##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-Q
 September 30, 2007
 000-33243
 Huntington Preferred Capital, Inc.
 Ohio
    
    31-1356967(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 41 South High Street, Columbus, Ohio 43287
 (614) 480-8300




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##### 



HUNTINGTON PREFERRED CAPITAL, INC.
  Part I.   Financial InformationItem 1.
    
    Financial Statements (Unaudited)Condensed Consolidated Balance Sheets -
At September 30, 2007, December 31, 2006, and September 30, 2006
    
    
    3Condensed Consolidated Statements of Income -
For the three-months and nine-months ended September 30, 2007 and 2006
    
    
    4Condensed Consolidated Statements of Changes in Shareholders Equity -
For the nine-months ended September 30, 2007 and 2006
    
    
    5Condensed Consolidated Statements of Cash Flows -
For the nine-months ended September 30, 2007 and 2006
    
    
    6Notes to the Unaudited Condensed Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    14Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    24Item 4.
    
    Controls and Procedures
    
    
    24Item 4T.
    
    Controls and Procedures
    
    
    24Part II. Other InformationItem 6.
    
    Exhibits
    
    
    24Signatures
    
    
    26EX-31.1EX-31.2EX-32.1EX-32.2EX-99.1
  2




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##### Table of Contents



Part I. Financial Information
 
 Item 1. Financial Statements
 Huntington Preferred Capital, Inc.
 
 Condensed Consolidated Balance Sheets
 (Unaudited)
 
 September 30,
    
    
    December 31,
    
    
    September 30,(in thousands, except share data)
    
    2007
    
    
    2006
    
    
    2006AssetsCash and interest bearing deposits with The Huntington National Bank
    
    $
    139,353
    
    
    $
    726,154
    
    
    $
    529,129Due from The Huntington National Bank
    
    
    76,476
    
    
    
    134,815
    
    
    
    45,910Loan participation interests:Commercial
    
    
    23,690
    
    
    
    31,049
    
    
    
    35,041Commercial real estate
    
    
    3,236,118
    
    
    
    3,108,533
    
    
    
    3,287,901Consumer
    
    
    1,179,479
    
    
    
    845,272
    
    
    
    888,603Residential real estate
    
    
    91,747
    
    
    
    112,355
    
    
    
    121,262Total loan participation interests
    
    
    4,531,034
    
    
    
    4,097,209
    
    
    
    4,332,807Allowance for loan participation losses
    
    
    (56,255
    )
    
    
    (48,703
    )
    
    
    (51,729
    )Net loan participation interests
    
    
    4,474,779
    
    
    
    4,048,506
    
    
    
    4,281,078Premises and equipment
    
    
    14,980
    
    
    
    17,711
    
    
    
    18,658Accrued income and other assets
    
    
    23,910
    
    
    
    22,550
    
    
    
    22,516Total assets
    
    $
    4,729,498
    
    
    $
    4,949,736
    
    
    $
    4,897,291Liabilities and shareholders equityLiabilitiesAllowance for unfunded loan participation commitments
    
    $
    4,125
    
    
    $
    3,804
    
    
    $
    4,658Dividends and distributions payable
    
    
    23,246
    
    
    
    450,000
    
    
    
    22,306Other liabilities
    
    
    55
    
    
    
    179
    
    
    
    123Total liabilities
    
    
    27,426
    
    
    
    453,983
    
    
    
    27,087Shareholders EquityPreferred securities, Class A, 8.000% noncumulative, non-
exchangeable; $1,000 par and liquidation value per share;
1,000 shares authorized, issued and outstanding
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,000Preferred securities, Class B, variable-rate noncumulative and
conditionally exchangeable; $1,000 par and liquidation
value per share; authorized 500,000 shares; 400,000
shares issued and outstanding
    
    
    400,000
    
    
    
    400,000
    
    
    
    400,000Preferred securities, Class C, 7.875% noncumulative and
conditionally exchangeable; $25 par and liquidation
value; 2,000,000 shares authorized, issued, and outstanding
    
    
    50,000
    
    
    
    50,000
    
    
    
    50,000Preferred securities, Class D, variable-rate noncumulative and
conditionally exchangeable; $25 par and liquidation
value; 14,000,000 shares authorized, issued, and outstanding
    
    
    350,000
    
    
    
    350,000
    
    
    
    350,000Preferred securities, $25 par, 10,000,000 shares
authorized; no shares issued or outstanding
    
    
    ---
    
    
    
    ---
    
    
    
    ---Common stock  without par value; 14,000,000 shares authorized,
issued and outstanding
    
    
    3,694,753
    
    
    
    3,694,753
    
    
    
    3,848,460Retained earnings
    
    
    206,319
    
    
    
    ---
    
    
    
    220,744Total shareholders equity
    
    
    4,702,072
    
    
    
    4,495,753
    
    
    
    4,870,204Total liabilities and shareholders equity
    
    $
    4,729,498
    
    
    $
    4,949,736
    
    
    $
    4,897,291
 See notes to unaudited condensed consolidated financial statements.
 3




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##### Table of Contents



Huntington Preferred Capital, Inc.
 
