HUNTINGTON BANCSHARES INC/MD.

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, 2007

Commission File Number 0-2525

Huntington Bancshares Incorporated


Maryland		31-0724920
(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. þ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer o Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No

There were 365,924,668 shares of Registrant’s common stock ($0.01 par value) outstanding on July 31, 2007.

Part 1. Financial Information

Item 1. Financial Statements

Huntington Bancshares Incorporated

Condensed Consolidated Balance Sheets
(Unaudited)


	2007			2006
(in thousands, except number of shares)	June 30,			December 31,			June 30,

Assets
Cash and due from banks	$	818,877		$	1,080,163		$	876,121
Federal funds sold and securities purchased under resale agreements		857,080			440,584			365,592
Interest bearing deposits in banks		271,133			74,168			37,576
Trading account securities		619,836			36,056			113,376
Loans held for sale		348,272			270,422			298,871
Investment securities		3,863,182			4,362,924			5,124,682
Loans and leases		26,811,513			26,153,425			26,354,581
Allowance for loan and lease losses		(307,519	)		(272,068	)		(287,517	)

Net loans and leases		26,503,994			25,881,357			26,067,064

Bank owned life insurance		1,107,042			1,089,028			1,070,909
Premises and equipment		398,436			372,772			365,763
Goodwill		569,738			570,876			571,697
Other intangible assets		54,646			59,487			64,141
Accrued income and other assets		1,008,450			1,091,182			1,309,985

Total Assets	$	36,420,686		$	35,329,019		$	36,265,777


Liabilities and Shareholders’ Equity Liabilities
Deposits	$	24,599,912		$	25,047,770		$	24,592,932
Short-term borrowings		2,860,939			1,676,189			2,125,932
Federal Home Loan Bank advances		1,397,398			996,821			1,271,678
Other long-term debt		2,016,199			2,229,140			2,716,784
Subordinated notes		1,494,197			1,286,657			1,255,278
Accrued expenses and other liabilities		987,900			1,078,116			1,364,017

Total Liabilities		33,356,545			32,314,693			33,326,621


Shareholders’ equity
Preferred stock — authorized 6,617,808 shares; none outstanding		—			—			—
Common stock — No par value and authorized 500,000,000 shares; issued 257,866,255 shares; outstanding 235,474,366 and 237,361,333 shares, respectively.		—			2,560,569			2,552,094
Par value of $0.01 and authorized 1,000,000,000 shares at June 30, 2007; issued 257,866,255 shares; outstanding 236,244,063 shares		2,579			—			—
Capital surplus		2,565,185			—			—
Treasury shares at cost, 21,622,192; 22,391,889 and 20,504,922, respectively		(489,633	)		(506,946	)		(457,758	)
Accumulated other comprehensive loss:
Unrealized (losses) gains on investment securities		(17,243	)		14,254			(69,723	)
Unrealized gains on cash flow hedging derivatives		18,158			17,008			28,915
Pension and other postretirement benefit adjustments		(81,705	)		(86,328	)		(3,283	)
Retained earnings		1,066,800			1,015,769			888,911

Total Shareholders’ Equity		3,064,141			3,014,326			2,939,156

Total Liabilities and Shareholders’ Equity	$	36,420,686		$	35,329,019		$	36,265,777

See notes to unaudited condensed consolidated financial statements

Huntington Bancshares Incorporated

Condensed Consolidated Statements of Income
(Unaudited)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands, except per share amounts)	2007			2006			2007			2006

Interest and fee income
Loans and leases
Taxable	$	466,904		$	445,924		$	928,045		$	845,270
Tax-exempt		114			520			585			1,029
Investment securities
Taxable		49,684			60,852			104,799			112,960
Tax-exempt		6,528			5,894			12,621			11,606
Other		19,231			8,713			31,360			15,825

Total interest income		542,461			521,903			1,077,410			986,690

Interest expenses
Deposits		198,108			173,032			394,831			321,346
Short-term borrowings		23,271			20,969			43,108			35,634
Federal Home Loan Bank advances		16,009			17,077			28,519			31,565
Subordinated notes and other long-term debt		51,682			48,630			102,006			92,270

Total interest expense		289,070			259,708			568,464			480,815

Net interest income		253,391			262,195			508,946			505,875
Provision for credit losses		60,133			15,745			89,539			35,285

Net interest income after provision for credit losses		193,258			246,450			419,407			470,590

Service charges on deposit accounts		50,017			47,225			94,810			88,447
Trust services		26,764			22,676			52,658			43,954
Brokerage and insurance income		17,199			14,345			33,281			29,538
Other service charges and fees		14,923			13,072			28,131			24,581
Bank owned life insurance income		10,904			10,604			21,755			20,846
Mortgage banking income		7,122			13,616			16,473			26,810
Securities losses		(5,139	)		(35	)		(5,035	)		(55	)
Other income		34,403			41,516			59,297			88,432

Total non-interest income		156,193			163,019			301,370			322,553

Personnel costs		135,191			137,904			269,830			269,461
Outside data processing and other services		25,701			19,569			47,515			39,420
Net occupancy		19,417			17,927			39,325			35,893
Equipment		17,157			18,009			35,376			34,512
Marketing		8,986			10,374			16,682			17,675
Professional services		8,101			6,292			14,583			11,657
Telecommunications		4,577			4,990			8,703			9,815
Printing and supplies		3,672			3,764			6,914			6,838
Amortization of intangibles		2,519			2,992			5,039			4,067
Other expense		19,334			30,538			42,760			61,436

Total non-interest expense		244,655			252,359			486,727			490,774

Income before income taxes		104,796			157,110			234,050			302,369
Provision for income taxes		24,275			45,506			57,803			86,309

Net income	$	80,521		$	111,604		$	176,247		$	216,060


Average common shares — basic		236,032			241,729			235,809			236,349
Average common shares — diluted		239,008			244,538			238,881			239,451

Per common share
Net income — basic	$	0.34		$	0.46		$	0.75		$	0.91
Net income — diluted		0.34			0.46			0.74			0.90
Cash dividends declared		0.265			0.250			0.530			0.500

See notes to unaudited condensed consolidated financial statements

Huntington Bancshares Incorporated

Condensed Consolidated Statements of Changes in Shareholders’ Equity
(Unaudited)


																			Accumulated
																			Other
	Preferred Stock				Common Stock					Capital			Treasury Stock						Comprehensive			Retained
(in thousands)	Shares		Amount		Shares		Amount			Surplus			Shares			Amount			Loss			Earnings			Total

Six Months Ended June 30, 2006:
Balance, beginning of period		—	$	—		257,866	$	2,491,326		$	—			(33,760	)	$	(693,576	)	$	(22,093	)	$	781,844		$	2,557,501
Comprehensive Income:
Net income																							216,060			216,060
Unrealized net losses on investment securities arising during the period, net of reclassification ⁽¹⁾ for net realized losses, net of tax of ($19,461).																				(35,707	)					(35,707	)
Unrealized gains on cash flow hedging derivatives, net of tax of $7,382.																				13,709						13,709

Total comprehensive income																										194,062

Cumulative effect of change in accounting principle for servicing financial assets, net of tax of $6,521																							12,110			12,110
Cash dividends declared ($0.50 per share)																							(121,103	)		(121,103	)
Shares issued pursuant to acquisition								53,366						25,350			522,390									575,756
Recognition of the fair value of share-based compensation								8,547																		8,547
Treasury shares purchased														(12,931	)		(303,943	)								(303,943	)
Stock options exercised								(1,196	)					880			18,445									17,249
Other								51						(44	)		(1,074	)								(1,023	)


Balance, end of period		—		—		257,866		2,552,094			—			(20,505	)		(457,758	)		(44,091	)		888,911			2,939,156


Six Months Ended June 30, 2007:
Balance, beginning of period		—		—		257,866		2,560,569			—			(22,392	)		(506,946	)		(55,066	)		1,015,769			3,014,326
Comprehensive Income:
Net income																							176,247			176,247
Unrealized net losses on investment securities arising during the period, net of reclassification ⁽¹⁾ for net realized gains, net of tax of ($30,423)																				(31,497	)					(31,497	)
Unrealized gains on cash flow hedging derivatives, net of tax of $619																				1,150						1,150
Amortization included in net periodic benefit costs:
Net actuarial loss, net of tax of ($2,188)																				4,063						4,063
Prior service costs, net of tax of ($108)																				200						200
Transition obligation, net of tax of ($194)																				360						360

Total comprehensive income																										150,523

Assignment of $0.01 par value per share for each share of Common Stock								(2,557,990	)		2,557,990															—
Cash dividends declared ($0.53 per share)																							(125,216	)		(125,216	)
Recognition of the fair value of share-based compensation											7,816															7,816
Stock options exercised											(2,851	)		881			19,911									17,060
Other											2,230			(111	)		(2,598	)								(368	)


Balance, end of period		—	$	—		257,866	$	2,579		$	2,565,185			(21,622	)	$	(489,633	)	$	(80,790	)	$	1,066,800		$	3,064,141


⁽¹⁾		Reclassification adjustments represent net unrealized gains or losses as of December 31 of the prior year on investment securities that were sold during the current year. For the six months ended June 30, 2007 and 2006, the reclassification adjustments were $5,035, net of tax of ($1,762), and $55, net of tax of ($19), respectively.

See notes to unaudited condensed consolidated financial statements.

Huntington Bancshares Incorporated

Condensed Consolidated Statements of Cash Flows
(Unaudited)


	Six Months Ended
	June 30,
(in thousands)	2007			2006

Operating activities
Net income	$	176,247		$	216,060
Adjustments to reconcile net income to net cash provided by operating activites:
Provision for credit losses		89,539			35,285
Depreciation and amortization		41,280			61,345
Increase in accrued income taxes		51,460			9,085
Deferred income tax benefit		(111,297	)		(123,830	)
Net increase in trading account securities		(583,780	)		(27,290	)
Pension contribution		—			(29,800	)
Originations of loans held for sale		(1,280,343	)		(1,318,453	)
Principal payments on and proceeds from loans held for sale		1,185,067			1,313,926
Other, net		(51,260	)		(233,826	)

Net cash provided by operating activities		(483,087	)		(97,498	)


Investing activities
Increase in interest bearing deposits in banks		(123,345	)		(12,089	)
Net cash received in acquisitions		—			66,507
Proceeds from:
Maturities and calls of investment securities		242,945			241,871
Sales of investment securities		550,070			376,263
Purchases of investment securities		(340,837	)		(1,024,048	)
Proceeds from sales of loans		108,588			—
Net loan and lease originations, excluding sales		(817,197	)		(246,265	)
Proceeds from sale of operating lease assets		23,031			82,139
Purchases of premises and equipment		(53,029	)		(12,645	)
Other, net		6,989			(67	)

Net cash used for investing activities		(402,785	)		(528,334	)


Financing activities
(Decrease) increase in deposits		(442,428	)		495,827
Increase in short-term borrowings		1,184,750			157,532
Proceeds from issuance of subordinated notes		250,010			250,000
Proceeds from Federal Home Loan Bank advances		850,600			2,162,050
Maturity/redemption of Federal Home Loan Bank advances		(450,023	)		(2,148,969	)
Proceeds from issuance of long-term debt		—			935,000
Maturity of long-term debt		(240,099	)		(635,549	)
Dividends paid on common stock		(124,003	)		(103,096	)
Repurchases of common stock		—			(303,943	)
Other, net		12,275			17,917

Net cash provided by financing activities		1,041,082			826,769

Increase in cash and cash equivalents		155,210			200,937
Cash and cash equivalents at beginning of period		1,520,747			1,040,776

Cash and cash equivalents at end of period	$	1,675,957		$	1,241,713


Supplemental disclosures:
Income taxes paid	$	169,822		$	194,505
Interest paid		580,982			463,979
Non-cash activities
Common stock dividends accrued, paid in subsequent quarter		48,484			46,884
Common stock and stock options issued for purchase acquisition		—			575,756

See notes to unaudited condensed consolidated financial statements.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1 – Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Huntington Bancshares Incorporated (Huntington or the Company) reflect all adjustments consisting of normal recurring accruals, which are, in the opinion of Management, necessary for a fair presentation of the consolidated financial position, the results of operations, and cash flows for the periods presented. These unaudited condensed consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission (SEC) and, therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been omitted. The Notes to Consolidated Financial Statements appearing in Huntington’s 2006 Annual Report on Form 10-K, (2006 Form 10-K), which include descriptions of significant accounting policies, as updated by the information contained in this report, should be read in conjunction with these interim financial statements.

