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**Huntington Bancshares Incorporated****Condensed Consolidated Statements of Income***(Unaudited)*                   Three Months Ended  Six Months Ended   June 30,  June 30, *(in thousands, except per share amounts)* **2009**  2008  **2009**  2008 Interest and fee income                Loans and leases                Taxable **$****491,082**  $604,746  **$****988,670**  $1,263,216 Tax-exempt  **604**   1,775   **1,702**   3,511 Investment securities                Taxable  **60,029**   54,563   **115,490**   108,458 Tax-exempt  **1,343**   7,524   **6,098**   14,878 Other  **9,946**   28,067   **21,001**   60,023              Total interest income  **563,004**   696,675   **1,132,961**   1,450,086                               Interest expenses                Deposits  **176,081**   227,765   **363,650**   502,648 Short-term borrowings  **580**   11,785   **1,261**   30,941 Federal Home Loan Bank advances  **2,714**   25,925   **8,948**   59,645 Subordinated notes and other long-term debt  **33,730**   41,334   **71,698**   90,162              Total interest expense  **213,105**   306,809   **445,557**   683,396              Net interest income  **349,899**   389,866   **687,404**   766,690 Provision for credit losses  **413,707**   120,813   **705,544**   209,463              **Net interest (loss) income after provision for credit losses**  **(63,808****)**  269,053   **(18,140****)**  557,227              Service charges on deposit accounts  **75,353**   79,630   **145,231**   152,298 Brokerage and insurance income  **32,052**   35,694   **72,000**   72,254 Trust services  **25,722**   33,089   **50,532**   67,217 Electronic banking  **24,479**   23,242   **46,961**   43,983 Bank owned life insurance income  **14,266**   14,131   **27,178**   27,881 Automobile operating lease income  **13,116**   9,357   **26,344**   15,189 Mortgage banking income (loss)  **30,827**   12,502   **66,245**   5,439 Net (losses) gains on sales of investment securities  **12,246**   2,073   **18,235**   6,606 Impairment losses on investment securities:                Impairment losses on investment securities  **(88,114****)**  —   **(92,036****)**  (3,104)Noncredit-related losses on securities not expectedto be sold (recognized in other comprehensive income)  **68,528**   —   **68,528**   —              Net impairment losses on investment securities  **(19,586****)**  **—**   **(23,508****)**  (3,104)Other income  **57,470**   26,712   **75,829**   84,419              **Total non-interest income**  **265,945**   236,430   **505,047**   472,182              Personnel costs  **171,735**   199,991   **347,667**   401,934 Outside data processing and other services  **39,266**   30,186   **71,698**   64,547 Net occupancy  **24,430**   26,971   **53,618**   60,214 Equipment  **21,286**   25,740   **41,696**   49,534 Amortization of intangibles  **17,117**   19,327   **34,252**   38,244 Professional services  **18,789**   13,752   **37,042**   22,842 Marketing  **7,491**   7,339   **15,716**   16,258 Automobile operating lease expense  **11,400**   7,200   **22,331**   11,706 Telecommunications  **6,088**   6,864   **11,978**   13,109 Printing and supplies  **4,151**   4,757   **7,723**   10,379 Goodwill impairment  **4,231**   —   **2,606,944**   — Other expense  **13,998**   35,676   **59,086**   59,517              **Total non-interest expense**  **339,982**   377,803   **3,309,751**   748,284              (Loss) income before income taxes  **(137,845****)**  127,680   **(2,822,844****)**  281,125 (Benefit) provision for income taxes  **(12,750****)**  26,328   **(264,542****)**  52,705              **Net (loss) income** **$****(125,095****)** $101,352  **$****(2,558,302****)** $228,420                               Dividends declared on preferred shares  **57,451**   11,151   **116,244**   11,151                               Net (loss) income applicable to common shares **$****(182,546****)** $90,201  **$****(2,674,546****)** $217,269                               Average common shares — basic  **459,246**   366,206   **413,083**   366,221 Average common shares — diluted  **459,246**   367,234   **413,083**   387,322                  **Per common share**                Net (loss) income — basic **$****(0.40****)** $0.25  **$****(6.47****)** $0.59 Net (loss) income — diluted  **(0.40****)**  0.25   **(6.47****)**  0.59 Cash dividends declared  **0.0100**   0.1325   **0.0200**   0.3975 *See notes to unaudited condensed consolidated financial statements*.
 
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**Huntington Bancshares Incorporated****Condensed Consolidated Statements of Changes in Shareholders’ Equity***(Unaudited)*                                                                                       Accumulated         Preferred Stock                      Other         Series B  Series A  Common Stock  Capital  Treasury Stock  Comprehensive  Retained    *(in thousands)* Shares  Amount  Shares  Amount  Shares  Amount  Surplus  Shares  Amount  Loss  Earnings  Total  Six Months Ended June 30, 2008:                                                Balance, beginning of period  —  $—   —  $—   367,001  $3,670  $5,237,783   (739) $(14,391) $(49,611) $771,689  $5,949,140 Cumulative effect of change in accounting principlefor fair value of assets and libilities, net of tax of ($803)                                          1,491   1,491 Cumulative effect of changing measurement dateprovisions for pension and post-retirement assetsand obligations, net of tax of $4,324                                      (3,834)  (4,195)  (8,029)Cumulative effect of change in accountingprinciple for noncontrolling interests                                          1,950   1,950                                      Balance, beginning of period — as adjusted  —   —   —   —   367,001   3,670   5,237,783   (739)  (14,391)  (53,445)  770,935   5,944,552                                                  Comprehensive Income:                                                Net income                                          228,420   228,420 Unrealized net losses on investment securitiesarising during the period, net of reclassificationfor net realized gains, net of tax of $74,479                                      (136,296)      (136,296)Unrealized losses on cash flow hedging derivatives,net of tax of $29,668                                      (55,097)      (55,097)Amortization included in net periodic benefit costs:                                                Net actuarial loss, net of tax of ($562)                                      1,043       1,043 Prior service costs, net of tax of ($169)                                      313       313 Transition obligation, net of tax of ($194)                                      360       360                                                 Total comprehensive income                                              38,743                                                 Issuance of preferred stock          569   569,000           (18,151)                  550,849 Cash dividends declared:                                                Common ($0.3975 per share)                                          (145,485)  (145,485)Preferred Series A ($19.597 per share)                                          (11,151)  (11,151)Recognition of the fair value ofshare-based compensation                          7,194                   7,194 Other share-based compensation activity                  19   —   (279)              (154)  (433)Other                          (221)  (84)  (833)      (2)  (1,056)                                                                                      Balance, end of period  —  $—   569  $569,000   367,020  $3,670  $5,226,326   (823) $(15,224) $(243,122) $842,563  $6,383,213                                                                                       **Six Months Ended June 30, 2009:**                                                **Balance, beginning of period**  **1,398**  **$****1,308,667**   **569**  **$****569,000**   **366,972**  **$****3,670**  **$****5,322,428**   **(915****)** **$****(15,530****)** **$****(326,693****)** **$****365,599**  **$****7,227,141** **Cumulative effect of change in accountingprinciple for noncontrolling interests**                                          **1,765**   **1,765**                                      **Balance, beginning of period — as adjusted**  **1,398**   **1,308,667**   **569**   **569,000**   **366,972**   **3,670**   **5,322,428**   **(915****)**  **(15,530****)**  **(326,693****)**  **367,364**   **7,228,906**                                                  **Comprehensive Income:**                                                **Net loss**                                          **(2,558,302****)**  **(2,558,302****)****Cumulative effect of change in accountingprinciple for other-than-temporarilyimpaired debt securities, net of tax of $1,907**                                      **(3,541****)**  **3,541**   **—** **Non-credit-related impairment losses on debtsecurities not expected to be sold, net of tax of$23,985**                                      **(44,543****)**      **(44,543****)****Unrealized net gains on investment securitiesarising during the period, net of reclassificationfor net realized gains, net of tax of ($69,827)**                                      **128,716**       **128,716** **Unrealized losses on cash flow hedging derivatives,net of tax of $16,380**                                      **(30,419****)**      **(30,419****)****Amortization included in net periodic benefit costs:**                                                **Net actuarial loss, net of tax of ($1,221)**                                      **2,267**       **2,267** **Prior service costs, net of tax of ($177)**                                      **328**       **328** **Transition obligation, net of tax of ($194)**                                      **360**       **360**                                                 **Total comprehensive loss**                                              **(2,501,593****)**                                                **Issuance of common stock**                  **161,549**   **1,614**   **550,850**                   **552,464** **Conversion of Preferred Series A stock**          **(206****)**  **(206,493****)**  **41,072**   **411**   **262,117**               **(56,035****)**  **—** **Amortization of discount**      **7,887**                                   **(7,887****)**  **—** **Cash dividends declared:**                                                **Common ($0.02 per share)**                                          **(9,167****)**  **(9,167****)****Preferred Series B ($25.00 per share)**                                          **(34,952****)**  **(34,952****)****Preferred Series A ($42.50 per share)**                                          **(17,370****)**  **(17,370****)****Recognition of the fair value ofshare-based compensation**                          **2,640**                   **2,640** **Other share-based compensation activity**                  **54**   **1**   **35**               **(108****)**  **(72****)****Other**      **300**                   **(3,480****)**  **10**   **3,307**       **(461****)**  **(334****)**                                                                                      **Balance, end of period**  **1,398**  **$****1,316,854**   **363**   **362,507**   **569,647**  **$****5,696**  **$****6,134,590**   **(905****)** **$****(12,223****)** **$****(273,525****)** **$****(2,313,377****)** **$****5,220,522**                                      *See notes to unaudited condensed consolidated financial statements.*
 
