HBAN 10-Q Quarterly Report June 30, 2011 | Alphaminr
HUNTINGTON BANCSHARES INC/MD

HBAN 10-Q Quarter ended June 30, 2011

HUNTINGTON BANCSHARES INC/MD
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10-Q 1 c17840e10vq.htm FORM 10-Q Form 10-Q
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY PERIOD ENDED June 30, 2011
Commission File Number 1-34073
Huntington Bancshares Incorporated
Maryland 31-0724920
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
41 South High Street, Columbus, Ohio 43287
Registrant’s telephone number (614) 480-8300
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ Accelerated filer o Non-accelerated filer o Smaller reporting company o
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No
There were 863,323,099 shares of Registrant’s common stock ($0.01 par value) outstanding on June 30, 2011.


HUNTINGTON BANCSHARES INCORPORATED
INDEX
78
78
79
80
81
82
5
6
9
31
51
54
57
58
58
62
76
133
133
133
133
133
135
Exhibit 12.1
Exhibit 12.2
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

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Table of Contents

Glossary of Acronyms and Terms
The following listing provides a comprehensive reference of common acronyms and terms used throughout the document:
2010 Form 10-K
Annual Report on Form 10-K for the year ended December 31, 2010
ABL
Asset Based Lending
ACL
Allowance for Credit Losses
AFCRE
Automobile Finance and Commercial Real Estate
ALCO
Asset & Liability Management Committee
ALLL
Allowance for Loan and Lease Losses
ARM
Adjustable Rate Mortgage
ARRA
American Recovery and Reinvestment Act of 2009
ASC
Accounting Standards Codification
ATM
Automated Teller Machine
AULC
Allowance for Unfunded Loan Commitments
AVM
Automated Valuation Methodology
C&I
Commercial and Industrial
CDARS
Certificate of Deposit Account Registry Service
CDO
Collateralized Debt Obligations
CDs
Certificates of Deposit
CFPB
Bureau of Consumer Financial Protection
CMO
Collateralized Mortgage Obligations
CPP
Capital Purchase Program
CRE
Commercial Real Estate
DDA
Demand Deposit Account
DIF
Deposit Insurance Fund
Dodd-Frank Act
Dodd-Frank Wall Street Reform and Consumer Protection Act
EESA
Emergency Economic Stabilization Act of 2008
EPS
Earnings Per Share
ERISA
Employee Retirement Income Security Act
EVE
Economic Value of Equity
FASB
Financial Accounting Standards Board
FDIC
Federal Deposit Insurance Corporation
FDICIA
Federal Deposit Insurance Corporation Improvement Act of 1991
FFIEC
Federal Financial Institutions Examination Council
FHA
Federal Housing Administration
FHFA
Federal Housing Finance Agency
FHLB
Federal Home Loan Bank
FHLMC
Federal Home Loan Mortgage Corporation
FICA
Federal Insurance Contributions Act
FICO
Fair Isaac Corporation
FNMA
Federal National Mortgage Association
Franklin
Franklin Credit Management Corporation
FSP
Financial Stability Plan
FTE
Fully-Taxable Equivalent
FTP
Funds Transfer Pricing
GAAP
Generally Accepted Accounting Principles in the United States of America

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Table of Contents

GSIFI
Globally Systemically Important Financial Institution
GSE
Government Sponsored Enterprise
HASP
Homeowner Affordability and Stability Plan
HCER Act
Health Care and Education Reconciliation Act of 2010
IPO
Initial Public Offering
IRS
Internal Revenue Service
ISE
Interest Sensitive Earnings
LIBOR
London Interbank Offered Rate
LTV
Loan to Value
MD&A
Management’s Discussion and Analysis of Financial Condition and Results of Operations
MRC
Market Risk Committee
MSR
Mortgage Servicing Rights
NALs
Nonaccrual Loans
NAV
Net Asset Value
NCO
Net Charge-off
NPAs
Nonperforming Assets
NSF / OD
Nonsufficient Funds and Overdraft
OCC
Office of the Comptroller of the Currency
OCI
Other Comprehensive Income (Loss)
OCR
Optimal Customer Relationship
OLEM
Other Loans Especially Mentioned
OREO
Other Real Estate Owned
OTTI
Other-Than-Temporary Impairment
Plan
Huntington Bancshares Retirement Plan
Reg E
Regulation E, of the Electronic Fund Transfer Act
REIT
Real Estate Investment Trust
SAD
Special Assets Division
SBA
Small Business Administration
SEC
Securities and Exchange Commission
SERP
Supplemental Executive Retirement Plan
SIFIs
Systemically Important Financial Institutions
Sky Financial
Sky Financial Group, Inc.
SRIP
Supplemental Retirement Income Plan
Sky Trust
Sky Bank and Sky Trust, National Association
TAGP
Transaction Account Guarantee Program
TARP
Troubled Asset Relief Program
TARP Capital
Series B Preferred Stock
TCE
Tangible Common Equity
TDR
Troubled Debt Restructured Loan
TLGP
Temporary Liquidity Guarantee Program
Treasury
U.S. Department of the Treasury
UCS
Uniform Classification System
Unizan
Unizan Financial Corp.
UPB
Unpaid Principal Balance
USDA
U.S. Department of Agriculture
VA
U.S. Department of Veteran Affairs
VIE
Variable Interest Entity
WGH
Wealth Advisors, Government Finance, and Home Lending

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PART I. FINANCIAL INFORMATION
When we refer to “we,” “our,” and “us” in this report, we mean Huntington Bancshares Incorporated and our consolidated subsidiaries, unless the context indicates that we refer only to the parent company, Huntington Bancshares Incorporated. When we refer to the “Bank” in this report, we mean our only bank subsidiary, The Huntington National Bank, and its subsidiaries.
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
INTRODUCTION
We are a multi-state diversified regional bank holding company organized under Maryland law in 1966 and headquartered in Columbus, Ohio. Through the Bank, we have 145 years of servicing the financial needs of our customers. Through our subsidiaries, we provide full-service commercial and consumer banking services, mortgage banking services, automobile financing, equipment leasing, investment management, trust services, brokerage services, customized insurance service programs, and other financial products and services. Our over 600 banking offices are located in Indiana, Kentucky, Michigan, Ohio, Pennsylvania, and West Virginia. Selected financial services and other activities are also conducted in various other states. International banking services are available through the headquarters office in Columbus, Ohio and a limited purpose office located in the Cayman Islands and another limited purpose office located in Hong Kong. Our foreign banking activities, in total or with any individual country, are not significant.
This MD&A provides information we believe necessary for understanding our financial condition, changes in financial condition, results of operations, and cash flows. The MD&A included in our 2010 Form 10-K should be read in conjunction with this MD&A as this discussion provides only material updates to the 2010 Form 10-K. This MD&A should also be read in conjunction with the financial statements, notes and other information contained in this report.
Our discussion is divided into key segments:
Executive Overview - Provides a summary of our current financial performance, and business overview, including our thoughts on the impact of the economy, legislative and regulatory initiatives, and recent industry developments. This section also provides our outlook regarding our expectations for the remainder of 2011.
Discussion of Results of Operations - Reviews financial performance from a consolidated Company perspective. It also includes a Significant Items section that summarizes key issues helpful for understanding performance trends. Key consolidated average balance sheet and income statement trends are also discussed in this section.
Risk Management and Capital - Discusses credit, market, liquidity, operational, and compliance risks, including how these are managed, as well as performance trends. It also includes a discussion of liquidity policies, how we obtain funding, and related performance. In addition, there is a discussion of guarantees and / or commitments made for items such as standby letters of credit and commitments to sell loans, and a discussion that reviews the adequacy of capital, including regulatory capital requirements.
Business Segment Discussion - Provides an overview of financial performance for each of our major business segments and provides additional discussion of trends underlying consolidated financial performance.
Additional Disclosures - Provides comments on important matters including forward-looking statements, critical accounting policies and use of significant estimates, recent accounting pronouncements and developments, and acquisitions.
A reading of each section is important to understand fully the nature of our financial performance and prospects.