 Condensed Consolidated Statements of Income
 (Unaudited)
 
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(in thousands of dollars)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Interest and fee incomeInterest on loan participation interests:Commercial
    
    $
    487
    
    
    $
    772
    
    
    $
    1,542
    
    
    $
    2,410Commercial real estate
    
    
    60,350
    
    
    
    61,475
    
    
    
    173,214
    
    
    
    177,098Consumer
    
    
    19,706
    
    
    
    15,338
    
    
    
    51,646
    
    
    
    48,105Residential real estate
    
    
    1,423
    
    
    
    1,880
    
    
    
    4,580
    
    
    
    6,119Total loan participation interest income
    
    
    81,966
    
    
    
    79,465
    
    
    
    230,982
    
    
    
    233,732Fees from loan participation interests
    
    
    216
    
    
    
    227
    
    
    
    617
    
    
    
    799Interest on deposits with The Huntington National Bank
    
    
    1,961
    
    
    
    6,129
    
    
    
    12,682
    
    
    
    10,910Total interest and fee income
    
    
    84,143
    
    
    
    85,821
    
    
    
    244,281
    
    
    
    245,441Reduction in allowances for credit losses
    
    
    (5,175
    )
    
    
    (3,255
    )
    
    
    (6,777
    )
    
    
    (17,641
    )Interest income after allowances for credit losses
    
    
    89,318
    
    
    
    89,076
    
    
    
    251,058
    
    
    
    263,082Non-interest income:Rental income
    
    
    1,710
    
    
    
    1,591
    
    
    
    5,130
    
    
    
    4,773Collateral fees
    
    
    81
    
    
    
    108
    
    
    
    259
    
    
    
    941Total non-interest income
    
    
    1,791
    
    
    
    1,699
    
    
    
    5,389
    
    
    
    5,714Non-interest expense:Servicing costs
    
    
    2,971
    
    
    
    2,611
    
    
    
    8,125
    
    
    
    8,114Depreciation and amortization
    
    
    892
    
    
    
    984
    
    
    
    2,714
    
    
    
    3,000(Gain) loss on disposal of premises and equipment
    
    
    ---
    
    
    
    ---
    
    
    
    17
    
    
    
    (31
    )Other
    
    
    196
    
    
    
    201
    
    
    
    603
    
    
    
    573Total non-interest expense
    
    
    4,059
    
    
    
    3,796
    
    
    
    11,459
    
    
    
    11,656Income before provision for income taxes
    
    
    87,050
    
    
    
    86,979
    
    
    
    244,988
    
    
    
    257,140Provision for income taxes
    
    
    428
    
    
    
    332
    
    
    
    1,239
    
    
    
    927Net income
    
    $
    86,622
    
    
    $
    86,647
    
    
    $
    243,749
    
    
    $
    256,213Dividends declared on preferred securities
    
    
    (12,456
    )
    
    
    (12,681
    )
    
    
    (37,430
    )
    
    
    (35,469
    )Net income applicable to common shares
    
    $
    74,166
    
    
    $
    73,966
    
    
    $
    206,319
    
    
    $
    220,744
 See notes to unaudited condensed consolidated financial statements.
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##### Table of Contents



Huntington Preferred Capital, Inc.
 
 Condensed Consolidated Statements of Changes in Shareholders Equity
 (Unaudited)
 
 Preferred, Class A
    
    
    Preferred, Class B
    
    
    Preferred, Class C(in thousands)
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    AmountNine Months Ended September 30, 2006:Balance, beginning of period
    
    
    1
    
    
    $
    1,000
    
    
    
    400
    
    
    $
    400,000
    
    
    
    2,000
    
    
    $
    50,000Comprehensive Income:Net incomeTotal comprehensive incomeBalance, end of period
    
    
    1
    
    
    $
    1,000
    
    
    
    400
    
    
    $
    400,000
    
    
    
    2,000
    
    
    $
    50,000Nine Months Ended September 30, 2007 :Balance, beginning of period
    
    
    1
    
    
    $
    1,000
    
    
    
    400
    
    
    $
    400,000
    
    
    
    2,000
    
    
    $
    50,000Comprehensive Income:Net incomeTotal comprehensive incomeBalance, end of period
    
    
    1
    
    
    $
    1,000
    
    
    
    400
    
    
    $
    400,000
    
    
    
    2,000
    
    
    $
    50,000
 Preferred, Class D
    
    
    Preferred
    
    
    Common
    
    
    Retained(in thousands)
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Earnings
    
    
    TotalNine Months Ended September 30, 2006 :Balance, beginning of period
    
    
    14,000
    
    
    $
    350,000
    
    
    
    ---
    
    
    $
    ---
    
    
    
    14,000
    
    
    $
    3,848,460
    
    
    $
    ---
    
    
    $
    4,649,460Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    256,213
    
    
    
    256,213Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    256,213Dividends declared on Class A preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (80
    )
    
    
    (80
    )Dividends declared on Class B preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,024
    )
    
    
    (15,024
    )Dividends declared on Class C preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,953
    )
    
    
    (2,953
    )Dividends declared on Class D preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,412
    )
    
    
    (17,412
    )Balance, end of period
    
    
    14,000
    
    
    $
    350,000
    
    
    