On July 1, 2007, Huntington acquired Sky Financial Group, Inc. Accordingly, the balances presented do not include the impact of the acquisition. See Note 3 for information regarding the acquisition.

Certain amounts in the prior-year’s financial statements have been reclassified to conform to the 2007 presentation.

For statement of cash flows purposes, cash and cash equivalents are defined as the sum of “Cash and due from banks” and “Federal funds sold and securities purchased under resale agreements.”

Note 2 – New Accounting Pronouncements

Financial Accounting Standards Board (FASB) Statement No. 158, Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132R (Statement No. 158) – In September 2006, the FASB issued Statement No. 158, as an amendment to FASB Statements No. 87, 88, 106, and 132R. Statement No. 158 requires an employer to recognize in its statement of financial position the funded status of its defined benefit plans and to recognize as a component of other comprehensive income, net of tax, any unrecognized transition obligations and assets, the actuarial gains and losses, and prior service costs and credits that arise during the period. The recognition provisions of Statement No. 158 are to be applied prospectively and were effective for fiscal years ending after December 15, 2006. In addition, Statement No. 158 requires a fiscal year end measurement of plan assets and benefit obligations, eliminating the use of earlier measurement dates currently permissible. However, the new measurement date requirement will not be effective until fiscal years ended after December 15, 2008. Currently, Huntington utilizes a measurement date of September 30th. The adoption of Statement No. 158 as of December 31, 2006 resulted in a write-down of its pension asset by $125.1 million, and decreased accumulated other comprehensive income by $83.0 million, net of taxes.

FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes – In July 2006, the FASB issued FIN 48, Accounting for Uncertainty in Income Taxes . This Interpretation of FASB Statement No. 109, Accounting for Income Taxes , contains guidance on the recognition and measurement of uncertain tax positions. Huntington adopted FIN 48 on January 1, 2007. Huntington recognizes the impact of a tax position if it is more likely than not that it will be sustained upon examination, based upon the technical merits of the position. The impact of this new pronouncement was not material to Huntington’s financial statements (See Note 9).

FASB Statement No. 157, Fair Value Measurements (Statement No. 157) – In September 2006, the FASB issued Statement No. 157. This Statement establishes a common definition for fair value to be applied to GAAP guidance requiring use of fair value, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. Statement No. 157 is effective for fiscal years beginning after November 15, 2007. Management is currently assessing the impact this Statement will have on its consolidated financial statements.

FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (Statement No. 159) – In February 2007, the FASB issued Statement No. 159. This Statement permits entities to choose to measure financial instruments and certain other financial assets and financial liabilities at fair value. This Statement is effective for fiscal years beginning after November 15, 2007. Management is currently assessing the impact this Statement will have on its consolidated financial statements.

Note 3 – Acquisition of Sky Financial Group, Inc.

On July 1, 2007, Huntington completed its merger with Sky Financial Group, Inc. (Sky Financial) in a stock and cash transaction valued at $3.5 billion. Sky Financial operated over 330 banking offices and over 400 ATMs and served communities in Ohio, Pennsylvania, Indiana, Michigan, and West Virginia.

Under the terms of the merger agreement, Sky Financial shareholders received 1.098 shares of Huntington common stock, on a tax-free basis, and a cash payment of $3.023 for each share of Sky Financial common stock. The assets and liabilities of the acquired entity were recorded on the Company’s balance sheet at their fair values as of the acquisition date.

The following table shows the excess purchase price over carrying value of net assets acquired, preliminary purchase price allocation, and resulting goodwill:


(in thousands)	July 1, 2007

Purchase price	$	3,519,213
Carrying value of net assets acquired		(1,111,393	)

Excess of purchase price over carrying value of net assets acquired		2,407,820

Purchase accounting adjustments:
Loans and leases		120,245
Accrued income and other assets		(33,789	)
Deposits		(13,057	)
Other borrowings		4,267
Deferred federal income tax liability		89,987
Accrued expenses and other liabilities		73,819

Goodwill and other intangible assets		2,649,292
Less other intangible assets:
Core deposit intangible		(357,000	)
Other identifiable intangible assets		(115,000	)

Other intangible assets		(472,000	)

Goodwill	$	2,177,292

Of the $2.6 billion of acquired intangible assets, $0.4 billion was assigned to core deposit intangible, and $0.1 billion was assigned to customer relationship intangibles. The core deposit and other identifiable intangible assets have useful lives ranging from 10 to 15 years.

The cost to acquire Sky Financial has been allocated to the identifiable tangible and intangible assets acquired and liabilities assumed based on preliminary estimated fair values. The allocation of the purchase price is subject to changes in the estimated fair values of assets acquired and liabilities assumed as additional information becomes available and plans are finalized. As such, it is not currently possible to report goodwill by segment.

The following table summarizes the estimated fair value of the net assets acquired on July 1, 2007 related to the acquisition of Sky Financial:


(in thousands)	July 1, 2007

Assets
Loans held for sale	$	81,188
Securities and other earning assets		852,209
Loans and leases		13,049,217
Goodwill and other intangible assets		2,649,292
Accrued income and other assets		822,247

Total assets		17,454,153

Liabilities
Deposits		12,850,629
Borrowings		866,175
Accrued expenses and other liabilities		218,136

Total liabilities		13,934,940

Purchase price	$	3,519,213

Note 4 – Goodwill and Other Intangible Assets

Goodwill by line of business as of June 30, 2007, was as follows:


	Regional		Dealer					Treasury/		Huntington
(in thousands)	Banking		Sales		PFCMG			Other		Consolidated

Balance, January 1, 2007	$	535,855	$	—	$	35,021		$	—	$	570,876
Adjustments		209		—		(1,347	)		—		(1,138	)

Balance, June 30, 2007	$	536,064	$	—	$	33,674		$	—	$	569,738

The change in goodwill for the six month period ended June 30, 2007, primarily related to purchase accounting adjustments from the December 31, 2006 acquisition of Unified Fund Services, Inc. and Unified Financial Securities, Inc. In accordance with FASB Statement No. 142, Goodwill and Other Intangible Assets, goodwill is not amortized, but is evaluated for impairment on an annual basis at September 30 ^th of each year or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

At June 30, 2007, December 31, 2006 and June 30, 2006, Huntington’s other intangible assets consisted of the following:


	Gross		Accumulated			Net
(in thousands)	Carrying Amount		Amortization			Carrying Value
June 30, 2007
Leasehold purchased	$	23,655	$	(20,038	)	$	3,617
Core deposit intangible		45,000		(11,230	)		33,770
Borrower relationship		6,570		(730	)		5,840
Trust customers		11,430		(1,317	)		10,113
Other		1,437		(131	)		1,306

Total other intangible assets	$	88,092	$	(33,446	)	$	54,646


December 31, 2006
Leasehold purchased	$	23,655	$	(19,631	)	$	4,024
Core deposit intangible		45,000		(7,525	)		37,475
Borrower relationship		6,570		(456	)		6,114
Trust customers		11,430		(796	)		10,634
Other		1,622		(382	)		1,240

Total other intangible assets	$	88,277	$	(28,790	)	$	59,487


June 30, 2006
Leasehold purchased	$	23,655	$	(19,224	)	$	4,431
Core deposit intangible		45,000		(3,010	)		41,990
Borrower relationship		6,570		(182	)		6,388
Trust customers		11,430		(327	)		11,103
Other		382		(153	)		229

Total other intangible assets	$	87,037	$	(22,896	)	$	64,141

Amortization expense of other intangible assets for the three month periods ended June 30, 2007 and 2006, was $2.5 million and $3.0 million, respectively. Amortization expense of other intangible assets for the six month periods ended June 30, 2007 and 2006 was $5.0 million and $4.0 million, respectively

Excluding the estimated amount that will be acquired with the acquisition of Sky Financial, the estimated amortization expense of other intangible assets for the remainder of 2007 and the next five annual years are as follows:


	Amortization
(in thousands)	Expense

Fiscal year:
2007	$	5,038
2008		8,888
2009		7,957
2010		7,132
2011		6,333
2012		4,982

Note 5 – Loan Sales and Securitizations

Automobile loans

Huntington sold $117.9 million and $218.4 million of automobile loans in the second quarter of 2007 and 2006, respectively, resulting in pre-tax gains of $0.9 million and $0.5 million, respectively. For the six month periods ended June 30, 2007 and 2006, sales of automobile loans totaled $259.2 million and $388.2 million, respectively, resulting in pre-tax gains of $2.1 million and $1.0 million, respectively.

Automobile loan servicing rights are acccounted for under the amortization provision of FASB Statement No. 156, Accounting for Servicing of Financial Assets – an amendment of FASB Statement No. 140 . A servicing asset is established at fair value at the time of the sale. The servicing asset is then amortized against servicing income. Impairment, if any, is recognized when carrying value exceeds the fair value as determined by calculating the present value of expected net future cash flows. The primary risk characteristic for measuring servicing assets is the payoff rate of the underlying loan pools. Valuation calculations rely on the predicted payoff assumption and, if actual payoff is quicker than expected, then future value would become impaired.

Changes in the carrying value of automobile loan servicing rights for the three and six month periods ended June 30, 2007 and 2006, and the fair value at the end of each period were as follows:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands)	2007			2006			2007			2006

Carrying value, beginning of period	$	7,186		$	9,610		$	7,916		$	10,805
New servicing assets		874			1,364			1,900			2,362
Amortization		(1,781	)		(1,989	)		(3,537	)		(4,182	)

Carrying value, end of period	$	6,279		$	8,985		$	6,279		$	8,985


Fair value, end of period	$	7,205		$	10,486		$	7,205		$	10,486

Huntington has retained servicing responsibilities on sold automobile loans and receives annual servicing fees from 0.55% to 1.00% and other ancillary fees of approximately 0.40% to 0.45% of the outstanding loan balances. Servicing income, net of amortization of capitalized servicing assets, amounted to $3.3 million and $3.4 million for the three month periods ended June 30, 2007 and 2006, respectively. For the six month periods ended June 30, 2007 and 2006, servicing income was $6.4 million and $6.8 million, respectively.

Residential Mortgage Loans

During the first quarter of 2007, Huntington sold $109.5 million of residential mortgage loans held for investment, resulting in a net pre-tax gain of $0.5 million. There were no sales of residential mortgage loans held for investment in the second quarter of 2007 or the first six months of 2006.

The following table is a summary of the changes in mortgage servicing right (MSR) fair value during the three and six month periods ended June 30, 2007 and 2006:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands)	2007			2006			2007			2006

Fair value, beginning of period	$	134,845			123,257			131,104			109,890
New servicing assets created		8,990			7,434			17,426			13,211
Servicing assets acquired		—			565			—			2,474
Change in fair value during the period due to:
Time decay ⁽¹⁾		(1,123	)		(1,062	)		(2,199	)		(1,985	)
Payoffs ⁽²⁾		(3,326	)		(2,231	)		(5,888	)		(4,840	)
Changes in valuation inputs or assumptions ⁽³⁾		16,034			8,281			14,977			17,494

Fair value, end of period	$	155,420		$	136,244		$	155,420		$	136,244


⁽¹⁾		Represents decrease in value due to passage of time, including the impact from both regularly scheduled loan principal payments and partial loan paydowns.

