<PAGE>
                                  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 September 30, 2001


                        Commission File Number: 000-33243


                       HUNTINGTON PREFERRED CAPITAL, INC.




                  OHIO                                   31-1356967
     (State or other jurisdiction of                  (I.R.S. Employer
      incorporation or organization)                 Identification No.)


                   41 SOUTH HIGH STREET, COLUMBUS, OHIO 43287


                  Registrant's telephone number (614) 480-8300


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.


 Yes                     No   X
     =======                ======



There were 14,000,000 shares of Registrant's without par value common stock
outstanding on October 31, 2001.

<PAGE>


                       HUNTINGTON PREFERRED CAPITAL, INC.

                                      INDEX


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

            Consolidated Balance Sheets -
            September 30, 2001 and 2000 and December 31, 2000                 3

            Consolidated Statements of Income -
            For the three and nine months ended September 30,
            2001 and 2000                                                     4

            Consolidated Statements of Changes in Shareholders' Equity -
            For the nine months ended September 30, 2001 and 2000             5

            Consolidated Statements of Cash Flows -
            For the nine months ended September 30, 2001 and 2000             6

            Notes to Unaudited Consolidated Financial Statements              7

Item 2. Management's Discussion and Analysis of
               Financial Condition and Results of Operations                 12

Item 3. Quantitative and Qualitative Disclosures about Market Risk           18


PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K                                     20

Signatures                                                                   21



                                                                               2
<PAGE>


<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------------------------------------------------------------------------------------------------

CONSOLIDATED BALANCE SHEETS

----------------------------------------------------------------------------------------------------------------------------------

                                                                       SEPTEMBER 30,         DECEMBER 31,         SEPTEMBER 30,
(in thousands of dollars, except share data)                               2001                  2000                  2000
---------------------------------------------------------------------------------------    ------------------    -----------------
<S>                                                                           <C>                   <C>                 <C>
ASSETS
Cash and due from The Huntington National Bank                             $    46,699           $    61,403          $   268,892
Interest bearing deposits with The Huntington National Bank                    614,378               818,872              660,595
Due from Huntington Preferred Capital Holdings, Inc.                           194,822               159,902               53,414
Loan participation interests purchased
   Commercial                                                                  486,941               614,956              665,456
   Consumer Secured by Real Property                                         1,048,513               971,594              933,519
   Residential Mortgage                                                        533,901               355,571              391,193
   Commercial Mortgage                                                       4,309,108             3,894,527            3,829,951
                                                                     ------------------    ------------------    -----------------
                                                                             6,378,463             5,836,648            5,820,119
     Less allowance for loan losses                                             91,931                91,826               92,367
                                                                     ------------------    ------------------    -----------------
Net loan participation interests purchased                                   6,286,532             5,744,822            5,727,752
                                                                     ------------------    ------------------    -----------------
Premises and equipment                                                             785                   ---                  ---
Accrued income and other assets                                                 50,045                48,625               45,724
                                                                     ------------------    ------------------    -----------------

TOTAL ASSETS                                                               $ 7,193,261           $ 6,833,624          $ 6,756,377
                                                                     ==================    ==================    =================

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
   Dividends payable on Class B preferred stock                               $ 15,090           $       ---          $       ---
                                                                     ------------------    ------------------    -----------------
      Total Liabilities                                                         15,090                   ---                  ---
                                                                     ------------------    ------------------    -----------------

SHAREHOLDERS' EQUITY
     Preferred stock, 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                1,000
     Preferred stock, Class B, variable-rate noncumulative and
          conditionally exchangeable; $1,000 par and liquidation
          value per share; authorized 500,000 shares; 400,000,
          400,000, and no shares issued and outstanding, respectively          400,000               400,000                  ---
     Preferred stock, Class C, 7.875% noncumulative and
          conditionally exchangeable; $25 par and liquidation
          value; authorized 2,000,000 shares; no shares issued
          or outstanding                                                           ---                   ---                  ---
     Preferred stock, Class D, variable-rate noncumulative and
          conditionally exchangeable; $25 par and liquidation
          value; authorized 14,000,000 shares; no shares
          issued or outstanding                                                    ---                   ---                  ---
     Preferred stock, $25 par value, 10,000,000 shares
          authorized; no shares issued or outstanding                              ---                   ---                  ---
     Common stock - without par value; 14,000,000, 750, and 750
          shares authorized, issued, and outstanding, respectively           6,341,717             6,341,717            6,330,066
     Retained earnings                                                         435,454                90,907              425,311
                                                                     ------------------    ------------------    -----------------
     Total Shareholders' Equity                                              7,178,171             6,833,624            6,756,377
                                                                     ------------------    ------------------    -----------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                 $ 7,193,261           $ 6,833,624          $ 6,756,377
                                                                     ==================    ==================    =================
</TABLE>



See notes to unaudited consolidated financial statements.


                                                                               3
<PAGE>


<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME

---------------------------------------------------------------------------------------------------------------------------------


                                                                THREE MONTHS ENDED                        NINE MONTHS ENDED
                                                                   SEPTEMBER 30,                             SEPTEMBER 30,
(in thousands of dollars,                             -------------------------------------     ------------------------------------
 except per share amounts)                                  2001                2000                 2001                2000
----------------------------------------------------- -----------------    ----------------     ----------------    ----------------
<S>                                                            <C>                <C>                  <C>                 <C>
Interest and fee income
   Interest on loan participation interests purchased
      Commercial                                               $ 7,779            $ 13,516             $ 27,669            $ 41,048
      Consumer Secured by Real Property                         25,102              20,180               72,418              56,380
      Residential Mortgage                                      10,438              10,568               31,942              41,173
      Commercial Mortgage                                       64,358              70,662              205,140             201,544
                                                      -----------------    ----------------     ----------------    ----------------
                                                               107,677             114,926              337,169             340,145
   Fees                                                          1,909                 967                5,659               2,882
   Interest bearing deposits with The
      Huntington National Bank                                   6,115               9,886               23,426              20,194
                                                      -----------------    ----------------     ----------------    ----------------
TOTAL INTEREST AND FEE INCOME                                  115,701             125,779              366,254             363,221
                                                      -----------------    ----------------     ----------------    ----------------

NET INTEREST INCOME                                            115,701             125,779              366,254             363,221
Provision for loan losses                                          ---                 ---                  371                 ---
                                                      -----------------    ----------------     ----------------    ----------------
NET INTEREST INCOME
  AFTER PROVISION FOR LOAN LOSSES                              115,701             125,779              365,883             363,221
                                                      -----------------    ----------------     ----------------    ----------------

Rental income                                                       15                 ---                   43                 ---