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EXECUTIVE OVERVIEW
Summary of 2011 Second Quarter Results
For the quarter, we reported net income of $145.9 million, or $0.16 per common share, compared with $126.4 million, or $0.14 per common share, in the prior quarter ( see Table 1 ).
Fully-taxable equivalent net interest income was $407.2 million for the quarter, down $1.1 million, or less than 1%, from the prior quarter. The decline primarily reflected a 1% (3% annualized) decrease in average earning assets and a 2 basis point decline in the fully-taxable equivalent net interest margin to 3.40% from 3.42%.
The provision for credit losses in the 2011 second quarter was $35.8 million, down $13.6 million, or 28% from the prior quarter. The decline in provision expense reflected a combination of lower NCOs and the reduction of Criticized loans throughout the entire loan and lease portfolio. The reduction in Criticized loans reflected the resolution of problem credits for which reserves had previously been established. The current quarter’s provision for credit losses was $61.7 million less than total NCOs.
Total noninterest income increased $18.8 million, or 8%, from the prior quarter. This reflected an increase in other income due to higher market related gains and capital markets income, service charges on deposit accounts due to higher NSF / OD fees, electronic banking reflecting higher activity levels, and bank owned life insurance income.
Total noninterest expense declined $2.3 million, or 1%, from the prior quarter. This reflected a decrease in other expense due to the prior quarter’s additions to litigation reserves. Partially offsetting this decline were increases in professional services for costs supporting regulatory and litigation efforts, deposit and other insurance, outside data processing and other services due to higher appraisal costs and system upgrade expenses, and marketing expense reflecting higher advertising costs.
Credit quality performance in the 2011 second quarter reflected continued improvement in the overall loan portfolio. NCOs and nonaccrual loans declined 41% and 3%, respectively, from the prior quarter. The NAL, NPA and Criticized asset ratios all showed continued improvement in the quarter. The ALLL and ACL coverage ratios fell slightly to 2.74% and 2.84%, from 2.96% and 3.07%, respectively, but remain sufficient and appropriate. NPAs fell by 5% in the quarter.
On July 21, 2011, we announced that our board of directors had declared a quarterly common stock cash dividend of $0.04 per common share, up from the prior quarterly dividend of $0.01. The dividend is payable on October 3, 2011, to shareholders of record on September 19, 2011. We are very pleased that our financial strength and performance have improved to the point that enabled us to take this action.
Business Overview
General
Our general business objectives are: (1) grow revenue and profitability, (2) improve cross-sell and share-of-wallet across all business segments, (3) grow key fee businesses (existing and new), (4) improve credit quality, including lower NCOs and NALs, (5) reduce noncore CRE exposure, and (6) continue to improve our overall management of risk.
Throughout last year, and continuing into this year, we are taking advantage of what we view as an opportunity to make significant investments in strategic initiatives to position us for more profitable and sustainable long-term growth. This includes implementing our “Fair Play” banking philosophy value proposition for our consumer customers, increasing share-of-wallet, investing in expanding existing business, and launching new businesses.
Our emphasis on cross-sell, coupled with consumer customers increasingly being attracted by the benefits offered through our “Fair Play” banking philosophy, with programs such as 24-Hour Grace ® on overdrafts and more recently the launch of Asterisk-Free Checking™ and Huntington Plus Checking™, is having a positive effect. The percentage of consumer households with over four products at the end of the 2011 second quarter was 71.3%, up from 69.4% at the end of last year. And for the first half of this year, consumer checking account households grew at a 9.9% annualized rate, up from 6.8% for full year 2010.

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Economy
Borrower and consumer confidence and the sustainability of the slow economic recovery remain major factors impacting growth opportunities for the remainder of 2011. Unfortunately, during the first half of 2011, a number of issues have emerged that could negatively impact the recovery. These additional risks include the U.S. debt ceiling discussions, the budget issues in local governments, and the continued economic and political instability in Europe as well as the political instability in the Middle East with its ramifications on the cost of oil translating to higher gas prices. In addition, above average office vacancy rates in large metropolitan areas indicate the possibility for some continued softness in commercial real estate in 2011. Within our footprint states of Indiana, Kentucky, Michigan, Ohio, Pennsylvania, and West Virginia, real estate has generally remained weak, in line with national trends, reflecting capacity overhang created by weakness in economic growth prior to the recovery. However, there are some signs that our footprint states have been experiencing cyclical recovery in line with, and in certain instances stronger than, the national average. They include:
From January 2009 through May 2011, an increase in total payroll for all footprint states, with all but West Virginia (one of our smaller regions) exceeding the national average.
Manufacturing that is expected to continue to improve, although near-term weakness is likely as a result of the negative impact of high energy prices on demand and supply bottlenecks created by the crisis in Japan.
From May 2010 to May 2011, unemployment rates declined for all of our footprint states.
Since its low in January 2009, exports have grown faster than the U.S. average in all footprint states except Kentucky.
State and local fiscal conditions will likely remain tight in the next year, although rising tax revenue should gradually reduce strains.
For now, we continue to believe the economy is likely to remain fragile and not show much growth throughout the remainder of 2011.
Legislative and Regulatory
Regulatory reforms continue to be adopted which impose additional restrictions on current business practices. Recent actions affecting us included an amendment to Reg E relating to certain overdraft fees for consumer deposit accounts and the rules and regulations that have been issued pursuant to the Dodd-Frank Act.
Durbin Amendment — The Durbin Amendment to the Dodd-Frank Act instructed the Federal Reserve to establish the rate merchants pay banks for electronic clearing of debit card transactions (i.e., the interchange rate). The Federal Reserve recently issued its final rule establishing standards for debit card interchange fees and prohibiting network exclusivity arrangements and routing restrictions. The final rule establishes standards for assessing whether debit card interchange fees received by debit card issuers are reasonable and proportional to the costs incurred by issuers for electronic debit transactions. Under the final rule, the maximum permissible interchange fee that an issuer may receive for an electronic debit transaction will be the sum of 21 cents per transaction, 1 cent fraud prevention adjustment, and 5 basis points multiplied by the value of the transaction. This provision regarding debit card interchange fees will become effective on October 1, 2011. Based on the final rule, we expect our 2011 fourth quarter electronic banking income to decline from the 2011 second quarter level by approximately 50%.
Recent Industry Developments
Foreclosure Documentation — On June 30, 2011, the OCC issued OCC Bulletin 2011-29 clarifying their expectations for the oversight and management of mortgage foreclosure activities by national banks and directing national banks to perform a self-assessment no later than September 30, 2011. We believe that, with the self-assessments Huntington has performed and is currently performing, we are in compliance with the OCC expectation for self-assessment.
Mortgage Servicing Rights — MSR fair values are estimated based on residential mortgage servicing revenue in excess of estimated market costs to service the underlying loans. Historically, the estimated market cost to service has been stable. Due to changes in the regulatory environment related to loan servicing and foreclosure activities, costs to service may potentially increase, however the potential impact on the market costs to service remains uncertain. Certain large residential mortgage loan servicers entered into consent orders with banking regulators in April 2011, which require the banks to remedy deficiencies and unsafe or unsound practices and to enhance residential mortgage servicing and foreclosure processes. It is unclear what impact this may ultimately have on market costs to service. At June 30, 2011, we estimated a 25% increase to our loan servicing market cost assumption would result in a fair value impairment charge of approximately $8.3 million.
Representation and Warranty Reserve —We primarily conduct our loan sale and securitization activity with FNMA and FHLMC. In connection with these and other sale and securitization transactions, we make representations and warranties that the loans meet certain criteria, such as collateral type and underwriting standards. We may be required to repurchase individual loans and / or indemnify these organizations against losses due to material breaches of these representations and warranties. At June 30, 2011, we had a reserve for such losses of $24.5 million, which is included in accrued expenses and other liabilities.

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Expectations
The lack of prospects for meaningful economic improvement, higher interest rates, and wider spreads between short-term and long-term interest rates over the remainder of this year is a challenge. Further, borrower and consumer confidence remain fragile. And while we now have clarity on the amount and timing of the pending reduction in debit card interchange fees, this nevertheless represents a reduction in fee income. All of these combined represent meaningful revenue growth headwinds.
Net income is expected to grow from the current quarter level throughout the rest of the year, primarily reflecting modest revenue growth and disciplined expense control.
We believe the momentum we are seeing in loan and low cost deposit growth will continue. This, coupled with a stable net interest margin, is expected to contribute to modest growth in net interest income. Our C&I portfolio is expected to continue to show meaningful growth. We believe period-end balances in our C&I and automobile loan portfolios position us for continued growth in average balances for these portfolios as we head into the third quarter.
We anticipate our total core deposits will increase, reflecting continued growth in consumer households and business relationships. Further, we expect the shift toward lower-cost noninterest-bearing and interest-bearing demand deposit accounts will continue.
Noninterest income is expected to grow modestly in the 2011 second half. The primary driver is expected to be service charge income as the benefits from our “Fair Play” banking philosophy continue to gain momentum commensurate with consumer household growth and increased product penetration. Mortgage banking income will likely show only modest, if any, growth throughout the second half of the year. As described above, electronic banking income in the fourth quarter is expected to decline by approximately 50% as the new interchange fee structure will be implemented October 1, 2011. We also expect to see continued growth in the earnings contribution from other key fee income activities including capital markets, treasury management services, and brokerage, reflecting the impact of our cross-sell and product penetration initiatives throughout the company, as well as the positive impact from strategic initiatives.
In addition, expense levels are expected to remain relatively stable.
Nonaccrual loans and net charge-offs are expected to continue to decline throughout the year.
We anticipate the effective tax rate for the remainder of the year to approximate 35% of income before income taxes less approximately $40.0 million of permanent tax differences over the remainder of 2011 primarily related to tax-exempt income, tax-advantaged investments, and general business credits.

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DISCUSSION OF RESULTS OF OPERATIONS
This section provides a review of financial performance from a consolidated perspective. It also includes a “Significant Items” section that summarizes key issues important for a complete understanding of performance trends. Key Unaudited Condensed Consolidated Balance Sheet and Statement of Income trends are discussed. All earnings per share data are reported on a diluted basis. For additional insight on financial performance, please read this section in conjunction with the “Business Segment Discussion.”