    ---
    
    
    $
    ---
    
    
    
    14,000
    
    
    $
    3,848,460
    
    
    $
    220,744
    
    
    $
    4,870,204Nine Months Ended September 30, 2007 :Balance, beginning of period
    
    
    14,000
    
    
    $
    350,000
    
    
    
    ---
    
    
    $
    ---
    
    
    
    14,000
    
    
    $
    3,694,753
    
    
    $
    ---
    
    
    $
    4,495,753Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    243,749
    
    
    
    243,749Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    243,749Dividends declared on Class A preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (80
    )
    
    
    (80
    )Dividends declared on Class B preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,070
    )
    
    
    (16,070
    )Dividends declared on Class C preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,953
    )
    
    
    (2,953
    )Dividends declared on Class D preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,327
    )
    
    
    (18,327
    )Balance, end of period
    
    
    14,000
    
    
    $
    350,000
    
    
    
    ---
    
    
    $
    ---
    
    
    
    14,000
    
    
    $
    3,694,753
    
    
    $
    206,319
    
    
    $
    4,702,072
 See notes to unaudited condensed consolidated financial statements.
 5




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##### Table of Contents



Huntington Preferred Capital, Inc.
 
 Condensed Consolidated Statements of Cash Flows
 (Unaudited)
 
 Nine Months EndedSeptember 30,(in thousands)
    
    2007
    
    
    2006Operating activitiesNet income
    
    $
    243,749
    
    
    $
    256,213Adjustments to reconcile net income to net
cash provided by operating activities:Reduction of allowances for credit losses
    
    
    (6,777
    )
    
    
    (17,641
    )Depreciation and amortization
    
    
    2,714
    
    
    
    3,000Deferred income tax benefit
    
    
    (389
    )
    
    
    (515
    )Increase in due from The Huntington National Bank
    
    
    (1,236
    )
    
    
    (3,318
    )Decrease in other liabilities
    
    
    (124
    )
    
    
    (167
    )Other, net
    
    
    1,125
    
    
    
    219Net cash provided by operating activities
    
    
    239,062
    
    
    
    237,791Investing activitiesParticipation interests acquired
    
    
    (2,420,052
    )
    
    
    (2,090,195
    )Sales and repayments of loans underlying
participation interests
    
    
    2,058,373
    
    
    
    2,284,538Proceeds from the sale of premises and equipment
    
    
    ---
    
    
    
    56Net cash (used in) provided by investing activities
    
    
    (361,679
    )
    
    
    194,399Financing activitiesDividends paid on preferred securities
    
    
    (14,184
    )
    
    
    (13,163
    )Dividends paid on common stock
    
    
    (296,292
    )
    
    
    (279,684
    )Return of capital to common shareholders
    
    
    (153,708
    )
    
    
    (420,316
    )Net cash used for financing activities
    
    
    (464,184
    )
    
    
    (713,163
    )Change in cash and cash equivalents
    
    
    (586,801
    )
    
    
    (280,973
    )Cash and cash equivalents at beginning of year
    
    
    726,154
    
    
    
    810,102Cash and cash equivalents at end of period
    
    $
    139,353
    
    
    $
    529,129Supplemental information:Income taxes paid
    
    $
    1,693
    
    
    $
    1,577Dividends and distributions declared, not paid
    
    
    23,246
    
    
    
    22,306Non-cash change in loan participation activity with
The Huntington National Bank
    
    
    (59,575
    )
    
    
    (3,729
    )
 See notes to unaudited condensed consolidated financial statements.
 6




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Notes to the Unaudited Condensed Consolidated Financial Statements
 Note 1 - Organization
   Note 2 - Basis of Presentation and New Accounting Pronouncements
     Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48), Accounting for
Uncertainty in Income Taxes Accounting for Uncertainty in
Income Taxes Accounting for Income Taxes
 7




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Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
 FASB Statement No. 157, Fair Value Measurements (Statement No. 157)
 FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilitie s
(Statement No. 159)
 Note 3 - Lending Concentrations and Participations in Non-Performing Assets and Past Due Loans
   September 30,
    
    
    December 31,
    
    
    September 30,(in thousands)
    
    2007
    
    
    2006
    
    
    2006Commercial
    
    $
    240
    
    
    $
    687
    
    
    $
    143Commercial real estate
    
    
    49,151
    
    
    
    19,966
    
    
    
    16,784Consumer
    
    
    3,250
    
    
    
    3,490
    
    
    
    3,375Residential real estate
    
    
    1,239
    
    
    
    1,159
    
    
    
    1,598Total participations in non-performing assets
    
    $
    53,880
    
    
    $
    25,302
    
    
    $
    21,900Participations in accruing loans past due 90 days or more
    
    $
    3,178
    
    
    $
    5,393
    
    
    $
    6,124
 Note 4
- Allowances for Credit Losses (ACL)
  8




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Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(in thousands)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006ALPL balance, beginning of period
    
    $
    57,074
    
    
    $
    51,466
    
    
    $
    48,703
    
    
    $
    57,530ALPL for loan participations acquired
    
    
    6,906
    
    
    
    5,055
    
    
    