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**Huntington Bancshares Incorporated****Condensed Consolidated Statements of Cash Flows*****(Unaudited)***           **Six Months Ended**   **June 30,** *(in thousands)* **2009**  **2008**  **Operating activities**        Net (loss) income **$****(2,558,302****)** $228,420 Adjustments to reconcile net (loss) income to net cash providedby operating activities:        Impairment of goodwill  **2,606,944**   — Provision for credit losses  **705,544**   209,463 Depreciation and amortization  **105,608**   119,243 Change in current and deferred income taxes  **(153,958****)**  (7,176)Net sales (purchases) of trading account securities  **843,849**   (263,494)Originations of loans held for sale  **(3,036,331****)**  (1,835,956)Principal payments on and proceeds from loans held for sale  **2,830,066**   1,911,111 Other, net  **205,147**   (81,667)       **Net cash provided by operating activities**  **1,548,567**   279,944                 **Investing activities**        Increase in interest bearing deposits in banks  **(232,753****)**  (10,743)Proceeds from:        Maturities and calls of investment securities  **293,663**   242,465 Sales of investment securities  **1,614,172**   341,988 Purchases of investment securities  **(3,068,943****)**  (1,087,439)Net proceeds from sales of loans  **949,398**   471,362 Net loan and lease activity, excluding sales  **722,076**   (1,569,943)Purchases of operating lease assets  **(119****)**  (149,963)Proceeds from sale of operating lease assets  **4,599**   15,791 Purchases of premises and equipment  **(21,096****)**  (31,122)Proceeds from sales of other real estate  **21,312**   28,084 Other, net  **2,700**   11,377        **Net cash provided by (used for) investing activities**  **285,009**   (1,738,143)                **Financing activities**        Increase in deposits  **1,232,510**   378,758 Decrease in short-term borrowings  **(549,727****)**  (513,090)Maturity/redemption of subordinated notes  **(136,942****)**  (50,000)Proceeds from Federal Home Loan Bank advances  **201,083**   953,894 Maturity/redemption of Federal Home Loan Bank advances  **(1,863,345****)**  (979,539)Proceeds from issuance of long-term debt  **598,200**   887,111 Maturity/redemption of long-term debt  **(514,989****)**  (236,824)Dividends paid on preferred stock  **(56,905****)**  — Dividends paid on common stock  **(43,780****)**  (183,621)Net proceeds from issuance of preferred stock  **—**   550,849 Net proceeds from issuance of common stock  **548,327**   — Other, net  **(72****)**  (433)       **Net cash (used for) provided by financing activities**  **(585,640****)**  807,105        **Increase in cash and cash equivalents**  **1,247,936**   (651,094)       **Cash and cash equivalents at beginning of period**  **844,668**   2,009,246        **Cash and cash equivalents at end of period** **$****2,092,604**  $1,358,152                 Supplemental disclosures:        Income taxes refunded **$****110,584**  $59,881 Interest paid  **485,439**   702,140 Non-cash activities        Common stock dividends accrued, paid in subsequent quarter  **5,062**   38,626 Preferred stock dividends accrued, paid in subsequent quarter  **16,635**   11,151 *See notes to unaudited condensed consolidated financial statements.*
 
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**Notes to Unaudited Condensed Consolidated Financial Statements****Note 1 – Basis of Presentation**The accompanying unaudited condensed consolidated financial statements of HuntingtonBancshares Incorporated (Huntington or the Company) reflect all adjustments consisting of normalrecurring accruals, which are, in the opinion of Management, necessary for a fair presentation ofthe consolidated financial position, the results of operations, and cash flows for the periodspresented. These unaudited condensed consolidated financial statements have been preparedaccording to the rules and regulations of the Securities and Exchange Commission (SEC) and,therefore, certain information and footnote disclosures normally included in financial statementsprepared in accordance with accounting principles generally accepted in the United States (GAAP)have been omitted. The Notes to Consolidated Financial Statements appearing in Huntington’s 2008Annual Report on Form 10-K (2008 Form 10-K), which include descriptions of significant accountingpolicies, as updated by the information contained in this report, should be read in conjunctionwith these interim financial statements.Certain amounts in the prior-period financial statements have been reclassified to conform tothe current period presentation.For statement of cash flows purposes, cash and cash equivalents are defined as the sum of“Cash and due from banks” and “Federal funds sold and securities purchased under resaleagreements.”**Note 2 – New Accounting Pronouncements****FASB Statement No. 141 (Revised 2008),*****Business Combinations (Statement No. 141R)***– Statement No.141R was issued in December 2007. The revised statement requires an acquirer to recognize theassets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at theacquisition date, measured at their fair values as of that date, with limited exceptions specifiedin the Statement. Statement No. 141R required prospective application for business combinationsconsummated in fiscal years beginning on or after December 15, 2008. The Franklin restructuringtransaction described in Note 3 was accounted for under this standard.**FASB Statement No. 160,*****Noncontrolling Interests in Consolidated Financial Statement*****s –*****anamendment of ARB No. 51 (Statement No. 160)***– Statement No. 160 was issued in December 2007. TheStatement requires that noncontrolling interests in subsidiaries be initially measured at fairvalue and classified as a separate component of equity. The Statement is effective for fiscal yearsbeginning on or after December 15, 2008. The adoption of this new Statement did not have a materialimpact on Huntington’s condensed consolidated financial statements.**FASB Statement No. 163,*****Accounting for Financial Guarantee Insurance Contracts*****–*****an interpretationof FASB Statement No. 60 (Statement No. 163)***– Statement No. 163 requires that an insuranceenterprise recognize a claim liability prior to an event of default (insured event) when there isevidence that credit deterioration has occurred in an insured financial obligation. This Statementalso clarifies how Statement No. 60 applies to financial guarantee insurance contracts, includingthe recognition and measurement to be used to account for premium revenue and claim liabilities.This Statement requires expanded disclosures about financial guarantee insurance contracts. ThisStatement is effective for financial statements issued for fiscal years and interim periodsbeginning after December 15, 2008. The adoption of this Statement did not have a material impacton the Huntington’s condensed consolidated financial statements.**FASB Staff Position (FSP) FAS 157-4,*****Determining Fair Value When the Volume and Level of Activityfor the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are NotOrderly (FSP FAS 157-4)***. FSP FAS 157-4 was issued in April 2009. The FSP reaffirms the exit pricefair value measurement guidance in Statement No. 157 and also provides additional guidance forestimating fair value in accordance with Statement No. 157 when the volume and level of activityfor the asset or liability have significantly decreased. This FSP is effective for interimreporting periods ending after June 15, 2009. The adoption of this Statement did not have amaterial impact on the Huntington’s condensed consolidated financial statements.
 
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**FSP FAS 115-2 and FAS 124-2,*****Recognition and Presentation of Other-Than-Temporary Impairments (FSPFAS 115-2 and FAS 124-2)*****.**FSP FAS 115-2 and FAS 124-2 was issued in April 2009. This FSP amendsthe other-than-temporary impairment (OTTI) guidance in GAAP for debt securities and includesadditional presentation and disclosure requirements for both debt and equity securities. This FSPis effective for interim reporting periods ending after June 15, 2009. The adoption of FSP FAS115-2 and FAS 124-2 requires an adjustment to retained earnings and other comprehensive income(OCI) in the period of adoption to reclassify non-credit related impairment to OCI for securitiesthat the Company does not intend to sell (and will not more likely than not be required to sell).The adoption of this Statement resulted in the reclassification of $3.5 million (net of tax) fromretained earnings to OCI. (See Condensed Consolidated Statements of Shareholders’ Equity and Note7).**FSP FAS 107-1 and APB 28-1,*****Interim Disclosures about Fair Value of Financial Instruments (FSP FAS107-1 and APB 28-1)****.*FSP FAS 107-1 and APB 28-1 was issued in April 2009. The FSP requiresdisclosures about fair value of financial instruments for interim reporting periods of publiclytraded companies as well as in annual financial statements. This FSP was effective for interimreporting periods ending after June 15, 2009 (See Note 11).**FSP FAS 132R-1,*****Employers’ Disclosures about Postretirement Benefit Plan Assets (FSP FAS 132R-1.)***FSP FAS 132R-1 was issued in December 2008. This FSP requires additional disclosures about planassets in an employer’s defined benefit pension and other postretirement plans. This FSP iseffective for fiscal years ending after December 15, 2009.**FASB Statement No. 165,*****Subsequent Events (Statement No. 165)***– Statement No. 165 establishesgeneral standards of accounting for and disclosure of subsequent events. Subsequent events areevents that occur after the balance sheet date but before financial statements are issued or areavailable to be issued. The Statement is effective for interim or annual periods ending after June15, 2009. The impact of this new Statement was not material to Huntington’s consolidated financialstatements. Huntington has evaluated its subsequent events through August 10, 2009.**FASB Statement No. 166,*****Accounting for Transfers of Financial Assets – an amendment of FASBStatement No. 140 (Statement No. 166)***– Statement 140 is the primary source of accounting guidancefor transfers of financial assets and securitization transactions. Statement No. 166 removes theconcept of a qualifying special purpose entity from Statement 140 and removes the exception fromapplying FASB Interpretation No. 46 (revised December 2003), *Consolidation of Variable InterestEntities,*to qualifying special-purpose entities. Many types of transferred financial assets thatwould have been derecognized previously are no longer eligible for derecognition. This Statementis effective for financial statements issued for fiscal years and interim periods beginning afterNovember 15, 2009, and early adoption is prohibited. The amendments apply prospectively totransfers of financial assets occurring on or after the effective date. Management is currentlyevaluating the impact that the Statement could have on the Company’s consolidated financialstatements.**FASB Statement No. 167,*****Amendments to FASB Interpretation No. 46R (Statement No. 167)***– StatementNo. 167 amends the consolidation guidance applicable for variable interest entities (VIE).Huntington will need to reconsider its previous Interpretation 46R conclusions including whether anentity is a VIE, and whether Huntington is the VIE’s primary beneficiary. It is possible thatapplication of this revised guidance will change Huntington’s assessment of which entities withwhich it is involved are VIEs and consolidation will be required. This Statement is effective forfinancial statements issued for fiscal years and interim periods beginning after November 15, 2009,and early adoption is prohibited. Management is currently evaluating the impact that the Statementcould have on the Company’s consolidated financial statements. However, based upon the currentregulatory requirements, Huntington anticipates the impact of adopting will decrease risk weightedcapital ratios between five and ten basis points.**FASB Statement No. 168,*****The FASB Accounting Standards Codification and the Hierarchy of GenerallyAccepted Accounting Principles****–****a replacement of FASB Statement No. 162***– Statement No. 168replaces the guidance in FASB Statement No. 162, *The Hierarchy of Generally Accepted AccountingPrinciples (Statement No. 162)*, and identifies the FASB Accounting Standards Codification(Codification) as the single source of authoritative U.S. Generally Accepted Accounting Principles(GAAP) recognized by the FASB to be applied by nongovernmental entities. The Codificationreorganizes all previous GAAP pronouncements into roughly 90 accounting topics and displays alltopics using a consistent structure. All existing standards that were used to create theCodification will be superseded, replacing the previous references to specific Statements ofFinancial Accounting Standards (SFAS) with numbers used in the Codification’s structuralorganization. Statement No. 168 is effective for interim and annual periods ending after September15, 2009. After September 15, only one level of authoritative GAAP will exist, other than guidanceissued bythe Securities and Exchange Commission (SEC). All other accounting literature excluded from theCodification will be considered non-authoritative. The adoption of the Codification does not havea material impact on the Company’s condensed consolidated financial statements.
 
