Form 10-Q

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, 2004

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. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

There were 229,685,385 shares of Registrant’s without par value common stock outstanding on July 31, 2004.

Huntington Bancshares Incorporated

INDEX


Part I.	Financial Information

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets at June 30, 2004, December 31, 2003, and June 30, 2003	3

	Condensed Consolidated Statements of Income for the three and six months ended June 30, 2004 and 2003	4

	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the six months ended June 30, 2004 and 2003	5

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2004 and 2003	6

	Notes to Unaudited Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	74

Item 4.	Controls and Procedures	74

Part II.	Other Information

Item 2.	Changes in Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	75

Item 4.	Submission of Matters to a Vote of Shareholders	75

Item 6.	Exhibits and Reports on Form 8-K	76

Signatures		77

Part 1. Financial Information

Item 1. Financial Statements

Huntington Bancshares Incorporated

Condensed Consolidated Balance Sheets


*(in thousands, except number of shares)*	June 30, 2004			December 31, 2003			June 30, 2003
	*(Unaudited)*						*(Unaudited)*
Assets
Cash and due from banks	$	1,162,995		$	899,689		$	1,153,108
Federal funds sold and securities purchased under resale agreements		193,772			96,814			74,473
Interest bearing deposits in banks		24,009			33,627			44,906
Trading account securities		20,577			7,589			19,426
Loans held for sale		314,262			226,729			713,722
Securities available for sale - at fair value		4,988,270			4,925,232			3,702,761
Investment securities held to maturity - fair value $3,224; $3,937 and $6,780, respectively		3,169			3,828			6,593
Loans and leases		21,775,669			21,075,118			19,059,533
Allowance for loan and lease losses		(286,935	)		(299,732	)		(307,667	)

Net loans and leases		21,488,734			20,775,386			18,751,866

Operating lease assets		888,612			1,260,440			1,672,608
Bank owned life insurance		944,892			927,671			906,823
Premises and equipment		354,534			349,712			332,916
Goodwill and other intangible assets		216,215			217,009			218,080
Customers’ acceptance liability		6,613			9,553			8,372
Accrued income and other assets		814,552			786,047			731,559

Total Assets	$	31,421,206		$	30,519,326		$	28,337,213

Liabilities
Deposits	$	19,465,146		$	18,487,395		$	18,371,359
Short-term borrowings		1,130,830			1,452,304			918,771
Federal Home Loan Bank advances		1,270,455			1,273,000			1,273,000
Other long-term debt		4,557,373			4,544,509			3,508,397
Subordinated notes		1,011,506			990,470			496,666
Company obligated mandatorily redeemable preferred capital securities of subsidiary trusts holding solely junior subordinated debentures of the parent company		—			—			300,000
Allowance for unfunded loan commitments and letters of credit		31,193			35,522			33,280
Bank acceptances outstanding		6,613			9,553			8,372
Accrued expenses and other liabilities		1,561,721			1,451,571			1,225,169

Total Liabilities		29,034,837			28,244,324			26,135,014

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 229,475,821; 229,008,088 and 228,660,038 shares, respectively		2,482,069			2,483,542			2,483,105
Less 28,390,434; 28,858,167 and 29,206,217 treasury shares, respectively		(539,852	)		(548,576	)		(555,176	)
Accumulated other comprehensive income (loss)		(27,204	)		2,678			40,817
Retained earnings		471,356			337,358			233,453

Total Shareholders’ Equity		2,386,369			2,275,002			2,202,199

Total Liabilities and Shareholders’ Equity	$	31,421,206		$	30,519,326		$	28,337,213

See notes to unaudited condensed consolidated financial statements

Huntington Bancshares Incorporated

Condensed Consolidated Statements of Income

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,

*(in thousands, except per share amounts)*	2004			2003			2004		2003
Interest and fee income
Loans and leases
Taxable	$	268,409		$	265,694		$	538,771	$	535,939
Taxable-exempt		444			675			950		1,409
Securities
Taxable		43,926			37,014			88,072		74,139
Taxable-exempt		7,247			5,019			14,760		9,972
Other		4,141			8,923			7,545		15,880

Total Interest Income		324,167			317,325			650,098		637,339

Interest expenses
Deposits		59,372			76,383			118,998		156,093
Short-term borrowings		2,789			4,313			6,102		9,872
Federal Home Loan Bank advances		8,098			5,634			16,139		11,219
Subordinated notes and other long-term debt including preferred capital securities		31,345			28,554			63,611		55,955

Total Interest Expense		101,604			114,884			204,850		233,139

Net Interest Income		222,563			202,441			445,248		404,200
Provision for credit losses		5,027			49,193			30,623		86,037

Net Interest Income After Provision for Credit Losses		217,536			153,248			414,625		318,163

Operating lease income		78,706			128,574			167,573		266,767
Service charges on deposit accounts		43,596			40,914			85,433		80,783
Trust services		16,708			15,580			33,031		30,491
Brokerage and insurance income		13,523			14,196			28,720		29,693
Mortgage banking		23,322			7,185			19,026		18,310
Bank owned life insurance income		11,309			11,043			21,794		22,180
Gain on sales of automobile loans		4,890			13,496			13,894		23,751
Other service charges and fees		10,645			11,372			20,158		21,710
Securities gains (losses)		(9,230	)		6,887			5,860		8,085
Other		24,659			27,704			50,278		48,105

Total Non-Interest Income		218,128			276,951			445,767		549,875

Personnel costs		119,715			105,242			241,339		218,331
Operating lease expense		62,563			102,939			133,273		214,527
Outside data processing and other services		17,563			16,104			36,025		32,683
Equipment		16,228			16,341			32,314		32,753
Net occupancy		16,258			15,377			33,021		31,986
Professional services		7,836			9,872			15,135		19,157
Marketing		8,069			8,454			15,908		15,080
Telecommunications		4,638			5,394			9,832		11,095
Printing and supplies		3,098			2,253			6,114		5,934
Amortization of intangibles		204			204			408		408
Restructuring reserve releases		—			(5,315	)		—		(6,315	)
Other		25,981			20,168			44,438		36,873

Total Non-Interest Expense		282,153			297,033			567,807		612,512

Income Before Income Taxes		153,511			133,166			292,585		255,526
Provision for income taxes		43,384			36,676			78,285		67,306

Net Income	$	110,127		$	96,490		$	214,300	$	188,220

Average Common Shares:
Basic		229,429			228,633			229,328		229,987
Diluted		232,659			230,572			232,787		231,684
Per Common Share:
Net Income - Basic	$	0.48		$	0.42		$	0.93	$	0.82
Net Income - Diluted		0.47			0.42			0.92		0.81
Cash Dividends Declared		0.175			0.16			0.35		0.32

See notes to unaudited condensed consolidated financial statements

Huntington Bancshares Incorporated

Consolidated Statements of Changes in Shareholders’ Equity


*(in thousands)*	Common Stock				Treasury Shares					Accumulated Other Comprehensive Income			Retained Earnings			Total
*(in thousands)*	Shares	Amount			Shares		Amount			Accumulated Other Comprehensive Income			Retained Earnings			Total
*Six Months Ended June 30, 2003 (Unaudited***):
Balance, beginning of period	257,866	$	2,484,421		(24,987	)	$	(475,399	)	$	62,300		$	118,471		$	2,189,793
Comprehensive Income:
Net income														188,220			188,220
Unrealized net holding losses on securities available for sale arising during the period, net of reclassification adjustment for net gains included in net income											(4,391	)					(4,391	)
Unrealized losses on derivative instruments used in cash flow hedging relationships											(17,092	)					(17,092	)

Total comprehensive income																	166,737

Cash dividends declared ($0.32 per share)														(73,238	)		(73,238	)
Stock options exercised			(1,316	)	118			1,902									586
Treasury shares purchased					(4,300	)		(81,061	)								(81,061	)
Other					(37	)		(618	)								(618	)

Balance, end of period (Unaudited)	257,866	$	2,483,105		(29,206	)	$	(555,176	)	$	40,817		$	233,453		$	2,202,199

*Six Months Ended June 30, 2004 (Unaudited***):
Balance, beginning of period	257,866	$	2,483,542		(28,858	)	$	(548,576	)	$	2,678		$	337,358		$	2,275,002
Comprehensive Income:
Net income														214,300			214,300
Unrealized net holding losses on securities available for sale arising during the period, net of reclassification adjustment for net gains included in net income											(52,165	)					(52,165	)
Unrealized gains on derivative instruments used in cash flow hedging relationships											22,283						22,283

Total comprehensive income																	184,418

Cash dividends declared ($0.35 per share)														(80,302	)		(80,302	)
Stock options exercised			(951	)	442			8,467									7,516
Other			(522	)	26			257									(265	)

*Balance, end of period (Unaudited***)	257,866	$	2,482,069		(28,390	)	$	(539,852	)	$	(27,204	)	$	471,356		$	2,386,369

See notes to unaudited condensed consolidated financial statements.

