UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY PERIOD ENDED September 30, 2006

Commission File Number 0-2525

Huntington Bancshares Incorporated

Maryland		31-0724920
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer 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 237,631,000 shares of Registrant’s without par value common stock outstanding on October 31, 2006.

 

Huntington Bancshares Incorporated

INDEX

Part I. Financial Information
Item 1.		Financial Statements (Unaudited)
		Condensed Consolidated Balance Sheets at September 30, 2006, December 31, 2005, and September 30, 2005			3
		Condensed Consolidated Statements of Income for the three months and nine months ended September 30, 2006 and 2005			4
		Condensed Consolidated Statements of Changes in Shareholders’ Equity for the nine months ended September 30, 2006 and 2005			5
		Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2006 and 2005			6
		Notes to Unaudited Condensed Consolidated Financial Statements			7
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			27
Item 3.		Quantitative and Qualitative Disclosures about Market Risk			96
Item 4.		Controls and Procedures			96
Part II. Other Information
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			96
Item 6.		Exhibits			97
Signatures					98
EX-31.A
EX-31.B
EX-32.A
EX-32.B

Part 1. Financial Information

Item 1. Financial Statements

Huntington Bancshares Incorporated

Condensed Consolidated Balance Sheets

		2006				2005
(in thousands, except number of shares)		September 30,				December 31,				September 30,
		(Unaudited)								(Unaudited)
Assets
Cash and due from banks		$	848,088			$	966,445			$	803,425
Federal funds sold and securities purchased under resale agreements			370,418				74,331				78,325
Interest bearing deposits in banks			59,333				22,391				22,379
Trading account securities			122,621				8,619				191,418
Loans held for sale			276,304				294,344				449,096
Investment securities			4,643,901				4,526,520				4,304,898
Loans and leases			26,361,502				24,472,166				24,496,287
Allowance for loan and lease losses			(280,152	)			(268,347	)			(253,943	)
Net loans and leases			26,081,350				24,203,819				24,242,344
Automobile operating lease assets			54,551				189,003				247,389
Bank owned life insurance			1,083,033				1,001,542				993,407
Premises and equipment			367,709				360,677				358,876
Goodwill			571,521				212,530				212,530
Other intangible assets			61,239				4,956				5,173
Accrued income and other assets			1,121,880				899,628				853,728
Total Assets		$	35,661,948			$	32,764,805			$	32,762,988
Liabilities and Shareholders’ Equity Liabilities
Deposits		$	24,738,395			$	22,409,675			$	22,349,122
Short-term borrowings			1,532,504				1,889,260				1,502,566
Federal Home Loan Bank advances			1,221,669				1,155,647				1,155,656
Other long-term debt			2,592,188				2,418,419				2,795,431
Subordinated notes			1,275,883				1,023,371				1,034,343
Deferred federal income tax liability			615,291				743,655				768,344
Accrued expenses and other liabilities			556,272				567,277				534,851
Total Liabilities			32,532,202				30,207,304				30,140,313
Shareholders’ equity
Preferred stock — authorized 6,617,808 shares; none outstanding			—				—				---
Common stock — without par value; authorized 500,000,000 shares; issued 257,866,255 shares; outstanding 237,921,076; 224,106,172 and 229,005,823 shares, respectively.			2,556,168				2,491,326				2,490,919
Less 19,945,179; 33,760,083 and 28,860,432 treasury shares at cost, respectively			(445,359	)			(693,576	)			(575,941	)
Accumulated other comprehensive income (loss)			32,076				(22,093	)			(21,839	)
Retained earnings			986,861				781,844				729,536
Total Shareholders’ Equity			3,129,746				2,557,501				2,622,675
Total Liabilities and Shareholders’ Equity		$	35,661,948			$	32,764,805			$	32,762,988

