,650; Mr. Ross, 3,180; Mr. Souder, 4,965; Mr. Spangler, 2,650; Mr. Starr, 2,530; Mr. Thompson, 5,940; Mr. Tosh, 2,500; Mr. Wean, 2,000; and all directors and named
executive officers as a group, 90,020.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Sky Trust, National Association, the Companys trust company subsidiary, was deemed beneficial owner of portions of the referenced number of shares based upon its sole or shared voting
or investment power over the shares. Sky Trust holds the shares solely in a fiduciary or custodial capacity under numerous trust relationships, none of which represents more than five percent of the Companys outstanding shares. The Company
disclaims beneficial ownership of the shares that may be deemed to be beneficially owned by Sky Trust.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | The number of shares of common stock shown as beneficially owned by Mr. Chandler includes 1,700 shares owned by his wife, for which Mr. Chandler disclaims beneficial ownership.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | The number of shares of common stock shown as beneficially owned by Mr. Tosh includes 53,871 shares owned by a trust, for which Mr. Tosh disclaims beneficial ownership.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Securities Authorized for Issuance under Equity Compensation Plans

The following table provides information as of December 31, 2006, regarding compensation plans under which equity securities of Sky Financial are authorized for issuance:



|                                                           |  |                                                                                           |   |  |   |                                                                          |  |                                                                                                                                       
|---------------------------------------------------------- |  | ----------------------------------------------------------------------------------------- | - |  | - | ------------------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------
|                                                           |  | Equity Compensation Plan Information                                                     
|Plan Category                                              |  | Number of Securities to beIssued upon Exercise ofOutstanding
Options,Warrants, and Rights | 1 |  |   | Weighted-AverageExercise Price ofOutstanding OptionsWarrants, and Rights |  | Number of SecuritiesRemaining Availablefor Future
IssuanceUnder Equity CompensationPlans (Excluding SecuritiesReflected in Column (a))
|                                                           |  | (a)                                                                                       |   |  |   | (b)                                                                      |  | (c)                                                                                                                                   
|                                                           |  | (In thousands)                                                                            |   |  |   |                                                                          |  | (In thousands)                                                                                                                        
|Equity Compensation Plans Approved by Security Holders     |  | 7,135                                                                                     |   |  | $ | 22.31                                                                    |  | 2,291                                                                                                                                 
|Equity Compensation Plans not Approved by Security Holders |  |                                                                                          |   |  |   |                                                                         |  |                                                                                                                                      
|Total                                                      |  | 7,135                                                                                     |   |  | $ | 22.31                                                                    |  | 2,291                                                                                                                                 



|(1) | Represents options to purchase shares of Sky Financial common stock and stock appreciation rights. There are no outstanding warrants.
|--- | -------------------------------------------------------------------------------------------------------------------------------------

Item 13.Certain Relationships and Related Transactions

Directors and executive officers of the Company and their associates were
clients of, or had transactions with, the Company or the Companys banking or other subsidiaries in the ordinary course of business during 2006. Additional transactions may be expected to take place in the future. All outstanding loans to
directors and executive officers and their associates were made in the ordinary course of business, on substantially the same terms, including interest rates and collateral where applicable, as those prevailing at the time for comparable
transactions with other persons, and did not involve more than normal risk of collectibility or present other unfavorable features.

Independence of Directors

The Companys Governance and Nominating Committee has established criteria for the determination of the independence of members of the Board of Directors
and its committees. The Committee has utilized the definitional criteria of the National Association of Securities Dealers, Inc. and the Securities and Exchange Commission in their respective rulemakings promulgated under certain provisions of the
Sarbanes Oxley Act of 2002. The Board of Directors of the Company has determined that a majority of the members of the Board are independent and that the membership of the Audit, Compensation and Governance Committees is comprised solely
of independent directors. Directors deemed independent by the Board include directors: Chandler, Duvall, Fennell, Hilliker, Johnson, Levy, Mastroianni, Ridler, Ross, Spangler, Tosh and Wean.

Item 14.Principal Accounting Fees and Services

In accordance with rules related to auditor independence, the table below sets
forth the aggregate fees billed by Deloitte & Touche LLP for services rendered to the Company and its affiliates during 2005 and 2006.



|                    |  |      |           |      |   |        
|------------------- |  | ---- | --------- | ---- | - | -------
|                    |  | 2006 |           | 2005
|Audit Fees          |  | $    | 1,022,657 |      | $ | 834,317
|Audit-Related Fees1 |  |      | 158,602   |      |   | 143,782
|Tax Fees            |  |      | 30,289    |      |   | 22,449 
|All Other Fees2     |  |      |          |      |   |       



|(1) | Audit-Related services provided by Deloitte & Touche LLP in 2006 included: SAS 70 service auditors report; audits of common trust funds; audits of employee benefit plans; and other
accounting consultations.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | No Other Fees were paid to Deloitte & Touche LLP in 2005 or 2006.
|--- | -----------------------------------------------------------------

The Committee has
reviewed the services provided by Deloitte & Touche LLP and has considered the compatibility of such services with maintaining the auditors independence. The Company did not retain Deloitte & Touche LPP in 2006 for internal
audit services or information technology consulting services relating to financial information systems design and implementation.