Non-interest expense
   Management fees                                               2,056               1,961                6,139               5,993
   Other                                                            46                  40                  150                 122
                                                      -----------------    ----------------     ----------------    ----------------
                                                                 2,102               2,001                6,289               6,115
                                                      -----------------    ----------------     ----------------    ----------------
INCOME BEFORE INCOME TAXES                                     113,614             123,778              359,637             357,106
Provision for income taxes                                         ---                 ---                  ---                 ---
                                                      -----------------    ----------------     ----------------    ----------------

NET INCOME                                                     113,614             123,778              359,637             357,106
PREFERRED STOCK DIVIDENDS                                       15,090                 ---               15,090                 ---
                                                      -----------------    ----------------     ----------------    ----------------

NET INCOME APPLICABLE TO COMMON SHARES                        $ 98,524           $ 123,778            $ 344,547           $ 357,106
                                                      =================    ================     ================    ================

PER COMMON SHARE (1)
     Net income
          Basic & Diluted                                        $7.04               $8.84               $24.61              $25.51

     Cash dividends                                              $ ---               $ ---               $ ---               $ ---

AVERAGE COMMON SHARES (1)
     Basic & Diluted                                        14,000,000          14,000,000           14,000,000          14,000,000

</TABLE>



(1) Adjusted for the 18,666.66667-to-1 stock split in April 2001.

See notes to unaudited consolidated financial statements.


                                                                               4
<PAGE>


<TABLE>
<CAPTION>
Consolidated Statements of Changes in Shareholders' Equity

-----------------------------------------------------------------------------------------------------------------------------------


                                                                  PREFERRED, CLASS A                PREFERRED, CLASS B
                                                            ------------------------------    ------------------------------
(in thousands of dollars, except share data)                   SHARES           STOCK           SHARES           STOCK
---------------------------------------------------------   -------------   --------------    ------------   ---------------
<S>                                                                <C>            <C>             <C>             <C>
Nine Months Ended September 30, 2000:
Balance, beginning of period                                       1,000          $ 1,000             ---             $ ---
Comprehensive Income:
    Net income
      Total comprehensive income
Paid in capital in excess of par value in consideration
   for the purchase of loan participations, net                      ---              ---             ---               ---

                                                            -------------   --------------    ------------   ---------------
Balance, end of period                                             1,000          $ 1,000             ---             $ ---
                                                            =============   ==============    ============   ===============

Nine Months Ended September 30, 2001:
Balance, beginning of period                                       1,000          $ 1,000         400,000         $ 400,000
Comprehensive Income:
    Net income
      Total comprehensive income
Dividends declared on Class B preferred stock                        ---              ---             ---               ---
Common shares issued in 18,666.66667-to-1
      stock split                                                    ---              ---             ---               ---

                                                            -------------   --------------    ------------   ---------------
Balance, end of period                                             1,000          $ 1,000         400,000         $ 400,000
                                                            =============   ==============    ============   ===============
</TABLE>


<TABLE>
<CAPTION>
                                                                     PREFERRED, CLASS C
                                                            -------------------------------------
(in thousands of dollars, except share data)                     SHARES              STOCK
---------------------------------------------------------   -----------------  ------------------
<S>                                                                   <C>               <C>
Nine Months Ended September 30, 2000:
Balance, beginning of period                                             ---               $ ---
Comprehensive Income:
    Net income
      Total comprehensive income
Paid in capital in excess of par value in consideration
   for the purchase of loan participations, net                          ---                 ---

                                                            -----------------  ------------------
Balance, end of period                                                   ---               $ ---
                                                            =================  ==================

Nine Months Ended September 30, 2001:
Balance, beginning of period                                             ---               $ ---
Comprehensive Income:
    Net income
      Total comprehensive income
Dividends declared on Class B preferred stock                            ---                 ---
Common shares issued in 18,666.66667-to-1
      stock split                                                        ---                 ---

                                                            -----------------  ------------------
Balance, end of period                                                   ---               $ ---
                                                            =================  ==================
</TABLE>


<TABLE>
<CAPTION>
                                                                 PREFERRED, CLASS D                    PREFERRED
                                                            ------------------------------    ------------------------------
(in thousands of dollars, except share data)                   SHARES           STOCK           SHARES           STOCK
---------------------------------------------------------   -------------   --------------    ------------   ---------------
<S>                                                                <C>            <C>              <C>             <C>
Nine Months Ended September 30, 2000:
Balance, beginning of period                                         ---            $ ---             ---             $ ---
Comprehensive Income:
    Net income

      Total comprehensive income

Paid in capital in excess of par value in consideration
   for the purchase of loan participations, net                      ---              ---             ---               ---

                                                            -------------   --------------    ------------   ---------------
Balance, end of period                                               ---            $ ---             ---             $ ---
                                                            =============   ==============    ============   ===============

Nine Months Ended September 30, 2001:
Balance, beginning of period                                         ---            $ ---             ---             $ ---
Comprehensive Income:
    Net income

      Total comprehensive income

Dividends declared on Class B preferred stock                        ---              ---             ---               ---
Common shares issued in 18,666.66667-to-1
      stock split                                                    ---              ---             ---               ---

                                                            -------------   --------------    ------------   ---------------
Balance, end of period                                               ---            $ ---             ---             $ ---
                                                            =============   ==============    ============   ===============
</TABLE>


<TABLE>
<CAPTION>
                                                                          COMMON
                                                            -----------------------------------     RETAINED
(in thousands of dollars, except share data)                   SHARES              STOCK            EARNINGS            TOTAL
---------------------------------------------------------   ---------------  ------------------  ---------------  ------------------
<S>                                                                 <C>         <C>                <C>               <C>
Nine Months Ended September 30, 2000:
Balance, beginning of period                                           750         $ 6,143,103         $ 68,205         $ 6,212,308
Comprehensive Income:
    Net income                                                                                          357,106             357,106
                                                                                                                  ------------------
      Total comprehensive income                                                                                            357,106
                                                                                                                  ------------------
Paid in capital in excess of par value in consideration
   for the purchase of loan participations, net                        ---             186,963              ---             186,963

                                                            ---------------  ------------------  ---------------  ------------------
Balance, end of period                                                 750         $ 6,330,066        $ 425,311         $ 6,756,377
                                                            ===============  ==================  ===============  ==================

Nine Months Ended September 30, 2001:
Balance, beginning of period                                           750         $ 6,341,717         $ 90,907         $ 6,833,624
Comprehensive Income:
    Net income                                                                                          359,637             359,637
                                                                                                                  ------------------
      Total comprehensive income                                                                                            359,637
                                                                                                                  ------------------
Dividends declared on Class B preferred stock                          ---                 ---          (15,090)            (15,090)
Common shares issued in 18,666.66667-to-1
      stock split                                               13,999,250                 ---              ---                 ---

                                                            ---------------  ------------------  ---------------  ------------------
Balance, end of period                                          14,000,000         $ 6,341,717        $ 435,454         $ 7,178,171
                                                            ===============  ==================  ===============  ==================
</TABLE>



See notes to unaudited consolidated financial statements.