Huntington Bancshares Incorporated

Consolidated Statements of Cash Flows

(Unaudited)


	Six Months Ended June 30,
*(in thousands)*	2004			2003
Operating Activities
Net Income	$	214,300		$	188,220
Adjustments to reconcile net income to net cash provided by operating activities
Provision for credit losses		30,623			86,037
Depreciation on operating lease assets		132,388			187,914
Other depreciation and amortization		38,995			42,209
Deferred income tax expense		66,243			31,479
Increase in trading account securities		(12,988	)		(19,185	)
Increase in mortgages held for sale		(87,783	)		(185,343	)
Gains on sales of securities available for sale		(5,860	)		(8,085	)
Gains on sales/securitizations of loans		(15,407	)		(30,797	)
Restructuring reserve releases		—			(6,315	)
Other, net		(8,146	)		(68,002	)

Net Cash Provided by Operating Activities		352,365			218,132

Investing Activities
Decrease (increase) in interest bearing deposits in banks		9,618			(7,606	)
Proceeds from:
Maturities and calls of investment securities held to maturity		670			954
Maturities and calls of securities available for sale		544,419			945,534
Sales of securities available for sale		885,554			591,497
Purchases of securities available for sale		(1,457,477	)		(1,649,721	)
Proceeds from sales/securitizations of loans		1,382,596			1,390,378
Net loan and lease originations, excluding sales		(2,234,989	)		(2,119,933	)
Net decrease in operating lease assets		240,523			340,003
Proceeds from sale of premises and equipment		334			4,049
Purchases of premises and equipment		(29,298	)		(22,220	)
Proceeds from sales of other real estate		6,460			4,872

Net Cash Used for Investing Activities		(651,590	)		(522,193	)

Financing Activities
Increase in deposits		982,401			869,313
Decrease in short-term borrowings		(321,474	)		(1,222,245	)
Proceeds from issuance of subordinated notes		148,830			—
Maturity of subordinated notes		(100,000	)		(250,000	)
Proceeds from Federal Home Loan Bank advances		455			270,000
Maturity of Federal Home Loan Bank advances		(3,000	)		(10,000	)
Proceeds from issuance of long-term debt		625,000			1,235,000
Maturity of long-term debt		(600,000	)		(225,000	)
Dividends paid on common stock		(80,239	)		(73,714	)
Repurchases of common stock		—			(81,061	)
Net proceeds from issuance of common stock		7,516			586

Net Cash Provided by Financing Activities		659,489			512,879

Change in Cash and Cash Equivalents		360,264			208,818
Cash and Cash Equivalents at Beginning of Period		996,503			1,018,763

Cash and Cash Equivalents at End of Period	$	1,356,767		$	1,227,581

Supplemental disclosures:
Income taxes paid	$	9,490		$	65,859
Interest paid		206,500			247,126
Non-cash activities
Residential mortgage loans securitized and retained in securities available for sale		115,929			171,586
Common stock dividends accrued not paid		31,562			27,932

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) 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 the Consolidated Financial Statements appearing in Huntington’s 2003 Annual Report on Form 10-K (2003 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 2004 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

Emerging Issues Task Force Issue No. 03-1, The Meaning of Other-Than-Temporary Impairments and Its Application to Certain Investments (EITF 03-1): The Emerging Issues Task Force reached a consensus about the criteria that should be used to determine when an investment is considered impaired, whether that impairment is other than temporary, and the measurement of an impairment loss. EITF 03-1 also included accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. EITF 03-1 will apply to the evaluation of other-than-temporary impairment in reporting periods beginning after June 15, 2004.

At June 30, 2004, Huntington had $3.3 billion of securities whose fair value was less than book value. The unrealized loss in these securities totaled $88.9 million. Of these securities, Huntington held $3.1 billion of securities, with an unrealized loss of $80.0 million, where the security cannot be contractually prepaid or where Huntington would recover substantially all of its cost if the securities were contractually prepaid. Management continues to evaluate its options with respect to adopting this new accounting guidance and cannot currently estimate the impact of adopting EITF 03-1.

Emerging Issues Task Force Issue No. 03-16, Accounting for Investment in Limited Liability Companies (EITF 03-16): The Task Force reached a consensus that an investment in a limited liability company (LLC) that maintains a “specific ownership account” for each investor should be viewed as similar to an investment in a limited partnership for purposes of determining whether a noncontrolling investment in an LLC should be accounted for using the cost method or the equity method. The current rules require a noncontrolling investment in a limited partnership to be accounted for under the equity method unless the interest is so minor that the limited partner may have virtually no influence over the partnership operating and financial policies. The guidance for evaluating an investment in a LLC should be applied for reporting periods beginning after June 15, 2004. The impact of EITF 03-16 is not expected to be material to Huntington’s financial condition, results of operations, or cash flows.

SEC Staff Accounting Bulletin No. 105, Application of Accounting Principles to Loan Commitments (SAB 105): On March 9, 2004, the SEC issued SAB 105, which summarizes the views of the SEC staff regarding the application of generally accepted accounting principles to loan commitments accounted for as derivative instruments. Specifically, SAB 105 indicated that the fair value of loan commitments that are required to follow derivative accounting under FAS 133, Accounting for Derivative Instruments and Hedging Activities, should not consider the expected future cash flows related to the associated servicing of the future loan. Prior to SAB 105, Huntington did not consider the expected future cash flows related to the associated servicing in determining the fair value of loan commitments. The adoption of SAB 105 did not have a material effect on Huntington’s financial results.

FASB Staff Position No. 106-2, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (FSP 106-2): In December 2003, a law was approved that expands Medicare benefits, primarily adding a prescription drug benefit for Medicare-eligible retirees beginning in 2006. The law also provides a federal subsidy to companies that sponsor postretirement benefit plans providing prescription drug coverage. FSP 106-2 was issued in May 2004 and supersedes FSP 106-1 issued in January 2004. FSP 106-2 specifies that any Medicare subsidy must be taken into account in measuring the employer’s postretirement health care benefit obligation and will also reduce the net periodic postretirement cost in future periods. The new guidance is effective for the reporting periods beginning on or after June 15, 2004. Accordingly, the postretirement benefit obligations and net periodic costs reported in the accompanying financial statements and notes do not reflect the impact of this legislation. The impact of this new pronouncement is not expected to be material to Huntington’s financial condition, results of operations, or cash flows.

AICPA Statement of Position No. 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer (SOP 03-3): In December 2003, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued SOP 03-3 to address accounting for differences between the contractual cash flows of certain loans and debt securities and the cash flows expected to be collected when loans or debt securities are acquired in a transfer and those cash flow differences are attributable, at least in part, to credit quality. As such, SOP 03-3 applies to loans and debt securities acquired in purchase business combinations and does not apply to originated loans. The application of SOP 03-3 limits the interest income, including accretion of purchase price discounts, that may be recognized for certain loans and debt securities. Additionally, SOP 03-3 requires that the excess of contractual cash flows over cash flows expected to be collected (nonaccretable difference) not be recognized as an adjustment of yield or valuation allowance, such as the allowance for credit losses. Subsequent to the initial investment, increases in expected cash flows generally should be recognized prospectively through adjustment of the yield on the loan or debt security over its remaining life. Decreases in expected cash flows should be recognized as impairment. SOP 03-3 is effective for loans and debt securities acquired in fiscal years beginning after December 15, 2004, with early application encouraged. The impact of this new pronouncement is not expected to be material to Huntington’s financial condition, results of operations, or cash flows.

FASB Statement No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure (FAS 148): FAS 148 was issued in December 2002, as an amendment of Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition to FAS 123’s fair value method of accounting for stock-based employee compensation. FAS 148 also amends the disclosure provisions of FAS 123 and Accounting Principles Board (APB) Opinion No. 28, Interim Financial Reporting (APB 28), to require disclosure in the summary of significant accounting policies of the effects of an entity’s accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. While FAS 148 does not require companies to account for employee stock options using the fair value method, the disclosure provisions of FAS 148 are applicable to all companies with stock-based employee compensation, regardless of whether they account for that compensation using the fair value method of FAS 123 or the intrinsic value method of APB 25, which is the method currently used by Huntington. See note 11 for the disclosures.

Note 3 – Securities and Exchange Commission Investigation

As previously disclosed, the Securities and Exchange Commission (SEC) is conducting a formal investigation regarding certain financial accounting and disclosure matters, including certain matters that were the subject of prior restatements by Huntington. The SEC staff has notified Huntington that the staff is considering recommending to the SEC that it institute enforcement action against Huntington and certain of its senior officers for, among other possible matters, violations of various provisions of the Securities Exchange Act of 1934 and the Securities Act of 1933 in connection with certain financial accounting matters relating to fiscal years 2002 and earlier, and certain related disclosure matters.