See notes to unaudited condensed consolidated financial statements

Huntington Bancshares Incorporated

Condensed Consolidated Statements of Income
(Unaudited)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in thousands, except per share amounts)		2006				2005				2006				2005
Interest and fee income
Loans and leases
Taxable		$	462,709			$	366,550			$	1,307,979			$	1,044,486
Tax-exempt			555				322				1,584				1,017
Investment securities Taxable			60,437				38,507				173,397				114,097
Tax-exempt			6,137				5,523				17,743				14,171
Other			9,150				9,956				24,975				25,518
Total interest income			538,988				420,858				1,525,678				1,199,289
Interest expenses
Deposits			194,623				119,376				515,969				313,103
Short-term borrowings			17,161				10,901				52,795				22,815
Federal Home Loan Bank advances			15,565				7,351				47,130				24,697
Subordinated notes and other long-term debt			56,326				41,593				148,596				119,939
Total interest expense			283,675				179,221				764,490				480,554
Net interest income			255,313				241,637				761,188				718,735
Provision for credit losses			14,162				17,699				49,447				50,468
Net interest income after provision for credit losses			241,151				223,938				711,741				668,267
Automobile operating lease income			8,580				27,822				37,771				110,481
Service charges on deposit accounts			48,718				44,817				137,165				125,751
Trust services			22,490				19,671				66,444				56,980
Brokerage and insurance income			14,697				13,948				44,235				40,518
Bank owned life insurance income			12,125				10,104				32,971				30,347
Other service charges and fees			12,989				11,449				37,570				32,860
Mortgage banking (loss) income			(2,166	)			21,116				36,021				30,801
Securities (losses) gains			(57,332	)			101				(57,387	)			715
Gains on sales of automobile loans			863				502				1,843				756
Other income			36,946				11,210				83,830				55,751
Total non-interest income			97,910				160,740				420,463				484,960
Automobile operating lease expense			5,988				21,637				27,317				86,667
Personnel costs			133,823				117,476				403,284				365,547
Net occupancy			18,109				16,653				54,002				53,152
Outside data processing and other services			18,664				18,062				58,084				54,945
Equipment			17,249				15,531				51,761				47,031
Professional services			6,438				8,323				18,095				27,129
Marketing			7,846				6,364				25,521				19,134
Telecommunications			4,818				4,512				14,633				14,195
Printing and supplies			3,416				3,102				10,254				9,489
Amortization of intangibles			2,902				203				6,969				611
Other expense			23,177				21,189				63,284				61,565
Total non-interest expense			242,430				233,052				733,204				739,465
Income before income taxes			96,631				151,626				399,000				413,762
Provision (benefit) for income taxes			(60,815	)			43,052				25,494				102,244
Net income		$	157,446			$	108,574				373,506				311,518
Average common shares — basic			237,672				229,830				236,790				231,290
Average common shares — diluted			240,896				233,456				239,933				234,727
Per common share
Net income — basic		$	0.66			$	0.47			$	1.58			$	1.35
Net income — diluted			0.65				0.47				1.56				1.33
Cash dividends declared			0.250				0.215				0.75				0.63

See notes to unaudited condensed consolidated financial statements

     Huntington Bancshares Incorporated

																		Accumulated
																		Other
		Common Stock								Treasury Shares								Comprehensive				Retained
(in thousands)		Shares				Amount				Shares				Amount				Income (Loss)				Earnings				Total
Nine Months Ended September 30, 2005 (Unaudited):
Balance, beginning of period			257,866			$	2,484,204				(26,261	)		$	(499,259	)		$	(10,903	)		$	563,596			$	2,537,638
Comprehensive Income:
Net income																							311,518				311,518
Unrealized net losses on investment securities arising during the period, net of reclassification of net realized gains																			(18,304	)							(18,304	)
Unrealized gains on cash flow hedging derivatives																			7,368								7,368
Total comprehensive income																											300,582
Cash dividends declared ($0.63 per share)																							(145,578	)			(145,578	)
Treasury shares purchased											(4,416	)			(108,610	)											(108,610	)
Stock options exercised							3,172				1,729				33,353												36,525
Other							3,543				88				(1,425	)											2,118
Balance, end of period (Unaudited)			257,866			$	2,490,919				(28,860	)		$	(575,941	)		$	(21,839	)		$	729,536			$	2,622,675
Nine Months Ended September 30, 2006 (Unaudited):
Balance, beginning of period			257,866			$	2,491,326				(33,760	)		$	(693,576	)		$	(22,093	)		$	781,844			$	2,557,501
Comprehensive Income:
Net income																							373,506				373,506
Cumulative effect of change in accounting principle for servicing financial assets, net of tax of $6,521																							12,110				12,110
Unrealized net gains on investment securities arising during the period, net of reclassification of net realized losses																			46,332								46,332
Unrealized gains on cash flow hedging derivatives																			7,837								7,837
Total comprehensive income																											439,785
Cash dividends declared ($0.75 per share)																							(180,599	)			(180,599	)
Shares issued pursuant to acquisition							53,366				25,350				522,390												575,756
Recognition of the fair value of share-based compensation							13,430																				13,430
Treasury shares purchased											(12,931	)			(303,898	)											(303,898	)
Stock options exercised							(2,073	)			1,439				30,911												28,838
Other							119				(43	)			(1,186	)											(1,067	)
Balance, end of period (Unaudited)			257,866			$	2,556,168				(19,945	)		$	(445,359	)		$	32,076			$	986,861			$	3,129,746

