##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY PERIOD ENDED June 30, 2005
 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
  o þ




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HUNTINGTON PREFERRED CAPITAL, INC.
  Part I. Financial InformationItem 1. Financial Statements (Unaudited)Condensed
Consolidated Balance Sheets 
At June 30, 2005, December 31, 2004, and June 30, 2004
    
    
    3Condensed Consolidated Statements of Income 
For the three-months and six-months ended June 30, 2005 and 2004
    
    
    4Condensed Consolidated Statements of Changes in Shareholders Equity 
For the six-months ended June 30, 2005 and 2004
    
    
    5Condensed Consolidated Statements of Cash Flows 
For the six-months ended June 30, 2005 and 2004
    
    
    6Notes to 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
    
    
    25Item 4. Controls and Procedures
    
    
    25Part II. Other InformationItem 4. Submission of Matters to a Vote of Shareholders
    
    
    26Item 6. Exhibits
    
    
    26Signatures
    
    
    28EX-10.EEX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



Part I. Financial Information
 
 Item 1. Financial Statements
 Huntington Preferred Capital, Inc.
 
 Condensed Consolidated Balance Sheets
 June 30,
    
    December 31,
    
    June 30,(in thousands of dollars, except share data)
    
    2005
    
    2004
    
    2004(Unaudited)
    
    
    
    
    
    (Unaudited)AssetsCash with The Huntington National Bank
    
    $
    62,980
    
    
    $
    48,253
    
    
    $
    234,870Interest bearing deposits with The Huntington National Bank
    
    
    395,500
    
    
    
    752,000
    
    
    
    150,000Due from The Huntington National Bank
    
    
    1,812
    
    
    
    175
    
    
    
    1,315Loan participation interests:Commercial
    
    
    72,310
    
    
    
    106,179
    
    
    
    140,424Commercial real estate
    
    
    3,614,633
    
    
    
    3,738,930
    
    
    
    4,060,435Consumer
    
    
    896,201
    
    
    
    819,250
    
    
    
    723,410Residential real estate
    
    
    188,407
    
    
    
    224,914
    
    
    
    254,600Total loan participation interests
    
    
    4,771,551
    
    
    
    4,889,273
    
    
    
    5,178,869Allowance for loan losses
    
    
    (60,987
    )
    
    
    (61,146
    )
    
    
    (72,524
    )Net loan participation interests
    
    
    4,710,564
    
    
    
    4,828,127
    
    
    
    5,106,345Premises and equipment
    
    
    23,862
    
    
    
    26,635
    
    
    
    29,364Accrued income and other assets
    
    
    19,573
    
    
    
    18,401
    
    
    
    16,630Total Assets
    
    $
    5,214,291
    
    
    $
    5,673,591
    
    
    $
    5,538,524LiabilitiesAllowance for unfunded loan participation commitments
    
    $
    4,650
    
    
    $
    3,765
    
    
    $
    3,892Dividends and distributions payable
    
    
    9,922
    
    
    
    600,000
    
    
    
    2,340Other liabilities
    
    
    265
    
    
    
    50
    
    
    
    156Total Liabilities
    
    
    14,837
    
    
    
    603,815
    
    
    
    6,388Shareholders 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
    
    
    4,268,776
    
    
    
    4,268,776
    
    
    
    4,604,978Retained earnings
    
    
    129,678
    
    
    
    
    
    
    
    126,158Total Shareholders Equity
    
    
    5,199,454
    
    
    
    5,069,776
    
    
    
    5,532,136Total Liabilities and Shareholders Equity
    
    $
    5,214,291
    
    
    $
    5,673,591
    
    
    $
    5,538,524
 See notes to unaudited condensed consolidated financial statements.
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Huntington Preferred Capital, Inc.
 
 Condensed Consolidated Statements of Income  (Unaudited)
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,(in thousands of dollars)
    
    2005
    
    2004
    
    2005
    
    2004Interest and fee incomeInterest on loan participation interests:Commercial
    
    $
    1,264
    
    
    $
    1,901
    
    
    $
    2,644
    
    
    $
    3,995Commercial real estate
    
    
    51,982
    
    
    
    44,751
    
    
    
    100,737
    
    
    
    89,811Consumer
    
    
    14,687
    
    
    
    12,969
    
    
    
    28,612
    
    
    
    24,982Residential real estate
    
    
    2,647
    
    
    
    3,475
    
    
    
    5,543
    
    
    
    7,158Total loan participation interest income
    
    
    70,580
    
    
    
    63,096
    
    
    
    137,536
    
    
    
    125,946Fees from loan participation interests
    
    
    491
    
    
    
    652
    
    
    
    1,119
    
    
    
    1,263Interest on deposits with The Huntington National Bank
    
    
    2,570
    
    
    
    198
    
    
    
    4,043
    
    
    
    487Total interest and fee income
    
    
    73,641
    
    
    
    63,946
    
    
    
    142,698
    
    
    
    127,696Reduction in allowances for credit losses
    
    
    (3,840
    )
    
    
    (9,301
    )
    
    
    (7,281
    )
    
    
    (11,564
    )Interest income after reduction in allowance for credit
losses
    
    
    77,481
    
    
    
    73,247
    
    
    
    149,979
    
    
    
    139,260Non-interest income:Rental income
    
    
    1,591
    
    
    
    1,853
    
    
    
    3,181
    
    
    
    3,322Collateral fees
    
    
    965
    
    
    
    192
    
    
    
