<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q



                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                      QUARTERLY PERIOD ENDED March 31, 2002


                        Commission File Number: 000-33243


                       HUNTINGTON PREFERRED CAPITAL, INC.


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


                   41 SOUTH HIGH STREET, COLUMBUS, OHIO 43287


                  Registrant's telephone number (614) 480-8300


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


 Yes   X              No
      ---                 ---



All common stock is held by affiliates of the registrant as of March 31, 2002.
As of April 30, 2002, 14,000,000 shares of common stock without par value were
outstanding.


<PAGE>

                       HUNTINGTON PREFERRED CAPITAL, INC.

                                      INDEX

PART I.    FINANCIAL INFORMATION

Item 1.    Financial Statements

           Consolidated Balance Sheets -
           March 31, 2002 and 2001, and December 31, 2001                     3

           Consolidated Statements of Income -
           For the three months ended March 31, 2002 and 2001                 4

           Consolidated Statements of Changes in Shareholders' Equity -
           For the three months ended March 31, 2002 and 2001                 5

           Consolidated Statements of Cash Flows -
           For the three months ended March 31, 2002 and 2001                 6

           Notes to Unaudited Consolidated Financial Statements               7

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

Item 3.    Quantitative and Qualitative Disclosures about Market Risk        19


PART II.   OTHER INFORMATION

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

Signatures                                                                   21




                                                                              2
<PAGE>

PART I. FINANCIAL INFORMATION
Financial Statements
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------

CONSOLIDATED BALANCE SHEETS
-----------------------------------------------------------------------------------------------------------------------------------

                                                                                       MARCH 31,      DECEMBER 31,      MARCH 31,
(in thousands of dollars, except share data)                                             2002             2001            2001
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                      (Unaudited)                      (Unaudited)
<S>                                                                                  <C>              <C>              <C>
ASSETS
Cash and due from The Huntington National Bank                                       $   38,287       $     --         $     --
Interest bearing deposits with The Huntington National Bank                             653,245          364,912          328,099
Due from Huntington Preferred Capital Holdings, Inc.                                      3,115          217,592          159,186
Loan participation interests
   Commercial                                                                           557,975          646,509          588,490
   Consumer                                                                             723,278          783,735        1,034,921
   Residential mortgage                                                                 229,228          270,671          771,511
   Commercial mortgage                                                                3,831,498        3,678,061        4,125,879
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                      5,341,979        5,378,976        6,520,801
     Less allowance for loan losses                                                     160,007          164,690           98,046
-----------------------------------------------------------------------------------------------------------------------------------
Net loan participation interests                                                      5,181,972        5,214,286        6,422,755
-----------------------------------------------------------------------------------------------------------------------------------
Premises and equipment                                                                   42,782           44,641              793
Accrued income and other assets                                                          43,538           42,111           55,057
-----------------------------------------------------------------------------------------------------------------------------------

TOTAL ASSETS                                                                         $5,962,939       $5,883,542       $6,965,890
===================================================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
   Accounts payable and other liabilities                                            $    5,898       $       31       $     --
-----------------------------------------------------------------------------------------------------------------------------------
      Total Liabilities                                                                   5,898               31             --
-----------------------------------------------------------------------------------------------------------------------------------

SHAREHOLDERS' EQUITY
     Preferred stock, Class A, 8.000% noncumulative, non-exchangeable; $1,000
          par and liquidation value per share;
          1,000 shares authorized, issued and outstanding                                 1,000            1,000            1,000
     Preferred stock, Class B, variable-rate noncumulative and
          conditionally exchangeable; $1,000 par and liquidation
          value per share; authorized 500,000 shares; 400,000
          shares issued and outstanding                                                 400,000          400,000          400,000
     Preferred stock, Class C, 7.875% noncumulative and
          conditionally exchangeable; $25 par and liquidation
          value; authorized 2,000,000 shares; 2,000,000; 2,000,000; and
          no shares issued and outstanding, respectively                                 50,000           50,000             --
     Preferred stock, Class D, variable-rate noncumulative and
          conditionally exchangeable; $25 par and liquidation
          value; authorized 14,000,000 shares; 14,000,000; 14,000,000;
          and no shares issued and outstanding, respectively                            350,000          350,000             --
     Preferred stock, $25 par value, 10,000,000 shares
          authorized; no shares issued or outstanding                                      --               --               --
     Common stock - without par value; 14,000,000; 14,000,000;
          and 750 shares authorized, issued, and outstanding, respectively            5,082,511        5,082,511        6,345,821
     Retained earnings                                                                   73,530             --            219,069
-----------------------------------------------------------------------------------------------------------------------------------
     Total Shareholders' Equity                                                       5,957,041        5,883,511        6,965,890
-----------------------------------------------------------------------------------------------------------------------------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                           $5,962,939       $5,883,542       $6,965,890
===================================================================================================================================
</TABLE>

See notes to unaudited consolidated financial statements.



                                                                               3
<PAGE>

CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------

                                                                   THREE MONTHS ENDED
                                                                        MARCH 31,
------------------------------------------------------------------------------------------
(in thousands of dollars)                                        2002              2001
------------------------------------------------------------------------------------------
                                                             (Unaudited)        (Unaudited)
<S>                                                          <C>                 <C>
Interest and fee income
   Interest on loan participation interests
      Commercial                                             $   6,333           $  10,967
      Consumer                                                  20,044              23,127
      Residential mortgage                                       5,085               9,272
      Commercial mortgage                                       46,574              73,159
------------------------------------------------------------------------------------------
                                                                78,036             116,525
   Fees from loan participation interests                        1,584               1,384
   Interest bearing deposits with The Huntington
      National Bank                                              1,878              12,270
------------------------------------------------------------------------------------------
TOTAL INTEREST AND FEE INCOME                                   81,498             130,179
------------------------------------------------------------------------------------------

NET INTEREST INCOME                                             81,498             130,179
Provision for loan losses                                         --                  --
------------------------------------------------------------------------------------------

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES             81,498             130,179
------------------------------------------------------------------------------------------

Non-interest income                                              1,535                  14
Non-interest expense                                             3,639               2,031
------------------------------------------------------------------------------------------

INCOME BEFORE INCOME TAXES                                      79,394             128,162
Income taxes                                                      (117)               --
------------------------------------------------------------------------------------------

NET INCOME BEFORE PREFERRED DIVIDENDS                           79,511             128,162
DIVIDENDS ON PREFERRED STOCK                                     5,981                --
------------------------------------------------------------------------------------------

NET INCOME APPLICABLE TO COMMON SHARES                       $  73,530           $ 128,162
==========================================================================================
</TABLE>

See notes to unaudited consolidated financial statements.


