##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY PERIOD ENDED September 30, 2008
 Commission File Number: 000-33243
 Huntington Preferred Capital, Inc.
 Ohio
    
    31-1356967(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 41 South High Street, Columbus, Ohio 43287
 (614) 480-8300
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



HUNTINGTON PREFERRED CAPITAL, INC.
  Part I. Financial InformationItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets -
At September 30, 2008, December 31, 2007, and September 30, 2007
    
    
    3Condensed Consolidated Statements of Income -
For the three-months and nine-months ended September 30, 2008 and 2007
    
    
    4Condensed Consolidated Statements of Changes in Shareholders Equity -
For the nine-months ended September 30, 2008 and 2007
    
    
    5Condensed Consolidated Statements of Cash Flows -
For the nine-months ended September 30, 2008 and 2007
    
    
    6Notes to The Unaudited Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    26Item 4. Controls and Procedures
    
    
    26Item 4T. Controls and Procedures
    
    
    26Part II. Other InformationItem 6. Exhibits
    
    
    26Signatures
    
    
    28EX-31.1EX-31.2EX-32.1EX-32.2EX-99.1
  2




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##### Table of Contents



Part I. Financial Information
 
 Item 1. Financial Statements
 Huntington Preferred Capital, Inc.
 
 Condensed Consolidated Balance Sheets
 (Unaudited)
 September 30,
    
    December 31,
    
    September 30,(in thousands, except share data)
    
    2008
    
    2007
    
    2007AssetsCash and interest bearing deposits with The Huntington National Bank
    
    $
    45,930
    
    
    $
    47,464
    
    
    $
    139,353Due from The Huntington National Bank
    
    
    82,165
    
    
    
    121,981
    
    
    
    76,476Loan participation interests:Commercial real estate
    
    
    3,554,080
    
    
    
    3,121,083
    
    
    
    3,259,808Consumer and residential real estate
    
    
    1,023,069
    
    
    
    1,217,956
    
    
    
    1,271,226Total loan participation interests
    
    
    4,577,149
    
    
    
    4,339,039
    
    
    
    4,531,034Allowance for loan participation losses
    
    
    (72,073
    )
    
    
    (62,275
    )
    
    
    (56,255
    )Net loan participation interests
    
    
    4,505,076
    
    
    
    4,276,764
    
    
    
    4,474,779Accrued income and other assets
    
    
    15,881
    
    
    
    19,665
    
    
    
    38,890Total assets
    
    $
    4,649,052
    
    
    $
    4,465,874
    
    
    $
    4,729,498Liabilities and shareholders equityLiabilitiesAllowance for unfunded loan participation commitments
    
    $
    3,423
    
    
    $
    3,856
    
    
    $
    4,125Dividends payable
    
    
    10,232
    
    
    
    
    
    
    
    23,246Other liabilities
    
    
    71
    
    
    
    59
    
    
    
    55Total liabilities
    
    
    13,726
    
    
    
    3,915
    
    
    
    27,426Shareholders EquityPreferred securities, Class A, 8.000% noncumulative, non-
exchangeable; $1,000 par and liquidation value per share;
1,000 shares authorized, issued and outstanding
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,000Preferred securities, Class B, variable-rate noncumulative and
conditionally exchangeable; $1,000 par and liquidation
value per share; authorized 500,000 shares; 400,000
shares issued and outstanding
    
    
    400,000
    
    
    
    400,000
    
    
    
    400,000Preferred securities, Class C, 7.875% noncumulative and
conditionally exchangeable; $25 par and liquidation
value; 2,000,000 shares authorized, issued, and outstanding
    
    
    50,000
    
    
    
    50,000
    
    
    
    50,000Preferred securities, Class D, variable-rate noncumulative and
conditionally exchangeable; $25 par and liquidation
value; 14,000,000 shares authorized, issued, and outstanding
    
    
    350,000
    
    
    
    350,000
    
    
    
    350,000Preferred securities, $25 par, 10,000,000 shares
authorized; no shares issued or outstanding
    
    
    
    
    
    
    
    
    
    
    Common stock  without par value; 14,000,000 shares authorized,
issued and outstanding
    
    
    3,660,959
    
    
    
    3,660,959
    
    
    
    3,694,753Retained earnings
    
    
    173,367
    
    
    
    
    
    
    
    206,319Total shareholders equity
    
    
    4,635,326
    
    
    
    4,461,959
    
    
    
    4,702,072Total liabilities and shareholders equity
    
    $
    4,649,052
    
    
    $
    4,465,874
    
    
    $
    4,729,498
 See notes to unaudited condensed consolidated financial statements.
 3




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Huntington Preferred Capital, Inc.
 