    21,880
    
    
    
    16,689Net loan losses
    
    
    (2,778
    )
    
    
    (881
    )
    
    
    (7,230
    )
    
    
    (4,326
    )Reduction in ALPL
    
    
    (4,947
    )
    
    
    (3,911
    )
    
    
    (7,098
    )
    
    
    (18,164
    )ALPL balance, end of period
    
    $
    56,255
    
    
    $
    51,729
    
    
    $
    56,255
    
    
    $
    51,729AULPC balance, beginning of period
    
    $
    4,353
    
    
    $
    4,002
    
    
    $
    3,804
    
    
    $
    4,135Provision for (reduction in) AULPC
    
    
    (228
    )
    
    
    656
    
    
    
    321
    
    
    
    523AULPC balance, end of period
    
    $
    4,125
    
    
    $
    4,658
    
    
    $
    4,125
    
    
    $
    4,658Total ACL
    
    $
    60,380
    
    
    $
    56,387
    
    
    $
    60,380
    
    
    $
    56,387
 Note 5
- Preferred Dividends
   i.e.
 i.e.,
  9




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Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    September 30,(in thousands)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Class A preferred securities
    
    $
    ---
    
    
    $
    ---
    
    
    $
    80
    
    
    $
    80Class B preferred securities
    
    
    5,360
    
    
    
    5,480
    
    
    
    16,070
    
    
    
    15,024Class C preferred securities
    
    
    984
    
    
    
    984
    
    
    
    2,953
    
    
    
    2,953Class D preferred securities
    
    
    6,112
    
    
    
    6,217
    
    
    
    18,327
    
    
    
    17,412Total dividends declared
    
    $
    12,456
    
    
    $
    12,681
    
    
    $
    37,430
    
    
    $
    35,469
 Note 6
- Related Party Transactions
    January 1, 2006thruSeptember 30, 2007Commercial and commercial real estate
    
    
    0.125
    %Consumer
    
    
    0.650Residential real estate
    
    
    0.267
   10




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Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
  Number ofCommon
    
    
    Number of Preferred SecuritiesShareholder:
    
    Shares
    
    
    Class A
    
    
    Class B
    
    
    Class C
    
    
    Class DHeld by related parties:HPC II
    
    
    4,550,000
    
    
    
    ---
    
    
    
    ---
    
    
    
    ---
    
    
    
    ---HCF
    
    
    6,580,000
    
    
    
    ---
    
    
    
    ---
    
    
    
    ---
    
    
    
    ---Holdings
    
    
    2,851,333
    
    
    
    895
    
    
    
    ---
    
    
    
    ---
    
    
    
    14,000,000HPC Holdings-II, Inc.
    
    
    ---
    
    
    
    ---
    
    
    
    400,000
    
    
    
    ---
    
    
    
    ---Huntington
    
    
    18,667
    
    
    
    ---
    
    
    
    ---
    
    
    
    ---
    
    
    
    ---Total held by related parties
    
    
    14,000,000
    
    
    
    895
    
    
    
    400,000
    
    
    
    ---
    
    
    
    14,000,000Other shareholders
    
    
    ---
    
    
    
    105
    
    
    
    ---
    
    
    
    2,000,000
    
    
    
    ---Total shares outstanding
    
    
    14,000,000
    
    
    
    1,000
    
    
    
    400,000
    
    
    
    2,000,000
    
    
    
    14,000,000
      11




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Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
   Note 7 - Commitments and Contingencies
 /
    Note 8 - Segment Reporting
  12




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Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
 Note 9
- Income Taxes
    13




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##### Table of Contents



Item 2. Managementss Discussion and Analysis of Financial Condition and Results of Operations
 INTRODUCTION
    Forward-looking Statements
    Critical Accounting Policies
  Use of Significant Estimates
  14




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##### Table of Contents



SUMMARY DISCUSSION OF RESULTS
     
 Table 1
- Loan Participation Interests
 % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofSeptember 30,
    
    
    Total
    
    
    December 31,
    
    
    Total
    
    
    September 30,
    
    
    Total(in thousands)
    
    2007
    
    
    Assets
    
    
    2006
    
    
    Assets
    
    
    2006
    
    
    AssetsGross loan participation interests:Commercial
    
    $
    23,690
    
    
    
    0.5
    
    
    $
    31,049
    
    
    
    0.6
    
    
    $
    35,041
    
    
    
    0.7Commercial real estate
    
    
    3,236,118
    
    
    
    68.4
    
    
    
    3,108,533
    
    
    
    62.8
    
    
    
    3,287,901
    
    
    
    67.1Consumer
    
    
    1,179,479
    
    
    
    24.9
    
    
    
    845,272
    
    
    
    17.1
    
    
    
    888,603
    
    
    
    18.1Residential real estate
    
    
    91,747
    
    
    
    2.0
    
    
    
    112,355
    
    
    
    2.3
    
    
    
    121,262
    
    
    
    2.6Total
    
    $
    4,531,034
    
    
    
    95.8
    
    
    $
    4,097,209
    
    
    
    82.8
    
    
    $
    4,332,807
    
    
    
