1

 
**Huntington Bancshares Incorporated****Condensed Consolidated Statements of Income*****(Unaudited)***           Three Months Ended   March 31, *(in thousands, except per share amounts)* **2009**  2008  Interest and fee income        Loans and leases        Taxable **$****497,588**  $658,470 Tax-exempt  **1,098**   1,736 Investment securities        Taxable  **55,461**   53,895 Tax-exempt  **4,755**   7,354 Other  **11,055**   31,956        Total interest income  **569,957**   753,411                 Interest expense        Deposits  **187,569**   274,883 Short-term borrowings  **681**   19,156 Federal Home Loan Bank advances  **6,234**   33,720 Subordinated notes and other long-term debt  **37,968**   48,828        Total interest expense  **232,452**   376,587        Net interest income  **337,505**   376,824 Provision for credit losses  **291,837**   88,650        **Net interest income after provision for credit losses**  **45,668**   288,174        Service charges on deposit accounts  **69,878**   72,668 Brokerage and insurance income  **39,948**   36,560 Trust services  **24,810**   34,128 Electronic banking  **22,482**   20,741 Bank owned life insurance income  **12,912**   13,750 Automobile operating lease income  **13,228**   5,832 Mortgage banking income (loss)  **35,418**   (7,063)Securities gains  **2,067**   1,429 Other income  **18,359**   57,707        **Total noninterest income**  **239,102**   235,752        Personnel costs  **175,932**   201,943 Outside data processing and other services  **32,432**   34,361 Net occupancy  **29,188**   33,243 Equipment  **20,410**   23,794 Amortization of intangibles  **17,135**   18,917 Professional services  **18,253**   9,090 Marketing  **8,225**   8,919 Automobile operating lease expense  **10,931**   4,506 Telecommunications  **5,890**   6,245 Printing and supplies  **3,572**   5,622 Goodwill impairment  **2,602,713**   — Other expense  **45,088**   23,841        **Total noninterest expense**  **2,969,769**   370,481        (Loss) income before income taxes  **(2,684,999****)**  153,445 (Benefit) provision for income taxes  **(251,792****)**  26,377        **Net (loss) income** **$****(2,433,207****)** $127,068        Dividends declared on preferred shares  **58,793**   —        **Net(loss) income applicable to common shares** **$****(2,492,000****)** $127,068                 Average common shares — basic  **366,919**   366,235 Average common shares — diluted  **366,919**   367,208          **Per common share**        Net income — basic **$****(6.79****)** $0.35 Net income — diluted  **(6.79****)**  0.35 Cash dividends declared  **0.010**   0.265 *Seenotes to unaudited condensed consolidated financial statements.*
 
2

 
**Huntington Bancshares Incorporated****Condensed Consolidated Statements of Changes in Shareholders’ Equity*****(Unaudited)***                                                                                       Accumulated         Preferred Stock                      Other         Series B  Series A  Common Stock  Capital  Treasury Stock  Comprehensive  Retained    *(in thousands)* Shares  Amount  Shares  Amount  Shares  Amount  Surplus  Shares  Amount  Loss  Earnings  Total  Three Months Ended March 31, 2008:                                                Balance, beginning of period  —  $—   —   —   367,001  $3,670  $5,237,783   (739) $(14,391) $(49,611) $771,689  $5,949,140 Cumulative effect of change in accounting principlefor fair value of assets and libilities, net of tax of ($803)                                          1,491   1,491 Cumulative effect of changing measurement dateprovisions for pension and post-retirement assetsand obligations, net of tax of $4,324                                      (3,834)  (4,195)  (8,029)Cumulative effect of change in accountingprinciple for noncontrolling interests                                          1,950   1,950                                      Balance, beginning of period — as adjusted  —   —   —   —   367,001   3,670   5,237,783   (739)  (14,391)  (53,445)  770,935   5,944,552 Comprehensive Income:                                                Net income                                          127,068   127,068 Unrealized net losses on investment securitiesarising during the period, net of reclassification (1)for net realized gains, net of tax of $37,930                                      (69,385)      (69,385)Unrealized losses on cash flow hedging derivatives,net of tax of $132                                      (246)      (246)Amortization included in net periodic benefit costs:                                                Net actuarial loss, net of tax of ($281)                                      522       522 Prior service costs, net of tax of ($84)                                      157       157 Transition obligation, net of tax of ($97)                                      180       180                                                 Total comprehensive income                                              58,296                                                 Cash dividends declared ($0.265 per share)                                          (97,062)  (97,062)Recognition of the fair value ofshare-based compensation                          3,654                   3,654 Other share-based compensation activity                  6   —   (219)              (64)  (283)Other                          (185)  (42)  (443)      70   (558)                                      Balance, end of period  —  $—           367,007  $3,670  $5,241,033   (781) $(14,834) $(122,217) $800,947  $5,908,599                                                                                       **Three Months Ended March 31, 2009:**                                                **Balance, beginning of period**  **1,398**  **$****1,308,667**   **569**  **$****569,000**   **366,972**  **$****3,670**  **$****5,322,428**   **(915****)** **$****(15,530****)** **$****(326,693****)** **$****365,599**  **$****7,227,141** **Cumulative effect of change in accountingprinciple for noncontrolling interests**                                          **1,765**   **1,765**                                      **Balance, beginning of period — as adjusted**  **1,398**   **1,308,667**   **569**   **569,000**   **366,972**   **3,670**   **5,322,428**   **(915****)**  **(15,530****)**  **(326,693****)**  **367,364**   **7,228,906**  **Comprehensive Income:**                                                **Net loss**                                          **(2,433,207****)**  **(2,433,207****)****Unrealized net gains on investment securitiesarising during the period, net of reclassification****(1)****for net realized gains, net of tax of ($25,506)**                                      **46,684**       **46,684** **Unrealized losses on cash flow hedging derivatives,net of tax of $581**                                      **(1,079****)**      **(1,079****)****Amortization included in net periodic benefit costs:**                                                **Net actuarial loss, net of tax of ($610)**                                      **1,134**       **1,134** **Prior service costs, net of tax of ($88)**                                      **164**       **164** **Transition obligation, net of tax of ($97)**                                      **180**       **180**                                                 **Total comprehensive loss**                                              **(2,386,124****)**                                                **Conversion ofPreferred Series A stock**          **(114****)**  **(114,109****)**  **24,591**   **246**   **141,605**               **(27,742****)**  **—** **Amortization of discount**      **3,908**                                   **(3,908****)**  **—** **Cash dividends declared:**                                              **—** **Common ($0.01 per share)**                                          **(3,593****)**  **(3,593****)****PreferredSeries B ($12.50 per share)**                                          **(17,476****)**  **(17,476****)****PreferredSeries A ($21.25 per share)**                                          **(9,667****)**  **(9,667****)****Recognition of the fair value ofshare-based compensation**                          **2,823**                   **2,823** **Other share-based compensation activity**                  **33**   **—**   **(255****)**              **(58****)**  **(313****)****Other**      **300**                   **(1,144****)**  **1**   **1,308**   **21**   **(305****)**  **180**                                                                                       **Balance, end of period**  **1,398**  **$****1,312,875**   **455**   **454,891**   **391,596**  **$****3,916**  **$****5,465,457**   **(914****)** **$****(14,222****)** **$****(279,589****)** **$****(2,128,592****)** **$****4,814,736**                                         (1) Reclassification adjustments represent net unrealized gains or losses as of December 31 ofthe prior year on investment securities that were sold during the current year.For the three months ended March 31, 2009 and 2008, the reclassification adjustments were $1,344, net of tax of ($723), and $929, net of tax of ($500), respectively.*See notes to unaudited condensed consolidated financial statements.*
 
3

 
**Huntington Bancshares Incorporated****Condensed Consolidated Statements of Cash Flows*****(Unaudited)***           **Three Months Ended**   **March 31,** *(in thousands)* **2009**  **2008**          **Operating activities**        Net (loss) income **$****(2,433,207****)** $127,068 Adjustmentsto reconcile net (loss) income to net cash provided by(used for) operating activites:        Impairment of goodwill  **2,602,713**   — Provision for credit losses  **291,837**   88,650 Depreciation and amortization  **53,756**   59,125 Change in current and deferred income taxes  **(141,170****)**  135,936 Net proceeds from (purchases of) trading account securities  **856,215**   (214,132)Originations of loans held for sale  **(1,529,276****)**  (1,026,797)Principal payments on and proceeds from loans held for sale  **1,408,133**   865,360 Other, net  **(49,429****)**  (40,670)       **Net cash provided by (used for) operating activities**  **1,059,572**   (5,460)                **Investing activities**        Decrease(increase) in interest bearing deposits in banks  **9,420**** **  (51,512)Proceeds from:        Maturities and calls of investment securities  **130,943**   108,541 Sales of investment securities  **634,463**   133,269 Purchases of investment securities  **(743,264****)**  (162,087)Net proceeds from sales of loans  **949,398**   — Net loan andlease activity, excluding sales  **(106,706****)**  (1,006,819)Purchases of operating lease assets  **(102****)**  (72,396)Proceeds from sale of operating lease assets  **1,637**   10,639 Purchases of premises and equipment  **(14,946****)**  (13,629)Proceeds from sales of other real estate  **5,959**   13,315 Other, net  **371**   5,393        **Net cash provided by (used for) investing activities**  **867,173**   (1,035,286)                **Financing activities**        Increase in deposits  **1,127,617**   367,188 (Decrease) increase in short-term borrowings  **(297,472****)**  536,335 Maturity/redemption of subordinated notes  **(26,050****)**  (50,000)Proceeds from Federal Home Loan Bank advances  **201,083**   602,771 Maturity/redemption of Federal Home Loan Bank advances  **(1,832,219****)**  (2,261)Proceeds from issuance of long-term debt  **598,200**   — Maturity of long-term debt  **(199,410****)**  (44,211)Dividends paid on preferred stock  **(29,761****)**  — Dividends paid on common stock  **(40,257****)**  (96,797)Other, net  **(313****)**  (283)       **Net cash (used for) provided by financing activities**  **(498,582****)**  1,312,742        **Increase in cash and cash equivalents**  **1,428,163**   271,996 **Cash andcash equivalents at beginning of period**  **844,668**   2,009,246        **Cash and cash equivalents at end of period** **$****2,272,831**  $2,281,242                 Supplemental disclosures:        Income taxes refunded **$****110,622**  $109,559 Interest paid  **256,654**   375,258 Non-cash activities        Common stock dividends accrued, paid in subsequent quarter  **3,011**   77,027 Preferred stock dividends accrued, paid in subsequent quarter  **18,600**   — *See notes to unaudited condensed consolidated financial statements.*
 
