Huntington Preferred Capital (HPCCP) 10-K/A 2004 FY Annual report (amended)

Exhibit 99 (d)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Huntington Bancshares Incorporated
Columbus, Ohio

We have audited the accompanying consolidated balance sheet of Huntington Bancshares Incorporated and subsidiaries (the “Company”) as of December 31, 2004, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The consolidated financial statements of the Company for the years ended December 31, 2003 and 2002 were audited by other auditors whose report, dated January 16, 2004 (except for Note 27, as to which the date is January 27, 2004 and Note 30, as to which the date is February 23, 2005), expressed an unqualified opinion on those financial statements and included explanatory paragraphs that described the restatement of the 2003 statement of cash flows and the adoption of new accounting guidance for variable interest entities in 2003 and goodwill and intangible assets in 2002.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such consolidated 2004 financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2004, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004, based on the criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission and our report (not presented herein) dated February 15, 2005 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP

Deloitte & Touche LLP
Columbus, Ohio
February 15, 2005
(March 1, 2005 as to Note 23)

CONSOLIDATEDBALANCESHEETS HUNTINGTON BANCSHARES INCORPORATED

			December 31,
(in thousands, except number of shares)			2004			2003
Assets
Cash and due from banks			$	877,320		$	899,689
Federal funds sold and securities purchased under resale agreements				628,040			96,814
Interest bearing deposits in banks				22,398			33,627
Trading account securities				309,630			7,589
Loans held for sale				223,469			226,729
Investment securities				4,238,945			4,929,060
Loans and leases:
	Commercial
		Commercial and industrial		5,829,685			5,313,517
		Commercial real estate		4,473,293			4,172,083
	Consumer
		Automobile loans		1,948,667			2,991,642
		Automobile leases		2,443,455			1,902,170
		Home equity loans		4,554,540			3,733,861
		Residential mortgage loans		3,829,234			2,530,665
		Other consumer loans		481,403			431,180
Total loans and leases				23,560,277			21,075,118
Allowance for loan and lease losses				(271,211	)		(299,732	)
Net loans and leases				23,289,066			20,775,386
Operating lease assets				587,310			1,260,440
Bank owned life insurance				963,059			927,671
Premises and equipment				355,115			349,712
Goodwill and other intangible assets				215,807			217,009
Customers’ acceptance liability				11,299			9,553
Accrued income and other assets				844,039			786,047
Total Assets			$	32,565,497		$	30,519,326
Liabilities and Shareholders’ Equity
Liabilities
	Deposits in domestic offices
		Non-interest bearing	$	3,392,123		$	2,986,992
		Interest bearing		16,935,091			15,025,188
	Deposits in foreign offices			440,947			475,215
	Total deposits			20,768,161			18,487,395
	Short-term borrowings			1,207,233			1,452,304
	Federal Home Loan Bank advances			1,271,088			1,273,000
	Other long-term debt			4,016,004			4,544,509
	Subordinated notes			1,039,793			990,470
	Allowance for unfunded loan commitments and letters of credit			33,187			35,522
	Bank acceptances outstanding			11,299			9,553
	Deferred federal income tax liability			783,628			654,535
	Accrued expenses and other liabilities			897,466			797,036
Total Liabilities				30,027,859			28,244,324
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 231,605,281 and 229,008,088 shares, respectively			2,484,204			2,483,542
	Less 26,260,974 and 28,858,167 treasury shares, respectively			(499,259	)		(548,576	)
	Accumulated other comprehensive income (loss)			(10,903	)		2,678
	Retained earnings			563,596			337,358
Total Shareholders’ Equity				2,537,638			2,275,002
Total Liabilities and Shareholders’ Equity			$	32,565,497		$	30,519,326

See Notes to Consolidated Financial Statements.

96

CONSOLIDATEDSTATEMENTS OFINCOME HUNTINGTON BANCSHARES INCORPORATED

			Twelve Months Ended December 31,
(in thousands, except per share amounts)			2004			2003			2002
Interest and fee income
	Loans and leases
		Taxable	$	1,132,938		$	1,097,109		$	1,088,932
		Taxable-exempt		1,135			1,315			1,975
	Investment securities
		Taxable		171,709			159,590			173,107
		Taxable-exempt		17,884			15,067			6,516
Other				23,649			32,675			22,665
Total Interest Income				1,347,315			1,305,756			1,293,195
Interest expense
	Deposits			257,099			288,271			385,733
	Short-term borrowings			13,053			15,698			28,668
	Federal Home Loan Bank advances			33,253			24,394			5,946
	Subordinated notes and other long-term debt including preferred capital securities			132,536			128,407			123,274
Total Interest Expense				435,941			456,770			543,621
Net Interest Income				911,374			848,986			749,574
	Provision for credit losses			55,062			163,993			194,426
Net Interest Income After Provision for Credit Losses				856,312			684,993			555,148
	Operating lease income			287,091			489,698			657,074
	Service charges on deposit accounts			171,115			167,840			153,564
	Trust services			67,410			61,649			62,051
	Brokerage and insurance income			54,799			57,844			62,109
	Bank owned life insurance income			42,297			43,028			43,123
	Other service charges and fees			41,574			41,446			42,888
	Mortgage banking			32,296			58,180			32,033
	Securities gains			15,763			5,258			4,902
	Gain on sales of automobile loans			14,206			40,039			—
	Gain on sale of branch offices			—			13,112			—
	Gain on sale of Florida operations			—			—			182,470
	Merchant Services gain			—			—			24,550
	Other income			92,047			91,059			76,940
Total Non-Interest Income				818,598			1,069,153			1,341,704
	Personnel costs			485,806			447,263			418,037
	Operating lease expense			236,478			393,270			518,970
	Net occupancy			75,941			62,481			59,539
	Outside data processing and other services			72,115			66,118			67,368
	Equipment			63,342			65,921			68,323
	Professional services			36,876			42,448			33,085
	Marketing			26,489			27,490			27,911
	Telecommunications			19,787			21,979			22,661
	Printing and supplies			12,463			13,009			15,198
	Amortization of intangibles			817			816			2,019
	Restructuring reserve (releases) charges			(1,151	)		(6,666	)		48,973
	Loss on early extinguishment of debt			—			15,250			—
	Other expense			93,281			80,780			92,063
Total Non-Interest Expense				1,122,244			1,230,159			1,374,147
Income Before Income Taxes				552,666			523,987			522,705
	Provision for income taxes			153,741			138,294			198,974
Income before cumulative effect of change in accounting principle				398,925			385,693			323,731
Cumulative effect of change in accounting principle, net of tax of $7,178				—			(13,330	)		—
Net Income			$	398,925		$	372,363		$	323,731
Average common shares — basic				229,913			229,401			242,279
Average common shares — diluted				233,856			231,582			244,012
Per Common Share:
	Income before cumulative effect of change in accounting principle — basic			$ 1.74		$	1.68		$	1.34
	Income before cumulative effect of change in accounting principle — diluted			1.71			1.67			1.33
	Net Income — basic			1.74			1.62			1.34
	Net Income — diluted			1.71			1.61			1.33
	Cash dividends declared			0.75			0.67			0.64

See Notes to Consolidated Financial Statements.

97

CONSOLIDATEDSTATEMENTS OFCHANGES INSHAREHOLDERS’EQUITY HUNTINGTON BANCSHARES INCORPORATED

																		Accumulated
			Preferred Stock				Common Stock					Treasury Stock						Other			Retained
																		Comprehensive			Earnings
(in thousands)			Shares		Amount		Shares		Amount			Shares			Amount			Income (Loss)			(Deficit)			Total
Balance — January 1, 2002				—	$	—		257,866	$	2,490,724			(6,672	)	$	(123,849	)		$ 25,488		$	(50,466	)	$	2,341,897
	Comprehensive Income:
	Net income																					323,731			323,731
	Unrealized net holding gains on securities available for sale arising during the period, net of reclassification adjustment for net gains included in net income																		27,387						27,387
	Unrealized gains on derivative instruments used in cash flow hedging relationships																		9,620						9,620
	Minimum pension liability																		(195	)					(195	)
		Total comprehensive income																							360,543
	Stock issued for acquisitions									(838	)		1,038			19,989									19,151
	Cash dividends declared ($0.64 per share)																					(154,794	)		(154,794	)
	Stock options exercised									(3,545	)		373			6,757									3,212
	Treasury shares purchased												(19,161	)		(370,012	)								(370,012	)
	Other									(1,920	)		(565	)		(8,284	)								(10,204	)
Balance — December 31, 2002				—		—		257,866		2,484,421			(24,987	)		(475,399	)		62,300			118,471			2,189,793
	Comprehensive Income:
	Net income																					372,363			372,363
	Unrealized net holding losses on securities available for sale arising during the period, net of reclassification adjustment for net gains included in net income																		(47,427	)					(47,427	)
	Unrealized losses on derivative instruments used in cash flow hedging relationships																		(11,081	)					(11,081	)
	Minimum pension liability																		(1,114	)					(1,114	)
		Total comprehensive income																							312,741
	Cash dividends declared ($0.67 per share)																					(153,476	)		(153,476	)
	Stock options exercised									(609	)		481			8,691									8,082
	Treasury shares purchased												(4,300	)		(81,061	)								(81,061	)
	Other									(270	)		(52	)		(807	)								(1,077	)
Balance — December 31, 2003				—		—		257,866		2,483,542			(28,858	)		(548,576	)		2,678			337,358			2,275,002
	Comprehensive Income:
	Net income																					398,925			398,925
	Unrealized net holding losses on securities available for sale arising during the period, net of reclassification adjustment for net gains included in net income																		(22,112	)					(22,112	)
	Unrealized gains on derivative instruments used in cash flow hedging relationships																		9,694						9,694
	Minimum pension liability																		(1,163	)					(1,163	)
		Total comprehensive income																							385,344
	Cash dividends declared ($0.75 per share)																					(172,687	)		(172,687	)
	Stock options exercised									678			2,432			46,561									47,239
	Other									(16	)		165			2,756									2,740
Balance — December 31, 2004				—	$	—		257,866	$	2,484,204			(26,261	)	$	(499,259	)		$(10,903	)	$	563,596		$	2,537,638

See Notes to Consolidated Financial Statements.

98

CONSOLIDATEDSTATEMENTS OFCASHFLOWS HUNTINGTON BANCSHARES INCORPORATED

			Twelve Months Ended December 31,
(in thousands of dollars)			2004			2003			2002
			(Restated)
Operating Activities
	Net Income		$	398,925		$	372,363		$	323,731
	Adjustments to reconcile net income to net cash provided by operating activities
		Cumulative effect of change in accounting principle, net of tax		—			13,330			—
		Provision for credit losses		55,062			163,993			194,426
		Depreciation on operating lease assets		216,444			350,550			463,783
		Amortization of mortgage servicing rights		19,019			25,966			12,051
		Other depreciation and amortization		89,669			126,530			4,006
		Mortgage servicing rights impairment (recoveries) charges		(1,378	)		(14,957	)		14,113
		Deferred income tax expense		140,962			258			96,718
		(Increase) decrease in trading account securities		(302,041	)		(7,348	)		13,151
		Originations of loans held for sale		(1,858,262	)		(4,221,322	)		(2,435,367	)
		Principal payments on and proceeds from loans held for sale		1,861,272			4,522,972			2,536,374
		Gains on sales of investment securities		(15,763	)		(5,258	)		(4,902	)
		Gains on sales/securitizations of loans		(14,206	)		(45,610	)		(11,031	)
		Gain on sale of branch offices		—			(13,112	)		—
		Gain on sale of Florida banking and insurance operations		—			—			(182,470	)
		Gain on restructuring of Huntington Merchant Services LLC		—			—			(24,550	)
		Loss on early extinguishment of debt		—			15,250			—
		Restructuring (releases) charges		(1,151	)		(6,666	)		48,973
		(Increase) decrease of cash surrender value of bank owned life insurance		(42,297	)		(43,028	)		(43,123	)
		Increase (decrease) in payable to investors in securitized loans		24,541			64,986			(13,794	)
		Other, net		(42,580	)		40,373			37,972
Net Cash Provided by Operating Activities				528,216			1,339,270			1,030,061
Investing Activities
	Decrease (increase) in interest bearing deposits in banks			11,229			3,673			(16,095	)
	Proceeds from:
		Maturities and calls of investment securities		881,305			1,585,979			1,036,706
		Sales of investment securities		2,386,479			1,161,325			855,309
	Purchases of investment securities			(2,438,158	)		(4,341,946	)		(1,959,137	)
	Proceeds from sales/securitizations of loans			1,534,395			2,576,869			465,699
	Net loan and lease originations, excluding sales			(4,216,309	)		(4,506,843	)		(3,867,300	)
	Purchases of operating lease assets			(14,666	)		—			(297,646	)
	Proceeds from sale of operating lease assets			451,264			572,596			667,147
	Sale of branch offices			—			(81,367	)		—
	Proceeds from sale of premises and equipment			1,188			7,382			19,390
	Purchases of premises and equipment			(56,531	)		(64,571	)		(57,761	)
	Proceeds from sales of other real estate			16,388			14,083			13,112
	Consolidation of cash of securitization trust			—			58,500			—
	Net cash paid in purchase acquisitions			—			—			(8,305	)
	Proceeds from restructuring of Huntington Merchant Services, LLC			—			—			27,000
	Net cash paid related to sale of Florida banking and insurance operations			—			—			(1,277,767	)
Net Cash Used for Investing Activities				(1,443,416	)		(3,014,320	)		(4,399,648	)
Financing Activities
	Increase in deposits			2,273,046			1,177,324			2,073,891
	(Decrease) increase in short-term borrowings			(245,071	)		(688,712	)		537,770
	Proceeds from issuance of subordinated notes			148,830			198,430			—
	Maturity of subordinated notes			(100,000	)		(250,000	)		—
	Proceeds from Federal Home Loan Bank advances			1,088			270,000			1,000,000
	Maturity of Federal Home Loan Bank advances			(3,000	)		(10,000	)		(4,000	)
	Proceeds from issuance of long-term debt			925,000			2,075,000			1,025,000
	Maturity of long-term debt			(1,455,000	)		(895,250	)		(932,150	)
	Dividends paid on common stock			(168,075	)		(151,023	)		(167,002	)
	Repurchases of common stock			—			(81,061	)		(370,012	)
	Net proceeds from issuance of common stock			47,239			8,082			3,212
Net Cash Provided by Financing Activities				1,424,057			1,652,790			3,166,709
Change in Cash and Cash Equivalents				508,857			(22,260	)		(202,878	)
Cash and Cash Equivalents at Beginning of Period				996,503			1,018,763			1,221,641
Cash and Cash Equivalents at End of Period			$	1,505,360		$	996,503		$	1,018,763
Supplemental disclosures
	Income taxes paid		$	34,904		$	72,128		$	70,463
	Interest paid			422,060			469,331			560,731
	Non-cash activities:
		Mortgage loans securitized		115,929			354,200			386,385
		Common stock dividends accrued, paid in subsequent year		35,662			31,113			28,032
		Stock issued for purchase acquisitions		—			—			19,151

See Notes to Consolidated Financial Statements.

99

NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS HUNTINGTON BANCSHARES INCORPORATED

1. SIGNIFICANT ACCOUNTING POLICIES

–  NATURE OF OPERATIONS — Huntington Bancshares Incorporated (Huntington) 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. Certain activities are also conducted in other states including Arizona, Florida, Georgia, Maryland, Nevada, New Jersey, Pennsylvania, and Tennessee. Huntington has a foreign office in the Cayman Islands and a foreign office in Hong Kong.