    88.5
   15




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QUALIFICATION TESTS
    16




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##### Table of Contents



RESULTS OF OPERATIONS
  
 Table 2 - Quarterly Statements of Income
 2007
    
    2006
    
    
    3Q07 vs 3Q06(in thousands)
    
    Third
    
    
    Second
    
    
    First
    
    
    Fourth
    
    
    Third
    
    
    
    $ Chg
    
    
    % ChgInterest and fee incomeInterest on loan participation interests:Commercial
    
    $
    487
    
    
    $
    514
    
    
    $
    541
    
    
    $
    742
    
    
    $
    772
    
    
    
    $
    (285
    )
    
    
    (36.9
    )%Commercial real estate
    
    
    60,350
    
    
    
    56,419
    
    
    
    56,445
    
    
    
    60,377
    
    
    
    61,475
    
    
    
    
    (1,125
    )
    
    
    (1.8
    )Consumer
    
    
    19,706
    
    
    
    17,475
    
    
    
    14,465
    
    
    
    14,604
    
    
    
    15,338
    
    
    
    
    4,368
    
    
    
    28.5Residential real estate
    
    
    1,423
    
    
    
    1,540
    
    
    
    1,617
    
    
    
    1,762
    
    
    
    1,880
    
    
    
    
    (457
    )
    
    
    (24.3
    )Total loan participation interest income
    
    
    81,966
    
    
    
    75,948
    
    
    
    73,068
    
    
    
    77,485
    
    
    
    79,465
    
    
    
    
    2,501
    
    
    
    3.1Fees from loan participation interests
    
    
    216
    
    
    
    203
    
    
    
    198
    
    
    
    265
    
    
    
    227
    
    
    
    
    (11
    )
    
    
    (4.8
    )Interest on deposits with The Huntington National Bank
    
    
    1,961
    
    
    
    5,113
    
    
    
    5,608
    
    
    
    8,115
    
    
    
    6,129
    
    
    
    
    (4,168
    )
    
    
    (68.0
    )Total interest and fee income
    
    
    84,143
    
    
    
    81,264
    
    
    
    78,874
    
    
    
    85,865
    
    
    
    85,821
    
    
    
    
    (1,678
    )
    
    
    (2.0
    )Provision for (reduction in) allowances for credit losses
    
    
    (5,175
    )
    
    
    1,091
    
    
    
    (2,693
    )
    
    
    (4,400
    )
    
    
    (3,255
    )
    
    
    
    (1,920
    )
    
    
    59.0Interest income after provision for (reduction in)
allowances for credit losses
    
    
    89,318
    
    
    
    80,173
    
    
    
    81,567
    
    
    
    90,265
    
    
    
    89,076
    
    
    
    
    242
    
    
    
    0.3Non-interest income:Rental income
    
    
    1,710
    
    
    
    1,710
    
    
    
    1,710
    
    
    
    1,710
    
    
    
    1,591
    
    
    
    
    119
    
    
    
    7.5Collateral fees
    
    
    81
    
    
    
    86
    
    
    
    92
    
    
    
    101
    
    
    
    108
    
    
    
    
    (27
    )
    
    
    (25.0
    )Total non-interest income
    
    
    1,791
    
    
    
    1,796
    
    
    
    1,802
    
    
    
    1,811
    
    
    
    1,699
    
    
    
    
    92
    
    
    
    5.4Non-interest expense:Servicing costs
    
    
    2,971
    
    
    
    2,704
    
    
    
    2,450
    
    
    
    2,521
    
    
    
    2,611
    
    
    
    
    360
    
    
    
    13.8Depreciation and amortization
    
    
    892
    
    
    
    903
    
    
    
    919
    
    
    
    947
    
    
    
    984
    
    
    
    
    (92
    )
    
    
    (9.3
    )Loss on disposal of premises and equipment
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    196
    
    
    
    213
    
    
    
    194
    
    
    
    198
    
    
    
    201
    
    
    
    
    (5
    )
    
    
    (2.5
    )Total non-interest expense
    
    
    4,059
    
    
    
    3,820
    
    
    
    3,580
    
    
    
    3,666
    
    
    
    3,796
    
    
    
    
    263
    
    
    
    6.9Income before provision for income taxes
    
    
    87,050
    
    
    
    78,149
    
    
    
    79,789
    
    
    
    88,410
    
    
    
    86,979
    
    
    
    
    71
    
    
    
    0.1Provision for income taxes
    
    
    428
    
    
    
    418
    
    
    
    393
    
    
    
    386
    
    
    
    332
    
    
    
    
    96
    
    
    
    28.9Net income
    
    $
    86,622
    
    
    $
    77,731
    
    
    $
    79,396
    
    
    $
    88,024
    
    
    $
    86,647
    
    
    
    $
    (25
    )
    
    
    (0.0
    )%Dividends declared on preferred securities
    
    
    (12,456
    )
    
    
    (12,438
    )
    
    
    (12,536
    )
    
    
    (12,475
    )
    
    
    (12,681
    )
    
    
    
    225
    
    
    
    (1.8
    )Net income applicable to common shares(1)
    
    $
    74,166
    
    
    $
    65,293
    
    
    $
    66,860
    
    
    $
    75,549
    
    
    $
    73,966
    
    
    