In accordance with
the requirements of the Audit Committee Charter, the Committee has established written

procedures for the pre-approval of all services provided by the Companys
Independent Registered Public Accounting Firm. The procedures identify specific permitted audit services, other permitted services and prohibited services. All services provided by the Companys Independent Registered Public Accounting Firm
must be approved in advance by the Audit Committee or a designated member of the Audit Committee. During 2006, approximately 2.5% of the total fees paid to Deloitte & Touche LLP related to non-audit services approved by the Audit Committee
pursuant to Rule 2-01(c)(7) of Regulation S-X.



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##### Table of Contents

PART IV

Item 15.Exhibits and Financial Statement Schedules

(a) The following documents are filed as part of this report:



|    |  |                                                                                                        |  |                   
|--- |  | ------------------------------------------------------------------------------------------------------ |  | ------------------
|    |  |                                                                                                        |  | Pages in Form 10-K
|(1) |  | Financial Statements:                                                                                  |  |                   
|    |  | Report of Independent Registered Public Accounting Firm                                                |  | 34                
|    |  | Consolidated Balance Sheets at December 31, 2006 and 2005                                              |  | 35                
|    |  | Consolidated Statements of Income for the three years ended December 31, 2006                          |  | 36                
|    |  | Consolidated Statements of Changes in Shareholders Equity for the three years ended December 31, 2006 |  | 37                
|    |  | Consolidated Statements of Cash Flows for the three years ended December 31, 2006                      |  | 38                
|    |  | Notes to Consolidated Financial Statements                                                             |  | 39                
|    |  |                                                                                                       
|(2) |  | All schedules are omitted because they are not applicable or the required information is shown in the  |  |                   
|    |  | financial statements or notes thereto.                                                                 |  |                   
|    |  |                                                                                                       
|(3) |  | See the exhibits listed below under Item 15(b)                                                         |  |                   

(b) The following exhibits required by Item 601 of Regulation S-K are filed as part of this report:

FORM 10-K EXHIBIT INDEX



|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|              | 
|3.1           |  | Sky Financials Seventh Amended and Restated Articles of Incorporation (incorporated by reference from Exhibit 3 of the Form 10-Q of Sky Financial for the quarterly period ended March 31, 2004
filed as of May 10, 2004)                                                                                                                                                                                                                                                                                 
|3.2           |  | Sky Financials Amended and Restated Code of Regulations (incorporated by reference from Exhibit 3.2 of the Form 10-K of Sky Financial for the year ended December 31, 2001 filed as of March 27,
2002)                                                                                                                                                                                                                                                                                                    
|4.1           |  | Shareholder Rights Agreement dated as of July 21, 1998, between Sky Financial and The Citizens Banking Company, as Rights Agent (incorporated by reference from Exhibit 4 of Form S-4 Registration
Statement No. 333-60741 of Sky Financial)                                                                                                                                                                                                                                                               
|4.2           |  | Amendment No. 1 to Rights Agreement dated July 21, 1998 (incorporated by reference from Exhibit 1.1 of the Form 8-A/A of Sky Financial filed as of December 21, 2006)                                                                                                                                                                                                                                                                                                                                      
|10.1          |  | Sky Financials Amended and Restated 1998 Stock Option Plan for Nonemployee Directors (incorporated by reference from Exhibit 4(d) of the Form S-8 Registration Statement No. 333-59312 of Sky
Financial)                                                                                                                                                                                                                                                                                                  
|10.2          |  | Sky Financials 1998 Stock Option Plan for Employees (incorporated by reference from Appendix H of the Joint Proxy Statement/Prospectus in Form S-4 Registration Statement No. 333-60741 of Sky
Financial)                                                                                                                                                                                                                                                                                                 
|10.3          |  | Sky Financials 2002 Stock Option and Stock Appreciation Rights Plan (incorporated by reference from Exhibit 10.3 of the Form 10-K of Sky Financial for the year ended December 31, 2002 filed as of
March 3, 2003)                                                                                                                                                                                                                                                                                        
|10.4          |  | Sky Financials 2004 Restricted Stock Plan (incorporated by reference from Appendix B of the Proxy Statement of Sky Financial for 2004 Annual Meeting of Shareholders filed as of March 4,
2004)                                                                                                                                                                                                                                                                                                           
|10.5          |  | Form of Indemnification Agreement between Sky Financial and individual directors and certain officers (incorporated by reference from Exhibits 99.1, 99.2 and 99.3 of Sky Financials Current Report
on Form 8-K filed as of February 2, 2005)                                                                                                                                                                                                                                                             
|10.6          |  | Employment Agreement between Sky Financial and Marty E. Adams dated March 1, 2004 (incorporated by reference from Exhibit 10.1 of Form 10-Q of Sky Financial for the quarterly period ended June 30, 2004
filed August 5, 2004)                                                                                                                                                                                                                                                                            
|10.7          |  | Employment Agreement by and among Sky Financial, The Citizens Banking Company and Frank J. Koch (incorporated by reference from Exhibit 10.11 to the Form 10-K of Sky Financial for the year ended
December 31, 1998 filed as of March 16,1999)                                                                                                                                                                                                                                                            
|10.8          |  | Form of Employment Agreement between Sky Financial and certain officers of Sky Financial, including Kevin T. Thompson, W. Granger Souder, Jr. and Les V. Starr. (incorporated by reference to Exhibit
10.10 to the Form 10-K of Sky Financial for the year ended December 31, 2002 filed as of March 3, 2003) and Amendment No 1 of the Employment Agreement dated November 25, 2005 (incorporated by reference from Item 1.01 of Sky Financials Current
Report on Form 8-K filed as of November 25, 2005)
|10.9          |  | Sky Financials Amended and Restated Profit Sharing, 401(k) and Employee Stock Ownership Pension Plan (incorporated by reference from Exhibit 10.9 to the Form 10-K of Sky Financial for the year
ended December 31, 2004 filed as of February 22, 2005)                                                                                                                                                                                                                                                   
|              | 
|10.10         |  | First Amendment of the Sky Financial Group, Inc. Amended and Restated Profit Sharing and 401(k) Plan (incorporated by reference from Exhibit 10.10 to the Form 10-K of Sky Financial for the year ended
December 31, 2004 filed as of February 22, 2005)                                                                                                                                                                                                                                                   
|10.11         |  | Second Amendment of the Sky Financial Group, Inc. Amended and Restated Profit Sharing, 401(k) and Employee Stock Ownership Pension Plan (incorporated by reference from Exhibit 10.11 to the Form 10-K of
Sky Financial for the year ended December 31, 2004 filed as of February 22, 2005)                                                                                                                                                                                                                