    1,146
    
    
    
    389Total non-interest income
    
    
    2,556
    
    
    
    2,045
    
    
    
    4,327
    
    
    
    3,711Non-interest expense:Servicing costs
    
    
    2,899
    
    
    
    2,199
    
    
    
    5,762
    
    
    
    4,335Depreciation and amortization
    
    
    1,102
    
    
    
    1,346
    
    
    
    2,239
    
    
    
    2,699Loss on disposal of fixed assets
    
    
    388
    
    
    
    26
    
    
    
    533
    
    
    
    63Other
    
    
    169
    
    
    
    374
    
    
    
    409
    
    
    
    479Total non-interest expense
    
    
    4,558
    
    
    
    3,945
    
    
    
    8,943
    
    
    
    7,576Income before provision for income taxes
    
    
    75,479
    
    
    
    71,347
    
    
    
    145,363
    
    
    
    135,395Provision for income taxes
    
    
    25
    
    
    
    84
    
    
    
    124
    
    
    
    107Net income
    
    $
    75,454
    
    
    $
    71,263
    
    
    $
    145,239
    
    
    $
    135,288Dividends declared on preferred securities
    
    
    (8,256
    )
    
    
    (4,488
    )
    
    
    (15,561
    )
    
    
    (9,130
    )Net income applicable to common shares
    
    $
    67,198
    
    
    $
    66,775
    
    
    $
    129,678
    
    
    $
    126,158
 See notes to unaudited condensed consolidated financial statements.
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Huntington Preferred Capital, Inc.
 
 Condensed Consolidated Statements of Changes in Shareholders Equity
 Preferred, Class A
    
    Preferred, Class B
    
    Preferred, Class C(in thousands)
    
    Shares
    
    Securities
    
    Shares
    
    Securities
    
    Shares
    
    SecuritiesSix Months Ended June 30, 2004 (Unaudited):Balance, beginning of period
    
    
    1
    
    
    $
    1,000
    
    
    
    400
    
    
    $
    400,000
    
    
    
    2,000
    
    
    $
    50,000Comprehensive Income:Net incomeTotal comprehensive incomeBalance, end of period (Unaudited)
    
    
    1
    
    
    $
    1,000
    
    
    
    400
    
    
    $
    400,000
    
    
    
    2,000
    
    
    $
    50,000Six Months Ended June 30, 2005 (Unaudited):Balance, beginning of period
    
    
    1
    
    
    $
    1,000
    
    
    
    400
    
    
    $
    400,000
    
    
    
    2,000
    
    
    $
    50,000Comprehensive Income:Net incomeTotal comprehensive incomeBalance, end of period (Unaudited)
    
    
    1
    
    
    $
    1,000
    
    
    
    400
    
    
    $
    400,000
    
    
    
    2,000
    
    
    $
    50,000
 Preferred, Class D
    
    Preferred
    
    Common
    
    Retained(in thousands)
    
    Shares
    
    Securities
    
    Shares
    
    Securities
    
    Shares
    
    Stock
    
    Earnings
    
    TotalSix Months Ended June 30, 2004 (Unaudited):Balance, beginning of period
    
    
    14,000
    
    
    $
    350,000
    
    
    
    
    
    
    $
    
    
    
    
    14,000
    
    
    $
    4,604,978
    
    
    $
    
    
    
    $
    5,405,978Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    135,288
    
    
    
    135,288Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    135,288Dividends declared on Class A preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (80
    )
    
    
    (80
    )Dividends declared on Class B preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,260
    )
    
    
    (2,260
    )Dividends declared on Class C preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,969
    )
    
    
    (1,969
    )Dividends declared on Class D preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,821
    )
    
    
    (4,821
    )Balance, end of period (Unaudited)
    
    
    14,000
    
    
    $
    350,000
    
    
    
    
    
    
    $
    
    
    
    
    14,000
    
    
    $
    4,604,978
    
    
    $
    126,158
    
    
    $
    5,532,136Six Months Ended June 30, 2005 (Unaudited):Balance, beginning of period
    
    
    14,000
    
    
    $
    350,000
    
    
    
    
    
    
    $
    
    
    
    
    14,000
    
    
    $
    4,268,776
    
    
    $
    
    
    
    $
    5,069,776Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    145,239
    
    
    
    145,239Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    145,239Dividends declared on Class A preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (80
    )
    
    
    (80
    )Dividends declared on Class B preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,690
    )
    
    
    (5,690
    )Dividends declared on Class C preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,969
    )
    
    
    (1,969
    )Dividends declared on Class D preferred securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,822
    )
    
    
    (7,822
    )Balance, end of period (Unaudited)
    
    
    14,000
    
    
    $
    350,000
    
    
    
    
    
    
    $
    
    
    
    
    14,000
    
    
    $
    4,268,776
    
    
    $
    129,678
    
    
    $
    5,199,454
 See notes to unaudited condensed consolidated financial statements.
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Huntington Preferred Capital, Inc.
 