    $
    200
    
    
    
    0.3
    %
 (1)
    
    All of HPCIs common stock is owned by Huntington, HPCII, HCF, and Holdings and,
therefore, net income per share is not presented.
  17




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##### Table of Contents



Table 3 - Year-To-Date Statements of Income
 Nine Months EndedSeptember 30,
    
    
    2007 vs 2006(in thousands)
    
    2007
    
    
    2006
    
    
    
    $ Chg
    
    
    % ChgInterest and fee incomeInterest on loan participation interests:Commercial
    
    $
    1,542
    
    
    $
    2,410
    
    
    
    $
    (868
    )
    
    
    (36.0
    )%Commercial real estate
    
    
    173,214
    
    
    
    177,098
    
    
    
    
    (3,884
    )
    
    
    (2.2
    )Consumer
    
    
    51,646
    
    
    
    48,105
    
    
    
    
    3,541
    
    
    
    7.4Residential real estate
    
    
    4,580
    
    
    
    6,119
    
    
    
    
    (1,539
    )
    
    
    (25.2
    )Total loan participation interest income
    
    
    230,982
    
    
    
    233,732
    
    
    
    
    (2,750
    )
    
    
    (1.2
    )Fees from loan participation interests
    
    
    617
    
    
    
    799
    
    
    
    
    (182
    )
    
    
    (22.8
    )Interest on deposits with The Huntington National Bank
    
    
    12,682
    
    
    
    10,910
    
    
    
    
    1,772
    
    
    
    16.2Total interest and fee income
    
    
    244,281
    
    
    
    245,441
    
    
    
    
    (1,160
    )
    
    
    (0.5
    )Provision for (reduction in) allowances for credit losses
    
    
    (6,777
    )
    
    
    (17,641
    )
    
    
    
    10,864
    
    
    
    (61.6
    )Interest income after reduction in allowances
for credit losses
    
    
    251,058
    
    
    
    263,082
    
    
    
    
    (12,024
    )
    
    
    (4.6
    )Non-interest income:Rental income
    
    
    5,130
    
    
    
    4,773
    
    
    
    
    357
    
    
    
    7.5Collateral fees
    
    
    259
    
    
    
    941
    
    
    
    
    (682
    )
    
    
    (72.5
    )Total non-interest income
    
    
    5,389
    
    
    
    5,714
    
    
    
    
    (325
    )
    
    
    (5.7
    )Non-interest expense:Servicing costs
    
    
    8,125
    
    
    
    8,114
    
    
    
    
    11
    
    
    
    0.1Depreciation and amortization
    
    
    2,714
    
    
    
    3,000
    
    
    
    
    (286
    )
    
    
    (9.5
    )(Gain) loss on disposal of premises and equipment
    
    
    17
    
    
    
    (31
    )
    
    
    
    48
    
    
    
    N.M.Other
    
    
    603
    
    
    
    573
    
    
    
    
    30
    
    
    
    5.2Total non-interest expense
    
    
    11,459
    
    
    
    11,656
    
    
    
    
    (197
    )
    
    
    (1.7
    )Income before provision for income taxes
    
    
    244,988
    
    
    
    257,140
    
    
    
    
    (12,152
    )
    
    
    (4.7
    )Provision for income taxes
    
    
    1,239
    
    
    
    927
    
    
    
    
    312
    
    
    
    33.7Net income
    
    $
    243,749
    
    
    $
    256,213
    
    
    
    $
    (12,464
    )
    
    
    (4.9
    )%Dividends declared on preferred securities
    
    
    (37,430
    )
    
    
    (35,469
    )
    
    
    
    (1,961
    )
    
    
    5.5Net income applicable to common shares(1)
    
    $
    206,319
    
    
    $
    220,744
    
    
    
    $
    (14,425
    )
    
    
    (6.5
    )%
 (1)
    
    All of HPCIs common stock is owned by Huntington, HPCII, HCF and Holdings and
therefore, net income per share is not presented.N.M. - Not Meaningful.
 Interest and Fee Income
  18




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Table 4 - Interest and Fee Income
 Three Months Ended September 30,2007
    
    2006Average
    
    
    
    
    
    
    
    
    
    
    Average(in millions)
    
    Balance
    
    
    Income(1)
    
    
    Yield
    
    
    Balance
    
    
    Income(1)
    
    
    YieldLoan participation interests:Commercial
    
    $
    26.0
    
    
    $
    0.5
    
    
    
    7.43
    %
    
    $
    36.3
    
    
    $
    0.8
    
    
    
    8.44
    %Commercial real estate
    
    
    3,261.9
    
    
    
    60.4
    
    
    
    7.35
    
    
    
    3,287.8
    
    
    
    61.5
    
    
    
    7.43Consumer
    
    
    1,166.9
    
    
    
    19.8
    
    
    
    6.74
    
    
    
    909.8
    
    
    
    15.5
    
    
    
    6.75Residential real estate
    
    
    93.8
    
    
    
    1.4
    
    
    
    6.07
    
    
    
    125.4
    
    
    
    1.9
    
    
    
    6.00Total loan participations
    
    
    4,548.6
    
    
    
    82.1
    
    
    
    7.17
    
    
    
    4,359.3
    
    
    
    79.7
    
    
    
    7.25Interest bearing deposits in the Bank
    
    
    145.1
    
    
    
    2.0
    
    
    
    5.29
    
    
    
    457.2
    
    
    
    6.1
    
    
    
    5.25Total
    
    $
    4,693.7
    
    
    $
    84.1
    
    
    
    7.11
    %
    
    $
    4,816.5
    
    
    $
    85.8
    
    
    
    7.06
    %
 (1)
    
    Income includes interest and fees.
 