See notes to unaudited condensed consolidated financial statements.

Huntington Bancshares Incorporated

Condensed Consolidated Statements of Cash Flows
(Unaudited)

		Nine Months Ended
		September 30,
(in thousands of dollars)		2006				2005
Operating activities
Net income		$	373,506			$	311,518
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			88,402				138,899
Deferred income tax benefit			(166,168	)			(9,422	)
(Increase) decrease in trading account securities			(36,535	)			118,212
Pension contribution			(29,800	)			(63,600	)
Reversal of tax reserves			(84,541	)			—
Originations of loans held for sale			(1,934,660	)			(1,603,271	)
Principal payments on and proceeds from loans held for sale			1,931,216				1,685,272
Losses (gains) on investment securities			57,387				(715	)
Other, net			(154,275	)			(243,971	)
Net cash provided by operating activities			44,532				332,922
Investing activities
(Increase) decrease in interest bearing deposits in banks			(33,846	)			19
Net cash received in acquisition of Unizan			66,507				—
Proceeds from:
Maturities and calls of investment securities			461,680				333,605
Sales of investment securities			1,330,257				1,715,426
Purchases of investment securities			(1,645,140	)			(2,146,993	)
Net loan and lease originations, excluding sales			(275,766	)			(1,332,014	)
Purchases of equipment for operating lease assets			(17,149	)			(16,546	)
Proceeds from sale of operating lease assets			106,448				239,194
Proceeds from sale of premises and equipment			5,695				189
Purchases of premises and equipment			(28,327	)			(42,069	)
Proceeds from sales of other real estate			10,786				47,755
Net cash used for investing activities			(18,855	)			(1,201,434	)
Financing activities
Increase in deposits			632,079				1,587,653
(Decrease) increase in short-term borrowings			(435,896	)			295,333
Proceeds from issuance of subordinated notes			250,000				—
Proceeds from Federal Home Loan Bank advances			2,312,050				809,589
Maturity of Federal Home Loan Bank advances			(2,339,341	)			(925,021	)
Proceeds from issuance of long-term debt			935,000				—
Maturity of long-term debt			(765,777	)			(1,308,145	)
Tax benefits in excess of recognized compensation cost for share-based payments			904				—
Dividends paid on common stock			(161,906	)			(142,422	)
Repurchases of common stock			(303,898	)			(108,610	)
Net proceeds from issuance of common stock			28,838				36,525
Net cash provided by financing activities			152,053				244,902
Change in cash and cash equivalents			177,730				(623,610	)
Cash and cash equivalents at beginning of period			1,040,776				1,505,360
Cash and cash equivalents at end of period		$	1,218,506			$	881,750
Supplemental disclosures:
Income taxes paid		$	282,418			$	146,911
Interest paid			457,404				447,864
Non-cash activities
Common stock dividends accrued, paid in subsequent quarter			47,700				39,167
Stock 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 or Commission) 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 2005 Annual Report on Form 10-K, as amended (2005 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.

     Certain amounts in the prior-year’s financial statements have been reclassified to conform to the 2006 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. 123 (revised 2004), Share-Based Payment (Statement No. 123R) – Statement No. 123R was issued in December 2004, requiring that the compensation cost relating to share-based payment transactions be recognized in the financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. Statement No. 123R covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. Statement No. 123R replaces FASB Statement No. 123, Accounting for Stock-Based Compensation (Statement No.123), and supersedes Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees (APB 25). Statement No. 123, as originally issued in 1995, established as preferable a fair-value-based method of accounting for share-based payment transactions with employees. Huntington adopted Statement No. 123R, effective January 1, 2006. The impact of adoption to Huntington’s results of operations is presented in Note 10.