⁽²⁾		Represents decrease in value associated with loans that paid off during the period.

⁽³⁾		Represents change in value resulting primarily from market-driven changes in interest rates.

MSRs do not trade in an active, open market with readily observable prices. While sales of MSRs occur, the precise terms and conditions are typically not readily available. Therefore, the fair value of MSRs is estimated using a discounted future cash flow model. The model considers portfolio characteristics, contractually specified servicing fees and assumptions related to prepayments, delinquency rates, late charges, other ancillary revenues, costs to service, and other economic factors. Changes in the assumptions used may have a significant impact on the valuation of MSRs.

A summary of key assumptions and the sensitivity of the MSR value at June 30, 2007 to changes in these assumptions follows:


				Decline in fair value
				due to
				10%			20%
				adverse			adverse
(in thousands)	Actual			change			change
Constant pre-payment rate		10.95	%	$	(6,383	)	$	(12,292	)
Discount rate		9.39			(6,074	)		(11,700	)

MSR values are very sensitive to movements in interest rates as expected future net servicing income depends on the projected outstanding principal balances of the underlying loans, which can be greatly impacted by the level of prepayments. The Company hedges against changes in MSR fair value attributable to changes in interest rates through a combination of derivative instruments and trading securities.

Below is a summary of servicing fee income, a component of mortgage banking income, earned during the three and six month periods ended June 30, 2007 and 2006.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands)	2007		2006		2007		2006

Servicing fees	$	6,976	$	5,995	$	13,796	$	11,920
Late fees		640		551		1,348		1,161
Ancillary fees		273		89		528		341

Total fee income	$	7,889	$	6,635	$	15,672	$	13,422

Note 6 — Investment Securities

Listed below are the contractual maturities (under 1 year, 1-5 years, 6-10 years and over 10 years) of investment securities at June 30, 2007, December 31, 2006, and June 30, 2006:


	June 30, 2007				December 31, 2006				June 30, 2006
	Amortized				Amortized				Amortized
(in thousands)	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value

U.S. Treasury
Under 1 year	$	200	$	201	$	800	$	800	$	699	$	704
1-5 years		548		546		1,046		1,056		21,924		21,083
6-10 years		—		—		—		—		504		522
Over 10 years		—		—		—		—		—		—

Total U.S. Treasury		748		747		1,846		1,856		23,127		22,309

Federal agencies
Mortgage backed securities
Under 1 year		2,896		2,888		1,848		1,847		350		347
1-5 years		11,110		11,105		9,560		9,608		32,033		30,619
6-10 years		3,501		3,476		4,353		4,355		549		519
Over 10 years		1,181,589		1,176,050		1,261,423		1,265,651		1,252,384		1,194,850

Total mortgage-backed Federal agencies		1,199,096		1,193,519		1,277,184		1,281,461		1,285,316		1,226,335

Other agencies
Under 1 year		99,751		99,531		—		—		45,000		44,284
1-5 years		49,668		49,357		149,819		149,853		249,604		237,742
6-10 years		—		—		98		96		50,000		45,922
Over 10 years		—		—		—		—		—		—

Total other Federal agencies		149,419		148,888		149,917		149,949		344,604		327,948

Total Federal agencies		1,348,515		1,342,407		1,427,101		1,431,410		1,629,920		1,554,283

Municipal securities
Under 1 year		45		45		42		42		42		42
1-5 years		9,650		9,541		10,553		10,588		103		103
6-10 years		168,481		165,195		165,624		165,229		154,360		150,215
Over 10 years		503,199		496,378		410,248		415,564		430,118		421,243

Total municipal securities		681,375		671,159		586,467		591,423		584,623		571,603

Private label CMO
Under 1 year		—		—		—		—		—		—
1-5 years		—		—		—		—		—		—
6-10 years		—		—		—		—		—		—
Over 10 years		727,026		723,515		586,088		590,062		749,019		731,031

Total private label CMO		727,026		723,515		586,088		590,062		749,019		731,031

Asset backed securities
Under 1 year		—		—		—		—		—		—
1-5 years		30,000		30,000		30,000		30,056		30,000		30,000
6-10 years		—		—		—		—		—		—
Over 10 years		933,778		926,599		1,544,572		1,552,748		1,949,008		1,948,538

Total asset backed securities		963,778		956,599		1,574,572		1,582,804		1,979,008		1,978,538

Other Under 1 year		5,600		5,594		4,800		4,784		1,900		1,900
1-5 years		2,747		2,736		2,750		2,706		8,795		8,780
6-10 years		844		833		—		—		1,050		985
Over 10 years		44		86		44		86		44		43
Non-marketable equity securities		152,071		152,071		150,754		150,754		146,957		146,957
Marketable equity securities		7,053		7,435		6,481		7,039		108,025		108,253

Total other		168,359		168,755		164,829		165,369		266,771		266,918

Total investment securities	$	3,889,801	$	3,863,182	$	4,340,903	$	4,362,924	$	5,232,468	$	5,124,682

Duration in years ⁽¹⁾				3.8				3.2				3.0


⁽¹⁾		The average duration assumes a market driven pre-payment rate on securities subject to pre-payment.

At June 30, 2007, non-marketable equity securities includes $123.0 million of stock of the Federal Home Loan Bank of Cincinnati and $29.1 million of stock of the Federal Reserve Bank.

Gross losses on securities totaled $5.1 million for the three months ended June 30, 2007. For the six months ended June 30, 2007, gross gains on securities totaled $5.0 million and gross losses totaled $10.0 million. Gross losses for the six months ended June 30, 2007 included $8.4 million of impairment losses on certain securities backed by mortgage loans to borrowers with low FICO scores. Including impairment recognized since the fourth quarter of 2006, at June 30, 2007, these securities had a carrying value of $9.3 million. Gross gains and losses from the sales of securities were not material for the three or six month periods ended June 30, 2006.

As of June 30, 2007, Management has evaluated all other investment securities with unrealized losses and all non-marketable securities for impairment. The unrealized losses were caused by interest rate increases and other market related conditions. The contractual terms and/or cash flows of the investments do not permit the issuer to settle the securities at a price less than the amortized cost. Huntington has the intent and ability to hold these investment securities until the fair value is recovered, which may be maturity, and therefore, does not consider them to be other-than-temporarily impaired at June 30, 2007.

Note 7 – Earnings per Share

Basic earnings per share is the amount of earnings available to each share of common stock outstanding during the reporting period. Diluted earnings per share is the amount of earnings available to each share of common stock outstanding during the reporting period adjusted to include the effect of potentially dilutive common shares. Potentially dilutive common shares include incremental shares issued upon exercise of outstanding stock options, the vesting of restricted stock units, and the distribution of shares from deferred compensation plans. The calculation of basic and diluted earnings per share for the three and six month periods ended June 30, 2007 and 2006, was as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands, except per share amounts)	2007		2006		2007		2006

Net income	$	80,521	$	111,604	$	176,247	$	216,060
Average common shares outstanding		236,032		241,729		235,809		236,349
Dilutive potential common shares		2,976		2,809		3,072		3,102

Diluted average common shares outstanding		239,008		244,538		238,881		239,451


Earnings per share
Basic	$	0.34	$	0.46	$	0.75	$	0.91
Diluted		0.34		0.46		0.74		0.90

Options to purchase 9.4 million shares during the three month and six month periods ended June 30, 2007 and 5.6 million shares during the three month and six month periods ended June 30, 2006, respectively, were outstanding but were not included in the computation of diluted earnings per share because the effect would be antidilutive. The weighted average exercise price for these options was $24.60 and $24.61 per share and $25.68 and $25.67 per share for the three and six month periods ended June 30, 2007 and 2006, respectively.

Note 8 – Share-based Compensation

Huntington sponsors nonqualified and incentive share-based compensation plans. These plans provide for the granting of stock options and other awards to officers, directors, and other employees. Stock options are granted at the market price on the date of the grant. Options vest ratably over three years or when other conditions are met. Options granted prior to May 2004 have a maximum term of ten years. All options granted beginning in May 2004 have a maximum term of seven years.

Beginning in 2006, Huntington began granting restricted stock units under the 2004 Stock and Long-Term Incentive Plan. Restricted stock units are issued at no cost to the recipient, and can be settled only in shares at the end of the vesting period, subject to certain service restrictions. The fair value of the restricted stock unit awards was based on the closing market price of the Company’s common stock on the date of award.

Huntington’s board of directors has approved all of the plans. Shareholders have approved each of the plans, except for the broad-based Employee Stock Incentive Plan. Of the 28.8 million shares of common stock authorized for issuance under the plans at June 30, 2007, 19.8 million were outstanding and 9.0 million were available for future grants.

Huntington uses the Black-Scholes option-pricing model to value share-based compensation expense. This model assumes that the estimated fair value of options is amortized over the options’ vesting periods. Compensation costs are included in personnel costs on the consolidated statements of income. Forfeitures are estimated at the date of grant based on historical rates and reduce the compensation expense recognized. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant. Expected volatility is based on the historical volatility of Huntington’s stock. The expected term of options granted is derived from historical data on employee exercises. The expected dividend yield is based on the dividend rate and stock price on the date of the grant. The following table illustrates the weighted-average assumptions used in the option-pricing model for options granted in each of the periods presented.


	Six Months Ended
	June 30,
	2007			2006

Assumptions
Risk-free interest rate		4.57	%		4.58	%
Expected dividend yield		4.45			4.20
Expected volatility of Huntington’s common stock		21.1			22.2
Expected option term (years)		6.0			6.0

Weighted-average grant date fair value per share	$	3.75		$	4.23

Huntington’s stock option activity and related information for the six month period ended June 30, 2007, was as follows:

Weighted-

Average

Remaining

Aggregate

Exercise

Contractual

Intrinsic

(in thousands, except per share amounts)

Options

Price

Life (Years)

Value

Outstanding at January 1, 2007

20,573

21.36

Granted

23.71

Exercised

(947

)

18.33

Forfeited/expired

(342

)

23.40

Outstanding at June 30, 2007

19,302

21.47

4.4

42,049

Exercisable at June 30, 2007

13,648

20.86

4.1

38,331

The aggregate intrinsic value represents the amount by which the fair value of underlying stock exceeds the option exercise price. The total intrinsic value of stock options exercised during the six month periods ended June 30, 2007 and 2006, was $4.1 million and $5.9 million, respectively.

Total share-based compensation expense was $3.9 million and $4.3 million for the three month periods ended June 30, 2007 and 2006, respectively. For the six month periods ended June 30, 2007 and 2006, share-based compensation expense was $7.8 million and $8.5 million, respectively. Huntington also recognized $1.4 million and $1.5 million in tax benefits for the three months ended June 30, 2007 and 2006, respectively, related to share-based compensation. The tax benefits recognized related to share-based compensation for the six month periods ended June 30, 2007 and 2006 were $2.7 million and $3.0 million, respectively.

Cash received from the exercise of options for the three month periods ended June 30, 2007 and 2006 was $10.7 million and $5.8 million, respectively. For the six month periods ended June 30, 2007 and 2006, cash received from option exercises were $14.6 million and $15.2 million, respectively. The tax benefit realized for the tax deductions from option exercises totaled $0.9 million for both the three month periods ended June 30, 2007 and 2006. For both of the six month periods ended June 30, 2007 and 2006, the tax benefit realized for the tax deductions from option exercises totaled $1.8 million.

Huntington issues shares to fulfill stock option exercises and restricted stock units from available shares held in treasury. At June 30, 2007, the Company believes there are adequate shares in treasury to satisfy anticipated stock option exercises in 2007.