                                                                               5
<PAGE>


<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows

-----------------------------------------------------------------------------------------------------------------------------------


                                                                                             NINE MONTHS ENDED
                                                                                               SEPTEMBER 30,
                                                                                ------------------------------------------
(in thousands of dollars)                                                             2001                    2000
----------------------------------------------------------------------------    ------------------     -------------------
<S>                                                                                      <C>                     <C>
OPERATING ACTIVITIES
     Net Income                                                                          $359,637                $357,106
     Adjustments to reconcile net income to net cash provided
       by operating activities
            Provision for loan losses                                                         371                     ---
            Depreciation                                                                       12                     ---
            Increase in accrued interest and other assets                                (336,766)               (345,405)
            Decrease in Due from/to Huntington Preferred
                Capital Holdings, Inc.                                                    (34,920)                (54,144)
                                                                                ------------------     -------------------

     NET CASH USED FOR OPERATING ACTIVITIES                                               (11,666)                (42,443)
                                                                                ------------------     -------------------

INVESTING ACTIVITIES
     Decrease (increase) in interest bearing deposits in banks                            204,494                (593,524)
     Participation interests purchased                                                 (4,468,634)             (4,480,408)
     Sales and repayments on loans underlying participations                            4,261,899               5,218,132
     Purchase of premises and equipment                                                      (797)                    ---
                                                                                ------------------     -------------------

     NET CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES                                  (3,038)                144,200
                                                                                ------------------     -------------------

     CHANGE IN CASH AND CASH EQUIVALENTS                                                  (14,704)                101,757
     CASH AND CASH EQUIVALENTS:
       AT BEGINNING OF PERIOD                                                              61,403                 167,135
                                                                                ------------------     -------------------
       AT END OF PERIOD                                                                  $ 46,699                $268,892
                                                                                ==================     ===================


     Supplemental information:
        Capital contributions from common
           stockholder in the form of loans                                              $    ---                $186,963
        Dividends declared, not paid, on Class B preferred stock                           15,090                     ---
        Income taxes paid                                                                     ---                     ---
        Interest paid                                                                         ---                     ---
</TABLE>


     See notes to unaudited consolidated financial statements.


                                                                               6
<PAGE>


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


A.   ORGANIZATION

     Huntington Preferred Capital, Inc. (HPCI or "the company") is a real estate
investment trust (REIT) organized under Ohio law in 1992. HPCI is a subsidiary
of Huntington Preferred Capital Holdings, Inc. (Holdings), an Indiana
corporation. Holdings is a subsidiary of The Huntington National Bank (the
Bank), a national banking association organized under the laws of the United
States and headquartered in Columbus, Ohio. The Bank is a wholly owned
subsidiary of Huntington Bancshares Incorporated (Huntington), a Maryland
corporation, also headquartered in Columbus, Ohio. HPCI has one
subsidiary, HPCLI, Inc. HPCI's management views its financial condition and
results of operations as one operating segment.

B.   BASIS OF PRESENTATION

     The unaudited interim consolidated financial statements reflect all
adjustments, consisting of normal recurring accruals, which are, in the opinion
of management, necessary for a fair presentation of the consolidated financial
position, the results of operations, and cash flows for the periods presented.
These unaudited consolidated financial statements have been prepared according
to the rules and regulations of the Securities and Exchange Commission and,
therefore, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles (GAAP) have been omitted.
     The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect amounts reported in the
financial statements. Actual results could differ from those estimates.

C.   LOAN PARTICIPATION INTERESTS AND ALLOWANCE FOR LOAN LOSSES

     Participation interests in loans are generally purchased from the Bank by
Holdings at the Bank's carrying value, which is the principal amount outstanding
plus accrued interest, net of unearned income, if any. Similarly, participation
interests in loans are generally purchased from Holdings by HPCI at Holdings'
carrying value.
     An allowance for loan losses was transferred from the Bank to Holdings and
from Holdings to HPCI on seasoned loans underlying the participations at the
time the participations were purchased. The allowance for loan losses reflects
HPCI management's judgment as to the level considered appropriate to absorb
inherent losses in the loan participation portfolio.
     The following table sets forth an analysis of the allowance for loan losses
for the periods indicated:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                        THREE MONTHS ENDED                    NINE MONTHS ENDED
                                                           SEPTEMBER 30,                        SEPTEMBER 30,
------------------------------------------------------------------------------------------------------------------------
(in thousands of dollars)                              2001            2000                2001               2000
------------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>              <C>                <C>                <C>
BALANCE, BEGINNING OF PERIOD                            $90,724          $94,091            $91,826            $104,151
Allowance of loan participation interests
   acquired/(redeemed)                                    3,662           (1,058)             3,396              (9,627)
Net loan losses                                          (2,455)            (666)            (3,662)             (2,157)
Provision for loan losses                                   ---              ---                371                 ---
                                                        -------          -------            -------            --------
BALANCE, END OF PERIOD                                  $91,931          $92,367            $91,931            $ 92,367
                                                        =======          =======            =======            ========
</TABLE>


                                                                               7
<PAGE>


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

D.   EARNINGS PER COMMON SHARE AND STOCK SPLIT

     Basic earnings per common share is the amount of earnings for the period
available to each share of common stock outstanding during the reporting period.
Diluted earnings per common share is the amount of earnings available to each
share of common stock outstanding during the reporting period adjusted for the
potential issuance of common shares for stock options, convertible debt, etc.
Currently, HPCI has no stock options or convertible debt or other potential
equity instruments and therefore basic and diluted earnings per share are
calculated on the same basis. Holdings and Huntington own all of the issued and
outstanding common stock of HPCI.
     In April 2001, the board of directors of HPCI declared an 18,666.66667-to-1
common stock split increasing the number of authorized, issued and outstanding
common shares from 750 to 14 million.

E.   INCOME TAXES

     HPCI has elected to be treated as a REIT for Federal income tax purposes
and intends to comply with the provisions of the Code. Accordingly, HPCI is
not subject to Federal income tax to the extent it distributes its earnings
to stockholders and as long as certain asset, income and stock ownership tests
are met in accordance with the Code. As HPCI expects to qualify as a REIT for
Federal income tax purposes, no provision for income taxes is included in the
accompanying unaudited consolidated financial statements.

