##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY PERIOD ENDED June 30, 2008
 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
 þ o
  Large accelerated filer
o
    
    Accelerated filer o
    
    Non-accelerated filer  
þ
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ




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##### 



HUNTINGTON PREFERRED CAPITAL, INC.
  Part I. Financial InformationItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets -
At June 30, 2008, December 31, 2007, and June 30, 2007
    
    
    3Condensed Consolidated Statements of Income -
For the three-months and six-months ended June 30, 2008 and 2007
    
    
    4Condensed Consolidated Statements of Changes in Shareholders Equity -
For the six-months ended June 30, 2008 and 2007
    
    
    5Condensed Consolidated Statements of Cash Flows -
For the six-months ended June 30, 2008 and 2007
    
    
    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
    
    
    26Item 4. Controls and Procedures
    
    
    26Item 4T. Controls and Procedures
    
    
    26Part II. Other InformationItem 4. Submission of Matters to a Vote of Security Holders
    
    
    26Item 6. Exhibits
    
    
    26Signatures
    
    
    28EX-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)
 June 30,
    
    December 31,
    
    June 30,(in thousands, except share data)
    
    2008
    
    2007
    
    2007AssetsCash and interest bearing deposits with The Huntington National Bank
    
    $
    379,239
    
    
    $
    47,464
    
    
    $
    324,182Due from The Huntington National Bank
    
    
    
    
    
    
    121,981
    
    
    
    Loan participation interests:Commercial real estate
    
    
    3,290,246
    
    
    
    3,121,083
    
    
    
    3,249,560Consumer and residential real estate
    
    
    1,070,496
    
    
    
    1,217,956
    
    
    
    1,216,248Total loan participation interests
    
    
    4,360,742
    
    
    
    4,339,039
    
    
    
    4,465,808Allowance for loan participation losses
    
    
    (66,876
    )
    
    
    (62,275
    )
    
    
    (57,074
    )Net loan participation interests
    
    
    4,293,866
    
    
    
    4,276,764
    
    
    
    4,408,734Accrued income and other assets
    
    
    15,319
    
    
    
    19,665
    
    
    
    38,613Total assets
    
    $
    4,688,424
    
    
    $
    4,465,874
    
    
    $
    4,771,529Liabilities and shareholders equityLiabilitiesAllowance for unfunded loan participation commitments
    
    $
    2,576
    
    
    $
    3,856
    
    
    $
    4,353Dividends payable
    
    
    7,444
    
    
    
    
    
    
    
    17,878Due to The Huntington National Bank
    
    
    103,619
    
    
    
    
    
    
    
    121,227Other liabilities
    
    
    58
    
    
    
    59
    
    
    
    165Total liabilities
    
    
    113,697
    
    
    
    3,915
    
    
    
    143,623Shareholders 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
    
    
    3,660,959
    
    
    
    3,660,959
    
    
    
    3,694,753Retained earnings
    
    
    112,768
    
    
    
    
    
    
    
    132,153Total shareholders equity
    
    
    4,574,727
    
    
    
    4,461,959
    
    
    
    4,627,906Total liabilities and shareholders equity
    
    $
    4,688,424
    
    
    $
    4,465,874
    
    
    $
    4,771,529
 See notes to unaudited condensed consolidated financial statements.
 3




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Huntington Preferred Capital, Inc.
 
 Condensed Consolidated Statements of Income
 (Unaudited)
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,(in thousands)
    
    2008
    
    2007
    
    2008
    
    2007Interest and fee incomeInterest on loan participation interests:Commercial real estate
    
    
    40,551
    
    
    
    56,933
    
    
    
    87,082
    
    
    
    113,919Consumer and residential real estate
    
    
    18,260
    
    
    
    19,015
    
    
    
    37,949
    
    
    
    35,097Total loan participation interest income
    
    
    58,811
    
    
    
    75,948
    
    
    
    125,031
    
    
    
    149,016Fees from loan participation interests
    
    
    333
    
    
    
    203
    
    
    
    647
    
    
    
    401Interest on deposits with The Huntington National Bank
    
    
    2,082
    
    
    
    5,113
    
    
    
    3,958
    
    
    
    10,721Total interest and fee income
    
    
    61,226
    
    
    
    81,264
    
    
    
    129,636
    
    
    