–  BASIS OF PRESENTATION — The consolidated financial statements include the accounts of Huntington and its majority-owned subsidiaries and are presented in accordance with accounting principles generally accepted in the United States (GAAP). All significant intercompany transactions and balances have been eliminated in consolidation. Companies in which Huntington holds more than a 50% voting equity interest are consolidated. For consolidated entities where Huntington holds less than a 100% interest, Huntington recognizes a minority interest liability (included in other liabilities) for the voting equity held by others and minority interest expense (included in other non-interest expenses) for the portion of the entity’s earnings attributable to minority interests. Investments in companies that are not consolidated are accounted for using the equity method when Huntington has the ability to exert significant influence, generally defined as a 20% or greater voting interest. Those investments for which Huntington does not have the ability to exert significant influence are generally accounted for using the cost method and are periodically evaluated for impairment. Investments in private investment partnerships are carried at fair value. Investments in private investment partnerships and investments that are accounted for under the equity method or the cost method are included in other assets in Huntington’s balance sheet and Huntington’s proportional interest in the investment’s earnings is included in other non-interest income. Huntington evaluates variable interest entities (VIEs) in which it holds a beneficial interest for consolidation. VIEs, as defined by the Financial Accounting Standards Board (FASB) Interpretation (FIN) No. 46,Consolidation of Variable Interest Entities, are legal entities with insubstantial equity, whose equity investors lack the ability to make decisions about the entity’s activities, or whose equity investors do not have the right to receive the residual returns of the entity if they occur. Huntington adopted FIN 46 on July 1, 2003 and therefore, consolidates these VIEs when it holds a majority of VIEs’ beneficial interests.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements. Actual results could differ from those estimates. Certain prior period amounts have been reclassified to conform to the current year’s presentation.

–  SECURITIES — Securities purchased with the intention of recognizing short-term profits are classified as trading account securities and reported at fair value. The unrealized gains or losses on trading securities are recorded in other non-interest income. All other securities are designated as investment securities. Investment securities include securities designated as available for sale, non-marketable equity securities, and securities held to maturity. Unrealized gains or losses on investment securities are reported as a separate component of accumulated other comprehensive income in shareholders’ equity. Declines in the value of debt and marketable equity securities that are considered other than temporary are recorded in non-interest income as a loss on investment securities.

Securities transactions are recognized on the trade date (the date the order to buy or sell is executed).

Nonmarketable equity securities include stock acquired for regulatory purposes, such as Federal Home Loan Bank stock and Federal Reserve Bank stock. These securities are generally accounted for at cost and are included in investment securities.

The amortized cost of specific securities sold is used to compute realized gains and losses. Interest and dividends on securities, including amortization of premiums and accretion of discounts using the effective interest method over the period to maturity, are included in interest income.

Statement of Financial Accounting Standards (SFAS) 115,Accounting for Certain Investments in Debt and Equity Securities, and Securities and Exchange Commission (SEC) Staff Accounting Bulletin (SAB) 59,Accounting for Noncurrent Marketable Equity Securities, and Emerging issues Task Force (EITF) No. 03-1,The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investmentsprovide guidance on determining when an investment is other-than-temporarily impaired. Investments are reviewed quarterly for indicators of other-than-temporary impairment. This determination requires significant judgment. In making this judgment, we evaluate, among other factors, the duration and extent to which the fair value of an investment is less than its cost and our intent and ability to hold the investment. Investments with an indicator are further evaluated to determine the

100

NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS HUNTINGTON BANCSHARES INCORPORATED

	likelihood of a significant adverse effect on the fair value and amount of the impairment as necessary. If market or economic conditions change, we may incur future impairments.
–	LOANS AND LEASES — Loans are stated at the principal amount outstanding, net of unamortized deferred loan origination fees and costs and net of unearned income. Direct financing leases are reported at the aggregate of lease payments receivable and estimated residual values, net of unearned and deferred income. Interest income is accrued as earned based on unpaid principal balances. Huntington defers the fees it receives from the origination of loans and leases, as well as the costs of those activities, and amortizes these fees and costs on a level-yield basis over the estimated lives of the related loans.
	Automobile loans and leases include loans secured by automobiles and leases of automobiles that qualify for the direct financing method of accounting. Substantially all of the direct financing leases that qualify for that accounting method do so because the present value of the lease payments and the guaranteed residual value are at least 90% of the cost of the vehicle. Huntington records the residual values of its leases based on estimated future market values of the automobiles as published in the Automotive Lease Guide (ALG), an authoritative industry source. Beginning in October 2000, Huntington purchased residual value insurance for its entire automobile lease portfolio to mitigate the risk of declines in residual values. Residual value insurance provides for the recovery of the vehicle residual value specified by the ALG at the inception of the lease. As a result, the risk associated with market driven declines in used car values is mitigated. Currently Huntington has three distinct residual value insurance policies in place to address the residual risk in the portfolio. Two residual value insurance policies cover all vehicles leased prior to May 2002, and have associated total payment caps of $120 million and $50 million, respectively. Management reviews expected future residual value losses to determine the need to either (a) establish a reserve for losses in excess of both insurance policy caps or (b) reduce the expected residual value and, therefore, increase the rate of depreciation. A third policy (the New Policy) provides similar coverage as the first two, but does not have a cap on losses payable under the policy. Leases covered by the New Policy qualify for the direct financing method of accounting. Leases covered by the earlier policies are accounted for using the operating lease method of accounting and are recorded as operating lease assets in Huntington’s consolidated balance sheet.
	Residual values on leased automobiles and equipment are evaluated periodically for impairment. Impairment of the residual values of direct financing leases is recognized by writing the leases down to fair value with a charge to non-interest expense. Residual value losses arise if the market value at the end of the lease term is less than the residual value embedded in the original lease contract. Residual value insurance covers the difference between the recorded residual value and the fair value of the automobile at the end of the lease term as evidenced by Black Book valuations. This insurance, however, does not cover residual losses below Black Book value, which may arise when the automobile has excess wear and tear and/or excess mileage, not reimbursed by the lessee.
	Commercial and industrial loans and commercial real estate loans are generally placed on non-accrual status and stop accruing interest when principal or interest payments are 90 days or more past due or the borrower’s creditworthiness is in doubt. A loan may remain in accruing status when it is sufficiently collateralized, which means the collateral covers the full repayment of principal and interest, and is in the process of active collection.
	Commercial and industrial and commercial real estate loans are evaluated for impairment in accordance with the provisions of Statement of Financial Accounting Standards (Statement) No. 114,Accounting by Creditors for Impairment of a Loan, as amended. This Statement requires an allowance to be established as a component of the allowance for loan and lease losses when it is probable that all amounts due pursuant to the contractual terms of the loan or lease will not be collected and the recorded investment in the loan or lease exceeds its fair value. Fair value is measured using either the present value of expected future cash flows discounted at the loan’s or lease’s effective interest rate, the observable market price of the loan or lease, or the fair value of the collateral if the loan or lease is collateral dependent.
	Consumer loans and leases, excluding residential mortgage and home equity loans, are subject to mandatory charge-off at a specified delinquency date and are not classified as non-performing prior to being charged off. These loans and leases are generally charged off in full no later than when the loan or lease becomes 120 days past due. Residential mortgage loans are placed on non-accrual status when principal payments are 180 days past due or interest payments are 210 days past due. A charge-off on a residential mortgage loan is recorded when the loan has been foreclosed and the loan balance exceeds the fair value of the collateral. The fair value of the collateral is then recorded as real estate owned and is reflected in other assets in the consolidated balance sheet. At September 30, 2004, Huntington adopted a new policy of placing home equity loans and lines on non-accrual status when they exceed 180 days past due. Such loans were previously classified as accruing loans and leases past due 90 days or more. This policy change conforms the home equity loans and lines classification to that of other consumer loans secured by residential real estate. The new policy did not have a material impact on total non-performing assets, the allowances for credit losses, or net income.(See Note 4 for further information.)

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	Huntington uses the cost recovery method of accounting for cash received on non-performing loans and leases. Under this method, cash receipts are applied entirely against principal until the loan or lease has been collected in full, after which time any additional cash receipts are recognized as interest income. When, in management’s judgment, the borrower’s ability to make periodic interest and principal payments resumes and collectibility is no longer in doubt, the loan or lease is returned to accrual status. When interest accruals are suspended, accrued interest income is reversed with current year accruals charged to earnings and prior year amounts generally charged off as a credit loss.
–	SOLD LOANS — Loans that are sold are accounted for in accordance with Statement No. 140,Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. For loan sales, an asset is also recorded for the servicing of the loans sold, which is retained at the time of sale, based on the relative fair value of the servicing rights.
	Gains and losses on the loans sold and servicing rights associated with loan sales are determined when the related loans are sold to the trust or third party. Fair values of the servicing rights are based on the present value of expected future cash flows from servicing the underlying loans, net of adequate compensation to service the loans. The present value of expected future cash flows is determined using assumptions for market interest rates, ancillary fees, and prepayment rates. Management also uses these assumptions to assess the servicing rights for impairment periodically. The servicing rights are recorded in other assets in the consolidated balance sheets. Servicing revenues on mortgage and automobile loans, net of the amortization of servicing rights, are included in mortgage banking income and other non-interest income, respectively.
–	ALLOWANCE FOR LOAN AND LEASE LOSSES — The allowance for loan and lease losses (ALLL) reflects management’s judgment as to the level considered appropriate to absorb probable inherent credit losses in the loan and lease portfolio. This judgment is based on the size and current risk characteristics of the portfolio, a review of individual loans and leases, historical and anticipated loss experience, and a review of individual relationships where applicable. External influences such as general economic conditions, economic conditions in the relevant geographic areas and specific industries, regulatory guidelines, and other factors are also assessed in determining the level of the allowance.
	The allowance is determined subjectively, requiring significant estimates, including the timing and amounts of expected future cash flows on impaired loans and leases, consideration of current economic conditions, and historical loss experience pertaining to pools of homogeneous loans and leases, all of which may be susceptible to change. The allowance is increased through a provision that is charged to earnings, based on Management’s quarterly evaluation of the factors previously mentioned, and is reduced by charge-offs, net of recoveries, and the allowance associated with securitized or sold loans.
	The ALLL consists of three components, the transaction reserve, specific reserve, and economic reserve. Loan and lease losses related to transaction and specific reserves are recognized and measured pursuant to Statements No. 5,Accounting for Contingenciesand 114, while losses related to the economic reserve are recognized and measured pursuant to Statement No. 5. The three components are more fully described below.

       Transaction Reserve

The transaction reserve component represents an estimate of loss based on characteristics of each commercial and consumer loan or lease in the portfolio. Each loan and lease is assigned a probability-of-default and a loss-in-event-of-default factor that are used to calculate the transaction reserve.

For middle market commercial and industrial, middle market commercial real estate, and small business loans, the calculation involves the use of a standardized loan grading system that is applied on an individual loan level and updated on a continuous basis. The reserve factors applied to these portfolios were developed based on internal credit migration models that track historical movements of loans between loan ratings over time and a combination of long-term average loss experience of the Company’s own portfolio and external industry data.

In the case of more homogeneous portfolios, such as consumer loans and leases and residential mortgage loans, the determination of the transaction component is conducted at an aggregate, or pooled, level. For such portfolios, the development of the reserve factors includes the use of forecasting models to measure inherent loss in these portfolios.

Models and analyses are updated frequently to capture the recent behavioral characteristics of the subject portfolios, as well as any changes in the loss mitigation or credit origination strategies. Adjustments to the reserve factors are made as needed based on observed results of the portfolio analytics.

       Specific Reserve

The specific reserve component is associated only with the middle market commercial and industrial, middle market commercial real estate, and small business segments and is the result of credit-by-credit reserve decisions for individual

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loans when it is determined that the calculated transaction reserve component is insufficient to cover the estimated losses. Individual non-performing and substandard loans over $250,000 are analyzed for impairment and possible assignment of a specific reserve. The impairment tests are done in accordance with applicable accounting standards and regulations.

       Economic Reserve

Changes in the economic environment are a significant judgmental factor management considers in determining the appropriate level of the ALLL. The economic reserve incorporates Management’s determination of the impact of risks associated with the general economic environment on the portfolio. The economic reserve is designed to address economic uncertainties and is determined based on a variety of economic factors that are correlated to the historical performance of the loan portfolio. Because of this more quantitative approach to recognizing risks in the general economy, the economic reserve may fluctuate from period to period.

In an effort to be as quantitative as possible in the ALLL calculation, Management developed a revised methodology for calculating the economic reserve portion of the ALLL for implementation in 2004. The revised methodology is specifically tied to economic indices that have a high correlation to the Company’s historic charge-off variability. The indices currently in the model consists of the U.S. Index of Leading Economic Indicators, U.S. Profits Index, U.S. Unemployment Index, and the University of Michigan Current Consumer Confidence Index. Beginning in 2004, the calculated economic reserve was determined based upon the variability of credit losses over a credit cycle. The indices and time frame may be adjusted as actual portfolio performance changes over time. Management has the capability to judgmentally adjust the calculated economic reserve amount by a maximum of +/- 20% to reflect, among other factors, differences in local versus national economic conditions. This adjustment capability is deemed necessary given the newness of the model and the continuing uncertainty of forecasting economic environment changes.

–	RESELL AND REPURCHASE AGREEMENTS — Securities purchased under agreements to resell and securities sold under agreements to repurchase are generally treated as collateralized financing transactions and are recorded at the amounts at which the securities were acquired or sold plus accrued interest. The fair value of collateral either received from or provided to a third party is continually monitored and additional collateral is obtained or is requested to be returned to Huntington as deemed appropriate.
–	GOODWILL AND OTHER INTANGIBLE ASSETS — Under the purchase method of accounting, the net assets of entities acquired by Huntington were recorded at their estimated fair value at the date of acquisition. The excess of cost over the fair value of net assets acquired is recorded as goodwill. Prior to 2002, goodwill was amortized over periods generally up to 25 years. Effective January 1, 2002, in accordance with Statement No. 142,Goodwill and Other Intangible Assets, goodwill is no longer amortized but is reviewed by management, along with other intangible assets arising from business combinations, for impairment as of September 30 each year, or whenever a significant event occurs that adversely affects operations, or when changes in circumstances indicate that the carrying value may not be recoverable. Other intangible assets are amortized on a straight-line basis over their estimated useful lives through 2011.
–	MORTGAGE BANKING ACTIVITIES — Loans held for sale are primarily composed of performing 1-to-4-family residential mortgage loans originated for resale and are carried at the lower of cost (net of purchase discounts or premiums and effects of hedge accounting) or fair value as determined on an aggregate basis. Fair value is determined using available secondary market prices for loans with similar coupons, maturities, and credit quality.
	Huntington recognizes the rights to service mortgage loans as separate assets, which are included in other assets in the consolidated balance sheets, only when purchased or when servicing is contractually separated from the underlying mortgage loans by sale or securitization of the loans with servicing rights retained. The carrying value of loans sold or securitized is allocated between loans and servicing rights based on the relative fair values of each. Purchased mortgage servicing rights are initially recorded at cost. All servicing rights are subsequently carried at the lower of the initial carrying value, adjusted for amortization, or fair value, and are included in other assets.
–	PREMISES AND EQUIPMENT — Premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is computed principally by the straight-line method over the estimated useful lives of the related assets. Buildings and building improvements are depreciated over an average of 30 to 40 years and 10 to 20 years, respectively. Land improvements and furniture and fixtures are depreciated over 10 years, while equipment is depreciated over a range of three to seven years. Leasehold improvements are amortized over the lesser of the asset life or term of the related leases. Maintenance and repairs are charged to expense as incurred, while improvements that extend the useful life of an asset are capitalized and depreciated over the remaining useful life.