F.   DISTRIBUTION OF FLORIDA PARTICIPATIONS

     On July 12, 2001, Huntington announced a comprehensive strategic and
financial restructuring plan. Under the plan, Huntington will, among other
things, divest its Florida retail and corporate banking businesses. On September
26, 2001, Huntington announced that it had entered into an agreement to sell its
Florida operations to SunTrust Banks, Inc. in a transaction that is expected to
close in the first quarter of 2002, subject to regulatory approval and other
customary conditions. Approximately $1.2 billion of loans underlying HPCI's
participation interests, representing approximately 18% of its total assets,
will be included in this sale. HPCI intends to distribute these participation
interests to Holdings in preparation for the eventual sale of the underlying
loans by the Bank to SunTrust Banks, Inc. This distribution by HPCI may be
completed prior to year end.

G.   SALE OF PREFERRED SECURITIES

     In October 2001, HPCI issued 2,000,000 shares of Class C preferred
securities and 14,000,000 shares of Class D preferred securities to Holdings in
exchange for the fair market value of certain participation interests and
leasehold improvements. The transaction totaled $400 million. The participation
interests were in commercial, including commercial real estate, and consumer
loans originated by the Bank. The underlying consumer loans included a
combination of automobile, truck, and equipment loans. Approximately 24% of
these participation interests were non-performing in nature. HPCI intends
to hold these participation interests as long-term investments. The company
transferred the leasehold improvements to its wholly owned subsidiary, HPCLI,
Inc., in exchange for its common shares.


                                                                               8
<PAGE>


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Holdings sold the Class C preferred securities in an underwritten public
offering for cash consideration of $25 per share. The offering was completed on
November 7, 2001. HPCI did not receive any of Holdings' proceeds from the sale
of the securities. The offering was made pursuant to a Registration Statement on
Form S-11, as amended (Commission File No. 333-61182), which was declared
effective on October 15, 2001.

H.   PREFERRED SECURITY DIVIDENDS

     The Class A preferred securities are non-voting and non-cumulative and have
a dividend rate of $80.00 per share per year. Full dividends were paid in the
last two calendar years.

     The Class B preferred securities are non-voting and non-cumulative and are
entitled to receive dividends at a variable rate based on LIBOR. Dividends on
the Class B preferred securities are declared quarterly and payable annually.
Dividends are not cumulative. However, so long as any Class B preferred
securities remain outstanding, no dividend, except a dividend payable in common
shares, or other distribution on the common shares and no repurchase or
redemption of the common shares may be made in a particular calendar year
unless the full dividend on the Class B preferred securities for all calendar
quarters within that year to the date of such action have been paid or declared
and set apart for payment. In the third quarter, dividends of $6.4 million,
$4.9 milion, and $3.8 million were declared for the first, second, and third
quarters of 2001, respectively, and are reflected in the consolidated
financial statements. It is expected that dividends will be declared in the
fourth quarter and all accrued dividends will be paid to the Class B security
holder prior to year end.
     Holders of Class C preferred securities are entitled to one-tenth of one
vote per share and will be entitled to receive, if, when, and as authorized and
declared by the board of directors out of legally available assets,
noncumulative cash dividends at the rate of 7.875% per annum of the initial
liquidation preference which is $25.00 per share. Dividends on the Class C
preferred securities will be payable, if authorized and declared, quarterly in
arrears on the last business day of March, June, September, and December of each
year. If full dividends are not paid on the Class C preferred securities for a
quarterly dividend period, the payment of dividends on the common shares or
other shares ranking junior to the Class C preferred securities will be
prohibited for that period and at least the following three quarterly dividend
periods.
     Holders of Class D preferred securities are entitled to one-tenth of one
vote per share as well and are entitled to receive non-cumulative dividends at a
variable rate equal to LIBOR plus 1.625% payable, if authorized and declared,
quarterly in arrears on the last business day of March, June, September, and
December of each year. If full dividends are not paid on the Class D preferred
securities for a quarterly dividend period, the payment of dividends on the
common shares or other shares ranking junior to the Class D preferred securities
will be prohibited for that period and at least the following three quarterly
dividend periods.

I.   RELATED PARTY TRANSACTIONS

     HPCI holds a 100% subparticipation interest through a subparticipation
agreement with Holdings and Holdings holds a 99% participation interest through
a participation agreement with the Bank in loans originated by the Bank and
its subsidiaries. The participation and subparticipation interests are in
commercial, commercial mortgage, residential real estate, and consumer loans
secured by real property that were either directly underwritten by the Bank and


                                                                               9
<PAGE>


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

its subsidiaries or acquired by the Bank. HPCI expects to continue to purchase
such interests in the future from Holdings under the terms of the participation
and subparticipation agreements.
     The participation and subparticipation agreements also provide for the Bank
to service the commercial, commercial mortgage, residential mortgage, and
consumer loans underlying the participations held by HPCI in a manner
substantially the same for similar work performed by the Bank for transactions
on its own behalf. The servicing fee the Bank charges is .125% per year of the
outstanding principal balances of the commercial, commercial mortgage, and
consumer loans underlying the participation interests and .282% per year of the
interest income collected on the underlying residential mortgages. Management
fee expense for servicing loans paid to the Bank totaled $2.1 million and $6.1
million for the three and nine months ended September 30, 2001, respectively.
Servicing fees were $2.0 million and $6.0 million for the same periods a year
ago.
     In its capacity as servicer, the Bank collects and holds the commercial and
mortgage loan payments received on behalf of HPCI until the end of each month.
At month end, the payments are transferred to HPCI and accordingly, HPCI does
not reflect any receivables for payments from the Bank in the accompanying
consolidated financial statements.
     HPCI, Huntington, and the Bank share personnel to handle day-to-day
operations such as accounting, financial analysis, tax reporting, and other
administrative functions. On a monthly basis, HPCI reimburses the Bank and
Huntington for the cost related to the time spent by employees for performing
these functions. The personnel costs, which are a component of Other
non-interest expense, were $40,000 and $121,000 for each of the three and nine
months ended September 30, 2001 and 2000, respectively.
     For all periods presented in the unaudited consolidated financial
statements, Holdings and Huntington were owners of 100% of the outstanding
common stock of HPCI. Accordingly, Holdings and Huntington were entitled to
receive all common dividends paid by HPCI.
     Of the outstanding shares of Class A preferred securities, 88.9% are owned
by Holdings and 11.1% are owned by present and past employees of Huntington and
its subsidiaries. All of the Class B preferred securities are owned by HPC
Holdings-II, Inc., a subsidiary of Huntington.
     HPCI maintains and transacts all of its cash activity through a
non-interest bearing demand deposit account with the Bank. In addition, HPCI
invests available funds in Eurodollar deposits with the Bank for a term of not
more than 30 days. "Cash and due from The Huntington National Bank" and
"Interest bearing deposits with The Huntington National Bank" are captioned on
the balance sheet and represent these balances on deposit with the Bank.
Furthermore, HPCI maintains receivables with Holdings that represent amounts for
unsettled transactions involving participation interests, fees, and other
related costs.