Huntington is presently in negotiations with the staff of the SEC regarding a settlement of its investigation. Huntington’s chief executive officer has indicated he accepts responsibility in his position as the chief executive officer for matters that occur on his watch, and has indicated a willingness to negotiate a settlement with the SEC of these matters. Huntington expects that a settlement of this matter would involve the entry of an order requiring, among other possible matters, Huntington to comply with various provisions of the Securities Exchange Act of 1934 and the Securities Act of 1933, along with the imposition of a fine and other possible measures. No assurances, however, can be provided as to the ultimate timing or outcome of these matters.

Huntington also remains in active dialogue with its bank regulators concerning these matters and is working diligently with the regulators to resolve them in a manner that permits it to proceed with its pending Unizan acquisition. No assurances, however, can be provided as to the ultimate timing or outcome of these matters.

Donald R. Kimble, who joined Huntington earlier this year as executive vice president in the Finance area, has been named chief financial officer and controller. Prior to joining Huntington, Kimble was executive vice president and controller of AmSouth Bancorporation, and previously held various subsidiary chief financial officer or accounting positions at Bank One Corporation. Michael J. McMennamin and John D. Van Fleet have relinquished their positions of chief financial officer and controller, respectively. Both remain with the company.

Note 4 – Pending Acquisition

On January 27, 2004, Huntington announced the signing of a definitive agreement to acquire Unizan Financial Corp. (Unizan), a financial holding company based in Canton, Ohio, with $2.7 billion of assets at December 31, 2003. Under the terms of the agreement, Unizan shareholders will receive 1.1424 shares of Huntington common stock, on a tax-free basis, for each share of Unizan. Based on the $23.10 closing price of Huntington’s common stock on January 26, 2004, this represented a price of $26.39 per Unizan share, and valued the transaction at approximately $587 million. Both boards unanimously approved the merger, and on May 25, 2004, Unizan shareholders approved the merger. Approval by Huntington shareholders is not required.

As reported on June 16, 2004, the Federal Reserve Board had informed Huntington that it had extended its review period to coordinate further with the staff of the SEC regarding the SEC’s ongoing formal investigation of Huntington and to complete its review of the Community Reinvestment Act aspects of the merger. Huntington remains in active dialogue with its bank regulators concerning these matters and is working diligently with the regulators to resolve them in a manner that permits it to proceed with its pending Unizan acquisition. No assurances, however, can be provided as to the ultimate timing or outcome of these matters (see Note 3 for additional discussion).

Huntington and Unizan are ready to close the merger, subject to the receipt of all necessary regulatory approvals. After the merger, Huntington also intends to purchase approximately 2.5 million common shares from time-to-time in the open market or through privately negotiated transactions depending on market conditions, to offset the dilutive effect of issuing shares to Unizan shareholders.

Note 5 – Stock Repurchase Plan

Effective April 27, 2004, the board of directors authorized a new share repurchase program (the 2004 Repurchase Program) which cancelled the 2003 Repurchase Program and authorized Management to repurchase not more than 7,500,000 shares of Huntington common stock. Any share repurchases will be made under this authorization. Purchases will be made from time-to-time in the open market or through privately negotiated transactions depending on market conditions. No share repurchases were made under the 2004 repurchase program.

Note 6 – Operating Lease Assets

Operating lease assets at June 30, 2004, December 31, 2003, and June 30, 2003, were as follows:


*(in thousands)*	June 30, 2004			December 31, 2003			June 30, 2003
Cost of assets under operating leases	$	1,629,552		$	2,136,502		$	2,689,413
Deferred lease origination fees and costs		(1,033	)		(2,117	)		(44,586	)
Accumulated depreciation		(739,907	)		(873,945	)		(972,219	)

Operating Lease Assets, Net	$	888,612		$	1,260,440		$	1,672,608

Depreciation and residual losses at termination related to operating lease assets was $57.4 million and $91.4 million for the three months ended June 30, 2004 and 2003, respectively. For the respective six-month periods, depreciation and residual losses at termination was $121.3 million and $190.7 million.

Note 7 – Securities Available for Sale

Securities available for sale at June 30, 2004, December 31, 2003, and June 30, 2003 were as follows:


	June 30, 2004				December 31, 2003				June 30, 2003
*(in thousands of dollars)*	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
U.S. Treasury
Under 1 year	$	796	$	800	$	1,374	$	1,376	$	327	$	331
1-5 years		24,480		24,404		31,356		31,454		38,930		39,543
6-10 years		754		824		271,271		275,540		64,063		66,158
Over 10 years		—		—		—		—		—		—

Total U.S. Treasury		26,030		26,028		304,001		308,370		103,320		106,032

Federal Agencies
Mortgage backed securities
1-5 years		14,181		14,548		19,899		20,434		23,879		24,661
6-10 years		155,460		155,628		198,755		201,995		248,896		254,564
Over 10 years		1,352,082		1,331,790		1,593,139		1,595,594		1,668,613		1,699,875

Total Mortgage-Backed		1,521,723		1,501,967		1,811,793		1,818,023		1,941,388		1,979,100

Other Federal Agencies
Under 1 year		116,357		118,776		173,181		175,505		137,797		141,375
1-5 years		728,472		719,339		585,561		593,662		294,977		313,029
6-10 years		343,226		322,398		403,953		390,164		171,343		169,976
Over 10 years		—		—		201		192		—		—

Total Other Agencies		1,188,055		1,160,512		1,162,896		1,159,523		604,117		624,380

Total U.S. Treasury and Other Federal Agencies		2,735,808		2,688,507		3,278,690		3,285,916		2,648,825		2,709,512

Municipal Securities
Under 1 year		6,679		6,731		6,594		6,663		6,639		6,728
1-5 years		14,191		14,424		20,015		20,569		20,402		21,150
6-10 years		69,861		68,928		69,511		71,013		52,995		54,707
Over 10 years		311,972		303,309		332,181		334,188		219,011		223,072

Total Municipal Securities		402,703		393,391		428,301		432,433		299,047		305,657

Private Label CMO
Under 1 year		—		—		1,973		1,973		—		—
1-5 years		—		—		—		—		—		—
6-10 years		—		—		—		—		—		—
Over 10 years		585,920		577,013		388,933		388,684		197,080		198,617

Total Private Label CMO		585,920		577,013		390,906		390,657		197,080		198,617

Asset Backed Securities
Under 1 year		—		—		—		—		—		—
1-5 years		30,000		30,038		30,000		29,944		30,000		29,944
6-10 years		11,187		11,339		20,000		19,984		—		—
Over 10 years		1,074,239		1,075,608		590,826		589,788		96,875		96,693

Total Asset Backed Securities		1,115,426		1,116,984		640,826		639,716		126,875		126,637

Other
Under 1 year		1,611		1,642		500		502		1,081		1,003
1-5 years		9,703		9,877		7,169		7,346		8,605		8,641
6-10 years		2,854		2,948		5,047		5,510		4,994		5,267
Over 10 years		193,652		190,545		145,103		146,685		136,226		132,948
Retained interest in securitizations		—		—		5,593		6,356		148,177		163,664
Marketable equity securities		6,658		7,364		8,547		10,111		50,809		50,815

Total Other		214,479		212,375		171,959		176,510		349,892		362,338

Total Securities Available for Sale	$	5,054,335	$	4,988,270	$	4,910,682	$	4,925,232	$	3,621,719	$	3,702,761

The growth from year-end and the year-ago quarter primarily consisted of over 10-year variable-rate asset backed securities.

Note 8 – Segment Reporting

Huntington has three distinct lines of business: Regional Banking, Dealer Sales, and the Private Financial Group (PFG). A fourth segment includes Huntington’s Treasury functions and capital markets activities and other unallocated assets, liabilities, revenue, and expense. Line of business results are determined based upon Huntington’s management reporting system, which assigns balance sheet and income statement items to each of the business segments. The process is designed around Huntington’s organizational and management structure and, accordingly, the results below are not necessarily comparable with similar information published by other financial institutions.

Management relies on “operating earnings” for review of performance and for critical decision making purposes. Operating earnings exclude the impact of the significant items listed in the reconciliation table below. See Note 12 for further discussions regarding Restructuring Reserves.