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–	OPERATING LEASE ASSETS — Operating lease assets consist of automobiles leased to consumers and equipment leased to business customers. These assets are reported at cost, including net deferred origination fees or costs, less accumulated depreciation. For automobile operating leases, net deferred origination fees or costs include the referral payments Huntington makes to automobile dealers, which are deferred and amortized on a straight-line basis over the life of the lease.
	Lease payments are recorded as rental income, a component of operating lease income in non-interest income. Net deferred origination fees or costs are amortized over the life of the lease to operating lease income. Depreciation expense is recorded on a straight-line basis over the term of the lease. Leased assets are depreciated to the estimated residual value at the end of the lease term. Depreciation expense is included in operating lease expense in the non-interest expense section of the consolidated income statement. Impairment of residual values of operating leases is evaluated under Statement No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets. Under that Statement, when the future cash flows from the operating lease, including the expected realizable fair value of the automobile or equipment at the end of the lease, is less than the book value of the lease, an immediate impairment write-down is recognized. Otherwise, reductions in the expected residual value result in additional depreciation of the leased asset over the remaining term of the lease. Upon disposition, a gain or loss is recorded for any difference between the net book value of the lease and the proceeds from the disposition of the asset, including any insurance proceeds.
	On a quarterly basis, Management evaluates the amount of residual value losses that it anticipates will result from the estimated fair value of a leased vehicle being less than the residual value inherent in the lease. Also as part of its quarterly analysis, Management evaluates automobile leases individually for impairment. Fair value includes estimated net proceeds from the sale of the leased vehicle plus expected residual value insurance proceeds and amounts expected to be collected from the lessee for excess mileage and other items that are billable under terms of the lease contract. When estimating the amount of expected insurance proceeds, Management takes into consideration policy caps that exist in two of the three residual value insurance policies and whether it expects aggregate claims under such policies to exceed these caps. Residual value losses exceeding any insurance policy cap are reflected in higher depreciation expense over the remaining life of the affected automobile lease.
	Credit losses, included in operating lease expense, occur when a lease is terminated early because the lessee cannot make the required lease payments. These credit-generated terminations result in Huntington taking possession of the automobile earlier than expected. When this occurs, the market value of the automobile may be less than Huntington’s book value, resulting in a loss upon sale. Rental income payments accrued, but not received, are written off when they reach 120 days past due and at that time the asset is evaluated for impairment.
–	BANK OWNED LIFE INSURANCE — Huntington’s bank owned life insurance policies are carried at their cash surrender value. Periodically, management confirms this cash surrender value with the insurance carriers that have issued each respective insurance policy. Huntington recognizes tax-free income from the periodic increases in the cash surrender value of these policies and from death benefits.
–	DERIVATIVE FINANCIAL INSTRUMENTS — Derivative financial instruments, primarily interest rate swaps, are accounted for in accordance with Statement No. 133,Accounting for Derivative Instruments and Hedging Activities, as amended. This Statement requires every derivative instrument to be recorded in the consolidated balance sheet as either an asset or liability measured at its fair value and Huntington to formally document, designate, and assess the effectiveness of transactions for which hedge accounting is applied. Depending on the nature of the hedge and the extent to which it is effective, the changes in fair value of the derivative recorded through earnings will either be offset against the change in the fair value of the hedged item in earnings, or recorded in other comprehensive income and subsequently recognized in earnings in the period the hedged item affects earnings. The portion of a hedge that is ineffective and all changes in the fair value of derivatives not designated as hedges, referred to as trading instruments, are recognized immediately in earnings. Deferred gains or losses from derivatives that are terminated are amortized over the shorter of the original remaining term of the derivative or the remaining life of the underlying asset or liability. Trading instruments are carried at fair value with changes in fair value included in other non-interest income. Trading instruments are executed primarily with Huntington’s customers to fulfill their needs. Derivative instruments used for trading purposes include interest rate swaps, including callable swaps, interest rate caps and floors, and interest rate and foreign exchange futures, forwards, and options.
–	ADVERTISING COSTS — Advertising costs are expensed as incurred as a marketing expense, a component of non-interest expense.
–	INCOME TAXES — Income taxes are accounted for under the asset and liability method. Accordingly, deferred tax assets and liabilities are recognized for the future book and tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are determined using enacted tax rates expected to apply in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income at the time of enactment of such change in tax rates.

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–  TREASURY STOCK — Acquisitions of treasury stock are recorded at cost. Reissuance of shares in treasury for acquisitions, stock option exercises, or for other corporate purposes, is recorded at their weighted-average cost.

–  STOCK-BASED COMPENSATION — Huntington’s stock-based compensation plans are accounted for based on the intrinsic value method promulgated by Accounting Principles Board 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,Accounting for Stock-Based Compensation, 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 costs in the consolidated 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 last three years:

			Year Ended December 31,
(in millions of dollars, except per share amounts)			2004			2003			2002
Assumptions
	Risk-free interest rate			3.78	%		4.45	%		4.12	%
	Expected dividend yield			3.20			3.11			3.34
	Expected volatility of Huntington’s common stock			30.9			33.8			33.8
Pro Forma Results
	Net income, as reported		$	398.9		$	372.4		$	323.7
	Less pro forma expense related to options granted			(14.4	)		(10.9	)		(10.0	)
	Pro Forma Net Income		$	384.5		$	361.5		$	313.7
	Net Income Per Common Share:
		Basic, as reported	$	1.74		$	1.62		$	1.34
		Basic, pro forma		1.67			1.58			1.29
		Diluted, as reported		1.71			1.61			1.33
		Diluted, pro forma		1.64			1.56			1.29

–  SEGMENT RESULTS — Accounting policies for the lines of business are the same as those used in the preparation of the consolidated financial statements with respect to activities specifically attributable to each business line. However, the preparation of business line results requires management to establish methodologies to allocate funding costs and benefits, expenses, and other financial elements to each line of business. Changes are made in these methodologies utilized for certain balance sheet and income statement allocations performed by Huntington’s management reporting system, as appropriate.

–  STATEMENT OF CASH FLOWS — Cash and cash equivalents are defined as “Cash and due from banks” and “Federal funds sold and securities purchased under resale agreements.” The statement of cash flows for the year ended December 31, 2003, has been restated to properly reflect the sale of branch offices during the third quarter of 2003.(See Note 30 of the Notes to Consolidated Financial Statements.)

2. NEW ACCOUNTING STANDARDS

–  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. On September 30, 2004, the FASB issued FSP EITF 03-1-1 which delayed the effective date for the measurement and recognition guidance contained in paragraphs 10–20 of Issue 03-1. See Note 3 for more information.

–  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 Statement 133,Accounting for Derivative Instruments and

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	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. The impact of this new pronouncement was not 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 purchased or 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 Staff Position No. 109-2,Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004 — On October 22, 2004, the American Jobs Creation Act (the Act) was signed into law. The Act introduces a special one-time dividends received deduction on the repatriation of certain foreign earnings to a U.S. taxpayer, provided certain criteria are met. Huntington may elect to apply this provision to qualifying earnings repatriations in 2005. Huntington has begun an evaluation of the effects of the repatriation provision as it applies to earnings from foreign asset securitization activities. However, Huntington does not expect to be able to complete this evaluation until after Congress or the Treasury Department provides additional clarifying language on key elements of the provision.
	The FASB staff believes that the lack of clarification of certain provisions within the Act and the timing of the enactment necessitate a practical exception to the Statement No. 109,Accounting for Income Taxes(SFAS 109) requirement to reflect in the period of enactment of the effect of a new tax law. Accordingly, in December 2004, the FASB issued FSP 109-2, which allows Huntington time beyond the fourth quarter of 2004, the period of enactment, to evaluate the effect of the Act on its plan for reinvestment or repatriation of foreign earnings for purposes of applying SFAS 109.
	At December 31, 2004, the range of possible amounts that Huntington is considering for repatriation under this provision is between zero and $89.0 million. The related potential range of income tax is between zero and $4.7 million.
–	FASB STATEMENT NO. 123 (REVISED 2004),Share-Based Payment(Statement 123R) — Statement 123R was issued in December 2004, to provide investors and other users of financial statements with more complete financial information by 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 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 123R replaces FASB Statement No. 123,Accounting for Stock-Based Compensation(Statement 123), and supersedes APB Opinion No. 25,Accounting for Stock Issued to Employees(APB 25). Statement 123, as originally issued in 1995, established as preferable a fair-value-based method of accounting for share-based payment transactions with employees. However, that Statement permitted entities the option of continuing to apply the guidance in APB 25, as long as the footnotes to financial statements disclosed pro forma net income under the preferable fair-value-based method. Public entities (other than those filing as small business issuers) will be required to apply Statement 123(R) as of the first interim or annual reporting period that begins after June 15, 2005. Effective January 1, 2005, Huntington has adopted Statement 123R. See Note 1 for the current accounting policy on share-based payments and Note 16 for the share-based payment disclosures.

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3. INVESTMENT SECURITIES

Investment securities at December 31 were as follows:

				Unrealized
(in thousands of dollars)		Amortized Cost		Gross Gains		Gross Losses			Fair Value
2004
U.S. Treasury		$	24,987	$	362	$	(213	)	$	25,136
Federal Agencies Mortgage-backed securities			985,846		177		(12,507	)		973,516
	Other agencies		986,954		1,193		(15,901	)		972,246
Total U.S. Treasury and Federal Agencies			1,997,787		1,732		(28,621	)		1,970,898
Municipal securities			410,614		7,404		(1,794	)		416,224
Private label CMO			462,394		866		(5,233	)		458,027
Asset backed securities			1,198,296		2,690		(1,004	)		1,199,982
Other securities			189,513		4,962		(661	)		193,814
Total Investment Securities		$	4,258,604	$	17,654	$	(37,313	)	$	4,238,945

				Unrealized
(in thousands of dollars)		Amortized Cost		Gross Gains		Gross Losses			Fair Value
2003
U.S. Treasury		$	304,001	$	4,410	$	(41	)	$	308,370
Federal Agencies Mortgage-backed securities			1,811,793		19,782		(13,552	)		1,818,023
	Other agencies		1,162,896		13,137		(16,510	)		1,159,523
Total U.S. Treasury and Federal Agencies			3,278,690		37,329		(30,103	)		3,285,916
Municipal securities			432,129		6,405		(2,273	)		436,261
Private label CMO			390,906		609		(858	)		390,657
Asset backed securities			640,826		64		(1,174	)		639,716
Retained interests in securitizations			5,593		763		—			6,356
Other securities			166,366		3,884		(96	)		170,154
Total Investment Securities		$	4,914,510	$	49,054	$	(34,504	)	$	4,929,060

Other securities include privately placed collateralized mortgage obligations, Federal Home Loan Bank and Federal Reserve Bank stock, corporate debt and municipal securities, and marketable equity securities.

Contractual maturities of investment securities as of December 31 were:

	2004				2003
(in thousands of dollars)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Under 1 year	$	8,597	$	8,653	$	185,016	$	187,413
1-5 years		610,189		606,140		695,691		705,100
6-10 years		584,619		575,399		969,280		964,949
Over 10 years		3,049,673		3,042,552		3,050,383		3,055,131
Retained interests in securitizations		—		—		5,593		6,356
Marketable equity securities		5,526		6,201		8,547		10,111
Total Investment Securities	$	4,258,604	$	4,238,945	$	4,914,510	$	4,929,060

At December 31, 2004, the carrying value of investment securities pledged to secure public and trust deposits, trading account liabilities, U.S. Treasury demand notes, and security repurchase agreements totaled $2.1 billion. There were no securities of a single issuer, which are not governmental or government-sponsored, that exceeded 10% of shareholders’ equity at December 31, 2004.

The following table provides the gross unrealized losses and fair value, aggregated by investment category and length of time the individual securities have been in a continuous loss position, at December 31, 2004.

107

NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS HUNTINGTON BANCSHARES INCORPORATED

		At December 31, 2004
		Less than 12 Months					Over 12 Months
												Total
		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(in thousands of dollars)		Value		Losses			Value		Losses			Value		Losses
U.S. Treasury		$	19,794	$	(213	)	$	—	$	—		$	19,794	$	(213	)
Federal agencies
	Mortgage-backed securities		810,462		(8,666	)		115,418		(3,841	)		925,880		(12,507	)
	Other agencies		509,153		(6,303	)		255,809		(9,598	)		764,962		(15,901	)
Total U.S. Treasury and Federal Agencies			1,339,409		(15,182	)		371,227		(13,439	)		1,710,636		(28,621	)
Municipal Securities			62,187		(273	)		51,875		(1,521	)		114,062		(1,794	)
Private label CMO			343,929		(5,230	)		2,046		(3	)		345,975		(5,233	)
Asset backed securities			416,476		(1,004	)		—		—			416,476		(1,004	)
Other securities			13,967		(659	)		—		(2	)		13,967		(661	)
Total temporarily impaired securities		$	2,175,968	$	(22,348	)	$	425,148	$	(14,965	)	$	2,601,116	$	(37,313	)

Gross gains from sales of securities of $34.7 million, $14.5 million, and $5.4 million, were realized in 2004, 2003, and 2002, respectively. Gross losses totaled $19.0 million in 2004, $9.2 million in 2003, and $0.5 million in 2002. At September 30, 2004, Management determined that $11.0 million of equity securities, with unrealized losses of $0.9 million were other-than-temporarily impaired. Consequently, Huntington recognized the unrealized losses in the third quarter of 2004. There were no other-than-temporary impairments of any securities recognized in 2003 or 2002. Huntington has both the intent and ability to hold the securities contained in the table above for a time necessary to recover the amortized cost.

4. LOANS AND LEASES

At December 31, 2004, $2.1 billion of commercial and industrial loans were pledged to secure potential discount window borrowings from the Federal Reserve Bank. At this same date, $4.7 billion of real estate qualifying loans were pledged to secure advances from the Federal Home Loan Bank. Real estate qualifying loans are comprised of residential mortgage loans secured by first and second liens.

Huntington’s loan and lease portfolio includes lease financing receivables consisting of direct financing leases on equipment, which are included in commercial and industrial loans, and on automobiles. Net investment in lease financing receivables by category at December 31 were as follows:

			At December 31,
(in thousands of dollars)			2004			2003
Commercial and industrial
	Lease payments receivable		$	391,157		$	315,518
	Estimated residual value of leased assets			37,704			36,300
		Gross investment in commercial lease financing receivables		428,861			351,818
	Unearned income			(39,414	)		(33,478	)
Total net investment in commercial lease financing receivables			$	389,447		$	318,340
Consumer
	Lease payments receivable		$	1,453,909		$	1,238,843
	Estimated residual value of leased assets			1,258,160			903,554
		Gross investment in consumer lease financing receivables		2,712,069			2,142,397
	Deferred origination fees and costs			(2,130	)		(1,950	)
	Unearned income			(266,484	)		(238,277	)
Total net investment in consumer lease financing receivables			$	2,443,455		$	1,902,170

Included in the estimated residual value of leased consumer assets, Huntington had a valuation reserve of $4.2 million and $2.1 million at December 31, 2004 and 2003, respectively, for expected residual value impairment that is not covered by residual value insurance.