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**Note 3 – Loans and Leases*****Franklin Credit Management relationship***Franklin Credit Management Corporation (Franklin) is a specialty consumer finance companyprimarily engaged in servicing residential mortgage loans. Prior to March 31, 2009, Franklin owneda portfolio of loans secured by first and second liens on 1-4 family residential properties. AtDecember 31, 2008, Huntington’s total loans outstanding to Franklin were $650.2 million, all ofwhich were on nonaccrual status. Additionally, the specific ALLL for the Franklin portfolio was$130.0 million, resulting in a net exposure to Franklin at December 31, 2008 of $520.2 million.On March 31, 2009, Huntington entered into a transaction with Franklin whereby a Huntingtonwholly-owned REIT subsidiary (REIT) exchanged a non controlling amount of certain equity interestsfor a 100% interest in Franklin Asset Merger Sub, LLC (Merger Sub), a wholly owned subsidiary ofFranklin. This was accomplished by merging Merger Sub into a wholly-owned subsidiary of REIT.Merger Sub’s sole assets were two trust participation certificates evidencing 84% ownership rightsin a trust (New Trust) which holds all the underlying consumer loans and OREO that were formerlycollateral for the Franklin commercial loans. The equity interests provided to Franklin by REITwere pledged by Franklin as collateral for the Franklin commercial loans.New Trust is a variable interest entity under FASB Interpretation No 46R, *Consolidation ofVariable Interest Entities (revised December 2003) — an interpretation of ARB No. 51*(FIN 46R),and, as a result of Huntington’s 84% participation certificates, New Trust was consolidated intoHuntington’s financial results. As required by FIN 46R, the consolidation is treated as a businesscombination under Statement No. 141R with the fair value of the equity interests issued to Franklinrepresenting the acquisition price. AICPA Statement of Position 03-3, *Accounting for Certain Loansor Debt Securities Acquired in a Transfer (SOP 03-3)*, provides guidance for accounting for acquiredloans, such as these, that have experienced a deterioration of credit quality at the time ofacquisition for which it is probable that the investor will be unable to collect all contractuallyrequired payments.Under SOP 03-3, the excess of cash flows expected at acquisition over the estimated fair valueis referred to as the accretable discount and is recognized in interest income over the remaininglife of the loan, or pool of loans, in situations where there is a reasonable expectation about thetiming and amount of cash flows expected to be collected. The difference between the contractuallyrequired payments at acquisition and the cash flows expected to be collected at acquisition,considering the impact of prepayments, is referred to as the nonaccretable discount. Subsequentdecreases to the expected cash flows will generally result in a charge to the provision for creditlosses and an increase to the allowance for loan and lease losses. Subsequent increases in cashflows result in reversal of any nonaccretable discount (or allowance for loan and lease losses tothe extent any has been recorded) with a positive impact on interest income. The measurement ofundiscounted cash flows involves assumptions and judgments for credit risk, interest rate risk,prepayment risk, default rates, loss severity, payment speeds, and collateral values. All of thesefactors are inherently subjective and significant changes in the cash flow estimates over the lifeof the loan can result.At June 30, 2009, there were no additional credit losses recorded on the portfolio and noadjustment to the accretable yield or nonaccretable yield was required.The following table reflects the contractually required payments receivable, cash flowsexpected to be collected, and fair value of the loans at the acquisition date:             *(in thousands)* Loans  OREO  Total Contractually required payments including interest $1,612,695  $113,732  $1,726,427 Less: nonaccretable difference  (1,079,362)  (34,136)  (1,113,498)          Cash flows expected to be collected  533,333   79,596   612,929 Less: accretable yield  (39,781)  —   (39,781)          Fair value of loans acquired $493,552  $79,596  $573,148           
 
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The fair values of the acquired mortgage loans and OREO assets were based upon a marketparticipant model and calculated in accordance with FASB Statement No. 157, *Fair Value Measurements*(Statement No. 157). Under this market participant model, expected cash flows for first-lienmortgages were calculated based upon the net expected foreclosure proceeds of the collateralunderlying each mortgage loan. Updated appraisals or other indicators of value provided the basisfor estimating cash flows. Sales proceeds from the underlying collateral were estimated to bereceived over a one to three year period, depending on the delinquency status of the loan.Expected proceeds were reduced assuming housing price depreciation of 18%, 12%, and 0% over eachyear of the next three years of expected collections, respectively. Interest cash flows wereestimated to be received for a limited time on each portfolio. The resulting cash flows werediscounted at an 18% rate of return. Limited value was assigned to all second-lien mortgagesbecause, after considering the house price depreciation rates above, little if any proceeds wouldbe realized.The following table presents a rollforward of the accretable yield from the beginning of theperiod to the end of the period:       Accretable *(in thousands)* Yield Balance at December 31, 2008 $— Impact of Franklin transaction on March 31, 2009  39,781 Additions  — Accretion  (750)Reclassification from (to) nonaccretable difference  —     Balance at June 30, 2009 $39,031     The following table reflects the outstanding balance of all contractually requiredpayments and carrying amounts of the acquired loans accounted for under SOP 03-3 at June 30, 2009:           June 30, 2009 *(in thousands)* Carrying Value  Outstanding Balance Residential mortgage **$****415,029**  $740,850 Home equity  **56,944**   829,994        Total **$****471,973**  $1,570,844        At June 30, 2009, $127.4 million of the acquired current mortgage loans accrue interest while$344.6 million were on nonaccrual. Management has concluded that it cannot reliably estimate thetiming of collection of cash flows for delinquent first and second lien mortgages, because themajority of the expected cash flows for the delinquent portfolio will result from the foreclosureand subsequent disposition of the underlying collateral supporting the loans.The consolidation of New Trust at March 31, 2009 resulted in the recording of a $95.8 millionliability, representing the 16% of New Trust certificates not acquired by Huntington. Thesecertificates were retained by Franklin.In accordance with Statement No. 141R, at March 31, 2009 Huntington has recorded a netdeferred tax asset of $159.9 million related to the difference between the tax basis and the bookbasis in the acquired assets. Because the acquisition price, represented by the equity interests inthe Huntington wholly-owned subsidiary, was equal to the fair value of the 84% interest in the NewTrust participant certificate, no goodwill was created from the transaction. The recording of thenet deferred tax asset was a bargain purchase under Statement No. 141R, and was recorded as taxbenefit in the current period.
 
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**Single Family Home Builders**At June 30, 2009, December 31, 2008, and June 30, 2008, Huntington had $1.2 billion, $1.6billion and $1.6 billion of commercial real estate loans to single family homebuilders, includingloans made to both middle market and small business homebuilders. The decline from December 31,2008 was primarily the result of a reclassification of loans from commercial real estate tocommercial and industrial. Such loans represented 3%, 4%, and 4% of total loans and leases at June30, 2009, December 31, 2008, and June 30, 2008 respectively. Of this portfolio at June 30, 2009,69% were to finance projects currently under construction, 16% to finance land under development,and 15% to finance land held for development.The housing market across Huntington’s geographic footprint remained stressed, reflectingrelatively lower sales activity, declining prices, and excess inventories of houses to be sold,particularly impacting borrowers in our eastern Michigan and northern Ohio regions. Further, aportion of the loans extended to borrowers located within Huntington’s geographic regions was tofinance projects outside of our geographic regions.**Retail properties**Huntington’s portfolio of commercial real estate loans secured by retail properties totaled$2.3 billion, $2.3 billion and $2.1 billion at June 30, 2009, December 31, 2008 and June 30, 2008or approximately 6%, 6% and 5%of total loans and leases, at each respective date. Credit approvalin this loan segment is generally dependant on pre-leasing requirements, and net operating incomefrom the project must cover interest expense when the loan is fully funded.The weakness of the economic environment in the Company’s geographic regions significantlyimpacted the projects that secure the loans in this portfolio segment. Increased unemploymentlevels compared with recent years, and the expectation that these levels will continue to increasefor the foreseeable future, are expected to adversely affect our borrowers’ ability to repay theseloans.**Home Equity and Residential Mortgage Loans (excluding loans in New Trust)**There is a potential for loan products to contain contractual terms that give rise to aconcentration of credit risk that may increase a lending institution’s exposure to risk ofnonpayment or realization. Examples of these contractual terms include loans that permit negativeamortization, a loan-to-value of greater than 100%, and option adjustable-rate mortgages.Huntington does not offer mortgage loan products that contain these terms. Recent declines inhousing prices have likely eliminated a portion of the collateral for the home equity portfolio,such that some loans originally underwritten at a LTV of less than 100% are currently at higherthan 100%. Home equity loans totaled $7.6 billion at June 30, 2009, $7.6 billion at December 31,2008, and $7.4 billion at June 30, 2008, or 20%, 18%, and 18% of total loans at the end of eachrespective period.As part of the Company’s loss mitigation process, Huntington increased its efforts in 2008 and2009 to re-underwrite, modify, or restructure loans when borrowers are experiencing paymentdifficulties, and these loan restructurings are based on the borrower’s ability to repay the loan.
 