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

Regional Banking: This segment provides products and services to retail, business banking, and commercial customers. These products and services are offered in seven operating regions within the five states of Ohio, Michigan, West Virginia, Indiana, and Kentucky through the company’s traditional banking network. 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, business loans, personal and business deposit products, as well as sales of investment and insurance services. Retail products and services comprise 57% and 81% of total Regional Banking loans and deposits, respectively. These products and services are delivered to customers through banking offices, ATMs, Direct Bank—Huntington’s customer service center, and Web Bank at huntington.com. Commercial banking serves middle-market and commercial banking relationships, which use a variety of banking products and services including, 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 serves automotive dealerships within Huntington’s primary banking markets, as well as in Arizona, Florida, Georgia, Pennsylvania, and Tennessee. This segment finances the purchase of automobiles by customers of the automotive dealerships, purchases automobiles from dealers and simultaneously leases the automobiles under long-term direct financing leases, finances dealership floor plan inventories, real estate, or working capital needs, and provides other banking services to the automotive dealerships and their owners.

Private Financial Group: This segment provides products and services designed to meet the needs of the company’s higher net worth customers. Revenue is derived through trust, asset management, investment advisory, brokerage, insurance, and private banking products and services.

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 three business segments. Assets included in this segment include bank owned life insurance, investment securities, and mezzanine loans originated through Huntington Capital Markets Group.

A match-funded transfer pricing system is used to attribute appropriate interest income and interest expense to other business segments. The Treasury/Other segment includes the net impact of interest rate risk management, including derivative activities. Furthermore, this segment’s results include the investment securities portfolios and capital markets activities. Additionally, income or expense and provision for income taxes, not allocated to other business segments, are also included.

Listed below is certain reported financial information reconciled to Huntington’s three and six month 2004 and 2003 operating results by line of business.


	Three Months Ended June 30,
Income Statements *(in thousands)*	Regional Banking			Dealer Sales			PFG			Treasury/ Other			Huntington Consolidated
2004
Net interest income	$	155,083		$	43,586		$	11,166		$	12,728		$	222,563
Provision for credit losses		3,949			(8,261	)		(654	)		(61	)		(5,027	)
Non-Interest income		82,475			85,983			27,680			21,990			218,128
Non-Interest expense		(147,840	)		(85,768	)		(28,559	)		(19,986	)		(282,153	)
Provision for income taxes		(32,783	)		(12,439	)		(3,372	)		5,210			(43,384	)

Net income, as reported		60,884			23,101			6,261			19,881			110,127
Gain on sale of automobile loans, net of tax		—			(2,068	)		—			(1,110	)		(3,178	)

Operating Earnings	$	60,884		$	21,033		$	6,261		$	18,771		$	106,949

2003
Net interest income	$	150,418		$	11,639		$	9,785		$	30,599		$	202,441
Provision for credit losses		(40,525	)		(9,191	)		457			66			(49,193	)
Non-Interest income		71,790			153,303			27,850			24,008			276,951
Non-Interest expense		(143,319	)		(125,464	)		(25,886	)		(2,364	)		(297,033	)
Provision for income taxes		(13,427	)		(10,600	)		(4,272	)		(8,377	)		(36,676	)

Net income, as reported		24,937			19,687			7,934			43,932			96,490
Gain on sale of automobile loans, net of tax		—			(2,216	)		—			(6,556	)		(8,772	)
Restructuring releases, net of taxes		—			—			—			(3,455	)		(3,455	)

Operating Earnings	$	24,937		$	17,471		$	7,934		$	33,921		$	84,263


	Six Months Ended June 30,
Income Statements *(in thousands)*	Regional Banking			Dealer Sales			PFG			Treasury/ Other			Huntington Consolidated
2004
Net interest income	$	306,145		$	73,891		$	22,295		$	42,917		$	445,248
Provision for credit losses		1,844			(29,916	)		(97	)		(2,454	)		(30,623	)
Non-Interest income		154,526			196,538			56,307			38,396			445,767
Non-Interest expense		(294,932	)		(177,137	)		(58,020	)		(37,718	)		(567,807	)
Provision for income taxes		(58,654	)		(22,182	)		(7,170	)		9,721			(78,285	)

Net income, as reported		108,929			41,194			13,315			50,862			214,300
Gain on sale of automobile loans, net of tax		—			(8,214	)		—			(817	)		(9,031	)

Operating Earnings	$	108,929		$	32,980		$	13,315		$	50,045		$	205,269

2003
Net interest income	$	296,832		$	27,286		$	19,280		$	60,802		$	404,200
Provision for credit losses		(64,078	)		(20,576	)		(1,443	)		60			(86,037	)
Non-Interest income		143,389			311,819			55,063			39,604			549,875
Non-Interest expense		(283,623	)		(259,633	)		(52,521	)		(16,735	)		(612,512	)
Provision for income taxes		(32,382	)		(20,614	)		(7,133	)		(7,177	)		(67,306	)

Net income, as reported		60,138			38,282			13,246			76,554			188,220
Gain on sale of automobile loans, net of tax		—			(4,807	)		—			(10,631	)		(15,438	)
Restructuring releases, net of taxes		—			—			—			(4,105	)		(4,105	)

Operating Earnings	$	60,138		$	33,475		$	13,246		$	61,818		$	168,677


	Total Assets at						Total Deposits at
Period-end Balance Sheet Data *(in millions)*	June 30, 2004		December 31, 2003		June 30, 2003		June 30, 2004		December 31, 2003		June 30, 2003
Regional Banking	$	16,526	$	14,971	$	14,585	$	16,435	$	15,539	$	16,628
Dealer Sales		6,162		7,335		6,607		71		77		67
PFG		1,540		1,461		1,328		1,016		1,164		1,027
Treasury / Other		7,193		6,752		5,817		1,943		1,707		649

Total	$	31,421	$	30,519	$	28,337	$	19,465	$	18,487	$	18,371

Note 9 – Comprehensive Income

The components of Huntington’s Other Comprehensive Income in the three and six months ended June 30 were as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
*(in thousands)*	2004			2003			2004			2003
Unrealized holding (losses) gains on securities available for sale arising during the period:
Unrealized net (losses) gains		(136,458	)		9,046			(74,755	)		1,799
Related tax benefit (expense)		47,760			(3,162	)		26,399			(935	)

Net		(88,698	)		5,884			(48,356	)		864

Less: Reclassification adjustment for net gains (losses) included in net income:
Realized net gains (losses)		9,230			(6,887	)		(5,860	)		(8,085	)
Related tax (expense) benefit		(3,231	)		2,410			2,051			2,830

Net		5,999			(4,477	)		(3,809	)		(5,255	)

Total unrealized holding (losses) gains on securities available for sale arising during the period, net of reclassification adjustment for net gains included in net income.

Net		(82,699	)		1,407			(52,165	)		(4,391	)

Unrealized gains (losses) on derivatives used in cash flow hedging relationships arising during the period:
Unrealized net gains (losses)		52,315			(23,415	)		34,282			(26,295	)
Related tax (expense) benefit		(18,310	)		8,195			(11,999	)		9,203

Net		34,005			(15,220	)		22,283			(17,092	)

Total Other Comprehensive Loss	$	(48,694	)	$	(13,813	)	$	(29,882	)	$	(21,483	)

Activity in Accumulated Other Comprehensive Income for the six months ended June 30, 2004 and 2003 was as follows:


*(in thousands)*	Minimum pension liability			Unrealized gains (losses) on securities available for sale			Unrealized gains (losses) on derivative instruments used in cash flow hedging relationships			Total
Balance, December 31, 2002	$	(195	)	$	56,856		$	5,639		$	62,300
Period change		—			(4,391	)		(17,092	)		(21,483	)

Balance, June 30, 2003	$	(195	)	$	52,465		$	(11,453	)	$	40,817

Balance, December 31, 2003	$	(1,309	)	$	9,429		$	(5,442	)	$	2,678
Period change		—			(52,165	)		22,283			(29,882	)

Balance, June 30, 2004	$	(1,309	)	$	(42,736	)	$	16,841		$	(27,204	)

Note 10 – Earnings per Share

Basic earnings per share is the amount of earnings for the period 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 for the potential issuance of common shares upon the exercise of stock options. The calculation of basic and diluted earnings per share for each of the three and six months ended June 30 is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
*(in thousands, except per share amount)*	2004		2003		2004		2003
Net Income	$	110,127	$	96,490	$	214,300	$	188,220

Average common shares outstanding		229,429		228,633		229,328		229,987
Dilutive effect of common stock equivalents		3,230		1,939		3,459		1,697

Diluted Average Common Shares Outstanding	$	232,659	$	230,572	$	232,787	$	231,684

Earnings Per Share
Basic	$	0.48	$	0.42	$	0.93	$	0.82
Diluted	$	0.47	$	0.42	$	0.92	$	0.81

The average market price of Huntington’s common stock for the period was used in determining the dilutive effect of outstanding stock options. Common stock equivalents are computed based on the number of shares subject to stock options that have an exercise price less than the average market price of Huntington’s common stock for the period.

Approximately 6.8 million and 5.1 million stock options were vested and outstanding at June 30, 2004 and 2003, respectively, but were not included in the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of the common shares for the period and, therefore, the effect would be antidilutive. The weighted average exercise price for these options was $22.06 per share and $23.73 per share at the end of the same respective periods.