                                                                              4
<PAGE>

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------

                                                   PREFERRED, CLASS A          PREFERRED, CLASS B           PREFERRED, CLASS C
                                                   ------------------          ------------------          ---------------------
(in thousands)                                     SHARES       STOCK          SHARES       STOCK          SHARES          STOCK
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>     <C>                 <C>       <C>            <C>            <C>
Three Months Ended March 31, 2001:
Balance, beginning of period                          1       $  1,000            400       $400,000           --         $   --
Comprehensive Income:
   Net income
      Total comprehensive income
Paid in capital in excess of par value
   in consideration for the acquisition of
   loan participations, net

----------------------------------------------------------------------------------------------------------------------------------
Balance, end of period (Unaudited)                    1       $  1,000            400       $400,000           --         $   --
==================================================================================================================================

THREE MONTHS ENDED MARCH 31, 2002:
BALANCE, BEGINNING OF PERIOD                          1       $  1,000            400       $400,000          2,000       $ 50,000
COMPREHENSIVE INCOME:
   NET INCOME
      TOTAL COMPREHENSIVE INCOME
DIVIDENDS DECLARED ON CLASS A PREFERRED STOCK
DIVIDENDS DECLARED ON CLASS B PREFERRED STOCK
DIVIDENDS DECLARED ON CLASS C PREFERRED STOCK
DIVIDENDS DECLARED ON CLASS D PREFERRED STOCK

----------------------------------------------------------------------------------------------------------------------------------
BALANCE, END OF PERIOD (Unaudited)                    1       $  1,000            400       $400,000          2,000       $ 50,000
==================================================================================================================================
</TABLE>


<TABLE>
<CAPTION>
                                              PREFERRED, CLASS D      PREFERRED              COMMON
                                              ------------------   ----------------     ----------------      RETAINED
(in thousands)                                  SHARES    STOCK     SHARES     STOCK     SHARES     STOCK     EARNINGS     TOTAL
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>      <C>        <C>         <C>      <C>     <C>        <C>         <C>
Three Months Ended March 31, 2001:
Balance, beginning of period                     --      $     --      --       $--           1  $6,341,717  $ 90,907   $6,833,624
Comprehensive Income:
   Net income                                                                                                 128,162      128,162
                                                                                                                         ---------
      Total comprehensive income                                                                                           128,162
                                                                                                                         ---------
Paid in capital in excess of par value
   in consideration for the acquisition of
   loan participations, net                                                                           4,104                  4,104
----------------------------------------------------------------------------------------------------------------------------------
Balance, end of period (Unaudited)               --      $     --      --       $--           1  $6,345,821  $219,069   $6,965,890
==================================================================================================================================

THREE MONTHS ENDED MARCH 31, 2002:
BALANCE, BEGINNING OF PERIOD                    14,000   $350,000      --       $--      14,000  $5,082,511  $     --   $5,883,511
COMPREHENSIVE INCOME:
   NET INCOME                                                                                                  79,511       79,511
                                                                                                                        ----------
      TOTAL COMPREHENSIVE INCOME                                                                                            79,511
                                                                                                                        ----------
DIVIDENDS DECLARED ON CLASS A PREFERRED STOCK                                                                     (80)         (80)
DIVIDENDS DECLARED ON CLASS B PREFERRED STOCK                                                                  (1,864)      (1,864)
DIVIDENDS DECLARED ON CLASS C PREFERRED STOCK                                                                    (985)        (985)
DIVIDENDS DECLARED ON CLASS D PREFERRED STOCK                                                                  (3,052)      (3,052)

----------------------------------------------------------------------------------------------------------------------------------
BALANCE, END OF PERIOD (Unaudited)              14,000   $350,000      --       $--      14,000  $5,082,511  $ 73,530   $5,957,041
==================================================================================================================================
</TABLE>

See notes to unaudited consolidated financial statements.


                                                                              5
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
                                                                                          THREE MONTHS ENDED
                                                                                              MARCH 31,
------------------------------------------------------------------------------------------------------------------
(in thousands of dollars)                                                               2002              2001
------------------------------------------------------------------------------------------------------------------
                                                                                    (Unaudited)        (Unaudited)
<S>                                                                                 <C>                <C>
OPERATING ACTIVITIES
     Net Income                                                                     $    79,511        $   128,162
     Adjustments to reconcile net income to net cash
     provided by operating activities
               Depreciation                                                               1,859                  4
               Decrease in Due from/to Huntington Preferred Capital Holdings,
                   Inc. and The Huntington National Bank                                214,477                716
               Net increase in accrued interest and other assets / accounts
                   payable and other liabilities                                        (73,721)          (122,159)
------------------------------------------------------------------------------------------------------------------
     NET CASH PROVIDED BY OPERATING ACTIVITIES                                          222,126              6,723
------------------------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES
     (Increase) decrease in interest bearing deposits in banks                         (288,333)           490,773
     Participation interests acquired                                                  (966,074)        (1,994,699)
     Sales and repayments on loans underlying participation interests                 1,070,568          1,436,597
     Purchase of premises and equipment                                                    --                 (797)
------------------------------------------------------------------------------------------------------------------
     NET CASH USED FOR INVESTING ACTIVITIES                                            (183,839)           (68,126)
------------------------------------------------------------------------------------------------------------------

     CHANGE IN CASH AND DUE FROM BANKS                                                   38,287            (61,403)
     CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD                                        --               61,403
------------------------------------------------------------------------------------------------------------------
     CASH AND DUE FROM BANKS AT END OF PERIOD                                       $    38,287        $      --
------------------------------------------------------------------------------------------------------------------

     Supplemental information:
        Net capital contributions from common
           stockholder in the form of participation                                 $      --          $     4,104
           interests in loans
        Dividends declared, not paid, on preferred stock                                  5,981               --
        Income taxes paid                                                                  --                 --
        Interest paid                                                                      --                 --
</TABLE>

     See notes to unaudited consolidated financial statements.



                                                                              6
<PAGE>

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION

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


NOTE 2 - BASIS OF PRESENTATION

     The unaudited interim consolidated financial statements reflect all
adjustments, consisting of normal and/or recurring accruals, which are, in the
opinion of management, necessary for a fair presentation of the consolidated
financial position, the results of operations, and cash flows for the periods
presented. These unaudited consolidated financial statements have been prepared
according to the rules and regulations of the Securities and Exchange Commission
and, therefore, certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles (GAAP) have been omitted. The Notes to the Consolidated
Financial Statements appearing in HPCI's 2001 Annual Report on Form 10-K (2001
Annual Report), which include descriptions of significant accounting policies,
should be read in conjunction with these interim financial statements.