    160,138(Reduction in) provision for allowances for credit losses
    
    
    (5,079
    )
    
    
    1,091
    
    
    
    (6,224
    )
    
    
    (1,602
    )Interest income after (reduction in) provision for allowances for
credit losses
    
    
    66,305
    
    
    
    80,173
    
    
    
    135,860
    
    
    
    161,740Non-interest income:Rental income
    
    
    16
    
    
    
    1,710
    
    
    
    33
    
    
    
    3,420Collateral fees
    
    
    733
    
    
    
    86
    
    
    
    1,509
    
    
    
    178Total non-interest income
    
    
    749
    
    
    
    1,796
    
    
    
    1,542
    
    
    
    3,598Non-interest expense:Servicing costs
    
    
    2,707
    
    
    
    2,704
    
    
    
    5,542
    
    
    
    5,154Other
    
    
    245
    
    
    
    1,116
    
    
    
    391
    
    
    
    2,246Total non-interest expense
    
    
    2,952
    
    
    
    3,820
    
    
    
    5,933
    
    
    
    7,400Income before provision for income taxes
    
    
    64,102
    
    
    
    78,149
    
    
    
    131,469
    
    
    
    157,938Provision for income taxes
    
    
    
    
    
    
    418
    
    
    
    
    
    
    
    811Net income
    
    $
    64,102
    
    
    $
    77,731
    
    
    $
    131,469
    
    
    $
    157,127Dividends declared on preferred securities
    
    
    (7,439
    )
    
    
    (12,438
    )
    
    
    (18,701
    )
    
    
    (24,974
    )Net income applicable to common shares
    
    $
    56,663
    
    
    $
    65,293
    
    
    $
    112,768
    
    
    $
    132,153
 See notes to unaudited condensed consolidated financial statements.
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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
    
    AmountSix Months Ended June 30, 2007:Balance, beginning of period
    
    
    1
    
    
    $
    1,000
    
    
    
    400
    
    
    $
    400,000
    
    
    
    2,000
    
    
    $
    50,000Comprehensive Income:Net incomeTotal comprehensive incomeBalance, end of the period
    
    
    1
    
    
    $
    1,000
    
    
    
    400
    
    
    $
    400,000
    
    
    
    2,000
    
    
    $
    50,000Six Months Ended June 30, 2008:Balance, beginning of period
    
    
    1
    
    
    $
    1,000
    
    
    
    400
    
    
    $
    400,000
    
    
    
    2,000
    
    
    $
    50,000Comprehensive Income:Net incomeTotal comprehensive incomeBalance, end of the 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
    
    TotalSix Months Ended June 30, 2007:Balance, beginning of period
    
    
    14,000
    
    
    $
    350,000
    
    
    
    
    
    
    $
    
    
    
    
    14,000
    
    
    $
    3,694,753
    
    
    $
    
    
    
    $
    4,495,753Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    157,127
    
    
    
    157,127Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    157,127Dividends declared on Class A preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (80
    )
    
    
    (80
    )Dividends declared on Class B preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,710
    )
    
    
    (10,710
    )Dividends declared on Class C preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,969
    )
    
    
    (1,969
    )Dividends declared on Class D preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,215
    )
    
    
    (12,215
    )Balance, end of the period
    
    
    14,000
    
    
    $
    350,000
    
    
    
    
    
    
    $
    
    
    
    
    14,000
    
    
    $
    3,694,753
    
    
    $
    132,153
    
    
    $
    4,627,906Six Months Ended June 30, 2008:Balance, beginning of period
    
    
    14,000
    
    
    $
    350,000
    
    
    
    
    
    
    $
    
    
    
    
    14,000
    
    
    $
    3,660,959
    
    
    $
    
    
    
    $
    4,461,959Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    131,469
    
    
    
    131,469Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    131,469Dividends declared on Class A preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (80
    )
    
    
    (80
    )Dividends declared on Class B preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,364
    )
    
    
    (7,364
    )Dividends declared on Class C preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,969
    )
    
    
    (1,969
    )Dividends declared on Class D preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,288
    )
    
    
    (9,288
    )Balance, end of the period
    
    
    14,000
    
    
    $
    350,000
    
    
    
    
    
    
    $
    
    
    
    
    14,000
    
    
    $
    3,660,959
    
    
    $
    112,768
    
    
    $
    4,574,727
 See notes to unaudited condensed consolidated financial statements.
 5




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Huntington Preferred Capital, Inc.
 