 Condensed Consolidated Statements of Income
 (Unaudited)
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,(in thousands)
    
    2008
    
    2007
    
    2008
    
    2007Interest and fee incomeInterest on loan participation interests:Commercial real estate
    
    
    44,375
    
    
    
    60,837
    
    
    
    131,457
    
    
    
    174,756Consumer and residential real estate
    
    
    17,454
    
    
    
    21,129
    
    
    
    55,403
    
    
    
    56,226Total loan participation interest income
    
    
    61,829
    
    
    
    81,966
    
    
    
    186,860
    
    
    
    230,982Fees from loan participation interests
    
    
    274
    
    
    
    216
    
    
    
    921
    
    
    
    617Interest on deposits with The Huntington National Bank
    
    
    830
    
    
    
    1,961
    
    
    
    4,788
    
    
    
    12,682Total interest and fee income
    
    
    62,933
    
    
    
    84,143
    
    
    
    192,569
    
    
    
    244,281Reduction in allowances for credit losses
    
    
    (7,437
    )
    
    
    (5,175
    )
    
    
    (13,661
    )
    
    
    (6,777
    )Interest income after reduction in allowances for credit
losses
    
    
    70,370
    
    
    
    89,318
    
    
    
    206,230
    
    
    
    251,058Non-interest income:Rental income
    
    
    17
    
    
    
    1,710
    
    
    
    50
    
    
    
    5,130Collateral fees
    
    
    744
    
    
    
    81
    
    
    
    2,253
    
    
    
    259Total non-interest income
    
    
    761
    
    
    
    1,791
    
    
    
    2,303
    
    
    
    5,389Non-interest expense:Servicing costs
    
    
    2,718
    
    
    
    2,971
    
    
    
    8,260
    
    
    
    8,125Other
    
    
    182
    
    
    
    1,088
    
    
    
    573
    
    
    
    3,334Total non-interest expense
    
    
    2,900
    
    
    
    4,059
    
    
    
    8,833
    
    
    
    11,459Income before provision for income taxes
    
    
    68,231
    
    
    
    87,050
    
    
    
    199,700
    
    
    
    244,988Provision for income taxes
    
    
    
    
    
    
    428
    
    
    
    
    
    
    
    1,239Net income
    
    $
    68,231
    
    
    $
    86,622
    
    
    $
    199,700
    
    
    $
    243,749Dividends declared on preferred securities
    
    
    (7,632
    )
    
    
    (12,456
    )
    
    
    (26,333
    )
    
    
    (37,430
    )Net income applicable to common shares
    
    $
    60,599
    
    
    $
    74,166
    
    
    $
    173,367
    
    
    $
    206,319
 See notes to unaudited condensed consolidated financial statements.
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Huntington Preferred Capital, Inc.
 
 Condensed Consolidated Statements of Changes in Shareholders Equity
 (Unaudited)
 Preferred, Class A
    
    Preferred, Class B
    
    Preferred, Class C(in thousands)
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    AmountNine Months Ended September 30, 2007:Balance, beginning of period
    
    
    1
    
    
    $
    1,000
    
    
    
    400
    
    
    $
    400,000
    
    
    
    2,000
    
    
    $
    50,000Comprehensive Income:Net incomeTotal comprehensive incomeBalance, end of the period
    
    
    1
    
    
    $
    1,000
    
    
    
    400
    
    
    $
    400,000
    
    
    
    2,000
    
    
    $
    50,000Nine Months Ended September 30, 2008:Balance, beginning of period
    
    
    1
    
    
    $
    1,000
    
    
    
    400
    
    
    $
    400,000
    
    
    
    2,000
    
    
    $
    50,000Comprehensive Income:Net incomeTotal comprehensive incomeBalance, end of the period
    
    
    1
    
    
    $
    1,000
    
    
    
    400
    
    
    $
    400,000
    
    
    
    2,000
    
    
    $
    50,000
 Preferred, Class D
    
    
    Preferred
    
    
    Common
    
    
    Retained(in thousands)
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Earnings
    
    
    TotalNine Months Ended September 30, 2007:Balance, beginning of period
    
    
    14,000
    
    
    $
    350,000
    
    
    
    
    
    
    $
    
    
    
    
    14,000
    
    
    $
    3,694,753
    
    
    $
    
    
    
    $
    4,495,753Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    243,749
    
    
    
    243,749Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    243,749Dividends declared on Class A preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (80
    )
    
    
    (80
    )Dividends declared on Class B preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,070
    )
    
    
    (16,070
    )Dividends declared on Class C preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,953
    )
    
    
    (2,953
    )Dividends declared on Class D preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,327
    )
    
    
    (18,327
    )Balance, end of the period
    
    
    14,000
    
    
    $
    350,000
    
    
    
    
    
    
    $
    
    
    
    
    14,000
    
    
    $
    3,694,753
    
    
    $
    206,319
    
    
    $
    4,702,072Nine Months Ended September 30, 2008:Balance, beginning of period
    
    
    14,000
    
    
    $
    350,000
    
    
    