 Condensed Consolidated Statements of Cash Flows  (Unaudited)
 Six Months EndedJune 30,(in thousands of dollars)
    
    2005
    
    2004Operating ActivitiesNet Income
    
    $
    145,239
    
    
    $
    135,288Adjustments to reconcile net income to net
cash provided by operating activities:Reduction of allowances for credit losses
    
    
    (7,281
    )
    
    
    (11,564
    )Depreciation and amortization
    
    
    2,239
    
    

    
    2,699Deferred income tax benefit
    
    
    (216
    )
    
    
    (472
    )Loss on disposal of fixed assets
    
    
    533
    
    
    
    63(Increase) decrease in due from The Huntington National Bank
    
    
    (1,637
    )
    
    
    12,337Increase in other liabilities
    
    
    215
    
    
    
    26Other, net operating activities
    
    
    (176
    )
    
    
    2,896Net Cash Provided by Operating Activities
    
    
    138,916
    
    
    
    141,273Investing ActivitiesParticipation interests acquired
    
    
    (1,599,095
    )
    
    
    (2,411,066
    )Sales and repayments of loans underlying
participation interests
    
    
    1,724,045
    
    
    
    2,537,368Net Cash Provided by Investing Activities
    
    
    124,950
    
    
    
    126,302Financing ActivitiesDividends paid on preferred securities
    
    
    (5,639
    )
    
    
    (6,790
    )Dividends paid on common stock
    
    
    (263,798
    )
    
    
    Return of capital to common shareholders
    
    
    (336,202
    )
    
    
    Net Cash Used for Financing Activities
    
    
    (605,639
    )
    
    
    (6,790
    )Change in Cash and Cash Equivalents
    
    
    (341,773
    )
    
    
    260,785Cash and Cash Equivalents:at Beginning of Year
    
    
    800,253
    
    
    
    124,085at End of Period
    
    $
    458,480
    
    
    $
    384,870Supplemental information:Income taxes paid
    
    $
    
    
    
    $
    690Dividends declared, not paid
    
    
    9,922
    
    
    
    2,340
 See notes to unaudited condensed consolidated financial statements.
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Notes to the Unaudited Condensed Consolidated Financial Statements
 Note 1  Organization
  
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Note 2  Basis of Presentation and New Accounting Pronouncements
     AICPA Statement of Position No. 03-3, Accounting for Certain Loans or Debt Securities Acquired in a
Transfer (SOP 03-3):
 FASB
Interpretation No. 47, Accounting for Conditional
Asset Retirement Obligations (FIN 47)  Accounting for Asset Retirement Obligations
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Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
 Note 3  Participations in Non-Performing Assets and Past Due Loans
  June 30,
    
    December 31,
    
    June 30,(in thousands of dollars)
    
    2005
    
    2004
    
    2004Commercial
    
    $
    1,069
    
    
    $
    425
    
    
    $
    3,988Commercial real estate
    
    
    17,965
    
    
    
    6,990
    
    
    
    9,218Consumer (1)
    
    
    2,252
    
    
    
    2,692
    
    
    
    Residential real estate
    
    
    4,652
    
    
    
    4,205
    
    
    
    4,900Total Participations in Non-Performing Assets
    
    $
    25,938
    
    
    $
    14,312
    
    
    $
    18,106Participations in Accruing Loans Past Due 90
Days or More (1)
    
    $
    12,036
    
    
    $
    11,686
    
    
    $
    10,255
 (1) Beginning September 30, 2004, HPCI adopted a new policy of placing consumer home equity loan
participations on non-accrual status when they exceed 180 days past due. Prior practice was to continue to accrue
interest until collection or resolution of the loan participations. Such loan participations were previously classified
as accruing loans past due 90 days or more.  Note 4  Allowances for Credit Losses (ACL)
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,(in thousands of dollars)
    
    2005
    
    2004
    
    2005
    
    2004ALL balance, beginning of period
    
    $
    62,461
    
    
    $
    79,842
    
    
    $
    61,146
    
    
    $
    84,532Allowance for loan participations acquired
    
    
    6,880
    
    
    
    3,601
    
    
    
    12,521
    
    
    
    9,178Net loan losses
    
    
    (3,522
    )
    
    
    (2,051
    )
    
    
    (4,514
    )
    
    
    (5,730
    )Reduction in ALL
    
    
    (3,894
    )
    
    
    (8,868
    )
    
    
    (7,228
    )
    
    
    (15,456
    )Economic reserve transfer to AULPC
    
    
    (938
    )
    
    
    
    
    
    
    (938
    )
    
    
    ALL balance, end of period
    
    $
    60,987
    
    
    $
    72,524
    
    
    $
    60,987
    
    
    $
    72,524AULPC balance, beginning of period
    
    $
    3,658
    
    
    $
    4,325
    
    
    $
    3,765
    
    
    $
    Provision for (reduction in) AULPC
    
    
    54
    
    
    
    (433
    )
    
    
    (53
    )
    
    
    3,892Economic reserve transfer from ALL
    
    
    938
    
    
    
    
    
    
    
    938
    
    
    
    AULPC balance, end of period
    
    $
    4,650
    
    
    $
    3,892
    
    
    $
    4,650
    
    
    $
    3,892Total ACL
    
    $
    65,637
    
    
    $
    76,416
    
    
    $
    65,637
    
    
    $
    76,416
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Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
 Note 5  Preferred Dividends
   i.e.
 i.e.,
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,(in thousands of dollars)
    
    2005
    
    2004
    
    2005
    
    2004Class A preferred securities
    
    $
    
    
    
    $
    
    
    
    $
    80
    
    
    $
    80Class B preferred securities
    
    
    3,120
    
    
    
    1,110
    
    
    
    5,690
    
    
    
    2,260Class C preferred securities
    
    
    984
    
    
    
    984
    
    
    
    1,969
    
    
    
    1,969Class D preferred securities
    
    
    4,152
    
    
    
    2,394
    
    
    
    7,822
    
    
    
    4,821Total dividends declared
    
    $
    8,256
    
    
    $
    4,488
    
    
    $
    15,561
    
    
    $
    9,130
 Note 6  Related Party Transactions
  10




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Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
    
    
    0.125% of the underlying commercial and commercial real estate loans,
    
    0.750% of the underlying consumer loans, and
    
    0.267% of the underlying residential real estate loans.
  