4

 
**Notes to Unaudited Condensed Consolidated Financial Statements****Note 1 — Basis of Presentation**The accompanying unaudited condensed consolidated financial statements of HuntingtonBancshares Incorporated (Huntington or the Company) reflect all adjustments consisting of normalrecurring accruals, which are, in the opinion of Management, necessary for a fair presentation ofthe consolidated financial position, the results of operations, and cash flows for the periodspresented. These unaudited condensed consolidated financial statements have been preparedaccording to the rules and regulations of the Securities and Exchange Commission (SEC) and,therefore, certain information and footnote disclosures normally included in financial statementsprepared in accordance with accounting principles generally accepted in the United States (GAAP)have been omitted. The Notes to Consolidated Financial Statements appearing in Huntington’s 2008Annual Report on Form 10-K (2008 Form 10-K), which include descriptions of significant accountingpolicies, as updated by the information contained in this report, should be read in conjunctionwith these interim financial statements.Certain amounts in the prior-year’s financial statements have been reclassified to conform tothe current period presentation.For statement of cash flows purposes, cash and cash equivalents are defined as the sum of“Cash and due from banks” and “Federal funds sold and securities purchased under resaleagreements.”**Note 2 — New Accounting Pronouncements****FASB Statement No. 141 (Revised 2008),*****Business Combinations (Statement No. 141R)*****—** Statement No.141R was issued in December 2007. The revised statement requires an acquirer to recognize theassets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at theacquisition date, measured at their fair values as of that date, with limited exceptions specifiedin the Statement. Statement No. 141R required prospective application for business combinationsconsummated in fiscal years beginning on or after December 15, 2008. The Franklin restructuringtransaction described in Note 3 was accounted for under this standard.**FASB Statement No. 160,*****Noncontrolling Interests in Consolidated Financial Statement*****s —*****anamendment of ARB No. 51 (Statement No. 160)*****—** Statement No. 160 was issued in December 2007. TheStatement requires that noncontrolling interests in subsidiaries be initially measured at fairvalue and classified as a separate component of equity. The Statement is effective for fiscal yearsbeginning on or after December 15, 2008. The adoption of this new Statement did not have a materialimpact on Huntington’s condensed consolidated financial statements.**FASB Statement No. 163,*****Accounting for Financial Guarantee Insurance Contracts*****—*****an interpretationof FASB Statement No. 60 (Statement No. 163)*****—** Statement No. 163 requires that an insuranceenterprise recognize a claim liability prior to an event of default (insured event) when there isevidence that credit deterioration has occurred in an insured financial obligation. This Statementalso clarifies how Statement No. 60 applies to financial guarantee insurance contracts, includingthe recognition and measurement to be used to account for premium revenue and claim liabilities.This Statement requires expanded disclosures about financial guarantee insurance contracts. ThisStatement is effective for financial statements issued for fiscal years and interim periodsbeginning after December 15, 2008. The adoption of this Statement did not have a material impacton the Huntington’s condensed consolidated financial statements.**FASB Staff Position (FSP) FAS 157-4,*****Determining Fair Value When the Volume and Level of Activityfor the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are NotOrderly (FSP FAS 157-4)*.** FSP FAS 157-4 was issued in April 2009. The FSP reaffirms the exit pricefair value measurement guidance in Statement No. 157 and also provides additional guidance forestimating fair value in accordance with Statement No. 157 when the volume and level of activityfor the asset or liability have significantly decreased. This FSP is effective for interimreporting periods ending after June 15, 2009. Management is currently evaluating the impact thatthe FSP could have on the Company’s results of operations.
 
5

 
**FSP FAS 115-2 and FAS 124-2,*****Recognition and Presentation of Other-Than-Temporary Impairments (FSPFAS 115-2 and FAS 124-2)*****.**FSP FAS 115-2 and FAS 124-2 were issued in April 2009. This FSP amendsthe other-than-temporary impairment (OTTI) guidance in US GAAP for debt securities and includesadditional presentation and disclosure requirements for both debt and equity securities. This FSPis effective for interim reporting periods ending after June 15, 2009. The adoption of FSP FAS115-2 and FAS 124-2 would require an adjustment to retained earnings and other comprehensive income(OCI) in the period of adoption to reclassify non-credit related impairment to OCI for securitiesthat the Company does not intend to sell (and will not more likely than not be required to sell).Management is currently evaluating the impact that the FSP could have on the Company’s results ofoperations.**FSP FAS 107-1 and APB 28-1,*****Interim Disclosures about Fair Value of Financial Instruments (FSP FAS107-1 and APB 28-1).*** FSP FAS 107-1 and APB 28-1 were issued in April 2009. The FSP requiresdisclosures about fair value of financial instruments for interim reporting periods of publiclytraded companies as well as in annual financial statements. This FSP is effective for interimreporting periods ending after June 15, 2009.**FSP FAS 132(R)-1,*****Employers’ Disclosures about Postretirement Benefit Plan Assets (FSP FAS132(R)-1).*** FSP FAS 132(R)-1 was issued in December 2008. This FSP requires additional disclosuresabout plan assets in an employer’s defined benefit pension and other postretirement plans. ThisFSP is effective for fiscal years ending after December 15, 2009.**Note 3 — Loans and Leases*****Franklin Credit Management relationship***Franklin Credit Management Corporation (Franklin) is a specialty consumer finance companyprimarily engaged in servicing residential mortgage loans. Prior to March 31, 2009, Franklin owneda portfolio of loans secured by first and second liens on 1-4 family residential properties. AtDecember 31, 2008, Huntington’s total loans outstanding to Franklin were $650.2 million, all ofwhich were placed on nonaccrual status. Additionally, the specific ALLL for the Franklin portfoliowas $130.0 million, resulting in a net exposure to Franklin at December 31, 2008 of $520.2 million.On March 31, 2009, Huntington entered into a transaction with Franklin whereby a Huntingtonwholly-owned REIT subsidiary (REIT) exchanged a non controlling amount of certain equityinterests for a 100% interest in Franklin Asset Merger Sub, LLC (Merger Sub), a wholly ownedsubsidiary of Franklin. This was accomplished by merging Merger Sub into a wholly-ownedsubsidiary of REIT. Merger Sub’s sole assets were two trust participation certificates evidencing84% ownership rights in a trust (New Trust) which holds all the underlying consumer loans and OREOthat were formerly collateral for the Franklin commercial loans. The equity interests provided toFranklin by REIT were pledged by Franklin as collateral for the Franklin commercial loans.New Trust is a variable interest entity under FASB Interpretation No 46R, *Consolidation ofVariable Interest Entities (revised December 2003)- an interpretation of ARB No. 51*(FIN 46R), and,as a result of Huntington’s 84% participation certificates, NewTrust was consolidated intoHuntington’s financial results. As required by FIN 46R, the consolidation is treated as a businesscombination under Statement No. 141R with the fair value of the equity interests issued to Franklinrepresenting the acquisition price. The assets of New Trust, which include first and second lienmortgage loans and OREO properties, were recorded at their fairvalues of $494 million and $80 million, respectively. AICPAStatement of Position 03-3, *Accounting for Certain Loans or Debt Securities Acquired in a Transfer(SOP 03-3)*, provides guidance for accounting for acquired loans, such as these, that haveexperienced a deterioration of credit quality at the time of acquisition for which it is probablethat the investor will be unable to collect all contractually required payments.Under SOP 03-3, the excess of cash flows expected at acquisition over the estimated fair valueis referred to as the accretable discount and is recognized in interest income over the remaininglife of the loan, or pool of loans, in situations where there is a reasonable expectation about thetiming and amount of cash flows expected to be collected. The difference between the contractuallyrequired payments at acquisition and the cash flows expected to be collected at acquisition,considering the impact of prepayments, is referred to as the nonaccretable discount. Subsequentdecreases to the expected cash flows will generally result in a charge to the provision for creditlosses and an increase to the allowance for loan and lease losses. Subsequent increases in cash flows resultin reversal of any nonaccretable discount (or allowance for loan and lease losses to the extent any has beenrecorded) with a positive impact on interest income. The measurement of undiscounted cash flowsinvolves assumptions and judgments for credit risk, interest rate risk, prepayment risk, defaultrates, loss severity, paymentspeeds, and collateral values. All of these factors are inherently subjective and significantchanges in the cash flow estimates over the life of the loan can result.
 
6

 
The portfolio of first and second lien Franklin mortgage loans have been accounted for underSOP 03-3 in the 2009 first quarter. No allowance for credit losses related to these loans was recordedat the acquisition date. A $39.8 million difference between the fair value of the loans and theexpected cash flows was recognized as an accretable discount that will be recognized over thecontractual term of the loans. A $1.1 billion difference between the unpaid principal balance ofthe loans and the expected cash flows was recognized as a nonaccretable discount. Any futureincreases to expected cash flows will be recognized as a yield adjustment over the remaining termof the respective loan. Any future decreases to expected cash flows will be recognized through anadditional allowance for credit losses.The fair values of the acquired mortgage loans and OREO assets were based upon a marketparticipant model and calculated in accordance with FASB Statement No. 157, *Fair Value Measurements*(Statement No. 157). Under this market participant model, expected cash flows for 1st lienmortgages were calculated based upon the net expected foreclosure proceeds of the collateralunderlying each mortgage loan. Updated appraisals or other indicators of value provided the basisfor estimating cash flows. Sales proceeds from the underlying collateral were estimated to bereceived over a one to three year period, depending on the delinquency status of the loan.Expected proceeds were reduced assuming housing price depreciation of18%, 12%, and 0% over each year of thenext three years of expected collections, respectively. Interest cash flows were estimated to bereceived for a limited time on each portfolio. The resulting cashflows were discounted at an 18%rate of return. Limited value was assigned to all second lienmortgages because, after considering thehouse price depreciation rates above, little if any proceeds would be realized.The consolidation of New Trust resulted in the recording of a $95.8 million liability,representing the 16% of New Trust certificates not acquired by Huntington. These certificates wereretained by Franklin.In accordance with Statement No. 141R, Huntington has recorded a net deferred tax asset of$159.9 million related to the difference between the tax basis and the book basis in the acquiredassets. Because the acquisition price, represented by the equity interests in the Huntingtonwholly-owned subsidiary, was equal to the fair value of the 84% interest in the New Trustparticipant certificate, no goodwill was created from the transaction. The recording of thenet deferred tax asset was a bargain purchase under StatementNo. 141R, and was recorded as taxbenefit in the current period.Subsequent to the transaction, $127 million of the acquired current mortgage loans accrueinterest while $366 million were on nonaccrual. Management has concluded that it cannot reliablyestimate the timing of collection of cash flows for delinquent firstand second lien mortgages, becausethe majority of the expected cash flows for the delinquent portfolio will result from theforeclosure and subsequent disposition of the underlying collateral supporting the loans.**Single Family Home Builders**At March 31, 2009 and December 31, 2008, Huntington had $1.2 billion and $1.6 billion of loansto single family homebuilders, including loans made to both middle market and small businesshomebuilders. The decline is primarily the result of a first quarterreclassification of loans from commercial real estate to commercialand industrial. Such loans represented 3% and 4% of total loans and leases at March 31, 2009 andDecember 31, 2008, respectively. Of this portfolio at March 31, 2009, 68% were to finance projectscurrently under construction, 16% to finance land under development, and 16% to finance land heldfor development.The housing market across Huntington’s geographic footprint remained stressed, reflectingrelatively lower sales activity, declining prices, and excess inventories of houses to be sold,particularly impacting borrowers in our eastern Michigan and northern Ohio regions. Further, aportion of the loans extended to borrowers located within Huntington’s geographic regions was tofinance projects outside of our geographic regions. The Company anticipates the residentialdeveloper market will continue to be depressed, and anticipates continued pressure on the singlefamily home builder segment throughout 2009. Huntington has taken the following steps to mitigatethe risk arising from this exposure: (a) all loans greater than $50 thousand within this portfoliohave been reviewed continuously over the past 18 months and continue to be monitored, (b) creditvaluation adjustments have been made when appropriate based on the current condition of eachrelationship, and (c) reserves have been increased based on proactive risk identification andthorough borrower analysis.
 
7

 
**Retail properties**Huntington’s portfolio of commercial real estate loans secured by retail properties totaled$2.4 billion and $2.3 billion, or approximately 6% of total loans and leases, at March 31, 2009 andDecember 31, 2008, respectively. Credit approval in this loan segment is generally dependant onpre-leasing requirements, and net operating income from the project must cover interest expensewhen the loan is fully funded.The weakness of the economic environment in the Company’s geographic regions significantlyimpacted the projects that secure the loans in this portfolio segment. Increased unemploymentlevels compared with recent years, and the expectation that these levels will continue to increasefor the foreseeable future, are expected to adversely affect our borrowers’ ability to repay theseloans. Huntington is currently performing a detailed review of all loans in this portfoliosegment. Collateral characteristics of individual loans including project type (strip center, bigbox store, etc.), geographic location by zip code, lease-up status, and tenant information (anchorand other) are being analyzed. Portfolio management models are being refined to provideinformation related to credit, concentration and other risks, which will allow for improvedforward-looking identification and proactive management of risk in this portfolio segment.**Home Equity and Residential Mortgage Loans**There is a potential for loan products to contain contractual terms that give rise to aconcentration of credit risk that may increase a lending institution’s exposure to risk ofnonpayment or realization. Examples of these contractual terms include loans that permit negativeamortization, a loan-to-value of greater than 100%, and option adjustable-rate mortgages.Huntington does not offer mortgage loan products that contain these terms. Home equity loanstotaled $7.7 billion and $7.6 billion at March 31, 2009 and December 31, 2008, respectively, or19%, and 18% of total loans at the end of each respective period.Aspart of the Company’s loss mitigation process, Huntingtonincreased its efforts in 2008 and 2009 tore-underwrite, modify, or restructure loans when borrowers are experiencing payment difficulties,and these loan restructurings are based on the borrower’s ability to repay the loan.
 