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Table 1 — Selected Quarterly Income Statement Data (1)
2011 2010
(dollar amounts in thousands, except per share amounts) Second First Fourth Third Second
Interest income
$ 492,137 $ 501,877 $ 528,291 $ 534,669 $ 535,653
Interest expense
88,800 97,547 112,997 124,707 135,997
Net interest income
403,337 404,330 415,294 409,962 399,656
Provision for credit losses
35,797 49,385 86,973 119,160 193,406
Net interest income after provision for credit losses
367,540 354,945 328,321 290,802 206,250
Service charges on deposit accounts
60,675 54,324 55,810 65,932 75,934
Mortgage banking income
23,835 22,684 53,169 52,045 45,530
Trust services
30,392 30,742 29,394 26,997 28,399
Electronic banking
31,728 28,786 28,900 28,090 28,107
Insurance income
16,399 17,945 19,678 19,801 18,074
Brokerage income
20,819 20,511 16,953 16,575 18,425
Bank owned life insurance income
17,602 14,819 16,113 14,091 14,392
Automobile operating lease income
7,307 8,847 10,463 11,356 11,842
Securities gains (losses)
1,507 40 (103 ) (296 ) 156
Other income
45,503 38,247 33,843 32,552 28,784
Total noninterest income
255,767 236,945 264,220 267,143 269,643
Personnel costs
218,570 219,028 212,184 208,272 194,875
Outside data processing and other services
43,889 40,282 40,943 38,553 40,670
Net occupancy
26,885 28,436 26,670 26,718 25,388
Deposit and other insurance expense
23,823 17,896 23,320 23,406 26,067
Professional services
20,080 13,465 21,021 20,672 24,388
Equipment
21,921 22,477 22,060 21,651 21,585
Marketing
20,102 16,895 16,168 20,921 17,682
Amortization of intangibles
13,386 13,370 15,046 15,145 15,141
OREO and foreclosure expense
4,398 3,931 10,502 12,047 4,970
Automobile operating lease expense
5,434 6,836 8,142 9,159 9,667
Other expense
29,921 48,083 38,537 30,765 33,377
Total noninterest expense
428,409 430,699 434,593 427,309 413,810
Income before income taxes
194,898 161,191 157,948 130,636 62,083
Provision (benefit) for income taxes
48,980 34,745 35,048 29,690 13,319
Net income
$ 145,918 $ 126,446 $ 122,900 $ 100,946 $ 48,764
Dividends on preferred shares
7,704 7,703 83,754 29,495 29,426
Net income applicable to common shares
$ 138,214 $ 118,743 $ 39,146 $ 71,451 $ 19,338
Average common shares — basic
863,358 863,359 757,924 716,911 716,580
Average common shares — diluted (2)
867,469 867,237 760,582 719,567 719,387
Net income per common share — basic
$ 0.16 $ 0.14 $ 0.05 $ 0.10 $ 0.03
Net income per common share — diluted
0.16 0.14 0.05 0.10 0.03
Cash dividends declared per common share
0.01 0.01 0.01 0.01 0.01
Return on average total assets
1.11 % 0.96 % 0.90 % 0.76 % 0.38 %
Return on average common shareholders’ equity
11.6 10.3 3.8 7.4 2.1
Return on average tangible common shareholders’ equity (3)
13.3 12.7 5.6 10.0 3.8
Net interest margin (4)
3.40 3.42 3.37 3.45 3.46
Efficiency ratio (5)
62.7 64.7 61.4 60.6 59.4
Effective tax rate
25.1 21.6 22.2 22.7 21.5
Revenue — FTE
Net interest income
$ 403,337 $ 404,330 $ 415,294 $ 409,962 $ 399,656
FTE adjustment
3,834 3,945 3,708 2,631 2,490
Net interest income (4)
407,171 408,275 419,002 412,593 402,146
Noninterest income
255,767 236,945 264,220 267,143 269,643
Total revenue (4)
$ 662,938 $ 645,220 $ 683,222 $ 679,736 $ 671,789

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(1) Comparisons for presented periods are impacted by a number of factors. Refer to Significant Items.
(2) For periods presented prior to their repurchase, the impact of the convertible preferred stock issued in 2008 and the warrants issued to the U.S. Department of the Treasury in 2008 related to Huntington’s participation in the voluntary Capital Purchase Program was excluded from the diluted share calculation because the result was more than basic earnings per common share (anti-dilutive) for those periods. The convertible preferred stock and warrants were repurchased in December 2010 and January 2011, respectively.
(3) Net income excluding expense for amortization of intangibles for the period divided by average tangible common shareholders’ equity. Average tangible common shareholders’ equity equals average total common shareholders’ equity less average intangible assets and goodwill. Expense for amortization of intangibles and average intangible assets are net of deferred tax liability, and calculated assuming a 35% tax rate.
(4) On a fully-taxable equivalent (FTE) basis assuming a 35% tax rate.
(5) Noninterest expense less amortization of intangibles and goodwill impairment divided by the sum of FTE net interest income and noninterest income excluding securities gains (losses).

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Table 2 — Selected Year to Date Income Statement Data(1)
Six Months Ended June 30, Change
(dollar amounts in thousands, except per share amounts) 2011 2010 Amount Percent
Interest income
$ 994,014 $ 1,082,432 $ (88,418 ) (8) %
Interest expense
186,347 288,883 (102,536 ) (35 )
Net interest income
807,667 793,549 14,118 2
Provision for credit losses
85,182 428,414 (343,232 ) (80 )
Net interest income after provision for credit losses
722,485 365,135 357,350 98
Service charges on deposit accounts
114,999 145,273 (30,274 ) (21 )
Mortgage banking income
46,519 70,568 (24,049 ) (34 )
Trust services
61,134 56,164 4,970 9
Electronic banking
60,514 53,244 7,270 14
Insurance income
34,344 36,934 (2,590 ) (7 )
Brokerage income
41,330 35,327 6,003 17
Bank owned life insurance income
32,421 30,862 1,559 5
Automobile operating lease income
16,154 24,145 (7,991 ) (33 )
Securities gains
1,547 125 1,422 1,138
Other income
83,750 57,853 25,897 45
Total noninterest income
492,712 510,495 (17,783 ) (3 )
Personnel costs
437,598 378,517 59,081 16
Outside data processing and other services
84,171 79,752 4,419 6
Net occupancy
55,321 54,474 847 2
Deposit and other insurance expense
41,719 50,822 (9,103 ) (18 )
Professional services
33,545 47,085 (13,540 ) (29 )
Equipment
44,398 42,209 2,189 5
Marketing
36,997 28,835 8,162 28
Amortization of intangibles
26,756 30,287 (3,531 ) (12 )
OREO and foreclosure expense
8,329 16,500 (8,171 ) (50 )
Automobile operating lease expense
12,270 19,733 (7,463 ) (38 )
Other expense
78,004 63,689 14,315 22
Total noninterest expense
859,108 811,903 47,205 6
Income before income taxes
356,089 63,727 292,362 459
Provision (benefit) for income taxes
83,725 (24,774 ) 108,499 N.R.
Net income
$ 272,364 $ 88,501 $ 183,863 208 %
Dividends declared on preferred shares
15,407 58,783 (43,376 ) (74 )
Net income applicable to common shares
$ 256,957 $ 29,718 $ 227,239 765 %
Average common shares — basic
863,358 716,450 146,908 21 %
Average common shares — diluted (2)
867,353 718,990 148,363 21
Per common share
Net income per common share — basic
$ 0.30 $ 0.04 $ 0.26 650 %
Net income per common share — diluted
0.30 0.04 0.26 650
Cash dividends declared
0.02 0.02
Return on average total assets
1.03 % 0.35 % 0.68 % 194 %
Return on average common shareholders’ equity
11.0 1.6 9.4 588
Return on average tangible common shareholders’ equity (3)
13.4 3.2 10.2 319
Net interest margin (4)
3.41 3.47 (0.06 ) (2 )
Efficiency ratio (5)
63.7 59.7 4.0 7
Effective tax rate (benefit)
23.5 (38.9 ) 62.4 N.R.
Revenue — FTE
Net interest income
$ 807,667 $ 793,549 $ 14,118 2 %
FTE adjustment
7,779 4,738 3,041 64
Net interest income (4)
815,446 798,287 17,159 2
Noninterest income
492,712 510,495 (17,783 ) (3 )
Total revenue (4)
$ 1,308,158 $ 1,308,782 $ (624 ) %
N.R. — Not relevant, as denominator of calculation is a loss in prior period compared with income in current period.
(1) Comparisons for presented periods are impacted by a number of factors. Refer to Significant Items.