 Condensed Consolidated Statements of Cash Flows
 (Unaudited)
 Six Months EndedJune 30,(in thousands)
    
    2008
    
    2007Operating activitiesNet income
    
    $
    131,469
    
    
    $
    157,127Adjustments to reconcile net income to net
cash provided by operating activities:Reduction in allowances for credit losses
    
    
    (6,224
    )
    
    
    (1,602
    )Change in due to/from The Huntington National Bank
    
    
    9,125
    
    
    
    (227
    )Other, net
    
    
    5,575
    
    
    
    3,049Net cash provided by operating activities
    
    
    139,945
    
    
    
    158,347Investing activitiesParticipation interests acquired
    
    
    (1,088,993
    )
    
    
    (1,446,448
    )Sales and repayments of loans underlying participation interests
    
    
    1,292,080
    
    
    
    1,343,225Net cash provided by (used for) investing activities
    
    
    203,087
    
    
    
    (103,223
    )Financing activitiesDividends paid on preferred securities
    
    
    (11,257
    )
    
    
    (7,096
    )Dividends paid on common stock
    
    
    
    
    
    
    (296,292
    )Return of capital to common shareholders
    
    
    
    
    
    
    (153,708
    )Net cash used for financing activities
    
    
    (11,257
    )
    
    
    (457,096
    )Increase (decrease) in cash and cash equivalents
    
    
    331,775
    
    
    
    (401,972
    )Cash and cash equivalents at beginning of period
    
    
    47,464
    
    
    
    726,154Cash and cash equivalents at end of period
    
    $
    379,239
    
    
    $
    324,182Supplemental information:Income taxes paid
    
    $
    
    
    
    $
    1,128Dividends and distributions declared, not paid
    
    
    7,444
    
    
    
    17,878Non cash change in loan participation activity with The
Huntington National Bank
    
    
    (216,475
    )
    
    
    (256,269
    )
 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
     7




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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
   June 30,
    
    December 31,
    
    June 30,(in thousands)
    
    2008
    
    2007
    
    2007Commercial real estate
    
    $
    52,406
    
    
    $
    42,060
    
    
    $
    43,654Consumer and residential real estate
    
    
    6,063
    
    
    
    4,136
    
    
    
    4,269Total participations in non-performing assets
    
    $
    58,469
    
    
    $
    46,196
    
    
    $
    47,923Participations in accruing loans past due 90
days or more
    
    $
    6,214
    
    
    $
    4,440
    
    
    $
    3,640
 8




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##### Table of Contents



Note 4  Allowance for Credit Losses (ACL)
   Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,(in thousands)
    
    2008
    
    2007
    
    2008
    
    2007ALPL balance, beginning of period
    
    $
    63,799
    
    
    $
    50,107
    
    
    $
    62,275
    
    
    $
    48,703ALPL for loan participations acquired
    
    
    12,123
    
    
    
    9,673
    
    
    
    15,996
    
    
    
    14,974Net loan losses
    
    
    (3,779
    )
    
    
    (2,956
    )
    
    
    (6,451
    )
    
    
    (4,452
    )Provision for (reduction in) ALPL
    
    
    (5,267
    )
    
    
    250
    
    
    
    (4,944
    )
    
    
    (2,151
    )ALPL balance, end of period
    
    $
    66,876
    
    
    $
    57,074
    
    
    $
    66,876
    
    
    $
    57,074AULPC balance, beginning of period
    
    $
    2,388
    
    
    $
    3,512
    
    
    $
    3,856
    
    
    $
    3,804Provision for (reduction in) AULPC
    
    
    188
    
    
    
    841
    
    
    
    (1,280
    )
    
    
    549AULPC balance, end of period
    
    $
    2,576
    
    
    $
    4,353
    
    
    $
    2,576
    
    
    $
    4,353Total ACL
    
    $
    69,452
    
    
    $
    61,427
    
    
    $
    69,452
    
    
    $
    61,427
   Accounting by Creditors for Impairment of a
Loan
 Note 5
 Preferred Dividends
  9




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i.e.
 i.e.,
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,(in thousands)
    
    2008
    
    2007
    
    2008
    
    2007Class A preferred securities
    
    $
    
    
    
    $
    
    
    