 Table 5 - Year-To-Date Interest and Fee Income Nine Months Ended September 30,2007
    
    2006Average
    
    
    
    
    
    
    
    
    
    
    Average(in millions)
    
    Balance
    
    
    Income(1)
    
    
    Yield
    
    
    Balance
    
    
    Income(1)
    
    
    YieldLoan participation interests:Commercial
    
    $
    27.9
    
    
    $
    1.5
    
    
    
    7.38
    %
    
    $
    42.0
    
    
    $
    2.4
    
    
    
    7.69
    %Commercial real estate
    
    
    3,146.3
    
    
    
    173.5
    
    
    
    7.37
    
    
    
    3,317.9
    
    
    
    177.5
    
    
    
    7.15Consumer
    
    
    1,035.7
    
    
    
    52.0
    
    
    
    6.71
    
    
    
    958.4
    
    
    
    48.5
    
    
    
    6.77Residential real estate
    
    
    100.0
    
    
    
    4.6
    
    
    
    6.10
    
    
    
    137.2
    
    
    
    6.1
    
    
    
    5.95Total loan participations
    
    
    4,309.9
    
    
    
    231.6
    
    
    
    7.18
    
    
    
    4,455.5
    
    
    
    234.5
    
    
    
    7.04Interest bearing deposits in the Bank
    
    
    318.2
    
    
    
    12.7
    
    
    
    5.26
    
    
    
    285.9
    
    
    
    10.9
    
    
    
    5.03Total
    
    $
    4,628.1
    
    
    $
    244.3
    
    
    
    7.05
    %
    
    $
    4,741.4
    
    
    $
    245.4
    
    
    
    6.92
    %
 (1)
    
    Income includes interest and fees.
  Allowances for Credit Losses (ACL)
 19




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##### Table of Contents



Table 6  Allowances for Credit Loss Activity
 
 2007
    
    2006(in thousands)
    
    Third
    
    
    Second
    
    
    First
    
    
    Fourth
    
    
    ThirdALPL balance, beginning of period
    
    $
    57,074
    
    
    $
    50,107
    
    
    $
    48,703
    
    
    $
    51,729
    
    
    $
    51,466Allowance of loan participations acquired
    
    
    6,906
    
    
    
    9,673
    
    
    
    5,301
    
    
    
    2,715
    
    
    
    5,055Net loan (losses) recoveriesCommercial
    
    
    15
    
    
    
    81
    
    
    
    20
    
    
    
    158
    
    
    
    77Commercial real estate
    
    
    (1,658
    )
    
    
    (2,201
    )
    
    
    (590
    )
    
    
    (1,411
    )
    
    
    (145
    )Consumer
    
    
    (1,135
    )
    
    
    (836
    )
    
    
    (926
    )
    
    
    (942
    )
    
    
    (780
    )Residential real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33
    )Total net loan (losses) recoveries
    
    
    (2,778
    )
    
    
    (2,956
    )
    
    
    (1,496
    )
    
    
    (2,195
    )
    
    
    (881
    )Provision for (reduction in) ALPL
    
    
    (4,947
    )
    
    
    250
    
    
    
    (2,401
    )
    
    
    (3,546
    )
    
    
    (3,911
    )ALPL balance, end of period
    
    $
    56,255
    
    
    $
    57,074
    
    
    $
    50,107
    
    
    $
    48,703
    
    
    $
    51,729AULPC balance, beginning of period
    
    $
    4,353
    
    
    $
    3,512
    
    
    $
    3,804
    
    
    $
    4,658
    
    
    $
    4,002Provision for (reduction in) AULPC
    
    
    (228
    )
    
    
    841
    
    
    
    (292
    )
    
    
    (854
    )
    
    
    656AULPC balance, end of period
    
    $
    4,125
    
    
    $
    4,353
    
    
    $
    3,512
    
    
    $
    3,804
    
    
    $
    4,658Total Allowance for Credit Losses
    
    $
    60,380
    
    
    $
    61,427
    
    
    $
    53,619
    
    
    $
    52,507
    
    
    $
    56,387ALPL as a % of total participation interests
    
    
    1.24
    %
    
    
    1.28
    %
    
    
    1.21
    %
    
    
    1.19
    %
    
    
    1.19
    %ACL as a % of total participation interests
    
    
    1.33
    
    
    
    1.38
    
    
    
    1.29
    
    
    
    1.28
    
    
    
    1.30
 Nine Months EndedSeptember 30,(in thousands)
    
    2007
    
    
    2006ALPL balance, beginning of period
    
    $
    48,703
    
    
    $
    57,530Allowance for loan participations acquired
    
    
    21,880
    
    
    