    
    0.125% of the underlying commercial and commercial real estate loans,
    
    0.320% of the underlying consumer loans, and
    
    0.2997% of the underlying residential real estate loans.
    11




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Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
 Number ofCommon
    
    
    Number of Preferred SecuritiesShareholder:
    
    Shares
    
    
    Class A
    
    
    Class B
    
    
    Class C
    
    
    Class DHeld by related parties:HPC II
    
    
    4,550,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    HCF
    
    
    6,580,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Holdings
    
    
    2,851,333
    
    
    
    895
    
    
    
    
    
    
    
    
    
    
    
    14,000,000HPC Holdings-II, Inc.
    
    
    
    
    
    
    
    
    
    
    400,000
    
    
    
    
    
    
    
    Huntington
    
    
    18,667
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total held by related parties
    
    
    14,000,000
    
    
    
    895
    
    
    
    400,000
    
    
    
    
    
    
    
    14,000,000Other shareholders
    
    
    
    
    
    
    105
    
    
    
    
    
    
    
    2,000,000
    
    
    
    Total shares outstanding
    
    
    14,000,000
    
    
    
    1,000
    
    
    
    400,000
    
    
    
    2,000,000
    
    
    
    14,000,000
      /
 12




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##### Table of Contents



Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
  Note 7  Commitments and Contingencies
     Note 8  Formal Regulatory Supervisory Agreements
  13




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##### Table of Contents



Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
  Note 9  Segment Reporting
  14




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##### Table of Contents



Item 2. Managementss Discussion and Analysis of Financial Condition and Results of
Operations
 INTRODUCTION
    Forward-looking Statements
    Formal Regulatory Supervisory Agreements
  15




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##### Table of Contents



Critical Accounting Policies
  Use of Significant Estimates
  SUMMARY DISCUSSION OF RESULTS
    Table 1  Loan Participation Interests
 % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofJune 30,
    
    
    Total
    
    
    December 31,
    
    
    Total
    
    
    June 30,
    
    
    Total(in thousands of dollars)
    
    2005
    
    
    Assets
    
    
    2004
    
    
    Assets
    
    
    2004
    
    
    AssetsGross loan participation interests:Commercial
    
    $
    72,310
    
    
    
    1.4
    
    
    $
    106,179
    
    
    
    1.9
    
    
    $
    140,424
    
    
    
    2.5Commercial real estate
    
    
    3,614,633
    
    
    
    69.3
    
    
    
    3,738,930
    
    
    
    65.9
    
    
    
    4,060,435
    
    
    
    73.3Consumer
    
    
    896,201
    
    
    
    17.2
    
    
    
    819,250
    
    
    
    14.4
    
    
    
    723,410
    
    
    
    13.1Residential real estate
    
    
    188,407
    
    
    
    3.6
    
    
    
    224,914
    
    
    
    4.0
    
    
    
    254,600
    
    
    
    4.6Total
    
    $
    4,771,551
    
    
    
    91.5
    
    
    $
    4,889,273
    
    
    
    86.2
    
    
    $
    5,178,869
    
    
    
    93.5
 16




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##### Table of Contents



QUALIFICATION TESTS
    17




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##### Table of Contents



RESULTS OF OPERATIONS
  Table 2  Quarterly Statements of Income
 2005
    
    
    
    
    
    2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Q05 vs 2Q04(in thousands of dollars)
    
    Second
    
    First
    
    Fourth
    
    Third
    
    Second
    
    
    
    
    
    
    
    
    
    
    $ Chg
    
    % ChgInterest and fee incomeInterest on loan participation interests:Commercial
    
    $
    1,264
    
    
    $
    1,380
    
    
    $
    1,679
    
    
    $
    2,136
    
    
    $
    1,901
    
    
    
    
    
    
    
    
    
    
    
    $
    (637
    )
    
    
    (33.5
    )%Commercial real estate
    
    
    51,982
    
    
    
    48,753
    
    
    
    46,931
    
    
    
    45,305
    
    
    
    44,751
    
    
    
    
    
    
    
    
    
    
    
    
    7,231
    
    
    
    16.2Consumer
    
    
    14,687
    
    
    
    13,925
    
    
    
    13,208
    
    
    
    12,353
    
    
    
    12,969
    
    
    
    
    
    
    
    
    
    
    
    
    1,718
    
    
    
    13.2Residential real estate
    
    
    2,647
    
    
    
    2,896
    
    
    
    3,069
    
    
    
    3,247
    
    
    
    3,475
    
    
    
    
    
    
    
    
    
    
    
    
    (828
    )
    
    
    (23.8
    )Total loan participation interest income
    
    
    70,580
    
    
    
    66,954
    
    
    
    64,887
    
    
    
    63,041
    
    
    
    63,096
    
    
    
    
    
    
    
    
    
    
    
    
    7,484
    
    
    
    11.9Fees from loan participation interests
    
    
    491
    
    
    
    629
    
    
    
    605
    
    
    
    469
    
    
    
    652
    
    
    
    
    
    
    
    
    
    
    