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(2) For all periods presented, the impact of the convertible preferred stock issued in 2008 and the warrants issued to the U.S. Department of the Treasury in 2008 related to Huntington’s participation in the voluntary Capital Purchase Program was excluded from the diluted share calculation because the result was more than basic earnings per common share (anti-dilutive) for the periods. The convertible preferred stock and warrants were repurchased in December 2010 and January 2011, respectively.
(3) Net income excluding expense for amortization of intangibles for the period divided by average tangible common shareholders’ equity. Average tangible common shareholders’ equity equals average total common shareholders’ equity less average intangible assets and goodwill. Expense for amortization of intangibles and average intangible assets are net of deferred tax liability, and calculated assuming a 35% tax rate.
(4) On a fully-taxable equivalent (FTE) basis assuming a 35% tax rate.
(5) Noninterest expense less amortization of intangibles and goodwill impairment divided by the sum of FTE net interest income and noninterest income excluding securities gains (losses).
Significant Items
Definition of Significant Items
From time-to-time, revenue, expenses, or taxes, are impacted by items judged by us to be outside of ordinary banking activities and / or by items that, while they may be associated with ordinary banking activities, are so unusually large that their outsized impact is believed by us at that time to be infrequent or short-term in nature. We refer to such items as Significant Items. Most often, these Significant Items result from factors originating outside the Company; e.g., regulatory actions / assessments, windfall gains, changes in accounting principles, one-time tax assessments / refunds, litigation actions, etc. In other cases, they may result from our decisions associated with significant corporate actions out of the ordinary course of business; e.g., merger / restructuring charges, recapitalization actions, goodwill impairment, etc.
Even though certain revenue and expense items are naturally subject to more volatility than others due to changes in market and economic environment conditions, as a general rule volatility alone does not define a Significant Item. For example, changes in the provision for credit losses, gains / losses from investment activities, asset valuation writedowns, etc., reflect ordinary banking activities and are, therefore, typically excluded from consideration as a Significant Item.
We believe the disclosure of Significant Items provides a better understanding of our performance and trends to ascertain which of such items, if any, to include or exclude from an analysis of our performance; i.e., within the context of determining how that performance differed from expectations, as well as how, if at all, to adjust estimates of future performance accordingly. To this end, we adopted a practice of listing Significant Items in our external disclosure documents (e.g., earnings press releases, investor presentations, Forms 10-Q and 10-K).
Significant Items for any particular period are not intended to be a complete list of items that may materially impact current or future period performance.
Significant Items Influencing Financial Performance Comparisons
Earnings comparisons were impacted by the Significant Items summarized below.
1. Litigation Reserve. During the 2011 first quarter, $17.0 million of additions to litigation reserves were recorded as other noninterest expense. This resulted in a negative impact of $0.01 per common share.
2. Franklin Relationship. Our relationship with Franklin was acquired in the Sky Financial acquisition in 2007. Significant events relating to this relationship following the acquisition, and the impacts of those events on our reported results were as follows:
On March 31, 2009, we restructured our relationship with Franklin. During the 2010 first quarter, a $38.2 million ($0.05 per common share) net tax benefit was recognized, primarily reflecting the increase in the net deferred tax asset relating to the assets acquired from the March 31, 2009 restructuring.
During the 2010 second quarter, the remaining portfolio of Franklin-related loans ($333.0 million of residential mortgages, and $64.7 million of home equity loans) was transferred to loans held for sale. At the time of the transfer, the loans were marked to the lower of cost or fair value, less costs to sell, of $323.4 million, resulting in $75.5 million of charge-offs, and the provision for credit losses commensurately increased $75.5 million ($0.07 per common share).

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The following table reflects the earnings impact of the above-mentioned significant items for periods affected by this Results of Operations discussion:
Table 3 — Significant Items Influencing Earnings Performance Comparison
Three Months Ended
June 30, 2011 March 31, 2011 June 30, 2010
(dollar amounts in thousands, except per share amounts) After-tax EPS After-tax EPS After-tax EPS
Net income
$ 145,918 $ 126,446 $ 48,764
Earnings per share, after-tax
$ 0.16 $ 0.14 $ 0.03
Change from prior quarter — $
0.02 0.09 0.02
Change from prior quarter — %
14.3 % 180.0 % 200.0 %
Change from year-ago — $
$ 0.13 $ 0.13 $ 0.43
Change from year-ago — %
433 % 1,300 % (107.5 )%
Significant Items — favorable (unfavorable) impact:
Earnings (1) EPS Earnings (1) EPS Earnings (1) EPS
Franklin-related loans transferred to held for sale
$ $ $ $ $ (75,500 ) $ (0.07 )
Litigation reserves addition
(17,028 ) (0.01 )
(1) Pretax unless otherwise noted.
Six Months Ended
June 30, 2011 June 30, 2010
(dollar amounts in thousands) After-tax EPS After-tax EPS
Net income
$ 272,364 $ 88,501
Earnings per share, after-tax
$ 0.30 $ 0.04
Change from a year-ago — $
0.26 6.51
Change from a year-ago — %
650 % 101 %
Significant Items — favorable (unfavorable) impact:
Earnings (1) EPS Earnings (1) EPS
Franklin-related loans transferred to held for sale
$ $ $ (75,500 ) $ (0.07 )
Net tax benefit recognized (2)
38,222 0.05
Litigation reserves addition
(17,028 ) (0.01 )
(1) Pretax unless otherwise noted.
(2) After-tax.
Pretax, Pre-provision Income Trends
One non-GAAP performance measurement that we believe is useful in analyzing our underlying performance trends is pretax, pre-provision income. This is the level of pretax earnings adjusted to exclude the impact of: (a) provision expense, (b) investment securities gains/losses, which are excluded because securities market valuations may become particularly volatile in times of economic stress, (c) amortization of intangibles expense, which is excluded because the return on tangible common equity is a key measurement we use to gauge performance trends, and (d) certain other items identified by us (see Significant Items) that we believe may distort our underlying performance trends.

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The following table reflects pretax, pre-provision income for each of the past five quarters:
Table 4 — Pretax, Pre-provision Income (1)
2011 2010
(dollar amounts in thousands) Second First Fourth Third Second
Income before income taxes
$ 194,898 $ 161,191 $ 157,948 $ 130,636 $ 62,083
Add: Provision for credit losses
35,797 49,385 86,973 119,160 193,406
Less: Securities gains (losses)
1,507 40 (103 ) (296 ) 156
Add: Amortization of intangibles
13,386 13,370 15,046 15,145 15,141
Less: Litigation reserves addition
(17,028 )
Total pretax, pre-provision income
$ 242,574 $ 240,934 $ 260,070 $ 265,237 $ 270,474
Change in total pretax, pre-provision income:
Prior quarter change — amount
$ 1,640 $ (19,136 ) $ (5,167 ) $ (5,237 ) $ 18,645
Prior quarter change — percent
1 % (7 )% (2 )% (2 )% 7 %
(1) Pretax, pre-provision income is a non-GAAP financial measure. Any ratio utilizing this financial measure is also non-GAAP. This financial measure has been included as it is considered to be an important metric with which to analyze and evaluate our results of operations and financial strength. Other companies may calculate this financial measure differently.
Pretax, pre-provision income was $242.6 million in the 2011 second quarter, up $1.6 million, or 1%, from the prior quarter. As discussed in the sections that follow, the increase from the prior quarter primarily reflected higher revenue partially offset by higher noninterest expense after consideration of the prior quarter Significant Item.
Net Interest Income / Average Balance Sheet
2011 Second Quarter versus 2010 Second Quarter
Fully-taxable equivalent net interest income increased $5.0 million, or 1%, from the year-ago quarter. This reflected the benefit of a $1.4 billion, or 3%, increase in average earning assets and a 6 basis points decline in the FTE net interest margin. The increase in average earning assets reflected a combination of factors including:
$1.4 billion, or 4%, increase in average total loans and leases.
$0.3 billion, or 3%, increase in average total available-for-sale and other securities and held-to-maturity securities.
The 6 basis points decline in the FTE net interest margin reflected a reduction in derivatives income, lower loan and securities yields, partially offset by the positive impacts of increases in low cost deposits and improved deposit pricing.

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The following table details the change in our average loans and leases and deposits:
Table 5 — Average Loans/Leases and Deposits — 2011 Second Quarter vs. 2010 Second Quarter
Second Quarter Change
(dollar amounts in millions) 2011 2010 Amount Percent
Loans/Leases
Commercial and industrial
$ 13,370 $ 12,244 $ 1,126 9 %
Commercial real estate
6,233 7,364 (1,131 ) (15 )
Total commercial
19,603 19,608 (5 )
Automobile
5,954 4,634 1,320 28
Home equity
7,874 7,544 330 4
Residential mortgage
4,566 4,608 (42 ) (1 )
Other loans
538 695 (157 ) (23 )
Total consumer
18,932 17,481 1,451 8
Total loans and leases
$ 38,535 $ 37,089 $ 1,446 4 %
Deposits
Demand deposits — noninterest-bearing
$ 7,806 $ 6,849 $ 957 14 %
Demand deposits — interest-bearing
5,565 5,971 (406 ) (7 )
Money market deposits
12,879 11,103 1,776 16
Savings and other domestic time deposits
4,778 4,677 101 2
Core certificates of deposit
8,079 9,199 (1,120 ) (12 )
Total core deposits
39,107 37,799 1,308 3
Other deposits
2,147 2,568 (421 ) (16 )
Total deposits
$ 41,254 $ 40,367 $ 887 2 %
The $1.4 billion, or 4%, increase in average total loans and leases primarily reflected:
$1.3 billion, or 28%, increase in the average automobile portfolio. Automobile lending is a core competency and continued area of growth. The growth from the year-ago quarter exhibited further penetration within our historical geographic footprint, as well as the positive impact of our expansion into Eastern Pennsylvania and selected New England states. Origination quality remained high.
$1.1 billion, or 9%, increase in the average C&I portfolio. Growth from the year-ago quarter reflected the benefits from our strategic initiatives including large corporate, asset based lending, automobile floor plan lending, and equipment finance. In addition, traditional middle-market loans continued to grow despite line utilization rates that remained well below historical norms.
$0.3 billion, or 4%, increase in average home equity portfolio, reflecting continued slower runoff due to the low interest rate environment.
Partially offset by:
$1.1 billion, or 15%, decrease in average CRE loans reflecting the continued execution of our plan to reduce the CRE exposure, primarily in the noncore CRE segment. This reduction is expected to continue through 2011, reflecting normal amortization, paydowns, refinancing, and restructures.
The $0.9 billion, or 2%, increase in average total deposits from the year-ago quarter reflected:
$1.3 billion, or 3%, growth in average total core deposits. The drivers of this change were a $1.8 billion, or 16%, growth in average money market deposits, and a $1.0 billion, or 14%, growth in average noninterest-bearing demand deposits. These increases were partially offset by a $1.1 billion, or 12%, decline in average core certificates of deposit and a $0.4 billion, or 7%, decrease in average interest-bearing demand deposits.
Partially offset by:
$0.4 billion, or 16%, decline in other deposits including a $0.2 billion, or 11%, decline in average brokered deposits and negotiable CDs, and a $0.2 billion, or 29%, decrease in other domestic deposits of $250,000 or more, which reflected a strategy of reducing such noncore funding.