On July 30, 2004, Huntington entered into an agreement with the former shareholders of LeaseNet, Inc. to issue in early 2005 up to 86,118 shares of Huntington common stock previously held in escrow subject to LeaseNet meeting certain contractual performance criteria. A total of 366,576 common shares, previously held in escrow, will be returned to Huntington. All shares in escrow had been accounted for as treasury stock.

Note 11 – Stock-Based Compensation

Huntington’s stock-based compensation plans are accounted for based on the intrinsic value method promulgated by APB Opinion 25, Accounting for Stock Issued to Employees, and related interpretations. Compensation expense for employee stock options is generally not recognized if the exercise price of the option equals or exceeds the fair value of the stock on the date of grant.

The following pro forma disclosures for net income and earnings per diluted common share is presented as if Huntington had applied the fair value method of accounting of Statement No. 123 in measuring compensation costs for stock options. The fair values of the stock options granted were estimated using the Black-Scholes option-pricing model. This model assumes that the estimated fair value of the options is amortized over the options’ vesting periods and the compensation costs would be included in personnel expense on the income statement. The following table also includes the weighted-average assumptions that were used in the option-pricing model for options granted in each of the quarters presented:


	Three Months Ended June 30,						Six Months Ended June 30,
	2004			2003			2004			2003
Stock Options Outstanding at period end *(in thousands)*		19,252			17,399			19,252			17,399

Assumptions
Risk-free interest rate		3.89	%		4.46	%		3.82	%		4.30	%
Expected dividend yield		3.33	%		3.26	%		3.28	%		3.30	%
Expected volatility of Huntington’s common stock		30.9	%		33.8	%		30.9	%		33.8	%

Pro Forma Results *(in millions of dollars)*
Net income, as reported	$	110.1		$	96.5		$	214.3		$	188.2
Less pro forma expense, net of tax, related to options granted		3.1			2.9			6.4			5.9

Pro Forma Net Income	$	107.0		$	93.6		$	207.9		$	182.3

Net Income Per Common Share:
Basic, as reported	$	0.48		$	0.42		$	0.93		$	0.82
Basic, pro forma	$	0.47		$	0.41		$	0.91		$	0.79
Diluted, as reported	$	0.47		$	0.42		$	0.92		$	0.81
Diluted, pro forma	$	0.46		$	0.41		$	0.89		$	0.79

Note 12 – Restructuring Reserves

On a quarterly basis, Huntington assesses its remaining restructuring reserves and makes adjustments to those reserves as necessary. Huntington had remaining reserves for restructuring of $8.3 million, $9.7 million, and $9.4 million as of June 30, 2004, December 31, 2003, and June 30, 2003, respectively. Huntington expects that the reserves will be adequate to fund the estimated future cash outlays.

Note 13 – 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 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:


	Pension Benefits Three Months Ended June 30,						Post Retirement Benefits Three Months Ended June 30,
*(in thousands)*	2004			2003			2004		2003
Service cost	$	3,040		$	2,454		$	326	$	280
Interest cost		4,371			4,162			802		870
Expected return on plan assets		(5,383	)		(6,285	)		—		—
Amortization of transition asset		—			(63	)		276		276
Amortization of prior service cost		—			—			146		151
Settlements		1,000			1,089			—		—
Recognized net actuarial loss		1,984			444			—		—

Benefit Expense	$	5,012		$	1,801		$	1,550	$	1,577


	Pension Benefits Six Months Ended June 30,						Post Retirement Benefits Six Months Ended June 30,
*(in thousands)*	2004			2003			2004		2003
Service cost	$	6,078		$	4,909		$	650	$	561
Interest cost		8,741			8,323			1,604		1,739
Expected return on plan assets		(10,764	)		(12,568	)		—		—
Amortization of transition asset		—			(126	)		552		551
Amortization of prior service cost		—			—			291		303
Settlements		2,000			2,176			—		—
Recognized net actuarial loss		3,968			886			—		—

Benefit Expense	$	10,023		$	3,600		$	3,097	$	3,154

Huntington also sponsors other retirement plans. One of those plans is an unfunded Supplemental Executive Retirement Plan. This plan is a nonqualified plan that provides certain former officers of Huntington and its subsidiaries with defined pension benefits in excess of limits imposed by federal tax law. Other plans, including plans assumed in various past acquisitions, are unfunded, nonqualified plans that provide certain active and former officers of Huntington and its subsidiaries nominated by Huntington’s compensation committee with deferred compensation, post-employment, and/or defined pension benefits in excess of the qualified plan limits imposed by federal tax law.

Huntington has a 401(k) plan, which is a defined contribution plan that is available to eligible employees. Matching contributions by Huntington equal 100% on the first 3%, then 50% on the next 2%, of participant elective deferrals. The cost of providing this plan was $2.3 million and $2.1 million for the three months ended June 30, 2004 and 2003, respectively. For the respective six-month periods, the cost was $4.7 million and $4.3 million.

Note 14 – Commitments and Contingent Liabilities

In the ordinary course of business, Huntington makes various commitments to extend credit that are not reflected in the financial statements. The contract amount of these financial agreements at June 30, 2004, December 31, 2003, and June 30, 2003, were as follows:


*(in millions)*	June 30, 2004		December 31, 2003		June 30, 2003
Contract amount represents credit risk
Commitments to extend credit
Commercial	$	4,993	$	5,712	$	4,924
Consumer		3,868		3,652		3,157
Commercial real estate		586		952		891
Standby letters of credit		962		983		978
Commercial letters of credit		231		166		215

Commitments to extend credit:

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 $3.2 million, $3.8 million, and $3.3 million at June 30, 2004, December 31, 2003, and June 30, 2003, 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.

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. (See also Note 3.)

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

INTRODUCTION

Huntington Bancshares Incorporated (Huntington or the company) is a multi-state diversified financial holding company organized under Maryland law in 1966 and headquartered in Columbus, Ohio. Through its subsidiaries, Huntington is engaged in providing full-service commercial and consumer banking services, mortgage banking services, automobile financing, equipment leasing, investment management, trust services, and discount brokerage services, as well as reinsuring credit life and disability insurance, and selling other insurance and financial products and services. Huntington’s banking offices are located in Ohio, Michigan, West Virginia, Indiana, and Kentucky. Selected financial services are also conducted in other states including Arizona, Florida, Georgia, Maryland, New Jersey, Pennsylvania, and Tennessee. Huntington has a foreign office in the Cayman Islands and a foreign office in Hong Kong. The Huntington National Bank (the Bank), organized in 1866, is Huntington’s only bank subsidiary.

The following discussion and analysis provides investors and others with information that Management believes to be necessary for an understanding of Huntington’s 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.

Forward-Looking Statements

This report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements about Huntington. These include descriptions of products or services, plans or objectives of Management for future operations, including pending 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, those set forth below and under the heading “Business Risks” included in Item 1 of Huntington’s Annual Report on Form 10-K for the year ended December 31, 2003 (2003 Form 10-K), and other factors described in this report and from time to time in other filings with the Securities and Exchange Commission.

Management encourages readers of this report to understand forward-looking statements to be strategic objectives rather than absolute forecasts of future performance. Forward-looking statements speak only as of the date they are made. Huntington assumes 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

Huntington, like other financial companies, is subject to a number of risks, many of which are outside of Management’s control, though Management strives 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 Huntington’s financial condition or results of operations, (3) liquidity risk, which is the risk that Huntington and / 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, or systems, or external events. The description of Huntington’s business contained in Item 1 of its 2003 Form 10-K, while not all inclusive, discusses a number of business risks that, in addition to the other information in this report, readers should carefully consider.

Securities and Exchange Commission Investigation

Critical Accounting Policies and Use of Significant Estimates

Note 1 to the company’s Notes to Consolidated Financial Statements included in Huntington’s 2003 Form 10-K lists significant accounting policies used in the development and presentation of its financial statements. These significant accounting policies, as well as the following discussion and analysis and other financial statement disclosures, identify and address key variables and other qualitative and quantitative factors that are necessary for an understanding and evaluation of Huntington, its financial position, results of operations, and cash flows.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (GAAP) requires Huntington’s management to establish critical accounting policies and make accounting estimates, assumptions, and judgments that affect amounts recorded and reported in its financial statements. An accounting estimate requires assumptions about uncertain matters that could have a material effect on the financial statements of Huntington if a different amount within a range of estimates were used or if estimates changed from period to period. Readers of this interim 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. Huntington’s management has identified the most significant accounting estimates and their related application in Huntington’s 2003 Form 10-K.