    
    (161
    )
    
    
    (24.7
    )Interest on deposits with the Bank
    
    
    2,570
    
    
    
    1,473
    
    
    
    3,736
    
    
    
    1,781
    
    
    
    198
    
    
    
    
    
    
    
    
    
    
    
    
    2,372
    
    
    
    N.M.Total interest and fee income
    
    
    73,641
    
    
    
    69,056
    
    
    
    69,228
    
    
    
    65,291
    
    
    
    63,946
    
    
    
    
    
    
    
    
    
    
    
    
    9,695
    
    
    
    15.2Reduction in allowances for credit losses
    
    
    (3,840
    )
    
    
    (3,441
    )
    
    
    (13,153
    )
    
    
    (6,874
    )
    
    
    (9,301
    )
    
    
    
    
    
    
    
    
    
    
    
    5,461
    
    
    
    58.7Interest income after reduction in
allowance for credit losses
    
    
    77,481
    
    
    
    72,497
    
    
    
    82,381
    
    
    
    72,165
    
    
    
    73,247
    
    
    
    
    
    
    
    
    
    
    
    
    4,234
    
    
    
    5.8Non-interest income:Rental income
    
    
    1,591
    
    
    
    1,591
    
    
    
    1,591
    
    
    
    1,590
    
    
    
    1,853
    
    
    
    
    
    
    
    
    
    
    
    
    (262
    )
    
    
    (14.1
    )Collateral fees
    
    
    965
    
    
    
    181
    
    
    
    177
    
    
    
    180
    
    
    
    192
    
    
    
    
    
    
    
    
    
    
    
    
    773
    
    
    
    N.M.Total non-interest income
    
    
    2,556
    
    
    
    1,772
    
    
    
    1,768
    
    
    
    1,770
    
    
    
    2,045
    
    
    
    
    
    
    
    
    
    
    
    
    511
    
    
    
    25.0Non-interest expense:Servicing costs
    
    
    2,899
    
    
    
    2,864
    
    
    
    2,735
    
    
    
    2,854
    
    
    
    2,199
    
    
    
    
    
    
    
    
    
    
    
    
    700
    
    
    
    31.8Depreciation and amortization
    
    
    1,102
    
    
    
    1,137
    
    
    
    1,235
    
    
    
    1,339
    
    
    
    1,346
    
    
    
    
    
    
    
    
    
    
    
    
    (244
    )
    
    
    (18.1
    )Loss on disposal of fixed assets
    
    
    388
    
    
    
    145
    
    
    
    155
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    
    362
    
    
    
    N.M.Other
    
    
    169
    
    
    
    241
    
    
    
    170
    
    
    
    196
    
    
    
    374
    
    
    
    
    
    
    
    
    
    
    
    
    (205
    )
    
    
    (54.8
    )Total non-interest expense
    
    
    4,558
    
    
    
    4,387
    
    
    
    4,295
    
    
    
    4,389
    
    
    
    3,945
    
    
    
    
    
    
    
    
    
    
    
    
    613
    
    
    
    15.5Income before provision for income taxes
    
    
    75,479
    
    
    
    69,882
    
    
    
    79,854
    
    
    
    69,546
    
    
    
    71,347
    
    
    
    
    
    
    
    
    
    
    
    
    4,132
    
    
    
    5.8Provision for income taxes
    
    
    25
    
    
    
    98
    
    
    
    58
    
    
    
    88
    
    
    
    84
    
    
    
    
    
    
    
    
    
    
    
    
    (59
    )
    
    
    (70.2
    )Net income
    
    $
    75,454
    
    
    $
    69,784
    
    
    $
    79,796
    
    
    $
    69,458
    
    
    $
    71,263
    
    
    
    
    
    
    
    
    
    
    
    $
    4,191
    
    
    
    5.9
    %Dividends declared on preferred securities
    
    
    (8,256
    )
    
    
    (7,305
    )
    
    
    (6,208
    )
    
    
    (5,406
    )
    
    
    (4,488
    )
    
    
    
    
    
    
    
    
    
    
    
    (3,768
    )
    
    
    (84.0
    )Net income applicable to
common shares (1)
    
    $
    67,198
    
    
    $
    62,479
    
    
    $
    73,588
    
    
    $
    64,052
    
    
    $
    66,775
    
    
    
    
    
    
    
    
    
    
    
    $
    423
    
    
    
    0.6
    %
 (1) All of HPCIs common stock is owned by Huntington, HPCII, HCF, and Holdings and therefore, net income per share is not presented.  18




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##### Table of Contents



Table
3  Year-To-Date Statements of Income
 Six Months Ended June 30,
    
    
    
    
    
    
    
    
    
    
    2005 vs 2004(in thousands of dollars)
    
    2005
    
    2004
    
    
    
    
    
    
    
    
    
    
    $ Chg
    
    % ChgInterest and fee incomeInterest on loan participation interests:Commercial
    
    $
    2,644
    
    
    $
    3,995
    
    
    
    
    
    
    
    
    
    
    
    $
    (1,351
    )
    
    
    (33.8
    )%Commercial real estate
    
    
    100,737
    
    
    
    89,811
    
    
    
    
    
    
    
    
    
    
    
    
    10,926
    
    
    
    12.2Consumer
    
    
    28,612
    
    
    
    24,982
    
    
    
    
    
    
    
    
    
    
    
    
    3,630
    
    
    
    14.5Residential real estate
    
    
    5,543
    
    
    