8

 
**Note 4 — Investment Securities**Listed below are the contractual maturities (under 1 year, 1-5 years, 6-10 years, and over 10years) of investment securities at March 31, 2009, December 31, 2008, and March 31, 2008:                           **March 31, 2009**  December 31, 2008  March 31, 2008   **Amortized**      Amortized      Amortized    *(in thousands of dollars)* **Cost**  **Fair Value**  Cost  Fair Value  Cost  Fair Value U.S. Treasury                        Under 1 year **$****50,779**  **$****50,815**  $11,141  $11,157  $200  $203 1-5 years  **—**   **—**   —   —   250   255 6-10 years  **—**   **—**   —   —   —   — Over 10 years  **—**   **—**   —   —   —   —                    **Total U.S. Treasury**  **50,779**   **50,815**   11,141   11,157   450   458                    Federal agencies                        Mortgage backed securities                        Under 1 year  **—**   **—**   —   —   —   — 1-5 years  **—**   **—**   —   —   —   — 6-10 years  **1**   **1**   1   1   1   1 Over 10 years  **1,711,937**   **1,742,398**   1,625,655   1,627,580   1,485,348   1,497,661                    **Total mortgage-backed Federalagencies**  **1,711,938**   **1,742,399**   1,625,656   1,627,581   1,485,349   1,497,662                    Temporary Liquidity GuaranteeProgram (TLGP) securities                        Under 1 year  **—**   **—**   —   —   —   — 1-5 years  **186,321**   **186,534**   —   —   —   — 6-10 years  **—**   **—**   —   —   —   — Over 10 years  **—**   **—**   —   —   —   —                    **Total TLGP securities**  **186,321**   **186,534**   —   —   —   —                    Other agencies                        Under 1 year  **1,456**   **1,505**   —   —   100,839   100,797 1-5 years  **1,079,455**   **1,094,020**   579,546   595,912   66,477   67,042 6-10 years  **7,260**   **7,522**   7,954   8,328   10,017   10,278 Over 10 years  **—**   **—**   —   —   —   —                    **Total other Federal agencies**  **1,088,171**   **1,103,047**   587,500   604,240   177,333   178,117                    **Total Federal agencies**  **3,037,209**   **3,082,795**   2,224,297   2,242,978   1,663,132   1,676,237                    Municipal securities                        Under 1 year  **—**   **—**   —   —   61   61 1-5 years  **1,165**   **1,196**   51,890   54,184   18,957   19,581 6-10 years  **50,938**   **54,177**   216,433   222,086   202,679   205,501 Over 10 years  **67,631**   **69,598**   441,825   434,076   492,953   490,613                    **Total municipal securities**  **119,734**   **124,971**   710,148   710,346   714,650   715,756                    Private label CMO                        Under 1 year  **—**   **—**   —   —   —   — 1-5 years  **—**   **—**   —   —   —   — 6-10 years  **—**   **—**   —   —   —   — Over 10 years  **649,620**   **511,949**   674,506   523,515   760,510   729,368                    **Total private label CMO**  **649,620**   **511,949**   674,506   523,515   760,510   729,368                    Asset backed securities                        Under 1 year  **—**   **—**   —   —   —   — 1-5 years  **78,676**   **78,366**   —   —   —   — 6-10 years  **132,190**   **131,670**   —   —   —   — Over 10 years  **646,898**   **486,227**   652,881   464,027   856,877   750,695                    **Total asset backed securities**  **857,764**   **696,263**   652,881   464,027   856,877   750,695                    Other                        Under 1 year  **1,349**   **1,351**   549   552   1,701   1,701 1-5 years  **53,049**   **53,077**   6,546   6,563   11,848   11,896 6-10 years  **1,106**   **1,127**   798   811   598   599 Over 10 years  **64**   **136**   64   136   64   113 Non-marketable equity securities  **427,772**   **427,772**   427,973   427,973   417,601   417,601 Marketable equity securities  **9,840**   **8,891**   8,061   7,556   8,829   9,040                    **Total other**  **493,180**   **492,354**   443,991   443,591   440,641   440,950                    **Total investment securities** **$****5,157,507**  **$****4,908,332**  $4,705,823  $4,384,457  $4,435,810  $4,313,006                    
 
9

 
Other securities include $240.6 million of stock issued by the Federal Home Loan Bank ofCincinnati, $45.7 million of stock issued by the Federal Home Loan Bank of Indianapolis, and$141.5 million of Federal Reserve Bank stock. Other securities also include corporate debt andmarketable equity securities. Huntington does not have any material equity positions in Fannie Maeand Freddie Mac.The following table is a summary of securities gains and losses for the three and nine monthsended March 31, 2009 and 2008:           Three Months Ended   March 31, *(in thousands)* **2009**  2008 Gross gains on sales of securities **$****12,794**  $4,533 Gross (losses) on sales of securities  **(6,805****)**  — Other-than-temporary impairment recorded  **(3,922****)**  (3,104)       **Total securities gain (loss)** **$****2,067**  $1,429        During the first quarter of 2009, Huntington sold $589.2 million of municipal securities for$595.1 million.As of March 31, 2009, management has evaluated all other investment securities with unrealizedlosses and all non-marketable securities for impairment. The unrealized losses are primarily theresult of wider liquidity spreads on asset-backed securities and, additionally, increased marketvolatility on non-agency mortgage and asset-backed securities that are backed by certain mortgageloans. The fair values of these assets have been impacted by various market conditions. Inaddition, the expected average lives of the asset-backed securities backed by trust preferredsecurities have been extended, due to changes in the expectations of when the underlying securitieswould be repaid. The contractual terms and/or cash flows of the investments do not permit theissuer to settle the securities at a price less than the amortized cost. Huntington has reviewedits asset-backed portfolio with independent third parties and does not believe there is anyother-than-temporary impairment from these securities other than what has already been recorded.Huntington has the intent and ability to hold these investment securities until the fair value isrecovered, which may be maturity and, therefore, does not consider them to beother-than-temporarily impaired at March 31, 2009.**Note 5 — Loan Sales and Securitizations****Residential Mortgage Loans**For the three months ended March 31, 2009 and 2008, Huntington sold $1.5 billion and $629.8million of residential mortgage loans with servicing retained, resulting in net pre-tax gains of$28.5 million and $3.7 million, respectively, recorded in mortgage banking income.A mortgage servicing right (MSR) is established only when the servicing is contractuallyseparated from the underlying mortgage loans by sale or securitization of the loans with servicingrights retained.At initial recognition, the MSR asset is established at its fair value using assumptions thatare consistent with assumptions used to estimate the fair value of the total MSR portfolio.Subsequent to initial capitalization, MSR assets are recorded using either the fair value method oramortization method, depending on whether or not the Company will engage in actively hedging theasset. During the 2009 first quarter, all new and existing MSRs were recorded using the fair valuemethod. MSRs are included in accrued income and other assets in the Company’s condensedconsolidated statement of financial position. Any increase ordecrease in the fair value of MSRs carried under the fair valuemethod during theperiod is recorded as an increase or decrease in mortgage banking income, which is reflected innon-interest income in the consolidated statements of income.The following table is a summary of the changes in MSR fair value during the three monthsended March 31, 2009 and 2008:           Three Months Ended   March 31, *(in thousands)* **2009**  2008 Fair value, beginning of period **$****167,438**  $207,894 New servicing assets created  **23,074**   8,919 Change in fair value during the period due to:        Time decay (1)  **(1,623****)**  (1,665)Payoffs (2)  **(10,662****)**  (5,249)Changes in valuation inputs or assumptions (3)  **(10,389****)**  (18,093)       **Fair value, end of period** **$****167,838**  $191,806        
 
10

 
   (1) Represents decrease in value due to passage of time, including the impact from bothregularly scheduled loan principal payments and partial loan paydowns. (2) Represents decrease in value associated with loans that paid off during the period. (3) Represents change in value resulting primarily from market-driven changes ininterest rates.MSRs do not trade in an active, open market with readily observable prices. While sales ofMSRs occur, the precise terms and conditions are typically not readily available. Therefore, thefair value of MSRs is estimated using a discounted future cash flow model. The model considersportfolio characteristics, contractually specified servicing fees and assumptions related toprepayments, delinquency rates, late charges, other ancillary revenues, costs to service, and othereconomic factors. Changes in the assumptions used may have a significant impact on the valuationof MSRs.A summary of key assumptions and the sensitivity of the MSR value at March 31, 2009 to changesin these assumptions follows:                   Decline in fair value       due to       10%  20%       adverse  adverse *(in thousands)* Actual  change  change Constant pre-payment rate  25.55  % $(10,714) $(21,934)Spread over forward interest rate swap rates 578  bps  (4,153)  (8,306)MSR values are very sensitive to movements in interest rates as expected future net servicingincome depends on the projected outstanding principal balances of the underlying loans, which canbe greatly impacted by the level of prepayments. The Company hedges against changes in MSR fairvalue attributable to changes in interest rates through a combination of derivative instruments andtrading securities.Total servicing fees included in mortgage banking income amounted to $11.8 million and $10.9million for the three months ended March 31, 2009 and 2008, respectively.**Automobile Loans**During the first quarter of 2009, Huntington transferred $1.0 billion automobile loans andleases to a trust in a securitization transaction. The securitization qualified for saleaccounting under Statement No. 140. Huntington retained $210.9 million of the related securitiesand recorded a $47.1 million retained residual interest as a result of the transaction. Theseamounts are recorded in investment securities on Huntington’s condensed consolidated statement offinancial position. Huntington also recorded a $5.9 million loss in other non-interest income onthe condensed consolidated statement of income and recorded a $19.5 million servicing asset inaccrued income and other assets associated with this transaction.Automobile loan servicing rights are accounted for under the amortization provision of FASBStatement No. 156, *Accounting for Servicing of FinancialAssets — An amendment of FASB Statement No.140*. A servicing asset is established at fair value at the time of the sale. The servicing assetis then amortized against servicing income. Impairment, if any, is recognized when carrying valueexceeds the fair value as determined by calculating the present value of expected net future cashflows. The primary risk characteristic for measuring servicing assets is payoff rates of theunderlying loan pools. Valuation calculations rely on the predicted payoff assumption and, ifactual payoff is quicker than expected, then future value would be impaired.Changes in the carrying value of automobile loan servicing rights for the three months endedMarch 31, 2009 and 2008, and the fair value at the end of each period were as follows:           Three Months Ended   March 31, *(in thousands)* **2009**  2008 Carrying value, beginning of period **$****1,656**  $4,099 New servicing assets  **19,538**   — Amortization  **(1,143****)**  (851)       Carrying value, end of period **$****20,051**  $3,248        Fair value, end of period **$****20,900**  $4,341        
 