108

NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS HUNTINGTON BANCSHARES INCORPORATED

RELATED PARTY TRANSACTIONS

Huntington has made loans to its officers, directors, and their associates. These loans were made in the ordinary course of business under normal credit terms, including interest rate and collateralization, and do not represent more than the normal risk of collection. These loans to related parties are summarized as follows:

		At December 31,
(in thousands of dollars)		2004
Balance, beginning of year		$	81,357
	Loans made		171,313
	Repayments		(179,044	)
	Changes due to status of executive officers and directors		12,392
Balance, end of year		$	86,018

NON-PERFORMING ASSETS AND PAST DUE LOANS

At December 31, 2004 and 2003, loans in non-accrual status and loans past due 90 days or more and still accruing interest, were as follows:

	At December 31,
(in thousands of dollars)	2004		2003
Commercial and industrial	$	34,692	$	43,387
Commercial real estate		8,670		22,399
Residential mortgage		13,545		9,695
Home equity(1)		7,055		—
Total non-performing loans		63,962		75,481
Other real estate, net(2)		44,606		11,905
Total non-performing assets	$	108,568	$	87,386
Accruing Loans Past Due 90 Days or More	$	54,283	$	55,913

(1)	As of September 30, 2004, the Company adopted a policy, consistent with its policy for residential mortgage loans, of placing home equity loans and lines on nonaccrual status when they become greater than 180 days past due.
(2)	At December 31, 2004, other real estate owned included $35.7 million of properties that relate to the work-out of $5.9 million of mezzanine loans. These properties are subject to $29.8 million of non-recourse debt to another financial institution. Both properties are in contract for sale in the first half of 2005.

The amount of interest that would have been recorded under the original terms for total loans classified as non-accrual or renegotiated was $3.3 million for 2004, $6.3 million for 2003, and $12.6 million for 2002. Amounts actually collected and recorded as interest income for these loans totaled $1.9 million, $3.0 million, and $5.1 million for 2004, 2003, and 2002, respectively.

5. LOAN SALES AND SECURITIZATIONS

AUTOMOBILE LOANS

Huntington sold $1.5 billion and $2.1 billion of automobile loans in 2004 and 2003, respectively. Pre-tax gains from the sales of automobile loans totaled $14.2 million and $40.0 million in 2004 and 2003, respectively. No sales of automobile loans were made in 2002.

A servicing asset is established at their initial carrying value based on the relative fair value at the time of the sale. Huntington has used the following assumptions to measure fair value at the time of the sale: estimated servicing income of 1.00%, estimated adequate compensation for servicing of approximately 0.50%, other ancillary fees received of approximately 0.12% to 0.15% and an estimated return on payments prior to remittance to investors. The asset is then amortized against the actual cash flows received from the investor over time. Impairment, if any, is recognized when carrying value exceeds the fair value as determined by calculating the present value of expected net future cash flows. The primary risk characteristic for measuring servicing assets is payoff rates of the underlying loan pools. Valuation calculations rely heavily on the predicted payoff assumption, and if actual payoff is quicker than expected, then future value would be impaired. Other impairment concerns would be changes to the other assumptions mentioned above.

109

NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS HUNTINGTON BANCSHARES INCORPORATED

Changes in the carrying value of automobile loan servicing rights for the three years ended December 31, 2004, and the fair value at the end of each period were as follows:

	Year Ended December 31,
(in thousands of dollars)	2004			2003			2002
Carrying value, beginning of year	$	17,662		$	12,676		$	17,647
New servicing assets		16,249			25,106			6,227
Amortization		(13,625	)		(8,434	)		(11,198	)
Adoption of FIN 46		—			(11,686	)		—
Carrying value, end of year	$	20,286		$	17,662		$	12,676

	At December 31,
	2004		2003		2002
Fair value, end of year	$	21,361	$	18,501	$	12,731

Huntington has retained servicing responsibilities and receives annual servicing fees of 1.0% of the outstanding loan balances. The unpaid principal balance of automobile loans serviced for third parties was $2.3 billion, $1.8 billion, and $1.1 billion at December 31, 2004, 2003, and 2002, respectively. Servicing income, net of amortization of capitalized servicing assets, amounted to $10.1 million in 2004, $4.3 million in 2003, and $1.0 million in 2002.

There were no pre-tax gains from automobile loan securitization in 2004. Huntington recorded net pre-tax gains from automobile loan securitizations of $5.6 million, and $11.0 million in 2003, and 2002, respectively. Gains or losses from securitizations depend in part on the previous carrying amount of the financial assets involved, which are allocated between the assets sold and the retained interests based on their relative fair value at the date of transfer. There were no impairment charges related to Huntington’s retained interest in 2004 and 2003. Impairment charges of retained interests were $4.0 million in 2002.

As a result of adopting FIN 46 in the third quarter of 2003, one of the securitization trusts sponsored by Huntington was consolidated. The impact of this consolidation was to reduce the outstanding automobile loans serviced by $1.0 billion, reduce the retained interest asset by $142.3 million, and reduce the servicing asset by $11.7 million. At December 31, 2004, cash of $30.9 million was held by the subsidiary securitization trust and was restricted as to Huntington’s ability to withdraw this cash. In the second quarter of 2004, Huntington repurchased all the outstanding loans of an unconsolidated trust for $23.9 million, resulting in a $1.5 million pre-tax gain.

RESIDENTIAL MORTGAGE LOANS

During 2004, Huntington sold $199.8 million of residential mortgage loans held for investment, resulting in a net pre-tax gain of $0.5 million. No sales of residential mortgage loans were made in 2003 and 2002.

Huntington also securitized $115.9 million, $354.2 million and $386.4 million of residential mortgage loans in 2004, 2003, and 2002, respectively, and retained all of the resulting securities. Accordingly, the securitized amounts were reclassified from loans to investment securities.

A mortgage servicing right (MSR) is established only when the loans are sold or when servicing is contractually separated from the underlying mortgage loans by sale or securitization of the loans with servicing rights retained. The initial carrying value of the asset is established based on its relative fair value at the time of sale using assumptions that are consistent with assumptions used at the time to estimate the fair value of the total MSR portfolio. All servicing rights are subsequently carried at the lower of the initial carrying value, adjusted for amortization, or fair value, and are included in other assets. From time-to-time, loans may be sold with recourse. This recourse may be for a limited period of time or for the life of the loan.

The unpaid principal balance of residential mortgage loans serviced for third parties was $6.9 billion, $6.4 billion, and $3.8 billion at December 31, 2004, 2003, and 2002, respectively.

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NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS HUNTINGTON BANCSHARES INCORPORATED

A summary of loans serviced balances at December 31, 2004 and average for the period ended, were as follows:

				Year Ended
		At December 31, 2004		December 31, 2004
(in millions of dollars)		Principal Balance		Average Balance
Loans serviced			$10,755		$9,930
	Less: loans serviced for others		6,861		6,633
Loans held in portfolio			$ 3,894		$3,297

Changes in the carrying value of mortgage servicing rights and the associated valuation allowance for the three years ended December 31, 2004, and the fair value at the end of each period were as follows:

	Year Ended December 31,
(in thousands of dollars)	2004			2003			2002
Balance, beginning of year	$	71,087		$	29,271		$	35,282
New servicing assets		23,738			52,896			41,586
Amortization		(19,019	)		(25,966	)		(12,051	)
Impairment recovery (charges)		1,378			14,957			(14,113	)
Sales		(77	)		(71	)		(21,433	)
Balance, end of year	$	77,107		$	71,087		$	29,271

	At December 31,
	2004		2003		2002
Fair value, end of year	$	84,084	$	74,684	$	29,728

Servicing rights are evaluated quarterly for impairment based on the fair value of those rights, using a disaggregated approach. The fair value of the servicing rights is determined by estimating the present value of future net cash flows, taking into consideration market loan prepayment speeds, discount rates, servicing costs, and other economic factors. Seven risk tranches are used in the evaluation of mortgage servicing rights for impairment: three tranches for servicing rights on 30-year fixed-rate mortgage loans (based on interest rate bands of below 6.00%; 6.00% up to 6.99%; and 7.00% and above), three tranches for servicing rights on 15-year fixed-rate mortgage loans (based on interest rate bands of below 5.50%; 5.50% up to 6.49%; and 6.50% and above), and one tranche encompassing balloon and adjustable rate mortgages. Huntington began using the expanded interest rate bands in the fourth quarter of 2003. Temporary impairment is recognized in a valuation allowance against the mortgage servicing rights. Huntington also analyzes its mortgage servicing rights periodically for other-than-temporary impairment. Other-than-temporary impairment is recognized as a direct reduction of the carrying value of the mortgage servicing right and cannot be recovered. Servicing rights are amortized over the period of, and in proportion to, the estimated future net servicing revenue. Amortization is recorded as a reduction of servicing income, which is reflected in non-interest income in Huntington’s consolidated income statement.

Changes in the impairment allowance of mortgage servicing rights for the three years ended December 31, 2004, were as follows:

	Year Ended December 31,
(in thousands of dollars)	2004			2003			2002
Balance, beginning of year	$	(6,153	)	$	(21,110	)	$	(6,997	)
Impairment charges		(18,110	)		(10,713	)		(14,533	)
Impairment recovery		19,488			25,670			420
Balance, end of year	$	(4,775	)	$	(6,153	)	$	(21,110	)

111

NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS HUNTINGTON BANCSHARES INCORPORATED

At December 31, 2004, the fair value, assumptions and the sensitivity of the current fair value of Huntington’s mortgage servicing rights to immediate 10% and 20% adverse changes in those assumptions were:

				Decline in fair value due to
				10%			20%
				adverse			adverse
(in millions of dollars)	Actual			change			change
Constant pre-payment rate		21.70	%	$	(4.8	)	$	(9.1	)
Discount rate		8.85			(2.2	)		(4.2	)

Caution should be used when reading these sensitivities as a change in an individual assumption and its impact on fair value is shown independent of changes in other assumptions. Economic factors are dynamic and may counteract or magnify sensitivities.

6. ALLOWANCES FOR CREDIT LOSSES (ACL)

The Company maintains two reserves, both of which are available to absorb possible credit losses: the allowance for loan and lease losses (ALLL) and the allowance for unfunded loan commitments and letters of credit (AULC). When summed together, these reserves constitute the total allowances for credit losses (ACL). The ALLL had historically included a component for unfunded loan commitments and letters of credit. To reflect the nature of this reserve and consistent with better disclosure, in the first quarter of 2004 the AULC was reclassified as a separate liability on the balance sheet. Prior period balance sheet amounts have also been reclassified to be consistent with the current years’s presentation. This reclassification had no impact on net income, shareholders’ equity, or the amount of total reserves aligned with credit risks. A summary of the transactions in the allowances for credit losses and details regarding impaired loans and leases follows for the three years ended December 31:

		Year Ended December 31,
(in thousands of dollars)		2004			2003			2002
Allowance for Loan and Leases Losses, Beginning of Period		$	299,732		$	300,503		$	345,402
Loan and lease losses			(126,115	)		(201,534	)		(234,352	)
Recoveries of loans previously charged off			47,580			39,725			37,440
	Net loan and lease losses		(78,535	)		(161,809	)		(196,912	)
Provision for credit losses			55,062			163,993			194,426
Net change in allowance for unfunded loan commitments and letters of credit			2,335			623			(12,215	)
Allowance for assets sold and securitized(1)			(7,383	)		(3,578	)		(30,198	)
Allowance for Loan and Lease Losses, End of Period		$	271,211		$	299,732		$	300,503
Allowance for Unfunded Loan Commitments and Letters of Credit, Beginning of Period		$	35,522		$	36,145		$	23,930
Net change			(2,335	)		(623	)		12,215
Allowance for Unfunded Loan Commitments and Letters of Credit, End of Period		$	33,187		$	35,522		$	36,145
Total Allowances for Credit Losses		$	304,398		$	335,254		$	336,648
Recorded Balance of Impaired Loans, at end of year(2):
	With specific reserves assigned to the loan and lease balances	$	51,875		$	54,853		$	91,578
	With no specific reserves assigned to the loan and lease balances		29,296			—			2,972
Total		$	81,171		$	54,853		$	94,550
Average Balance of Impaired Loans for the Year(2)		$	54,445		$	33,970		$	87,286
Allowance for Loan and Lease Losses on Impaired Loans(2)		$	23,447		$	26,249		$	37,984

(1)

In conjunction with the automobile loan sales and securitizations in 2004, 2003, and 2002, an allowance for loan and lease losses attributable to the associated loans sold was included as a component of the loan’s carrying value upon their sale. The allowance associated with the 2002 sale of the Florida banking and insurance operations was $22,297.

(2)

Includes impaired commercial and industrial loans and commercial real estate loans with outstanding balances greater than $500,000. A loan is impaired when it is probable that Huntington will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans are included in non-performing assets. The amount of interest recognized in 2004 on impaired loans while they were considered impaired was $1.1 million. There was no interest recognized in 2003 or 2002 on impaired loans while they were considered impaired.

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NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS HUNTINGTON BANCSHARES INCORPORATED

7. OPERATING LEASE ASSETS

For periods before May 2002, Huntington purchased vehicles, primarily automobiles, for lease to consumers under operating lease arrangements. These operating lease arrangements required the lessee to make a fixed monthly rental payment over a specified lease term, typically from 36 to 66 months. These vehicles, net of accumulated depreciation, were recorded as operating lease assets in the consolidated balance sheet. Rental income is earned by Huntington on the operating lease assets and reported as non-interest income. These vehicles are depreciated over the term of the lease to the estimated fair value of the vehicle at the end of the lease. The depreciation of these vehicles is reported as a component of non-interest expense. At the end of the lease, the vehicle is either purchased by the lessee or returned to Huntington. The following is a summary of operating lease assets at December 31:

	At December 31,
(in thousands of dollars)	2004			2003
Cost of operating lease assets (including residual value of $406,965 and $814,078, respectively)	$	1,173,616		$	2,136,502
Deferred origination fees and costs		(1,138	)		(2,117	)
Accumulated depreciation		(585,168	)		(873,945	)
Total	$	587,310		$	1,260,440

The future lease rental payments due from customers on operating lease assets at December 31, 2004, totaled $259.8 million and are due as follows: $164.7 million in 2005; $82.2 million in 2006; and $12.9 million in 2007. Depreciation expense for each of the years ended December 31, 2004, 2003, and 2002 was $216.4 million, $350.6 million, and $463.8 million, respectively.

8. PREMISES AND EQUIPMENT

At December 31, premises and equipment stated at cost were comprised of the following:

	At December 31,
(in thousands of dollars)	2004			2003
Land and land improvements	$	63,406		$	59,347
Buildings		237,071			216,076
Leasehold improvements		142,764			127,830
Equipment		467,674			477,385
Total premises and equipment		910,915			880,638
Less accumulated depreciation and amortization		(555,800	)		(530,926	)
Net Premises and Equipment	$	355,115		$	349,712

Depreciation and amortization charged to expense and rental income credited to occupancy expense for the year ended December 31 were:

	Year Ended December 31,
(in thousands of dollars)	2004		2003		2002
Total depreciation and amortization of premises and equipment	$	50,097	$	46,746	$	46,319
Rental income credited to occupancy expense		13,081		14,837		15,868

9. GOODWILL AND OTHER INTANGIBLE ASSETS

At December 31, goodwill and other intangible assets, net of accumulated amortization, were comprised of:

	At December 31,
(in thousands of dollars)	2004		2003
Goodwill	$	210,155	$	210,539
Favorable lease intangible		5,652		6,470
Balance, end of period	$	215,807	$	217,009

113

NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS HUNTINGTON BANCSHARES INCORPORATED

At December 31, 2004, none of Huntington’s goodwill is deductible for tax purposes. Goodwill and other intangible assets, net of accumulated amortization, and related activity, by segment, for the years ended December 31, 2004 and 2003, were as follows:

	Regional			Dealer					Treasury/			Huntington
(in thousands of dollars)	Banking			Sales		PFG			Other			Consolidated
Balance, January 1, 2003	$	198,335			—	$	12,947		$	7,285			$218,567
Disposals		(333	)		—		���			—			(333	)
Amortization		—			—		—			(816	)		(816	)
Adjustments		(409	)		—		—			—			(409	)
Balance, December 31, 2003		197,593			—		12,947			6,469			217,009
Amortization		—			—		—			(817	)		(817	)
Adjustments		—			—		(385	)		—			(385	)
Balance, December 31, 2004	$	197,593		$	—	$	12,562		$	5,652			$215,807

The $0.4 million adjustment in 2004 relates to goodwill recorded as part of the Haberer Registered Investment Advisor, Inc. acquisition in 2002. During 2003, Huntington completed the sale of certain banking offices in West Virginia, resulting in a $0.3 million write-off of the remaining associated goodwill. The remaining $0.4 million write-off in 2003 related to an adjustment of the goodwill amount recorded as part of the LeaseNet, Inc. acquisition in 2002. No impairment of goodwill was recognized in 2004, 2003, or 2002.