    7,158
    
    
    
    
    
    
    
    
    
    
    
    
    (1,615
    )
    
    
    (22.6
    )Total loan participation interest income
    
    
    137,536
    
    
    
    125,946
    
    
    
    
    
    
    
    
    
    
    
    
    11,590
    
    
    
    9.2Fees from loan participation interests
    
    
    1,119
    
    
    
    1,263
    
    
    
    
    
    
    
    
    
    
    
    
    (144
    )
    
    
    (11.4
    )Interest on deposits with the Bank
    
    
    4,043
    
    
    
    487
    
    
    
    
    
    
    
    
    
    
    
    
    3,556
    
    
    
    N.M.Total interest and fee income
    
    
    142,698
    
    
    
    127,696
    
    
    
    
    
    
    
    
    
    
    
    
    15,002
    
    
    
    11.7Reduction of allowances for credit losses
    
    
    (7,281
    )
    
    
    (11,564
    )
    
    
    
    
    
    
    
    
    
    
    
    4,283
    
    
    
    37.0Interest income after reduction of
allowances for credit losses
    
    
    149,979
    
    
    
    139,260
    
    
    
    
    
    
    
    
    
    
    
    
    10,719
    
    
    
    7.7Non-interest income:Rental income
    
    
    3,181
    
    
    
    3,322
    
    
    
    
    
    
    
    
    
    
    
    
    (141
    )
    
    
    (4.2
    )Collateral fees
    
    
    1,146
    
    
    

    389
    
    
    
    
    
    
    
    
    
    
    
    
    757
    
    
    
    N.M.Total non-interest income
    
    
    4,327
    
    
    
    3,711
    
    
    
    
    
    
    
    
    
    
    
    
    616
    
    
    
    16.6Non-interest expense:Servicing costs
    
    
    5,762
    
    
    
    4,335
    
    
    
    
    
    
    
    
    
    
    
    
    1,427
    
    
    
    32.9Depreciation and amortization
    
    
    2,239
    
    
    
    2,699
    
    
    
    
    
    
    
    
    
    
    
    
    (460
    )
    
    
    (17.0
    )Loss on disposal of fixed assets
    
    
    533
    
    
    
    63
    
    
    
    
    
    
    
    
    
    
    
    
    470
    
    
    
    N.M.Other
    
    
    409
    
    
    
    479
    
    
    
    
    
    
    
    
    
    
    
    
    (70
    )
    
    
    (14.6
    )Total non-interest expense
    
    
    8,943
    
    
    
    7,576
    
    
    
    
    
    
    
    
    
    
    
    
    1,367
    
    
    
    18.0Income before provision for income taxes
    
    
    145,363
    
    
    
    135,395
    
    
    
    
    
    
    
    
    
    
    
    
    9,968
    
    
    
    7.4Provision for income taxes
    
    
    124
    
    
    
    107
    
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    15.9Net income
    
    $
    145,239
    
    
    $
    135,288
    
    
    
    
    
    
    
    
    
    
    
    $
    9,951
    
    
    
    7.4
    %Dividends declared on preferred securities
    
    
    (15,561
    )
    
    
    (9,130
    )
    
    
    
    
    
    
    
    
    
    
    
    (6,431
    )
    
    
    (70.4
    )Net income applicable to
common shares (1)
    
    $
    129,678
    
    
    $
    126,158
    
    
    
    
    
    
    
    
    
    
    
    $
    3,520
    
    
    
    2.8
    %
 (1) All of HPCIs common stock is owned by Huntington, HPCII, HCF and Holdings and therefore, net income per share is not presented.  Interest
and Fee Income
   19




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##### Table of Contents



Table 4  Quarterly Average Balance Sheets and Net Interest Margin Analysis
 Three Months Ended June 30,2005
    
    
    
    
    
    
    
    
    
    
    2004Average
    
    
    
    
    
    
    
    
    
    
    Average(in millions of dollars)
    
    Balance
    
    
    Income(1)
    
    
    Yield
    
    
    Balance
    
    
    Income(1)
    
    
    YieldLoan participation interests:Commercial
    
    $
    89.5
    
    
    $
    1.3
    
    
    
    5.69
    %
    
    $
    190.0
    
    
    $
    1.9
    
    
    
    4.01
    %Commercial real estate
    
    
    3,637.1
    
    
    
    52.3
    
    
    
    5.77
    
    
    
    4,239.5
    
    
    
    45.1
    
    
    
    4.28Consumer
    
    
    867.3
    
    
    
    14.9
    
    
    
    6.88
    
    
    
    720.4
    
    
    
    13.2
    
    
    
    7.39Residential real estate
    
    
    197.7
    
    
    
    2.6
    
    
    
    5.36
    
    
    
    268.0
    
    
    
    3.5
    
    
    
    5.19Total loan participations
    
    
    4,791.6
    
    
    
    71.1
    
    
    
    5.95
    
    
    
    5,417.9
    
    
    
    63.7
    
    
    
    4.73Interest bearing deposits in banks
    
    
    347.6
    
    
    
    2.6
    
    
    
    2.97
    
    
    
    78.4
    
    
    
    0.2
    
    
    
    1.02Total
    
    $
    5,139.2
    
    
    $
    73.7
    
    
    
    5.75
    %
    
    $
    5,496.3
    
    
    $
    63.9
    
    
    
    4.68
    %
 (1) Income includes interest and fees. Table 5  Year-To-Date Average Balance Sheets and Net Interest Margin Analysis
 Six Months Ended June 30,2005
    