11

 
Huntington has retained servicing responsibilities on sold automobile loans and receivesannual servicing fees from 0.55% to 1.00% and other ancillary fees of approximately 0.40% to 0.50%of the outstanding loan balances. Servicing income, net of amortization of capitalized servicingassets, amounted to $1.2 million and $2.1 million for the three months ended March 31, 2009 and2008, respectively.**Note 6 — Goodwill and Other Intangible Assets**Goodwill by line of business as of March 31, 2009, was as follows:                   Regional      Treasury/  Huntington *(in thousands)* Banking  PFG  Other  Consolidated Balance, January 1, 2009 $2,888,344  $153,178  $13,463  $3,054,985 Adjustments  (2,573,818)  (28,895)  (162)  (2,602,875)             Balance, March 31, 2009 **$****314,526**  **$****124,283**  **$****13,301**  **$****452,110**              In accordance with FASB Statement No. 142, *Goodwill and Other Intangible Assets*(Statement No.142), goodwill is not amortized but is evaluated for impairment on an annual basis at October 1stof each year or whenever events or changes in circumstances indicate that the carrying value maynot be recoverable. During the first quarter of 2009, Huntington experienced a sustained declinein its stock price, which was primarily attributable to the continuing economic slowdown andincreased market concern surrounding financial service companies’ credit risks and capitalpositions as well as uncertainty related to increased regulatory supervision and intervention.Huntington determined that these changes would more likely than not reduce the fair value ofcertain reporting units below their carrying amounts. Therefore, Huntington performed a goodwillimpairment test during the first quarter of 2009.The first step (Step 1) of impairment testing requires a comparison of each reporting unit’sfair value to carrying value to identify potential impairment. Huntington identified four reportingunits: Regional Banking, the Private Financial Group (PFG), Insurance, and Auto Finance and DealerServices (AFDS). Although Insurance is included within PFG for business segment reporting, it wasevaluated as a separate reporting unit for impairment testing since it contains separatelyidentifiable goodwill. Based on the results of the Step 1 test as defined in Statement No. 142, theRegional Banking and Insurance reporting units carrying amounts, including goodwill, exceeded theirrelated fair values. To determine the fair value of the Regional Banking reporting unit, both anincome (discounted cash flows) and market approach were utilized. To determine the fair value ofthe Insurance reporting unit, a market approach was utilized. Upon completion of the Step 2 test,Huntington determined that the Regional Banking and Insurance reporting units’ goodwill carryingamounts exceeded their implied fair values by $2,574 million and $29 million, respectively. Theresulting $2,603 million goodwill impairment charge was recorded in the first quarter of 2009.At March 31, 2009, December 31, 2008, and March 31, 2008, Huntington’s other intangible assetsconsisted of the following:               **Gross**  **Accumulated**  **Net** *(in thousands)* **Carrying Amount**  **Amortization**  **Carrying Value** **March 31, 2009**            Core deposit intangible $373,300  $(125,495) $247,805 Customer relationship  104,574   (19,087)  85,487 Other  29,327   (23,047)  6,280           Total other intangible assets $507,201  $(167,629) $339,572           **December 31, 2008**            Core deposit intangible $373,300  $(111,163) $262,137 Customer relationship  104,574   (16,776)  87,798 Other  29,327   (22,559)  6,768           Total other intangible assets $507,201  $(150,498) $356,703           **March 31, 2008**            Core deposit intangible $373,300  $(62,334) $310,966 Customer relationship  104,574   (9,490)  95,084 Other  23,655   (20,650)  3,005           Total other intangible assets $501,529  $(92,474) $409,055           
 
12

 
The estimated amortization expense of other intangible assets for the remainder of 2009 and thenext five years are as follows:       Amortization *(in thousands)* Expense 2009 $50,647 2010  60,455 2011  53,310 2012  46,066 2013  40,429 2014  35,744 **Note 7 — Shareholders’ Equity*****Issuance of Convertible Preferred Stock***In the second quarter of 2008, Huntington completed the public offering of 569,000 shares of8.50% Series A Non-Cumulative Perpetual Convertible Preferred Stock (Series A Preferred Stock) witha liquidation preference of $1,000 per share, resulting in an aggregate liquidation preference of$569 million.Each share of the Series A Preferred Stock is non-voting and may be converted at any time, atthe option of the holder, into 83.6680 shares of common stock of Huntington, which represents anapproximate initial conversion price of $11.95 per share of common stock (for a total ofapproximately 38.1 million shares at March 31, 2009). The conversion rate and conversion price willbe subject to adjustments in certain circumstances. On or after April 15, 2013, at the option ofHuntington, the Series A Preferred Stock will be subject to mandatory conversion into Huntington’scommon stock at the prevailing conversion rate, if the closing price of Huntington’s common stockexceeds 130% of the then applicable conversion price for 20 trading days during any 30 consecutivetrading day period.During the 2009 first quarter, Huntington entered into agreements with various institutionalinvestors exchanging shares of common stock for shares of the Series A Preferred Stock held bythe institutional investors. The table below provides details of the aggregate activities:               January 1, 2009 -  April 1, 2009 -    *(in whole amounts)* March 31, 2009  April 2, 2009  **Total** Preferred shares exchanged  114,109   20,000   **134,109** Common shares issued:            At stated convertible option  9,547,272   1,673,360   **11,220,632** As conversion inducement  15,044,012   3,026,640   **18,070,652**           Total common shares issued:  24,591,284   4,700,000   **29,291,284** During the 2009 second quarter, Huntington completed a “discretionary equity issuance”program. This program allowed the Company to take advantage of marketopportunities to issue 38.5 million new shares of common stockworth $120 million. Sales of the common shares were made throughordinary brokers’ transactions on the NASDAQ Global Select Market or otherwise at the prevailingmarket prices. In addition to this program, the Company may considersimilar actions to those taken in the 2009 first quarter in thefuture.***Troubled Asset Relief Program (TARP)***On November 14, 2008, Huntington received $1.4 billion of equity capital by issuing to theU.S. Department of Treasury 1.4 million shares of Huntington’s 5.00% Series B Non-voting CumulativePreferred Stock, par value $0.01 per share with a liquidation preference of $1,000 per share, and aten-year warrant to purchase up to 23.6 million shares of Huntington’s common stock, par value$0.01 per share, at an exercise price of $8.90 per share. The proceeds received were allocated tothe preferred stock and additional paid-in-capital based on their relative fair values. Theresulting discount on the preferred stock is amortized against retained earnings and is reflectedin Huntington’s consolidated statement of income as “Dividends on preferred shares”, resulting inadditional dilution to Huntington’s earnings per share. The warrants would be immediatelyexercisable, in whole or in part, over a term of 10 years. The warrants were included inHuntington’s diluted average common shares outstanding (subject to anti-dilution). Both thepreferred securities and warrants were accounted for as additions to Huntington’s regulatory Tier 1and Total capital.
 
13

 
The Series B Preferred Stock is not mandatorily redeemable and will pay cumulative dividendsat a rate of 5% per year for the first five years and 9% per year thereafter. Huntington cannotredeem the preferred securities during the first three years after issuance except with theproceeds from a “qualified equity offering.” Any redemption requires Federal Reserve approval. TheSeries B Preferred Stock will rank on equal priority with Huntington’s existing 8.50% Series ANon-Cumulative Perpetual Convertible Preferred Stock.A company that participates in the TARP must adopt certain standards for executivecompensation, including (a) prohibiting “golden parachute” payments as defined in the EmergencyEconomic Stabilization Act of 2008 (EESA) to senior executive officers; (b) requiring recovery ofany compensation paid to senior executive officers based on criteria that is later proven to bematerially inaccurate; (c) prohibiting incentive compensation that encourages unnecessary andexcessive risks that threaten the value of the financial institution, and (d) accept restrictionson the payment of dividends and the repurchase of common stock.**Note 8 — (Loss) Earnings per Share**Basic loss or earnings per share is the amount of (loss) earnings (adjusted for dividendsdeclared on preferred stock) available to each share of common stock outstanding during thereporting period. Diluted (loss) earnings per share is the amount of loss or earnings available toeach share of common stock outstanding during the reporting period adjusted to include the effectof potentially dilutive common shares. Potentially dilutive common shares include incrementalshares issued for stock options, restricted stock units, distributions from deferred compensationplans, and the conversion of the Company’s convertible preferred stock and warrants (See Note 7).Potentially dilutive common shares are excluded from the computation of diluted earnings per sharein periods in which the effect would be antidilutive. For diluted (loss) earnings per share, net(loss) income available to common shares can be affected by the conversion of the Company’sconvertible preferred stock. Where the effect of this conversion would be dilutive, net (loss)income available to common shareholders is adjusted by the associated preferred dividends. Thecalculation of basic and diluted (loss) earnings per share for the three months ended March 31,2009 and 2008, was as follows:           Three Months Ended   March 31, (in thousands, except per share amounts) **2009**  2008 **Basic (loss) earnings per common share**        Net (loss) income **$****(2,433,207****)** $127,068 Preferred Class B and Class A stock dividends  **(27,143****)**  — Amortization of discount on issuance of Preferred Class B stock  **(3,908****)**  — Deemed dividend on conversion of Preferred Class A stock  **(27,742****)**  —        Net (loss) income available to common shareholders **$****(2,492,000****)** $127,068 Average common shares issued and outstanding  **366,919**   366,235 **Basic (loss) earnings per common share** **$****(6.79****)** $0.35  **Diluted (loss) earnings per common share**        Net (loss) income available to common shareholders **$****(2,492,000****)** $127,068 Effect of assumed preferred stock conversion  **—**   —        Net (loss) income applicable to diluted earnings per share **$****(2,492,000****)** $127,068 Average common shares issued and outstanding  **366,919**   366,235 Dilutive potential common shares:        Stock options and restricted stock units  **—**   204 Shares held in deferred compensation plans  **—**   769 Conversion of preferred stock  **—**   —        Dilutive potential common shares:  **—**   973        Total diluted average common shares issued and outstanding  **366,919**   367,208 **Diluted (loss) earnings per common share** **$****(6.79****)** $0.35 Due to the loss attributable to common shareholders for the three months ended March 31, 2009,no potentially dilutive shares are included in loss per share calculation as including such sharesin the calculation would reduce the reported loss per share. Options to purchase 25.0 million and27.7 million shares during the three months ended March 31, 2009 and 2008, respectively, wereoutstanding but were not included in the computation of diluted earnings per share because theeffect would have been antidilutive. The weighted average exercise price for these options was$18.96 per share, and $20.57 per share at the end of each respective period.
 
14

 
**Note 9 — Share-based Compensation**Huntington sponsors nonqualified and incentive share-based compensation plans. These plansprovide for the granting of stock options and other awards to officers, directors, and otheremployees. Compensation costs are included in personnel costs on the consolidated statements ofincome. Stock options are granted at the closing market price on the date of the grant. Optionsvest ratably over three years or when other conditions are met. Options granted prior to May 2004have a term of ten years. All options granted after May 2004 have a term of seven years.Huntington uses the Black-Scholes option-pricing model to value share-based compensationexpense. This model assumes that the estimated fair value of options is amortized over the options’vesting periods. Forfeitures are estimated at the date of grant based on historical rates andreduce the compensation expense recognized. The risk-free interest rate is based on the U.S.Treasury yield curve in effect at the date of grant. Expected volatility is based on the estimatedvolatility of Huntington’s stock over the expected term of the option. The expected dividend yieldis based on the dividend rate and stock price at the date of the grant. The following tableillustrates the weighted-average assumptions used in the option-pricing model for options grantedin each of the periods presented.           Three Months Ended   March 31,   **2009**  2008 **Assumptions**        Risk-free interest rate  **2.03**%  3.22%Expected dividend yield  **0.83**   8.05 Expected volatility of Huntington’s common stock  **35.0**   21.0 Expected option term (years)  **6.0**   6.0 **Weighted-average grant date fair value per share** **$****1.66**  $0.85 Total share-based compensation expense for the three months ended March 31, 2009 and 2008 was$2.8 million and $3.7 million, respectively. Huntington also recognized $1.0 million and $1.3million, respectively, in tax benefits for each of the three-months ended March 31, 2009 and 2008,related to share-based compensation.Huntington’s stock option activity and related information for the three months ended March31, 2009, was as follows:                           Weighted-          Weighted-  Average          Average  Remaining  Aggregate       Exercise  Contractual  Intrinsic *(in thousands, except per share amounts)* Options  Price  Life *(Years)*  Value Outstanding at January 1, 2009  26,289  $19.45         Granted  1,015   4.90         Exercised  —   —         Forfeited/expired  (2,305)  18.28                      **Outstanding at March 31, 2009**  **24,999**  **$****18.96**   **3.7**  **$****3**              **Exercisable at March 31, 2009**  **20,947**  **$****20.42**   **3.3**  **$****—**              The aggregate intrinsic value represents the amount by which the fair value of underlyingstock exceeds the “in-the-money” option exercise price. There were no exercises of stock options inthe first three months of 2009 or 2008.Huntington also grants restricted stock units and awards. Restricted stock units and awardsare issued at no cost to the recipient, and can be settled only in shares at the end of the vestingperiod. Restricted stock awards provide the holder with full voting rights and cash dividendsduring the vesting period. Restricted stock units do not provide the holder with voting rights orcash dividends during the vesting period and are subject to certain service restrictions. The fairvalue of the restricted stock units and awards is the closing market price of the Company’s commonstock on the date of award.The following table summarizes the status of Huntington’s restricted stock units andrestricted stock awards as of March 31, 2009, and activity for the three months ended March 31,2009:                       Weighted-      Weighted-       Average      Average   Restricted  Grant Date  Restricted  Grant Date   Stock  Fair Value  Stock  Fair Value *(in thousands, except per share amounts)* Units  Per Share  Awards  Per Share Nonvested at January 1, 2009  **1,823**  **$****14.64**   **—**  **$****—** Granted  **4**   **1.63**   **74**   **1.66** Vested  **(41****)**  **15.04**   **—**   **—** Forfeited  **(141****)**  **15.86**   **—**   **—**              **Nonvested at March 31, 2009**  **1,645**  **$****14.49**   **74**  **$****1.66**              
 