     The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect amounts reported in the
financial statements. Actual results could differ from those estimates.


NOTE 3 - LOAN PARTICIPATION INTERESTS

     Participation interests in loans, which are predominantly secured by real
estate, are generally acquired from the Bank by Holdings at the Bank's carrying
value, which is the principal amount outstanding plus accrued interest, net of
unearned income, if any, less an allowance for loan losses. Similarly,
participation interests in loans are generally acquired from Holdings by HPCI at
Holdings' carrying value. There are no underlying loans outstanding which would
be considered a concentration of lending in any particular industry, group of
industries, or business activity. Underlying loans are, however, concentrated in
the Bank's primary markets of Ohio, Michigan, Indiana, and Kentucky and comprise
96.0% of the portfolio at March 31, 2002.

     In July 2001, Huntington announced a comprehensive strategic and financial
restructuring plan, which included divesting its Florida retail and corporate
banking businesses. In September 2001, Huntington announced that it entered
into an agreement to sell its Florida operations to SunTrust Banks, Inc.
(SunTrust). In December 2001, HPCI distributed participation interests in
Florida-related loans to its common shareholders, Holdings and Huntington. This
distribution approximated $1.3 billion and consisted of cash and the net book
value of participation interests in loans, net of $18.6 million of Allowance for
loan losses (ALL), which were included in the sale to SunTrust, including the
related accrued interest. This distribution represented approximately 17% of
HPCI's total assets as of December 31, 2001. The sale by Huntington closed in
February 2002.



                                                                              7
<PAGE>

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 4 - ALLOWANCE FOR LOAN LOSSES

     An allowance for loan losses is transferred to HPCI from the Bank through
Holdings on loans underlying the participations at the time the participations
are acquired. The allowance for loan losses reflects HPCI management's judgment
as to the level considered appropriate to absorb inherent losses in the loan
participation portfolio.

     The following table sets forth a summary of the transactions in the
allowance for loan losses for the periods indicated:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
                                                     THREE MONTHS ENDED
                                                          MARCH 31,
-------------------------------------------------------------------------------
(in thousands of dollars)                             2002             2001
-------------------------------------------------------------------------------

<S>                                                  <C>             <C>
BALANCE, BEGINNING OF PERIOD                         $164,690        $ 91,826
Allowance of loan participations acquired, net          6,561           9,110
Net loan losses                                       (11,244)         (2,890)
Provision for loan losses                                 --              --
-------------------------------------------------------------------------------
BALANCE, END OF PERIOD                               $160,007        $ 98,046
===============================================================================
</TABLE>


NOTE 5 - ISSUANCE OF PREFERRED SECURITIES

     In April 2001, HPCI created three new classes of preferred securities,
Class C and Class D preferred securities and blank check preferred securities.
HPCI issued the Class C and D preferred securities in October 2001 to Holdings
and received a capital contribution and $452.6 million of participation
interests in performing and non-performing commercial loans, including
commercial real estate loans, and consumer loans, with $86.5 million of
specific loan loss reserves, $45.4 million of leasehold improvements, and $3.5
million of accrued interest that Holdings had acquired from the Bank. The
underlying consumer loans included a combination of automobile, truck, and
equipment loans. The company transferred the leasehold improvements to HPCLI in
exchange for its common shares. Holdings then sold the Class C preferred
securities to the public in November 2001 for cash consideration of $25 per
share totaling $50 million. HPCI did not receive any of Holdings' proceeds from
the sale of the securities.


NOTE 6 - DIVIDENDS AND STOCK SPLIT

     Holders of Class A preferred securities are entitled to receive, if, when
and as authorized and declared by the Board of Directors of HPCI out of funds
legally available, dividends at a rate of $80.00 per share per annum of the
initial liquidation preference ($1,000.00 per share). Dividends on the Class A
preferred securities, if authorized and declared, are payable annually in
December to holders of record on the respective record dates fixed for such
purpose by the Board of Directors in advance of payment. Dividends were declared
and set apart for payment in December 2002 to the holders of the Class A
preferred securities in the first quarter ended March 31, 2002.

     The holder of the Class B preferred securities, HPC Holdings-II, Inc., is
entitled to receive dividends at a variable rate based on the three-month LIBOR
published on the first day of each calendar quarter. Dividends on the Class B
preferred securities are declared quarterly and payable annually and are
non-cumulative. The Board of Directors may declare dividends on Class B
preferred securities and may set apart funds for payment of dividends at the
time of declaration. Any dividend when and if declared by the



                                                                               8
<PAGE>

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Board of Directors out of funds legally available shall be payable annually on a
date fixed by the Board of Directors. No dividend, except payable in common
shares, shall be declared or paid upon Class B preferred securities unless
dividend obligations are satisfied on the Class A preferred securities. The
Board of Directors of HPCI declared a quarterly dividend of $1.9 million in
March 2002 based on a LIBOR rate of 2.04%. No dividends were declared or paid
for the same period in the prior year.

     For the Class C preferred securities issued October 15, 2001, dividends are
payable if, when, and as declared by the Board of Directors of HPCI. If
declared, dividends are payable quarterly. Dividends accrue in each quarterly
period from the first day of each period, whether or not dividends are paid with
respect to the preceding period. Dividends are not cumulative and if no dividend
is paid on the Class C preferred securities for a quarterly dividend period, the
payment of dividends (1) on HPCI's common stock and (2) on other HPCI-issued
securities ranking junior to the Class C preferred securities (Class B preferred
securities and common stock) will be prohibited for that period and at least the
following three quarterly dividend periods. In March 2002, the Board of
Directors declared a quarterly dividend of $984,375 for Class C preferred
securities based on the fixed rate of 7.875%. The dividends were paid April 1,
2002.

     For the Class D preferred securities issued to Holdings on October 15,
2001, dividends are established at the beginning of each calendar quarter at a
variable rate equal to LIBOR plus 1.625%. Dividends on the Class D preferred
securities are paid quarterly when declared. Dividends are not cumulative and if
full dividends are not paid on the Class D preferred securities for a quarterly
dividend period, the payment of dividends on the common shares or other shares
ranking junior to the Class D preferred securities will be prohibited for that
period and at least the following three quarterly dividend periods. Dividends of
$3.1 million were declared in the first quarter of 2002 by the Board of
Directors. The dividends were paid April 1, 2002.