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2011 Second Quarter versus 2011 First Quarter
FTE net interest income decreased $1.1 million, or less than 1%, from the 2011 first quarter. This reflected a 1% (3% annualized) decrease in average earning assets and a decrease in the FTE net interest margin to 3.40% from 3.42%. The decrease in average earning assets reflected a combination of factors including:
$0.5 billion, or 5% (22% annualized), decrease in average available-for-sale and other and held-to-maturity securities given the low level of interest rates and the incremental cost to grow interest-bearing deposits. Certain higher cost deposits were allowed to mature without replacement, resulting in a reduction to the securities portfolio.
$0.2 billion decline in loans held for sale as our mortgage pipeline slowed considerably during the current quarter and sales of prior originations were completed.
The 2 basis points decline in the FTE net interest margin reflected a reduction in derivatives income and lower loan yields, partially offset by the positive impact of increases in low cost deposits and improved deposit pricing.
The following table details the change in our average loans / leases and deposits:
Table 6 — Average Loans/Leases and Deposits — 2011 Second Quarter vs. 2011 First Quarter
2011 Change
(dollar amounts in millions) Second Quarter First Quarter Amount Percent
Loans/Leases
Commercial and industrial
$ 13,370 $ 13,121 $ 249 2 %
Commercial real estate
6,233 6,524 (291 ) (4 )
Total commercial
19,603 19,645 (42 )
Automobile
5,954 5,701 253 4
Home equity
7,874 7,728 146 2
Residential mortgage
4,566 4,465 101 2
Other consumer
538 559 (21 ) (4 )
Total consumer
18,932 18,453 479 3
Total loans and leases
$ 38,535 $ 38,098 $ 437 1 %
Deposits
Demand deposits — noninterest-bearing
$ 7,806 $ 7,333 $ 473 6 %
Demand deposits — interest-bearing
5,565 5,357 208 4
Money market deposits
12,879 13,492 (613 ) (5 )
Savings and other domestic time deposits
4,778 4,701 77 2
Core certificates of deposit
8,079 8,391 (312 ) (4 )
Total core deposits
39,107 39,274 (167 )
Other deposits
2,147 2,390 (243 ) (10 )
Total deposits
$ 41,254 $ 41,664 $ (410 ) (1) %
The $0.4 billion, or 1% (5% annualized), increase in average total loans and leases reflected:
$0.2 billion, or 2% (8% annualized), growth in the average C&I portfolio. The growth in the C&I portfolio during the second quarter came from several business lines including business banking, large corporate, middle market, asset based lending, and equipment finance. The growth was also evident across our geographic footprint, further contributing to the diversity of the portfolio. Non-automobile floorplan C&I utilization rates were little changed from the end of the prior quarter. In contrast, automobile floor plan utilization rates were down, primarily reflecting the slowdown in production by Japanese manufacturers.
$0.3 billion, or 4% (18% annualized), growth in the average automobile portfolio. We continued to originate very high quality loans with attractive returns. We focus on larger, multi-franchised, well-capitalized dealers that are rarely reliant on the success of one franchise to generate profitability. While the used automobile market remained very strong, we increased our originations of new vehicle loans, which reflected a reduction by the captive finance companies in the number and magnitude of incentive programs offered through dealers due to supply concerns.

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Partially offset by:
$0.3 billion, or 4% (18% annualized), decline in average CRE loans, primarily as a result of our on-going strategy to reduce our exposure to the commercial real estate market. We were successful in reducing exposure across virtually all of the CRE project types that we actively manage through our concentration management process. The decline in noncore CRE accounted for the vast majority of the decline in the total CRE portfolio. The noncore CRE portfolio declines reflected paydowns, refinancing, and NCOs. The core CRE portfolio continued to exhibit high quality characteristics with minimal downgrade or NCO activity.
The $0.4 billion, or 1% (4% annualized), decrease in average total deposits from the 2011 first quarter reflected:
$0.6 billion, or 5% (18% annualized), decline in average money market deposits, reflecting lowered pricing on our money market accounts.
$0.3 billion, or 4% (15% annualized), decrease in average core certificates of deposit as rates offered on new certificates of deposits declined.
Partially offset by:
$0.5 billion, or 6% (26% annualized), increase in average noninterest-bearing demand deposit accounts. This was driven primarily by growth in commercial noninterest-bearing demand deposits related to government finance and business banking.
$0.2 billion, or 4% (16% annualized), growth in interest-bearing demand deposits, primarily driven by consumer checking account growth.

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Tables 7 and 8 reflect quarterly average balance sheets and rates earned and paid on interest-earning assets and interest-bearing liabilities.
Table 7 — Consolidated Quarterly Average Balance Sheets
Change
2011 2010 2Q11 vs. 2Q10
(dollar amounts in millions) Second First Fourth Third Second Amount Percent
Assets
Interest-bearing deposits in banks
$ 131 $ 130 $ 218 $ 282 $ 309 $ (178 ) (58) %
Trading account securities
112 144 297 110 127 (15 ) (12 )
Federal funds sold and securities purchased under resale agreement
21
Loans held for sale
181 420 779 663 323 (142 ) (44 )
Available-for-sale and other securities:
Taxable
8,428 9,108 9,747 8,876 8,369 59 1
Tax-exempt
436 445 449 365 389 47 12
Total available-for-sale and other securities
8,864 9,553 10,196 9,241 8,758 106 1
Held-to-maturity securities — taxable
174 174
Loans and leases: (1)
Commercial:
Commercial and industrial
13,370 13,121 12,767 12,393 12,244 1,126 9
Commercial real estate:
Construction
554 611 716 989 1,279 (725 ) (57 )
Commercial
5,679 5,913 6,082 6,084 6,085 (406 ) (7 )
Commercial real estate
6,233 6,524 6,798 7,073 7,364 (1,131 ) (15 )
Total commercial
19,603 19,645 19,565 19,466 19,608 (5 )
Consumer:
Automobile
5,954 5,701 5,520 5,140 4,634 1,320 28
Home equity
7,874 7,728 7,709 7,567 7,544 330 4
Residential mortgage
4,566 4,465 4,430 4,389 4,608 (42 ) (1 )
Other consumer
538 559 576 653 695 (157 ) (23 )
Total consumer
18,932 18,453 18,235 17,749 17,481 1,451 8
Total loans and leases
38,535 38,098 37,800 37,215 37,089 1,446 4
Allowance for loan and lease losses
(1,128 ) (1,231 ) (1,323 ) (1,384 ) (1,506 ) 378 (25 )
Net loans and leases
37,407 36,867 36,477 35,831 35,583 1,824 5
Total earning assets
48,018 48,345 49,290 47,511 46,606 1,412 3
Cash and due from banks
1,068 1,299 1,187 1,618 1,509 (441 ) (29 )
Intangible assets
652 665 679 695 710 (58 ) (8 )
All other assets
4,160 4,291 4,313 4,277 4,384 (224 ) (5 )
Total assets
$ 52,770 $ 53,369 $ 54,146 $ 52,717 $ 51,703 $ 1,067 2 %
Liabilities and Shareholders’ Equity
Deposits:
Demand deposits — noninterest-bearing
$ 7,806 $ 7,333 $ 7,188 $ 6,768 $ 6,849 $ 957 14 %
Demand deposits — interest-bearing
5,565 5,357 5,317 5,319 5,971 (406 ) (7 )
Money market deposits
12,879 13,492 13,158 12,336 11,103 1,776 16
Savings and other domestic deposits
4,778 4,701 4,640 4,639 4,677 101 2
Core certificates of deposit
8,079 8,391 8,646 8,948 9,199 (1,120 ) (12 )
Total core deposits
39,107 39,274 38,949 38,010 37,799 1,308 3
Other domestic time deposits of $250,000 or more
467 606 737 690 661 (194 ) (29 )
Brokered deposits and negotiable CDs
1,333 1,410 1,575 1,495 1,505 (172 ) (11 )
Deposits in foreign offices
347 374 443 451 402 (55 ) (14 )
Total deposits
41,254 41,664 41,704 40,646 40,367 887 2
Short-term borrowings
2,112 2,134 2,134 1,739 966 1,146 119
Federal Home Loan Bank advances
97 30 112 188 212 (115 ) (54 )
Subordinated notes and other long-term debt
3,249 3,525 3,558 3,672 3,836 (587 ) (15 )
Total interest-bearing liabilities
38,906 40,020 40,320 39,477 38,532 374 1
All other liabilities
913 994 993 952 924 (11 ) (1 )
Shareholders’ equity
5,145 5,022 5,645 5,520 5,398 (253 ) (5 )
Total liabilities and shareholders’ equity
$ 52,770 $ 53,369 $ 54,146 $ 52,717 $ 51,703 $ 1,067 2 %
(1) For purposes of this analysis, NALs are reflected in the average balances of loans.