15

 
The weighted-average grant date fair value of nonvested shares granted for the three monthsended March 31, 2009 and 2008, were $1.66 and $13.08, respectively. The total fair value of awardsvested during each of the three months ended March 31, 2009 and 2008, was $0.1 million. As of March31, 2009, the total unrecognized compensation cost related to nonvested awards was $9.0 millionwith a weighted-average remaining expense recognition period of 1.8 years.Of the 30.0 million shares of common stock authorized for issuance under the plans at March31, 2009, 25.7 million were outstanding and 4.3 million were available for future grants.Huntington issues shares to fulfill stock option exercises and restricted stock units fromavailable authorized shares. At March 31, 2009, the Company believes there are adequate authorizedshares to satisfy anticipated stock option exercises in 2009.**Note 10 — Fair Values of Assets and Liabilities**Huntington adopted FASB Statement No. 157, *Fair Value Measurements*(Statement No. 157) andFASB Statement No. 159, *The Fair Value Option for Financial Assets and Financial Liabilities*(Statement No. 159) effective January 1, 2008. Huntington elected to apply the provisions ofStatement No. 159, the fair value option, for mortgage loans originated with the intent to sellwhich are included in loans held for sale.At March 31, 2009, mortgage loans held for sale had an aggregate fair value of $469.6 millionand an aggregate outstanding principal balance of $459.9 million. Interest income on these loansis recorded in interest and fees on loans and leases. Included in mortgage banking income were netgains resulting from changes in fair value of these loans, including net realized gains of $25.6million and $5.8 million for the three months ended March 31, 2009 and 2008, respectively.Statement No. 157 defines fair value as the exchange price that would be received for an assetor paid to transfer a liability (an exit price) in the principal or most advantageous market forthe asset or liability in an orderly transaction between market participants on the measurementdate. Statement No. 157 also establishes a three-level valuation hierarchy for disclosure of fairvalue measurements. The valuation hierarchy is based upon the transparency of inputs to thevaluation of an asset or liability as of the measurement date. The three levels are defined asfollows:*Level 1*— inputs to the valuation methodology are quoted prices (unadjusted) for identical assetsor liabilities in active markets.*Level 2*— inputs to the valuation methodology include quoted prices for similar assets andliabilities in active markets, and inputs that are observable for the asset or liability, eitherdirectly or indirectly, for substantially the full term of the financial instrument.*Level 3*— inputs to the valuation methodology are unobservable and significant to the fair valuemeasurement.A financial instrument’s categorization within the valuation hierarchy is based upon thelowest level of input that is significant to the fair value measurement.Following is a description of the valuation methodologies used for instruments measured atfair value, as well as the general classification of such instruments pursuant to the valuationhierarchy.*Securities*Where quoted prices are available in an active market, securities are classified within Level 1 ofthe valuation hierarchy. Level 1 securities include US Treasury and other federal agencysecurities, and money market mutual funds. If quoted market prices are not available, then fairvalues are estimated by using pricing models, quoted prices of securities with similarcharacteristics, or discounted cash flows. Level 2 securities include US Government and agencymortgage-backed securities and municipal securities. In certain cases where there is limitedactivity or less transparency around inputs to the valuation, securities are classified withinLevel 3 of the valuation hierarchy. Securities classified within Level 3 include asset backedsecurities and private label CMOs, for which Huntington obtains third party pricing. With thecurrent market conditions, the assumptions used to determine the fair value of many Level 3securities have greater subjectivity due to the lack of observable market transactions.*Mortgage loans held for sale*Mortgage loans held for sale are estimated using security prices for similar product types and,therefore, are classified in Level 2.*Mortgage servicing rights*MSRs do not trade in an active, open market with readily observable prices. For example, sales ofMSRs do occur, but the precise terms and conditions typically are not readily available.Accordingly, MSRs are classified in Level 3.
 
16

 
*Equity Investments*Equity investments are valued initially based upon transaction price. The carrying values are thenadjusted from the transaction price to reflect expected exit values as evidenced by financing andsale transactions with third parties, or when determination of a valuation adjustment is considerednecessary based upon a variety of factors including, but not limited to, current operatingperformance and future expectations of the particular investment, industry valuations of comparablepublic companies, and changes in market outlook. Due to the absence of quoted market prices andinherent lack of liquidity and the long-term nature of such assets, these equity investments areincluded in Level 3. Certain equity investments are accounted for under the equity method and,therefore, are not subject to the fair value disclosure requirements.*Derivatives*Huntington uses derivatives for a variety of purposes including asset and liability management,mortgage banking, and for trading activities. Level 1 derivatives consist of exchange tradedoptions and forward commitments to deliver mortgage backed securities which have quoted prices.Level 2 derivatives include basic asset and liability conversion swaps and options, and interestrate caps. Derivative instruments offered to customers are adjusted for credit considerationsrelated to the customer based upon individual credit considerations. These derivative positionsare valued using internally developed models that use readily observable market parameters.Derivatives in Level 3 consist of interest rate lock agreements related to mortgage loancommitments. The valuation includes assumptions related to the likelihood that a commitment willultimately result in a closed loan, which is a significant unobservable assumption.***Assets and Liabilities measured at fair value on a recurring basis***Assets and liabilities measured at fair value on a recurring basis at March 31, 2009 and 2008are summarized below:                       Fair Value Measurements at Reporting Date Using  Netting  **Balance at** *(in thousands)* Level 1  Level 2  Level 3  Adjustments (1)  **March 31, 2009** **Assets**                    Trading account securities $56,144  $27,410          **$****83,554** Investment securities  1,352,543   1,919,805  $1,208,212       **4,480,560** Mortgage loans held for sale      469,560           **469,560** Mortgage servicing rights          167,838       **167,838** Derivative assets  474   589,682   9,580  $(174,764)  **424,972** Equity investments          32,480       **32,480** **Liabilities**                    Derivative liabilities  10,262   353,757   65   (287,327)  **76,757**** **                       Fair Value Measurements at Reporting Date Using  Netting  **Balance at** *(in thousands)* Level 1  Level 2  Level 3  Adjustments (1)  **March 31, 2008** **Assets**                    Trading account securities $34,544  $1,212,333          **$****1,246,877** Investment securities  195,933   2,948,777  $750,695       **3,895,405** Mortgage loans held for sale      565,913           **565,913** Mortgage servicing rights          191,806       **191,806** Derivative assets  5,042   315,238   3,107  $(43,234)  **280,153** Equity investments          35,345       **35,345** **Liabilities**                    Derivative liabilities  6,037   191,324   159   (138,381)  **59,139**    (1) Amounts represent the impact of legally enforceable master netting agreements thatallow the Company to settlepositive and negative positions and cash collateral held or placed with the same counterparties.
 
17

 
below:The tables below present a rollforward of the balance sheet amounts for the three months endedMarch 31, 2009 and 2008, for financial instruments measured on a recurring basis and classified asLevel 3. The classification of an item as Level 3 is based on the significance of the unobservableinputs to the overall fair value measurement. However, Level 3 measurements may also includeobservable components of value that can be validated externally. Accordingly, the gains and lossesin the table below included changes in fair value due in part to observable factors that are partof the valuation methodology. Transfers in and out of Level 3 are presented in the tables below atfair value at the beginning of the reporting period.                   **Level 3 Fair Value Measurements**   **ThreeMonths Ended March 31, 2009**   Mortgage  Net Interest  Investment  Equity *(in thousands)* Servicing Rights  Rate Locks  Securities  investments **Balance, January 1, 2009** $167,438  $8,132  $987,542  $36,893 Total gains/losses:                Included in earnings  (1,988)  1,968   1,295   (1,320)Included in other comprehensive loss          40,673     Purchases, issuances, and settlements  2,388   (585)  226,251   (3,093)             **Balance, March 31, 2009** **$****167,838**  **$****9,515**  **$****1,255,761**  **$****32,480**              The amount of total gains or losses for the periodincluded in earnings (or other comprehensive loss)attributable to the change in unrealized gains orlosses relating to assets still held at reporting date **$****(1,988****)** **$****1,382**  **$****41,968**  **$****(1,320****)**                                **Level 3 Fair Value Measurements**   **ThreeMonths Ended March 31, 2008**   Mortgage  Net Interest  Investment  Equity *(in thousands)* Servicing Rights  Rate Locks  Securities  investments **Balance, January 1, 2008** $207,894  $(46) $834,489  $41,516 Total gains/losses:                Included in earnings  (16,737)  2,989   (3,317)  (8,777)Included in other comprehensive loss          (71,017)    Purchases, issuances, and settlements  649   5   (9,460)  2,606              **Balance, March 31, 2008** **$****191,806**  **$****2,948**  **$****750,695**  **$****35,345**              The amount of total gains or losses for the periodincluded in earnings (or other comprehensive loss)attributable to the change in unrealized gains orlosses relating to assets still held at reporting date **$****(16,737****)** **$****2,994**  **$****(74,334****)** **$****(2,877****)**             
 
18

 
The table below summarizes the classification of gains and losses due to changes in fairvalue, recorded in earnings for Level 3 assets and liabilities for the three months ended March 31,2009 and 2008.                   **Level 3 Fair Value Measurements**   **Three Months Ended March 31, 2009**   Mortgage  Net Interest  Investment  Equity *(in thousands)* Servicing Rights  Rate Locks  Securities  Investments Classification of gainsand losses in earnings:                Mortgage banking income $(1,988) $1,968         Securities losses         $(3,937)    Interest and fee income          5,232     Non-interest expense             $(1,320)             **Total** **$****(1,988****)** **$****1,968**  **$****1,295**  **$****(1,320****)**                                **Level 3 Fair Value Measurements**   **Three Months Ended March 31, 2008**   Mortgage  Net Interest  Investment  Equity *(in thousands)* Servicing Rights  Rate Locks  Securities  Investments Classification of gainsand losses in earnings:                Mortgage banking income $(16,737) $2,989         Securities losses         $(3,317)    Non-interest expense             $(8,777)             **Total** **$****(16,737****)** **$****2,989**  **$****(3,317****)** **$****(8,777****)**             
 
19

 
***Assets and Liabilities measured at fair value on a nonrecurring basis***Certain assets and liabilities may be required to be measured at fair value on a nonrecurringbasis in periods subsequent to their initial recognition. These assets and liabilities are notmeasured at fair value on an ongoing basis; however, they are subject to fair value adjustments incertain circumstances, such as when there is evidence of impairment.Periodically, Huntington records nonrecurring adjustments of collateral-dependent loansmeasured for impairment in accordance with FASB Statement No. 114, “*Accounting by Creditors forImpairment of a Loan*,” when establishing the allowance for credit losses. Such amounts aregenerally based on the fair value of the underlying collateral supporting the loan. In cases wherethe carrying value exceeds the fair value of the collateral, an impairment charge is recognized.During the first quarter of 2009 and 2008, Huntington identified $62.8 million, and $32.4 million,respectively, of impaired loans for which the fair value is recorded based upon collateral value, aLevel 3 input in the valuation hierarchy. For the three months ended March 31, 2009 and 2008,nonrecurring fair value losses of $33.5 million and $14.5 million, respectively, were recordedwithin the provision for credit losses.In accordance with the provisions of Statement No. 142, goodwill at March 31, 2009 with acarrying amount of $2,954 million was written down to its implied fair value of $351.3 million.TheFranklin first- and second-lien mortgage loans and OREO assets of $494 millionand $80 million, respectively, as discussed in Note 3, were recorded at fair value at March 31,2009.As discussed in Note 5, during the first quarter 2009, Huntington transferred $1.0 billionautomobile loans and leases to a trust in a securitization transaction. Huntington recorded a$47.1 million retained residual interest and a $19.5 million servicing asset at fair value as aresult of the transaction.**Note 11 — Benefit Plans**Huntington sponsors the Huntington Bancshares Retirement Plan (the Plan), a non-contributorydefined benefit pension plan covering substantially all employees. The Plan provides benefits basedupon length of service and compensation levels. The funding policy of Huntington is to contributean annual amount that is at least equal to the minimum funding requirements but not more than thatdeductible under the Internal Revenue Code.In addition, Huntington has an unfunded, defined benefit post-retirement plan (Post-RetirementBenefit Plan) that provides certain healthcare and life insurance benefits to retired employees whohave attained the age of 55 and have at least 10 years of vesting service under this plan. For anyemployee retiring on or after January 1, 1993, post-retirement healthcare benefits are based uponthe employee’s number of months of service and are limited to the actual cost of coverage. Lifeinsurance benefits are a percentage of the employee’s base salary at the time of retirement, with amaximum of $50,000 of coverage.On January 1, 2008, Huntington transitioned to fiscal year-end measurement date of plan assetsand benefit obligations as required by FASB Statement No. 158, *Employer’s Accounting for DefinedBenefit Pension and Other Postretirement Plans — An amendment of FASB Statements No. 87, 88, 106,and 132R (Statement No. 158)*. As a result, Huntington recognized a charge to beginning retainedearnings of $4.2 million, representing the net periodic benefit costs for the last three months of2008, and a charge to the opening balance of accumulated other comprehensive loss of $3.8 million,representing the change in fair value of plan assets and benefit obligations for the last threemonths of 2008 (net of amortization included in net periodic benefit cost).
 