A substantial portion of the remaining goodwill is attributable to the previously acquired banking operations reported under the Regional Banking line of business. For the years 2005 through 2009, amortization expense associated with the leasehold intangible is expected to be $0.8 million each year.

10. SHORT-TERM BORROWINGS

At December 31, short-term borrowings were comprised of the following:

	At December 31,
(in thousands of dollars)	2004		2003
Federal funds purchased	$	30,620	$	230,585
Securities sold under agreements to repurchase		1,093,247		1,147,473
Commercial paper		1,928		3,481
Other		81,438		70,765
Total Short-term Borrowings	$	1,207,233	$	1,452,304

Information concerning securities sold under agreements to repurchase at December 31 is summarized as follows:

	Year Ended December 31,
(in thousands of dollars)	2004			2003
Average balance during the year	$	1,410,174		$	880,363
Average interest rate during the year		0.93	%		0.73	%
Maximum month-end balance during the year	$	1,500,267		$	1,276,761

Commercial paper is issued by Huntington Bancshares Financial Corporation, a non-bank subsidiary, with principal and interest guaranteed by the parent company.

11. FEDERAL HOME LOAN BANK ADVANCES

Huntington’s long-term advances from the Federal Home Loan Bank had weighted average interest rates of 2.32% and 1.23% at December 31, 2004 and 2003, respectively. These advances, which predominately had variable interest rates, were collateralized by qualifying real estate loans. As of December 31, 2004 and 2003, Huntington’s maximum borrowing capacity was $1.5 billion and $1.4 billion, respectively. The advances of $1.3 billion mature over the next 15 years as follows: $100 million in 2005; none in 2006; $900 million in 2007; $270 million in 2008; none in 2009, and $1 million thereafter. The terms of advances include various restrictive covenants including limitations on the acquisition of additional debt in excess of specified levels, dividend payments, and the disposition of subsidiaries. As of December 31, 2004, Huntington was in compliance with all such covenants.

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NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS HUNTINGTON BANCSHARES INCORPORATED

12. SUBORDINATED NOTES

At December 31, Huntington’s subordinated notes consisted of the following:

		At December 31,
(in thousands of dollars)		2004		2003
Parent company:
	2.86% junior subordinated debentures due 2027(1)	$	206,186	$	206,186
	3.115% junior subordinated debentures due 2028(2)		103,093		103,093
The Huntington National Bank:
	Floating rate subordinated notes due 2008		—		100,000
	8.00% subordinated notes due 2010		160,692		162,769
	4.90% subordinated notes due 2014		199,136		198,431
	6.60% subordinated notes due 2018		219,505		219,991
	5.375% subordinated notes due 2019		151,181		—
Total subordinated notes		$	1,039,793	$	990,470

(1)	Variable effective rate at December 31, 2004, based on three month LIBOR + 0.70.
(2)	Variable effective rate at December 31, 2004, based on three month LIBOR + 0.625.

The Bank issued $100 million of long-term notes in 2002 that were called in the first quarter of 2004. Proceeds from lower rate subordinated notes issued in the first quarter of 2004 were used to fund the payment of the long-term notes. The weighted-average interest rate for subordinated notes was 5.16 % at December 31, 2004, and 6.36% at the end of 2003.

Amounts above are reported net of unamortized discounts and include values related to hedging with derivative financial instruments. The derivative instruments, principally interest rate swaps, are used to match the funding rates on certain assets by hedging the cash flow variability associated with certain variable-rate debt by converting the debt to fixed-rate and hedging the fair values of certain fixed-rate debt by converting the debt to a variable rate. See Note 20 for more information regarding such financial instruments. All principal is due upon maturity of the note as described in the table above.

13. OTHER LONG-TERM DEBT

At December 31, Huntington’s other long-term debt consisted of the following:

		At December 31,
(in thousands of dollars)		2004		2003
	The Huntington National Bank	$	3,866,004	$	4,394,509
	Parent company (maturing in 2005 and interest rate of 2.63%)(1)		100,000		100,000
	Class C preferred securities of REIT subsidiary (no maturity and interest rate of 7.88%)		50,000		50,000
Total Other Long-Term Debt		$	4,016,004	$	4,544,509

(1)  Variable effective rate at December 31, 2004, of 1.40% plus three-month LIBOR.

Amounts above include values related to hedging with derivative financial instruments. The derivative instruments, principally interest rate swaps, are used to match the funding rates on certain assets by hedging the cash flow variability associated with certain variable-rate debt by converting the debt to fixed-rate and hedging the fair values of certain fixed-rate debt by converting the debt to a variable rate. See Note 20 for more information regarding such financial instruments.

The weighted-average interest rate for other long-term debt at December 31, 2004 and 2003, was 2.86% and 1.67%, respectively. At December 31, 2004, Huntington’s other long-term debt included $300 million of secured borrowings, which had variable rates based on three-month LIBOR. At December 31, 2004, these secured borrowings had a remaining average maturity of 0.6 years and a weighted average cost of 2.24%.

The terms of the other long-term debt obligations contain various restrictive covenants including limitations on the acquisition of additional debt in excess of specified levels, dividend payments, and the disposition of subsidiaries. As of December 31, 2004, Huntington was in compliance with all such covenants.

Other long-term debt maturities for the next five years are as follows: $1.5 billion in 2005; $0.8 billion in 2006; $0.1 billion in 2007; $0.2 billion in 2008; $0.2 billion in 2009; and $1.2 billion in 2010 and thereafter.

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14. OTHER COMPREHENSIVE INCOME

The components of Huntington’s Other Comprehensive Income in each of the three years ended December 31 were as follows:

			Year Ended December 31,
(in thousands of dollars)			2004			2003			2002
Unrealized holding gains and losses on securities available for sale arising during the period:
	Unrealized net (losses) gains		$	(18,555	)	$	(67,520	)	$	46,655
	Related tax benefit (expense)			6,689			23,511			(16,082	)
		Net		(11,866	)		(44,009	)		30,573
Reclassification adjustment for net gains from sales of securities available for sale realized during the period:
	Realized net gains			(15,763	)		(5,258	)		(4,902	)
	Related tax expense			5,517			1,840			1,716
		Net		(10,246	)		(3,418	)		(3,186	)
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				(22,112	)		(47,427	)		27,387
Unrealized holding gains and losses on derivatives used in cash flow hedging relationships arising during the period:
	Unrealized net gains (losses)			14,914			(17,048	)		14,799
	Related tax (expense) benefit			(5,220	)		5,967			(5,179	)
		Net		9,694			(11,081	)		9,620
Minimum pension liability:
	Unrealized net loss			(1,789	)		(1,714	)		(300	)
	Related tax benefit			626			600			105
		Net		(1,163	)		(1,114	)		(195	)
Total Other Comprehensive (Loss) Income			$	(13,581	)	$	(59,622	)	$	36,812

Activity in Accumulated Other Comprehensive Income for the most recent three years is as follows:

	Unrealized gains and			Unrealized gains and losses on
	losses on securities			derivative instruments used in			Minimum
(in thousands of dollars)	available for sale			cash flow hedging relationships			pension liability			Total
Balance, January 1, 2002	$	29,469		$	(3,981	)	$	—		$	25,488
Current period change		27,387			9,620			(195	)		36,812
Balance, December 31, 2002		56,856			5,639			(195	)		62,300
Current period change		(47,427	)		(11,081	)		(1,114	)		(59,622	)
Balance, December 31, 2003		9,429			(5,442	)		(1,309	)		2,678
Current period change		(22,112	)		9,694			(1,163	)		(13,581	)
Balance, December 31, 2004	$	(12,683	)	$	4,252		$	(2,472	)	$	(10,903	)

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15. 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 for dilutive stock options. The calculation of basic and diluted earnings per share for each of the three years ended December 31 is as follows:

			Year Ended December 31,
(in thousands, except per share amounts)			2004		2003			2002
Income before cumulative effect of accounting change			$	398,925	$	385,693		$	323,731
Cumulative effect of change in accounting principle, net of tax				—		(13,330	)		—
Net income			$	398,925	$	372,363		$	323,731
Average common shares outstanding				229,913		229,401			242,279
Dilutive effect of common stock equivalents				3,943		2,181			1,733
Diluted average common shares outstanding				233,856		231,582			244,012
Earnings Per Share
	Basic
		Income before cumulative effect of accounting change		$1.74		$1.68			$1.34
		Net income		1.74		1.62			1.34
	Diluted
		Income before cumulative effect of accounting change		1.71		1.67			1.33
		Net income		1.71		1.61			1.33

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 2.6 million, 2.8 million, and 7.7 million stock options outstanding at the end of 2004, 2003, and 2002, respectively, were not included in the computation of diluted earnings per share because the effect would be antidilutive. The weighted average exercise price for these options was $26.96 per share, $26.74 per share, and $22.19 per share at the end of the same respective periods.

On January 7, 2005, Huntington released from escrow 86,118 shares of Huntington common stock to former shareholders of LeaseNet, Inc., which were previously issued in September 2002. A total of 373,896 common shares, previously held in escrow, was returned to Huntington. All shares in escrow had been accounted for as treasury stock.

16. STOCK-BASED COMPENSATION

Huntington sponsors nonqualified and incentive stock option plans. These plans provide for the granting of stock options to officers and other employees. Huntington’s board of directors has approved all of the plans. Shareholders have approved each of the plans, except for the broad-based Employee Stock Incentive Plan. Approximately 28.8 million shares have been authorized under the plans, of which 8.8 million were available for future grants at December 31, 2004. Options that were granted in the most recent seven years vest ratably over three years or when other conditions are met while those granted in 1994 through 1997 vested ratably over four years. All grants preceding 1994 became fully exercisable after one year. All options granted have a maximum term of ten years.

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NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS HUNTINGTON BANCSHARES INCORPORATED

The fair value of the options granted was estimated at the date of grant using a Black-Scholes option-pricing model. Huntington’s stock option activity and related information for each of the recent three years ended December 31 is summarized below:

	2004					2003					2002
				Weighted-					Weighted-					Weighted-
				Average					Average					Average
				Exercise					Exercise					Exercise
(in thousands, except per share amounts)	Options			Price		Options			Price		Options			Price
Outstanding at beginning of year		19,997		$	19.40		18,024		$	18.93		14,649		$	18.70
Granted		3,200			23.05		3,659			20.38		5,511			18.78
Exercised		(2,478	)		17.05		(788	)		14.40		(887	)		12.79
Forfeited/expired		(702	)		20.02		(898	)		19.32		(1,249	)		19.89
Outstanding at end of year		20,017		$	20.25		19,997		$	19.40		18,024		$	18.93
Exercisable at end of year		11,984		$	19.68		9,649		$	19.60		8,352		$	19.62
Weighted-Average Fair Value of Options Granted During the Year				$	5.78				$	5.64				$	5.18

Additional information regarding options outstanding as of December 31, 2004, is as follows:

	Options Outstanding						Exercisable Options
			Weighted-
			Average		Weighted-				Weighted-
Range of			Remaining		Average				Average
Exercise Prices			Contractual		Exercise				Exercise
(in thousands, except per share amounts)	Shares		Life (Years)		Price		Shares		Price
$11.09 to $15.00		1,242		4.1	$	14.38		1,242	$	14.38
$15.01 to $20.00		9,507		6.5		18.17		6,890		17.72
$20.01 to $25.00		6,927		7.3		21.80		1,534		21.30
$25.01 to $28.35		2,341		4.1		27.24		2,318		27.26
Total		20,017		6.4	$	20.25		11,984	$	19.68

On August 27, 2002, common stock options were granted to, with certain specified exceptions, full- and part-time employees under the Huntington Bancshares Incorporated Employee Stock Incentive Plan (the Incentive Plan). Under the terms of the Incentive Plan, these options are to vest on the earlier of August 27, 2007, or at such time as the closing price for Huntington’s common stock for five consecutive trading days reached or exceeded $27.00. As of December 31, 2004, 1.7 million shares under option remain unvested.

17. INCOME TAXES

The following is a summary of the provision for income taxes:

		At December 31,
(in thousands of dollars)		2004		2003		2002
Currently payable
	Federal	$	12,779	$	138,036	$	102,256
Deferred tax expense
	Federal		140,962		258		96,718
Provision for income taxes		$	153,741	$	138,294	$	198,974

Tax expense associated with securities transactions included in the above amounts was $5.5 million in 2004, $1.8 million in 2003, and $1.7 million in 2002.

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The following is a reconcilement of income tax expense to the amount computed at the statutory rate of 35%:

		2004						2003						2002
(in thousands of dollars)		Amount			Rate			Amount			Rate			Amount			Rate
Income tax expense computed at the statutory rate		$	193,433			35.0%		$	183,396			35.0%		$	182,947			35.0%
Increases (decreases):
	Tax-exempt interest income		(7,640	)		(1.4	)		(6,381	)		(1.2	)		(3,528	)		(0.7	)
	Tax-exempt bank owned life insurance income		(14,804	)		(2.7	)		(15,060	)		(2.9	)		(15,093	)		(2.9	)
	Asset securitization activities		(6,278	)		(1.1	)		(5,211	)		(1.0	)		(8,244	)		(1.6	)
	Nondeductible goodwill		—			—			—			—			52,500			10.0
	General business credits		(7,768	)		(1.4	)		(11,176	)		(2.1	)		(2,100	)		(0.4	)
	Other, net		(3,202	)		(0.6	)		(7,274	)		(1.4	)		(7,508	)		(1.3	)
Income taxes		$	153,741			27.8%		$	138,294			26.4%		$	198,974			38.1%

The significant components of deferred assets and liabilities at December 31, are as follows:

		At December 31,
(in thousands of dollars)		2004		2003
Deferred tax assets:
	Allowance for loan losses	$	122,926	$	153,060
	Net operating loss		22,936		8,715
	Fair value adjustments		6,791		—
Other			95,527		170,964
Total deferred tax assets			248,180		332,739
Deferred tax liabilities:
	Lease financing		861,273		871,684
	Pension and other employee benefits		31,822		3,037
	Mortgage servicing rights		32,947		15,770
	Fair value adjustments		—		5,078
	Other		105,766		91,705
Total deferred tax liability			1,031,808		987,274
Net deferred tax liability		$	783,628	$	654,535

At December 31, 2004, Huntington’s deferred tax asset related to loss and credit carry-forwards amounted to $22.9 million. This is comprised of a net operating loss carry-forward for U.S. federal tax purposes, which will begin expiring in 2023, with the remaining expiring in 2024. A valuation allowance is provided when it is more likely than not that some portion of the federal tax asset will not be realized. In Management’s opinion, the results of future operations will generate sufficient taxable income to realize the deferred tax assets. Consequently, Management has determined that a valuation allowance for deferred tax assets was not required as of December 31, 2004 or 2003.

18. 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 health-care 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.

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The following table shows the weighted-average assumptions used to determine the benefit obligation at December 31, 2004 and 2003, and the net periodic benefit cost for the years then ended. Huntington selected September 30, 2004 as the measurement date for all calculations and contracted an actuary to provide measurement services.