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Table 8 — Consolidated Quarterly Net Interest Margin Analysis
Average Rates (2)
2011 2010
Fully-taxable equivalent basis (1) Second First Fourth Third Second
Assets
Interest-bearing deposits in banks
0.22 % 0.11 % 0.63 % 0.21 % 0.20 %
Trading account securities
1.59 1.37 1.98 1.20 1.74
Federal funds sold and securities purchased under resale agreement
0.09
Loans held for sale
4.97 4.08 4.01 5.75 5.02
Available-for-sale and other securities:
Taxable
2.59 2.53 2.42 2.77 2.85
Tax-exempt
4.02 4.70 4.59 4.70 4.62
Total available-for-sale and other securities
2.66 2.63 2.52 2.84 2.93
Held-to-maturity securities — taxable
2.96
Loans and leases: (3)
Commercial:
Commercial and industrial
4.31 4.57 4.94 5.14 5.31
Commercial real estate:
Construction
3.37 3.36 3.07 2.83 2.61
Commercial
3.90 3.93 3.92 3.91 3.69
Commercial real estate
3.84 3.88 3.83 3.76 3.49
Total commercial
4.16 4.34 4.56 4.64 4.63
Consumer:
Automobile
5.06 5.22 5.46 5.79 6.46
Home equity
4.49 4.54 4.64 4.74 5.26
Residential mortgage
4.62 4.76 4.82 4.97 4.70
Other consumer
7.76 7.85 7.92 7.10 6.84
Total consumer
4.79 4.90 5.04 5.19 5.49
Total loans and leases
4.47 4.61 4.79 4.90 5.04
Total earning assets
4.14 % 4.24 % 4.29 % 4.49 % 4.63 %
Liabilities and Shareholders’ Equity
Deposits:
Demand deposits — noninterest-bearing
% % % % %
Demand deposits — interest-bearing
0.09 0.09 0.13 0.17 0.22
Money market deposits
0.40 0.50 0.77 0.86 0.93
Savings and other domestic deposits
0.74 0.81 0.90 0.99 1.07
Core certificates of deposit
2.04 2.07 2.11 2.31 2.68
Total core deposits
0.82 0.89 1.05 1.18 1.33
Other domestic time deposits of $250,000 or more
1.01 1.08 1.21 1.28 1.37
Brokered deposits and negotiable CDs
0.89 1.11 1.53 2.21 2.56
Deposits in foreign offices
0.26 0.20 0.17 0.22 0.19
Total deposits
0.82 0.90 1.06 1.21 1.37
Short-term borrowings
0.16 0.18 0.20 0.22 0.21
Federal Home Loan Bank advances
0.88 2.98 0.95 1.25 1.93
Subordinated notes and other long-term debt
2.39 2.34 2.15 2.15 2.05
Total interest-bearing liabilities
0.91 % 0.99 % 1.11 % 1.25 % 1.41 %
Net interest rate spread
3.19 % 3.21 % 3.16 % 3.24 % 3.22 %
Impact of noninterest-bearing funds on margin
0.21 0.21 0.21 0.21 0.24
Net interest margin
3.40 % 3.42 % 3.37 % 3.45 % 3.46 %
(1) FTE yields are calculated assuming a 35% tax rate.
(2) Loan and lease and deposit average rates include impact of applicable derivatives, non-deferrable fees, and amortized deferred fees.
(3) For purposes of this analysis, NALs are reflected in the average balances of loans.

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2011 First Six Months versus 2010 First Six Months
Fully-taxable equivalent net interest income for the six-month period of 2011 increased $17.2 million, or 2%, from the comparable year-ago period. This reflected the benefit of a 4% increase in average total earning assets partially offset by a decrease in the net interest margin to 3.41% from 3.47%. The increase in average earning assets reflected a combination of factors including:
$1.3 billion, or 3%, increase in average total loans and leases.
$0.7 billion, or 7%, increase in average total available-for-sale and other and held-to-maturity securities.
The 6 basis points decrease in the net interest margin reflected reduction in derivatives income, lower loan yields, and lower securities yields, partially offset by the positive impact of increases in low cost deposits and improved deposit pricing.
The following table details the change in our reported loans and deposits:
Table 9 — Average Loans/Leases and Deposits — 2011 First Six Months vs. 2010 First Six Months
Six Months Ended June 30, Change
(dollar amounts in millions) 2011 2010 Amount Percent
Loans/Leases
Commercial and industrial
$ 13,246 $ 12,279 $ 967 8 %
Commercial real estate
6,377 7,520 (1,143 ) (15 )
Total commercial
19,623 19,799 (176 ) (1 )
Automobile
5,829 4,443 1,386 31
Home equity
7,801 7,541 260 3
Residential mortgage
4,516 4,543 (27 ) (1 )
Other consumer
548 709 (161 ) (23 )
Total consumer
18,694 17,236 1,458 8
Total loans and leases
$ 38,317 $ 37,035 $ 1,282 3 %
Deposits
Demand deposits — noninterest-bearing
$ 7,571 $ 6,739 $ 832 12 %
Demand deposits — interest-bearing
5,462 5,844 (382 ) (7 )
Money market deposits
13,184 10,723 2,461 23
Savings and other domestic deposits
4,740 4,645 95 2
Core certificates of deposit
8,234 9,586 (1,352 ) (14 )
Total core deposits
39,191 37,537 1,654 4
Other deposits
2,268 2,759 (491 ) (18 )
Total deposits
$ 41,459 $ 40,296 $ 1,163 3 %
The $1.3 billion, or 3%, increase in average total loans and leases primarily reflected:
$1.4 billion, or 31%, increase in the average automobile portfolio. Automobile lending is a core competency and continued area of growth. The growth from the year-ago period exhibited further penetration within our historical geographic footprint, as well as the positive impact of our expansion into Eastern Pennsylvania and selected New England states. Origination quality remained high.
$1.0 billion, or 8%, increase in the average C&I portfolio. Growth from the year-ago period reflected the benefits from our strategic initiatives including large corporate, asset based lending, automobile floor plan lending, and equipment finance. Traditional middle-market loans continued to grow despite line utilization rates that remain well below historical norms.
$0.3 billion, or 3%, increase in the average home equity portfolio, reflecting higher originations and continued slower runoff.

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Partially offset by:
$1.1 billion, or 15%, decrease in average CRE loans reflecting the continued execution of our plan to reduce the CRE exposure, primarily in the noncore CRE segment. This reduction is expected to continue through 2011, reflecting normal amortization, paydowns, and refinancing.
The $1.2 billion, or 3%, increase in average total deposits reflected:
$1.7 billion, or 4%, growth in average total core deposits. The drivers of this change were a $2.5 billion, or 23%, growth in average money market deposits, and a $0.8 billion, or 12%, growth in average noninterest-bearing demand deposits. These increases were partially offset by a $1.4 billion, or 14%, decline in average core certificates of deposit and a $0.4 billion, or 7%, decrease in average interest-bearing demand deposits.
Partially offset by:
$0.5 billion, or 18%, decline in other deposits including a $0.3 billion, or 18%, decline in average brokered deposits and negotiable CDs, and a $0.1 billion, or 21%, decrease in other domestic time deposits of $250,000 or more, reflecting a strategy of reducing such noncore funding.