The following table summarizes the status of Huntington’s restricted stock units as of and for the six months ended June 30, 2007:


				Weighted-
				Average
	Restricted			Grant Date
	Stock			Fair Value
(in thousands, except per share amounts)	Units			Per Share

Nonvested at January 1, 2007		468		$	23.37
Granted		5			23.62
Vested		(6	)		23.34
Forfeited		(13	)		23.34

Nonvested at June 30, 2007		454		$	23.38

As of June 30, 2007, the total compensation cost related to restricted stock units not yet recognized was $7.0 million with a weighted-average expense recognition period of 2.1 years. The total fair value of restricted stock units vested during the six months ended June 30, 2007, was $0.1 million.

As a result of the acquisition of Sky Financial, the outstanding stock options to purchase Sky Financial’s common stock were converted into 7.4 million options to purchase shares of Huntington common stock with a weighted average exercise price of $18.40.

Note 9 – Income Taxes

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state, city, and foreign jurisdictions. Federal income tax audits have been resolved through 2003. Various state and city jurisdictions remain open to examination for tax years 2000 and forward.

The Company adopted the provisions of FIN 48 on January 1, 2007. The implementation of FIN 48 did not impact the Company’s financial statements. As of June 30, 2007, there were no unrecognized tax benefits.

The Company recognizes interest and penalties on income tax assessments or income tax refunds in the financial statements as a component of its provision for income taxes.

Note 10 – Benefit Plans

Huntington sponsors the Huntington Bancshares Retirement Plan (the Plan), a non-contributory defined benefit pension plan covering substantially all employees. The Plan provides benefits based upon length of service and compensation levels. The funding policy of Huntington is to contribute an annual amount that is at least equal to the minimum funding requirements but not more than that deductible under the Internal Revenue Code.

In addition, Huntington has an unfunded, defined benefit post-retirement plan (Post-Retirement Benefit Plan) that provides certain healthcare and life insurance benefits to retired employees who have attained the age of 55 and have at least 10 years of vesting service under this plan. For any employee retiring on or after January 1, 1993, post-retirement healthcare benefits are based upon the employee’s number of months of service and are limited to the actual cost of coverage. Life insurance benefits are a percentage of the employee’s base salary at the time of retirement, with a maximum of $50,000 of coverage.

The following table shows the components of net periodic benefit expense of the Plan and the Post-Retirement Benefit Plan:


	Pension Benefits						Post Retirement Benefits
	Three Months Ended						Three Months Ended
	June 30,						June 30,
(in thousands)	2007			2006			2007			2006

Service cost	$	4,445		$	4,414		$	375		$	383
Interest cost		5,966			5,539			667			565
Expected return on plan assets		(9,120	)		(8,319	)		—			—
Amortization of transition asset		2			—			276			276
Amortization of prior service cost		—			—			47			95
Settlements		1,000			1,000			—			—
Recognized net actuarial loss (gain)		3,116			4,377			(122	)		(181	)

Benefit expense	$	5,409		$	7,011		$	1,243		$	1,138


	Pension Benefits						Post Retirement Benefits
	Six Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands)	2007			2006			2007			2006

Service cost	$	8,890		$	8,723		$	749		$	720
Interest cost		11,933			11,078			1,334			1,130
Expected return on plan assets		(18,240	)		(16,539	)		—			—
Amortization of transition asset		3			—			552			552
Amortization of prior service cost		1			1			189			190
Settlements		2,000			2,000			—			—
Recognized net actuarial loss (gain)		6,231			8,754			(203	)		(362	)

Benefit expense	$	10,818		$	14,017		$	2,621		$	2,230

There is no required minimum contribution for 2007 to the Plan.

Huntington also sponsors other retirement plans, the most significant being the Supplemental Executive Retirement Plan and the Supplemental Retirement Income Plan. These plans are nonqualified plans that provide certain former officers and directors of Huntington and its subsidiaries with defined pension benefits in excess of limits imposed by federal tax law. The cost of providing these plans was $0.6 million for each of the three month periods ended June 30, 2007 and 2006, respectively. For the respective six-month periods, the cost was $1.4 million and $1.3 million.

Huntington has a defined contribution plan that is available to eligible employees. Huntington matches participant contributions dollar for dollar, up to the first 3% of base pay contributed to the plan. The match is 50 cents for each dollar on the 4th and 5th percent of base pay contributed to the plan. The cost of providing this plan was $2.7 million and $2.6 million for the three month periods ended June 30, 2007 and 2006, respectively. For the respective six month periods, the cost was $5.4 million and $5.1 million.

As a result of the acquisition of Sky Financial, Huntington will remeasure its pension and post retirement plan assets and liabilities as of July 1, 2007.

Note 11 – Commitments and Contingent Liabilities

Commitments to extend credit :

In the ordinary course of business, Huntington makes various commitments to extend credit that are not reflected in the financial statements. The contract amounts of these financial agreements at June 30, 2007, December 31, 2006, and June 30, 2006, were as follows:


	June 30,		December 31,		June 30,
(in millions)	2007		2006		2006

Contract amount represents credit risk
Commitments to extend credit
Commercial	$	4,602	$	4,416	$	4,021
Consumer		3,491		3,374		3,595
Commercial real estate		1,559		1,645		1,764
Standby letters of credit		1,230		1,156		1,121
Commercial letters of credit		48		54		54

Commitments to extend credit generally have fixed expiration dates, are variable-rate, and contain clauses that permit Huntington to terminate or otherwise renegotiate the contracts in the event of a significant deterioration in the customer’s credit quality. These arrangements normally require the payment of a fee by the customer, the pricing of which is based on prevailing market conditions, credit quality, probability of funding, and other relevant factors. Since many of these commitments are expected to expire without being drawn upon, the contract amounts are not necessarily indicative of future cash requirements. The interest rate risk arising from these financial instruments is insignificant as a result of their predominantly short-term, variable-rate nature.

Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. Most of these arrangements mature within two years. The carrying amount of deferred revenue associated with these guarantees was $3.8 million, $4.3 million, and $3.6 million at June 30, 2007, December 31, 2006, and June 30, 2006, respectively.

Commercial letters of credit represent short-term, self-liquidating instruments that facilitate customer trade transactions and generally have maturities of no longer than 90 days. The merchandise or cargo being traded normally secures these instruments.

Commitments to sell loans:

Huntington enters into forward contracts relating to its mortgage banking business. At June 30, 2007, December 31, 2006, and June 30, 2006, Huntington had commitments to sell residential real estate loans of $484.5 million, $319.9 million, and $341.5 million, respectively. These contracts mature in less than one year.

Litigation:

In the ordinary course of business, there are various legal proceedings pending against Huntington and its subsidiaries. In the opinion of Management, the aggregate liabilities, if any, arising from such proceedings are not expected to have a material adverse effect on Huntington’s consolidated financial position.

Note 12 – Derivative Financial Instruments

Derivatives used in Asset and Liability Management Activities

The following table presents the gross notional values of derivatives used in Huntington’s Asset and Liability Management activities at June 30, 2007, identified by the underlying interest rate-sensitive instruments:


	Fair Value		Cash Flow
(in thousands )	Hedges		Hedges		Total

Instruments associated with:
Deposits	$	615,000	$	315,000		930,000
Federal Home Loan Bank advances		—		525,000		525,000
Subordinated notes		750,000		—		750,000
Other long-term debt		50,000		—		50,000

Total notional value at June 30, 2007	$	1,415,000	$	840,000	$	2,255,000

The following table presents additional information about the interest rate swaps used in Huntington’s Asset and Liability Management activities at June 30, 2007:


			Average					Weighted-Average
	Notional		Maturity		Fair			Rate
(in thousands )	Value		(years)		Value			Receive			Pay

Liability conversion swaps Receive fixed — generic	$	810,000		9.1	$	(34,481	)		5.29	%		5.57	%
Receive fixed — callable		605,000		6.1		(18,942	)		4.67			5.26
Pay fixed — generic		840,000		2.0		6,485			5.34			4.98

Total liability conversion swaps	$	2,255,000		5.7	$	(46,938	)		5.14	%		5.27	%

Interest rate caps used in Huntington’s Asset and Liability Management activities at June 30, 2007, are shown in the table below:

Average

Notional

Maturity

Fair

Weighted-Average

(in thousands )

Value

(years)

Value

Strike Rate

Interest rate caps — purchased

500,000

1.6

1,900

5.50

These derivative financial instruments were entered into for the purpose of altering the interest rate risk of assets and liabilities. Consequently, net amounts receivable or payable on contracts hedging either interest earning assets or interest bearing liabilities were accrued as an adjustment to either interest income or interest expense. The net amount resulted in a decrease to net interest income of $0.5 million and $0.8 million for the three month periods ended June 30, 2007 and 2006, respectively. For the six month periods ended June 30, 2007 and 2006, the impact to net interest income was a decrease of $0.2 million and $0.2 million, respectively.

Collateral agreements are regularly entered into as part of the underlying derivative agreements with Huntington’s counterparties to mitigate the credit risk associated with derivatives. At June 30, 2007, December 31, 2006 and June 30, 2006, aggregate credit risk associated with these derivatives, net of collateral that has been pledged by the counterparty, was $17.2 million, $42.6 million and $31.1 million, respectively. The credit risk associated with interest rate swaps is calculated after considering master netting agreements.

During 2006, Huntington terminated certain interest rate swaps used to hedge the future expected cash flows of certain FHLB advances and deferred these gains in accumulated other comprehensive income. The deferred swap gains were being amortized into interest expense over the remaining terms of the outstanding advances. During the second quarter of 2007, Huntington prepaid the FHLB advances, and recognized a gain of $4.1 million, which represented the remaining unamortized portion of the terminated swap gains.

Derivatives Used in Mortgage Banking Activities

The following is a summary of the derivative assets and liabilities that Huntington used in its mortgage banking activities:


	June 30,			December 31,			June 30,
(in thousands)	2007			2006			2006

Derivative assets:
Interest rate lock agreements	$	354		$	236		$	232
Forward trades and options		6,441			1,176			3,029

Total derivative assets		6,795			1,412			3,261

Derivative liabilities:
Interest rate lock agreements		(818	)		(838	)		(1,222	)
Forward trades and options		(417	)		(699	)		(35	)

Total derivative liabilities		(1,235	)		(1,537	)		(1,257	)

Net derivative (liability) asset	$	5,560		$	(125	)	$	2,004

Derivatives Used in Trading Activities

Various derivative financial instruments are offered to enable customers to meet their financing and investing objectives and for their risk management purposes. Derivative financial instruments used in trading activities consisted predominantly of interest rate swaps, but also included interest rate caps, floors, and futures, as well as foreign exchange options. Interest rate options grant the option holder the right to buy or sell an underlying financial instrument for a predetermined price before the contract expires. Interest rate futures are commitments to either purchase or sell a financial instrument at a future date for a specified price or yield and may be settled in cash or through delivery of the underlying financial instrument. Interest rate caps and floors are option-based contracts that entitle the buyer to receive cash payments based on the difference between a designated reference rate and a strike price, applied to a notional amount. Written options, primarily caps, expose Huntington to market risk but not credit risk. Purchased options contain both credit and market risk. The interest rate risk of these customer derivatives is mitigated by entering into similar derivatives having offsetting terms with other counterparties.

Supplying these derivatives to customers results in non-interest income. These instruments are carried at fair value in other assets with gains and losses reflected in other non-interest income. Total trading revenue for customer accommodation was $3.4 million and $2.2 million for the three month periods ended June 30, 2007 and 2006, respectively. For the six month periods ended June 30, 2007 and 2006, total trading revenue for customer accommodation was $6.8 million and $5.2 million, respectively. The total notional value of derivative financial instruments used by Huntington on behalf of customers, including offsetting derivatives was $5.2 billion, $4.6 billion, and $4.6 billion at June 30, 2007, December 31, 2006, and June 30, 2006, respectively. Huntington’s credit risk from interest rate swaps used for trading purposes was $53.3 million, $40.0 million, and $64.4 million at the same dates.