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**Note 4 – Investment Securities**Listed below are the contractual maturities (under 1 year, 1-5 years, 6-10 years, and over 10years) of investment securities at June 30, 2009, December 31, 2008, and June 30, 2008:                           **June 30, 2009**  December 31, 2008  June 30, 2008   **Amortized**      Amortized      Amortized    *(in thousands of dollars)* **Cost**  **Fair Value**  Cost  Fair Value  Cost  Fair Value **U.S. Treasury**                        Under 1 year **$****50,480**  **$****50,497**  $11,141  $11,157  $349  $355 1-5 years  **—**   **—**   —   —   —   — 6-10 years  **—**   **—**   —   —   —   — Over 10 years  **—**   **—**   —   —   —   —                    **Total U.S. Treasury**  **50,480**   **50,497**   11,141   11,157   349   355                    **Federal agencies**                        Mortgage backed securities                        Under 1 year  **—**   **—**   —   —   600   604 1-5 years  **—**   **—**   —   —   13,948   14,096 6-10 years  **1**   **1**   1   1   9,812   9,784 Over 10 years  **1,845,469**   **1,870,855**   1,625,655   1,627,580   1,907,774   1,906,654                    **Total mortgage-backed Federal agencies**  **1,845,470**   **1,870,856**   1,625,656   1,627,581   1,932,134   1,931,138                    Temporary Liquidity Guarantee Program (TLGP) securities                        Under 1 year  **—**   **—**   —   —   —   — 1-5 years  **319,737**   **320,021**   —   —   —   — 6-10 years  **—**   **—**   —   —   —   — Over 10 years  **—**   **—**   —   —   —   —                    **Total TLGP securities**  **319,737**   **320,021**   —   —   —   —                    Other agencies                        Under 1 year  **2,206**   **2,271**   —   —   —   — 1-5 years  **1,965,647**   **1,979,813**   579,546   595,912   352,425   348,964 6-10 years  **7,018**   **7,189**   7,954   8,328   —   — Over 10 years  **—**   **—**   —   —   —   —                    **Total other Federal agencies**  **1,974,871**   **1,989,273**   587,500   604,240   352,425   348,964                    **Total U.S. government backedsecurities**  **4,190,558**   **4,230,647**   2,224,297   2,242,978   2,284,908   2,280,457                    Municipal securities                        Under 1 year  **—**   **—**   —   —   16   16 1-5 years  **1,165**   **1,191**   51,890   54,184   18,903   19,187 6-10 years  **53,148**   **56,223**   216,433   222,086   219,369   218,709 Over 10 years  **65,254**   **67,106**   441,825   434,076   475,112   470,457                    **Total municipal securities**  **119,567**   **124,520**   710,148   710,346   713,400   708,369                    Private label CMO                        Under 1 year  **—**   **—**   —   —   —   — 1-5 years  **—**   **—**   —   —   —   — 6-10 years  **—**   **—**   —   —   —   — Over 10 years  **603,099**   **510,503**   674,506   523,515   725,896   686,122                    **Total private label CMO**  **603,099**   **510,503**   674,506   523,515   725,896   686,122                    Asset backed securities                        Under 1 year  **—**   **—**   —   —   —   — 1-5 years  **—**   **—**   —   —   —   — 6-10 years  **132,205**   **134,270**   —   —   —   — Over 10 years  **554,032**   **402,928**   652,881   464,027   847,443   673,739                    **Total asset backed securities**  **686,237**   **537,198**   652,881   464,027   847,443   673,739                    Other                        Under 1 year  **2,350**   **2,350**   549   552   1,700   1,703 1-5 years  **4,451**   **4,513**   6,546   6,563   6,200   6,145 6-10 years  **50,038**   **50,336**   798   811   698   686 Over 10 years  **63**   **137**   64   136   164   214 Non-marketable equity securities  **427,772**   **427,772**   427,973   427,973   424,271   424,271 Marketable equity securities  **47,369**   **46,728**   8,061   7,556   9,860   6,569                    **Total other**  **532,043**   **531,836**   443,991   443,591   442,893   439,588                    **Total investment securities** **$****6,131,504**  **$****5,934,704**  $4,705,823  $4,384,457  $5,014,540  $4,788,275                    
 
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Other securities include $240.6 million of stock issued by the Federal Home Loan Bank ofCincinnati, $45.7 million of stock issued by the Federal Home Loan Bank of Indianapolis, and $141.5million of Federal Reserve Bank stock. Other securities also include corporate debt and marketableequity securities. Huntington does not have any material equity positions in Federal NationalMortgage Association (FNMA or Fannie Mae) and the Federal Home Loan Mortgage Corporation (FHLMC orFreddie Mac).The following table provides gross unrealized gains and losses recognized in accumulated othercomprehensive income by investment category at June 30, 2009 and December 31, 2008.                       **Unrealized**      **Amortized**  **Gross**  **Gross**  **Fair** ***(in thousands)*** **Cost**  **Gains**  **Losses**  **Value** **June 30, 2009**                U.S. Treasury $50,480  $17  $—  $50,497 Federal Agencies                Mortgage-backed securities  1,845,470   34,269   (8,883)  1,870,856 TLGP securities  319,737   1,084   (800)  320,021 Other agencies  1,974,871   15,666   (1,264)  1,989,273              Total Federal agencies andU.S. Government backed securities  4,190,558   51,036   (10,947)  4,230,647 Municipal securities  119,567   5,442   (489)  124,520 Private label CMO  603,099   —   (92,596)  510,503 Asset backed securities  686,237   16,195   (165,234)  537,198 Other securities  532,043   442   (649)  531,836              **Total investment securities** **$****6,131,504**  **$****73,115**  **$****(269,915****)** **$****5,934,704**                                     **Unrealized**      **Amortized**  **Gross**  **Gross**  **Fair** ***(in thousands)*** **Cost**  **Gains**  **Losses**  **Value** **December 31, 2008**                U.S. Treasury $11,141  $16  $—  $11,157 Federal Agencies                Mortgage-backed securities  1,625,656   18,822   (16,897)  1,627,581 TLGP securities  —   —   —   — Other agencies  587,500   16,748   (8)  604,240              Total Federal agencies andU.S. Government backed securities  2,224,297   35,586   (16,905)  2,242,978 Municipal securities  710,148   13,897   (13,699)  710,346 Private label CMO  674,506   —   (150,991)  523,515 Asset backed securities  652,881   —   (188,854)  464,027 Other securities  443,991   114   (514)  443,591              **Total investment securities** **$****4,705,823**  **$****49,597**  **$****(370,963****)** **$****4,384,457**              
 
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The following table provides detail on investment securities with unrealized losses aggregatedby investment category and length of time the individual securities have been in a continuous lossposition, at June 30, 2009 and December 31, 2008.                           **Less than 12 Months**  **Over 12 Months**  **Total**   **Fair**  **Unrealized**  **Fair**  **Unrealized**  **Fair**  **Unrealized** (in thousands ) **Value**  **Losses**  **Value**  **Losses**  **Value**  **Losses** **June 30, 2009**                        U.S. Treasury $—  $—  $—  $—  $—  $— Federal agencies                        Mortgage-backed securities  518,356   (8,883)  —   —   518,356   (8,883)TLGP securities  132,758   (800)  —   —   132,758   (800)Other agencies  551,296   (1,218)  6,830   (46)  558,126   (1,264)                   Total Federal agencies andUS Government backed securities  1,202,410   (10,901)  6,830   (46)  1,209,240   (10,947)Municipal securities  8,893   (103)  10,949   (386)  19,842   (489)Private label CMO  17,889   (2,536)  492,599   (90,060)  510,488   (92,596)Asset backed securities  17,561   (99)  217,425   (165,135)  234,986   (165,234)Other securities  38,913   (240)  2,541   (409)  41,454   (649)                   **Total temporarily impairedsecurities** **$****1,285,666**  **$****(13,879****)** **$****730,344**  **$****(256,036****)** **$****2,016,010**  **$****(269,915****)**                                              **Less than 12 Months**  **Over 12 Months**  **Total**   **Fair**  **Unrealized**  **Fair**  **Unrealized**  **Fair**  **Unrealized** (in thousands ) **Value**  **Losses**  **Value**  **Losses**  **Value**  **Losses** **December 31, 2008**                        U.S. Treasury $—  $—  $—  $—  $—  $— Federal agencies                        Mortgage-backed securities  417,988   (16,897)  —   —   417,988   (16,897)TLGP securities  —   —   —   —   —   — Other agencies  —   —   2,028   (8)  2,028   (8)                   Total Federal agencies andUS Government backed securities  417,988   (16,897)  2,028   (8)  420,016   (16,905)Municipal securities  276,990   (6,951)  40,913   (6,748)  317,903   (13,699)Private label CMO  449,494   (130,914)  57,024   (20,077)  506,518   (150,991)Asset backed securities  61,304   (24,220)  164,074   (164,634)  225,378   (188,854)Other securities  1,132   (323)  1,149   (191)  2,281   (514)                   **Total temporarily impairedsecurities** **$****1,206,908**  **$****(179,305****)** **$****265,188**  **$****(191,658****)** **$****1,472,096**  **$****(370,963****)**                   Securities transactions are recognized on the trade date (the date the order to buy or sell isexecuted). The amortized cost of sold securities is used to compute realized gains and losses.Interest and dividends on securities, including amortization of premiums and accretion of discountsusing the effective interest method over the period to maturity, are included in interest income.
 