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Table 10 — Consolidated YTD Average Balance Sheets and Net Interest Margin Analysis
YTD Average Balances YTD Average Rates (2)
Fully-taxable equivalent basis (1) Six Months Ended June 30, Change Six Months Ended June 30,
(dollar amounts in millions) 2011 2010 Amount Percent 2011 2010
Assets
Interest-bearing deposits in banks
$ 130 $ 328 $ (198 ) (60) % 0.17 % 0.19 %
Trading account securities
128 112 16 14 1.47 1.92
Federal funds sold and securities purchased under resale agreement
11 11 0.09
Loans held for sale
300 334 (34 ) (10 ) 4.36 5.00
Available-for-sale and other securities:
Taxable
8,766 8,197 569 7 2.56 2.89
Tax-exempt
441 418 23 6 4.37 4.49
Total available-for-sale and other securities
9,207 8,615 592 7 2.65 2.97
Total held-to-maturity securities
87 87 2.95
Loans and leases: (3)
Commercial:
Commercial and industrial
13,246 12,279 967 8 4.44 5.45
Commercial real estate:
Construction
582 1,344 (762 ) (57 ) 3.37 2.64
Commercial
5,795 6,176 (381 ) (6 ) 3.91 3.64
Commercial real estate
6,377 7,520 (1,143 ) (15 ) 3.86 3.46
Total commercial
19,623 19,799 (176 ) (1 ) 4.25 4.70
Consumer:
Automobile
5,829 4,443 1,386 31 5.14 6.54
Home equity
7,801 7,541 260 3 4.51 5.42
Residential mortgage
4,516 4,543 (27 ) (1 ) 4.69 4.79
Other consumer
548 709 (161 ) (23 ) 7.80 6.92
Total consumer
18,694 17,236 1,458 8 4.85 5.61
Total loans and leases
38,317 37,035 1,282 3 4.54 5.12
Allowance for loan and lease losses
(1,179 ) (1,508 ) 329 (22 )
Net loans and leases
37,138 35,527 1,611 5
Total earning assets
48,180 46,424 1,756 4 4.19 % 4.72 %
Cash and due from banks
1,183 1,634 (451 ) (28 )
Intangible assets
659 717 (58 ) (8 )
All other assets
4,224 4,436 (212 ) (5 )
Total assets
$ 53,067 $ 51,703 $ 1,364 3 %
Liabilities and Shareholders’ Equity
Deposits:
Demand deposits — noninterest-bearing
$ 7,571 $ 6,739 $ 832 12 % % %
Demand deposits — interest-bearing
5,462 5,844 (382 ) (7 ) 0.09 0.22
Money market deposits
13,184 10,723 2,461 23 0.45 0.96
Savings and other domestic deposits
4,740 4,645 95 2 0.78 1.13
Core certificates of deposit
8,234 9,586 (1,352 ) (14 ) 2.05 2.81
Total core deposits
39,191 37,537 1,654 4 0.86 1.42
Other domestic time deposits of $250,000 or more
536 680 (144 ) (21 ) 1.05 1.41
Brokered deposits and negotiable CDs
1,372 1,673 (301 ) (18 ) 1.00 2.52
Deposits in foreign offices
360 406 (46 ) (11 ) 0.23 0.19
Total deposits
41,459 40,296 1,163 3 0.86 1.46
Short-term borrowings
2,123 947 1,176 124 0.17 0.21
Federal Home Loan Bank advances
63 196 (133 ) (68 ) 1.36 2.28
Subordinated notes and other long-term debt
3,386 3,948 (562 ) (14 ) 2.36 2.15
Total interest-bearing liabilities
39,460 38,648 812 2 0.95 1.51
All other liabilities
952 935 17 2
Shareholders’ equity
5,084 5,381 (297 ) (6 )
Total liabilities and shareholders’ equity
$ 53,067 $ 51,703 $ 1,364 3 %
Net interest rate spread
3.20 3.21
Impact of noninterest-bearing funds on margin
0.21 0.26
Net interest margin
3.41 % 3.47 %
(1) FTE yields are calculated assuming a 35% tax rate.
(2) Loan, lease, and deposit average rates include the impact of applicable derivatives, non-deferrable fees, and amortized deferred fees.
(3) For purposes of this analysis, nonaccrual loans are reflected in the average balances of loans.

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Provision for Credit Losses
(This section should be read in conjunction with Significant Item 2, the Credit Risk section, and the Franklin-related Impacts section.)
The provision for credit losses is the expense necessary to maintain the ALLL and the AULC at levels appropriate to absorb our estimate of inherent credit losses in the loan and lease portfolio and the portfolio of unfunded loan commitments and letters-of-credit.
The provision for credit losses for the 2011 second quarter was $35.8 million, down $13.6 million, or 28%, from the prior quarter and down $157.6 million, or 81%, from the year-ago quarter. The provision for credit losses for the first six-month period of 2011 was $85.2 million, down $343.2 million, or 80%, from the year-ago period. These declines reflected a combination of lower NCOs and a reduction in commercial Criticized loans. The reduction in commercial Criticized loans reflected the resolution of problem credits for which reserves had been previously established. The current quarter’s provision for credit losses was $61.7 million less than total NCOs and the provision for credit losses for the first six-month period of 2011 was $177.4 million less than total NCOs (see Credit Quality discussion).
Noninterest Income
The following table reflects noninterest income for each of the past five quarters:
Table 11 — Noninterest Income
2011 2010
(dollar amounts in thousands) Second First Fourth Third Second
Service charges on deposit accounts
$ 60,675 $ 54,324 $ 55,810 $ 65,932 $ 75,934
Mortgage banking income
23,835 22,684 53,169 52,045 45,530
Trust services
30,392 30,742 29,394 26,997 28,399
Electronic banking
31,728 28,786 28,900 28,090 28,107
Insurance income
16,399 17,945 19,678 19,801 18,074
Brokerage income
20,819 20,511 16,953 16,575 18,425
Bank owned life insurance income
17,602 14,819 16,113 14,091 14,392
Automobile operating lease income
7,307 8,847 10,463 11,356 11,842
Securities gains (losses)
1,507 40 (103 ) (296 ) 156
Other income
45,503 38,247 33,843 32,552 28,784
Total noninterest income
$ 255,767 $ 236,945 $ 264,220 $ 267,143 $ 269,643
The following table details mortgage banking income and the net impact of MSR hedging activity for each of the past five quarters:
Table 12 — Mortgage Banking Income
2011 2010
(dollar amounts in thousands, except as noted) Second First Fourth Third Second
Mortgage banking income
Origination and secondary marketing
$ 11,522 $ 19,799 $ 48,236 $ 35,840 $ 19,778
Servicing fees
12,417 12,546 11,474 12,053 12,178
Amortization of capitalized servicing
(9,052 ) (9,863 ) (13,960 ) (13,003 ) (10,137 )
Other mortgage banking income
4,259 3,769 4,789 4,966 3,664
Sub-total
19,146 26,251 50,539 39,856 25,483
MSR valuation adjustment (1)
(8,292 ) 774 31,319 (12,047 ) (26,221 )
Net trading gains (losses) related to MSR hedging
12,981 (4,341 ) (28,689 ) 24,236 46,268
Total mortgage banking income
$ 23,835 $ 22,684 $ 53,169 $ 52,045 $ 45,530
Mortgage originations (in millions)
$ 916 $ 929 $ 1,827 $ 1,619 $ 1,161
Average trading account securities used to hedge MSRs (in millions)
22 46 184 23 28
Capitalized mortgage servicing rights (2)
189,740 202,559 196,194 161,594 179,138
Total mortgages serviced for others (in millions) (2)
16,315 16,456 15,933 15,713 15,954
MSR % of investor servicing portfolio
1.16 % 1.23 % 1.23 % 1.03 % 1.12 %
Net impact of MSR hedging
MSR valuation adjustment (1)
$ (8,292 ) $ 774 $ 31,319 $ (12,047 ) $ (26,221 )
Net trading gains (losses) related to MSR hedging
12,981 (4,341 ) (28,689 ) 24,236 46,268
Net interest income related to MSR hedging
84 99 713 32 58
Net gain (loss) of MSR hedging
$ 4,773 $ (3,468 ) $ 3,343 $ 12,221 $ 20,105
(1) The change in fair value for the period represents the MSR valuation adjustment, net of amortization of capitalized servicing.
(2) At period end.

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2011 Second Quarter versus 2010 Second Quarter
Noninterest income decreased $13.9 million, or 5%, from the year-ago quarter.
Table 13 — Noninterest Income — 2011 Second Quarter vs. 2010 Second Quarter
Second Quarter Change
(dollar amounts in thousands) 2011 2010 Amount Percent
Service charges on deposit accounts
$ 60,675 $ 75,934 $ (15,259 ) (20 )%
Mortgage banking income
23,835 45,530 (21,695 ) (48 )
Trust services
30,392 28,399 1,993 7
Electronic banking
31,728 28,107 3,621 13
Insurance income
16,399 18,074 (1,675 ) (9 )
Brokerage income
20,819 18,425 2,394 13
Bank owned life insurance income
17,602 14,392 3,210 22
Automobile operating lease income
7,307 11,842 (4,535 ) (38 )
Securities gains (losses)
1,507 156 1,351 866
Other income
45,503 28,784 16,719 58
Total noninterest income
$ 255,767 $ 269,643 $ (13,876 ) (5 )%
The $13.9 million, or 5%, decrease in total noninterest income from the year-ago quarter reflected:
$21.7 million, or 48%, decrease in mortgage banking income. This primarily reflected a $15.4 million decrease in MSR net hedging income and an $8.3 million, or 42%, decrease in origination and secondary marketing income, as originations decreased 21% from the year-ago quarter.
$15.3 million, or 20%, decline in service charges on deposit accounts, reflecting lower personal service charges due to the implementation of the amendment to Reg E and lower underlying activity levels.
$4.5 million, or 38%, decline in automobile operating lease income reflecting the impact of a declining portfolio as a result of having exited that business in 2008.
Partially offset by:
$16.7 million, or 58%, increase in other income, of which $10.8 million was associated with SBA gains and servicing. Also contributing to the growth were increases from the sale of interest rate protection products and capital markets activities.
$3.6 million, or 13%, increase in electronic banking income, reflecting an increase in debit card transaction volume and new account growth.
$3.2 million, or 22%, increase in bank owned life insurance income.
$2.4 million, or 13%, increase in brokerage income, primarily reflecting increased sales of investment products.
$2.0 million, or 7%, increase in trust services income, due to a $10.3 billion increase in total trust assets, including a $2.5 billion increase in assets under management. This increase reflected improved market values and net growth in accounts.