    
    
    
    $
    
    
    
    
    14,000
    
    
    $
    3,660,959
    
    
    $
    
    
    
    $
    4,461,959Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    199,700
    
    
    
    199,700Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    199,700Dividends declared on Class A preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (80
    )
    
    
    (80
    )Dividends declared on Class B preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,152
    )
    
    
    (10,152
    )Dividends declared on Class C preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,953
    )
    
    
    (2,953
    )Dividends declared on Class D preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,148
    )
    
    
    (13,148
    )Balance, end of the period
    
    
    14,000
    
    
    $
    350,000
    
    
    
    
    
    
    $
    
    
    
    
    14,000
    
    
    $
    3,660,959
    
    
    $
    173,367
    
    
    $
    4,635,326
 See notes to unaudited condensed consolidated financial statements.
 5




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Huntington Preferred Capital, Inc.
 
 Condensed Consolidated Statements of Cash Flows
 (Unaudited)
 Nine Months EndedSeptember 30,(in thousands)
    
    2008
    
    2007Operating activitiesNet income
    
    $
    199,700
    
    
    $
    243,749Adjustments to reconcile net income to net
cash provided by operating activities:Reduction in allowances for credit losses
    
    
    (13,661
    )
    
    
    (6,777
    )Change in due to/from The Huntington National Bank
    
    
    7,775
    
    
    
    (1,236
    )Other, net
    
    
    5,918
    
    
    
    3,326Net cash provided by operating activities
    
    
    199,732
    
    
    
    239,062Investing activitiesParticipation interests acquired
    
    
    (2,182,061
    )
    
    
    (2,420,052
    )Sales and repayments of loans underlying participation interests
    
    
    1,996,896
    
    
    
    2,058,373Net cash used for investing activities
    
    
    (185,165
    )
    
    
    (361,679
    )Financing activitiesDividends paid on preferred securities
    
    
    (16,101
    )
    
    
    (14,184
    )Dividends paid on common stock
    
    
    
    
    
    
    (296,292
    )Return of capital to common shareholders
    
    
    
    
    
    
    (153,708
    )Net cash used for financing activities
    
    
    (16,101
    )
    
    
    (464,184
    )Decrease in cash and cash equivalents
    
    
    (1,534
    )
    
    
    (586,801
    )Cash and cash equivalents at beginning of period
    
    
    47,464
    
    
    
    726,154Cash and cash equivalents at end of period
    
    $
    45,930
    
    
    $
    139,353Supplemental information:Income taxes paid
    
    $
    
    
    
    $
    1,693Dividends and distributions declared, not paid
    
    
    10,232
    
    
    
    23,246Non cash change in loan participation activity with The Huntington National Bank
    
    
    (32,041
    )
    
    
    (59,575
    )
 See notes to unaudited condensed consolidated financial statements.
 6




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Notes to the Unaudited Condensed Consolidated Financial Statements
 Note 1  Organization
    Note 2  Basis of Presentation and New Accounting Pronouncements
      7




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FASB Statement No. 157, Fair Value Measurements (Statement No. 157)
 FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilitie s
(Statement No. 159)
 Note 3  Lending Concentrations and Participations in Non-Performing Assets and Past Due Loans
   September 30,
    
    December 31,
    
    September 30,(in thousands)
    
    2008
    
    2007
    
    2007Commercial real estate
    
    $
    59,701
    
    
    $
    42,060
    
    
    $
    49,391Consumer and residential real estate
    
    
    6,834
    
    
    
    4,136
    
    
    
    4,489Total participations in non-performing assets
    
    $
    66,535
    
    
    $
    46,196
    
    
    $
    53,880Participations in accruing loans past due 90
days or more
    
    $
    8,315
    
    
    $
    4,440
    
    
    $
    3,178
  8




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Note 4  Allowance for Credit Losses (ACL)
   Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,(in thousands)
    
    2008
    
    2007
    
    2008
    
    2007ALPL balance, beginning of period
    
    $
    66,876
    
    
    $
    57,074
    
    
    $
    62,275
    
    
    $
    48,703ALPL for loan participations acquired
    
    
    15,828
    
    
    
    6,906
    
    
    
    31,824
    
    
    
    21,880Net loan losses
    
    
    (2,347
    )
    
    
    (2,778
    )
    
    
    (8,798
    )
    
    
    (7,230
    )Provision reduction in ALPL
    
    
    (8,284
    )
    
    
    (4,947
    )
    
    
    (13,228
    )
    
    
    (7,098
    )ALPL balance, end of period
    
    $
    72,073
    
    
    $
    56,255
    
    
    $
    72,073
    
    
    $
    56,255AULPC balance, beginning of period
    
    $
    2,576
    
    
    $
    4,353
    
    
    $
    3,856
    
    
    $
    3,804Provision for (reduction in) AULPC
    
    
    847
    
    
    