J.   COMMITMENTS AND CONTINGENCIES

     The Bank is eligible to obtain advances from various federal agencies such
as the Federal Home Loan Bank of Cincinnati (FHLBC). In the future, HPCI may
be asked to act as co-borrower or guarantee the Bank's obligations under such
advances and/or pledge all or a portion of its assets in connection with those
advances. Any such borrowing, guarantee, or pledge would rank senior to HPCI's
common and preferred securities upon liquidation. At September 30, 2001, the
Bank had $15.7 million in outstanding FHLBC borrowings. This line of credit or
advances is not to exceed at any one time $800 million in the aggregate from the
FHLBC. Although HPCI may have up to 25% of its assets serve as collateral for
such advances, to date, HPCI has never acted as co-borrower or guarantor of any
of the Bank's obligations under such advances and has


                                                                              10
<PAGE>


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

never pledged any assets. Any such borrowing, guarantee, and/or pledge will not
require HPCI to obtain the consent of the holders of its common or preferred
securities in order to complete the Bank's transaction.


                                                                              11
<PAGE>


ITEM 2. MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS


INTRODUCTION

         Huntington Preferred Capital, Inc. (HPCI or "the company") is an Ohio
corporation that was incorporated in July 1992 under the name Airbase Realty,
Inc. The company changed its name to Huntington Preferred Capital, Inc. in May
2001. The company's principal business objective is to acquire, hold, and manage
mortgage assets and other authorized investments that will generate net income
for distribution to its shareholders. Since May 1998, the company has been
operating as a real estate investment trust (REIT), for federal income tax
purposes.
         The company is a subsidiary of Huntington Preferred Capital Holdings,
Inc. (Holdings), which is owned by The Huntington National Bank (the Bank) and
Huntington Bancshares Incorporated (Huntington). All of HPCI's day-to-day
activities and the servicing of the loans underlying its participation interests
are administered by the Bank. HPCI has one wholly-owned subsidiary, HPCLI, Inc.
(HPCLI).
         The participation agreement between the Bank and Holdings and the
subparticipation agreement between Holdings and HPCI require the Bank to service
HPCI's loan portfolio in a manner substantially the same as for similar work
performed by the Bank for transactions on its own behalf. The Bank collects and
remits principal and interest payments, maintains perfected collateral
positions, and submits and pursues insurance claims. The Bank also provides to
HPCI accounting and reporting services as required. The Bank is required to pay
all expenses related to the performance of its duties under the participation
and subparticipation agreements.

FORWARD-LOOKING STATEMENTS

         Management's discussion and analysis of financial condition and results
of operations contains forward-looking statements about HPCI, including
descriptions of products or services, plans, or objectives of its management for
future operations, and forecasts of its revenues, earnings, or other measures of
economic performance. Forward-looking statements can be identified by the fact
that they do not relate strictly to historical or current facts.
         By their nature, forward-looking statements are subject to numerous
assumptions, risks, and uncertainties. A number of factors, many of which are
beyond HPCI's control, could cause actual conditions, events, or results to
differ significantly from those described in the forward-looking statements.
These factors include, but are not limited to changes in general, national, or
regional economic conditions; movements in interest rates; geographic
concentration of the loans underlying HPCI's participation interests; changes in
loan default and charge-off rates relating to a decline in the commercial real
estate market; success and timing of business strategies; the possible exchange
of the Class B, C, & D preferred securities for preferred shares of the Bank at
the direction of the FDIC if the Bank becomes undercapitalized; the failure of
HPCI to maintain its status as a REIT for federal income tax purposes; and the
nature, extent, and timing of governmental actions and reforms.
         Forward-looking statements speak only as of the date they are made.
HPCI does not update forward-looking statements to reflect circumstances or
events that occur after the date the forward-looking statements are made or to
reflect the occurrence of unanticipated events, such as further market
deterioration that adversely affects credit quality and/or other asset values.
         The management of HPCI encourages readers of this Form 10-Q to
understand forward-looking statements to be strategic objectives rather than
absolute targets of future performance. The following discussion and analysis of
the financial performance of HPCI for the third quarter


                                                                              12
<PAGE>


of 2001 should be read in conjunction with the financial statements, notes, and
other information contained in this document and the risk factors which are
described in HPCI's Registration Statement, as amended, on Form S-11 (Commission
File No. 333-61182), which are incorporated herein by reference.

DISTRIBUTION OF FLORIDA PARTICIPATION INTERESTS

     On July 12, 2001, Huntington announced a comprehensive strategic and
financial restructuring plan. Under the plan, Huntington will, among other
things, divest its Florida retail and corporate banking businesses. On September
26, 2001, Huntington announced that it had entered into an agreement to sell its
Florida operations to SunTrust Banks, Inc. in a transaction that is expected to
close in the first quarter of 2002, subject to regulatory approval and other
customary conditions. Approximately $1.2 billion of loans underlying HPCI's
participation interests, representing approximately 18% of its total assets,
will be included in this sale. HPCI intends to distribute these participation
interests to the Bank through Holdings in preparation for the eventual
distribution of the underlying loans by the Bank to SunTrust Banks, Inc. This
distribution by HPCI may be completed prior to year end.

OVERVIEW

         HPCI reported net income available to common shareholders of $98.5
million, or $7.04 per share, for the third quarter and $344.5 million, or $24.61
per share, for the first nine months of 2001. This compares with $123.8 million,
or $8.84 per common share, and $357.1 million, or $25.51 per common share, for
the same periods last year. Return on average assets (ROA) was 5.52% and 6.69%
for the recent three and nine month periods, respectively. Return on average
common equity (ROE) was 5.86% and 7.11% for the same periods in 2001. Last year,
ROA was 7.39% and 7.21% in the three and nine month periods, respectively, while
ROE was 7.40% and 7.21% for the same periods.
         At September 30, 2001 and 2000, HPCI had total assets and total equity
of $7.2 billion and $6.8 billion, respectively. As of the most recent quarter
end, an aggregate of $6.4 billion, or 88.7%, of total assets consisted of 99%
participation interests in loans. Before the allowance for loan losses,
participation interests in commercial and commercial mortgage loans was $4.8
billion, or 66.7% of total assets, $1.0 billion, or 14.6%, in consumer loans
secured by real property, and $.6 billion, or 7.4%, in residential mortgage
loans. These participation interests were all acquired from Holdings and
Holdings acquired them from the Bank.
         Non-interest bearing cash balances on deposit with the Bank were $46.7
million and $268.9 million at September 30, 2001 and 2000, respectively.
Interest bearing balances with the Bank were $614.4 million and $660.6 million
as of the same dates. These amounts are invested overnight in Eurodollar
deposits with HNB for a term of not more than 30 days. Amounts due from Holdings
at September 30, 2001 and 2000, were $194.8 million and $53.4 million,
respectively. These represent amounts due from or due to Holdings and/or the
Bank for unsettled transactions involving participation interests, fees, and
other related costs.