								Post-Retirement
		Pension Benefits						Benefits
		2004			2003			2004			2003
Weighted-average assumptions used to determine benefit obligations at December 31
	Discount rate		5.81	%		6.00	%		5.81	%		6.00	%
	Rate of compensation increase		5.00			5.00			N/A			N/A
Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31
	Discount rate		6.00			6.75			6.00			6.75
	Expected return on plan assets		7.00			8.50			N/A			N/A
	Rate of compensation increase		5.00			5.00			N/A			N/A

N/ A, not applicable.

The investment objective of the Plan is to maximize the return on Plan assets over a long time horizon, while meeting the Plan obligations. At September 30, 2004, Plan assets were invested 73% in equity investments and 27% in bonds, with an average duration of four years on bond investments. The estimated life of benefit obligations was 12 years. Management believes that this mix is appropriate for the current economic environment. In 2004, Huntington lowered its assumptions for the discount rate. The 5.81% assumed discount rate was based upon the Moody’s daily long-term corporate Aa bond yield as of the Plan’s measurement date. The impact of lowering this assumption will increase Huntington’s 2005 pension expense.

The following table reconciles the beginning and ending balances of the benefit obligation of the Plan and the post-retirement benefit plan with the amounts recognized in the consolidated balance sheets at December 31:

									Post-Retirement
			Pension Benefits						Benefits
(in thousands of dollars)			2004			2003			2004			2003
Change in Benefit Obligation:
Projected Benefit Obligation at beginning of measurement year			$	299,028		$	253,456		$	55,490		$	53,552
Changes due to:
	Service cost			11,819			9,567			1,302			1,121
	Interest cost			17,482			16,647			3,209			3,479
	Benefits paid			(6,900	)		(6,542	)		(2,986	)		(2,967	)
	Settlements			(8,977	)		(9,684	)		—			—
	Actuarial assumptions and gains and losses			23,555			35,584			(1,511	)		305
		Total changes		36,979			45,572			14			1,938
Projected Benefit Obligation at end of measurement year (September 30)			$	336,007		$	299,028		$	55,504		$	55,490

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The following table reconciles the beginning and ending balances of the fair value of Plan assets with the amounts recognized in the consolidated balance sheets at the September 30, 2004, measurement date:

			Pension Benefits
(in thousands of dollars)			2004			2003
Change in Plan Assets:
Fair Value of Plan Assets at beginning of measurement year			$	288,569		$	246,643
Changes due to:
	Actual return on plan assets			35,962			33,594
	Employer contributions			44,667			25,000
	Settlements			(9,076	)		(10,126	)
	Benefits paid			(6,900	)		(6,542	)
		Total changes		64,653			41,926
Fair Value of Plan Assets at end of measurement year (September 30)			$	353,222		$	288,569

Huntington’s accumulated benefit obligation was $294 million and $262 million at September 30, 2004 and 2003, respectively. In both years, the fair value of Huntington’s plan assets exceeded its accumulated benefit obligation.

The following table presents the funded status of the Plan and the post-retirement benefit plan with the amounts recognized in the consolidated balance sheets at December 31:

						Post-Retirement
	Pension Benefits					Benefits
(in thousands of dollars)	2004		2003			2004			2003
Projected benefit obligation less (greater) than plan assets		17,215		(10,459	)		(55,504	)		(55,490	)
Unrecognized net actuarial loss		116,744		118,952			718			2,229
Unrecognized prior service cost		1,789		1,790			3,856			4,439
Unrecognized transition (asset) liability, net of amortization		—		—			8,831			9,936
Prepaid (Accrued) Benefit Costs	$	135,748	$	110,283		$	(42,099	)	$	(38,886	)

The following table shows the components of net periodic benefit cost recognized in the most recent three years:

	Pension Benefits									Post-Retirement Benefits
(in thousands of dollars)	2004			2003			2002			2004		2003		2002
Service cost	$	12,159		$	9,817		$	8,263		$	1,302	$	1,121	$	1,126
Interest cost		17,482			16,647			15,458			3,209		3,479		3,603
Expected return on plan assets		(21,530	)		(25,138	)		(26,416	)		—		—		—
Amortization of transition asset		1			(251	)		(265	)		1,104		1,104		1,104
Amortization of prior service cost		1			—			(185	)		583		605		605
Curtailments		—			—			2,022			—		—		2,526
Settlements		3,151			4,354			3,373			—		—		—
Recognized net actuarial loss		7,936			1,774			—			—		—		—
Benefit Cost	$	19,200		$	7,203		$	2,250		$	6,198	$	6,309	$	8,964

Service costs presented in the above table included $0.3 million of plan expenses that were recognized in each of the three years ended December 31, 2004. The curtailment reflected above related to the sale of the Florida banking and insurance operations. This expense was recognized in Huntington’s results of operations in 2002. It is Huntington’s policy to recognize settlement gains and losses as incurred. Management expects net periodic pension cost to approximate $20 million and net periodic post-retirement benefits cost to approximate $6 million for 2005.

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NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS HUNTINGTON BANCSHARES INCORPORATED

At September 30, 2004 and 2003, The Huntington National Bank, as trustee, held all Plan assets. The Plan assets consisted of investments in a variety of Huntington mutual funds, Huntington common stock, and other equity investments as follows:

	Fair Value
	2004					2003
(in thousands of dollars)	Balance		%			Balance		%
Cash	$	300		—	%	$	—		—	%
Huntington Funds — money market		500		—			1,570		1
Huntington Funds — equity funds		240,456		68			191,616		66
Huntington Funds — fixed income funds		95,837		27			82,520		29
Huntington Common Stock		16,129		5			12,863		4
Fair value of plan assets at September 30		353,222		100	%		288,569		100	%

The number of shares of Huntington common stock held by the Plan was 642,364 at December 31, 2004 and 2003. Dividends and interest received by the Plan during 2004 and 2003 were $11.0 million and $7.0 million, respectively. The Plan has acquired and held Huntington common stock in compliance at all times with Section 407 of the Employee Retirement Income Security Act of 1978.

The following table shows when benefit payments, which include expected future service, as appropriate, are expected to be paid:

(in thousands of dollars)		Pension Benefits		Post-Retirement Benefits
Fiscal Year:
	2005	$	16,194	$	3,948
	2006		17,126		4,131
	2007		19,249		4,268
	2008		21,228		4,355
	2009		22,741		4,437
	2010 through 2014		134,355		23,409

There is no expected minimum contribution for 2005 to the Plan. However, Huntington may choose to make a contribution to the Plan up to the maximum deductible limit in the 2005 plan year. Expected contributions for 2005 for the Post-Retirement Benefit plan are $4.0 million.

The assumed health-care cost trend rate has a significant effect on the amounts reported. A one-percentage point increase would increase service and interest costs and the post-retirement benefit obligation by $48,000 and $0.7 million, respectively. A one-percentage point decrease would reduce service and interest costs by $44,000 and the post-retirement benefit obligation by $0.6 million. The 2005 health care cost trend rate was projected to be 10.99% for pre-65 participants and 10.86% for post-65 participants compared with an estimate of 12.18% for pre-65 participants and 12.23% for post-65 participants in 2003. These rates are assumed to decrease gradually until they reach 5.09% for pre-65 participants and 5.17% for post-65 participants in the year 2017 and remain at that level thereafter. Huntington updated the immediate health care cost trend rate assumption based on current market data and Huntington’s claims experience. This trend rate is expected to decline over time to a trend level consistent with medical inflation and long-term economic assumptions.

Huntington also sponsors other retirement plans, the most significant being the Supplemental Executive Retirement Plan and the Supplemental Retirement Income Plan. These plans are nonqualified plans that provide certain former officers and directors of Huntington and its subsidiaries with defined pension benefits in excess of limits imposed by federal tax law. At December 31, 2004 and 2003, the accrued pension liability for these plans totaled $25.1 million and $23.3 million, respectively. Pension expense for the plans was $2.1 million, $1.7 million, and $2.3 million in 2004, 2003, and 2002, respectively. Huntington recorded a $1.1 million, net of tax, minimum pension liability adjustment within other comprehensive income associated with these unfunded plans in 2004.

Huntington has 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 $9.2 million in 2004, $8.6 million in 2003, and $8.4 million in 2002. The number of shares of Huntington common stock held by this plan was 7,914,602 at December 31, 2004, and 8,368,383 at the end of the prior year. The market value of these shares was $195.8 million and $188.3 million at the same respective dates. Dividends received by the plan were $10.1 million during 2004 and $7.6 million during 2003.

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19. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts and estimated fair values of Huntington’s financial instruments at December 31 are presented in the following table:

		2004						2003
		Carrying			Fair			Carrying			Fair
(in thousands of dollars)		Amount			Value			Amount			Value
Financial Assets:
	Cash and short-term assets	$	1,527,758		$	1,527,758		$	1,030,130		$	1,030,130
	Trading account securities		309,630			309,630			7,589			7,589
	Mortgages held for sale		223,469			223,469			226,729			226,729
	Investment securities		4,238,945			4,238,945			4,929,060			4,929,060
	Net loans and direct financing leases		23,289,066			23,528,066			20,775,386			21,256,386
	Customers’ acceptance liability		11,299			11,299			9,553			9,553
	Derivatives		41,809			41,809			100,180			100,180
Financial Liabilities:
	Deposits		(20,768,161	)		(19,915,161	)		(18,487,395	)		(17,903,395	)
	Short-term borrowings		(1,207,233	)		(1,207,233	)		(1,452,304	)		(1,452,304	)
	Bank acceptances outstanding		(11,299	)		(11,299	)		(9,553	)		(9,553	)
	Federal Home Loan Bank advances		(1,271,088	)		(1,271,088	)		(1,273,000	)		(1,273,000	)
	Subordinated notes		(1,039,793	)		(1,039,793	)		(990,470	)		(990,470	)
	Other long term debt		(4,016,004	)		(4,094,004	)		(4,544,509	)		(4,613,509	)
	Derivatives		(4,903	)		(4,903	)		(95,008	)		(95,008	)

The short-term nature of certain assets and liabilities result in their carrying value approximating fair value. These include trading account securities, customers’ acceptance liabilities, short-term borrowings, bank acceptances outstanding, Federal Home Loan Bank Advances and cash and short-term assets, which include cash and due from banks, interest-bearing deposits in banks, and federal funds sold and securities purchased under resale agreements. Loan commitments and letters of credit generally have short-term, variable-rate features and contain clauses that limit Huntington’s exposure to changes in customer credit quality. Accordingly, their carrying values, which are immaterial at the respective balance sheet dates, are reasonable estimates of fair value.

Certain assets, the most significant being operating lease assets, bank owned life insurance, and premises and equipment, do not meet the definition of a financial instrument and are excluded from this disclosure. Similarly, mortgage and non-mortgage servicing rights, deposit base, and other customer relationship intangibles are not considered financial instruments and are not discussed below. Accordingly, this fair value information is not intended to, and does not, represent Huntington’s underlying value. Many of the assets and liabilities subject to the disclosure requirements are not actively traded, requiring fair values to be estimated by management. These estimations necessarily involve the use of judgment about a wide variety of factors, including but not limited to, relevancy of market prices of comparable instruments, expected future cash flows, and appropriate discount rates.

The following methods and assumptions were used by Huntington to estimate the fair value of the remaining classes of financial instruments:

–  MORTGAGES HELD FOR SALE — valued using outstanding commitments from investors.

–  INVESTMENT SECURITIES — based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. Retained interests in securitized assets are valued using a discounted cash flow analysis. The carrying amount and fair value of securities exclude the fair value of asset/liability management interest rate contracts designated as hedges of securities available for sale.

–  LOANS AND DIRECT FINANCING LEASES — variable-rate loans that reprice frequently are based on carrying amounts, as adjusted for estimated credit losses. The fair values for other loans and leases are estimated using discounted cash flow analyses and employ interest rates currently being offered for loans and leases with similar terms. The rates take into account the position of the yield curve, as well as an adjustment for prepayment risk, operating costs, and profit. This value is also reduced by an estimate of probable losses in the loan and lease portfolio.

–  DEPOSITS — demand deposits, savings accounts, and money market deposits are, by definition, equal to the amount payable on demand. The fair values of fixed-rate time deposits are estimated by discounting cash flows using interest rates currently being offered on certificates with similar maturities.

–  DEBT — fixed-rate, long-term debt is based upon quoted market prices or, in the absence of quoted market prices, discounted cash flows using rates for similar debt with the same maturities. The carrying amount of variable-rate obligations approximates fair value.

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20. DERIVATIVE FINANCIAL INSTRUMENTS

A variety of derivative financial instruments, principally interest rate swaps, are used in asset and liability management activities to protect against the risk of adverse price or interest rate movements on the value of certain assets and liabilities and on future cash flows. These instruments provide flexibility in adjusting the Company’s sensitivity to changes in interest rates without exposure to loss of principal and higher funding requirements. By using derivatives to manage interest rate risk, the effect is a smaller, more efficient balance sheet, with a lower wholesale funding requirement and a higher net interest margin, but with a comparable level of net interest revenue and return on equity. All derivatives are reflected at fair value in the consolidated balance sheet. Huntington also uses derivatives, principally loan sale commitments, in the hedging of its mortgage loan commitments and its mortgage loans held for sale.

Market risk, which is the possibility that economic value of net assets or net interest income will be adversely affected by changes in interest rates or other economic factors, is managed through the use of derivatives. Derivatives are also sold to meet customers’ financing needs and, like other financial instruments, contain an element of credit risk, which is the possibility that Huntington will incur a loss because a counter-party fails to meet its contractual obligations. Notional values of interest rate swaps and other off-balance sheet financial instruments significantly exceed the credit risk associated with these instruments and represent contractual balances on which calculations of amounts to be exchanged are based. Credit exposure is limited to the sum of the aggregate fair value of positions that have become favorable to Huntington, including any accrued interest receivable due from counterparties. Potential credit losses are minimized through careful evaluation of counterparty credit standing, selection of counterparties from a limited group of high quality institutions, collateral agreements, and other contract provisions.

ASSET AND LIABILITY MANAGEMENT

Derivatives that are used in asset and liability management are classified as fair value hedges or cash flow hedges and are required to meet specific criteria. To qualify as a hedge, the hedge relationship is designated and formally documented at inception, detailing the particular risk management objective and strategy for the hedge. This includes identifying the item and risk being hedged, the derivative being used, and how the effectiveness of the hedge is being assessed. A derivative must be highly effective in accomplishing the objective of offsetting either changes in fair value or cash flows for the risk being hedged. Correlation is evaluated on a retrospective and prospective basis using quantitative measures. If a hedge relationship is found to be ineffective, the derivative no longer qualifies as a hedge and any excess gains or losses attributable to ineffectiveness, as well as subsequent changes in its fair value, are recognized in other income.

For fair value hedges, deposits, short-term borrowings, and long-term debt are effectively converted to variable-rate obligations by entering into interest rate swap contracts whereby fixed-rate interest is received in exchange for variable-rate interest without the exchange of the contract’s underlying notional amount. Forward contracts, used primarily in connection with its mortgage banking activities, settle in cash at a specified future date based on the differential between agreed interest rates applied to a notional amount. The changes in fair value of the hedged item and the hedging instrument are reflected in current earnings. The amounts recognized in connection with the ineffective portion of Huntington’s fair value hedging in 2004, 2003, and 2002 were insignificant.

For cash flow hedges, interest rate swap contracts were entered into that pay fixed-rate interest in exchange for the receipt of variable-rate interest without the exchange of the contract’s underlying notional amount, which effectively converts a portion of its floating-rate debt to fixed-rate. This reduces the potentially adverse impact of increases in interest rates on future interest expense. In like fashion, certain LIBOR-based commercial and industrial loans were effectively converted to fixed-rate by entering into contracts that swap variable-rate interest for fixed-rate interest over the life of the contracts.