     In April 2001, the Board of Directors declared a 18,666.67-for-1 stock
split on its common stock outstanding. The result of the transaction increased
the number of authorized, issued, and outstanding common shares from 750 to 14
million.


NOTE 7 - RELATED PARTY TRANSACTIONS

     HPCI holds a 100% subparticipation interest through an agreement with
Holdings and Holdings holds a 99% participation interest in loans originated by
the Bank and its subsidiaries. The participation and subparticipation interests
are in commercial, commercial mortgage, residential real estate, and consumer
loans secured by real property that were either directly underwritten by the
Bank and its subsidiaries or acquired by the Bank. HPCI expects to continue to
purchase such interests, net of ALL, in the future from Holdings.

     Under HPCI's subparticipation agreement and Holding's participation with
the Bank, the Bank performs the servicing of the commercial, commercial
mortgage, residential mortgage, and consumer loans underlying the participations
held by HPCI in accordance with normal industry practice. The servicing fee the
Bank charges is 0.125% per year of the outstanding principal balances of the
commercial, commercial mortgage, and consumer loans underlying the participation
interests and 0.282% per year of the interest income collected on the underlying
residential mortgages. Servicing fee expense paid to the Bank totaled $1.7
million and $2.0 million for the three months ended March 31, 2002 and 2001,
respectively. In its capacity as servicer, the Bank collects and holds the
commercial and mortgage loan payments received on behalf of HPCI until the end
of each month. At month end, the payments are transferred to HPCI and
accordingly, HPCI does not reflect any receivables for payments from the Bank in
the accompanying unaudited consolidated financial statements.



                                                                               9
<PAGE>

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


     HPCI, Huntington, and Holdings share personnel with the Bank to handle
day-to-day operations of the company such as accounting, financial analysis, tax
reporting, and other administrative functions. On a monthly basis, HPCI
reimburses the Bank for the cost related to the time spent by employees for
performing these functions for HPCI. The personnel costs were $40,000 for each
of the three months ended March 31, 2002 and 2001.

     In February 2001, Huntington purchased 18,667 shares of the 14 million
outstanding common shares of HPCI from Holdings (after adjusting for the April
2001 18,666.67-for-1 stock split). For all previous periods presented in the
unaudited consolidated financial statements, Holdings was the owner of 100% of
the outstanding common stock of HPCI.

     Of the outstanding shares of Class A preferred securities, 89.5% are owned
by Holdings while present and past employees of Huntington and its subsidiaries
own 10.5%. The Class A preferred securities are non-voting and have a dividend
rate of $80.00 per share per year. All of the Class B preferred securities are
owned by HPC Holdings-II, Inc., a non-bank subsidiary of Huntington. The Class B
preferred securities have a variable dividend rate based on LIBOR, which is
determined quarterly. In 2001, the Class C preferred securities were issued to
Holdings in exchange for certain assets and Holdings sold them to the public in
an underwritten offering. Various board members and executive officers of HPCI
purchased some of these shares in the offering or in the open market. At
December 31, 2001, a total of 3,700 shares, or 0.185%, were beneficially owned
by the group as a whole. All of the Class D preferred securities are owned by
Holdings for possible sale to the public in the future.

     HPCI's premises and equipment were acquired from the Bank through Holdings
in 2000 and 2001. Leasehold improvements were subsequently contributed to HPCLI
for its common shares. HPCLI charges rent to the Bank for use of applicable
facilities by the Bank. The amount of rental income received by HPCLI during the
first quarter of 2002 was $1.5 million and is reflected as the only component of
non-interest income in the consolidated statements of income.

     HPCI has a receivable due from Holdings amounting to $3.1 million and
$159.2 million at March 31, 2002 and 2001, respectively. These balances
represent unsettled cash transactions involving its participation interests that
occur in the ordinary course of business.

     HPCI maintains and transacts all of its cash activity through a
non-interest bearing demand deposit account with the Bank. In addition, HPCI
invests available funds in Eurodollar deposits with the Bank for a term of not
more than 30 days. These amounts were on deposit with the Bank:

------------------------------------------------------------------
                                          AT MARCH 31,
                                   -------------------------------
(in thousands of dollars)             2002                2001
------------------------------------------------------------------
Non-interest bearing               $ 38,287               $   --
Interest bearing                    653,245                328,099
------------------------------------------------------------------
   Total                           $691,532               $328,099
==================================================================


NOTE 8 - COMMITMENTS AND CONTINGENCIES

     The Bank is eligible to obtain advances from various federal and
government-sponsored agencies such as the Federal Home Loan Bank (FHLB). From
time to time, HPCI may act as co-borrower or guarantee the Bank's obligations
under such advances and/or pledge all or a portion of its assets in connection
with those advances. Any such borrowing, guarantee, and/or pledge would rank
senior to HPCI's common and preferred securities upon liquidation. Accordingly,
any federal or government-sponsored agencies that make advances to the Bank
where HPCI has acted as co-borrower or guarantor or


                                                                              10
<PAGE>

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


has pledged its assets as collateral will have a preference over the holders of
HPCI's securities. At any one time, these advances are not to exceed $1.258
billion in the aggregate from the FHLB. HPCI expects that no more than 25% of
its assets will serve as collateral for such advances. HPCI has identified
approximately $700 million of eligible mortgage collateral pledged as security
for future advances from the FHLB. Any such borrowing, guarantee, and/or pledge
in connection with the Bank's advances from federal or government-sponsored
agencies will fall within the definition of Indebtedness and Permitted
Indebtedness (as defined in HPCI's articles of incorporation) and will not
require the consent of the holders of HPCI's common or preferred securities for
any such borrowing, guarantee, and/or pledge. As of March 31, 2002, the Bank had
no borrowings under this facility with the FHLB.


NOTE 9 - SEGMENT REPORTING

     HPCI's operations consist of investing, monitoring, and evaluating its
participation interests. Accordingly, HPCI only operates in one segment. HPCI
has no external customers and transacts all of its business with the Bank
through Holdings.




                                                                              11
<PAGE>


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


INTRODUCTION

         Huntington Preferred Capital, Inc. is an Ohio corporation that was
incorporated in July 1992 under the name Airbase Realty, Inc. The company
changed its name to Huntington Preferred Capital, Inc. in May 2001. HPCI's
principal business objective is to acquire, hold, and manage mortgage assets and
other authorized investments that will generate net income for distribution to
its shareholders. Since May 1998, the company has been operating as a REIT, for
federal income tax purposes.