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The following table is a summary of securities gains and losses for the three and six monthsended June 30, 2009 and 2008:                   Three Months Ended  Six Months Ended   June 30,  June 30, *(in thousands)* **2009**  2008  **2009**  2008 Gross gains on sales of securities **$****15,697**  $2,074  **$****28,491**  $6,607 Gross (losses) on sales of securities  **(3,451****)**  (1)  **(10,256****)**  (1)             **Net gain (loss) on sales of securities**  **12,246**   2,073   **18,235**   6,606 Net other-than-temporary impairment recorded  **(19,586****)**  —   **(23,508****)**  (3,104)             **Total securities gain (loss)** **$****(7,340****)** $2,073  **$****(5,273****)** $3,502              Huntington evaluates its investment securities portfolio on a quarterly basis forother-than-temporary impairment (OTTI). For the 2009 second quarter, Huntington adopted FSP FAS115-2 and FAS 124-2. Huntington assesses whether OTTI has occurred when the fair value of a debtsecurity is less than the amortized cost basis at the balance sheet date. Under thesecircumstances, as required by the new FSP, OTTI is considered to have occurred (1) if Huntingtonintends to sell the security; (2) if it is more likely than not Huntington will be required to sellthe security before recovery of its amortized cost basis; or (3) the present value of the expectedcash flows is not sufficient to recover the entire amortized cost basis.For securities that Huntington does not expect to sell or it is not more likely than not to berequired to sell, credit-related OTTI, represented by the expected loss in principal, is recognizedin earnings, while noncredit-related OTTI is recognized in other comprehensive income (OCI). Forsecurities which Huntington does expect to sell, all OTTI is recognized in earnings.Noncredit-related OTTI results from other factors, including increased liquidity spreads andextension of the security. Presentation of OTTI is made in the income statement on a gross basiswith a reduction for the amount of OTTI recognized in OCI. Noncredit-related OTTI recognized inearnings prior to April 1, 2009 of $3.5 million (net of tax) was reclassified from retainedearnings to accumulated OCI as a cumulative effect adjustment.For the security types discussed below, we applied the criteria of FSP FAS 115-2 and 124-2.Alt-A mortgage-backed and private-label collateralized mortgage obligation (CMO)securities represent securities collateralized by first-lien residential mortgage loans. Thesecurities were priced with the assistance of an outside third-party consultant using a discountedcash flow approach and the independent third-party’s proprietary pricing model. The model usedinputs such as estimated prepayment speeds, losses, recoveries, default rates that were implied bythe underlying performance of collateral in the structure or similar structures, discount ratesthat were implied by market prices for similar securities, collateral structure types, and houseprice depreciation/appreciation rates that were based upon macroeconomic forecasts.Pooled-trust-preferred securities represent collateralized debt obligations (CDOs)backed by a pool of debt securities issued by financial institutions. The collateral generallyconsisted of trust-preferred securities and subordinated debt securities issued by banks, bankholding companies, and insurance companies. A full cash flow analysis was used to estimate fairvalues and assess impairment for each security within this portfolio. We engaged a third partyspecialist with direct industry experience in pooled trust preferred securities valuations toprovide assistance in estimating the fair value and expected cash flows for each security in thisportfolio. Relying on cash flows was necessary because there was a lack of observable transactionsin the market and many of the original sponsors or dealers for these securities were no longer ableto provide a fair value that was compliant with FASB Statement No. 157, *Fair Value Measurements.*
 
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For the three months ended June 30, 2009, the following table summarizes by debt securitytype, total OTTI losses, OTTI losses included in OCI, and OTTI recognized in the income statement.                   **Alt-A**  **Pooled-**  **Private**    *(in thousands)* **Mortgage-backed**  **Trust-Preferred**  **Label CMO**  **Total** Total OTTI losses (unrealized and realized) $(5,980) $(13,479) $(68,655) $(88,114)Unrealized OTTI recognized in OCI  99   12,228   56,201   68,528              **Net impairment losses recognized in earnings** **$****(5,881****)** **$****(1,251****)** **$****(12,454****)** **$****(19,586****)**             The following table displays the cumulative credit component of OTTI recognized in earnings ondebt securities held by Huntington for the three months ended June 30, 2009 is as follows:     *(in thousands)* **Total** **Balance, March 31, 2009** **$****—** Credit component of other-than-temporaryimpairment not reclassified to othercomprehensive income in conjunction with thecumulative effect transition adjustment  25 Additions for the credit component on debtsecurities in which other-than-temporaryimpairment was not previously recognized  19,586     **Balance, June 30, 2009** **$****19,611**     As of June 30, 2009, management has evaluated all other investment securities with unrealizedlosses and all non-marketable securities for impairment. The unrealized losses were primarily theresult of wider liquidity spreads on asset-backed securities and, additionally, increased marketvolatility on non-agency mortgage and asset-backed securities that are backed by certain mortgageloans. The fair values of these assets have been impacted by various market conditions. Inaddition, the expected average lives of the asset-backed securities backed by trust preferredsecurities have been extended, due to changes in the expectations of when the underlying securitieswould be repaid. The contractual terms and/or cash flows of the investments do not permit theissuer to settle the securities at a price less than the amortized cost. Huntington has reviewedits asset-backed portfolio with independent third parties and does not believe there is additionalOTTI from these securities other than what has already been recorded. Huntington does not intend tosell, nor does it believe it will be required to sell these securities until the fair value isrecovered, which may be maturity and, therefore, does not consider them to beother-than-temporarily impaired at June 30, 2009.**Note 5 – Loan Sales and Securitizations****Residential Mortgage Loans**For each of the three months ended June 30, 2009 and 2008, Huntington sold $1.2 billion ofresidential mortgage loans with servicing retained, resulting in net pre-tax gains of $27.1 millionand $12.3 million, respectively, recorded in mortgage banking income. During the first six monthsof 2009 and 2008, sales of residential mortgage loans with servicing retained totaled $2.7 billionand $1.9 billion, respectively, resulting in net pre-tax gains of $55.5 million and $16.0 million,respectively.A mortgage servicing right (MSR) is established only when the servicing is contractuallyseparated from the underlying mortgage loans by sale or securitization of the loans with servicingrights retained.At initial recognition, the MSR asset is established at its fair value using assumptions thatare consistent with assumptions used to estimate the fair value of the total MSR portfolio.Subsequent to initial capitalization, MSR assets are adjusted using the fair value method if theCompany will engage in actively hedging the asset or adjusted using the amortization method if noactive hedging will be performed. MSRs are included in accrued income and other assets in theCompany’s condensed consolidated balance sheet. Any increase or decrease in the fair value oramortized cost of MSRs carried under the fair value method during the period is recorded as anincrease or decrease in mortgage banking income, which is reflected in non-interest income in theconsolidated statements of income.
 
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The following tables summarize the changes in MSRs recorded using either the fair value methodor the amortization method during the three months and six months ended June 30, 2009 and 2008:                   **MSRs recorded using the fair value method**   Three Months Ended  Six Months Ended   June 30,  June 30, *(in thousands)* **2009**  2008  **2009**  2008 Fair value, beginning of period **$****167,838**  $191,806  **$****167,438**  $207,894 New servicing assets created  **—**   16,211   **23,074**   25,130 Change in fair value during the period due to:                Time decay (1)  **(1,705****)**  (1,936)  **(3,328****)**  (3,601)Payoffs (2)  **(12,646****)**  (5,088)  **(23,308****)**  (10,337)Changes in valuation inputs or assumptions (3)  **46,551**   39,031   **36,162**   20,938 Other changes  **(3,106****)**  —   **(3,106****)**  —              **Fair value, end of period** **$****196,932**  $240,024  **$****196,932**  $240,024                 (1) Represents decrease in value due to passage of time, including the impactfrom both regularly scheduled loan principal payments and partial loan paydowns. (2) Represents decrease in value associated with loans that paid off during theperiod. (3) Represents change in value resulting primarily from market-driven changesin interest rates.                   **MSRs recorded using the amortization method**   Three Months Ended  Six Months Ended   June 30,  June 30, *(in thousands)* **2009**  2008  **2009**  2008 Carrying value, beginning of period **$****—**  **$****—**  **$****—**  **$****—** New servicing assets created  **22,444**   —   **22,444**   — Amortization  **(94****)**  —   **(94****)**  —              **Carrying value, end of period** **$****22,350**  **$****—**  **$****22,350**  **$****—**              MSRs do not trade in an active, open market with readily observable prices. While sales ofMSRs occur, the precise terms and conditions are typically not readily available. Therefore, thefair value of MSRs is estimated using a discounted future cash flow model. The model considersportfolio characteristics, contractually specified servicing fees and assumptions related toprepayments, delinquency rates, late charges, other ancillary revenues, costs to service, and othereconomic factors. Changes in the assumptions used may have a significant impact on the valuationof MSRs.A summary of key assumptions and the sensitivity of the MSR value at June 30, 2009 to changesin these assumptions follows:                   Decline in fair value       due to       10%  20%       adverse  adverse *(in thousands)* Actual  change  change Constant pre-payment rate  17.60% $(7,788) $(14,894)Spread over forward interest rate swap rates 446 bps  (3,901)  (7,803)MSR values are very sensitive to movements in interest rates as expected future net servicingincome depends on the projected outstanding principal balances of the underlying loans, which canbe greatly impacted by the level of prepayments. The Company hedges against changes in MSR fairvalue attributable to changes in interest rates through a combination of derivative instruments andtrading securities.Total servicing fees included in mortgage banking income amounted to $12.0 million and $11.2million for the three months ended June 30, 2009 and 2008, respectively. For the six months endedJune 30, 2009 and 2008, servicing fees totaled $23.9 million and $22.1 million, respectively.
 