    (228
    )
    
    
    (433
    )
    
    
    321AULPC balance, end of period
    
    $
    3,423
    
    
    $
    4,125
    
    
    $
    3,423
    
    
    $
    4,125Total ACL
    
    $
    75,496
    
    
    $
    60,380
    
    
    $
    75,496
    
    
    $
    60,380
  Note 5  Preferred Dividends
    9




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i.e.
 i.e.,
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,(in thousands)
    
    2008
    
    2007
    
    2008
    
    2007Class A preferred securities
    
    $
    
    
    
    $
    
    
    
    $
    80
    
    
    $
    80Class B preferred securities
    
    
    2,788
    
    
    
    5,360
    
    
    
    10,152
    
    
    
    16,070Class C preferred securities
    
    
    984
    
    
    
    984
    
    
    
    2,953
    
    
    
    2,953Class D preferred securities
    
    
    3,860
    
    
    
    6,112
    
    
    
    13,148
    
    
    
    18,327Total dividends declared
    
    $
    7,632
    
    
    $
    12,456
    
    
    $
    26,333
    
    
    $
    37,430
  Note 6  Related Party Transactions
    10




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January 1, 2007throughSeptember 30, 2008Commercial real estate
    
    
    0.125
    %Consumer
    
    
    0.650
    %Residential real estate
    
    
    0.267
    %
    Number ofCommon
    
    Number of Preferred SecuritiesShareholder:
    
    Shares
    
    Class A
    
    Class B
    
    Class C
    
    Class DHeld by related parties:HPC II
    
    
    4,550,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    HCF
    
    
    6,580,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Holdings
    
    
    2,851,333
    
    
    
    895
    
    
    
    
    
    
    
    
    
    
    
    14,000,000HPC Holdings-II, Inc.
    
    
    
    
    
    
    
    
    
    
    400,000
    
    
    
    
    
    
    
    Huntington (1)
    
    
    18,667
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total held by related parties
    
    
    14,000,000
    
    
    
    895
    
    
    
    400,000
    
    
    
    
    
    
    
    14,000,000Other shareholders
    
    
    
    
    
    
    105
    
    
    
    
    
    
    
    2,000,000
    
    
    
    Total shares outstanding
    
    
    14,000,000
    
    
    
    1,000
    
    
    
    400,000
    
    
    
    2,000,000
    
    
    
    14,000,000
 (1)
    
    Subsequent to September 30, 2008, all shares of HPCIs common stock held by
Huntington, were transferred to Holdings.
  11




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Note 7  Commitments and Contingencies
 /
   12




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Note 8  Segment Reporting
  13




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




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Critical Accounting Policies
  Use of Significant Estimates
  QUALIFICATION TESTS
    RESULTS OF OPERATIONS
  15




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Table 1  Quarterly Statements of Income
 2008
    
    2007
    
    
    3Q08 vs 3Q07(in thousands)
    
    Third
    
    Second
    
    First
    
    Fourth
    
    Third
    
    
    $ Chg
    
    % ChgInterest and fee incomeInterest on loan
participation interests:Commercial real estate
    
    $
    44,375
    
    
    $
    40,551
    
    
    $
    46,531
    
    
    $
    56,238
    
    
    $
    60,837
    
    
    
    $
    (16,462
    )
    
    
    (27.1
    )%Consumer and
residential real
estate
    
    
    17,454
    
    
    
    18,260
    
    
    
    19,689
    
    
    
    20,927
    
    
    
    21,129
    
    
    
    
    (3,675
    )
    
    
    (17.4
    )Total loan participation
interest income
    
    
    61,829
    
    
    
    58,811
    
    
    
    66,220
    
    
    
    77,165
    
    
    
    81,966
    
    
    
    
    (20,137
    )
    
    
    (24.6
    )Fees from loan participation
interests
    
    
    274
    
    
    
    333
    
    
    
    314
    
    
    
    162
    
    
    
    216
    
    
    
    
    58
    
    
    
    26.9Interest on deposits with 
The Huntington National Bank
    
    
    830
    
    
    
    2,082
    
    
    
    1,876
    
    
    
    3,203
    
    
    
    1,961
    
    
    
    
    (1,131
    )
    
    
    (57.7
    )Total interest and fee income
    
    
    62,933
    
    
    
    61,226
    
    
    
    68,410
    
    
    
    80,530
    
    
    
    84,143
    
    
    
    
    (21,210
    )
    
    
    (25.2
    )Provision for (reduction in)
allowances for credit losses
    
    
    (7,437
    )
    
    
    (5,079
    )
    
    
    (1,145
    )
    
    
    10,167
    
    
    
    (5,175
    )
    
    
    
    (2,262
    )
    
    
    (43.7
    )Interest income after (reduction in)
provision for allowances for credit
losses
    
    
    70,370
    
    
    
    66,305
    
    
    
    69,555
    
    
    