SUMMARY DISCUSSION OF RESULTS

Earnings comparisons from the second quarter of 2003 through the second quarter of 2004 were impacted by a number of factors, some related to changes in the economic and competitive environment, while others reflected specific Management strategies or changes in accounting practices. Understanding the nature and implications of these factors on financial results is important in understanding the company’s income statement, balance sheet, and credit quality trends and the comparison of the current quarter and year-to-date performance with comparable prior-year periods. The key factors impacting the current reporting period comparisons are more fully described in the Significant Factors Influencing Financial Performance Comparisons section, which follows the summary of results below.

2004 Second Quarter versus 2003 Second Quarter

Huntington’s 2004 second quarter earnings were $110.1 million, or $0.47 per common share, up 14% and 12%, respectively, from $96.5 million and $0.42 per common share in the year-ago quarter. This increase in earnings reflected:

•

90% decrease in provision for credit losses,

•

10% increase in fully taxable equivalent net interest income, and

•

5% decline in non-interest expenses

Partially offset by a 21% decline in non-interest income.

The return on average assets (ROA) and return on average equity (ROE), were 1.41% and 19.1%, respectively, compared with 1.38% and 18.0% in the year-ago quarter (see Table 1).

2004 Second Quarter versus 2004 First Quarter

Compared with 2004 first quarter net income of $104.2 million, or $0.45 per common share, 2004 second quarter earnings were up 6% and 4%, respectively. This increase in earnings primarily reflected:

•

80% decline in provision for credit losses, and

•

1% decline in non-interest expenses

Partially offset by a 4% decline in non-interest income.

The ROA and ROE were 1.41% and 19.1%, respectively, in the current quarter, compared with 1.36% and 18.4% in the 2004 first quarter (see Table 1).

Table 1 - Selected Quarterly Income Statement Data


*(in thousands, except per share amounts)*	2004						2003									2Q04 vs. 2Q03
*(in thousands, except per share amounts)*	Second			First			Fourth			Third			Second			Amount			%
Total interest income	$	324,167		$	325,931		$	335,097		$	333,320		$	317,325		$	6,842		2.2	%
Total interest expense		101,604			103,246			110,782			112,849			114,884			(13,280	)	(11.6	)%

Net interest income		222,563			222,685			224,315			220,471			202,441			20,122		9.9	%
Provision for credit losses		5,027			25,596			26,341			51,615			49,193			(44,166	)	(89.8	)%

Net interest income after provision for credit losses		217,536			197,089			197,974			168,856			153,248			64,288		42.0	%

Operating lease income		78,706			88,867			105,307			117,624			128,574			(49,868	)	(38.8	)%
Service charges on deposit accounts		43,596			41,837			44,763			42,294			40,914			2,682		6.6	%
Trust services		16,708			16,323			15,793			15,365			15,580			1,128		7.2	%
Brokerage and insurance		13,523			15,197			14,344			13,807			14,196			(673	)	(4.7	)%
Mortgage banking		23,322			(4,296	)		9,677			30,193			7,185			16,137		N.M.
Bank owned life insurance		11,309			10,485			10,410			10,438			11,043			266		2.4	%
Gain on sale of automobile loans		4,890			9,004			16,288			—			13,496			(8,606	)	(63.8	)%
Gain on sale of branch office		—			—			—			13,112			—			—		N.M.
Other service charges and fees		10,645			9,513			9,237			10,499			11,372			(727	)	(6.4	)%
Securities gains (losses)		(9,230	)		15,090			1,280			(4,107	)		6,887			(16,117	)	N.M.
Other		24,659			25,619			19,411			23,543			27,704			(3,045	)	(11.0	)%

Total non-interest income		218,128			227,639			246,510			272,768			276,951			(58,823	)	(21.2	)%

Personnel costs		119,715			121,624			115,762			113,170			105,242			14,473		13.8	%
Operating lease expense		62,563			70,710			85,609			93,134			102,939			(40,376	)	(39.2	)%
Outside data processing and other services		17,563			18,462			15,957			17,478			16,104			1,459		9.1	%
Equipment		16,228			16,086			16,840			16,328			16,341			(113	)	(0.7	)%
Net occupancy		16,258			16,763			14,925			15,570			15,377			881		5.7	%
Professional services		7,836			7,299			12,175			11,116			9,872			(2,036	)	(20.6	)%
Marketing		8,069			7,839			6,895			5,515			8,454			(385	)	(4.6	)%
Telecommunications		4,638			5,194			5,272			5,612			5,394			(756	)	(14.0	)%
Printing and supplies		3,098			3,016			3,417			3,658			2,253			845		37.5	%
Amortization of intangibles		204			204			204			204			204			—		N.M.
Loss on early extinguishment of debt		—			—			15,250			—			—			—		N.M.
Restructuring reserve releases		—			—			(351	)		—			(5,315	)		5,315		N.M.
Other		25,981			18,457			25,510			18,397			20,168			5,813		28.8	%

Total non-interest expense		282,153			285,654			317,465			300,182			297,033			(14,880	)	(5.0	)%

Income before provision for income taxes		153,511			139,074			127,019			141,442			133,166			20,345		15.3	%
Provision for income taxes		43,384			34,901			33,758			37,230			36,676			6,708		18.3	%

Income before cumulative effect effect of change in accounting principle		110,127			104,173			93,261			104,212			96,490			13,637		14.1	%
Cumulative effect of change in accounting principle, net of tax ⁽¹⁾		—			—			—			(13,330	)		—			—		N.M.

Net Income	$	110,127		$	104,173		$	93,261		$	90,882		$	96,490		$	13,637		14.1	%

Per Common Share
Income before cumulative effect of change in accounting
principle - Diluted	$	0.47		$	0.45		$	0.40		$	0.45		$	0.42		$	0.05		11.9	%
Net income - Diluted		0.47			0.45			0.40			0.39			0.42			0.05		11.9	%
Cash dividends declared		0.175			0.175			0.175			0.175			0.16			0.02		9.4	%
Return on:
Average total assets ⁽²⁾		1.41	%		1.36	%		1.22	%		1.38	%		1.38	%		0.03	%	2.2	%
Average total shareholders’ equity ⁽²⁾		19.1	%		18.4	%		16.6	%		18.5	%		18.0	%		1.1	%	6.1	%
Net interest margin ⁽³⁾		3.29	%		3.36	%		3.42	%		3.46	%		3.47	%		(0.18	)%	(5.2	)%
Efficiency ratio ⁽⁴⁾		62.3	%		65.1	%		67.1	%		60.0	%		62.5	%		(0.2	)%	(0.3	)%
Effective tax rate		28.3	%		25.1	%		26.6	%		26.3	%		27.5	%		0.8	%	2.9	%
Revenue - Fully Taxable Equivalent (FTE)
Net interest income	$	222,563		$	222,685		$	224,315		$	220,471		$	202,441		$	20,122		9.9	%
Tax equivalent adjustment ⁽³⁾		2,919			3,023			2,954			2,558			2,076			843		40.6	%

Net Interest Income		225,482			225,708			227,269			223,029			204,517			20,965		10.3	%
Non-Interest Income		218,128			227,639			246,510			272,768			276,951			(58,823	)	(21.2	)%

Total Revenue	$	443,610		$	453,347		$	473,779		$	495,797		$	481,468		$	(37,858	)	(7.9	)%

⁽¹⁾	Due to the adoption of FASB Interpretation No. 46 for variable interest entities.

⁽²⁾	Based on income before cumulative effect change in accounting principle, net of tax.

⁽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).

N.M.	- Not Meaningful

Table 2 - Selected Year to Date Income Statement Data


	Six Months Ending June 30,						2004 vs. 2003
*(in thousands, except per share amounts)*	2004			2003			Amount			%
Total interest income	$	650,098		$	637,339		$	12,759		2.0	%
Total interest expense		204,850			233,139			(28,289	)	(12.1	)%

Net interest income		445,248			404,200			41,048		10.2	%
Provision for credit losses		30,623			86,037			(55,414	)	(64.4	)%

Net interest income after provision for credit losses		414,625			318,163			96,462		30.3	%

Operating lease income		167,573			266,767			(99,194	)	(37.2	)%
Service charges on deposit accounts		85,433			80,783			4,650		5.8	%
Trust services		33,031			30,491			2,540		8.3	%
Brokerage and insurance		28,720			29,693			(973	)	(3.3	)%
Mortgage banking		19,026			18,310			716		3.9	%
Bank owned life insurance		21,794			22,180			(386	)	(1.7	)%
Gain on sale of automobile loans		13,894			23,751			(9,857	)	(41.5	)%
Other service charges and fees		20,158			21,710			(1,552	)	(7.1	)%
Securities gains		5,860			8,085			(2,225	)	(27.5	)%
Other		50,278			48,105			2,173		4.5	%