    $
    80
    
    
    $
    80Class B preferred securities
    
    
    2,684
    
    
    
    5,350
    
    
    
    7,364
    
    
    
    10,710Class C preferred securities
    
    
    984
    
    
    
    984
    
    
    
    1,969
    
    
    
    1,969Class D preferred securities
    
    
    3,771
    
    
    
    6,104
    
    
    
    9,288
    
    
    
    12,215Total dividends declared
    
    $
    7,439
    
    
    $
    12,438
    
    
    $
    18,701
    
    
    $
    24,974
  Note 6  Related Party Transactions
  10




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##### Table of Contents



January 1, 2007throughJune 30, 2008Commercial real estate
    
    
    0.125
    %Consumer
    
    
    0.650
    %Residential real estate
    
    
    0.267
    %
    11




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##### Table of Contents



Number ofCommon
    
    Number of Preferred SecuritiesShareholder:
    
    Shares
    
    Class A
    
    Class B
    
    Class C
    
    Class DHeld by related parties: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
       12




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Note 7  Commitments and Contingencies
 /
    Note 8  Segment Reporting
  13




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




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Use of Significant Estimates
  QUALIFICATION TESTS
    15




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RESULTS OF OPERATIONS
   Table 1  Quarterly Statements of Income
 2008
    
    2007
    
    
    2Q08 vs 2Q07(in thousands)
    
    Second
    
    First
    
    Fourth
    
    Third
    
    Second
    
    
    $ Chg
    
    % ChgInterest and fee incomeInterest on loan participation interests:Commercial real estate
    
    $
    40,551
    
    
    $
    46,531
    
    
    $
    56,238
    
    
    $
    60,837
    
    
    $
    56,933
    
    
    
    $
    (16,382
    )
    
    
    (28.8)
    %Consumer and residential real estate
    
    
    18,260
    
    
    
    19,689
    
    
    
    20,927
    
    
    
    21,129
    
    
    
    19,015
    
    
    
    
    (755
    )
    
    
    (4.0
    )Total loan participation interest income
    
    
    58,811
    
    
    
    66,220
    
    
    
    77,165
    
    
    
    81,966
    
    
    
    75,948
    
    
    
    
    (17,137
    )
    
    
    (22.6
    )Fees from loan participation interests
    
    
    333
    
    
    
    314
    
    
    
    162
    
    
    
    216
    
    
    
    203
    
    
    
    
    130
    
    
    
    64.0Interest on deposits withThe Huntington National Bank
    
    
    2,082
    
    
    
    1,876
    
    
    
    3,203
    
    
    
    1,961
    
    
    
    5,113
    
    
    
    
    (3,031
    )
    
    
    (59.3
    )Total interest and fee income
    
    
    61,226
    
    
    
    68,410
    
    
    
    80,530
    
    
    
    84,143
    
    
    
    81,264
    
    
    
    
    (20,038
    )
    
    
    (24.7
    )Provision for (reduction in)
allowances for credit losses
    
    
    (5,079
    )
    
    
    (1,145
    )
    
    
    10,167
    
    
    
    (5,175
    )
    
    
    1,091
    
    
    
    
    (6,170
    )
    
    
    N.M.Interest income after (reduction in)
provision for allowances for credit losses
    
    
    66,305
    
    
    
    69,555
    
    
    
    70,363
    
    
    
    89,318
    
    
    
    80,173
    
    
    
    
    (13,868
    )
    
    
    (17.3
    )Non-interest income:Rental income
    
    
    16
    
    
    
    17
    
    
    
    1,710
    
    
    
    1,710
    
    
    
    1,710
    
    
    
    
    (1,694
    )
    
    
    (99
    )Collateral fees
    
    
    733
    
    
    
    776
    
    
    
    4,943
    
    
    
    81
    
    
    
    86
    
    
    
    
    647
    
    
    
    N.M.Total non-interest income
    
    
    749
    
    
    
    793
    
    
    
    6,653
    
    
    
    1,791
    
    
    
    1,796
    
    
    
    
    (1,047
    )
    
    
    (58.3
    )Non-interest expense:Servicing costs
    
    
    2,707
    
    
    
    2,835
    
    
    
    2,955
    
    
    
    2,971
    
    
    
    2,704
    
    
    
    
    3
    
    
    
    0.1Other
    
    
    245
    
    
    