    
    
    
    
    
    
    
    
    
    2004Average
    
    
    
    
    
    
    
    
    
    
    Average(in millions of dollars)
    
    Balance
    
    
    Income(1)
    
    
    Yield
    
    
    Balance
    
    
    Income(1)
    
    
    YieldLoan participation interests:Commercial
    
    $
    96.6
    
    
    $
    2.7
    
    
    
    5.56
    %
    
    $
    180.4
    
    
    $
    4.0
    
    
    
    4.48
    %Commercial real estate
    
    
    3,671.1
    
    
    
    101.5
    
    
    
    5.58
    
    
    
    4,240.0
    
    
    
    90.6
    
    
    
    4.30Consumer
    
    
    844.9
    
    
    
    29.0
    
    
    
    6.91
    
    
    
    673.0
    
    
    
    25.4
    
    
    
    7.60Residential real estate
    
    
    207.3
    
    
    
    5.5
    
    
    
    5.35
    
    
    
    276.2
    
    
    
    7.2
    
    
    
    5.18Total loan participations
    
    
    4,819.9
    
    
    
    138.7
    
    
    
    5.80
    
    
    
    5,369.6
    
    
    
    127.2
    
    
    
    4.76Interest bearing deposits in banks
    
    
    292.7
    
    
    
    4.0
    
    
    
    2.79
    
    
    
    96.3
    
    
    
    0.5
    
    
    
    1.02Total
    
    $
    5,112.6
    
    
    $
    142.7
    
    
    
    5.63
    %
    
    $
    5,465.9
    
    
    $
    127.7
    
    
    
    4.70
    %
 (1) Income includes interest and fees.  Allowances for Credit Losses (ACL)
  20




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Table
6  Allowances for Credit Loss Activity
 2005
    
    
    
    
    
    
    
    2004(in thousands of dollars)
    
    Second
    
    
    First
    
    
    Fourth
    
    
    Third
    
    
    SecondALL
balance, beginning of period
    
    $
    62,461
    
    
    $
    61,146
    
    
    $
    67,668
    
    
    $
    72,524
    
    
    $
    79,842Allowance of loan participations acquired
    
    
    6,880
    
    
    
    5,641
    
    
    
    9,285
    
    
    
    2,738
    
    
    
    3,601Net loan lossesCommercial
    
    
    312
    
    
    
    544
    
    
    
    964
    
    
    
    848
    
    
    
    (372
    )Commercial real estate
    
    
    (2,705
    )
    
    
    13
    
    
    
    (1,271
    )
    
    
    (588
    )
    
    
    (785
    )Consumer
    
    
    (1,123
    )
    
    
    (1,523
    )
    
    
    (1,482
    )
    
    
    (1,666
    )
    
    
    (885
    )Residential real estate
    
    
    (6
    )
    
    
    (26
    )
    
    
    (251
    )
    
    
    (55
    )
    
    
    (9
    )Total net loan losses
    
    
    (3,522
    )
    
    
    (992
    )
    
    
    (2,040
    )
    
    
    (1,461
    )
    
    
    (2,051
    )Reduction in ALL
    
    
    (3,894
    )
    
    
    (3,334
    )
    
    
    (13,767
    )
    
    
    (6,133
    )
    
    
    (8,868
    )Economic reserve transfer to AULPC
    
    
    (938
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ALL balance, end of period
    
    $
    60,987
    
    
    $
    62,461
    
    
    $
    61,146
    
    
    $
    67,668
    
    
    $
    72,524AULPC balance, beginning of period
    
    $
    3,658
    
    
    $
    3,765
    
    
    $
    3,151
    
    
    $
    3,892
    
    
    $
    4,325(Reduction in) provision for AULPC
    
    
    54
    
    
    
    (107
    )
    
    
    614
    
    
    
    (741
    )
    
    
    (433
    )Economic reserve transfer from ALL
    
    
    938
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AULPC balance, end of period
    
    $
    4,650
    
    
    $
    3,658
    
    
    $
    3,765
    
    
    $
    3,151
    
    
    $
    3,892Total Allowance for Credit Losses
    
    $
    65,637
    
    
    $
    66,119
    
    
    $
    64,911
    
    
    $
    70,819
    
    
    $
    76,416ALL as a % of total participation interests
    
    
    1.28
    %
    
    
    1.29
    %
    
    
    1.25
    %
    
    
    1.40
    %
    
    
    1.40
    %ACL as a % of total participation interests
    
    
    1.38
    
    
    
    1.37
    
    
    
    1.33
    
    
    
    1.46
    
    
    
    1.48
   Non-Performing
Assets (NPAs)
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##### Table of Contents



Table
7  Quarterly Non-Performing Assets
 (in thousands of dollars)
    
    2005
    
    
    
    
    
    
    2004Second
    
    
    First
    
    
    Fourth
    
    
    Third
    
    
    SecondParticipation interests in non-accrual loansCommercial
    
    $
    1,069
    
    
    $
    373
    
    
    $
    425
    
    
    $
    973
    
    
    $
    3,988Commercial real estate
    
    
    17,965
    
    
    
    10,641
    
    
    
    6,990
    
    
    
    10,460
    
    
    
    9,218Consumer(1)
    
    
    2,252
    
    
    
    2,178
    
    
    
    2,692
    
    
    
    2,692
    
    
    
    Residential real estate
    
    
    4,652
    
    
    