Total non-interest income		445,767			549,875			(104,108	)	(18.9	)%

Personnel costs		241,339			218,331			23,008		10.5	%
Operating lease expense		133,273			214,527			(81,254	)	(37.9	)%
Outside data processing and other services		36,025			32,683			3,342		10.2	%
Equipment		32,314			32,753			(439	)	(1.3	)%
Net occupancy		33,021			31,986			1,035		3.2	%
Professional services		15,135			19,157			(4,022	)	(21.0	)%
Marketing		15,908			15,080			828		5.5	%
Telecommunications		9,832			11,095			(1,263	)	(11.4	)%
Printing and supplies		6,114			5,934			180		3.0	%
Amortization of intangibles		408			408			—		N.M.
Restructuring reserve releases		—			(6,315	)		6,315		N.M.
Other		44,438			36,873			7,565		20.5	%

Total non-interest expense		567,807			612,512			(44,705	)	(7.3	)%

Income before provision for income taxes		292,585			255,526			37,059		14.5	%
Provision for income taxes		78,285			67,306			10,979		16.3	%

Net Income	$	214,300		$	188,220		$	26,080		13.9	%

Per Common Share
Net income - Diluted	$	0.92		$	0.81		$	0.11		13.6	%
Cash dividends declared	$	0.35		$	0.32		$	0.03		9.4	%

Return on:
Average total assets		1.36	%		1.35	%		0.01	%	0.8	%
Average total shareholders’ equity		18.4	%		17.3	%		1.1	%	6.1	%
Net interest margin ⁽¹⁾		3.32	%		3.52	%		(0.20	)%	(5.7	)%
Efficiency ratio ⁽²⁾		63.7	%		64.4	%		(0.7	)%	(1.1	)%
Effective tax rate		26.8	%		26.3	%		0.5	%	1.7	%

Revenue - Fully Taxable Equivalent (FTE)
Net interest income	$	445,248		$	404,200		$	41,048		10.2	%
Tax equivalent adjustment ⁽¹⁾		5,942			4,172			1,770		42.4	%

Net Interest Income		451,190			408,372			42,818		10.5	%
Non-Interest Income		445,767			549,875			(104,108	)	(18.9	)%

Total Revenue	$	896,957		$	958,247		$	(61,290	)	(6.4	)%

⁽¹⁾	On a fully taxable equivalent (FTE) basis assuming a 35% tax rate.

⁽²⁾	Non-interest expense less amortization of intangibles divided by the sum of FTE net interest income and non-interest income excluding securities gains.

2004 First Six Months versus 2003 First Six Months

Earnings for the first six months of 2004 were $214.3 million, or $0.92 per common share, both up 14% from the comparable year-ago period earnings of $188.2 million, or $0.81 per common share. This increase in earnings reflected:

•

64% decrease in provision for credit losses,

•

10% increase in fully taxable equivalent net interest income, and

•

7% decline in non-interest expenses

Partially offset by a 19% decline in non-interest income.

The ROA and ROE were 1.36% and 18.4%, respectively, compared with 1.35% and 17.3% in the year-ago six-month period (see Table 2).

Significant Factors Influencing Financial Performance Comparisons

Automobile leases originated through April 2002 accounted for as operating leases – Automobile leases originated before May 2002 are accounted for using the operating lease method of accounting because they do not qualify as direct financing leases. Operating leases are a non-interest earning asset with the related rental income, other revenue, and credit recoveries reflected as operating lease income, a component of non-interest income. Under this accounting method, depreciation expenses, as well as other costs and charge-offs, are reflected as operating lease expense, a component of non-interest expense. With no new operating leases originated since April 2002, the operating lease assets are rapidly decreasing and will eventually run-off, along with related operating lease income and expense. Since operating lease income and expense represent a significant percentage of total non-interest income and expense, respectively, throughout this reporting period, their downward trend influences total non-interest income and non-interest expense trends.

All automobile leases originated since April 2002 are accounted for as direct financing leases, an interest earning asset included in total loans and leases with the related income reflected as interest income and included in the calculation of the net interest margin. Credit charge-offs and recoveries are reflected in the allowance for loan and lease losses (ALLL), with related changes in the ALLL reflected in provision for credit losses. The relative newness and rapid growth of this portfolio has resulted in higher reported automobile lease growth rates than in a more mature portfolio. To better understand overall trends in automobile lease exposure it is helpful to compare trends of the combined total of automobile leases plus operating leases (see the company’s 2003 Form 10-K for a full discussion).

Transition from a weak economic environment in 2003 to a recovering economic environment in 2004. The weak economic environment resulted in significant reductions in non-performing assets (NPAs), charge-offs, and the ALLL, as well as continued weak demand for commercial and industrial (C&I) loans, which contributed to declining C&I loans through the first quarter of 2004.

Declining interest rates in 2003 with generally increasing interest rates in 2004. Interest rates impacted, among other factors, loan and deposit growth, the net interest margin, and the valuation of mortgage servicing rights (MSRs) and investment securities.

•

The historically low interest rate environment resulted in strong demand and resultant growth in residential real estate, home equity, and commercial real estate (CRE) loans generally throughout this period. Mortgage banking revenue was also favorably impacted by the significant mortgage origination activity.

•

As interest rates fell in 2003 and attained historically low absolute levels, it became increasingly difficult to lower interest rates offered on deposit accounts commensurate with the overall decline in interest rates and yields on earning assets. This created an extremely competitive environment in which to grow deposits. These factors resulted in an inability to lower deposit rates commensurate with the overall decline in earning asset rates, which contributed to the decline in the net interest margin throughout this period.

•

Since the second quarter of 2002, the company generally has retained the servicing on mortgage loans it originates and sells. The mortgage servicing right, or MSR, represents the present value of expected future net servicing income for the loan. MSR values are very sensitive to movements in interest rates. Expected future net servicing income depends on the projected outstanding principal balances of the underlying loans, which can be greatly affected by prepayments. Prepayments usually increase when interest rates decline and decrease when interest rates rise. Thus, as interest rates decline, less future income is expected and the value of MSRs declines and becomes impaired when the valuation is less than the recorded book value. The company recognizes temporary impairment due to change in interest rates through a valuation reserve and records a direct write-down of the book value of its MSRs for other-than-temporary declines in valuation. Changes in interest rate levels between quarters resulted in some quarters reporting an MSR temporary impairment, with others reporting a recovery of previously reported MSR temporary impairment. Such swings in MSR valuations have significantly impacted quarterly mortgage banking income throughout this period (see Table 3).

•

The company uses gains or losses on investment securities to offset MSR temporary valuation changes. As a result, changes in interest rate levels have also resulted in securities gains or losses. As such, in quarters where an MSR temporary impairment is recognized, investment securities were sold resulting in a gain on sale, and vice versa. The earnings impact of the MSR valuation change and securities gain/loss may not exactly offset due to, among other factors, the difference in the timing of when the MSR valuation is determined and recorded, compared with when the securities are sold and any gain or loss is recorded (see Table 3).

Management strategies to lower the overall credit risk profile of the balance sheet. Throughout this period, certain strategies were implemented to lower the overall credit risk profile of the balance sheet with the objective of lowering the volatility of earnings.

•

Automobile loan sales – One strategy has been to lower the credit exposure to automobile loans and leases to 20% of total credit exposure, as manifested through the sale of automobile loans. These sales of higher-rate, higher-risk loans impact results in a number of ways including: lower growth rates in automobile, total consumer, and total company loans; the generation of gains reflected in non-interest income; lower net interest income than otherwise would be the case if the loans were not sold; and lower net interest margin (see Table 3).

•

Reduction in large-individual C&I and CRE credits – This strategy has been reflected in the reduction in shared national credits, as well as other, mostly C&I, loans. In addition, the company sold and charged-off lower-quality C&I and CRE credits in 2003 and 2004. This strategy was a contributing factor in the declines in C&I loan balances, NPAs, and the ALLL. In certain quarters, this strategy contributed to higher C&I net charge-offs.

Adoption of FIN 46 – Effective July 1, 2003, the company adopted Financial Accounting Standards Board (FASB) Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities. The adoption of FIN 46 resulted in the consolidation of $1.0 billion of previously securitized automobile loans and a $13.3 million after-tax charge in the 2003 third quarter for the cumulative effect of a change in accounting principle (see Tables 1 and 2).

Corporate Restructuring Charges – The 2001 strategic refocusing plan included the intent to sell the Florida banking and insurance operations, credit-related and other actions to strengthen the balance sheet and financial performance, and the consolidation of numerous non-Florida banking offices. As a result, non-interest expenses in 2001 and 2002 were higher than they otherwise would have been as they included net restructuring charges based on estimated costs associated with implementing these strategic initiatives. In contrast, 2003 non-interest expense reflected recoveries of previously established reserves, which were no longer needed (see Table 3) and lowered 2003 non-interest expense (see Note 21 of the company’s 2003 Form 10-K Notes to Consolidated Financial Statements). There were no increases or releases of restructuring charges in the first half of 2004.