    146
    
    
    
    1,173
    
    
    
    1,088
    
    
    
    1,116
    
    
    
    
    (871
    )
    
    
    (78.0
    )Total non-interest expense
    
    
    2,952
    
    
    
    2,981
    
    
    
    4,128
    
    
    
    4,059
    
    
    
    3,820
    
    
    
    
    (868
    )
    
    
    (22.7
    )Income before provision for income taxes
    
    
    64,102
    
    
    
    67,367
    
    
    
    72,888
    
    
    
    87,050
    
    
    
    78,149
    
    
    
    
    (14,047
    )
    
    
    (18.0
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    378
    
    
    
    428
    
    
    
    418
    
    
    
    
    (418
    )
    
    
    N.M.Net income
    
    $
    64,102
    
    
    $
    67,367
    
    
    $
    72,510
    
    
    $
    86,622
    
    
    $
    77,731
    
    
    
    $
    (13,629
    )
    
    
    (17.5
    )Dividends declared on preferred securities
    
    
    (7,439
    )
    
    
    (11,262
    )
    
    
    (12,213
    )
    
    
    (12,456
    )
    
    
    (12,438
    )
    
    
    
    4,999
    
    
    
    40.2Net income applicable to common shares(1)
    
    $
    56,663
    
    
    $
    56,105
    
    
    $
    60,297
    
    
    $
    74,166
    
    
    $
    65,293
    
    
    
    $
    (8,630
    )
    
    
    (13.2)
    %
 
 (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. 16




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##### Table of Contents



Table 2  Year-To-Date Statements of Income
 Six Months Ended June 30,
    
    
    2008 vs 2007(in thousands)
    
    2008
    
    2007
    
    
    $ Chg
    
    % ChgInterest and fee incomeInterest on loan participation interests:Commercial real estate
    
    $
    87,082
    
    
    $
    113,919
    
    
    
    $
    (26,837
    )
    
    
    (23.6)
    %Consumer and residential real estate
    
    
    37,949
    
    
    
    35,097
    
    
    
    
    2,852
    
    
    
    8.1Total loan participation interest income
    
    
    125,031
    
    
    
    149,016
    
    
    
    
    (23,985
    )
    
    
    (16.1
    )Fees from loan participation interests
    
    
    647
    
    
    
    401
    
    
    
    
    246
    
    
    
    61.3Interest on deposits with The Huntington National
Bank
    
    
    3,958
    
    
    
    10,721
    
    
    
    
    (6,763
    )
    
    
    (63.1
    )Total interest and fee income
    
    
    129,636
    
    
    
    160,138
    
    
    
    
    (30,502
    )
    
    
    (19.0
    )Reduction in allowances for credit losses
    
    
    (6,224
    )
    
    
    (1,602
    )
    
    
    
    (4,622
    )
    
    
    N.M.Interest income after reduction in allowances
for credit losses
    
    
    135,860
    
    
    
    161,740
    
    
    
    
    (25,880
    )
    
    
    (16.0
    )Non-interest income:Rental income
    
    
    33
    
    
    
    3,420
    
    
    
    
    (3,387
    )
    
    
    (99.0
    )Collateral fees
    
    
    1,509
    
    
    
    178
    
    
    
    
    1,331
    
    
    
    N.M.Total non-interest income
    
    
    1,542
    
    
    
    3,598
    
    
    
    
    (2,056
    )
    
    
    (57.1
    )Non-interest expense:Servicing costs
    
    
    5,542
    
    
    
    5,154
    
    
    
    
    388
    
    
    
    7.5Other
    
    
    391
    
    
    
    2,246
    
    
    
    
    (1,855
    )
    
    
    (82.6
    )Total non-interest expense
    
    
    5,933
    
    
    
    7,400
    
    
    
    
    (1,467
    )
    
    
    (19.8
    )Income before provision for income taxes
    
    
    131,469
    
    
    
    157,938
    
    
    
    
    (26,469
    )
    
    
    (16.8
    )Provision for income taxes
    
    
    
    
    
    
    811
    
    
    
    
    (811
    )
    
    
    N.M.Net income
    
    $
    131,469
    
    
    $
    157,127
    
    
    
    $
    (25,658
    )
    
    
    (16.3)
    %Dividends declared on preferred securities
    
    
    (18,701
    )
    