    70,363
    
    
    
    89,318
    
    
    
    
    (18,948
    )
    
    
    (21.2
    )Non-interest income:Rental income
    
    
    17
    
    
    
    16
    
    
    
    17
    
    
    
    1,710
    
    
    
    1,710
    
    
    
    
    (1,693
    )
    
    
    (99
    )Collateral fees
    
    
    744
    
    
    
    733
    
    
    
    776
    
    
    
    4,943
    
    
    
    81
    
    
    
    
    663
    
    
    
    N.M.Total non-interest income
    
    
    761
    
    
    
    749
    
    
    
    793
    
    
    
    6,653
    
    
    
    1,791
    
    
    
    
    (1,030
    )
    
    
    (57.5
    )Non-interest expense:Servicing costs
    
    
    2,718
    
    
    
    2,707
    
    
    
    2,835
    
    
    
    2,955
    
    
    
    2,971
    
    
    
    
    (253
    )
    
    
    (8.5
    )Other
    
    
    182
    
    
    
    245
    
    
    
    146
    
    
    
    1,173
    
    
    
    1,088
    
    
    
    
    (906
    )
    
    
    (83.3
    )Total non-interest expense
    
    
    2,900
    
    
    
    2,952
    
    
    
    2,981
    
    
    
    4,128
    
    
    
    4,059
    
    
    
    
    (1,159
    )
    
    
    (28.6
    )Income before provision for income
taxes
    
    
    68,231
    
    
    
    64,102
    
    
    
    67,367
    
    
    
    72,888
    
    
    
    87,050
    
    
    
    
    (18,819
    )
    
    
    (21.6
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    378
    
    
    
    428
    
    
    
    
    (428
    )
    
    
    N.M.Net income
    
    $
    68,231
    
    
    $
    64,102
    
    
    $
    67,367
    
    
    $
    72,510
    
    
    $
    86,622
    
    
    
    $
    (18,391
    )
    
    
    (21.2
    )Dividends declared on preferred
securities
    
    
    (7,632
    )
    
    
    (7,439
    )
    
    
    (11,262
    )
    
    
    (12,213
    )
    
    
    (12,456
    )
    
    
    
    4,824
    
    
    
    38.7Net income applicable to common
shares(1)
    
    $
    60,599
    
    
    $
    56,663
    
    
    $
    56,105
    
    
    $
    60,297
    
    
    $
    74,166
    
    
    
    $
    (13,567
    )
    
    
    (18.3
    )%
 (1)
    
    All of HPCIs common stock is owned by Huntington, HPCII, HCF, and Holdings and,
therefore, net income per share is not presented.N.M. - Not Meaningful.
 16




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##### Table of Contents



Table 2  Year-To-Date Statements of Income
 Nine Months EndedSeptember 30,
    
    
    2008 vs 2007(in thousands)
    
    2008
    
    2007
    
    
    $ Chg
    
    % ChgInterest and fee incomeInterest on loan participation interests:Commercial real estate
    
    $
    131,457
    
    
    $
    174,756
    
    
    
    $
    (43,299
    )
    
    
    (24.8
    )%Consumer and residential real estate
    
    
    55,403
    
    
    
    56,226
    
    
    
    
    (823
    )
    
    
    (1.5
    )Total loan participation interest income
    
    
    186,860
    
    
    
    230,982
    
    
    
    
    (44,122
    )
    
    
    (19.1
    )Fees from loan participation interests
    
    
    921
    
    
    
    617
    
    
    
    
    304
    
    
    
    49.3Interest on deposits with The Huntington National
Bank
    
    
    4,788
    
    
    
    12,682
    
    
    
    
    (7,894
    )
    
    
    (62.2
    )Total interest and fee income
    
    
    192,569
    
    
    
    244,281
    
    
    
    
    (51,712
    )
    
    
    (21.2
    )Reduction in allowances for credit losses
    
    
    (13,661
    )
    
    
    (6,777
    )
    
    
    
    (6,884
    )
    
    
    N.M.Interest income after reduction in allowances
for credit losses
    
    
    206,230
    
    
    
    251,058
    
    
    
    
    (44,828
    )
    
    
    (17.9
    )Non-interest income:Rental income
    
    
    50
    
    
    
    5,130
    
    
    
    
    (5,080
    )
    
    
    (99.0
    )Collateral fees
    
    
    2,253
    
    
    
    259
    
    
    
    
    1,994
    
    
    
    N.M.Total non-interest income
    
    
    2,303
    
    
    
    5,389
    
    
    
    
    (3,086
    )
    
    
    (57.3
    )Non-interest expense:Servicing costs
    
    
    8,260
    
    
    
    8,125
    
    
    
    
    135
    
    
    
    1.7Other
    
    
    573
    
    
    
    3,334
    
    
    
    
    (2,761
    )
    