Huntington also uses certain derivative financial instruments to offset changes in value of its residential mortgage servicing assets. These derivatives consist primarily of forward interest rate agreements, and forward mortgage securities. The derivative instruments used are not designated as hedges under Statement No. 133. Accordingly, such derivatives are recorded at fair value with changes in fair value reflected in mortgage banking income . The total notional value of these derivative financial instruments at June 30, 2007, was $475.0 million. The total notional amount corresponds to trading assets with a fair value of $0.3 million. Total losses for the three month periods ended June 30, 2007 and 2006 were $12.3 million and $5.8 million, respectively. Total losses for the six month periods ended June 30, 2007 and 2006 were $12.8 million and $9.3 million, respectively.

In connection with securitization activities, Huntington purchased interest rate caps with a notional value totaling $1.5 billion. These purchased caps were assigned to the securitization trust for the benefit of the security holders. Interest rate caps were also sold totaling $1.5 billion outside the securitization structure. Both the purchased and sold caps are marked to market through income.

Note 13 – Shareholders’ Equity

Change in par value and shares authorized:

During the second quarter, Huntington amended its charter to, among other things, assign a par value of $0.01 to each share of common stock. Shares of common stock previously had no assigned par value. Huntington also amended its charter to increase the number of authorized shares of common stock from 500 million shares to 1.0 billion shares.

Share Repurchase Program:

On April 20, 2006, the Company announced that its board of directors authorized a new program for the repurchase of up to 15 million shares of common stock (the 2006 Repurchase Program). The 2006 Repurchase Program does not have an expiration date. The 2006 Repurchase Program cancelled and replaced the prior share repurchase program, authorized by the board of directors in 2005. The Company announced its expectation to repurchase the shares from time to time in the open market or through privately negotiated transactions depending on market conditions.

Huntington did not repurchase any shares under the 2006 Repurchase Program for the three month period ended June 30, 2007. At the end of the period, 3,850,000 shares may be purchased under the 2006 Repurchase Program.

Note 14 – Segment Reporting

Huntington has three distinct lines of business: Regional Banking, Dealer Sales, and the Private Financial and Capital Markets Group (PFCMG). A fourth segment includes the Treasury function and other unallocated assets, liabilities, revenue, and expense. Lines of business results are determined based upon the Company’s management reporting system, which assigns balance sheet and income statement items to each of the business segments. The process is designed around the Company’s organizational and management structure and, accordingly, the results derived are not necessarily comparable with similar information published by other financial institutions. An overview of this system is provided below, along with a description of each segment and discussion of financial results.

The following provides a brief description of the four operating segments of Huntington:

Regional Banking: This segment provides traditional banking products and services to consumer, small business, and, commercial customers. As of June 30 2007, and excluding the impact of the Sky Financial acquisition, it operated in eight regions within the five states of Ohio, Michigan, West Virginia, Indiana, and Kentucky. It provided these services through a banking network of 375 branches, over 1,000 ATMs, along with Internet and telephone banking channels. It also provided certain services outside of these five states, including mortgage banking and equipment leasing. Each region is further divided into retail and commercial banking units. Retail products and services include home equity loans and lines of credit, first mortgage loans, direct installment loans, small business loans, personal and business deposit products, as well as sales of investment and insurance services. Retail Banking accounts for 56% and 77% of total Regional Banking loans and deposits, respectively. Commercial Banking serves middle market commercial banking relationships, which use a variety of banking products and services including, but not limited to, commercial loans, international trade, cash management, leasing, interest rate protection products, capital market alternatives, 401(k) plans, and mezzanine investment capabilities.

Dealer Sales: This segment provides a variety of banking products and services to more than 3,500 automotive dealerships within the Company’s primary banking markets, as well as in Arizona, Florida, Georgia, Nevada, New Jersey, North Carolina, New York, Pennsylvania, South Carolina, and Tennessee. Dealer Sales finances the purchase of automobiles by customers at the automotive dealerships, purchases automobiles from dealers and simultaneously leases the automobiles to consumers under long-term leases, finances the dealerships’ new and used vehicle inventories, land, buildings, and other real estate owned by the dealerships, or dealer working capital needs, and provides other banking services to the automotive dealerships and their owners. Competition from the financing divisions of automobile manufacturers and from other financial institutions is intense. Dealer Sales’ production opportunities are directly impacted by the general automotive sales business, including programs initiated by manufacturers to enhance and increase sales directly. Huntington has been in this line of business for over 50 years.

Private Financial and Capital Markets Group (PFCMG): This segment provides products and services designed to meet the needs of higher net worth customers. Revenue is derived through the sale of trust, asset management, investment advisory, brokerage, insurance, and private banking products and services. It also focuses on financial solutions for corporate and institutional customers that include investment banking, sales and trading of securities, mezzanine capital financing, and risk management products. To serve high net worth customers, a unique distribution model is used that employs a single, unified sales force to deliver products and services mainly through Regional Banking distribution channels.

Treasury / Other: This segment includes revenue and expense related to assets, liabilities, and equity that are not directly assigned or allocated to one of the other three business segments. Assets in this segment include investment securities and bank owned life insurance. The net interest income/(expense) of this segment includes the net impact of administering our investment securities portfolios as part of overall liquidity management. A match-funded transfer pricing system is used to attribute appropriate funding interest income and interest expense to other business segments. As such, net interest income includes the net impact of any over or under allocations arising from centralized management of interest rate risk. Furthermore, net interest income includes the net impact of derivatives used to hedge interest rate sensitivity. Non-interest income includes miscellaneous fee income not allocated to other business segments, including bank owned life insurance income. Fee income also includes asset revaluations not allocated to other business segments, as well as any investment securities and trading assets gains or losses. The non-interest expense includes certain corporate administrative and other miscellaneous expenses not allocated to other business segments. This segment also includes any difference between the actual effective tax rate of Huntington and the statutory tax rate used to allocate income taxes to the other segments.

Listed below are certain financial results by line of business. For the three and six month periods ended June 30, 2007 and 2006, operating earnings were the same as reported earnings.


	Three Months Ended June 30,
Income Statements	Regional			Dealer						Treasury/			Huntington
(in thousands )	Banking			Sales			PFCMG			Other			Consolidated

2007
Net interest income	$	213,589		$	32,333		$	18,199		$	(10,730	)	$	253,391
Provision for credit losses		(54,873	)		(303	)		(4,957	)		—			(60,133	)
Non-interest income		96,657			10,984			45,964			2,588			156,193
Non-interest expense		(166,469	)		(18,618	)		(41,063	)		(18,505	)		(244,655	)
Income taxes		(31,116	)		(8,539	)		(6,350	)		21,730			(24,275	)

Operating / reported net income	$	57,788		$	15,857		$	11,793		$	(4,917	)	$	80,521

2006
Net interest income	$	227,473		$	34,784		$	18,037		$	(18,099	)	$	262,195
Provision for credit losses		(14,844	)		949			(1,850	)		—			(15,745	)
Non-interest income		92,759			21,516			39,139			9,605			163,019
Non-interest expense		(177,245	)		(28,103	)		(38,116	)		(8,895	)		(252,359	)
Income taxes		(44,850	)		(10,201	)		(6,024	)		15,569			(45,506	)

Operating / reported net income	$	83,293		$	18,945		$	11,186		$	(1,820	)	$	111,604


	Six Months Ended June 30,
Income Statements	Regional			Dealer						Treasury/			Huntington
(in thousands of dollars)	Banking			Sales			PFCMG			Other			Consolidated

2007
Net interest income	$	428,589		$	63,974		$	37,376		$	(20,993	)	$	508,946
Provision for credit losses		(77,329	)		(8,048	)		(4,162	)		—			(89,539	)
Non-Interest income		186,200			24,165			79,615			11,390			301,370
Non-Interest expense		(329,370	)		(38,205	)		(81,295	)		(37,857	)		(486,727	)
Income taxes		(72,831	)		(14,661	)		(11,037	)		40,726			(57,803	)

Operating / reported net income	$	135,259		$	27,225		$	20,497		$	(6,734	)	$	176,247

2006
Net interest income	$	435,553		$	69,615		$	35,606		$	(34,899	)	$	505,875
Provision for credit losses		(25,234	)		(6,813	)		(3,238	)		—			(35,285	)
Non-Interest income		170,551			48,508			80,033			23,461			322,553
Non-Interest expense		(319,393	)		(59,883	)		(68,827	)		(42,671	)		(490,774	)
Income taxes		(91,517	)		(17,999	)		(15,251	)		38,458			(86,309	)

Operating / reported net income	$	169,960		$	33,428		$	28,323		$	(15,651	)	$	216,060


	Assets at						Deposits at
	June 30,		December 31,		June 30,		June 30,		December 31,		June 30,
(in millions)	2007		2006		2006		2007		2006		2006

Regional Banking	$	21,681	$	20,933	$	21,035	$	20,482	$	20,231	$	19,839
Dealer Sales		5,146		5,003		5,417		58		59		61
PFCMG		2,296		2,153		2,179		1,104		1,162		1,218
Treasury / Other		7,298		7,240		7,635		2,956		3,596		3,475

Total	$	36,421	$	35,329	$	36,266	$	24,600	$	25,048	$	24,593

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

INTRODUCTION

Huntington Bancshares Incorporated (we or our) is a multi-state diversified financial holding company organized under Maryland law in 1966 and headquartered in Columbus, Ohio. Through our bank subsidiaries, The Huntington National Bank and Sky Bank, we provide full-service commercial and consumer banking services, mortgage banking services, automobile financing, equipment leasing, investment management, trust services, brokerage services, reinsurance of private mortgage insurance; reinsurance of credit life and disability insurance; and other insurance and financial products and services. Our banking offices are located in Ohio, Michigan, Pennsylvania, West Virginia, Indiana, and Kentucky. Sky Insurance offers retail and commercial insurance agency services, through offices in Ohio, Pennsylvania, Michigan, Indiana, and West Virginia. Certain activities are also conducted in Arizona, Florida, Georgia, Maryland, Nevada, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, and Vermont. International banking services are made available through our headquarters office in Columbus, a limited purpose office located in the Cayman Islands, and another located in Hong Kong. The Huntington National Bank (the Bank) was organized in 1866.

The following discussion and analysis provides you with information we believe necessary for understanding our financial condition, changes in financial condition, results of operations, and cash flows and should be read in conjunction with the financial statements, notes, and other information contained in this report. The Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) appearing in our 2006 Annual Report on Form 10-K (2006 Form 10-K), as updated by the information contained in this report, should be read in conjunction with this discussion and analysis.

You should note the following discussion is divided into key segments:

	•		Introduction - Provides overview comments on important matters including risk factors and other items. These are essential for understanding our performance and prospects.

	•		Discussion of Results of Operations - Reviews financial performance from a consolidated company perspective. It also includes a Significant Items Influencing Financial Performance Comparisons section that summarizes key issues helpful for understanding performance trends. Key consolidated balance sheet and income statement trends are also discussed in this section.

	•		Risk Management and Capital - Discusses credit, market, liquidity, and operational risks, including how these are managed, as well as performance trends. It also includes a discussion of liquidity policies, how we fund ourselves, and related performance. In addition, there is a discussion of guarantees and/or commitments made for items such as standby letters of credit and commitments to sell loans, and a discussion that reviews the adequacy of capital, including regulatory capital requirements.

	•		Lines of Business Discussion - Provides an overview of financial performance for each of our major lines of business and provides additional discussion of trends underlying consolidated financial performance.