Single commercial recovery – A single commercial credit recovery in the 2004 second quarter on a loan previously charged off in the 2002 fourth quarter favorably impacted the 2004 second quarter provision expense (see Table 3), as well as C&I, total commercial, and total net charge-offs for the quarter (see Table 11).

The following table quantifies the earnings impact of changes in MSR and investment securities valuation, sales of automobile loans, restructuring reserve releases, and a single, large commercial credit recovery on the specified periods.

Table 3 - Significant Items Influencing Earnings Performance Comparisons


*(in millions, except per share )*	Pre-tax			Impact After-tax⁽¹⁾			EPS
*(in millions, except per share )*	Pre-tax			Impact After-tax⁽¹⁾			EPS
Three Months Ended:
June 30, 2004 - GAAP earnings	$	153.5		$	110.1		$	0.47
Gain on sale of automobile loans		4.9			3.2			0.01
Mortgage servicing right (MSR) temporary impairment recovery		10.4			6.8			0.03
Investment securities losses		(9.2	)		(6.0	)		(0.03	)
Single commercial credit recovery		9.7			6.3			0.03

June 30, 2003 - GAAP earnings	$	133.2		$	96.5		$	0.42
Gain on sale of automobile loans		13.5			8.8			0.04
MSR temporary impairment		(6.4	)		(4.1	)		(0.02	)
Investment securities gains		6.9			4.5			0.02
Restructuring reserve releases		5.3			3.5			0.01

Six Months Ended:
June 30, 2004 - GAAP earnings	$	292.6		$	214.3		$	0.92
Gain on sale of automobile loans		13.9			9.0			0.04
MSR temporary impairment recovery		0.3			0.2			—
Investment securities gain on sale		5.9			4.0			0.02
Single commercial credit recovery		9.7			6.3			0.03

June 30, 2003 - GAAP earnings	$	255.5		$	188.2		$	0.81
Gain on sale of automobile loans		23.8			15.0			0.06
MSR temporary impairment		(6.4	)		(4.1	)		(0.02	)
Investment securities gains		8.1			5.0			0.02
Restructuring reserve releases		6.3			4.0			0.02

⁽¹⁾	Increase (decrease) to GAAP earnings.

RESULTS OF OPERATIONS

Net Interest Income

2004 Second Quarter versus 2003 Second Quarter

Fully taxable equivalent net interest income increased $21.0 million, or 10%, from the year-ago quarter, reflecting the favorable impact of a 16% increase in average earning assets, partially offset by an 18 basis point, or an effective 5%, decline in the net interest margin. The fully taxable equivalent net interest margin decreased to 3.29% from 3.47%, reflecting the continued impact of historically low interest rates and the strategic repositioning of portfolios to reduce automobile loans and increase the relative proportion of lower-rate, and lower-risk, residential real estate-related loans and investment securities.

Average total loans and leases increased $2.5 billion, or 13%, from the 2003 second quarter due primarily to a $2.2 billion, or 23%, increase in average consumer loans. Contributing to the consumer loan growth was a $1.1 billion, or 58%, increase in average residential mortgages and a $0.8 billion, or 23%, increase in average home equity loans. Average total automobile loans and leases increased $0.3 billion, or 8%. This growth from the year-ago quarter reflected the positive impact of underlying new automobile loan originations, the 2003 third quarter consolidation of a $1.0 billion automobile loan securitization trust, and the rapid growth in direct financing leases due to the migration from operating lease assets, which are no longer being originated. Offsetting these positive impacts was the sale of $2.4 billion of automobile loans over this 12-month period (see Loan and Lease Composition for additional discussion and Table 10).

Average total C&I and CRE loans increased $0.3 billion, or 3%, from the year-ago quarter, reflecting an 11% increase in small business C&I and CRE loans and a 9% increase in middle-market CRE loans. Average middle-market C&I loans were down 4% from the year-ago period and reflected both weak demand and the impact from continued strategies to specifically lower exposure to large individual commercial credits, including shared national credits.

Average investment securities increased $1.6 billion, or 43%, from the year-ago quarter, primarily reflecting the investment of a portion of the proceeds from the automobile loan sales. The growth from the year-ago quarter primarily consisted of 10-year variable-rate securities.

Average total core deposits in the second quarter were $16.2 billion, up $0.8 billion, or 5%, from the year-ago quarter. This growth primarily reflected a $1.1 billion, or 18%, increase in interest bearing demand deposits, partially offset by a $0.4 billion, or 14%, decline in retail CDs.

Tables 4 and 5 reflect quarterly average balance sheets and rates earned and paid on interest-earning assets and interest-bearing liabilities:

Table 4 - Condensed Consolidated Quarterly Average Balance Sheets


	Average Balances										2Q04 vs. 2Q03
*(in millions)*	2004				2003						2Q04 vs. 2Q03
Fully Tax Equivalent Basis	Second		First		Fourth		Third		Second		Amount			Percent
Assets
Interest bearing deposits in banks	$	69	$	79	$	83	$	90	$	45	$	24		53.3	%
Trading account securities		28		16		11		11		22		6		27.3
Federal funds sold and securities purchased under resale agreements		168		92		117		103		69		99		N.M.
Loans held for sale		254		207		295		898		601		(347	)	(57.7	)
Securities:
Taxable		4,861		4,646		4,093		3,646		3,385		1,476		43.6
Tax exempt		410		437		424		358		291		119		40.9

Total Securities		5,271		5,083		4,517		4,004		3,676		1,595		43.4

Loans and Leases:
Commercial and industrial		5,536		5,365		5,382		5,380		5,626		(90	)	(1.6	)
Real Estate
Construction		1,322		1,322		1,297		1,258		1,239		83		6.7
Commercial		2,906		2,876		2,830		2,744		2,621		285		10.9
Consumer
Automobile loans		2,337		3,041		3,529		3,594		2,830		(493	)	(17.4	)
Automobile leases		2,139		1,988		1,802		1,590		1,306		833		63.8

Automobile loans and leases		4,476		5,029		5,331		5,184		4,136		340		8.2

Home equity		4,142		3,880		3,678		3,503		3,359		783		23.3
Residential mortgage		2,986		2,674		2,501		2,075		1,887		1,099		58.2
Other loans		399		356		387		367		379		20		5.3

Total Consumer		12,003		11,939		11,897		11,129		9,761		2,242		23.0

Total Loans and Leases		21,767		21,502		21,406		20,511		19,247		2,520		13.1

Allowance for loan and lease losses		310		313		350		330		304		6		2.0

Net loans and leases		21,457		21,189		21,056		20,181		18,943		2,514		13.3

Total earning assets		27,557		26,979		26,429		25,617		23,660		3,897		16.5

Operating lease assets		977		1,166		1,355		1,565		1,802		(825	)	(45.8	)
Cash and due from banks		772		740		766		747		735		37		5.0
Intangible assets		216		217		217		218		218		(2	)	(0.9	)
All other assets		2,101		2,046		2,005		2,067		1,988		113		5.7

Total Assets	$	31,313	$	30,835	$	30,422	$	29,884	$	28,099	$	3,214		11.4	%

Liabilities and Shareholders’ Equity
Core deposits
Non-interest bearing deposits	$	3,223	$	3,017	$	3,131	$	3,218	$	3,046	$	177		5.8	%
Interest bearing demand deposits		7,168		6,609		6,466		6,558		6,100		1,068		17.5
Savings deposits		2,839		2,819		2,824		2,808		2,804		35		1.2
Retail certificates of deposit		2,400		2,399		2,492		2,561		2,798		(398	)	(14.2	)
Other domestic time deposits		600		637		631		656		673		(73	)	(10.8	)

Total core deposits		16,230		15,481		15,544		15,801		15,421		809		5.2

Domestic time deposits of $100,000 or more		795		788		828		803		808		(13	)	(1.6	)
Brokered time deposits and negotiable CDs		1,737		1,907		1,851		1,421		1,241		496		40.0
Foreign time deposits		542		549		522		536		426		116		27.2

Total deposits		19,304		18,725		18,745		18,561		17,896		1,408		7.9

Short-term borrowings		1,396		1,603		1,433		1,393		1,635		(239	)	(14.6	)
Federal Home Loan Bank advances		1,270		1,273		1,273		1,273		1,267		3		0.2
Subordinated notes and other long-term debt,
including preferred capital securities		5,623		5,557		5,432		5,197		4,010		1,613		40.2

Total interest bearing liabilities		24,370		24,141		23,752		23,206		21,762		2,608		12.0

All other liabilities		1,397		1,399		1,311		1,221		1,140		257		22.5
Shareholders’ equity		2,323		2,278		2,228		2,239		2,151		172		8.0

Total Liabilities and Shareholders’ Equity

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