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**Automobile Loans and Leases**During the first quarter of 2009, Huntington transferred $1.0 billion automobile loans andleases to a trust in a securitization transaction. The securitization qualified for saleaccounting under Statement No. 140. Huntington retained $210.9 million of the related securitiesand recorded a $47.1 million retained residual interest as a result of the transaction. Subsequentto the transaction, Huntington sold $78.4 million of these securities in the second quarter of2009. These amounts were recorded as investment securities on Huntington’s condensed consolidatedbalance sheet. Huntington also recorded a $5.9 million loss in other noninterest income on thecondensed consolidated statement of income and recorded a $19.5 million servicing asset in accruedincome and other assets associated with this transaction.Automobile loan servicing rights are accounted for under the amortization method. A servicingasset is established at fair value at the time of the sale. The servicing asset is then amortizedagainst servicing income. Impairment, if any, is recognized when carrying value exceeds the fairvalue as determined by calculating the present value of expected net future cash flows. Theprimary risk characteristic for measuring servicing assets is payoff rates of the underlying loanpools. Valuation calculations rely on the predicted payoff assumption and, if actual payoff isquicker than expected, then future value would be impaired.Changes in the carrying value of automobile loan servicing rights for the three months and sixmonths ended June 30, 2009 and 2008, and the fair value at the end of each period were as follows:                   Three Months Ended  Six Months Ended   June 30,  June 30, *(in thousands)* **2009**  2008  **2009**  2008 Carrying value, beginning of period **$****20,051**  $3,248  **$****1,656**  $4,099 New servicing assets  **—**   —   **19,538**   — Amortization  **(2,628****)**  (604)  **(3,771****)**  (1,455)             Carrying value, end of period **$****17,423**  $2,644  **$****17,423**  $2,644              Fair value, end of period **$****18,401**  $3,626  **$****18,401**  $3,626              Huntington has retained servicing responsibilities on sold automobile loans and receivesannual servicing fees from 0.55% to 1.00% and other ancillary fees of approximately 0.40% to 0.50%of the outstanding loan balances. Servicing income, net of amortization of capitalized servicingassets, amounted to $1.6 million and $1.9 million for the three months ended June 30, 2009 and2008, respectively. For the six months ended June 30, 2009 and 2008, servicing income, net ofamortization of capitalized servicing assets, was $2.8 million and $4.0 million, respectively.**Note 6 – Goodwill and Other Intangible Assets**During the second quarter of 2009, Huntington reorganized its internal reporting structure.The Regional Banking reporting unit, which through March 31, 2009 had been managed geographically,is now managed on a product segment approach. Regional Banking was divided into CommercialBanking, Retail and Business Banking, and Commercial Real Estate segments. Regional Bankinggoodwill was assigned to the new reporting units affected using a relative fair value allocation.Auto Finance and Dealer Services (AFDS), Private Financial Group (PFG), and Treasury / Otherremained essentially unchanged. A rollforward of goodwill including the reallocation noted above,was as follows:                                   Retail &                   Regional  Business  Commercial  Commercial      Treasury/  Huntington *(in thousands)* Banking  Banking  Banking  Real Estate  PFG  Other  Consolidated Balance, January 1, 2009 $2,888,344  **$****—**  **$****—**  **$****—**  $153,178  $13,463  $3,054,985 Impairment, March 31, 2009  (2,573,818)  —   —   —   (28,895)  —   (2,602,713)Reallocation of goodwill  (314,526)  309,518   5,008   —   —   —   —                       Balance, April 1, 2009  —   309,518   5,008   —   124,283   13,463   452,272 Impairment  —   —   —   —   —   (4,231)  (4,231)Other adjustments  —   —   —   —   —   (162)  (162)                      Balance, June 30, 2009 **$****—**  **$****309,518**  **$****5,008**  **$****—**  **$****124,283**  **$****9,070**  **$****447,879**                       
 
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In accordance with FASB Statement No. 142, *Goodwill and Other Intangible Assets*(Statement No.142), goodwill is not amortized but is evaluated for impairment on an annual basis at October 1stof each year or whenever events or changes in circumstances indicate that the carrying value maynot be recoverable. During the first quarter of 2009, Huntington experienced a sustained declinein its stock price, which was primarily attributable to the continuing economic slowdown andincreased market concern surrounding financial institutions’ credit risks and capital positions aswell as uncertainty related to increased regulatory supervision and intervention. Huntingtondetermined that these changes would more likely than not reduce the fair value of certain reportingunits below their carrying amounts. Therefore, Huntington performed a goodwill impairment test,which resulted in a goodwill impairment charge of $2,603 million in the first quarter of 2009.An impairmentcharge of $4.3 million was recorded related to the sale of a small payments-related businesscompleted in July 2009. Huntington concluded that no other goodwill impairment was required duringthe 2009 second quarter.At June 30, 2009, December 31, 2008, and June 30, 2008, Huntington’s other intangible assetsconsisted of the following:               **Gross**  **Accumulated**  **Net** *(in thousands)* **Carrying Amount**  **Amortization**  **Carrying Value** **June 30, 2009**            Core deposit intangible $373,300  $(139,826) $233,474 Customer relationship  104,574   (21,399)  83,175 Other  29,327   (23,509)  5,818           Total other intangible assets $507,201  $(184,734) $322,467           **December 31, 2008**            Core deposit intangible $373,300  $(111,163) $262,137 Customer relationship  104,574   (16,776)  87,798 Other  29,327   (22,559)  6,768           Total other intangible assets $507,201  $(150,498) $356,703           **June 30, 2008**            Core deposit intangible $373,300  $(78,610) $294,690 Customer relationship  104,574   (11,926)  92,648 Other  29,177   (21,265)  7,912           Total other intangible assets $507,051  $(111,801) $395,250           The estimated amortization expense of other intangible assets for the remainder of 2009 and thenext five years are as follows:       Amortization *(in thousands)* Expense 2009 $34,157 2010  60,455 2011  53,310 2012  46,066 2013  40,429 2014  35,744 
 
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**Note 7 – Other Comprehensive Income**The components of Huntington’s other comprehensive income in the three and six months endedJune 30, 2009 and 2008, were as follows:                   Three Months Ended  Six Months Ended   June 30,  June 30, *(in thousands)* **2009**  2008  **2009**  2008 **Cumulative effect of change in accounting principle for other-than-temporarilyimpaired debt securities** **$****(5,448****)** $—  **$****(5,448****)** $— Related tax benefit  **1,907**   —   **1,907**   —              **Net**  **(3,541****)**  —   **(3,541****)**  —              Non-credit-related impairment losses on debt securities not expected to be sold  **(68,528****)**  **—**   **(68,528****)**  **—** Related tax benefit (expense)  **23,985**   **—**   **23,985**   **—**              Net  **(44,543****)**  **—**   **(44,543****)**  **—**              Unrealized holding (losses) gains on debt securities available for salearising during the period:                Unrealized net (losses) gains  **118,702**   (97,886)  **193,405**   (203,997)Related tax benefit (expense)  **(41,642****)**  34,597   **(68,029****)**  72,106              Net  **77,060**   (63,289)  **125,376**   (131,891)             Reclassification adjustment for net losses (gains) losses included in netincome                Realized net gains (losses)  **7,340**   (2,073)  **5,273**   (3,502)Related tax (expense) benefit  **(2,569****)**  726   **(1,846****)**  1,226              Net  **4,771**   (1,347)  **3,427**   (2,276)             **Total unrealized holding (losses) gains on debt securities available for salearising during the period, net of reclassification adjustment for net (losses) gainsincluded in net income**                             **Net**  **37,288**   (64,636)  **84,260**   (134,167)             Unrealized holding (losses) gains on equity securities available for salearising during the period:                Unrealized net (losses) gains  **309**   (3,502)  **(135****)**  (3,276)Related tax benefit (expense)  **(108****)**  1,226   **48**   1,147              Net  **201**   (2,276)  **(87****)**  (2,129)             Reclassification adjustment for net losses (gains) losses included in netincome                Realized net gains (losses)  **—**   —   **—**   — Related tax (expense) benefit  **—**   —   **—**   —              Net  **—**   —   **—**   —              **Total unrealized holding (losses) gains on equity securities available for salearising during the period, net of reclassification adjustment for net gains includedin net income**                             **Net**  **201**   (2,276)  **(87****)**  (2,129)             **Unrealized gains and losses on derivatives used in cash flow hedging relationshipsarising during the period:**                Unrealized net losses  **(45,173****)**  (84,386)  **(46,799****)**  (84,765)Related tax benefit  **15,811**   29,535   **16,380**   29,668              **Net**  **(29,362****)**  (54,851)  **(30,419****)**  (55,097)             **Cumulative effect of changing measurement date provisions for pension andpost-retirement assets and obligations**  **—**   —   **—**   (5,898)Related tax benefit  **—**   —   **—**   2,064              **Net**  **—**   —   **—**   (3,834)             **Amortization included in net periodic benefit costs:**                Net actuarial loss  **1,744**   802   **3,488**   1,605 Prior service cost  **252**   241   **505**   482 Transition obligation  **277**   277   **554**   554 Related tax benefit (expense)  **(795****)**  (462)  **(1,592****)**  (925)             **Net**  **1,478**   858   **2,955**   1,716              **Total other comprehensive income (loss)** **$****6,064**  $(120,905) **$****53,168**  $(193,511)             
 