To the extent these derivatives are effective in offsetting the variability of the hedged cash flows, changes in the derivatives’ fair value will not be included in current earnings but are reported as a component of accumulated other comprehensive income in shareholders’ equity. These changes in fair value will be included in earnings of future periods when earnings are also affected by the changes in the hedged cash flows. To the extent these derivatives are not effective, changes in their fair values are immediately included in earnings. During 2004, 2003, and 2002, a net loss was recognized in connection with the ineffective portion of its cash flow hedging instruments. The amounts were classified in other non-interest income and were considered insignificant. No amounts were excluded from the assessment of effectiveness during 2004 and 2003 for derivatives designated as cash flow hedges.

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Derivatives used to manage Huntington’s interest rate risk at December 31, 2004, are shown in the table below:

				Average					Weighted-Average Rate
		Notional		Maturity		Fair
(in thousands of dollars)		Value		(years)		Value			Receive			Pay
Asset conversion swaps
	Receive fixed — generic	$	350,000		3.3	$	(1,692	)		3.41	%		2.25	%
	Pay fixed — forwards		50,000		N/A		(316	)		N/A			N/A
Total asset conversion swaps		$	400,000		3.3		(2,008	)		3.41	%		2.25	%
Liability conversion swaps
	Receive fixed — generic		1,450,000		6.8		19,318			4.23	%		2.54	%
	Receive fixed — callable		637,000		8.6		(5,461	)		4.50			2.13
	Pay fixed — generic		2,266,000		2.0		7,863			2.23			2.96
	Pay fixed — forwards		410,000		N/A		(1,829	)		N/A			N/A
Total liability conversion swaps			4,763,000		4.6		19,891			3.23	%		2.70	%
Total Swap Portfolio		$	5,163,000		4.5	$	17,883			3.24	%		2.67	%

N/ A, not applicable

At December 31, 2003, the fair value of the swap portfolio used for asset and liability management was a liability of $11.3 million. These values must be viewed in the context of the overall financial structure of Huntington, including the aggregate net position of all on- and off-balance sheet financial instruments.

As is the case with cash securities, the fair value of interest rate swaps is largely a function of the financial market’s expectations regarding the future direction of interest rates. Accordingly, current market values are not necessarily indicative of the future impact of the swaps on net interest income. This will depend, in large part, on the shape of the yield curve as well as interest rate levels. Management made no assumptions regarding future changes in interest rates with respect to the variable-rate information presented in the table above.

The next table represents the gross notional value of derivatives used to manage interest rate risk at December 31, 2004, identified by the underlying interest rate-sensitive instruments. The notional amounts shown in the tables above and below should be viewed in the context of overall interest rate risk management activities to assess the impact on the net interest margin.

		Fair Value		Cash Flow
(in thousands of dollars)		Hedges		Hedges		Total
Instruments associated with:
	Investment securities	$	50,000	$	25,000	$	75,000
	Loans		—		325,000		325,000
	Deposits		647,000		70,000		717,000
	Federal Home Loan Bank advances		—		901,000		901,000
	Subordinated notes		500,000		300,000		800,000
	Other long term debt		950,000		1,395,000		2,345,000
Total Notional Value at December 31, 2004		$	2,147,000	$	3,016,000	$	5,163,000

The estimated amount of the existing unrealized gains and losses to be reclassified to pre-tax earnings from accumulated other comprehensive income within the next 12 months is expected to be a net loss of $2.9 million.

Collateral agreements are regularly entered into as part of the underlying derivative agreements with its counterparties to mitigate the credit risk associated with both the derivatives used for asset and liability management and used in trading activities. At December 31, 2004 and 2003, aggregate credit risk associated with these derivatives, net of collateral that has been pledged by the counterparty, was $12.3 million and $17.2 million, respectively. The credit risk associated with interest rate swaps is calculated after considering master netting agreements.

These derivative financial instruments were entered into for the purpose of altering the interest rate risk embedded in its assets and liabilities. Consequently, net amounts receivable or payable on contracts hedging either interest earning assets or interest bearing liabilities were accrued as an adjustment to either interest income or interest expense. The net amount resulted in an increase to net interest income of $24.0 million, $51.6 million, and $48.4 million in 2004, 2003, and 2002, respectively.

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DERIVATIVES USED IN MORTGAGE BANKING ACTIVITIES

Huntington also uses derivatives, principally loan sale commitments, in the hedging of its mortgage loan commitments and its mortgage loans held for sale. For derivatives that are used in hedging mortgage loans held for sale, ineffective hedge gains and losses are reflected in mortgage banking revenue in the income statement. Mortgage loan commitments are derivatives that are not included in FAS 133 relationships. These derivative financial instruments are carried at fair value on the consolidated balance sheet with changes in fair value reflected in mortgage banking revenue. The following is a summary of the derivative assets and liabilities that Huntington used in its mortgage banking activities:

		At December 31,
(in thousands of dollars)		2004			2003
Derivative assets:
	Interest rate lock agreements	$	479		$	658
	Forward trades		853			24
Total derivative assets			1,332			682
Derivative liabilities:
	Interest rate lock agreements		(993	)		(270	)
	Forward trades		(334	)		(2,021	)
Total derivative liabilities			(1,327	)		(2,291	)
Net derivative liability		$	5		$	(1,609	)

DERIVATIVES USED IN TRADING ACTIVITIES

Various derivative financial instruments are offered to enable customers to meet their financing and investing objectives and for their risk management purposes. Derivative financial instruments held in Huntington’s trading portfolio during 2004 and 2003 consisted predominantly of interest rate swaps, but also included interest rate caps, floors, and futures, as well as foreign exchange options. Interest rate options grant the option holder the right to buy or sell an underlying financial instrument for a predetermined price before the contract expires. Interest rate futures are commitments to either purchase or sell a financial instrument at a future date for a specified price or yield and may be settled in cash or through delivery of the underlying financial instrument. Interest rate caps and floors are option-based contracts that entitle the buyer to receive cash payments based on the difference between a designated reference rate and a strike price, applied to a notional amount. Written options, primarily caps, expose Huntington to market risk but not credit risk. Purchased options contain both credit and market risk. They are used to manage fluctuating interest rates as exposure to loss from interest rate contracts changes.

Supplying these derivatives to customers results in fee income. These instruments are carried at fair value in other assets with gains and losses reflected in other non-interest income. Total trading revenue for customer accommodation was $8.8 million in 2004, $10.3 million in 2003, and $6.4 million in 2002. The total notional value of derivative financial instruments used by Huntington on behalf of customers (for which the related interest rate risk is offset by third parties) was $4.5 billion at the end of 2004 and $5.0 billion at the end of the prior year. Huntington’s credit risk from interest rate swaps used for trading purposes was $53.8 million and $82.2 million at the same dates.

In connection with its securitization activities, interest rate caps were purchased with a notional value totaling $1 billion. These purchased caps were assigned to the securitization trust for the benefit of the security holders. Interest rate caps were also sold totaling $1 billion outside the securitization structure. Both the purchased and sold caps are marked to market through income in accordance with accounting principles generally accepted in the United States.

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21. COMMITMENTS AND CONTINGENT LIABILITIES

COMMITMENTS TO EXTEND CREDIT

In the ordinary course of business, Huntington makes various commitments to extend credit that are not reflected in the financial statements. The contract amount of these financial agreements, representing the credit risk, at December 31 were:

		At December 31,
(in millions of dollars)		2004		2003
Commitments to extend credit
	Commercial	$	5,076	$	5,712
	Consumer		4,086		3,652
	Commercial real estate		340		952
Standby letters of credit			945		961
Commercial letters of credit			72		90

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. At December 31, 2004, approximately 47% of standby letters of credit are collateralized and nearly 97% are expected to expire without being drawn upon. The carrying amount of deferred revenue associated with these guarantees was $4.1 million and $3.8 million at December 31, 2004, and 2003, respectively.

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

COMMITMENTS TO SELL LOANS

Huntington entered into forward contracts, relating to its mortgage banking business. At December 31, 2004 and 2003, Huntington had commitments to sell residential real estate loans of $311.3 million and $276.9 million, respectively. These contracts mature in less than one year.

LITIGATION

In the ordinary course of business, there are various legal proceedings pending against Huntington and its subsidiaries. In the opinion of management, the aggregate liabilities, if any, arising from such proceedings are not expected to have a material adverse effect on Huntington’s consolidated financial position(See also Note 22.)

COMMITMENTS UNDER CAPITAL AND OPERATING LEASE OBLIGATIONS

At December 31, 2004, Huntington and its subsidiaries were obligated under noncancelable leases for land, buildings, and equipment. Many of these leases contain renewal options and certain leases provide options to purchase the leased property during or at the expiration of the lease period at specified prices. Some leases contain escalation clauses calling for rentals to be adjusted for increased real estate taxes and other operating expenses or proportionately adjusted for increases in the consumer or other price indices.

The future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 2004, were $32.5 million in 2005, $30.6 million in 2006, $29.1 million in 2007, $27.1 million in 2008, $25.9 million in 2009, and $176.2 million thereafter. At December 31, 2004, total minimum lease payments have not been reduced by minimum sublease rentals of $82.1 million due in the future under noncancelable subleases. The rental expense for all operating leases was $40.4 million, $36.1 million, and $38.7 million for 2004, 2003, and 2002, respectively. Huntington had no material obligations under capital leases.

22. SECURITIES AND EXCHANGE COMMISSION FORMAL INVESTIGATION

On June 26, 2003, Huntington announced that the Securities and Exchange Commission (SEC) staff was conducting a formal investigation into certain financial accounting matters relating to fiscal years 2002 and earlier and certain related disclosure matters. On August 9, 2004, Huntington announced the Company was in negotiations with the staff of the SEC regarding a settlement of the

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128

formal investigation and disclosed that it expected that a settlement of this matter, which is subject to approval by the SEC, 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 civil money penalty. At December 31, 2004, the Company had reserves related to the expectation of the imposition of a civil money penalty, which the Company viewed as sufficient given negotiations with the SEC. However, no assurances can be made that any assessed penalty may not exceed this amount.

Management continues to have ongoing discussions with the staff of the SEC regarding resolution of this matter. The final results of the investigation, however, are not known at the time of this filing and therefore, the impact to Huntington’s financial condition, results of operations, and cash flows is not known.

23. FORMAL REGULATORY SUPERVISORY AGREEMENTS

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

Management has been working with its banking regulators over the past several months and has been taking actions and devoting significant resources to address all of the issues raised. Management believes that the changes that it has already made, and is in the process of making, will address these issues fully and comprehensively. No assurances, however, can be provided as to the ultimate timing or outcome of these matters.

24. OTHER REGULATORY MATTERS

Huntington and its bank subsidiary, The Huntington National Bank, are subject to various regulatory capital requirements administered by federal and state banking agencies. These requirements involve qualitative judgments and quantitative measures of assets, liabilities, capital amounts, and certain off-balance sheet items as calculated under regulatory accounting practices. Failure to meet minimum capital requirements can initiate certain actions by regulators that, if undertaken, could have a material adverse effect on Huntington’s and The Huntington National Bank’s financial statements. Applicable capital adequacy guidelines require minimum ratios of 4.00% for Tier 1 Risk-based Capital, 8.00% for Total Risk-based Capital, and 4.00% for Tier 1 Leverage Capital. To be considered well capitalized under the regulatory framework for prompt corrective action, the ratios must be at least 6.00%, 10.00%, and 5.00%, respectively.

As of December 31, 2004, Huntington and The Huntington National Bank (the Bank) met all capital adequacy requirements and had regulatory capital ratios in excess of the levels established for well-capitalized institutions. The period-end capital amounts and capital ratios of Huntington and the Bank are as follows:

		Tier 1						Total Capital						Tier 1 Leverage
(in millions of dollars)		2004			2003			2004			2003			2004			2003
Huntington Bancshares Incorporated
	Amount	$	2,683		$	2,401		$	3,687		$	3,367		$	2,683		$	2,401
	Ratio		9.08	%		8.53	%		12.48	%		11.95	%		8.42	%		7.98	%
The Huntington National Bank
	Amount	$	1,770		$	1,782		$	2,955		$	2,983		$	1,770		$	1,782
	Ratio		6.08	%		6.36	%		10.16	%		10.65	%		5.66	%		6.01	%

Tier 1 Risk-Based Capital consists of total equity plus qualifying capital securities and minority interests, excluding unrealized gains and losses accumulated in other comprehensive income, and non-qualifying intangible and servicing assets. Total Risk-Based Capital is Tier 1 Risk-Based Capital plus qualifying subordinated notes and allowable allowances for credit losses (limited to 1.25% of total risk-weighted assets). Tier 1 Leverage Capital is equal to Tier 1 Capital. Both Tier 1 Capital and Total Capital ratios are derived by dividing the respective capital amounts by net risk-weighted assets, which are calculated as prescribed by regulatory agencies. Tier 1 Leverage Capital ratio is calculated by dividing the Tier 1 capital amount by average adjusted total assets for the fourth quarter of 2004 and 2003, less non-qualifying intangibles and other adjustments.

Huntington and its subsidiaries are also subject to various regulatory requirements that impose restrictions on cash, debt, and dividends. The Bank is required to maintain cash reserves based on the level of certain of its deposits. This reserve requirement may be met by holding cash in banking offices or on deposit at the Federal Reserve Bank. During 2004 and 2003, the average balance of these deposits were $70.4 million and $66.6 million, respectively.

NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS HUNTINGTON BANCSHARES INCORPORATED

Under current Federal Reserve regulations, the Bank is limited as to the amount and type of loans it may make to the parent company and non-bank subsidiaries. At December 31, 2004, the Bank could lend $295.5 million to a single affiliate, subject to the qualifying collateral requirements defined in the regulations.

Dividends from the Bank are one of the major sources of funds for Huntington. These funds aid the parent company in the payment of dividends to shareholders, expenses, and other obligations. Payment of dividends to the parent company is subject to various legal and regulatory limitations. Regulatory approval is required prior to the declaration of any dividends in excess of available retained earnings. The amount of dividends that may be declared without regulatory approval is further limited to the sum of net income for the current year and retained net income for the preceding two years, less any required transfers to surplus or common stock. The Bank could declare, without regulatory approval, dividends in 2005 of approximately $274.3 million plus an additional amount equal to its net income through the date of declaration in 2005.

25. PARENT COMPANY FINANCIAL STATEMENTS

The parent company condensed financial statements, which include transactions with subsidiaries, are as follows.

Balance Sheets	December 31,
(in thousands of dollars)	2004		2003
ASSETS
Cash and cash equivalents	$	630,444	$	432,632
Due from The Huntington National Bank		250,771		250,759
Due from non-bank subsidiaries		204,976		172,371
Investment in The Huntington National Bank		1,472,357		1,492,278
Investment in non-bank subsidiaries		595,233		584,741
Goodwill, net of accumulated amortization		9,877		9,877
Accrued interest receivable and other assets		141,284		155,114
Total Assets	$	3,304,942	$	3,097,772
LIABILITIES
Long-term borrowed funds from unaffiliated companies	$	411,750	$	513,291
Dividends payable, accrued expenses, and other liabilities		355,554		309,479
Total Liabilities		767,304		822,770
Shareholders’ Equity		2,537,638		2,275,002
Total Liabilities and Shareholders’ Equity	$	3,304,942	$	3,097,772

The parent company had a $100 million line of credit to one of its non-bank subsidiaries at December 31, 2004 and 2003. This line of credit remained undrawn during 2003 and 2004.