         HPCI is a subsidiary of Holdings, which is owned by the Bank and
Huntington. All of HPCI's day-to-day activities and the servicing of the loans
underlying its participation interests are administered by the Bank. HPCI has
one wholly-owned subsidiary, HPCLI.

         A participation agreement between the Bank and Holdings and a
subparticipation agreement between Holdings and HPCI require the Bank to service
HPCI's loan portfolio in a manner substantially the same as for similar work
performed by the Bank for transactions on its own behalf. HPCI, however, has
retained the right to elect to foreclose on mortgaged properties and the Bank
has agreed to follow any such direction from HPCI in this regard. The Bank also
collects and remits principal and interest payments, maintains perfected
collateral positions, and submits and pursues insurance claims. The Bank
provides to HPCI accounting and reporting services as required. In addition, the
Bank is required to pay all expenses related to the performance of its duties
under the participation and subparticipation agreements. These participation
interests were all acquired from Holdings and Holdings acquired them from the
Bank.

FORWARD-LOOKING STATEMENTS
         Management's discussion and analysis of financial condition and results
of operations contains forward-looking statements about HPCI, including
descriptions of products or services, plans, or objectives of its management for
future operations, and forecasts of its revenues, earnings, or other measures of
economic performance. Forward-looking statements can be identified by the fact
that they do not relate strictly to historical or current facts.

         By their nature, forward-looking statements are subject to numerous
assumptions, risks, and uncertainties. A number of factors, including but not
limited to, those set forth under the heading "Business Risks" included in Item
1 of HPCI's 2001 Annual Report on Form 10-K (2001 Annual Report) and other
factors described from time to time in the company's other filings with the
Securities and Exchange Commission, could cause actual conditions, events, or
results to differ significantly from those described in the forward-looking
statements.

         Forward-looking statements speak only as of the date they are made.
HPCI does not update forward-looking statements to reflect circumstances or
events that occur after the date the forward-looking statements are made or to
reflect the occurrence of unanticipated events.

         The following discussion and analysis, the purpose of which is to
provide investors and others with information that the company's management
believes to be necessary for an understanding of its financial condition,
changes in financial condition, and results of operations, should be read in
conjunction with the financial statements, notes, and other information
contained in this document.

SIGNIFICANT ACCOUNTING POLICIES
         Note 3 to HPCI's consolidated financial statements included in the 2001
Annual Report lists significant accounting policies used in the development and
presentation of its financial statements. This discussion and analysis, the
significant accounting policies, and other financial statement disclosures
identify and address key variables and other qualitative and quantitative
factors that are necessary for an understanding and evaluation of HPCI and its
results of operations.


                                                                              12
<PAGE>


ISSUANCE OF PREFERRED SECURITIES
         In October 2001, HPCI issued to Holdings 2,000,000 shares of Class C
preferred securities and 14,000,000 shares of Class D preferred securities and
received a capital contribution and $452.6 million of gross participation
interests in certain loans, $86.5 million of related specific loan loss
reserves, $45.4 million of net leasehold improvements, and $3.5 million of
accrued interest. These participation interests were in commercial, commercial
real estate, and consumer loans. The underlying consumer loans included a
combination of automobile, truck, and equipment loans. HPCI intends to hold
these participation interests as long-term investments. Approximately 24% of
these participation interests were non-performing in nature. The company
transferred the leasehold improvements to HPCLI in exchange for its common
shares. Holdings subsequently sold all of the Class C preferred securities in
an underwritten public offering. HPCI did not receive any of Holdings' proceeds
from the sale.

DISTRIBUTION OF FLORIDA LOAN PARTICIPATION INTERESTS
         On July 12, 2001, Huntington announced a comprehensive strategic and
financial restructuring plan, which included, among other things, divesting its
Florida retail and corporate banking businesses. On September 26, 2001,
Huntington announced that it had entered into an agreement to sell its Florida
operations to SunTrust Banks, Inc. (SunTrust). On December 31, 2001, in
anticipation of the sale of the Florida operations by Huntington, which closed
February 15, 2002, HPCI completed its $1.3 billion distribution to common
shareholders, Holdings and Huntington. This distribution consisted of cash and
the net book value of participation interests in loans that were included in the
sale to SunTrust, including the related accrued interest and allowance for loan
losses, representing approximately 17% of HPCI's total assets as of December 31,
2001.

OVERVIEW

         HPCI's income is primarily derived from its participation interests in
loans acquired from the Bank through Holdings. Income varies based on the level
of these assets and their relative interest rates. The cash flows from these
assets are used to satisfy HPCI's preferred dividend obligations. The preferred
stock is considered equity and therefore, the dividends are not reflected as
interest expense.

         HPCI reported net income available to common shareholders of $73.6
million for the first quarter of 2002, compared with $128.2 million for the same
period in 2001. Average assets approximate average shareholders' equity
(including preferred stock) and therefore, return on average assets (ROA) and
return on average equity (ROE) were the same for the quarterly periods
presented. ROA and ROE were 5.46% for 2002, versus 7.72% for 2001.

         At March 31, 2002 and 2001, HPCI had total assets and total equity
(including preferred stock) of $6.0 billion and $7.0 billion, respectively. At
the most recent quarter end, an aggregate of $5.3 billion, or 89.6%, of total
assets consisted of 99% participation interests in loans. Before the allowance
for loan losses, participation interests in commercial and commercial mortgage
loans was $4.4 billion, or 73.6% of total assets, $723.3 million, or 12.1%, in
consumer loans, and $229.2 million, or 3.8%, in residential mortgage loans. The
change from the prior year is due primarily to the distribution of participation
interests in Florida loans.

---------------------------------------------------------------------------
                                                      AT MARCH 31,
---------------------------------------------------------------------------
(in thousands of dollars)                       2002               2001
---------------------------------------------------------------------------
Gross loan participation interests:
   Commercial                                $  557,975          $  588,490
   Consumer                                     723,278           1,034,921
   Residential mortgage                         229,228             771,511
   Commercial mortgage                        3,831,498           4,125,879
---------------------------------------------------------------------------
      Total                                  $5,341,979          $6,520,801
===========================================================================



                                                                              13
<PAGE>

         Interest-bearing and non-interest bearing cash balances on deposit with
the Bank were $691.5 million at March 31, 2002, up from $364.9 million at
December 31, 2001 and $328.1 million at March 31, 2001. Interest bearing
balances are invested overnight or in Eurodollar deposits with the Bank for a
term of not more than 30 days. Amounts due from Holdings and the Bank at March
31, 2002 declined to $3.1 million from $217.6 million at the most recent year
end and $159.2 million at March 31, 2001. These represent amounts due from or
due to Holdings and/or the Bank that arise in the ordinary course of business
for unsettled transactions involving participation interests, fees, and other
related costs.