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Activity in accumulated other comprehensive income for each of the six month periodsended June 30, 2009 and 2008, was as follows:                               Unrealized gains  Amortization      Unrealized gains  Unrealized gains  and losses on cash  included      and losses on debt  and losses on  flow hedging  in net periodic    *(in thousands)* securities  equity securities  derivatives  benefit costs  Total Balance, December 31, 2007 $(10,001) $(10) $4,553  $(44,153) $(49,611)Cumulative effect of change in measurementdate provisions for pension andpost-retirement assets and obligations  —   —   —   (3,834)  (3,834)Period change  (134,167)  (2,129)  (55,097)  1,716   (189,677)                **Balance, June 30, 2008** **$****(144,168****)** **$****(2,139****)** **$****(50,544****)** **$****(46,271****)** $(243,122)                                     Balance, December 31, 2008 $(207,427) $(329) $44,638  $(163,575) $(326,693)Cumulative effect of change in accountingprinciple for other-than-temporarilyimpaired debt securities  (3,541)  —   —   —   (3,541)Period change  84,260(1)  (87)  (30,419)  2,955   56,709                 **Balance, June 30, 2009** **$****(126,708****)** **$****(416****)** **$****14,219**  **$****(160,620****)** **$****(273,525****)**                   (1) includes $68.5 million of unrealized losses in which other-than temporary impairmenthas been recognized.**Note 8 – Shareholders’ Equity*****Issuance of Common Stock***During the 2009 second quarter, Huntington completed an offering of 103.5 million shares ofits common stock at a price to the public of $3.60 per share, or $372.6 million in aggregate grossproceeds.Also, during the 2009 second quarter, Huntington completed two separate “discretionary equityissuance” programs. These programs allowed the Company to take advantage of market opportunitiesto issue a total of 56.9 million new shares of common stock worth a total of $195.9 million. Salesof the common shares were made through ordinary brokers’ transactions on the NASDAQ Global SelectMarket or otherwise at the prevailing market prices.***Conversion of Convertible Preferred Stock***In 2008, Huntington completed the public offering of 569,000 shares of 8.50% Series ANon-Cumulative Perpetual Convertible Preferred Stock (Series A Preferred Stock) with a liquidationpreference of $1,000 per share, resulting in an aggregate liquidation preference of $569 million.During the 2009 first and second quarters, Huntington entered into agreements with variousinstitutional investors exchanging shares of common stock for shares of the Series A PreferredStock held by the institutional investors. The table below provides details of the aggregateactivities:               First  Second    *(in thousands)* Quarter 2009  Quarter 2009  **Total** Preferred shares exchanged  114   92   **206** Common shares issued:            At stated convertible option  9,547   7,730   **17,277** As deemeddividend  15,044   8,751   **23,795**           Total common shares issued:  24,591   16,481   **41,072**              Deemed dividend $27,742  $28,293  **$****56,035** 
 
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Each share of the Series A Preferred Stock is non-voting and may be converted at anytime, at the option of the holder, into 83.668 shares of common stock of Huntington, whichrepresents an approximate initial conversion price of $11.95 per share of common stock (for a totalof approximately 30.3 million shares at June 30, 2009). The conversion rate and conversion pricewill be subject to adjustments in certain circumstances. On or after April 15, 2013, at the optionof Huntington, the Series A Preferred Stock will be subject to mandatory conversion intoHuntington’s common stock at the prevailing conversion rate, if the closing price of Huntington’scommon stock exceeds 130% of the conversion price for 20 trading days during any 30 consecutivetrading day period.***Troubled Asset Relief Program (TARP)***In 2008, Huntington received $1.4 billion of equity capital by issuing to the U.S. Departmentof Treasury 1.4 million shares of Huntington’s 5.00% Series B Non-voting Cumulative PreferredStock, par value $0.01 per share with a liquidation preference of $1,000 per share, and a ten-yearwarrant to purchase up to 23.6 million shares of Huntington’s common stock, par value $0.01 pershare, at an exercise price of $8.90 per share. The proceeds received were allocated to thepreferred stock and additional paid-in-capital based on their relative fair values. The resultingdiscount on the preferred stock is amortized against retained earnings and is reflected inHuntington’s consolidated statement of income as “Dividends on preferred shares”, resulting inadditional dilution to Huntington’s earnings per share. The warrants are immediately exercisable,in whole or in part, over a term of 10 years. The warrants are included in Huntington’s dilutedaverage common shares outstanding using the treasury stock method. Both the preferred securitiesand warrants were accounted for as additions to Huntington’s regulatory Tier 1 and Total capital.The Series B Preferred Stock is not mandatorily redeemable and will pay cumulative dividendsat a rate of 5% per year for the first five years and 9% per year thereafter. Huntington cannotredeem the preferred securities during the first three years after issuance except with theproceeds from a “qualified equity offering.” Any redemption requires Federal Reserve approval. TheSeries B Preferred Stock rank on equal priority with Huntington’s existing 8.50% Series ANon-Cumulative Perpetual Convertible Preferred Stock.A company that participates in the TARP must adopt certain standards for executive compensation,including (a) prohibiting “golden parachute” payments as defined in the Emergency EconomicStabilization Act of 2008 (EESA) to senior executive officers; (b) requiring recovery of anycompensation paid to senior executive officers based on criteria that is later proven to bematerially inaccurate; (c) prohibiting incentive compensation that encourages unnecessary andexcessive risks that threaten the value of the financial institution, and (d) acceptingrestrictions on the payment of dividends and the repurchase of common stock. As of June 30, 2009,Huntington is in compliance with all TARP standards and restrictions.
 
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**Note 9 – (Loss) Earnings per Share**Basic loss or earnings per share is the amount of (loss) earnings (adjusted for dividendsdeclared on preferred stock) available to each share of common stock outstanding during thereporting period. Diluted (loss) earnings per share is the amount of loss or earnings available toeach share of common stock outstanding during the reporting period adjusted to include the effectof potentially dilutive common shares. Potentially dilutive common shares include incrementalshares issued for stock options, restricted stock units, distributions from deferred compensationplans, and the conversion of the Company’s convertible preferred stock and warrants (See Note 8).Potentially dilutive common shares are excluded from the computation of diluted earnings per sharein periods in which the effect would be antidilutive. For diluted (loss) earnings per share, net(loss) income available to common shares can be affected by the conversion of the Company’sconvertible preferred stock. Where the effect of this conversion would be dilutive, net (loss)income available to common shareholders is adjusted by the associated preferred dividends. Thecalculation of basic and diluted (loss) earnings per share for the three months and six monthsended June 30, 2009 and 2008, was as follows:                   Three Months Ended  Six Months Ended   June 30,  June 30, (in thousands, except per share amounts) **2009**  2008  **2009**  2008 **Basic (loss) earnings per common share**                Net (loss) income **$****(125,095****)** $101,352  **$****(2,558,302****)** $228,420 Preferred Class B and Class A stock dividends  **(25,179****)**  (11,151)  **(52,322****)** $(11,151)Amortization of discount on issuance of Preferred Class B stock  **(3,979****)**  —   **(7,887****)**    Deemed dividend on conversion of Preferred Class A stock  **(28,293****)**  —   **(56,035****)**                 Net (loss) income available to common shareholders **$****(182,546****)** $90,201  **$****(2,674,546****)** $217,269 Average common shares issued and outstanding  **459,246**   366,206   **413,083**   366,221 **Basic (loss) earnings per common share** **$****(0.40****)** $0.25  **$****(6.47****)** $0.59                  **Diluted (loss) earnings per common share**                Net (loss) income available to common shareholders **$****(182,546****)** $90,201  **$****(2,674,546****)** $217,280 Effect of assumed preferred stock conversion  —   —   —  $11,151              Net (loss) income applicable to diluted earnings per share **$****(182,546****)** $90,201  **$****(2,674,546****)** $228,431 Average common shares issued and outstanding  **459,246**   366,206   **413,083**   366,221                  Dilutive potential common shares:                Stock options and restricted stock units  —   221   —   212 Shares held in deferred compensation plans  —   807   —   788 Conversion of preferred stock  —   —   —   20,101              Dilutive potential common shares:  —   1,028   —   21,101              Total diluted average common shares issued and outstanding  **459,246**   367,234   **413,083**   387,322 **Diluted (loss) earnings per common share** **$****(0.40****)** $0.25  **$****(6.47****)** $0.59 Options to purchase 23.3 million and 26.4 million shares during the three months and sixmonths ended June 30, 2008, respectively, were outstanding but were not included in the computationof diluted earnings per share because the effect would have been antidilutive. The weighted averageexercise price for these options was $18.62 per share for the three months and six months endedJune 30, 2009, and $20.35 per share for the three months and six months ended June 30, 2008. Due tothe loss attributable to common shareholders for the three months and six months ended June 30,2009, no additional potentially dilutive shares were included in loss per share calculation asincluding such shares in the calculation would have reduced the reported loss per share.
 
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**Note 10 – Share-based Compensation**Huntington sponsors nonqualified and incentive share-based compensation plans. These plansprovide for the granting of stock options and other awards to officers, directors, and otheremployees. Compensation costs are included in personnel costs on the condensed consolidatedstatements of income. Stock options are granted at the closing market price on the date of thegrant. Options granted typically vest ratably over three years or when other conditions are met.Options granted prior to May 2004 have a term of ten years. All options granted after May 2004 havea term of seven years.Huntington uses the Black-Scholes option-pricing model to value share-based compensationexpense. This model assumes that the estimated fair value of options is amortized over the options’vesting periods. Forfeitures are estimated at the date of grant based on historical rates andreduce the compensation expense recognized. The risk-free interest rate is based on the U.S.Treasury yield curve in effect at the date of grant. Expected volatility is based on the estimatedvolatility of Huntington’s stock over the expected term of the option. The expected dividend yieldis based on the dividend rate and stock price at the date of the grant. The following tableillustrates the weighted-average assumptions used in the option-pricing model for options grantedin each of the periods presented.                   Three Months Ended  Six Months Ended   June 30,  June 30,   **2009**  2008  **2009**  2008 **Assumptions**                Risk-free interest rate  **2.63**%  2.98%  **2.03**%  3.12%Expected dividend yield  **1.20**   5.11   **0.84**   6.82 Expected volatility of Huntington’s common stock  **35.0**   27.5   **35.0**   23.7 Expected option term (years)  **6.0**   6.0   **6.0**   6.0 **Weighted-average grant date fair value per share** **$****1.18**  $1.71  $1.66  $1.21 As a result of increased employee turnover, during the 2009 second quarter Huntington updatedits forfeiture rate assumption and adjusted share-based compensation expense to account for thehigher forfeiture rate. This resulted in a reduction to share-based compensation expense of $2.8million. The following table illustrates total share-based compensation expense for the threemonths ended June 30, 2009 and 2008:                   Three Months Ended  Six Months Ended   June 30,  June 30, *(in thousands)* **2009**  2008  **2009**  2008 Share-based compensation expense **$****(183****)** $3,540  **$****2,640**  $7,194 Tax (expense) benefit  **(64****)**  1,239   **924**   2,518 Upon adoption of Financial Accounting Standards Board Statement No. 123 (revised 2004),Share-Based Payment on January 1, 2006, Huntington established an additional paid-in capital pool(APIC Pool). With the continued decline in Huntington’s stock price, the tax deductions have beenless than the compensation expense recorded for book purposes, causing the related APIC Pool to bereduced to zero. As a result, Huntington will be required to take a tax expense equal to any shortfall in future periods.
 