20

 
The following table shows the components of net periodic benefit expense of the Plan and thePost-Retirement Benefit Plan:                   Pension Benefits  Post Retirement Benefits   Three Months Ended  Three Months Ended   March 31,  March 31, *(in thousands)* **2009**  2008  **2009**  2008 Service cost **$****6,155**  $5,954  **$****465**  $420 Interest cost  **7,055**   6,761   **895**   903 Expected return on plan assets  **(10,551****)**  (9,786)  **—**   — Amortization of transition asset  **1**   1   **276**   276 Amortization of prior service cost  **121**   79   **95**   95 Settlements  **1,725**   450   **—**   — Recognized net actuarial loss (gain)  **1,874**   1,038   **(231****)**  (274)             **Benefit expense** **$****6,380**  $4,497  **$****1,500**  $1,420              There is no required minimum contribution for 2009 to the Plan.Huntington also sponsors other retirement plans, the most significant being the SupplementalExecutive Retirement Plan and the Supplemental Retirement Income Plan. These plans are nonqualifiedplans that provide certain former officers and directors of Huntington and its subsidiaries withdefined pension benefits in excess of limits imposed by federal tax law. The cost of providingthese plans was $0.8 million and $0.9 million for the three-month periods ended March 31, 2009 and2008, respectively.Huntington has a defined contribution plan that is available to eligible employees. Huntingtonmatches participant contributions, up to the first 3% of base pay contributed to the plan. Half ofthe employee contribution is matched on the 4th and 5th percent of base pay contributed to theplan. In the first quarter 2009, the Company announced the suspension of the contribution match tothe plan. The cost of providing this plan was $3.1 million and $3.9 million for the three monthsended March 31, 2009 and 2008, respectively.**Note 12 — Derivative Financial Instruments**A variety of derivative financial instruments, principally interest rate swaps, are used inasset and liability management activities to protect against the risk of adverse price or interestrate movements. These instruments provide flexibility in adjusting Huntington’s sensitivity tochanges in interest rates without exposure to loss of principal and higher funding requirements.Huntington records derivatives at fair value, as further described in Note 10. Collateralagreements are regularly entered into as part of the underlying derivative agreements withHuntington’s counterparties to mitigate counter party credit risk. At March 31, 2009, December 31,2008, and March 31, 2008, aggregate credit risk associated with these derivatives, net ofcollateral that has been pledged by the counterparty, was $58.2 million, $40.7 million, and $47.6million, respectively. The credit risk associated with interest rate swaps is calculated afterconsidering master netting agreements.At March 31, 2009, Huntington pledged $293.7 million cash collateral to variouscounterparties, while various other counterparties pledged $185.2 million to Huntington to satisfycollateral netting agreements. In the event of credit downgrades, Huntington could be required toprovide an additional $7.9 million in collateral.***Derivatives used in Asset and Liability Management Activities***The following table presents the gross notional values of derivatives used in Huntington’sAsset and Liability Management activities at March 31, 2009, identified by the underlying interestrate-sensitive instruments:               **Fair Value**  **Cash Flow**    *(in thousands)* **Hedges**  **Hedges**  **Total** Instruments associated with:            Loans $—  $6,605,000  $6,605,000 Deposits  25,000   —   25,000 Federal Home Loan Bank advances  —   —   — Subordinated notes  675,000   —   675,000 Other long-term debt  50,000   —   50,000           **Total notional value at March 31, 2009** $750,000  $6,605,000  $7,355,000           
 
21

 
The following table presents additional information about the interest rate swaps and capsused in Huntington’s Asset and Liability Management activities at March 31, 2009:                           **Average**      **Weighted-Average**   **Notional**  **Maturity**  **Fair**  **Rate** *(in thousands)* **Value**  **(years)**  **Value**  **Receive**  **Pay** Asset conversion swaps                    Receive fixed — generic $6,605,000   1.7  $65,178   2.30%  0.53%                **Total asset conversion swaps**  6,605,000   1.7   65,178   2.30   0.53 Liability conversion swaps                    Receive fixed — generic  750,000   7.3   120,773   5.31   1.46                 **Total liability conversion swaps**  750,000   7.3   120,773   5.31   1.46                 **Total swap portfolio**  **7,355,000**   **2.3**   **185,951**   **2.61****%**  **0.63****%**                                                   **Weighted-Average**              **Strike Rate**                     Purchased caps               Interest rate caps  300,000   0.3   —  5.50%                 **Total purchased caps** **$****300,000**   **0.3**  **$****—**  **5.50%**** **                These derivative financial instruments were entered into for the purpose of altering theinterest rate risk of assets and liabilities. Consequently, net amounts receivable or payable oncontracts hedging either interest earning assets or interest bearing liabilities were accrued as anadjustment to either interest income or interest expense. The net amount resulted in anincrease/(decrease) to net interest income of $31.2 million and ($0.9 million) for the three monthsended March 31, 2009 and 2008, respectively.The following table presents the fair values at March 31, 2009, December 31, 2008, and March31, 2008 of Huntington’s derivatives that are designated and not designated as hedging instrumentsunder Statement No. 133. Amounts in the table below are presented without the impact of any netcollateral arrangements             ** ** **Asset derivatives included in accrued income and other assets**  **March 31,**  December 31,  March 31, *(in thousands)* **2009**  2008  2008 Interest rate contracts designated as hedging instruments $186,900  $230,601  $77,788 Interest rate contracts not designated as hedginginstruments  410,817   436,131   238,628           **Total contracts** **$****597,717**  **$****666,732**  **$****316,416**                        **Liability derivatives included in accrued expenses and other liabilities** **March 31,**  December 31,  March 31, *(in thousands)* **2009**  2008  2008 Interest rate contracts designated as hedging instruments $949  $—  $8,341 Interest rate contracts not designated as hedginginstruments  352,808   377,249   42,964           **Total contracts** **$****353,757**  **$****377,249**  **$****51,305**           Fair value hedges effectively convert deposits, subordinated and other long term debt fromfixed rate obligations to floating rate. The changes in fair value of the derivative are, to theextent that the hedging relationship is effective, recorded through earnings and offset againstchanges in the fair value of the hedged item.
 
22

 
The following table presents the increase or (decrease) to interest expense for the threemonths ending March 31, 2009 and 2008 for derivatives designated as fair value hedges underStatement No 133:           **Derivatives in fair value**   **Increase (decrease) to** **hedging relationships** **Location of change in fair value recognized in earnings on** **interest expense** *(in thousands)* **derivative** 2009  2008 **Interest rateContracts**          Deposits Interest expense - deposits $(346) $(427)Subordinated notes Interest expense - subordinated notes and other long term debt  (6,346)  (2,013)Other long term debt Interest expense - subordinated notes and other long term debt  486   1,574         **Total**   $(6,206) $(866)        For cash flow hedges, interest rate swap contracts were entered into that pay fixed-rateinterest in exchange for the receipt of variable-rate interest without the exchange of thecontract’s underlying notional amount, which effectively converts a portion of its floating-ratedebt to fixed-rate. This reduces the potentially adverse impact of increases in interest rates onfuture interest expense. In like fashion, certain LIBOR-based commercial and industrial loans wereeffectively converted to fixed-rate by entering into contracts that swap certain variable-rateinterest payments for fixed-rate interest payments at designated times.To the extent these derivatives are effective in offsetting the variability of the hedged cashflows, changes in the derivatives’ fair value will not be included in current earnings but arereported as a component of accumulated other comprehensive income in shareholders’ equity. Thesechanges in fair value will be included in earnings of future periods when earnings are alsoaffected by the changes in the hedged cash flows. To the extent these derivatives are noteffective, changes in their fair values are immediately included in earnings.The following table presents the gains and losses recognized in other comprehensive loss (OCL)and the location in the consolidated statements of income of gains and losses reclassified from OCLinto earnings for the three months ending March 31, 2009 and 2008 for derivatives designated aseffective cash flow hedges under Statement No 133:                               **Amount of gain or**   **Amount of gain or**    **(loss) reclassified** ** ** **(loss) recognized in**    **from accumulated** **Derivatives in cash flow** **OCL on derivative**    **OCL into earnings** **hedging relationships** **(effective portion)**  **Location of gain or (loss) reclassified from accumulated OCL** **(effective portion)** *(in thousands)* 2009  2008  **into earnings (effective portion)** 2009  2008 **Interest rate contracts**                  Loans $(15,324) $13,883  Interest and fee income - loans and leases $16,888  $(295)FHLB Advances  1,338   (7,736) Interest expense - FHLB Advances  1,861   (434)Deposits  136   546  Interest expense - deposits  1,623   (8,858)Subordinated notes  43   —  Interest expense - subordinated notes and other long term debt  (669)  (883)Other long term debt  —   22  Interest expense - subordinated notes and other long term debt  (122)  (239)               Total $(13,807) $6,715    $19,581  $(10,709)               The following table details the gains recognized in non-interest income on the ineffectiveportion on interest rate contracts for derivatives designated as cash flow hedges for the threemonths ending March 31, 2009 and 2008.         **Derivatives in cash flow hedging relationships** *(in thousands)* 2009  2008 **Interest rate contracts**        Loans $4,312  $596 
 
23

 
***Derivatives Used in Trading Activities***Various derivative financial instruments are offered to enable customers to meet theirfinancing and investing objectives and for their risk management purposes. Derivative financialinstruments used in trading activities consisted predominantly of interest rate swaps, but alsoincluded interest rate caps, floors, and futures, as well as foreign exchange options. Interestrate options grant the option holder the right to buy or sell an underlying financial instrumentfor a predetermined price before the contract expires. Interest rate futures are commitments toeither purchase or sell a financial instrument at a future date for a specified price or yield andmay be settled in cash or through delivery of the underlying financial instrument. Interest ratecaps and floors are option-based contracts that entitle the buyer to receive cash payments based onthe difference between a designated reference rate and a strike price, applied to a notionalamount. Written options, primarily caps, expose Huntington to market risk but not credit risk.Purchased options contain both credit and market risk. The interest rate risk of these customerderivatives is mitigated by entering into similar derivatives having offsetting terms with othercounterparties. The credit risk to these customers is evaluated and included in the calculation offair value.The fair values of these derivative financial instruments, which are included in other assets,were $40.7 million, $41.9 million, and $41.2 million at March 31, 2009, December 31, 2008, andMarch 31, 2008. Changes in fair value of $3.8 million and $11.6 million for the three months endedMarch 31, 2009 and 2008, respectively, are reflected in other non-interest income. The totalnotional values of derivative financial instruments used by Huntington on behalf of customers,including offsetting derivatives, were $10.5 billion, $10.9 billion, and $8.6 billion at March 31,2009, December 31, 2008, and March 31, 2008, respectively. Huntington’s credit risks from interestrate swaps used for trading purposes were $409.3 million,$429.9 million, and $229.8 million at thesame dates, respectively.Huntington also uses certain derivative financial instruments to offset changes in value ofits residential mortgage servicing assets. These derivatives consist primarily of forward interestrate agreements and forward mortgage securities. The derivative instruments used are notdesignated as hedges under Statement No. 133. Accordingly, such derivatives are recorded at fairvalue with changes in fair value reflected in mortgage banking income*.*The total notional value ofthese derivative financial instruments at March 31, 2009, December 31, 2008, and March 31, 2008,was $4.9 billion, $2.2 billion, and $1.8 billion. The total notional amount at March 31, 2009corresponds to trading assets with a fair value of $16.5 million and trading liabilities with afair value of $2.6 million. The gains and (losses) related to derivative instruments included inmortgage banking income for the three months ended March 31, 2009 and 2008 were $6.7 million and($15.9 million), respectively. Total MSR hedging gains and losses for the three months ended March31, 2009 and 2008, were $9.4 million and $0.3 million, respectively, and were also included inmortgage banking income.In connection with securitization activities, Huntington purchased interest rate caps with anotional value totaling $1.3 billion. These purchased caps were assigned to the securitizationtrust for the benefit of the security holders. Interest rate caps were also sold totaling $1.3billion outside the securitization structure. Both the purchased and sold caps are marked to marketthrough income.
 