         Shareholders' equity (including preferred stock) was $6.0 billion at
March 31, 2002, down from $7.0 billion at March 31, 2001, reflecting a $1.3
billion distribution of the Florida-related participations at December 31, 2001
and the aggregate dividend payments on the common and preferred securities
during 2001 and the first quarter of 2002 offset by $400 million received from
the issuance of the Class C and D preferred securities in the last quarter of
2001.

RESULTS OF OPERATIONS

NET INTEREST INCOME
         HPCI's primary source of revenue is interest income on its
participation interests in loans. At present, HPCI does not have any
interest-bearing liabilities and no related interest expense. HPCI's cash flows
from its participation interests in loans provide sufficient funding such that
outside borrowings are not required. Net interest income is impacted by changes
in the level of interest rates and earning assets. The yield on earning assets
is the percentage of interest income to average earning assets.

         HPCI's average balances, interest income, and yields are presented
below for the three-month periods ended March 31:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                                                      2002                                      2001
                                      ---------------------------------      ------------------------------------
                                       AVERAGE                                AVERAGE
(in millions of dollars)               BALANCE       INCOME       YIELD        BALANCE          INCOME      YIELD
-----------------------------------------------------------------------------------------------------------------
<S>                                   <C>            <C>           <C>        <C>            <C>           <C>
Loan participation interests:
   Commercial                         $  607.1       $ 6.3         4.23%      $  604.8       $ 11.0        7.35%
   Consumer                              763.3        20.0        10.65          994.5         23.1        9.43
   Residential mortgage                  256.3         5.1         7.93          446.8          9.3        8.30
   Commercial mortgage                 3,733.8        46.6         5.06        3,993.8         73.1        7.43
---------------------------------------------------------------------------------------------------------------
      Total loan participations        5,360.5        78.0         5.90        6,039.9        116.5        7.82
---------------------------------------------------------------------------------------------------------------
Interest bearing deposits
   in banks                              423.0         1.9         1.80          901.6         12.3        5.52
Fees from loan participation
   interests                                           1.6                                      1.4
---------------------------------------------------------------------------------------------------------------

Total interest-earning assets         $5,783.5       $81.5         5.60%      $6,941.5       $130.2        7.52%
================================================================================================================
</TABLE>


         Net interest income was $81.5 million and $130.2 million for the three
months ended March 31, 2002 and 2001, respectively. The decline in net interest
income of $48.7 million was due to the previously mentioned distribution of
Florida-related participations and the contraction of spreads on the remaining
portfolio of participation interests. As shown in the table above, the yield on
HPCI's participation interests declined from 7.82% to 5.90%. The table above
includes interest received on participations in non-accrual loans in the
individual portfolios.

         The table below shows changes in net interest income for the three
month periods ended March 31 due to volume and rate variances for each category
of earning assets. The change in interest not solely due to changes in volume or
rates has been allocated in proportion to the absolute dollar amounts of the
change in volume and rate.


                                                                              14
<PAGE>
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------
                                                                2002                                    2001
------------------------------------------------------------------------------------------------------------------------------
                                                      Increase (Decrease) From                   Increase (Decrease) From
                                                         Previous Year Due To:                   Previous Year Due To:
------------------------------------------------------------------------------------------------------------------------------
Fully Tax Equivalent Basis(1)                                   Yield/                                    Yield/
(in millions of dollars)                         Volume          Rate           Total        Volume        Rate         Total
------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>            <C>            <C>            <C>           <C>           <C>
Interest bearing deposits in
  The Huntington National Bank                  $  (4.6)       $  (5.8)       $ (10.4)       $  8.3        $  0.2       $  8.5
Loan participation interests:
   Commercial                                        --           (4.6)          (4.6)         (3.4)          0.4         (3.0)
   Consumer                                        (5.9)           2.8           (3.1)          4.6           0.9          5.5
   Residential mortgage                            (3.9)          (0.3)          (4.2)         (8.3)          2.0         (6.3)
   Commercial mortgage                             (4.6)         (21.8)         (26.4)          0.4           8.4          8.8
------------------------------------------------------------------------------------------------------------------------------
     TOTAL EARNING ASSETS                         (19.0)         (29.7)         (48.7)          1.6          11.9         13.5
------------------------------------------------------------------------------------------------------------------------------

     TOTAL INTEREST-BEARING LIABILITIES          --             --             --             --              --            --
------------------------------------------------------------------------------------------------------------------------------
     NET INTEREST INCOME                        $ (19.0)       $ (29.7)       $ (48.7)       $  1.6        $ 11.9       $ 13.5
==============================================================================================================================
</TABLE>

(1) Calculated assuming a 35% tax rate.


PROVISION FOR LOAN LOSSES AND ALLOWANCE FOR LOAN LOSSES
         The provision for loan losses is the charge to pre-tax earnings
necessary to maintain the ALL at a level adequate to absorb management's
estimate of inherent losses in the loan portfolio. There was no provision for
loan losses for the first quarters of 2002 and 2001. An ALL is transferred from
the Bank to Holdings and from Holdings to HPCI on loans underlying the
participations at the time the participations are acquired.

         The ALL was $160.0 million at March 31, 2002, down slightly from $164.7
million at December 31, 2001, and up from $98.0 million at the end of the first
quarter a year ago. This represents 3.00%, 3.06%, and 1.50% of total loan
participations at the end of each of the respective periods. The ALL increased
from March of last year because of the acquisition of participation interests in
performing and non-performing loans in the fourth quarter of 2001, offset by the
distribution of the participation interests in Florida-related loans at the end
of 2001. The ALL was down from the recent year-end due to the level of
charge-offs. The ALL covered 89.9% of the participations in non-performing loans
at the end of March 2002, versus 83.4% and 169.7% at December 31, 2001 and March
31, 2001, respectively. Additional information regarding the ALL and asset
quality appears in the "Credit Quality" section. The following table shows the
activity in HPCI's ALL for each of the periods ended March 31,:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
(in thousands of dollars                                 2002              2001
-----------------------------------------------------------------------------------
<S>                                                    <C>                <C>
BALANCE, BEGINNING OF PERIOD                            $164,690          $ 91,826
Allowance of loan participations acquired, net             6,561             9,110
Net loan losses
   Commercial                                             (1,386)             (137)
   Consumer                                               (7,871)           (2,588)
   Residential mortgage                                       --                --
   Commercial mortgage                                    (1,987)             (165)
-----------------------------------------------------------------------------------
      Total net loan losses                              (11,244)           (2,890)
-----------------------------------------------------------------------------------
Provision for loan losses                                     --                --
-----------------------------------------------------------------------------------
BALANCE, END OF PERIOD                                  $160,007          $ 98,046
===================================================================================
</TABLE>