    
    (24,974
    )
    
    
    
    6,273
    
    
    
    25.1Net income applicable to common shares(1)
    
    $
    112,768
    
    
    $
    132,153
    
    
    
    $
    (19,385
    )
    
    
    (14.7)
    %-
 
 (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. 17




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Interest and Fee Income
   Table 3  Interest and Fee Income
 Three Months Ended June 30,2008
    
    2007Average
    
    
    
    
    
    
    
    
    
    Average(in millions)
    
    Balance
    
    Income(1)
    
    Yield
    
    Balance
    
    Income(1)
    
    YieldLoan participation interests:Commercial real estate
    
    $
    3,095.5
    
    
    $
    40.7
    
    
    
    5.29
    %
    
    $
    3,123.5
    
    
    $
    57.0
    
    
    
    7.32
    %Consumer and residential real estate
    
    
    1,105.1
    
    
    
    18.4
    
    
    
    6.70
    
    
    
    1,152.6
    
    
    
    19.1
    
    
    
    6.66Total loan participations
    
    
    4,200.6
    
    
    
    59.1
    
    
    
    5.66
    
    
    
    4,276.1
    
    
    
    76.1
    
    
    
    7.14Interest bearing deposits in the Bank
    
    
    396.3
    
    
    
    2.1
    
    
    
    2.08
    
    
    
    385.3
    
    
    
    5.1
    
    
    
    5.25Total
    
    $
    4,596.9
    
    
    $
    61.2
    
    
    
    5.35
    %
    
    $
    4,661.4
    
    
    $
    81.2
    
    
    
    6.99
    %
 
 (1)
    
    Income includes interest and fees. Table 4  Year-To-Date Interest and Fee Income
 Six Months Ended June 30,2008
    
    2007Average
    
    
    
    
    
    
    
    
    
    Average(in millions)
    
    Balance
    
    Income(1)
    
    Yield
    
    Balance
    
    Income(1)
    
    YieldLoan participation interests:Commercial real estate
    
    $
    3,087.4
    
    
    $
    87.5
    
    
    
    5.70
    %
    
    $
    3,116.6
    
    
    $
    114.1
    
    
    
    7.38
    %Consumer and residential real estate
    
    
    1,145.9
    
    
    
    38.2
    
    
    
    6.71
    
    
    
    1,072.2
    
    
    
    35.3
    
    
    
    6.64Total loan participations
    
    
    4,233.3
    
    
    
    125.7
    
    
    
    5.97
    
    
    
    4,188.8
    
    
    
    149.4
    
    
    
    7.19Interest bearing deposits in the Bank
    
    
    311.0
    
    
    
    4.0
    
    
    
    2.52
    
    
    
    406.2
    
    
    
    10.7
    
    
    
    5.25Total
    
    $
    4,544.3
    
    
    $
    129.7
    
    
    
    5.74
    %
    
    $
    4,595.0
    
    
    $
    160.1
    
    
    
    7.02
    %
 
 (1)
    
    Income includes interest and fees.  18




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##### Table of Contents



Provision for (reduction in) allowance for credit losses
  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, 2007throughJune 30, 2008Commercial real estate
    
    
    0.125
    %Consumer
    
    
    0.650
    %Residential real estate
    
    
    0.267
    %
  19




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##### Table of Contents



Provision for Income Taxes
  CREDIT RISK
  Credit Exposure Mix
  Commercial Credit
    Single family homebuilders
  20




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##### Table of Contents



Table 5  Commercial Real Estate Loans by Property Type and Borrower Location
 At June 30, 2008Geographic Region
    
    Total
    
    Percent(in thousands of dollars)
    
    Indiana
    
    Kentucky
    

    Michigan
    
    Ohio
    
    Other
    
    
    
    Amount
    
    
    
    of TotalIndustrial and warehouse
    
    $
    24,920
    
    
    $
    19,022
    
    
    $
    201,479
    
    
    $
    362,087
    
    
    $
    78,973
    
    
    $
    686,481
    
    
    
    20.9
    %Retail properties
    
    
    69,018
    
    
    
    37,976
    
    
    
    75,462
    
    
    
    375,742
    
    
    
    87,846
    
    
    
    646,044
    
    
    
    19.6Office
    
    
    28,953
    
    
    
    20,309
    
    
    
    129,399
    
    
    