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|              |  |                                                                                                                                                                                                                                                                                           
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Exhibit                                                                                                                                                                                                                                                                                   
|              | 
|10.12         |  | Third Amendment of the Sky Financial Group, Inc. Amended and Restated Profit Sharing, 401(k) and Employee Stock Ownership Pension Plan (incorporated by reference from Exhibit 10.12 to the Form 10-K of Sky
Financial for the year ended December 31, 2004 filed as of February 22, 2005)
|10.13         |  | Sky Financials Non-Qualified Retirement Plan (incorporated by reference from Exhibit 10.3 of the Form 10-K of Sky Financial for the year ended December 31, 2001 filed as of March 27,
2002)                                                                                             
|10.14         |  | Fourth Amendment of the Sky Financial Group, Inc. Non-Qualified Retirement Plan (As Amended and Restated Effective January 1, 2001) (incorporated by reference from Exhibit 10.19 to the Form 10-K of Sky
Financial for the year ended December 31, 2002 filed as of March 3, 2003)       
|10.15         |  | Fifth Amendment of the Sky Financial Group, Inc. Non-Qualified Retirement Plan (As Amended and Restated Effective January 1, 2001) (incorporated by reference from Exhibit 10.20 to the Form 10-K of Sky
Financial for the year ended December 31, 2002 filed as of March 3, 2003)        
|10.16         |  | Sixth Amendment of the Sky Financial Group, Inc. Non-Qualified Retirement Plan (incorporated by reference from Exhibit 10.16 to the Form 10-K of Sky Financial for the year ended December 31, 2004 filed as
of February 22, 2005)                                                        
|10.17         |  | Three Rivers Bank and Trust Company Pension Trust (as Amended and Restated Effective January 1, 1997) (incorporated by reference to Exhibit 10.21 from the Form 10-K of Sky Financial for the year ended
December 31, 2002 filed as of March 3, 2003)                                     
|10.18         |  | Second Amendment to the Three Rivers Bank and Trust Company Pension Trust (as Amended and Restated Effective January 1, 1997) (incorporated by reference from Exhibit 10.22 to the Form 10-K of Sky
Financial for the year ended December 31, 2002 filed as of March 3, 2003)             
|10.19         |  | Second National Bank Defined Benefit Plan (incorporated by reference from Exhibit 10.19 to the Form 10-K of Sky Financial for the year ended December 31, 2004 filed as of February 22,
2005)                                                                                             
|10.20         |  | Pennsylvania Capital Bank 401(k) Plan (incorporated by reference from Exhibit 10.20 to the Form 10-K of Sky Financial for the year ended December 31, 2004 filed as of February 22, 2005)                                                                                                 
|10.21         |  | Sky Financial Group, Inc. Annual Incentive Compensation Program, Master Plan Description (incorporated by reference from Exhibit 10.21 to the Form 10-K of Sky Financial for the year ended December 31,
2005 filed as of February 23, 2006)                                              
|10.22         |  | Form of Option Agreement, 1998 Stock Option Plan for Employees (incorporated by reference from Exhibit 10.22 to the Form 10-K of Sky Financial for the year ended December 31, 2005 filed as of February 23,
2006)                                                                        
|10.23         |  | Form of Option Agreement, 1998 Stock Option Plan for Directors, as amended (incorporated by reference from Exhibit 10.23 to the Form 10-K of Sky Financial for the year ended December 31, 2005 filed as of
February 23, 2006)                                                            
|10.24         |  | Form of Option Agreement, 2002 Stock Option Plan & Stock Appreciation Rights Plan (incorporated by reference from Exhibit 10.24 to the Form 10-K of Sky Financial for the year ended December 31, 2005
filed as of February 23, 2006)                                                     
|10.25         |  | Form of Restricted Stock Award Agreement, 2004 Restricted Stock Plan (incorporated by reference from Exhibit 10.25 to the Form 10-K of Sky Financial for the year ended December 31, 2005 filed as of
February 23, 2006)                                                                  
|10.26         |  | First Amendment of the Sky Financial Group, Inc. 2004 Restricted Stock Plan (incorporated by reference from Exhibit 10.26 to the Form 10-K of Sky Financial for the year ended December 31, 2005 filed as of
February 23, 2006)                                                           
|10.27         |  | Second Amendment of the Sky Financial Group, Inc. 2004 Restricted Stock Plan (incorporated by reference from Exhibit 10.27 to the Form 10-K of Sky Financial for the year ended December 31, 2005 filed as
of February 23, 2006)                                                          
|10.28         |  | Third Amendment of the Sky Financial Group, Inc. 2004 Restricted Stock Plan (incorporated by reference from Exhibit 10.28 to the Form 10-K of Sky Financial for the year ended December 31, 2005 filed as of
February 23, 2006)                                                           
|10.29         |  | Fourth Amendment of the Sky Financial Group, Inc. Amended and Restated Profit Sharing, 401(k) and Employee Stock Ownership Plan (incorporated by reference from Exhibit 10.29 to the Form 10-K of Sky
Financial for the year ended December 31, 2005 filed as of February 23, 2006)       
|10.30         |  | Fifth Amendment of the Sky Financial Group, Inc. Amended and Restated Profit Sharing, 401(k) and Employee Stock Ownership Plan (incorporated by reference from Exhibit 10.30 to the Form 10-K of Sky
Financial for the year ended December 31, 2005 filed as of February 23, 2006)        
|10.31         |  | Sixth Amendment of the Sky Financial Group, Inc. Amended and Restated Profit Sharing, 401(k) and Employee Stock Ownership Plan (incorporated by reference from Exhibit 10.31 to the Form 10-K of Sky
Financial for the year ended December 31, 2005 filed as of February 23, 2006)        
|10.32         |  | Seventh Amendment of the Sky Financial Group, Inc. Amended and Restated Profit Sharing, 401(k) and Employee Stock Ownership Plan (incorporated by reference from Exhibit 10.32 to the Form 10-K of Sky
Financial for the year ended December 31, 2005 filed as of February 23, 2006)      
|10.33         |  | Eighth Amendment of the Sky Financial Group, Inc. Amended and Restated Profit Sharing, 401(k) and Employee Stock Ownership Plan                                                                                                                                                           
|10.34         |  | Ninth Amendment of the Sky Financial Group, Inc. Amended and Restated Profit Sharing, 401(k) and Employee Stock Ownership Plan                                                                                                                                                            
|10.35         |  | Seventh Amendment of the Sky Financial Group, Inc. Non-Qualified Retirement Plan (incorporated by reference from Exhibit 10.33 to the Form 10-K of Sky Financial for the year ended December 31, 2005 filed
as of February 23, 2006)                                                      
|10.36         |  | First Amendment of the Sky Financial Group, Inc. Non-Qualified Retirement Plan II                                                                                                                                                                                                         
|10.37         |  | Second Amendment of the Sky Financial Group, Inc. Non-Qualified Retirement Plan II                                                                                                                                                                                                        
|10.38         |  | First Amendment of the Sky Financial Group, Inc. 2002 Stock Option Plan & Stock Appreciation Rights Plan (incorporated by reference from Exhibit 10.34 to the Form 10-K of Sky Financial for the year
ended December 31, 2005 filed as of February 23, 2006)                              
|10.39         |  | Agreement of Plan of Merger dated December 20, 2006 by and between Sky Financial Group, Inc. and Huntington Bancshares Incorporated (incorporated by reference from Exhibit 2.1 of the Form 8-K of the Sky
Financial filed as of December 22, 2006)                                       