    4,068
    
    
    
    4,205
    
    
    
    4,749
    
    
    
    4,900Total Non-Performing Assets
    
    $
    25,938
    
    
    $
    17,260
    
    
    $
    14,312
    
    
    $
    18,874
    
    
    $
    18,106Participations in Accruing Loans
Past Due 90 Days or More(1)
    
    $
    12,036
    
    
    $
    14,178
    
    
    $
    11,686
    
    
    $
    8,466
    
    
    $
    10,255NPAs as a % of total
participation interests
    
    
    0.54
    %
    
    
    0.36
    %
    
    
    0.29
    %
    
    
    0.39
    %
    
    
    0.35
    %ALL as a % of NPAs
    
    
    235
    
    
    
    362
    
    
    
    427
    
    
    
    359
    
    
    
    401ALL and AULPC as a % of NPAs
    
    
    253
    
    
    
    383
    
    
    
    454
    
    
    
    375
    
    
    
    422
 
 (1) Beginning September 30, 2004, HPCI adopted a new policy of placing consumer home
equity loan participations on non-accrual status when they exceed 180 days past due. Prior practice
was to continue to accrue interest until collection or resolution of the loan participations. Such
loan participations were previously classified as accruing loans past due 90 days or more.     Non-Interest
Income and Non-Interest Expense
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
    
    0.125% of the underlying commercial and commercial real estate loans,
    
    0.750% of the underlying consumer loans, and
    
    0.267% of the underlying residential real estate loans.
  
    
    0.125% of the underlying commercial and commercial real estate loans,
    
    0.320% of the underlying consumer loans, and
    
    0.2997% of the underlying residential real estate loans.
  Provision for Income Taxes
  MARKET RISK
   23




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##### Table of Contents



OFFBALANCE SHEET ARRANGEMENTS
  LIQUIDITY AND CAPITAL RESOURCES
     24




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##### Table of Contents



Item 3. Quantitative And Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
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PART II. OTHER INFORMATION
  
 Item 4.
Submission of Matters to a Vote of Shareholders
  1.
    
    Election of directors to serve as Directors until the next Annual Meeting of
shareholders as follows: Richard A. Cheap, Stephen E. Dutton, R. Larry Hoover, Edward J.
Kane, Roger E. Kephart, Donald R. Kimble, Thomas P. Reed, James D. Robbins, and Karen D.
Roggenkamp.2.
    
    Ratification of appointment of Deloitte & Touche LLP to serve as the companys
independent auditor for the year 2005.
  
 Item 6. Exhibits
 (a)
 3.(i).
    
    Amended and Restated Articles of Incorporation (previously filed as Exhibit 3(a)(ii) to
Amendment No. 4 to Registration Statement of Form S-11 (File No. 333-61182), filed with
the Securities and Exchange Commission on October 12, 2001, and incorporated herein by
reference.)3.(ii).
    
    Code of Regulations (previously filed as Exhibit 3(b) to the Registrants Registration
Statement of Form S -11 (File No. 333-61182), filed with the Securities and Exchange
Commission on May 17, 2001, and incorporated herein by reference.)4.
    
    Specimen of certificate representing Class C preferred securities, previously filed
as Exhibit 4 to the Registrants Amendment No. 1 to Registration Statement of Form S-11
(File No.
333-61182), filed with the Securities and Exchange Commission on May 31, 2001, and
incorporated herein by reference.10.
    
    Material Contracts:
 (a).
    
    Third Amended and Restated Loan Participation Agreement, dated May 12, 2005,
between The Huntington National Bank and Huntington Preferred Capital Holdings,
Inc. Bank (previously filed as Exhibit 10(a) to Quarterly Report on Form 10-Q for
the quarter ended March 31, 2005, and incorporated herein by reference).(b).
    
    Third Amended and Restated Loan Subparticipation Agreement, dated May 12, 2005,
between Huntington Preferred Capital Holdings, Inc. and Huntington Preferred Capital,
Inc. Bank (previously filed as Exhibit 10(b) to Quarterly Report on Form 10-Q for the
quarter ended March 31, 2005, and incorporated herein by reference).(c).
    
    Second Amended and Restated Loan Participation Agreement, dated May 12, 2005,
between The Huntington National Bank and Huntington Preferred Capital, Inc. Bank
(previously filed as Exhibit 10(c) to Quarterly Report on Form 10-Q for the quarter
ended March 31, 2005, and incorporated herein by reference).
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##### Table of Contents



(d).
    
    Amended and Restated Agreement dated June 1, 2005 between Huntington Preferred
Capital Inc. and Huntington National Bank to govern the terms on which Huntington
Preferred Capital Inc. may pledge certain of its assets as collateral for the
Huntington National Banks borrowings from the Federal Home Loan Bank of Cincinnati
under a secured revolving loan facility (previously filed as Exhibit 99.1 to Form 8-K
dated June 1, 2005).(e).
    
    Limited Waiver of Contract Provision, dated August 11,
2005, with Huntington Preferred Capital Holdings, Huntington
Preferred Capital, Inc., and the Huntington National Bank.
 31.1.
    
    Rule 13a  14(a) Certification  signed by Donald R. Kimble, President.31.2.
    
    Rule 13a  14(a) Certification  signed by Thomas P. Reed, Vice President.32.1.
    
    Section 1350 Certification  signed by Donald R. Kimble, President.32.2.
    
    Section 1350 Certification  signed by Thomas P. Reed, Vice President.
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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