    303,796
    
    
    
    75,613
    
    
    
    558,070
    
    
    
    17.0Single family home
builders
    
    
    18,677
    
    
    
    9,497
    
    
    
    69,236
    
    
    
    184,993
    
    
    
    61,071
    
    
    
    343,474
    
    
    
    13.5Raw land and other land
uses
    
    
    26,295
    
    
    
    10,458
    
    
    
    106,223
    
    
    
    203,562
    
    
    
    37,750
    
    
    
    384,288
    
    
    
    11.7Multi family
    
    
    77,613
    
    
    
    11,959
    
    
    
    18,556
    
    
    
    98,569
    
    
    
    16,914
    
    
    
    223,611
    
    
    
    6.8Health care
    
    
    1,046
    
    
    
    462
    
    
    
    6,894
    
    
    
    74,514
    
    
    
    17,213
    
    
    
    100,129
    
    
    
    3.0Hotel
    
    
    13,535
    
    
    
    
    
    
    
    23,481
    
    
    
    12,282
    
    
    
    328
    
    
    
    49,626
    
    
    
    1.5Other
    
    
    24,231
    
    
    
    18,733
    
    
    
    45,383
    
    
    
    155,009
    
    
    
    55,167
    
    
    
    298,523
    
    
    
    6.0Total
    
    $
    284,288
    
    
    $
    128,416
    
    
    $
    676,113
    
    
    $
    1,770,554
    
    
    $
    430,875
    
    
    $
    3,290,246
    
    
    
    100.0
    %
 Consumer Credit
   Allowance for Credit Losses (ACL)
  21




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Table 6  Allowances for Credit Loss Activity
 2008
    
    
    2007(in thousands)
    
    Second
    
    
    First
    
    
    Fourth
    
    
    Third
    
    
    SecondALPL balance, beginning of period
    
    $
    63,799
    
    
    $
    62,275
    
    
    $
    56,255
    
    
    $
    57,074
    
    
    $
    50,107Allowance of loan participations acquired
    
    
    12,123
    
    
    
    3,873
    
    
    
    4,650
    
    
    
    6,906
    
    
    
    9,673Net
loan lossesCommercial real estate
    
    
    (2,007
    )
    
    
    (1,197
    )
    
    
    (7,668
    )
    
    
    (1,643
    )
    
    
    (2,120
    )Consumer and residential real estate
    
    
    (1,772
    )
    
    
    (1,475
    )
    
    
    (1,398
    )
    
    
    (1,135
    )
    
    
    (836
    )Total net loan losses
    
    
    (3,779
    )
    
    
    (2,672
    )
    
    
    (9,066
    )
    
    
    (2,778
    )
    
    
    (2,956
    )Provision for (reduction in) ALPL
    
    
    (5,267
    )
    
    
    323
    
    
    
    10,436
    
    
    
    (4,947
    )
    
    
    250ALPL balance, end of period
    
    $
    66,876
    
    
    $
    63,799
    
    
    $
    62,275
    
    
    $
    56,255
    
    
    $
    57,074AULPC balance, beginning of period
    
    $
    2,388
    
    
    $
    3,856
    
    
    $
    4,125
    
    
    $
    4,353
    
    
    $
    3,512Provision for (reduction in) AULPC
    
    
    188
    
    
    
    (1,468
    )
    
    
    (269
    )
    
    
    (228
    )
    
    
    841AULPC balance, end of period
    
    $
    2,576
    
    
    $
    2,388
    
    
    $
    3,856
    
    
    $
    4,125
    
    
    $
    4,353Total Allowance for Credit Losses
    
    $
    69,452
    
    
    $
    66,187
    
    
    $
    66,131
    
    
    $
    60,380
    
    
    $
    61,427ALPL as a
% of total participation interestsTransaction
reserve
    
    
    1.29
    %
    
    
    1.30
    %
    
    
    1.24
    %
    
    
    1.05
    %
    
    
    1.05
    %Economic
reserve
    
    
    0.24
    
    
    
    0.22
    
    
    
    0.20
    
    
    
    0.19
    
    
    
    0.23Total
    
    
    1.53
    %
    
    
    1.52
    %
    
    
    1.44
    %
    
    
    1.24
    %
    
    
    1.28
    %ACL as a
% of total participation interests
    
    
    1.59
    
    
    