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Huntington’s stock option activity and related information for the six months ended June 30,2009, was as follows:                           Weighted-          Weighted-  Average          Average  Remaining  Aggregate       Exercise  Contractual  Intrinsic *(in thousands, except per share amounts)* Options  Price  Life *(Years)*  Value Outstanding at January 1, 2009  26,289  $19.45         Granted  1,025   4.89         Exercised  —   —         Forfeited/expired  (4,024)  20.50                      **Outstanding at June 30, 2009**  **23,290**  **$****18.62**   **3.5**  **$****45**              **Exercisable at June 30, 2009**  **19,433**  **$****20.10**   **3.1**  **$****—**              The aggregate intrinsic value represents the amount by which the fair value of underlyingstock exceeds the “in-the-money” option exercise price. There were no exercises of stock options inthe first six months of 2009 or 2008.Huntington also grants restricted stock units and awards. Restricted stock units and awardsare issued at no cost to the recipient, and can be settled only in shares at the end of the vestingperiod. Restricted stock awards provide the holder with full voting rights and cash dividendsduring the vesting period. Restricted stock units do not provide the holder with voting rights orcash dividends during the vesting period and are subject to certain service restrictions. The fairvalue of the restricted stock units and awards is the closing market price of the Company’s commonstock on the date of award.The following table summarizes the status of Huntington’s restricted stock units andrestricted stock awards as of June 30, 2009, and activity for the six months ended June 30, 2009:                       Weighted-      Weighted-       Average      Average   Restricted  Grant Date  Restricted  Grant Date   Stock  Fair Value  Stock  Fair Value *(in thousands, except per share amounts)* Units  Per Share  Awards  Per Share Nonvested at January 1, 2009  **1,823**  **$****14.64**   **—**  **$****—** Granted  **114**   **3.07**   **74**   **1.66** Vested  **(68****)**  **16.08**   **—**   **—** Forfeited  **(186****)**  **15.18**   **—**   **—**              **Nonvested at June 30, 2009**  **1,683**  **$****13.73**   **74**  **$****1.66**              The weighted-average grant date fair value of nonvested shares granted for the six monthsended June 30, 2009 and 2008, were $2.52 and $11.99, respectively. The total fair value of awardsvested during the six months ended June 30, 2009 and 2008, was $0.2 million and $0.1 million,respectively. As of June 30, 2009, the total unrecognized compensation cost related to nonvestedawards was $7.2 million with a weighted-average remaining expense recognition period of 1.6 years.Of the 32.4 million shares of common stock authorized for issuance under the plans at June 30,2009, 23.9 million were outstanding and 8.5 million were available for future grants. Huntingtonissues shares to fulfill stock option exercises and restricted stock units from availableauthorized shares. At June 30, 2009, the Company believes there are adequate authorized shares tosatisfy anticipated stock option exercises in 2009.
 
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**Note11 – Fair Values of Assets and Liabilities**Huntington adopted FASB Statement No. 157, *Fair Value Measurements*(Statement No. 157) andFASB Statement No. 159, *The Fair Value Option for Financial Assets and Financial Liabilities*(Statement No. 159) effective January 1, 2008. Huntington elected to apply the provisions ofStatement No. 159, the fair value option, for mortgage loans originated with the intent to sellwhich are included in loans held for sale.At June 30, 2009, mortgage loans held for sale had an aggregate fair value of $545.1 millionand an aggregate outstanding principal balance of $540.9 million. Interest income on these loansis recorded in interest and fees on loans and leases. Included in mortgage banking income were netgains resulting from changes in fair value of these loans, including net realized gains of $55.4million and $17.8 million for the six months ended June 30, 2009 and 2008, respectively.Statement No. 157 defines fair value as the exchange price that would be received for an assetor paid to transfer a liability (an exit price) in the principal or most advantageous market forthe asset or liability in an orderly transaction between market participants on the measurementdate. Statement No. 157 also establishes a three-level valuation hierarchy for disclosure of fairvalue measurements. The valuation hierarchy is based upon the transparency of inputs to thevaluation of an asset or liability as of the measurement date. The three levels are defined asfollows:*Level 1*– inputs to the valuation methodology are quoted prices (unadjusted) for identical assetsor liabilities in active markets.*Level 2*– inputs to the valuation methodology include quoted prices for similar assets andliabilities in active markets, and inputs that are observable for the asset or liability, eitherdirectly or indirectly, for substantially the full term of the financial instrument.*Level 3*– inputs to the valuation methodology are unobservable and significant to the fair valuemeasurement.A financial instrument’s categorization within the valuation hierarchy is based upon thelowest level of input that is significant to the fair value measurement.Following is a description of the valuation methodologies used for instruments measured atfair value, as well as the general classification of such instruments pursuant to the valuationhierarchy.*Securities*Where quoted prices are available in an active market, securities are classified within Level 1 ofthe valuation hierarchy. Level 1 securities include US Treasury and other federal agencysecurities, and money market mutual funds. If quoted market prices are not available, then fairvalues are estimated by using pricing models, quoted prices of securities with similarcharacteristics, or discounted cash flows. Level 2 securities include US Government and agencymortgage-backed securities and municipal securities. In certain cases where there is limitedactivity or less transparency around inputs to the valuation, securities are classified withinLevel 3 of the valuation hierarchy. Securities classified within Level 3 include asset backedsecurities and private label CMOs, for which Huntington obtains third party pricing. With thecurrent market conditions, the assumptions used to determine the fair value of many Level 3securities have greater subjectivity due to the lack of observable market transactions.*Mortgage loans held for sale*Mortgage loans held for sale are estimated using security prices for similar product types and,therefore, are classified in Level 2.*Mortgage servicing rights*MSRs do not trade in an active, open market with readily observable prices. For example, sales ofMSRs do occur, but the precise terms and conditions typically are not readily available.Accordingly, MSRs are classified in Level 3.*Equity Investments*Equity investments are valued initially based upon transaction price. The carrying values are thenadjusted from the transaction price to reflect expected exit values as evidenced by financing andsale transactions with third parties, or when determination of a valuation adjustment is considerednecessary based upon a variety of factors including, but not limitedto, current operating performance and future expectations of the particular investment, industryvaluations of comparable public companies, and changes in market outlook. Due to the absence ofquoted market prices and inherent lack of liquidity and the long-term nature of such assets, theseequity investments are included in Level 3. Certain equity investments are accounted for under theequity method and, therefore, are not subject to the fair value disclosure requirements.
 
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*Derivatives*Huntington uses derivatives for a variety of purposes including asset and liability management,mortgage banking, and for trading activities. Level 1 derivatives consist of exchange tradedoptions and forward commitments to deliver mortgage backed securities which have quoted prices.Level 2 derivatives include basic asset and liability conversion swaps and options, and interestrate caps. Derivative instruments offered to customers are adjusted for credit considerationsrelated to the customer based upon individual credit considerations. These derivative positionsare valued using internally developed models that use readily observable market parameters.Derivatives in Level 3 consist primarily of interest rate lock agreements related to mortgage loancommitments. The valuation includes assumptions related to the likelihood that a commitment willultimately result in a closed loan, which is a significant unobservable assumption.***Assets and Liabilities measured at fair value on a recurring basis***Assets and liabilities measured at fair value on a recurring basis at June 30, 2009 and 2008are summarized below:                       Fair Value Measurements at Reporting Date Using  Netting  **Balance at** *(in thousands)* Level 1  Level 2  Level 3  Adjustments (1)  **June 30, 2009** **Assets**                    Trading account securities $58,763  $37,157          **$****95,920** Investment securities  2,377,767   2,032,372  $1,096,793       **5,556,024** Mortgage loans held for sale      545,119           **545,119** Mortgage servicing rights          196,932       **196,932** Derivative assets  7,920   337,491   3,180  $(115,701)  **232,890** Equity investments          28,462       **28,462** **Liabilities**                    Derivative liabilities  1,744   236,069   7,717   (87,887)  **157,643**                                             Fair Value Measurements at Reporting Date Using  Netting  **Balance at** *(in thousands)* Level 1  Level 2  Level 3  Adjustments (1)  **June 30, 2008** **Assets**                    Trading account securities $43,200  $1,053,039          **$****1,096,239** Investment securities  358,681   3,331,584  $673,739       **4,364,004** Mortgage loans held for sale      350,304           **350,304** Mortgage servicing rights          240,024       **240,024** Derivative assets  3,473   140,126   2,708  $(17,358)  **128,949** Equity investments          32,200       **32,200** **Liabilities**                    Derivative liabilities  1,626   153,662   703   (50,978)  **105,013**    (1) Amounts represent the impact of legally enforceable master netting agreements thatallow the Company to settle positive and negative positions and cash collateral held or placed withthe same counterparties.
 
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The tables below present a rollforward of the balance sheet amounts for the three months andsix months ended June 30, 2009 and 2008, for financial instruments measured on a recurring basisand classified as Level 3. The classification of an item as Level 3 is based on the significance ofthe unobservable inputs to the overall fair value measurement. However, Level 3 measurements mayalso include observable components of value that can be validated externally. Accordingly, thegains and losses in the table below included changes in fair value due in part to observablefactors that are part of the valuation methodology. Transfers in and out of Level 3 are presentedin the tables below at fair value at the beginning of the reporting period.                               **Level 3 Fair Value Measurements**