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|              |  |                                                                                                                                                                                                                
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Exhibit                                                                                                                                                                                                        
|              | 
|11.1          |  | Statement Re: Computation of Per Share Earnings (incorporated by reference from the information contained in Note 13 Earnings Per Common Share on page 55 of Sky Financials 2006 Annual
Report on Form 10-K)
|14.1          |  | Code of Ethics for Senior Financial Officers (filed as Exhibit 14.2 from Registrants Current Report on Form 8-K filed on July 31, 2003, and incorporated herein by reference)                                 
|21.1          |  | Subsidiaries of Sky Financial                                                                                                                                                                                  
|23.1          |  | Consent of Deloitte & Touche LLP                                                                                                                                                                               
|24.1          |  | Power of Attorney                                                                                                                                                                                              
|31.1          |  | Rule 13a-14(a)/15-d-14(a) Certification of Chief Executive Officer                                                                                                                                             
|31.2          |  | Rule 13a-14(a)/15-d-14(a) Certification of Chief Financial Officer                                                                                                                                             
|32.1          |  | Section 1350 Certification of Chief Executive Officer                                                                                                                                                          
|32.2          |  | Section 1350 Certification of Chief Financial Officer                                                                                                                                                          

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SKY FINANCIAL GROUP, INC.



|    |  |                                                                                                                        
|--- |  | -----------------------------------------------------------------------------------------------------------------------
|By: |  | /s/ Kevin T. Thompson                                                                                                  
|    |  | Kevin T. Thompson                                                                                                      
|    |  | Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal     Accounting Officer)
|    |  | February 23, 2007                                                                                                      

Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the date indicated.

Signatures



|                                |  |                        |  | 
|------------------------------- |  | ---------------------- |  | 
|Marty E. Adams*                 |  | Jonathan A. Levy*      |  | 
|Director/Chairman/President/CEO |  | Director               |  | 
|February 23, 2007               |  | February 23, 2007      |  | 
|                                |  |                       
|Kevin T. Thompson*              |  | Gerard P. Mastroianni* |  | 
|Executive Vice President/CFO    |  | Director               |  | 
|February 23, 2007               |  | February 23, 2007      |  | 
|                                |  |                       
|George N. Chandler II*          |  | Gregory L. Ridler*     |  | 
|Director                        |  | Director               |  | 
|February 23, 2007               |  | February 23, 2007      |  | 
|                                |  |                       
|Robert C. Duvall*               |  | Emerson J. Ross, Jr.*  |  | 
|Director                        |  | Director               |  | 
|February 23, 2007               |  | February 23, 2007      |  | 
|                                |  |                       
|Marylouise Fennell*             |  | C. Gregory Spangler*   |  | 
|Director                        |  | Director               |  | 
|February 23, 2007               |  | February 23, 2007      |  | 
|                                |  |                       
|D. James Hilliker*              |  | Joseph N. Tosh II*     |  | 
|Director                        |  | Director               |  | 
|February 23, 2007               |  | February 23, 2007      |  | 
|                                |  |                       
|Fred H. Sam Johnson III*      |  | R. John Wean III*      |  | 
|Director                        |  | Director               |  | 
|February 23, 2007               |  | February 23, 2007      |  | 



|* | The undersigned attorney-in-fact, by signing his name below, does hereby sign this Report on Form 10-K on behalf of the above-named officers and directors pursuant to a power of attorney
executed by such persons and filed with the Securities and Exchange Commission contemporaneously herewith.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|    |  |                      
|--- |  | ---------------------
|By: |  | /s/ Kevin T. Thompson
|    |  | Kevin T. Thompson    
|    |  | Attorney-In-Fact     



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