24

 
**Note 13 — Variable Interest Entities*****Loan Securitizations***Consolidated loan securitizations at March 31, 2009, consist of auto loan and leasesecuritization trusts formed in 2008, 2006, and 2000. Huntington has determined that the trustsare not qualified special purpose entities and therefore are variable interest entities (VIEs)based upon equity guidelines established in FIN 46R. Huntington owns 100% of the trusts and is theprimary beneficiary of the VIEs, therefore, the trusts are consolidated. The carrying amount andclassification of the trusts’ assets and liabilities included in the consolidated balance sheet areas follows:                   **March 31, 2009**     *(in thousands)* 2008 Trust  2006 Trust  2000 Trust  **Total** **Assets**                Cash $33,319  $290,523  $24,415  **$****348,257** Loans and leases  746,632   1,156,825   77,046   **1,980,503** Allowance for loan and lease losses  (11,248)  (17,506)  (1,161)  **(29,915****)**             Net loans and leases  735,384   1,139,319   75,885   **1,950,588** Accrued income and other assets  4,905   6,220   293   **11,418**              Total assets $773,608  $1,436,062  $100,593  **$****2,310,263**              **Liabilities**                Other long-term debt $603,940  $1,053,206  $—  **$****1,657,146** Accrued interest and other liabilities  1,007   11,417   —   **12,424**              Total liabilities $604,947  $1,064,623  $—  **$****1,669,570**              The auto loans and leases were designated to repay the securitized note. Huntington servicesthe loans and leases and uses the proceeds from principal and interest payments to pay thesecuritized notes during the amortization period. Huntington has not provided financial or othersupport that was not previously contractually required.***Trust Preferred Securities***Under FIN 46R, certain wholly-owned trusts are not consolidated. The trusts have been formedfor the sole purpose of issuing trust preferred securities, from which the proceeds are theninvested in Huntington junior subordinated debentures, which are reflected in Huntington’scondensed consolidated balance sheet as subordinated notes. The trust securities are theobligations of the trusts and are not consolidated within Huntington’s balance sheet. A list oftrust preferred securities outstanding at March 31, 2009 follows:           ** **      **Principal amount of**  **Investment in**   **subordinated note/**  **unconsolidated** *(in thousands)* **debenture issued to trust****(1)**  **subsidiary** Huntington Capital I $158,366  $6,186 Huntington Capital II  71,093   3,093 Huntington Capital III  249,421   10 BankFirst Ohio Trust Preferred  23,335   619 Sky Financial Capital Trust I  65,675   1,856 Sky Financial Capital Trust II  30,929   929 Sky Financial Capital Trust III  78,056   2,320 Sky Financial Capital Trust IV  78,056   2,320 Prospect Trust I  6,186   186        **Total** **$****761,117**  **$****17,519**           (1) Represents the principal amount of debentures issued to each trust, including unamortizedoriginal issue discount.Huntington’s investment in the unconsolidated trust represents the only risk of loss.Each issue of the junior subordinated debentures has an interest rate equal to thecorresponding trust securities distribution rate. Huntington has the right to defer payment ofinterest on the debentures at any time, or from time to time for a period not exceeding five years,provided that no extension period may extend beyond the stated maturity of the related debentures.During any such extension period, distributions to the trust securities will also be deferred andHuntington’s ability to pay dividends on its common stock will be restricted. Periodic cashpayments and payments upon liquidation or redemption with respect to trust securities areguaranteed by Huntington to the extent of funds held by the trusts. The guarantee rankssubordinate and junior in right of payment to all indebtedness of the company to the same extent asthe junior subordinated debt. The guarantee does not place a limitation on the amount ofadditional indebtedness that may be incurred by Huntington.
 
25

 
***Low Income Housing Tax Credit Partnerships***Huntington makes certain equity investments in various limited partnerships that sponsoraffordable housing projects utilizing the Low Income Housing Tax Credit (LIHTC) pursuant to Section42 of the Internal Revenue Code. The purpose of these investments is to achieve a satisfactoryreturn on capital, to facilitate the sale of additional affordable housing product offerings and toassist us in achieving goals associated with the Community Reinvestment Act. The primaryactivities of the limited partnerships include the identification, development, and operation ofmulti-family housing that is leased to qualifying residential tenants. Generally, these types ofinvestments are funded through a combination of debt and equity.Huntington does not own a majority of the limited partnership interests in these entities andis not the primary beneficiary. Huntington uses the equity method to account for the majority ofits investments in these entities. These investments are included in accrued income and otherassets. At March 31, 2009, we have commitments of $198.9 million of which $156.6 million arefunded. The unfunded portion is included in accrued expenses and other liabilities.**Note 14 — Commitments and Contingent Liabilities*****Commitments to extend credit***In the ordinary course of business, Huntington makes various commitments to extend credit thatare not reflected in the financial statements. The contract amounts of these financial agreementsat March 31, 2009, December 31, 2008, and March 31, 2008, were as follows:               **March 31,**  December 31,  March 31, *(in millions)* **2009**  2008  2008              **Contract amount represents credit risk**            Commitments to extend credit            Commercial **$****6,235**  $6,494  $6,727 Consumer  **4,974**   4,964   4,788 Commercial real estate  **1,672**   1,951   2,337 Standby letters of credit  **1,042**   1,272   1,611 Commitments to extend credit generally have fixed expiration dates, are variable-rate, andcontain clauses that permit Huntington to terminate or otherwise renegotiate the contracts in theevent of a significant deterioration in the customer’s credit quality. These arrangements normallyrequire the payment of a fee by the customer, the pricing of which is based on prevailing marketconditions, credit quality, probability of funding, and other relevant factors. Since many of thesecommitments are expected to expire without being drawn upon, the contract amounts are notnecessarily indicative of future cash requirements. The interest rate risk arising from thesefinancial instruments is insignificant as a result of their predominantly short-term, variable-ratenature.Standby letters of credit are conditional commitments issued to guarantee the performance of acustomer to a third party. These guarantees are primarily issued to support public and privateborrowing arrangements, including commercial paper, bond financing, and similar transactions. Mostof these arrangements mature within two years. The carrying amount of deferred revenue associatedwith these guarantees was $3.8 million, $4.5 million, and $4.9 million at March 31, 2009, December31, 2008, and March 31, 2008, respectively.Through the Company’s credit process, Huntington monitors the credit risks of outstandingstandby letters of credit. When it is probable that a standby letter of credit will be drawn andnot repaid in full, losses are recognized in the provision for credit losses. At March 31, 2009,Huntington had $1.0 billion of standby letters of credit outstanding, of which 48% werecollateralized. Included in this $1.0 billion total are letters of credit issued by the Bank thatsupport $0.4 billion of securities that were issued by customers and remarketed by The HuntingtonInvestment Company (HIC), the Company’s broker-dealer subsidiary. If the Bank’s short-term creditratings were downgraded, the Bank could be required to obtain funding in order to purchase theentire amount of these securities pursuant to its letters of credit. Due to lower demand,investors have begun returning these securities to the Bank. Subsequently, the Bank tendered thesesecurities to itstrustee, where the securities were held for re-marketing, maturity, or payoff. Pursuant tothe letters of credit issued by the Bank, the Bank repurchased $70.4 million of these securities,net of payments and maturities, during the 2009 first quarter and anadditional $112.1 million inApril of 2009.
 
26

 
Huntington uses an internal loan grading system to assess an estimate of loss on its loan andlease portfolio. The same loan grading system is used to help monitor credit risk associated withstandby letters of credit. Under this risk rating system as of March 31, 2009, approximately$158 million of the standby letters of credit were rated strong; approximately $819 million wererated average; and approximately $65 million were rated substandard.Commercial letters of credit represent short-term, self-liquidating instruments thatfacilitate customer trade transactions and generally have maturities of no longer than 90 days. Themerchandise or cargo being traded normally secures these instruments.***Commitments to sell loans***Huntington enters into forward contracts relating to its mortgage banking business to hedgethe exposures from commitments to make new residential mortgage loans with existing customers andfrom mortgage loans classified as held for sale. At March 31, 2009, December 31, 2008, and March31, 2008, Huntington had commitments to sell residential real estate loans of $912.5 million,$759.4 million, and $803.2 million, respectively. These contracts mature in less than one year.***Income Taxes***Both the Internal Revenue Service and other taxing jurisdictions have proposed variousadjustments to the Company’s previously filed tax returns. Management believes that the taxpositions taken by the Company related to such proposed adjustments were correct and supported byapplicable statutes, regulations, and judicial authority, and intends to vigorously defend them. Itis possible that the ultimate resolution of the proposed adjustments, if unfavorable, may bematerial to the results of operations in the period it occurs. However, although no assurance canbe given, Huntington believes that the resolution of these examinations will not, individually orin the aggregate, have a materially adverse impact on its consolidated financial position.***Litigation***Between December 19, 2007 and February 1, 2008, two putative class actions were filed in theUnited States District Court for the Southern District of Ohio, Eastern Division, againstHuntington and certain of its current or former officers and directors purportedly on behalf ofpurchasers of Huntington securities during the periods July 20, 2007 to November 16, 2007, orJuly 20, 2007 to January 10, 2008. These complaints seek to allege that the defendants violatedSection 10(b) of the Securities Exchange Act of 1934, as amended (the Exchange Act), and Rule 10b-5promulgated thereunder, and Section 20(a) of the Exchange Act by issuing a series of allegedlyfalse and/or misleading statements concerning Huntington’s financial results, prospects, andcondition, relating, in particular, to its transactions with Franklin.. On June 5, 2008, the twocases were consolidated into a single action. On August 22, 2008, a consolidated complaint wasfiled asserting a class period of July 19, 2007 through November 16, 2007. At this stage, it is notpossible for management to assess the probability of an adverse outcome, or reasonably estimate theamount of any potential loss.Three putative derivative class action lawsuits were filed in the Court of Common Pleas ofDelaware County, Ohio, the United States District Court for the Southern District of Ohio, EasternDivision, and the Court of Common Pleas of Franklin County, Ohio, between January 16, 2008, andApril 17, 2008, against certain of Huntington’s current or former officers and directors variouslyseeking to allege breaches of fiduciary duty, waste of corporate assets, abuse of control, grossmismanagement, and unjust enrichment, all in connection with Huntington’s acquisition of SkyFinancial, certain transactions between Huntington and Franklin, and the financial disclosuresrelating to such transactions. Huntington is named as a nominal defendant in each of these actions.At this stage of the lawsuits, it is not possible for management to assess the probability of anadverse outcome, or reasonably estimate the amount of any potential loss.Between February 20, 2008 and February 29, 2008, three putative class action lawsuits werefiled in the United States District Court for the Southern District of Ohio, Eastern Division,against Huntington, the Huntington Bancshares Incorporated Pension Review Committee, the HuntingtonInvestment and Tax Savings Plan (the Plan) Administrative Committee, and certain of the Company’sofficers and directors purportedly on behalf of participants in or beneficiaries of the Planbetween either July 1, 2007 or July 20, 2007 and the present. The complaints seek to allegebreaches of fiduciaryduties in violation of the Employee Retirement Income Security Act (ERISA) relating toHuntington stock being offered as an investment alternative for participants in the Plan. Thecomplaints sought money damages and equitable relief. On May 13, 2008, the three cases wereconsolidated into a single action. On August 4, 2008, a consolidated complaint was filed assertinga class period of July 1, 2007 through the present. On February 9, 2009, the court entered an orderdismissing with prejudice the consolidated lawsuit in its entirety. Due to the possibility of anappeal, it is not possible for management to assess the probability of an eventual material adverseoutcome, or reasonably estimate the amount of any potential loss at this time.
 