    
    (82.8
    )Total non-interest expense
    
    
    8,833
    
    
    
    11,459
    
    
    
    
    (2,626
    )
    
    
    (22.9
    )Income before provision for income taxes
    
    
    199,700
    
    
    
    244,988
    
    
    
    
    (45,288
    )
    
    
    (18.5
    )Provision for income taxes
    
    
    
    
    
    
    1,239
    
    
    
    
    (1,239
    )
    
    
    N.M.Net income
    
    $
    199,700
    
    
    $
    243,749
    
    
    
    $
    (44,049
    )
    
    
    (18.1
    )%Dividends declared on preferred securities
    
    
    (26,333
    )
    
    
    (37,430
    )
    
    
    
    11,097
    
    
    
    29.6Net income applicable to common shares(1)
    
    $
    173,367
    
    
    $
    206,319
    
    
    
    $
    (32,952
    )
    
    
    (16.0
    )%
 
 (1)
    
    All of HPCIs common stock is owned by Huntington, HPCII, HCF and Holdings and
therefore, net income per share is not presented.N.M.  Not Meaningful. 17




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Interest and Fee Income
   Table 3  Interest and Fee Income
 Three Months Ended September 30,2008
    
    2007Average
    
    
    
    
    
    
    
    
    
    Average(in millions)
    
    Balance
    
    Income(1)
    
    Yield
    
    Balance
    
    Income(1)
    
    YieldLoan participation interests:Commercial real estate
    
    $
    3,459.9
    
    
    $
    44.6
    
    
    
    5.12
    %
    
    $
    3,287.9
    
    
    $
    60.9
    
    
    
    7.35
    %Consumer and residential real estate
    
    
    1,045.5
    
    
    
    17.5
    
    
    
    6.68
    
    
    
    1,260.7
    
    
    
    21.2
    
    
    
    6.69Total loan participations
    
    
    4,505.4
    
    
    
    62.1
    
    
    
    5.48
    
    
    
    4,548.6
    
    
    
    82.1
    
    
    
    7.17Interest bearing deposits in the Bank
    
    
    162.5
    
    
    
    0.8
    
    
    
    2.00
    
    
    
    145.1
    
    
    
    2.0
    
    
    
    5.29Total
    
    $
    4,667.9
    
    
    $
    62.9
    
    
    
    5.36
    %
    
    $
    4,693.7
    
    
    $
    84.1
    
    
    
    7.11
    %
 
 (1)
    
    Income includes interest and fees. Table 4  Year-To-Date Interest and Fee Income
 Nine Months Ended September 30,2008
    
    2007Average
    
    
    
    
    
    
    
    
    
    Average(in millions)
    
    Balance
    
    Income(1)
    
    Yield
    
    Balance
    
    Income(1)
    
    YieldLoan participation interests:Commercial real estate
    
    $
    3,212.5
    
    
    $
    132.0
    
    
    
    5.49
    %
    
    $
    3,174.2
    
    
    $
    175.0
    
    
    
    7.37
    %Consumer and residential real estate
    
    
    1,112.2
    
    
    
    55.8
    
    
    
    6.70
    
    
    
    1,135.7
    
    
    
    56.6
    
    
    
    6.66Total loan participations
    
    
    4,324.7
    
    
    
    187.8
    
    
    
    5.80
    
    
    
    4,309.9
    
    
    
    231.6
    
    
    
    7.18Interest bearing deposits in the Bank
    
    
    261.1
    
    
    
    4.8
    
    
    
    2.41
    
    
    
    318.2
    
    
    
    12.7
    
    
    
    5.26Total
    
    $
    4,585.8
    
    
    $
    192.6
    
    
    
    5.61
    %
    
    $
    4,628.1
    
    
    $
    244.3
    
    
    
    7.05
    %
 
 (1)
    
    Income includes interest and fees.  18




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##### Table of Contents



Provision for (reduction in) allowance for credit losses
  Non-Interest Income and Non-Interest Expense
 (See Note 7 to the unaudited condensed
consolidated financial statements for more information regarding use of HPCIs assets as collateral
for the Banks advances from the FHLB.)
  January 1, 2007throughSeptember 30, 2008Commercial real estate
    
    
    0.125
    %Consumer
    
    
    0.650
    %Residential real estate
    
    
    0.267
    %
  19




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##### Table of Contents



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




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##### Table of Contents



Table 5  Commercial Real Estate Loans by Property Type and Borrower Location
 At September 30, 2008Geographic RegionTotal
    
    Percent(in thousands of dollars)
    
    Indiana
    
    Kentucky
    
    Michigan
    
    Ohio
    
    Other
    
    Amount
    
    of TotalIndustrial and warehouse
    
    $
    44,302
    
    
    $
    18,650
    
    
    $
    214,791
    
    
    $
    410,081
    
    
    $
    66,386
    
    
    $
    754,210
    
    
    