RESULTS OF OPERATIONS

NET INTEREST INCOME
         Net interest income was $115.7 million for the three months ended
September 30, 2001. Net interest income declined $4.7 million from the
immediately preceding quarter and $10.1 million from the third quarter last
year. The net interest margin contracted from 6.97% for the quarter ended June
30, 2001 and 7.60% for the third quarter last year to 6.56%. The following


                                                                              13
<PAGE>


table, which includes underlying non-performing loans in the average balances,
represents the yields on HPCI's earning assets for the periods presented:


<TABLE>
<CAPTION>
                                           THREE MONTHS ENDED                          THREE MONTHS ENDED
                                           SEPTEMBER 30, 2001                          SEPTEMBER 30, 2000
                               ----------------------------------------    --------------------------------------
                                  Average                                     Average
(in millions)                     Balance        Income        Yield          Balance        Income       Yield
----------------------------   --------------  ------------   ---------    --------------  -----------   --------
<S>                                  <C>             <C>          <C>            <C>           <C>          <C>
Loan participation interests:
   Commercial                        $ 509.6         $ 7.8        6.06 %         $ 705.1       $ 13.5       7.63 %
   Consumer Secured by
      Real Property                  1,053.5          25.1        9.45             885.1         20.2       9.07
   Residential Mortgage                566.6          10.4        7.37             661.4         10.6       6.39
   Commercial Mortgage               4,180.5          64.4        6.11           3,720.9         70.7       7.55
                               --------------  ------------   ---------    --------------  -----------   --------
      Total participations           6,310.2         107.7        6.78           5,972.5        115.0       7.66
                               --------------  ------------   ---------    --------------  -----------   --------
Interest bearing deposits
   in banks                            663.9           6.1        3.65             648.0          9.9       6.07
Allowance for loan
   losses/Fees                         (89.3)          1.9                         (86.2)         0.9
                               --------------  ------------   ---------    --------------  -----------   --------
Total interest-earning
   assets                          $ 6,884.8       $ 115.7        6.56 %       $ 6,534.3      $ 125.8       7.60 %
                               ==============  ============   =========    ==============  ===========   ========
</TABLE>


<TABLE>
<CAPTION>
                                          NINE MONTHS ENDED                           NINE MONTHS ENDED
                                          SEPTEMBER 30, 2001                          SEPTEMBER 30, 2000
                               ---------------------------------------     ---------------------------------------
                                 Average                                      Average
(in millions)                    Balance         Income        Yield          Balance         Income      Yield
----------------------------   -------------   ------------   --------     --------------   -----------  ---------
<S>                                 <C>             <C>          <C>             <C>             <C>         <C>
Loan participation interests:
   Commercial                       $ 557.1         $ 27.7       6.64 %          $ 746.7         $41.0       7.34 %
   Consumer Secured by
      Real Property                 1,030.7           72.4       9.39              838.1          56.4       8.99
   Residential Mortgage               573.8           31.9       7.42              794.9          41.2       6.91
   Commercial Mortgage              4,095.9          205.1       6.70            3,791.3         201.5       7.10
                               -------------   ------------   --------     --------------   -----------  ---------
      Total participations          6,257.5          337.1       7.20            6,171.0         340.1       7.36
                               -------------   ------------   --------     --------------   -----------  ---------
Interest bearing deposits
   in banks                           677.3           23.4       4.62              458.2          20.2       5.89
Allowance for loan
   losses/Fees                        (89.7)           5.7                         (90.3)          2.9
                               -------------   ------------   --------     --------------   -----------  ---------
Total interest-earning
   assets                         $ 6,845.1        $ 366.2       7.04 %         $6,538.9        $363.2       7.36 %
                               =============   ============   ========     ==============   ===========  =========
</TABLE>

         The declines experienced during 2001 were due to decreases in interest
earned on participation interests as runoff from higher rate assets was replaced
by lower rate purchases, which was indicative of the changes in the interest
rate environment in the periods. The rate earned on participation interests was
6.78% over the recent three months, compared with 7.06% and 7.66% for the second
quarter 2001 and the third quarter 2000, respectively. On a year-to-date basis,
net interest income was $366.3 million versus $363.2 million a year ago and the
net interest margin declined from 7.36% to 7.04%. Higher fees helped to offset
some of the decline in interest income as rates have fallen.


                                                                              14
<PAGE>


         PROVISION FOR LOAN LOSSES The provision for loan losses is the charge
to pre-tax earnings necessary to maintain the allowance for loan losses (ALL) at
a level adequate to absorb management's estimate of inherent losses in the loan
portfolio. There was no provision for loan losses in the third quarter of 2001
and 2000 and in the nine months of 2000. The provision for loan losses was
$371,000 for the nine months of 2001. An allowance for loan losses is
transferred from the Bank to Holdings and from Holdings to HPCI on seasoned
loans underlying the participations at the time the participations are
purchased.

NON-INTEREST INCOME AND NON-INTEREST EXPENSE
         Non-interest income was $15,000 and $43,000 for the three months and
year-to-date periods ended September 30, 2001. This represents rental income
received from the Bank related to assets purchased by HPCI earlier in 2001.
         Non-interest expense was $2.1 million and $6.3 million for the three
and nine-month periods of 2001. Non-interest expense for the same periods last
year was $2.0 million and $6.1 million. Non-interest expense is comprised
largely of compensation paid to the Bank for servicing the loans underlying the
participation interests. On an annual basis, the service fee with respect to the
commercial mortgage, commercial, and consumer loans is equal to the outstanding
principal balance of each loan multiplied by a fee of .125% and the service fee
for residential mortgage loans is equal to .282% of the interest income
collected.

PROVISION FOR INCOME TAXES
         HPCI has elected to be treated as a REIT for Federal income tax
purposes and intends to comply with the provisions of the Code and therefore is
not subject to income taxes. No provision for income taxes is included in the
accompanying unaudited consolidated financial statements.

INTEREST RATE RISK MANAGEMENT

         HPCI's income consists primarily of interest income on participation
interests in commercial, consumer, residential mortgage, and commercial mortgage
loans. The company does not intend to use any derivative products to manage its
interest rate risk. If there is a further decline in market interest rates, the
company may experience a reduction in interest income on its participation
interests and a corresponding decrease in funds available to be distributed to
shareholders. The reduction in interest income may result from downward
adjustments of the indices upon which the interest rates on loans are based and
from prepayments of loans with fixed interest rates, resulting in reinvestment
of the proceeds in lower-yielding participation interests. Further information
regarding market risk can be found under Item 3 below.