Forward-Looking Statements

This report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements. These include descriptions of products or services, plans or objectives for future operations, including statements about the benefits of any proposed or completed acquisitions, and forecasts of revenues, earnings, cash flows, 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 could cause actual conditions, events, or results to differ significantly from those described in the forward-looking statements. These factors include, but are not limited to, the businesses of Huntington and that of any pending or completed acquisition may not be integrated successfully or such integration may take longer to accomplish than expected; the expected cost savings and any revenue synergies from any acquisition may not be fully realized within the expected timeframes; disruption from any acquisition may make it more difficult to maintain relationships with clients, associates, or suppliers; the required governmental approvals of the acquisition may not be obtained on the proposed terms and schedule; if required by the acquisition, Huntington and/or the stockholders of the company of any pending or approved acquisition

may not approve the merger; changes in economic conditions; movements in interest rates; competitive pressures on product pricing and services; success and timing of other business strategies; the nature, extent, and timing of governmental actions and reforms; and extended disruption of vital infrastructure; and other factors described in Item 1A of Huntington’s 2006 Annual Report on Form 10-K, the corresponding annual report on Form 10-K of any pending or approved acquisition, and other factors described from time to time in Huntington’s, or any pending or approved acquisition’s, other filings with the Securities and Exchange Commission (SEC).

You should understand forward-looking statements to be strategic objectives and not absolute forecasts of future performance. Forward-looking statements speak only as of the date they are made. We assume no obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events.

Risk Factors

We, like other financial companies, are subject to a number of risks, many of which are outside of our direct control, though efforts are made to manage those risks while optimizing returns. Among the risks assumed are: (1) credit risk, which is the risk that loan and lease customers or other counter parties will be unable to perform their contractual obligations, (2) market risk, which is the risk that changes in market rates and prices will adversely affect our financial condition or results of operation, (3) liquidity risk, which is the risk that we, or the Bank, will have insufficient cash or access to cash to meet operating needs, and (4) operational risk, which is the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events . Refer to the ‘Risk Management and Capital’ section for additional information regarding risk factors. Additionally, more information on risk is set forth under the heading “Risk Factors” included in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2006, and subsequent filings with the SEC.

Critical Accounting Policies and Use of Significant Estimates

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP). The preparation of financial statements in conformity with GAAP requires us to establish critical accounting policies and make accounting estimates, assumptions, and judgments that affect amounts recorded and reported in our financial statements. Note 1 of the Notes to Consolidated Financial Statements included in our 2006 Form 10-K as supplemented by this report lists significant accounting policies we use in the development and presentation of our 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 necessary for an understanding and evaluation of our company, financial position, results of operations, and cash flows.

An accounting estimate requires assumptions about uncertain matters that could have a material effect on the financial statements if a different amount within a range of estimates were used or if estimates changed from period to period. Readers of this report should understand that estimates are made under facts and circumstances at a point in time, and changes in those facts and circumstances could produce actual results that differ from when those estimates were made.

Acquisition of Sky Financial

On July 1, 2007, we acquired Sky Financial Group, Inc. (Sky Financial) in a stock and cash transaction valued at approximately $3.5 billion. As of June 30, 2007, Sky Financial was a $16.7 billion diversified financial holding company with over 330 financial centers and over 400 ATMs. Sky Financial served communities in Ohio, Pennsylvania, Indiana, Michigan, and West Virginia. Sky Financial’s financial service affiliates included: Sky Bank, commercial and retail banking; Sky Trust, asset management services; and Sky Insurance, retail and commercial insurance agency services.

Sky Financial results will be reflected in consolidated results beginning in the 2007 third quarter and, therefore, had no direct impact on balance sheet comparisons. Refer to the Significant Items Influencing Financial Comparisons section for additional information regarding the impact of the acquisition costs on period to period earnings comparisons.

DISCUSSION OF RESULTS OF OPERATIONS

This section provides a review of financial performance from a consolidated perspective. It also includes a Significant Items Influencing Financial Performance Comparisons section that summarizes key issues important for a complete understanding of performance trends. Key consolidated balance sheet and income statement trends are discussed in this

section. All earnings per share data are reported on a diluted basis. For additional insight on financial performance, this section should be read in conjunction with the Lines of Business Discussion.

Significant Items

Certain components of the Income Statement are naturally subject to more volatility than others. As a result, analysts/investors may view such items differently in their assessment of performance compared with their expectations and/or any implications resulting from them on their assessment of future performance trends. It is a general practice of analysts/investors to try and determine their perception of what “underlying” or “core” earnings performance is in any given reporting period, as this typically forms the basis for their estimation of performance in future periods.

Therefore, we believe the disclosure of certain “Significant Items” in current and prior period results aids analysts/investors in better understanding corporate performance so that they can ascertain for themselves what, if any, items they may wish to include/exclude from their analysis of performance; i.e., within the context of determining how that performance differed from their expectations, as well as how, if at all, to adjust their estimates of future performance accordingly.

To this end, we have adopted a practice of listing as “Significant Items” in our external disclosure documents (e.g., earnings press releases, investor presentations, Forms 10-Q and 10-K) individual and/or particularly volatile items that impact the current period results by $0.01 per share or more. Such “Significant Items” generally fall within one of two categories: timing differences and other items.

Timing Differences

Part of our regular business activities are by their nature volatile; e.g., capital markets income, gains and losses on the sale of loans, etc. While such items may generally be expected to occur within a full year reporting period, they may vary significantly from period to period. Such items are also typically a component of an Income Statement line item and not, therefore, readily discernable. By specifically disclosing such items, analysts/investors can better assess how, if at all, to adjust their estimates of future performance.

Other Items

From time to time an event or transaction might significantly impact revenues, expenses or taxes in a particular reporting period that are judged to be one-time, short-term in nature, and/or materially outside typically expected performance. Examples would be (1) merger costs as they typically impact expenses for only a few quarters during the period of transition; e.g., restructuring charges, asset valuation adjustments, etc.; (2) changes in an accounting principle; (3) one-time tax assessments/refunds; (4) a large gain/loss on the sale of an asset; (5) outsized commercial loan net charge-offs; and other items deemed significant. By disclosing such items, analysts/investors can better assess how, if at all, to adjust their estimates of future performance.

Provision for Credit Losses

While the provision for credit losses may vary significantly between periods, we typically exclude it from the list of “Significant Items”, unless in our view, there is a significant specific credit(s) that is causing distortion in the period.

Provision expense is always an assumption in analyst/investor expectations of earnings, and we believe there is apparent agreement among them that provision expense is included in their definition of “underlying” or “core” earnings, unlike “timing differences” or “other items”. In addition, provision expense is an individual Income Statement line item so its value is easily known and, except in very rare situations, the amount in any reporting period always exceeds $0.01 per share. Also, the factors influencing the level of provision expense receive detailed additional disclosure and analysis so that analysts/investors have information readily available to understand the underlying factors that result in the reported provision expense amount.

In addition, provision expense trends usually increase/decrease in a somewhat orderly pattern in conjunction with credit quality cycle changes; i.e., as credit quality improves provision expense generally declines and vice versa. While they may have differing views regarding magnitude and/or trends in provision expense, we believe every analyst and most investors incorporate a provision expense estimate in their financial performance estimates.

Other Exclusions

“Significant Items” for any particular period are not intended to be a complete list of items that may significantly impact future periods. A number of factors, including those described in Huntington’s 2006 Annual Report on Form 10-K and other factors described from time to time in Huntington’s other filings with the Securities and Exchange Commission, could also significantly impact future periods.

Summary

Earnings comparisons of 2007 second quarter performance with that of the 2007 first and 2006 second quarters were impacted by a number of factors, some related to changes in the economic and competitive environment, while others reflected specific strategies, changes in accounting practices, the impact of mergers, or other significant items. Understanding the nature and implications of these factors on financial results is important in understanding our income statement, balance sheet, and credit quality trends and the comparison of the current quarter performance with that of previous quarters. The key factors impacting the current reporting period comparisons are more fully described in the Significant Items Influencing Financial Performance Comparisons section, which follows this summary discussion of results.

2007 Second Quarter versus 2006 Second Quarter

Net income for the second quarter of 2007 was $80.5 million, or $0.34 per common share, compared with $111.6 million, or $0.46 per common share, in the comparable year-ago quarter. This $31.1 million decrease in net income primarily reflected the negative impacts of:

	•		$44.4 million increase in provision for credit losses, reflecting a higher allowance for credit losses (ACL) on both an absolute basis and as a percentage of total loans and leases. This was due to significant deterioration in commercial credit quality, primarily in the eastern Michigan single-family homebuilder sector. Three credit relationships, two in the single-family home builder sector, and one northern Ohio commercial credit to an auto industry-related manufacturing company, accounted for $24.8 million ($16.1 million after tax, or $0.07 per common share) of the increase in provision for credit losses. These three credits, along with increases in other monitored credits, accounted for a significant portion of the increase in non-performing loans (NPLs) and the ACL. The residential real estate market in eastern Michigan continued to deteriorate during the quarter, reflecting a significant downturn in home sales activity. The spring and early-summer selling season is extremely important for homebuilders, and softness was expected. However, in the case of eastern Michigan, the impact turned out to be far worse than anticipated, particularly for the two noted relationships. (See Provision for Credit Losses and the Credit Risk discussions for details.)

	•		$8.8 million, or 3%, decline in net interest income. This reflected the unfavorable impact of a $0.3 billion, or 1%, decrease in average earning assets and a decrease in the fully taxable equivalent net interest margin of 8 basis points to 3.26%. The decline in average earning assets was due to a decline in average investment securities as part of our overall interest rate risk management strategy. This negative impact was partially offset by an increase in average total loans and leases, which increased $0.2 billion, or 1%, primarily reflecting growth in commercial loans, partially offset by declines in total consumer loans. (See Net Interest Income discussion for details.)

	•		$6.8 million, or 4%, decline in total non-interest income. This reflected the negative impacts of a decline in other income due to the continued decline in automobile operating lease income, investment securities losses due to impairment of certain investment securities, and a negative mortgage servicing rights (MSR) fair value adjustment, net of hedge-related trading activity. Partially offsetting these negative impacts was growth in trust services, brokerage and insurance income, service charges on deposit accounts, and other service charges and fees. (See Non-interest Income discussion for details.)

Partially offset by:

	•		$21.2 million reduction in federal income tax expense, primarily due to the decrease in pre-tax income. (See Provision for Income Taxes discussion for details.)

	•		$7.7 million, or 3%, decline in total non-interest expense. This reflected a decrease in other expense due to the continued decline in automobile operating lease expense and the recognition of a $4.1 million gain on the repayment of FHLB debt. Personnel and marketing expenses also declined. Partially offsetting these declines were increases in outside data processing and other services expense, as well as professional services expense, due

primarily to Sky Financial merger costs. (See Non-interest Expense discussion for details.)

The return on average assets (ROA) and return on average equity (ROE) in the 2007 second quarter were 0.92% and 10.6%, respectively, compared with 1.25% and 14.9%, respectively, in the year-ago quarter. The return on average tangible shareholders’ equity (ROTE) in the 2007 second quarter was 13.6%, compared with 19.3% in the year-ago quarter ( see Table 1).

2007 Second Quarter versus 2007 First Quarter

Net income for the second quarter of 2007 was $80.5 million, or $0.34 per common share, compared with $95.7 million, or $0.40 per common share, in the prior quarter. This $15.2 million decrease in net income primarily reflected the negative impacts of:

	•		$30.7 million increase in the provision for credit losses. This reflected a higher ACL on both an absolute basis and as a percentage of total loans and leases, due to significant deterioration in commercial credit quality, primarily in the eastern Michigan single-family homebuilder sector. (See Provision for Credit Losses and the Credit Risk discussions for details.)

	•		$2.6 million, or 1%, increase in total non-interest expense. This reflected increases in outside data processing and other services, professional services and marketing expenses, primarily reflecting Sky Financial merger costs. (See Non-interest Expense discussion for details.)