    21.2
    %Retail properties
    
    
    73,921
    
    
    
    45,798
    
    
    
    84,557
    
    
    
    417,146
    
    
    
    119,831
    
    
    
    741,253
    
    
    
    20.9Office
    
    
    35,241
    
    
    
    20,531
    
    
    
    134,569
    
    
    
    319,037
    
    
    
    77,893
    
    
    
    587,271
    
    
    
    16.5Raw land and other land
uses
    
    
    32,954
    
    
    
    14,036
    
    
    
    94,872
    
    
    
    208,368
    
    
    
    35,117
    
    
    
    385,347
    
    
    
    10.8Single family home
builders
    
    
    19,376
    
    
    
    6,278
    
    
    
    77,746
    
    
    
    185,215
    
    
    
    62,921
    
    
    
    351,536
    
    
    
    9.9Multi family
    
    
    84,580
    
    
    
    30,394
    
    
    
    20,905
    
    
    
    114,197
    
    
    
    24,103
    
    
    
    274,179
    
    
    
    7.7Health care
    
    
    1,039
    
    
    
    184
    
    
    
    6,272
    
    
    
    107,785
    
    
    
    17,744
    
    
    
    133,024
    
    
    
    3.8Hotel
    
    
    13,497
    
    
    
    
    
    
    
    23,220
    
    
    
    11,902
    
    
    
    323
    
    
    
    48,942
    
    
    
    1.4Other
    
    
    10,588
    
    
    
    3,175
    
    
    
    69,681
    
    
    
    140,679
    
    
    
    54,195
    
    
    
    278,318
    
    
    
    7.8Total
    
    $
    315,498
    
    
    $
    139,046
    
    
    $
    726,613
    
    
    $
    1,914,410
    
    
    $
    458,513
    
    
    $
    3,554,080
    
    
    
    100.0
    %
 Consumer Credit
   Allowance for Credit Losses (ACL)
  21




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Table 6  Allowances for Credit Loss Activity
 2008
    
    2007(in thousands)
    
    Third
    
    Second
    
    First
    
    Fourth
    
    ThirdALPL balance, beginning of period
    
    $
    66,876
    
    
    $
    63,799
    
    
    $
    62,275
    
    
    $
    56,255
    
    
    $
    57,074Allowance of loan participations acquired
    
    
    15,828
    
    
    
    12,123
    
    
    
    3,873
    
    
    
    4,650
    
    
    
    6,906Net loan lossesCommercial real estate
    
    
    (179
    )
    
    
    (2,007
    )
    
    
    (1,197
    )
    
    
    (7,668
    )
    
    
    (1,643
    )Consumer and residential real estate
    
    
    (2,168
    )
    
    
    (1,772
    )
    
    
    (1,475
    )
    
    
    (1,398
    )
    
    
    (1,135
    )Total net loan losses
    
    
    (2,347
    )
    
    
    (3,779
    )
    
    
    (2,672
    )
    
    
    (9,066
    )
    
    
    (2,778
    )Provision for (reduction in) ALPL
    
    
    (8,284
    )
    
    
    (5,267
    )
    
    
    323
    
    
    
    10,436
    
    
    
    (4,947
    )ALPL balance, end of period
    
    $
    72,073
    
    
    $
    66,876
    
    
    $
    63,799
    
    
    $
    62,275
    
    
    $
    56,255AULPC balance, beginning of period
    
    $
    2,576
    
    
    $
    2,388
    
    
    $
    3,856
    
    
    $
    4,125
    
    
    $
    4,353Provision for (reduction in) AULPC
    
    
    847
    
    
    
    188
    
    
    
    (1,468
    )
    
    
    (269
    )
    
    
    (228
    )AULPC balance, end of period
    
    $
    3,423
    
    
    $
    2,576
    
    
    $
    2,388
    
    
    $
    3,856
    
    
    $
    4,125Total Allowance for Credit Losses
    
    $
    75,496
    
    
    $
    69,452
    
    
    $
    66,187
    
    
    $
    66,131
    
    
    $
    60,380ALPL as a % of total participation interestsTransaction reserve
    
    
    1.32
    %
    
    
    1.29
    %
    
    
    1.30
    %
    
    
    1.24
    %
    
    
    1.05
    %Economic reserve
    
    
    0.25
    
    
    
    0.24
    
    
    
    0.22
    
    
    
    0.20
    
    
    
    0.19Total
    
    
    1.57
    %
    
    
    1.53
    %
    
    
    1.52
    %
    
    
    1.44
    %
    
    
    1.24
    %ACL as a % of total participation interests
    
    
    1.65
    
    
    
    1.59
    
    
    
    1.58
    
    
    
    1.52
    
    
    
    1.33
 Nine Months EndedSeptember 30,(in thousands)
    
    2008
    
    2007ALPL balance, beginning of period
    
    $
    62,275
    
    
    $
    48,703Allowance for loan participations acquired
    
    
    31,824
    
    
    