FASB Statement No. 154, Accounting Changes and Error Corrections – a replacement of APB Opinion No. 20 and FASB Statement No. 3 (Statement No. 154) – In May 2005, the FASB issued Statement No. 154, which replaces APB Opinion No. 20, Accounting Changes, and Statement No. 3, Reporting Accounting Changes in Interim Financial Statements. Statement No. 154 changes the requirements for the accounting for and reporting of a change in accounting principle. Statement No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The impact of this new pronouncement was not material to Huntington’s financial condition, results of operations, or cash flows.

FASB Statement No. 155, Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and 140 (Statement No. 155) – On February 16, 2006, the FASB issued Statement No. 155, which amends Statement No. 133 to simplify the accounting for certain derivatives embedded in other financial instruments (hybrid financial instruments) by permitting these hybrid financial instruments to be carried at fair value. Statement No. 155 also establishes a requirement to evaluate interests in securitized financial assets, including collateralized mortgage obligations and mortgage-backed securities, to identify embedded derivatives that would need to be separately accounted for from the financial asset.

On October 25, 2006, the FASB addressed the application of Statement No. 155 to collateralized mortgage obligations and mortgage-backed securities. The FASB expects to issue an exposure draft of a derivatives implementation group issue in November regarding its conclusions. Based on the FASB’s preliminary conclusions regarding the applicability of Statement No. 155 to collateralized mortgage obligations and mortgage-backed securities, Management does not believe that the pending proposed implementation issue will have a significant impact to its financial position or its results of operations.

Huntington adopted Statement No. 155 effective January 1, 2006, with no impact to reported financial results.

FASB Statement No. 156, Accounting for Servicing of Financial Assets – an amendment of FASB Statement No. 140 (Statement No. 156) – In March 2006, the FASB issued Statement No. 156, an amendment of Statement No. 140. This Statement requires all separately recognized servicing rights be initially measured at fair value, if practicable. For each class of separately recognized servicing assets and liabilities, this statement permits Huntington to choose either to report servicing assets and liabilities at fair value or at amortized cost. Under the fair value approach, servicing assets and liabilities are recorded at fair value at each reporting date with changes in fair value recorded in earnings in the period in which the changes occur. Under the amortized cost method, servicing assets and liabilities are amortized in proportion to and over the period of estimated net servicing income or net servicing loss and are assessed for impairment based on fair value at each reporting date. The statement is effective for fiscal years beginning after September 15, 2006, and allows early adoption as of the beginning of a fiscal year for which the entity has not previously issued interim financial statements. Huntington elected to adopt the provisions of Statement No. 156 for mortgage servicing rights effective January 1, 2006, and has recorded mortgage servicing right assets using the fair value provision of the standard. The adoption of Statement No. 156 resulted in an $18.6 million increase in the carrying value of mortgage servicing right assets as of January 1, 2006. The cumulative effect of this change was $12.1 million, net of taxes, which is reflected as an increase in retained earnings in the Condensed Consolidated Statement of Shareholders’ Equity. (See Note 6.)

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. The Company is currently assessing the impact this Statement will have on its consolidated financial position and results of operations.

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 overfunded or underfunded 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 are effective for fiscal years ending after December 15, 2006. Management estimates that, based on the carrying value of its net pension asset at December 31, 2005, Statement No. 158 would result in a write-down of its pension asset by $155.7 million pre-tax, which would decrease other comprehensive income by $101.2 million in the period ended December 31, 2006.

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 will be required to recognize 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 effective date for application of this interpretation is for periods beginning after December 15, 2006. The cumulative effect of applying the provisions of this Interpretation must be reported as an adjustment to the opening balance of retained earnings for that fiscal period. Huntington is currently evaluating the impact this Interpretation will have on its consolidated financial statements.

Note 3 – Formal Regulatory Supervisory Agreements

     On March 1, 2005, Huntington announced that it had entered into a formal written agreement with the Federal Reserve Bank of Cleveland (FRBC), and The Huntington National Bank (Bank) had entered into a formal written agreement with the Office of the Comptroller of the Currency (OCC), providing for a comprehensive action plan designed to enhance corporate governance, internal audit, risk management, accounting policies and procedures, and financial and regulatory reporting. The agreements called for independent third-party reviews, as well as the submission of written plans and progress reports by Management and would remain in effect until terminated by the banking regulators.

     On October 6, 2005, H