27

 
On May 7, 2008, a putative class action lawsuit was filed in the United States District Courtfor the Southern District of Ohio, Eastern Division, against Huntington (as successor in interestto Sky Financial), and certain of Sky Financial’s former officers on behalf of all persons whopurchased or acquired Sky Financial common stock in connection with and as a result of SkyFinancial’s October 2006 acquisition of Waterfield Mortgage Company. The complaint seeks to allegethat the defendants violated Sections 11, 12, and 15 of the Securities Act of 1933 in connectionwith the issuance of allegedly false and misleading registration and proxy statements leading up tothe Waterfield acquisition and their disclosures about the nature and extent of Sky Financial’slending relationship with Franklin. On May 1, 2009, Plaintiff filed a stipulation dismissing thelawsuit with prejudice. The dismissal entry was approved by the Court on May 5, 2009, and the caseis now terminated.It is possible that the ultimate resolution of these matters, if unfavorable, may be materialto the results of operations for a particular period. However, although no assurance can be given,based on information currently available, consultation with counsel, and available insurancecoverage, management believes that the eventual outcome of these claims against the Company willnot, individually or in the aggregate, have a material adverse effect on Huntington’s consolidatedfinancial position.**Note 15 — Parent Company Financial Statements**The parent company condensed financial statements, which include transactions withsubsidiaries, are as follows.             **Balance Sheets** **March 31,**  December 31,  March 31, *(in thousands)* **2009**  2008  2008 **ASSETS**            Cash and cash equivalents (1) **$****1,173,649**  $1,122,056  $147,491 Due from The Huntington National Bank  **541,926**   532,746   133,791 Due from non-bank subsidiaries  **307,926**   338,675   339,183 Investment in The Huntington National Bank  **2,883,113**   5,274,261   5,677,568 Investment in non-bank subsidiaries  **854,204**   854,575   835,561 Accrued interest receivable and other assets  **169,180**   146,167   136,611           **Total assets** **$****5,929,998**  $8,268,480  $7,270,205            **LIABILITIES AND SHAREHOLDERS’ EQUITY**            Short-term borrowings **$****1,393**  $1,852  $2,137 Long-term borrowings  **803,699**   803,699   852,169 Dividends payable, accrued expenses, and other liabilities  **310,170**   234,023   509,320           **Total liabilities**  **1,115,262**   1,039,574   1,363,626           Shareholders’ equity (2)  **4,814,736**   7,228,906   5,906,579           **Total liabilities and shareholders’ equity** **$****5,929,998**  $8,268,480  $7,270,205              (1) Includes restricted cash of $125,000 at March 31, 2009 and December 31, 2008. (2) See page 74 for Huntington’s Condensed Consolidated Statements of Changes inShareholders’ Equity.
 
28

 
           **Three Months Ended** **Statements of Income** **March 31,** *(in thousands)* **2009**  2008 Income        Dividends from        Non-bank subsidiaries **$****9,250**  $13,845 Interest from        The Huntington National Bank  **11,351**   3,044 Non-bank subsidiaries  **4,431**   3,650 Other  **(180****)**  533        **Total income**  **24,852**   21,072        Expense        Personnel costs  **2,087**   5,626 Interest on borrowings  **9,390**   12,555 Other  **6,474**   3,371        **Total expense**  **17,951**   21,552        Income (loss) before income taxes and equity inundistributed net income of subsidiaries  **6,901**   (480)Income taxes  **(51,627****)**  (9,492)       Income before equity in undistributed net income of subsidiaries  **58,528**   9,012 Increase (decrease) in undistributed net income of:        The Huntington National Bank  **(2,460,305****)**  130,959 Non-bank subsidiaries  **(31,430****)**  (12,903)       **Net income** **$****(2,433,207****)** $127,068                   **Three Months Ended** **Statements of Cash Flows** **March 31,** *(in thousands)* **2009**  2008 Operating activities        Net income **$****(2,433,207****)** $127,068 Adjustments to reconcile net income to net cashprovided by operating activities:        Equity in undistributed net income ofsubsidiaries  **2,491,735**   (117,094)Depreciation and amortization  **270**   281 Change in other, net  **(47,804****)**  50,253        **Net cash provided by operating activities**  **10,994**   60,508        Investing activities        Repayments from subsidiaries  **215,242**   114,557 Advances to subsidiaries  **(104,312****)**  (34,223)       **Net cash provided by (used in) investing activities**  **110,930**   80,334        Financing activities        Payment of borrowings  **—**   (50,000)Dividends paid on preferred stock  **(29,761****)**  — Dividends paid on common stock  **(40,257****)**  (96,797)Proceeds from issuance of common stock  **(313**)  (43)       **Net cash used for financing activities**  **(70,331****)**  (146,840)       Change in cash and cash equivalents  **51,593**   (5,998)Cash and cash equivalents at beginning of year  **1,122,056**   153,489        **Cash and cash equivalents at end of year** **$****1,173,649**  $147,491        **Supplemental disclosure:**        Interest paid **$****9,390**  $12,555 
 
29

 
**Note 16 — Segment Reporting**During the first quarter of 2009, Huntington operated as three distinct lines of business:Regional Banking, Auto Finance and Dealer Services, and PrivateFinancial Group. A fourth segment includes the Treasury function and otherunallocated assets, liabilities, revenue, and expense. Lines of business results are determinedbased upon the Company’s management reporting system, which assigns balance sheet and incomestatement items to each of the business segments. The process is designed around the Company’sorganizational and management structure and, accordingly, the results derived are not necessarilycomparable with similar information published by other financial institutions. An overview of thissystem is provided below, along with a description of each segment and discussion of financialresultsThe following provides a brief description of the four operating segments of Huntington:**Regional Banking:**This segment provides traditional banking products and services to consumer,small business, and commercial customers located in its 11 operating regions within the six statesof Ohio, Michigan, Pennsylvania, Indiana, West Virginia, and Kentucky. It provides these servicesthrough a banking network of over 600 branches, and over 1,300 ATMs, along with Internet andtelephone banking channels. It also provides certain services outside of these six states,including mortgage banking and equipment leasing. Each region is further divided into retail andcommercial banking units. Retail products and services include home equity loans and lines ofcredit, first mortgage loans, direct installment loans, small business loans, personal and businessdeposit products, as well as sales of investment and insurance services. At March 31, 2009, RetailBanking accounted for 52% and 84% of total Regional Banking loans and deposits, respectively.Commercial Banking serves middle market and large commercial banking relationships, which use avariety of banking products and services including, but not limited to, commercial loans,international trade, cash management, leasing, interest rate protection products, capital marketalternatives, 401(k) plans, and mezzanine investment capabilities.**Auto Finance and Dealer Services (AFDS):**This segment provides a variety of banking products andservices to more than 2,200 automotive dealerships within the Company’s primary banking markets.During the first quarter of 2009, AFDS discontinued lending activities in Arizona, Florida,Tennessee, Texas, and Virginia. AFDS finances the purchase of automobiles by customers at theautomotive dealerships, finances the dealerships’ new and used vehicle inventories, land,buildings, and other real estate owned by the dealerships, or dealer working capital needs; andprovides other banking services to the automotive dealerships and their owners. Competition fromthe financing divisions of automobile manufacturers and from other financial institutions isintense. AFDS’ production opportunities are directly impacted by the general automotive salesbusiness, including programs initiated by manufacturers to enhance and increase sales directly.Huntington has been in this line of business for over 50 years.**Private Financial Group (PFG):**This segment provides products and services designed to meet theneeds of higher net worth customers. Revenue is derived through the sale of trust, assetmanagement, investment advisory, brokerage, insurance, and private banking products and services.PFG also focuses on financial solutions for corporate and institutional customers that includeinvestment banking, sales and trading of securities, mezzanine capital financing, and riskmanagement products. To serve high net worth customers, a unique distribution model is used thatemploys a single, unified sales force to deliver products and services mainly through RegionalBanking distribution channels.**Treasury / Other:**This segment includes revenue and expense related to assets, liabilities, andequity that are not directly assigned or allocated to one of the other three business segments.Assets in this segment include investment securities, bank owned life insurance and the loans andOREO properties acquired in the Franklin transaction. Net interest income/(expense) includes thenet impact of administering our investment securities portfolios as part of overall liquiditymanagement. A match-funded transfer pricing system is used to attribute appropriate fundinginterest income and interest expense to other business segments. As such, net interest incomeincludes the net impact of any over or under allocations arising from centralized management ofinterest rate risk. Furthermore, net interest income includes the net impact of derivatives used tohedge interest rate sensitivity. Non-interest income includes miscellaneous fee income notallocated to other business segments, including bank owned life insurance income. Fee income alsoincludes asset revaluations not allocated to other business segments, as well as any investmentsecurities and trading assets gains or losses. The non-interest expense includes certain corporateadministrative, merger costs, and other miscellaneous expenses not allocated to other businesssegments. This segment also includes any difference between the actual effective tax rate ofHuntington and the statutory tax rate used to allocate income taxes to the other segments.
 
30

 
Listed below are certain financial results by line of business. For the three months endedMarch 31, 2009 and 2008, operating earnings were the same as reported earnings.                       Three Months Ended March 31, **Income Statements** Regional          Treasury/  Huntington *(in thousands)* Banking  AFDS  PFG  Other  Consolidated                      **2009**                    Net interest income **$****359,148**  **$****38,103**  **$****27,891**  **$****(87,637****)** **$****337,505** Provision for credit losses  **(236,920****)**  **(45,994****)**  **(10,585****)**  **1,662**   **(291,837****)**Non interest income  **153,258**   **9,914**   **61,701**   **14,229**   **239,102** Non interest expense  **(2,813,165****)**  **(29,594****)**  **(87,387****)**  **(39,623****)**  **(2,969,769****)**Income taxes  **(12,649****)**  **9,650**   **(4,494****)**  **259,285**   **251,792**                 **Operating / reported net income** **$****(2,550,328****)** **$****(17,921****)** **$****(12,874****)** **$****147,916**  **$****(2,433,207****)**                                     **2008**                    Net interest income $343,238  $36,171  $24,876  $(27,461) $376,824 Provision for credit losses  (69,736)  (17,080)  (1,834)  —   (88,650)Non interest income  103,901   12,796   64,933   54,122   235,752 Non interest expense  (252,448)  (26,324)  (64,002)  (27,707)  (370,481)Income taxes  (43,734)  (1,947)  (8,391)  27,695   (26,377)                Operating / reported net income $81,221  $3,616  $15,582  $26,649  $127,068                                            Assets at  Deposits at   **March 31,**  December 31,  March 31,  **March 31,**  December 31,  March 31, *(in millions)* **2009**  2008  2008  **2009**  2008  2008                          Regional Banking **$****33,656**  $34,435  $34,721  **$****33,413**  $32,874  $33,100 AFDS  **6,175**   6,395   6,179   **71**   67   56 PFG  **3,334**   3,413   3,048   **2,251**   1,785   1,543 Treasury / Other  **8,537**   10,110   12,104   **3,335**   3,217   3,417                    **Total** **$****51,702**  $54,353  $56,052  **$****39,070**  $37,943  $38,116                    ***Segment Reporting Subsequent Event***Beginning in the second quarter of 2009, Huntington intends to reorganize its internalreporting structure. The Regional Banking reporting unit, which through March 31, 2009 had beenmanaged geographically, will be managed on a product segment approach. Regional Banking willbecome divided into Commercial Banking, Retail and Business Banking, and Commercial Real Estatesegments. AFDS, PFG and Treasury/Other will remain essentially unchanged. Segments will berestated for the new organizational structure beginning with the 2009 second quarter.
 
31