CREDIT QUALITY

         HPCI's exposure to credit risk is managed by personnel of the Bank
through its use of consistent underwriting standards that emphasize "in-market"
lending while avoiding highly leveraged transactions as well as excessive
industry and business activity concentrations. The Bank's credit administration
function employs extensive risk management techniques, including forecasting, to
ensure that loans adhere to corporate policy and problem loans are promptly
identified. These procedures provide executive management of the Bank and HPCI
with the information necessary to implement policy adjustments where necessary,
and take corrective actions on a proactive basis. These procedures also include
evaluating the adequacy of the allowance for loan losses (ALL), which includes
an analysis of specific credits and the application of relevant reserve factors
that represent relative risk, based on portfolio trends,


                                                                              15
<PAGE>


current and historic loss experience, and prevailing economic conditions, to
specific portfolio segments.
         Concentration of credit risk generally arises with respect to
participation interests when a number of underlying loans have borrowers
engaged in similar business activities or activities in the same geographical
region. Concentration of credit risk indicates the relative sensitivity of
performance to both positive and negative developments affecting a particular
industry. HPCI's balance sheet exposure to geographic concentrations directly
affects the credit risk of the underlying loans within the participation
interests. The  majority of the loans underlying the participation interests
are located in Ohio, Michigan, Florida, Indiana, and Kentucky. Borrowers
obligated in loans underlying HPCI's participation interests, however, do not
represent a particular concentration of similar business activity. At September
30, 2001, over 95% of the underlying loans in all participation interests
consisted of loans located in these five states. Consequently, the portfolio
may experience a higher default rate in the event of adverse economic,
political, or business developments or natural hazards in these states and may
affect the ability of borrowers to make payments of principal and interest on
the underlying loans.
         Certain industries have been identified as being particularly
vulnerable to the weakening economic environment such as hotels, restaurants,
amusements/recreation, insurance, and airlines. At September 30, 2001, these
industries comprised only 7% of the total underlying commercial and commercial
real estate loans.
         Non-performing assets (NPAs), consist of underlying loans that are no
longer accruing interest. Commercial, commercial mortgage, and residential
mortgage loans are placed on non-accrual status and stop accruing interest when
collection of principal or interest is in doubt or generally when the underlying
loan is 90 days past due. When interest accruals are suspended, accrued interest
income is reversed with current year accruals charged to earnings and prior year
amounts generally charged off as a credit loss. Consumer loans are not placed on
non-accrual status; rather they are charged off in accordance with regulatory
statutes governing the Bank, which is generally no more than 120 days.
         Total NPAs were $83.8 million at September 30, 2001 and $41.9 million
at December 31, 2000. NPAs were $36.9 million at September 30, 2000. As of the
same dates, the underlying non-performing loans represented 1.31%, .72%, and
 .63% of total participation interests. Transfers of $24.3 million of large
underlying commercial and commercial mortgage credits to nonaccrual status drove
a substantial portion of the increase in the recent nine months. Given the
weakened economic conditions, HPCI expects that NPAs will increase from the
recent quarter level.
         Underlying loans past due ninety days or more but continuing to accrue
interest were $32.3 million at September 30, 2001, and $23.7 million and $23.9
million at the end of June and March 2001, respectively.
         HPCI maintains the ALL to absorb loan losses inherent in the loans
underlying its participation interests. At September 30, 2001 and 2000, the ALL
was $91.9 million and $92.4 million, respectively. The ALL represented 1.44% and
1.59% of total loan participations at those same dates. The ALL is established
through a provision for loan losses charged to earnings and by additions in
connection with purchases of participation interests. HPCI has not been required
to record a provision for loan losses since its inception as a REIT in 1998,
except in the most recent nine month period. Provision for loan losses in 2001
was $371,000. Loan losses are charged against the allowance when management
believes the underlying loan balance, or a portion thereof, is uncollectible.
Subsequent recoveries, if any, are credited to the allowance. Net loan losses
for the three and nine months ended September 30, 2001, were $2.5 million and
$3.7 million, respectively, compared with $.7 million and $2.2 million for the
same periods a year ago. Net loan losses for commercial and commercial mortgage
loan participations


                                                                              16
<PAGE>


for the first nine months of 2001 declined $.6 million and $.5 million from
2000, respectively, while net loan losses for consumer loan participations
increased $2.6 million. HPCI expects that future net charge-offs will be higher
than the current quarter levels given the weaker economic conditions as well as
seasonal trends.

         On an ongoing basis, management of the Bank monitors the loans
underlying HPCI's participation interests and evaluates the adequacy of the
allowance for loan losses in conjunction with its analysis of the Bank's loan
portfolio. Based upon the Bank's analysis, HPCI management believes that the
allowance for loan losses is sufficient to absorb any known and inherent risks
that currently exist in the underlying loans in the    participation interests.
HPCI management will review the underlying loans to determine the extent to
which any changes in loss experience may require provisions in the future.
Given the weakening economic conditions, it is expected that the allowance and
provision for loan losses will increase in the future.
         HPCI allocates its ALL to each underlying loan category based on a
detailed credit quality review performed by the Bank periodically on specific
underlying commercial loans based on size and relative risk and other relevant
factors such as portfolio performance and internal controls. Loss factors are
applied on larger, commercial and commercial mortgage credits and represent
management's estimate of the inherent loss. The portion of the allowance
allocated to homogeneous consumer loans is determined by applying projected loss
ratios giving consideration to existing economic conditions and trends.
Projected loss ratios incorporate factors such as trends in past due and
non-accrual amounts, recent underlying loan loss experience, current economic
conditions, risk characteristics, and concentrations of various underlying loan
categories. Actual loss ratios experienced in the future, however, could vary
from those projected because an underlying loan's performance depends not only
on economic factors but also other factors unique to each customer. The
diversity in size of corporate commercial loans can be significant as well and
even if the projected number of underlying loans deteriorates, the dollar
exposure could significantly vary from estimated amounts. Additionally, the
impact on individual customers from recent economic events may be unknown. To
ensure adequacy to a higher degree of confidence, a portion of the ALL is
considered unallocated. While amounts are allocated to various portfolio
segments, the total ALL, excluding impairment reserves prescribed under
provisions of Statement of Financial Accounting Standard No. 114, is available
to absorb losses from any segment of the portfolio of participation interests.
The estimated total unallocated reserves was approximately 15% at September
30, 2001 and 2000.
         Under the participation and subparticipation agreements, HPCI may
direct the Bank to dispose of any underlying loan that becomes classified, is
placed in a non-performing status, or is renegotiated due to the financial
deterioration of the borrower. The Bank may institute foreclosure proceedings,
exercise any power of sale contained in any mortgage or deed of trust, obtain a
deed in lieu of foreclosure, or otherwise acquire title to a property underlying
a mortgage loan by operation of law or otherwise in accordance with the terms of
the participation and subparticipation agreement. Any underlying loan is sold to
the Bank at fair market value where the security is either repossessed or goes
into foreclosure proceedings. The Bank then incurs all costs associated with
repossession and foreclosure.