         Total net charge-offs for the first three months of 2002 were $11.2
million, or 0.85% of average participation interests, which was up from $2.9
million, or 0.19%, for the same period a year ago. Although there are certain
indications that general economic conditions are improving, trends in credit
quality and net charge-offs typically lag in their timing to these changes.
HPCI's management believes that the net charge-offs in the near term could be
comparable to the past several quarters, with some improvement beginning in the
latter part of 2002.



                                                                              15
<PAGE>

         HPCI, through reliance on methods utilized by Huntington, allocates the
ALL to each loan or loan participation category based on an expected loss ratio
determined by continuous assessment of credit quality based on portfolio risk
characteristics and other relevant factors such as historical performance,
internal controls, and impacts from mergers and acquisitions. For the commercial
and commercial mortgage loan participations, expected loss factors are assigned
by credit grade at the individual underlying loan level. The aggregation of
these factors represents management's estimate of the inherent loss. The portion
of the allowance allocated to the more homogeneous underlying consumer loan
segments is determined by developing expected loss ratios based on the risk
characteristics of the various segments and giving consideration to existing
economic conditions and trends.

         Projected loss ratios incorporate factors such as trends in past due
and non-accrual amounts, recent underlying loan loss experience, current
economic conditions, risk characteristics, and concentrations of various
underlying loan categories. Actual loss ratios experienced in the future,
however, could vary from those projected as an underlying loan's performance is
a function of not only economic factors but also other factors unique to each
customer. The diversity in size of the underlying commercial and commercial
mortgage loans can be significant as well. The dollar exposure could
significantly vary from estimated amounts due to diversity. To ensure adequacy
to a higher degree of confidence, a portion of the ALL is considered
unallocated. While amounts are allocated to various portfolio segments, the
total ALL, excluding impairment reserves prescribed under provisions of
Statement of Financial Accounting Standard No. 114, is available to absorb
losses from any segment of the portfolio. The estimated total unallocated
reserves was approximately 11% at March 31, 2002.

NON-INTEREST INCOME AND NON-INTEREST EXPENSE
         Non-interest income was $1.5 million for the first quarter of 2002.
This represents rental income received from the Bank related to land and land
improvements, and buildings acquired in 2000, and leasehold improvements
acquired by HPCI in 2001.

         Non-interest expense was $3.6 million for the three months ended March
31, 2002 and for the same period in 2001 was $2.0 million. Non-interest expense
includes fees paid to the Bank for servicing the loans underlying the
participation interests, which amounted to $1.7 million and $2.0 million for the
first quarter of 2002 and 2001, respectively. On an annual basis, the service
fee with respect to the commercial mortgage, commercial, and consumer loans is
equal to the outstanding principal balance of each loan multiplied by a fee of
0.125% and the service fee for residential mortgage loans is equal to 0.282% of
the interest income collected. In addition, non-interest expense for the most
recent quarter of 2002 included depreciation on premises and equipment of $1.9
million.

PROVISION FOR INCOME TAXES
         HPCI has elected to be treated as a REIT for Federal income tax
purposes and intends to maintain compliance with the provisions of the Code and
therefore is not subject to income taxes. HPCI's subsidiary, HPCLI, elected to
be treated as a taxable REIT subsidiary. HPCLI incurred a net loss for the first
quarter of 2002 and therefore, a credit for income taxes is reflected in the
accompanying consolidated financial statements.

INTEREST RATE RISK MANAGEMENT

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



                                                                              16
<PAGE>

CREDIT QUALITY

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

         Non-performing assets (NPAs), consist of participation interests in
underlying loans that are no longer accruing interest. Underlying commercial,
commercial mortgage, and residential mortgage loans are placed on non-accrual
status and stop accruing interest when collection of principal or interest is in
doubt or generally when the underlying loan is 90 days past due. When interest
accruals are suspended, accrued interest income is reversed with current year
accruals charged to earnings and prior year amounts generally charged off as a
credit loss. Consumer loans are not placed on non-accrual status; rather they
are charged off in accordance with regulatory statutes governing the Bank, which
is generally no more than 120 days.

NON-PERFORMING ASSETS                                      AT MARCH 31,
----------------------------------------------------------------------------
(in thousands of dollars                              2002            2001
----------------------------------------------------------------------------
Participation interests in non-accrual loans
   Commercial                                       $126,724        $ 21,469
   Real Estate
      Commercial                                      42,737          28,873
      Residential                                      8,458           7,448
----------------------------------------------------------------------------
TOTAL NON-PERFORMING ASSETS                         $177,919        $ 57,790
============================================================================
NON-PERFORMING ASSETS AS A % OF TOTAL
   PARTICIPATION INTERESTS                              3.33%           0.89%

ALLOWANCE FOR LOAN LOSSES AS A % OF NON-
   PERFORMING ASSETS                                   89.93%         169.66%



         Total NPAs were $177.9 million at March 31, 2002, down from $197.6
million at December 31, 2001 but up from $57.8 million at March 31, 2001. As of
the same dates, the underlying non-performing loans represented 3.33%, 3.67%,
and 0.89% of total participation interests. There was a slight improvement in
the level of participation interests in non-performing loans during the recent
three months. HPCI's management believes that NPAs in the near term could be
comparable to the past several quarters, with some improvement beginning in the
latter part of 2002. The increase in NPAs from a year ago was due to the
aforementioned acquisition of participation interests in performing and
non-performing loans in the fourth quarter of 2001. The amount of participation
interests in non-performing Florida-related loans distributed at the end of 2001
approximated $4.6 million.

         Underlying loans past due ninety days or more but continuing to accrue
interest were $28.3 million at March 31, 2002, up 15.5% from $24.5 million at
the end of the immediately preceding quarter.