    16,689Net loan (losses) recoveriesCommercial
    
    
    116
    
    
    
    966Commercial real estate
    
    
    (4,449
    )
    
    
    (3,083
    )Consumer
    
    
    (2,897
    )
    
    
    (2,144
    )Residential real estate
    
    
    
    
    
    
    (65
    )Total net loan (losses) recoveries
    
    
    (7,230
    )
    
    
    (4,326
    )Reduction in ALPL
    
    
    (7,098
    )
    
    
    (18,164
    )ALPL balance, end of period
    
    $
    56,255
    
    
    $
    51,729AULPC balance, beginning of period
    
    $
    3,804
    
    
    $
    4,135Provision for AULPC
    
    
    321
    
    
    
    523AULPC balance, end of period
    
    $
    4,125
    
    
    $
    4,658Total Allowance for Credit Losses
    
    $
    60,380
    
    
    $
    56,387
  20




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##### Table of Contents



Non-Performing Assets (NPAs)
   
 Table 7 - Quarterly Non-Performing Assets
 2007
    
    2006(in thousands)
    
    Third
    
    
    Second
    
    
    First
    
    
    Fourth
    
    
    ThirdParticipation interests in non-accrual loansCommercial
    
    $
    240
    
    
    $
    391
    
    
    $
    408
    
    
    $
    687
    
    
    $
    143Commercial real estate
    
    
    49,151
    
    
    
    43,263
    
    
    
    23,162
    
    
    
    19,966
    
    
    
    16,784Consumer
    
    
    3,250
    
    
    
    3,106
    
    
    
    3,243
    
    
    
    3,490
    
    
    
    3,375Residential real estate
    
    
    1,239
    
    
    
    1,163
    
    
    
    1,659
    
    
    
    1,159
    
    
    
    1,598Total Non-Performing Assets
    
    $
    53,880
    
    
    $
    47,923
    
    
    $
    28,472
    
    
    $
    25,302
    
    
    $
    21,900Participations in Accruing Loans
Past Due 90 Days or More
    
    $
    3,178
    
    
    $
    3,640
    
    
    $
    3,046
    
    
    $
    5,393
    
    
    $
    6,124NPAs as a % of total participation interests
    
    
    1.19
    %
    
    
    1.07
    %
    
    
    0.69
    %
    
    
    0.62
    %
    
    
    0.51
    %ALPL as a % of NPAs
    
    
    104
    
    
    
    119
    
    
    
    176
    
    
    
    192
    
    
    
    236ACL as a % of NPAs
    
    
    112
    
    
    
    128
    
    
    
    188
    
    
    
    208
    
    
    
    257
    21




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##### Table of Contents



Non-Interest Income and Non-Interest Expense
 (See Note 7 to the unaudited condensed consolidated financial statements for
more information regarding use of HPCIs assets as collateral for the Banks advances from the
FHLB.)
  January 1, 2006thruSeptember 30, 2007Commercial and commercial real estate
    
    
    0.125
    %Consumer
    
    
    0.650Residential real estate
    
    
    0.267
  Provision for Income Taxes
  MARKET RISK
   22




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
       23




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##### Table of Contents



Item 3. Quantitative And Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
   
 Item 4T. Controls and Procedures
  
 PART II. OTHER INFORMATION
  
 Item 6. Exhibits
  3.1.
    
    Amended and Restated Articles of Incorporation (previously
filed as Exhibit 3(a)(ii) to Amendment No. 4 to Registration Statement of Form
S-11 (File No. 333-61182), filed with the Securities and Exchange Commission on
October 12, 2001, and incorporated herein by reference.)3.2.
    
    Code of Regulations (previously filed as Exhibit 3(b) to the
Registrants Registration Statement of Form S-11 (File No. 333-61182), filed
with the Securities and Exchange Commission on May 17, 2001, and incorporated
herein by reference.)4.1
    
    Specimen of certificate representing Class C preferred
securities, previously filed as Exhibit 4 to the Registrants Amendment No. 1
to Registration Statement of Form S-11 (File No. 333-61182), filed with the
Securities and Exchange Commission on May 31, 2001, and incorporated herein by
reference.31.1.
    
    Rule 13a  14(a) Certification  President (chief executive officer).31.2.
    
    Rule 13a  14(a) Certification  Vice President (chief financial officer).32.1.
    
    Section 1350 Certification  President (chief executive officer).
 24




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##### Table of Contents



32.2.
    
    Section 1350 Certification  Vice President (chief financial officer).99.1.
    
    Unaudited Condensed Consolidated Financial Statements of
Huntington Bancshares Incorporated as of and for the three and nine months
ended September 30, 2007 and 2006.
 25




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##### Table of Contents



Signatures
  
 By:
    
    /s/ Donald R. Kimble
    
    
    
    By:
    
    /s/ Thomas P. ReedDonald R. Kimble
    
    
    
    
    
    Thomas P. ReedPresident and Director
    
    
    
    
    
    Vice President and Director(Principal Executive Officer)
    
    
    
    
    
    (Principal Financial and Accounting Officer)
 26