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Statements of Income			Year Ended December 31,
(in thousands of dollars)			2004			2003			2002
Income
	Dividends from
		The Huntington National Bank	$	400,000		$	150,533		$	231,000
		Non-bank subsidiaries		8,202			3,000			8,142
	Interest from
		The Huntington National Bank		13,417			20,098			29,611
		Non-bank subsidiaries		7,638			7,356			5,854
	Management fees from subsidiaries			34,603			34,129			33,070
	Other			(810	)		3,214			877
Total Income				463,050			218,330			308,554
Expense
		Personnel costs		32,227			18,608			23,695
		Interest on debt		4,317			12,976			20,213
		Other		36,738			27,347			37,868
Total Expense				73,282			58,931			81,776
Income before income taxes and equity in undistributed net income of subsidiaries				389,768			159,399			226,778
Benefit from income taxes				(4,223	)		(5,130	)		(12,970	)
Income before equity in undistributed net income of subsidiaries and cumulative effect of change in accounting principle				393,991			164,529			239,748
Cumulative effect of change in accounting principle net of tax of $1,315				—			(2,442	)		—
Income before equity in undistributed net income of subsidiaries				393,991			162,087			239,748
Equity in undistributed net (loss) income of
		The Huntington National Bank		(9,073	)		196,659			88,710
		Non-bank subsidiaries		14,007			13,617			(4,727	)
Net Income			$	398,925		$	372,363		$	323,731

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Statements of Cash Flows			Year Ended December 31,
(in thousands of dollars)			2004			2003			2002
Operating Activities
	Net Income		$	398,925		$	372,363		$	323,731
	Adjustments to reconcile net income to net cash provided by operating activities:
		Cumulative effect of change in accounting principle		—			2,442			—
		Equity in undistributed net income of subsidiaries		(4,934	)		(210,275	)		(83,983	)
		Depreciation and amortization		2,690			2,211			1,254
		Gain on sales of securities available for sale		—			(5	)		(709	)
		Change in other assets and other liabilities		(13,609	)		(67,852	)		45,575
		Restructuring charges		—			—			6,859
Net Cash Provided by Operating Activities				383,072			98,884			292,727
Investing Activities
	Decrease in investments in subsidiaries			—			—			670,000
	Repayments from subsidiaries			117,314			27,001			66,258
	Advances to subsidiaries			(80,197	)		(74,650	)		(58,861	)
	Proceeds from sale of securities available for sale			—			46			8,977
Net Cash Provided by (Used in) Investing Activities				37,117			(47,603	)		686,374
Financing Activities
	Proceeds from issuance of other long-term debt			—			100,000			100,000
	Payment of other long-term debt			(101,541	)		(41,544	)		(154,020	)
	Dividends paid on common stock			(168,075	)		(151,023	)		(167,002	)
	Acquisition of treasury stock			—			(81,061	)		(370,012	)
	Proceeds from issuance of treasury stock			47,239			8,082			3,212
Net Cash Used for Financing Activities				(222,377	)		(165,546	)		(587,822	)
Change in Cash and Cash Equivalents				197,812			(114,265	)		391,279
Cash and Cash Equivalents at beginning of year				432,632			546,897			155,618
Cash and Cash Equivalents at end of year			$	630,444		$	432,632		$	546,897
Supplemental disclosure:
	Interest paid		$	18,495		$	13,157		$	20,779
	Common stock issued in purchase acquisitions			—			—			19,151

26. RESTRUCTURING RESERVES

On a quarterly basis, Huntington assesses its remaining restructuring reserves, primarily related to lease obligations, and makes adjustments to those reserves as necessary. During 2004, Huntington released $1.2 million of restructuring reserves through a credit to the restructuring charges line of non-interest expense in the accompanying consolidated income statement. As of December 31, 2004, Huntington had remaining reserves for restructuring of $5.3 million. Huntington expects that the reserves will be adequate to fund the estimated cash outlays necessary to complete the exit activities.

27. ACQUISITIONS AND DIVESTITURES

ACQUISITIONS

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. On June 16, 2004, Huntington announced that the closing of the Unizan merger would be delayed beyond the early July 2004 targeted date as the FRBC had informed the Company it was extending its merger application review period to coordinate further with the staff of the SEC regarding the SEC’s formal investigation and to complete its review of the Community Reinvestment Act aspects of the merger. On November 3, 2004, Huntington announced that it was negotiating a one-year extension of its pending merger agreement with Unizan. It was also announced that Huntington was withdrawing its current application with the FRBC to acquire Unizan and intends to resubmit the application for regulatory approval of the merger once Huntington has successfully resolved the pending SEC and banking regulatory concerns. On November 11, 2004, Huntington and Unizan jointly announced they had entered into an amendment to their January 26, 2004 merger agreement. The amendment extends the term of the agreement for one year from January 27, 2005 to January 27, 2006.

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Management remains in active dialogue with the SEC and banking regulators concerning these and related matters and is working diligently to resolve them in a full and comprehensive manner. No assurances, however, can be provided as to the ultimate timing or outcome of these matters.

DIVESTITURES

During 2003, Huntington sold four banking offices located in eastern West Virginia. This sale included approximately $50 million of loans and $130 million of deposits. Huntington’s pre-tax gain from this sale was $13.1 million in 2003 and is reflected as a separate component of non-interest income.

During 2002, Huntington announced the restructuring of its investment in Huntington Merchant Services LLC, the Company’s merchant services business. Huntington sold its Florida-related merchant business and decreased its equity investment in Huntington Merchant Services. As a result of the transaction, Huntington recorded a pre-tax gain of $24.6 million in 2002 which is reflected as a separate component of non-interest income.

During 2002, Huntington completed the sale of its Florida insurance operations to members of The J. Rolfe Davis Insurance Agency, Inc. management. Though the sale affected selected non-interest income and non-interest expense categories, it had no material gain or impact on net income.

During 2002, Huntington completed the sale of its Florida operations to SunTrust Banks, Inc. Included in the sale were $4.8 billion of deposits and other liabilities and $2.8 billion of loans and other assets. Huntington received a deposit premium of 15%, or $711.9 million. The total net pre-tax gain from the sale was $182.5 million and is reflected in non-interest income. The after-tax gain was $61.4 million, or $0.25 per share. Income taxes related to this transaction were $121.0 million, an amount higher than the tax impact at the statutory rate of 35%, because most of the goodwill relating to the Florida operations was non-deductible for tax purposes.

28. 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 function 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. During 2002, the previously reported segments, Retail Banking and Corporate Banking, were combined and renamed Regional Banking. Since this segment is managed through seven geographically defined regions where each region’s management has responsibility for both retail and corporate banking business development, combining these two previously separate segments better reflects the management accountability and decision making structure. In addition, changes were made to the methodologies utilized for certain balance sheet and income statement allocations from Huntington’s management reporting system.

Management relies on operating earnings for review of performance trends and for critical decision making purposes. Operating earnings exclude the impact of the significant items listed in the reconciliation table below. See Note 26 to the consolidated financial statements for further discussions regarding restructuring reserves and Note 27 regarding the sale of Huntington’s Florida banking and insurance operations. The financial information that follows is inclusive of the above adjustments on an after-tax basis to reflect the reconciliation to reported net income.

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

Regional Banking:This segment provides products and services to consumer, small business, 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 banking network of 334 branches, over 700 ATMs, plus Internet and telephone banking channels. 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 59% and 80%, of total regional banking loans and deposits, respectively. Commercial Banking serves middle market and large commercial banking relationships, which use a variety of banking products and services including, but not limited to, commercial loans, international trade, cash management, leasing, interest rate protection products, capital market alternatives, 401(k) plans, and mezzanine investment capabilities.

Dealer Sales:This segment serves more than 3,500 automotive dealerships within Huntington’s primary banking markets, as well as in Arizona, Florida, Georgia, Pennsylvania, and Tennessee. The segment finances the purchase of automobiles by customers of the automotive dealerships, purchases automobiles from dealers and simultaneously leases the automobiles to consumers under long-term

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operating or direct finance leases, finances the dealership’s 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. As of December 31, 2004, the trust division provides fiduciary services to more than 11,000 accounts with assets totaling $42.8 billion, with $9.8 billion managed by PFG, including approximately $600 million in assets managed by Haberer Registered Investment Advisor, which provides investment management services to nearly 400 customers.

Treasury/Other:This segment includes revenue and expense related to assets, liabilities, and equity that are not directly assigned or allocated to one of the other three business segments. Assets included in this segment include investment securities, bank owned life insurance, and mezzanine loans originated through Huntington Capital Markets.

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Listed below is certain operating basis financial information reconciled to Huntington’s 2004, 2003, and 2002 reported results by line of business:

	Regional			Dealer						Treasury/			Huntington
INCOME STATEMENTS (in thousands of dollars)	Banking			Sales			PFG			Other			Consolidated
2004
Net interest income	$	642,140		$	149,251		$	46,575		$	73,408		$	911,374
Provision for credit losses		(7,565	)		(44,692	)		(2,299	)		(506	)		(55,062	)
Non-Interest income		307,119			320,434			111,630			65,209			804,392
Non-Interest expense		(588,111	)		(324,240	)		(113,672	)		(97,372	)		(1,123,395	)
Income taxes		(123,755	)		(35,264	)		(14,782	)		25,435			(148,366	)
Operating earnings		229,828			65,489			27,452			66,174			388,943
Restructuring releases, net of taxes		—			—			—			748			748
Gain on sale of automobile loans, net of taxes		—			8,598			—			636			9,234
Net income	$	229,828		$	74,087		$	27,452		$	67,558		$	398,925

2003
Net interest income	$	605,378		$	107,242		$	41,876		$	94,490			$	848,986
Provision for credit losses		(94,004	)		(59,469	)		(4,781	)		(5,739	)	��		(163,993	)
Non-Interest income		317,687			525,987			107,951			64,377				1,016,002
Non-Interest expense		(563,099	)		(481,354	)		(105,153	)		(71,969	)			(1,221,575	)
Income taxes		(93,086	)		(32,343	)		(13,963	)		16,697				(122,695	)
Operating earnings		172,876			60,063			25,930			97,856				356,725
Restructuring releases, net of tax		—			—			—			4,333				4,333
Gain on sale of automobile loans, net of tax		—			13,493			—			12,532				26,025
Cumulative effect of change in accounting principle, net of taxes		—			(10,888	)		—			(2,442	)			(13,330	)
Gain on sale of branch offices, net of tax		—			—			—			8,523				8,523
Long-term debt extinguishment, net of tax		—			—			—			(9,913	)			(9,913	)
Net income	$	172,876		$	62,668		$	25,930		$	110,889			$	372,363
2002
Net interest income	$	583,999		$	5,404		$	35,773		$	114,674			$	739,850
Provision for credit losses		(133,907	)		(46,335	)		(3,468	)		(5,530	)			(189,240	)
Non-Interest income		264,026			687,557			108,948			60,810				1,121,341
Non-Interest expense		(539,992	)		(609,833	)		(103,110	)		(52,029	)			(1,304,964	)
Income taxes		(60,944	)		(12,878	)		(13,350	)		(106	)			(87,278	)
Operating earnings		113,182			23,915			24,793			117,819				279,709
Restructuring charges, net of tax		—			—			(3,429	)		(28,403	)			(31,832	)
Florida operations sold, net of tax		1,270			790			1,428			(5,013	)			(1,525	)
Gain on sale of Florida operations, net of tax		—			—			—			61,422				61,422
Merchant Services restructuring gain, net of tax		—			—			—			15,957				15,957
Net income	$	114,452		$	24,705		$	22,792		$	161,782			$	323,731

		Assets						Deposits
		At December 31,						At December 31,
BALANCE SHEETS (in millions of dollars)		2004		2003		2002		2004		2003		2002
Regional Banking		$	17,809	$	14,970	$	13,947	$	17,424	$	15,539	$	15,296
Dealer Sales			6,133		7,454		7,285		76		77		61
PFG			1,649		1,461		1,203		1,172		1,164		939
Treasury / Other			6,974		6,634		5,105		2,096		1,707		1,203
	Total	$	32,565	$	30,519	$	27,540	$	20,768	$	18,487	$	17,499

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29. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of the unaudited quarterly results of operations, for the years ended December 31, 2004 and 2003:

2004
(in thousands of dollars, except per share data)	Fourth			Third			Second			First
Interest income	$	359,215		$	338,002		$	324,167		$	325,931
Interest expense		(120,147	)		(110,944	)		(101,604	)		(103,246	)
Net interest income		239,068			227,058			222,563			222,685
Provision for credit losses		(12,654	)		(11,785	)		(5,027	)		(25,596	)
Non-interest income		182,940			189,891			218,128			227,639
Non-interest expense		(281,014	)		(273,423	)		(282,153	)		(285,654	)
Income before income taxes		128,340			131,741			153,511			139,074
Income taxes		(37,201	)		(38,255	)		(43,384	)		(34,901	)
Net income	$	91,139		$	93,486		$	110,127		$	104,173
Net income per common share — Basic		$0.39			$0.41			$0.48			$0.45
Net income per common share — Diluted		0.39			0.40			0.47			0.45

2003
(in thousands of dollars, except per share data)	Fourth			Third			Second			First
Interest income	$	335,097		$	333,320		$	317,325		$	320,014
Interest expense		(110,782	)		(112,849	)		(114,884	)		(118,255	)
Net interest income		224,315			220,471			202,441			201,759
Provision for credit losses		(26,341	)		(51,615	)		(49,193	)		(36,844	)
Non-interest income		246,510			272,768			276,951			272,924
Non-interest expense		(317,465	)		(300,182	)		(297,033	)		(315,479	)
Income before income taxes		127,019			141,442			133,166			122,360
Income taxes		(33,758	)		(37,230	)		(36,676	)		(30,630	)
Income before cumulative effect of change in accounting principle		93,261			104,212			96,490			91,730
Cumulative effect of change in accounting principle, net of tax		—			(13,330	)		—			—
Net income	$	93,261		$	90,882		$	96,490		$	91,730
Income per common share before cumulative effect of change in accounting principle — Basic		$0.41			$0.46			$0.42			$0.40
Net income per common share — Basic		0.41			0.40			0.42			0.40
Income per common share before cumulative effect of change in accounting principle — Diluted		0.40			0.45			0.42			0.39
Net income per common share — Diluted		0.40			0.39			0.42			0.39

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30. RESTATEMENT OF CONSOLIDATED STATEMENTS OF CASH FLOWS

The Company restated its consolidated statement of cash flows for the year ended December 31, 2003 to correct the presentation of activity related to the 2003 sale of banking offices. The results of this restatement are reflected in the consolidated statements of cash flows for 2003, included in this report. The impact of this restatement had no effect on net income, shareholders’ equity or the balance of cash and cash equivalents. The following table reflects the previously reported amounts before the restatement, as well as the impact of this restatement by financial statement line in Huntington’s consolidated statements of cash flows for the three years ended December 31, 2004:

			Twelve Months Ended December 31, 2003
(in thousands of dollars)			Previously Reported			Restated
Operating activities
	Other, net		$	61,467		$	62,331
		Net cash provided by operating activities		1,338,406			1,339,270
Investing Activities
	Net loan and lease originations, excluding sales			(4,408,975	)		(4,506,843	)
	Proceeds from the sale of branch offices			81,367			(81,367	)
	Purchases of premises and equipment			(62,503	)		(64,571	)
		Net cash used for investing activities		(2,751,650	)		(3,014,320	)
Financing Activities
	Increase in total deposits			915,518			1,177,324
		Net cash provided by financing activities		1,390,984			1,652,790

In addition to this restatement, the Company also reclassified components of other net operating activities to captions within the reconciliation of net income to net cash provided by operating activities. The impact on other net operating activities for the year ended December 31, 2003 is as follows:

(in thousands of dollars)
Other operating activities — as restated		$	62,331
	Increase of cash surrender value of bank owned life insurance		43,028
	Increase in payable to investors in securitized loans		(64,986	)
Other operating activities — as presented		$	40,373

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