         Under the participation and subparticipation agreements, HPCI may
direct the Bank to foreclose on mortgaged property or dispose of any underlying
loan that becomes classified, is placed in a non-performing status, or is
renegotiated due to the financial deterioration of the borrower. The Bank has
agreed to institute foreclosure proceedings at the direction of HPCI and may
exercise any power of sale contained in any mortgage or deed of trust, obtain a
deed in lieu of foreclosure, or otherwise acquire title to a property
underlying a mortgage loan by operation of law or otherwise in accordance with
the terms of the participation and subparticipation agreement. Any underlying
loan is sold to the Bank at



                                                                              17
<PAGE>

fair market value where the security is either repossessed or goes into
foreclosure proceedings. The Bank then incurs all costs associated with
repossession and foreclosure.

SIGNIFICANT CONCENTRATIONS OF CREDIT RISK

         Concentration of credit risk generally arises with respect to HPCI's
participation interests when a number of underlying loans have borrowers engaged
in similar business activities or activities in the same geographical region.
Concentration of credit risk indicates the relative sensitivity of performance
to both positive and negative developments affecting a particular industry.
There are no significant concentrations of underlying loans to borrowers
engaged in similar business activities. HPCI's balance sheet exposure to
geographic concentrations directly affects the credit risk of the underlying
loans within the participation interests. At March 31, 2002, 96.0% of the
underlying loans in all participation interests were located in Ohio, Michigan,
Indiana, and Kentucky. Consequently, the portfolio of underlying loans may
experience a higher default rate in the event of adverse economic, political,
or business developments or natural hazards in these states that may affect the
ability of borrowers to make payments of principal and interest on the
underlying loans.

LIQUIDITY AND CAPITAL RESOURCES

         The objective of HPCI's liquidity management is to ensure the
availability of sufficient cash flows to meet all of its financial commitments
and to capitalize on opportunities for business expansion. In managing
liquidity, management takes into account various legal limitations placed on a
REIT.

         HPCI's principal liquidity needs are to pay operating expenses and
dividends and acquire additional participation interests as the underlying loans
in its portfolio paydown or mature. Operating expenses and dividends are
expected to be funded through cash generated by operations, while the
acquisition of additional participation interests in loans is intended to be
funded with the proceeds obtained from repayment of principal balances by
individual borrowers. HPCI intends to pay dividends on its preferred stock and
common stock in amounts necessary to continue to preserve its status as a REIT
under the Internal Revenue Code.

         As mentioned previously, HPCI issued to Holdings Class C and D
preferred securities and received a capital contribution and participation
interests in certain loans and leasehold improvements in the fourth quarter of
2001, which approximated $400 million in the aggregate. The company transferred
the leasehold improvements to HPCLI in exchange for its common shares. Holdings
subsequently sold all of the Class C preferred securities in an underwritten
public offering. HPCI did not receive any of Holdings' proceeds from the sale.

         On December 31, 2001, HPCI distributed cash and its participation
interests in Florida-related loans to its common shareholders, Holdings and
Huntington, in  anticipation of the sale of the Florida operations by
Huntington, which closed on February 15, 2002. This distribution approximated
$1.3 billion.

         In March 2002, HPCI's board of directors declared dividends on its
preferred securities. HPCI accrued for these dividend obligations to its
preferred security holders and paid dividends on the Class C and D preferred
securities on April 1, 2002. Dividends on the Class A and B preferred securities
were declared and are expected to be paid in December of this year. The amount
of dividends accrued for the first quarter of 2002 on the Class A preferred
securities was $80,000, $1.9 million on the Class B preferred securities,
$984,375 on the Class C preferred securities, and $3.1 million on the Class D
securities.

         To the extent that the board of directors determines that additional
funding is required, management may raise such funds through additional equity
offerings, debt financings, or retention of cash flow, or a combination of these
methods. However, any cash flow retention must be consistent with the provisions
of the Internal Revenue Code requiring the distribution by a REIT of at least
90% of its REIT taxable income, excluding capital gains, and must take into
account taxes that would be imposed on



                                                                              18
<PAGE>

undistributed income. Management does not anticipate that additional funding
will be required for at least the next twelve months.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Interest rate risk is HPCI's primary market risk. As indicated earlier,
HPCI's income consists primarily of interest income from participation interests
in commercial, consumer, residential mortgage, and commercial mortgage loans. If
there is a decline in market interest rates resulting from downward adjustments
in the indices upon which the interest rates on loans are based, HPCI may
experience a reduction in interest income and a corresponding decrease in funds
available for distribution to shareholders. A decline in interest income can
also be realized from prepayments, including pay-offs, of loans with fixed
interest rates, resulting in reinvestment of proceeds in lower-yielding
participation interests. The borrower has the ability to prepay a loan with or
without premium or penalty depending on the provisions found in the underlying
loan agreements. The level of underlying loan prepayments is influenced by
several factors, including the interest rate environment, the real estate market
in particular geographic areas, the timing of transactions, and circumstances
related to individual borrowers and loans.

         At March 31, 2002, approximately 27% of the loans underlying the
participation portfolio carried fixed interest rates. Such loans tend to
increase interest rate risk. At this same date, HPCI did not have any
interest-rate-sensitive liabilities.

         Analysis of HPCI's interest earning assets is performed in conjunction
with, and is part of, Huntington's overall interest rate management process. A
key element used in Huntington's process is the use of an income simulation
model, which includes, among other things, assumptions for prepayments. Based on
the most recent simulation performed at March 31, 2002, HPCI's experience and
management's estimates, the results of the company's sensitivity analysis
indicated that 12-month net interest income would be expected to increase by
approximately 5.6% if rates rose 200 basis points above March 31, 2002 implied
forward expectations and would drop an estimated 5.7%, in the event of a gradual
200 basis point decline from March 31, 2002 implied forward expectations.







                                                                              19
<PAGE>

PART II.  OTHER INFORMATION

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



Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits

                     None.

         (b)  Reports on Form 8-K

              (1)  During the quarter ended December 31, 2001, HPCI filed one
                   Current Report on Form 8-K. This report, dated December 31,
                   2001, was filed under Item 2, concerning HPCI's distribution
                   of its participation interests in Florida-related loans to
                   its common shareholders.




                                                                              20
<PAGE>

                                   SIGNATURES




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



                       HUNTINGTON PREFERRED CAPITAL, INC.
                                  (Registrant)




Date:   May 15, 2002                        /s/ Michael J. McMennamin
                                            ---------------------------
                                            Michael J. McMennamin
                                            President
                                            (Principal Executive Officer)



Date:   May 15, 2002                        /s/ John D. Van Fleet
                                            -----------------------------
                                            John D. Van Fleet
                                            Vice President
                                            (Principal Financial Officer)






                                                                              21