    21,880Net loan lossesCommercial real estate
    
    
    (3,383
    )
    
    
    (4,333
    )Consumer and residential real estate
    
    
    (5,415
    )
    
    
    (2,897
    )Total net loan losses
    
    
    (8,798
    )
    
    
    (7,230
    )Reduction in ALPL
    
    
    (13,228
    )
    
    
    (7,098
    )ALPL balance, end of period
    
    $
    72,073
    
    
    $
    56,255AULPC balance, beginning of period
    
    $
    3,856
    
    
    $
    3,804Provision for (reduction in) AULPC
    
    
    (433
    )
    
    
    321AULPC balance, end of period
    
    $
    3,423
    
    
    $
    4,125Total Allowance for Credit Losses
    
    $
    75,496
    
    
    $
    60,380
  22




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##### Table of Contents



Non-Performing Assets (NPAs)
   Table 7  Quarterly Non-Performing Assets
 2008
    
    2007(in thousands)
    
    Third
    
    Second
    
    First
    
    Fourth
    
    ThirdParticipation interests in non-accrual loansCommercial real estate
    
    $
    59,701
    
    
    $
    52,406
    
    
    $
    45,827
    
    
    $
    42,060
    
    
    $
    49,391Consumer and residential real
estate
    
    
    6,834
    
    
    
    6,063
    
    
    
    4,841
    
    
    
    4,136
    
    
    
    4,489Total Non-Performing Assets
    
    $
    66,535
    
    
    $
    58,469
    
    
    $
    50,668
    
    
    $
    46,196
    
    
    $
    53,880Participations in Accruing Loans
Past Due 90 Days or More
    
    $
    8,315
    
    
    $
    6,214
    
    
    $
    5,421
    
    
    $
    4,440
    
    
    $
    3,178NPAs as a % of total
participation interests
    
    
    1.45
    %
    
    
    1.34
    %
    
    
    1.21
    %
    
    
    1.06
    %
    
    
    1.19
    %ALPL as a % of NPAs
    
    
    108
    
    
    
    114
    
    
    
    126
    
    
    
    135
    
    
    
    104ACL as a % of NPAs
    
    
    113
    
    
    
    119
    
    
    
    131
    
    
    
    143
    
    
    
    112
   23




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##### Table of Contents



MARKET RISK
     LIQUIDITY AND CAPITAL RESOURCES
   24




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##### Table of Contents



Table 8  Regulatory Capital Ratios
 2008
    
    2007Third
    
    Second
    
    First
    
    Fourth
    
    ThirdTier 1 Leverage Ratio (5.00% well-capitalized)
    
    
    6.36
    %
    
    
    6.37
    %
    
    
    6.24
    %
    
    
    5.99
    %
    
    
    6.23
    %Tier 1 Risk-based Capital Ratio (6.00%
well-capitalized)
    
    
    7.01
    
    
    
    7.10
    
    
    
    6.89
    
    
    
    6.64
    
    
    
    6.99Total Risk-based Capital Ratio (10.00%
well-capitalized)
    
    
    10.25
    
    
    
    10.32
    
    
    
    10.39
    
    
    
    10.17
    
    
    
    10.42
   25




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##### Table of Contents



Item 3. Quantitative And Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
   
 Item 4T. Controls and Procedures
  
 PART II. OTHER INFORMATION
  
 Item 6. Exhibits
  http://www.sec.gov http://www.huntington.com
  3.1.
    
    Amended and Restated Articles of Incorporation (previously
filed as Exhibit 3(a)(ii) to Amendment No. 4 to Registration Statement of Form
S-11 (File No. 333-61182), filed with the Securities and Exchange Commission on
October 12, 2001, and incorporated herein by reference.)3.2.
    
    Code of Regulations (previously filed as Exhibit 3(b) to the
Registrants Registration Statement of Form S-11 (File No. 333-61182), filed
with the Securities and Exchange Commission on May 17, 2001, and incorporated
herein by reference.)
 26




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##### Table of Contents



4.1
    
    Specimen of certificate representing Class C preferred
securities, previously filed as Exhibit 4 to the Registrants Amendment No. 1
to Registration Statement of Form S-11 (File No. 333-61182), filed with the Securities and Exchange Commission on
May 31, 2001, and incorporated herein by reference.31.1.
    
    Rule 13a  14(a) Certification  President (chief executive officer).31.2.
    
    Rule 13a  14(a) Certification  Vice President (chief financial officer).32.1.
    
    Section 1350 Certification  President (chief executive officer).32.2.
    
    Section 1350 Certification  Vice President (chief financial officer).99.1.
    
    Unaudited Condensed Consolidated Financial Statements of
Huntington Bancshares Incorporated as of and for the three and nine month
periods ended September 30, 2008 and 2007.
 27




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##### Table of Contents



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