    1.58
    
    
    
    1.52
    
    
    
    1.33
    
    
    
    1.38
 Six Months EndedJune 30,(in thousands)
    
    2008
    
    2007ALPL balance, beginning of period
    
    $
    62,275
    
    
    $
    48,703Allowance for loan participations acquired
    
    
    15,996
    
    
    
    14,974Net loan lossesCommercial real estate
    
    
    (3,204
    )
    
    
    (2,690
    )Consumer and residential real estate
    
    
    (3,247
    )
    
    
    (1,762
    )Total net loan losses
    
    
    (6,451
    )
    
    
    (4,452
    )Reduction in ALPL
    
    
    (4,944
    )
    
    
    (2,151
    )ALPL balance, end of period
    
    $
    66,876
    
    
    $
    57,074AULPC balance, beginning of period
    
    $
    3,856
    
    
    $
    3,804Provision for (reduction in) AULPC
    
    
    (1,280
    )
    
    
    549AULPC balance, end of period
    
    $
    2,576
    
    
    $
    4,353Total Allowance for Credit Losses
    
    $
    69,452
    
    
    $
    61,427
  22




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##### Table of Contents



Non-Performing Assets (NPAs)
   Table 7  Quarterly Non-Performing Assets
 2008
    
    2007(in thousands)
    
    Second
    
    First
    
    Fourth
    
    Third
    
    SecondParticipation interests in non-accrual loansCommercial real estate
    
    $
    52,406
    
    
    $
    45,827
    
    
    $
    42,060
    
    
    $
    49,391
    
    
    $
    43,654Consumer and residential real estate
    
    
    6,063
    
    
    
    4,841
    
    
    
    4,136
    
    
    
    4,489
    
    
    
    4,269Total Non-Performing Assets
    
    $
    58,469
    
    
    $
    50,668
    
    
    $
    46,196
    
    
    $
    53,880
    
    
    $
    47,923Participations in Accruing LoansPast Due 90 Days or More
    
    $
    6,214
    
    
    $
    5,421
    
    
    $
    4,440
    
    
    $
    3,178
    
    
    $
    3,640NPAs as a
% of total participation interests
    
    
    1.34
    %
    
    
    1.21
    %
    
    
    1.06
    %
    
    
    1.19
    %
    
    
    1.07
    %ALPL as a % of NPAs
    
    
    114
    
    
    
    126
    
    
    
    135
    
    
    
    104
    
    
    
    119ACL as a % of NPAs
    
    
    119
    
    
    
    131
    
    
    
    143
    
    
    
    112
    
    
    
    128
    23




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##### Table of Contents



MARKET RISK
     LIQUIDITY AND CAPITAL RESOURCES
   24




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##### Table of Contents



Table 8  Regulatory Capital Ratios
 2008
    
    2007Second
    
    First
    
    Fourth
    
    Third
    
    SecondTier 1 Leverage Ratio (5.00% well-capitalized)
    
    
    6.37
    %
    
    
    6.24
    %
    
    
    5.99
    %
    
    
    6.23
    %
    
    
    6.09
    %Tier 1 Risk-based Capital Ratio (6.00% well-capitalized)
    
    
    7.10
    
    
    
    6.89
    
    
    
    6.64
    
    
    
    6.99
    
    
    
    6.55Total Risk-based Capital Ratio (10.00% well-capitalized)
    
    
    10.32
    
    
    
    10.39
    
    
    
    10.17
    
    
    
    10.42
    
    
    
    10.42
 25




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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 4. Submission of Matters to a Vote of Shareholders
  1.
    
    Election of directors to serve as Directors until the next Annual Meeting of
shareholders as follows:
  2.
    
    Ratification of appointment of Deloitte & Touche LLP to serve as the companys
independent registered public accounting firm for the year 2008.
  
 Item 6. Exhibits
  http://www.sec.gov http://www.huntington.com
 26




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##### Table of Contents



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).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 six month
periods ended June 30, 2008 and 2007.
 27




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##### Table of Contents



Signatures
  
 By:
    
    /s/ Donald R. Kimble

Donald R. Kimble
    
    By:
    
    /s/ Thomas P. Reed
 Thomas
P. ReedPresident and Director
    
    
    
    Vice President and Director(Principal Executive Officer)
    
    
    
    (Principal Financial and Accounting Officer)
 28