	•		$2.2 million, or 1%, decline in net interest income. This reflected the unfavorable impact of a 10 basis point decline in the net interest margin, due primarily to the negative impact of higher non-accrual loans, including accrued interest reversals. Average total earning assets increased 1%, reflecting growth in average total loans and leases, as well as other earning assets, mostly trading account assets and interest bearing deposits in banks. (See Net Interest Income discussion for details.)

Partially offset by:

	•		$9.3 million reduction in federal income tax expense, primarily due to the decrease in pre-tax income. (See Provision for Income Taxes discussion for details)

	•		$11.0 million increase in total non-interest income. This reflected the benefit of an increase in other income due to equity investment gains in the current quarter compared with such losses in the prior quarter, and growth in service charges on deposit accounts, other service charges and fees, and brokerage and insurance income. These benefits were partially offset by investment securities impairment losses in the current period, and a decline in mortgage banking income due to a net loss on MSR fair value adjustments, net of hedge-related trading activity. (See Non-interest Income discussion for details.)

The ROA and ROE in the 2007 second quarter were 0.92% and 10.6%, respectively, compared with 1.11% and 12.9%, respectively, in the 2007 first quarter. The ROTE in the 2007 second quarter was 13.6%, compared with 16.5% in the prior quarter (see Table 1).

2007 First Six Months versus 2006 First Six Months

Net income for the first six month period of 2007 was $176.2 million, or $0.74 per common share, compared with $216.1 million, or $0.90 per common share, in the comparable year-ago period. This $39.8 million decrease in net income primarily reflected the negative impacts of:

	•		$54.3 million increase in provision for credit losses, reflecting a higher ACL on both an absolute basis and as a percentage of total loans and leases. This was due to significant deterioration in commercial credit quality, primarily in the eastern Michigan single-family homebuilder sector. Two credit relationships in this sector, along with increases in monitored credits, and a middle market commercial and industrial (C&I) loan in northern Ohio, accounted for a significant portion of the increase in NPLs and the ACL. (See Provision for Credit Losses and the Credit Risk discussions for details.)

	•		$21.2 million, or 7%, decline in total non-interest income. This reflected the negative impacts of a decline in other income due to the continued decline in automobile operating lease income (down $24.7 million), a decline in mortgage banking income reflecting negative MSR fair value adjustments, net of hedge-related trading activity,

and investment securities losses due to impairment of certain investment securities. Partially offsetting these negative impacts was growth in trust services, service charges on deposit accounts, brokerage and insurance income, and other service charges and fees. (See Non-interest Income discussion for details.)

Partially offset by:

	•		$28.5 million reduction in federal income tax expense, primarily due to the decrease in pre-tax income. (See Provision for Income Taxes discussion for details.)

	•		$4.0 million, or 1%, decline in total non-interest expense. This reflected a decrease in other expense due to the continued decline in automobile operating lease expense (down $18.4 million), and a decline in telecommunication expenses, partially offset by increases in outside data process and other services, net occupancy and professional services due primarily to Sky Financial merger costs, as well as Unizan merger-related expenses. (See Non-interest Expense discussion for details.)

	•		$3.1 million, or 1%, increase in net interest income. This reflected the favorable impact of a $0.4 billion, or 1%, increase in average earning assets, partially offset by the negative impact of a 2 basis point decline in the fully taxable equivalent net interest margin to 3.31%. The increase in average earning assets was driven by a $0.7 billion, or 3%, increase in average total loans, consisting of a 9% increase in average total commercial loans, partially offset by a 2% decline in average total consumer loans. (See Net Interest Income discussion for details.)

The ROA and ROE for the first six month period of 2007 were 1.01% and 11.7%, respectively, compared with 1.26% and 15.2%, respectively, in the comparable year-ago period. The ROTE for the first six months of 2007 was 15.1%, compared with 18.7% in the comparable year-ago period ( see Table 1).

Table 1 — Selected Quarterly Income Statement Data ^{(1), (6)}


	2007									2006
(in thousands, except per share amounts)	Second			First			Fourth			Third			Second

Interest income	$	542,461		$	534,949		$	544,841		$	538,988		$	521,903
Interest expense		289,070			279,394			286,852			283,675			259,708

Net interest income		253,391			255,555			257,989			255,313			262,195
Provision for credit losses		60,133			29,406			15,744			14,162			15,745

Net interest income after provision for credit losses		193,258			226,149			242,245			241,151			246,450

Service charges on deposit accounts		50,017			44,793			48,548			48,718			47,225
Trust services		26,764			25,894			23,511			22,490			22,676
Brokerage and insurance income		17,199			16,082			14,600			14,697			14,345
Other service charges and fees		14,923			13,208			13,784			12,989			13,072
Bank owned life insurance income		10,904			10,851			10,804			12,125			10,604
Mortgage banking (loss) income		7,122			9,351			6,169			8,512			13,616
Securities (losses) gains		(5,139	)		104			(15,804	)		(57,332	)		(35	)
Other income		34,403			24,894			38,994			35,711			41,516

Total non-interest income		156,193			145,177			140,606			97,910			163,019

Personnel costs		135,191			134,639			137,944			133,823			137,904
Outside data processing and other services		25,701			21,814			20,695			18,664			19,569
Net occupancy		19,417			19,908			17,279			18,109			17,927
Equipment		17,157			18,219			18,151			17,249			18,009
Marketing		8,986			7,696			6,207			7,846			10,374
Professional services		8,101			6,482			8,958			6,438			6,292
Telecommunications		4,577			4,126			4,619			4,818			4,990
Printing and supplies		3,672			3,242			3,610			3,416			3,764
Amortization of intangibles		2,519			2,520			2,993			2,902			2,992
Other expense		19,334			23,426			47,334			29,165			30,538

Total non-interest expense		244,655			242,072			267,790			242,430			252,359

Income before income taxes		104,796			129,254			115,061			96,631			157,110
Provision (benefit) for income taxes ⁽²⁾		24,275			33,528			27,346			(60,815	)		45,506

Net income	$	80,521		$	95,726		$	87,715		$	157,446		$	111,604


Average common shares — diluted		239,008			238,754			239,881			240,896			244,538

Per common share
Net income — diluted	$	0.34		$	0.40		$	0.37		$	0.65		$	0.46
Cash dividends declared		0.265			0.265			0.250			0.250			0.250

Return on average total assets		0.92	%		1.11	%		0.98	%		1.75	%		1.25	%
Return on average total shareholders’ equity		10.6			12.9			11.3			21.0			14.9
Return on average tangible shareholder’s equity ⁽³⁾		13.6			16.5			14.5			27.1			19.3
Net interest margin ⁽⁴⁾		3.26			3.36			3.28			3.22			3.34
Efficiency ratio ⁽⁵⁾		57.8			59.2			63.3			57.8			58.1
Effective tax rate		23.2			25.9			23.8			(62.9	)		29.0

Revenue — fully taxable equivalent (FTE)
Net interest income	$	253,391		$	255,555		$	257,989		$	255,313		$	262,195
FTE adjustment		4,127			4,047			4,115			4,090			3,984

Net interest income ⁽⁴⁾		257,518			259,602			262,104			259,403			266,179
Non-interest income		156,193			145,177			140,606			97,910			163,019

Total revenue ⁽⁴⁾	$	413,711		$	404,779		$	402,710		$	357,313		$	429,198


⁽¹⁾		Comparisons for presented periods are impacted by a number of factors. Refer to the ‘Significant Items Influencing Financial Performance Comparisons’ for additional discussion regarding these key factors.

⁽²⁾		The third quarter of 2006 includes $84.5 million benefit reflecting the resolution of a federal income tax audit of tax years 2002 and 2003.

⁽³⁾		Net income less expense for amortization of intangibles (net of tax) for the period divided by average tangible common shareholders’ equity. Average tangible common shareholders’ equity equals average total common shareholders’ equity less average identifiable intangible assets and goodwill.

⁽⁴⁾		On a fully taxable equivalent (FTE) basis assuming a 35% tax rate.

⁽⁵⁾		Non-interest expense less amortization of intangibles divided by the sum of FTE net interest income and non-interest income excluding securities gains (losses).

⁽⁶⁾		On July 1, 2007, Huntington acquired Sky Financial Group, Inc. Accordingly, the balances presented do not include the impact of the acquisition.

Table 2 — Selected Year to Date Income Statement Data ^{(1), (5)}


	Six Months Ended June 30,						Change
(in thousands, except per share amounts)	2007			2006			Amount			Percent

Interest income	$	1,077,410		$	986,690		$	90,719			9.2	%
Interest expense		568,464			480,815			87,649			18.2

Net interest income		508,946			505,875			3,071			0.6
Provision for credit losses		89,539			35,285			54,254			N.M.

Net interest income after provision for credit losses		419,407			470,590			(51,183	)		(10.9	)

Service charges on deposit accounts		94,810			88,447			6,363			7.2
Trust services		52,658			43,954			8,704			19.8
Brokerage and insurance income		33,281			29,538			3,743			12.7
Other service charges and fees		28,131			24,581			3,550			14.4
Bank owned life insurance income		21,755			20,846			909			4.4
Mortgage banking income		16,473			26,810			(10,337	)		(38.6	)
Securities (losses) gains ⁽¹⁾		(5,035	)		(55	)		(4,980	)		N.M.
Other income		59,297			88,432			(29,135	)		(32.9	)

Total non-interest income		301,370			322,553			(21,183	)		(6.6	)

Personnel costs		269,830			269,461			369			0.1
Outside data processing and other services		47,515			39,420			8,095			20.5
Net occupancy		39,325			35,893			3,432			9.6
Equipment		35,376			34,512			864			2.5
Marketing		16,682			17,675			(993	)		(5.6	)
Professional services		14,583			11,657			2,926			25.1
Telecommunications		8,703			9,815			(1,112	)		(11.3	)
Printing and supplies		6,914			6,838			76			1.1
Amortization of intangibles		5,039			4,067			972			23.9
Other expense		42,760			61,436			(18,676	)		(30.4	)

Total non-interest expense		486,727			490,774			(4,047	)		(0.8	)

Income before income taxes		234,050			302,369			(68,319	)		(22.6	)
Provision for income taxes		57,803			86,309			(28,506	)		(33.0	)

Net income	$	176,247		$	216,060		$	(39,813	)		(18.4	)%


Average common shares — diluted		238,881			239,451			(570	)		(0.2	)%

Per common share
Net income per common share — diluted	$	0.74		$	0.90		$	(0.16	)		(17.8	)%
Cash dividends declared		0.530			0.500			0.030			6.0

Return on average total assets		1.01	%		1.26	%		(0.25	)%		(19.8	)%
Return on average total shareholders’ equity		11.7			15.2			(3.5	)		(23.0	)
Return on average tangible shareholders’ equity ⁽²⁾		15.1			18.7			(3.6	)		(19.3	)
Net interest margin ⁽³⁾		3.31			3.33			(0.02	)		(0.6	)
Efficiency ratio ⁽⁴⁾		58.5			58.2			0.3			0.5
Effective tax rate		24.7			28.5			(3.8	)		(13.3	)

Revenue — fully taxable equivalent (FTE)
Net interest income	$	508,946		$	505,875		$	3,071			0.6	%
FTE adjustment ⁽³⁾		8,174			7,820			354			4.5

Net interest income		517,120			513,695			3,425			0.7
Non-interest income		301,370			322,553			(21,183	)		(6.6	)

Total revenue	$	818,490		$	836,248		$	(17,758	)		(2.1	)%


N.M., not a meaningful value.

⁽¹⁾		Comparisons for presented periods are impacted by a number of factors. Refer to the ‘Significant Items Influencing Financial Performance Comparisons’ for additional discussion regarding these key factors.

⁽²⁾		Net income less expense for amortization of intangibles (net of tax) for the period divided by average tangible common shareholders’ equity. Average tangible common shareholders’ equity equals average total common shareholders’ equity less average identifiable intangible assets and goodwill.