LIQUITY AND CAPITAL RESOURCES

         The objective of HPCI's liquidity management is to ensure the
availability of sufficient cash flows to meet all of its financial commitments
and to capitalize on opportunities for business expansion. In managing
liquidity, management takes into account various legal limitations placed on a
REIT.
         HPCI's principal liquidity needs are to pay operating expenses and
dividends and acquire additional participation interests as the underlying loans
in its portfolio paydown or mature.


                                                                              17
<PAGE>


Operating expenses and dividends are expected to be funded through cash
generated by operations, while the acquisition of additional participation
interests in loans is intended to be funded with the proceeds obtained from
repayment of principal balances by individual borrowers. HPCI intends to pay
dividends on its preferred stock and common stock in amounts necessary to
continue to preserve its status as a REIT under the Internal Revenue Code.
         In October 2001, HPCI issued to Holdings 2,000,000 shares
of Class C preferred securities and 14,000,000 shares of Class D preferred
securities in exchange for the fair market value of the participation interests
and leasehold improvements, which were $400 million. These participation
interests were in commercial loans, including commercial real estate loans, and
consumer loans. The underlying consumer loans included a combination of
automobile, truck, and equipment loans. HPCI intends to hold these participation
interests as long term investments. Approximately 24% of these participation
interests were non-performing in nature. The company transferred the leasehold
improvements to HPCLI in exchange for its common shares.
         Holdings subsequently sold all of the Class C preferred securities in
an underwritten public offering. HPCI did not receive any of Holdings' proceeds
from the sale.
         To the extent that the board of directors determines that additional
funding is required, management may raise such funds through additional equity
offerings, debt financings, or retention of cash flow, or a combination of these
methods. However, any cash flow retention must be consistent with the provisions
of the Internal Revenue Code requiring the distribution by a REIT of at least
90% of its REIT taxable income, excluding capital gains, and must take into
account taxes that would be imposed on undistributed income. Management does not
anticipate that additional funding will be required for at least the next twelve
months.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Asset and liability management is concerned with the timing and
magnitude of the repricing of assets and liabilities. It is management's
objective to attempt to control risks associated with interest rate movements.
Market risk is the risk of loss from adverse changes in market prices and
interest rates. Market risk arises primarily from interest rate risk inherent in
lending and other related activities. Management actively monitors interest rate
risk exposure including the mix of variable versus fixed rate assets. The
company's asset and liability management strategy is formulated and monitored on
an ongoing basis. HPCI management reviews, among other things, the sensitivity
of assets and liabilities, as applicable, to interest rate changes, the book and
market values of assets and liabilities, unrealized gains and losses, purchase
and sale activity, maturities of investments and anticipated loan participation
pay-offs. HPCI's interest-rate-sensitive assets consisted largely of
participation interests in commercial, consumer, residential mortgage, and
commercial mortgage loans. As HPCI has expanded its loan participation
portfolio, it has acquired a number of participations with underlying loans at
fixed rates. Such loans tend to increase interest rate risk. At September 30,
2001, approximately 40% of the loans underlying the participation portfolio
carried fixed interest rates. At this same date, HPCI did not have any
interest-rate-sensitive liabilities.
         As indicated earlier, HPCI's income consists primarily of interest
income from participation interests. If there is a decline in market interest
rates resulting from downward adjustments in the indices upon which the interest
rates on loans are based, HPCI may experience a reduction in interest income and
a corresponding decrease in funds available for distribution to shareholders. A
decline in interest income can also be realized from prepayments, including
pay-offs, of loans with fixed interest rates, resulting in reinvestment of
proceeds in lower-yielding participation interests. The borrower has the ability
to prepay a loan with or


                                                                              18
<PAGE>


without premium or penalty depending on the provisions found in the underlying
loan agreements. The level of underlying loan prepayments is influenced by
several factors, including the interest rate environment, the real estate market
in particular geographic areas, the timing of transactions, and circumstances
related to individual borrowers and loans.
         Because the movement of interest rates cannot be known in advance,
management uses simulation models to analyze various interest-rate scenarios.
Prepayment assumptions are based on management's experience and estimate of loan
prepayment activity for the loans underlying the participations. Based on the
most recent simulation performed at June 30, 2001 (which does not include the
assets acquired in connection with the sale of the Class C and Class D preferred
securities to Holdings and the distribution of the Florida participation
interests), Huntington's experience, and management's estimates, the results of
the company's sensitivity analysis indicated that 12-month net interest income
would be expected to increase by approximately 3.2% if rates rose 200 basis
points above June 30, 2001 implied forward expectations and would drop an
estimated 3.1%, in the event of a gradual 200 basis point decline from June 30,
2001 implied forward expectations. However, the unprecedented low level of
interest rates might make the sensitivity of net interest income to falling
interest rates less certain than in periods of higher absolute interest rate
levels.


                                                                              19
<PAGE>


PART II.  OTHER INFORMATION

In accordance with the instructions to Part II, the other specified items in
this part have been omitted because they are not applicable or the information
has been previously reported.



Item 6.    Exhibits and Reports on Form 8-K

3(i)     Amended and Restated Articles of Incorporation (previously filed as
         Exhibit 3(a)(ii) to Amendment No. 4 to Registration Statement of Form
         S-11 (File No. 333-61182), filed with the Securities and Exchange
         Commission on October 12, 2001, and incorporated herein by reference.)

3(ii)    Code of Regulations (previously filed as Exhibit 3(b) to the
         Registrant's Registration Statement of Form S-11 (File No. 333-61182),
         filed with the Securities and Exchange Commission on May 17, 2001, and
         incorporated herein by reference.)

4        Specimen of certificate representing Class C preferred securities,
         previously filed as Exhibit 4 to the Registrant's Amendment No. 1 to
         Registration Statement of Form S-11 (File No. 333-61182), filed with
         the Securities and Exchange Commission on May 31, 2001, and
         incorporated herein by reference.


                                                                              20
<PAGE>


                                   SIGNATURES
                                   ----------




Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                       Huntington Preferred Capital, Inc.
                       ----------------------------------
                                  (Registrant)




Date:    November 30, 2001                  /s/ Michael J. McMennamin
                                            ---------------------------
                                            Michael J. McMennamin
                                            President
                                            (Principal Executive Officer)



Date:    November 30, 2001                  /s/ Paul V. Sebert
                                            ---------------------------
                                            Paul V. Sebert
                                            Vice President and Treasurer
                                            (Principal Financial Officer)



                                                                              21