⁽³⁾		On a fully taxable equivalent (FTE) basis assuming a 35% tax rate.

⁽⁴⁾		Non-interest expense less amortization of intangibles divided by the sum of FTE net interest income and non-interest income excluding securities gains/(losses).

⁽⁵⁾		On July 1, 2007, Huntington acquired Sky Financial Group, Inc. Accordingly, the balances presented do not include the impact of the acquisition.

Significant Items Influencing Financial Performance Comparisons

Earnings comparisons from the beginning of 2006 through the second quarter of 2007 were impacted by a number of factors summarized below.

Balance Sheet Restructuring . In third and fourth quarters of 2006, we utilized the excess capital resulting from the third quarter’s favorable resolution to certain federal income tax audits to restructure certain under-performing components of the balance sheet. Total securities losses as a result of these actions totaled $73.3 million. The refinancing of FHLB funding and the sale of mortgage loans resulted in total charges of $4.4 million, resulting in total balance sheet restructuring costs of $77.7 million ($0.21 per common share). Our actions impacted 2006 third and fourth quarter results as follows:

	•		$57.5 million pre-tax ($0.16 per common share) negative impact in the 2006 third quarter from securities impairment. Subsequent to the end of the quarter, the company initiated a review of its investment securities portfolio. The objective of this review was to reposition the portfolio to optimize performance in light of changing economic conditions and other factors. A total of $2.1 billion of securities, primarily consisting of U.S. Treasury, agency securities, and mortgage-backed securities, as well as certain other asset-backed securities, were identified as other-than-temporarily impaired as a result of this review.

	•		$20.2 million pre-tax ($13.1 million after tax or $0.05 per common share) negative impact in the 2006 fourth quarter related to costs associated with the completion of the balance sheet restructuring. This consisted of $9.0 million pretax of investment securities losses as well as $6.8 million of additional impairment on certain asset-backed securities not included in the third quarter restructuring, and $4.4 million pre-tax of other balance sheet restructuring expenses, most notably FHLB funding refinancing costs.

2.		Sky Financial Group Acquisition. The merger with Sky Financial Group (Sky Financial) was completed on July 1, 2007. At the time of acquisition, Sky Financial had assets of $16.7 billion, including $13.2 billion of loans and core deposits of $12.0 billion. Sky Financial results will be reflected in consolidated results beginning in the 2007 third quarter and, therefore, had no direct impact on balance sheet comparisons. Nevertheless, the 2007 first and second quarters reflected merger costs of $0.8 million and $7.6 million, respectively.

3.		Unizan Acquisition. The merger with Unizan Financial Corp. (Unizan) was completed on March 1, 2006. At the time of acquisition, Unizan had assets of $2.5 billion, including $1.6 billion of loans and core deposits of $1.5 billion. Unizan results were only in consolidated results for a partial quarter in the 2006 first quarter, but fully impacted all quarters thereafter. As a result, performance comparisons between the 2007 second quarter and 2006 second quarter periods, as well as comparisons between the 2007 second quarter and 2007 first quarter periods, are unaffected. However, comparisons between the 2007 six-month period and 2006 six-month period are affected, as Unizan results were included in the 2006 period for four months. Comparisons of the first six months of 2007 with the first six months of 2006 are impacted as follows:

	•		Increased reported average balance sheet, revenue, expense, and credit quality results (e.g., net charge-offs).

	•		Increased reported non-interest expense items as a result of costs incurred as part of merger-integration activities, most notably employee retention bonuses, outside programming services related to systems conversions, and marketing expenses related to customer retention initiatives. These net merger costs were $1.0 million in the 2006 first quarter, $2.6 million in the 2006 second quarter, $0.5 million in the 2006 third quarter, and a net cost recovery of $0.4 million in the 2006 fourth quarter.

Given the impact of the merger on reported 2006 results, management believes that an understanding of the impacts of the merger is necessary to understand better underlying performance trends. When comparing post-merger period results to pre-merger periods, two terms relating to the impact of the Unizan merger on reported results are used:

	•		“Merger-related” refers to amounts and percentage changes representing the impact attributable to the merger.

	•		“Merger costs” represent expenses associated with merger integration activities.

An analysis reflecting the estimated impact of the Unizan merger on our reported average balance sheet and income statement can be found in Table 24 – Estimated Impact of Unizan Merger.

Mortgage servicing rights (MSRs) and related hedging. MSR fair values are very sensitive to movements in

interest rates as expected future net servicing income depends on the projected outstanding principal balances of the underlying loans, which can be greatly reduced by prepayments. Prepayments usually increase when mortgage interest rates decline and decrease when mortgage interest rates rise. A hedging strategy is used to minimize the impact from MSR fair value changes. However, volatile changes in interest rates can diminish the effectiveness of these hedges. We typically report MSR fair value adjustments net of hedge-related trading activity. Mortgage banking income included the following net impact of MSR hedging activity (reference Table 8) :


($in millions)	Pre-tax			After tax			Per Common Share
1Q07	$	(2.0	)	$	(1.3	)	$	(0.01	)
2Q07		(4.8	)		(3.1	)		(0.01	)

6 Mo. 2007	$	(6.8	)	$	(4.4	)	$	(0.02	)

1Q06	$	(0.6	)	$	(0.4	)	$	—
2Q06		1.5			1.0			—

6 Mo. 2006	$	1.0		$	0.6		$	—
3Q06		0.0			0.0			—
4Q06		(2.5	)		(1.6	)		(0.01	)

12 Mo. 2006	($	1.6	)	$	(1.0	)	$	—

Beginning in the first quarter of 2006, we adopted Statement of Financial Accounting Standards (Statement) No. 156, Accounting for Servicing of Financial Assets (an amendment of FASB Statement No. 140), which allowed us to carry MSRs at fair value. This resulted in a $5.1 million pre-tax ($0.01 per common share) positive impact in the 2006 first quarter (this impact is not reflected in the above table). Under the fair value approach, servicing assets and liabilities are recorded at fair value at each reporting date. Changes in fair value between reporting dates are recorded as an increase or decrease in mortgage banking income. MSR assets are included in other assets (reference Tables 2, 5, and 6) .

5.		Significant commercial loan provision expense. Performance for the 2007 second quarter included $24.8 million ($16.1 million after tax, or $0.07 per common share) in provision for credit losses associated with three credit relationships, two in the East Michigan single-family home builder sector, and one northern Ohio commercial credit to an auto industry-related manufacturing company.

6.		Effective tax rate. For 2006, impacts included an $84.5 million ($0.35 per common share) reduction of federal income tax expense from the release of tax reserves as a result of the resolution of the federal income tax audit for 2002 and 2003, and the recognition of a federal tax loss carry back.

7.		Other significant items influencing earnings performance comparisons. In addition to other items discussed separately in this section, a number of other items impacted financial results. These included:

2007 — Second Quarter

	•		$2.3 million pre-tax ($1.5 million after tax or $0.01 per common share) in equity investment gains.

	•		$5.1 million pre-tax ($3.3 million after tax or $0.01 per common share) of impairment loss on certain investment securities backed by mortgage loans to borrowers with low FICO scores.

	•		$4.1 million pre-tax ($2.7 million after tax or $0.01 per common share) gain from the repayment of FHLB debt.

2007 — First Quarter

	•		$8.5 million pre-tax ($5.5 million after tax or $0.02 per common share) in equity investment losses, resulting from investments in three hedge funds.

	•		$1.9 million pre-tax ($1.2 million after tax or $0.01 per common share) negative impact due to litigation losses.

2006 — Fourth Quarter

	•		$10.0 million pre-tax ($6.5 million after tax or $0.03 per common share) contribution to the Huntington Foundation.
	•		$5.2 million pre-tax ($3.6 million after tax or $0.02 per common share) increase in automobile lease residual value losses. This increase reflected higher relative losses on vehicles sold at auction, most notably high-line imports and larger sport utility vehicles.
	•		$4.5 million pre-tax ($2.9 million after tax or $0.01 per common share) in severance and consolidation expenses. This reflected severance-related expenses associated with a reduction of 75 Regional Banking staff positions, as well as costs associated with the retirements of a vice chairman and an executive vice president.
	•		$3.3 million pre-tax ($2.1 million after tax or $0.01 per common share) in equity investment gains.
	•		$2.6 million pre-tax ($1.7 million after tax or $0.01 per common share) gain related to the sale of MasterCard ^® stock.

2006 — Third Quarter

•

$2.1 million pre-tax ($0.01 per common share) negative impact associated with the write-down of equity method investments.

2006 — Second Quarter

•

$2.3 million pre-tax ($1.5 million after tax or $0.1 per common share) positive impact from equity investment gains.

2006 — First Quarter

•

$2.3 million pre-tax ($1.5 million after tax or $0.01 per common share) negative impact, reflecting a cumulative adjustment to defer annual fees related to home equity loans.

Table 3 reflects the earnings impact of the above-mentioned significant items for periods affected by this Discussion of Results of Operations:

Table 3 — Significant Items Influencing Earnings Performance Comparison ⁽¹⁾


	Three Months Ended
	June 30, 2007					March 31, 2007					June 30, 2006

(in millions)	After-tax		EPS			After-tax		EPS			After-tax		EPS

Net income – reported earnings	$	80.5				$	95.7				$	111.6
Earnings per share, after tax			$	0.34				$	0.40				$	0.46
Change from prior quarter — $				(0.06	)				0.03					0.01
Change from prior quarter — %				(15.0	)%				8.1	%				2.2	%

Change from a year-ago — $			$	(0.12	)			$	(0.05	)			$	0.01
Change from a year-ago — %				(26.1	)%				(11.1	)%				2.2	%


Significant items – favorable (unfavorable) impact:	Earnings ⁽²⁾			EPS			Earnings ⁽²⁾			EPS			Earnings ⁽²⁾			EPS

Debt repayment gain	$	4.1		$	0.01		$	—		$	—		$	—		$	—
Equity investment gains (losses)		2.3			0.01			(8.5	)		(0.02	)		2.3			0.01
Significant commercial loan provision expense		(24.8	)		(0.07	)		—			—			—			—
Merger costs		(7.6	)		(0.02	)		—			—			(2.6	)		(0.01	)
Securities impairment		(5.1	)		(0.01	)		—			—			—			—
MSR fair value adjustments, net of hedge-related trading activity		(4.8	)		(0.01	)		(2.0	)		(0.01	)		—			—
Litigation losses		—			—			(1.9	)		(0.01	)		—			—


	Six Months Ended
	June 30, 2007					June 30, 2006

(in millions)	After-tax		EPS			After-tax		EPS

Net income – reported earnings	$	176.2				$	216.1
Earnings per share, after tax			$	0.74				$	0.90
Change from a year-ago — $				(0.16	)				0.04
Change from a year-ago — %				(17.8	)%				4.7	%

Significant items – favorable (unfavorable) impact:

Earnings ⁽²⁾

EPS

Earnings ⁽²⁾

EPS

Debt repayment gain

4.1

0.01

—

Significant commercial loan provision expense

(24.8

)

(0.07

)

—

Merger costs

(8.4


Part I. Financial Information

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets at June 30, 2007, December 31, 2006, and June 30, 2006	3

	Condensed Consolidated Statements of Income for the three month and six month periods ended June 30, 2007 and 2006	4

	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the six month periods ended June 30, 2007 and 2006	5

	Condensed Consolidated Statements of Cash Flows for the six month periods ended June 30, 2007 and 2006	6

	Notes to Unaudited Condensed Consolidated Financial Statements	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	77

Item 4.	Controls and Procedures	77

Item 4T.	Controls and Procedures	77

Part II. Other Information

Item 4.	Submission of Matters to a Vote of Security Holders	78

Item 6.	Exhibits	78

Signatures		80
EX-10.3
EX-12.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2