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2011 Second Quarter versus 2011 First Quarter
Noninterest income increased $18.8 million, or 8%, from the prior quarter.
Table 14 — Noninterest Income — 2011 Second Quarter vs. 2011 First Quarter
2011 Change
(dollar amounts in thousands) Second Quarter First Quarter Amount Percent
Service charges on deposit accounts
$ 60,675 $ 54,324 $ 6,351 12 %
Mortgage banking income
23,835 22,684 1,151 5
Trust services
30,392 30,742 (350 ) (1 )
Electronic banking
31,728 28,786 2,942 10
Insurance income
16,399 17,945 (1,546 ) (9 )
Brokerage income
20,819 20,511 308 2
Bank owned life insurance income
17,602 14,819 2,783 19
Automobile operating lease income
7,307 8,847 (1,540 ) (17 )
Securities gains
1,507 40 1,467 3,668
Other income
45,503 38,247 7,256 19
Total noninterest income
$ 255,767 $ 236,945 $ 18,822 8 %
The $18.8 million, or 8%, increase in total noninterest income from the prior quarter reflected:
$7.3 million, or 19%, increase in other income, reflecting SBA gains, higher market-related gains and capital markets income.
$6.4 million, or 12%, increase in service charges on deposit accounts, primarily reflecting an increase in personal services charges, mostly due to higher NSF/OD fees.
$2.9 million, or 10%, increase in electronic banking income, reflecting higher activity levels.
2011 First Six Months versus 2010 First Six Months
Noninterest income for the first six-month period of 2011 decreased $17.8 million, or 3%, from the comparable year-ago period.
Table 15 — Noninterest Income — 2011 First Six Months vs. 2010 First Six Months
Six Months Ended June 30, Change
(dollar amounts in thousands) 2011 2010 Amount Percent
Service charges on deposit accounts
$ 114,999 $ 145,273 $ (30,274 ) (21 )%
Mortgage banking income
46,519 70,568 (24,049 ) (34 )
Trust services
61,134 56,164 4,970 9
Electronic banking
60,514 53,244 7,270 14
Insurance income
34,344 36,934 (2,590 ) (7 )
Brokerage income
41,330 35,327 6,003 17
Bank owned life insurance income
32,421 30,862 1,559 5
Automobile operating lease income
16,154 24,145 (7,991 ) (33 )
Securities gains
1,547 125 1,422 1,138
Other income
83,750 57,853 25,897 45
Total noninterest income
$ 492,712 $ 510,495 $ (17,783 ) (3 )%

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The following table details mortgage banking income and the net impact of MSR hedging activity for the first six-month period of 2011 and 2010:
Table 16 — Year to Date Mortgage Banking Income and Net Impact of MSR Hedging
Six Months Ended June 30, YTD Change 2011 vs 2010
(dollar amounts in thousands, except as noted) 2011 2010 Amount Percent
Mortgage Banking Income
Origination and secondary marketing
$ 31,321 $ 33,364 $ (2,043 ) (6 )%
Servicing fees
24,963 24,596 367 1
Amortization of capitalized servicing
(18,915 ) (20,202 ) 1,287 (6 )
Other mortgage banking income
8,028 6,874 1,154 17
Subtotal
45,397 44,632 765 2
MSR valuation adjustment (1)
(7,518 ) (31,993 ) 24,475 (77 )
Net trading gains related to MSR hedging
8,640 57,929 (49,289 ) (85 )
Total mortgage banking income
$ 46,519 $ 70,568 $ (24,049 ) (34 )%
Mortgage originations (in millions)
$ 1,845 $ 2,030 $ (185 ) (9 )%
Average trading account securities used to hedge MSRs (in millions)
34 23 11 48
Capitalized mortgage servicing rights (2)
189,740 179,138 10,602 6
Total mortgages serviced for others (in millions) (2)
16,315 15,954 361 2
MSR % of investor servicing portfolio
1.16 % 1.12 % 0.04 % 357 %
Net Impact of MSR Hedging
MSR valuation adjustment (1)
$ (7,518 ) $ (31,993 ) $ 24,475 (77 )%
Net trading gains related to MSR hedging
8,640 57,929 (49,289 ) (85 )
Net interest income related to MSR hedging
183 227 (44 ) (19 )
Net impact of MSR hedging
$ 1,305 $ 26,163 $ (24,858 ) (95 )%
(1) The change in fair value for the period represents the MSR valuation adjustment, excluding amortization of capitalized servicing.
(2) At period end.
The $17.8 million, or 3%, decrease in total noninterest income reflected:
$30.3 million, or 21%, decline in service charges on deposit accounts, reflecting lower personal service charges due to the implementation of the amendment to Reg E and lower underlying activity levels.
$24.0 million, or 34%, decrease in mortgage banking income. This primarily reflected a $24.9 million decrease in MSR net hedging income and a $2.0 million, or 6%, decrease in origination and secondary marketing income, as originations decreased 9% from the year-ago period.
Partially offset by:
$25.9 million, or 45%, increase in other income, of which $20.2 million was associated with SBA gains and loan fees. Also contributing to the growth were increases from the sale of interest rate protection products and capital markets activities.
$7.3 million, or 14%, increase in electronic banking income, reflecting an increase in debit card transaction volume and new account growth.
$6.0 million, or 17%, increase in brokerage income, primarily reflecting increased sales of investment products.
$5.0 million, or 9%, increase in trust services income, due to a $10.3 billion increase in total trust assets, including a $2.5 billion increase in assets under management. This increase reflected improved market values and net growth in accounts.
For additional information regarding noninterest income, see the Legislative and Regulatory section located within the Executive Overview.

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Noninterest Expense
(This section should be read in conjunction with Significant Item 1.)
The following table reflects noninterest expense for each of the past five quarters:
Table 17 — Noninterest Expense
2011 2010
(dollar amounts in thousands) Second First Fourth Third Second
Personnel costs
$ 218,570 $ 219,028 $ 212,184 $ 208,272 $ 194,875
Outside data processing and other services
43,889 40,282 40,943 38,553 40,670
Net occupancy
26,885 28,436 26,670 26,718 25,388
Deposit and other insurance expense
23,823 17,896 23,320 23,406 26,067
Professional services
20,080 13,465 21,021 20,672 24,388
Equipment
21,921 22,477 22,060 21,651 21,585
Marketing
20,102 16,895 16,168 20,921 17,682
Amortization of intangibles
13,386 13,370 15,046 15,145 15,141
OREO and foreclosure expense
4,398 3,931 10,502 12,047 4,970
Automobile operating lease expense
5,434 6,836 8,142 9,159 9,667
Other expense
29,921 48,083 38,537 30,765 33,377
Total noninterest expense
$ 428,409 $ 430,699 $ 434,593 $ 427,309 $ 413,810
Number of employees (full-time equivalent), at period-end
11,457 11,319 11,341 11,279 11,117
2011 Second Quarter versus 2010 Second Quarter
Noninterest expense increased $14.6 million, or 4%, from the year-ago quarter.
Table 18 — Noninterest Expense — 2011 Second Quarter vs. 2010 Second Quarter
Second Quarter Change
(dollar amounts in thousands) 2011 2010 Amount Percent
Personnel costs
$ 218,570 $ 194,875 $ 23,695 12 %
Outside data processing and other services
43,889 40,670 3,219 8
Net occupancy
26,885 25,388 1,497 6
Deposit and other insurance expense
23,823 26,067 (2,244 ) (9 )
Professional services
20,080 24,388 (4,308 ) (18 )
Equipment
21,921 21,585 336 2
Marketing
20,102 17,682 2,420 14
Amortization of intangibles
13,386 15,141 (1,755 ) (12 )
OREO and foreclosure expense
4,398 4,970 (572 ) (12 )
Automobile operating lease expense
5,434 9,667 (4,233 ) (44 )
Other expense
29,921 33,377 (3,456 ) (10 )
Total noninterest expense
$ 428,409 $ 413,810 $ 14,599 4 %
Number of employees (full-time equivalent), at period-end
11,457 11,117 340 3 %
The $14.6 million, or 4%, increase in total noninterest expense from the year-ago quarter reflected:
$23.7 million, or 12%, increase in personnel costs, primarily reflecting a 3% increase in full-time equivalent staff in support of strategic initiatives, as well as higher benefit related expenses, including costs associated with the reinstatement of our 401(k) plan matching contribution in May 2010.
$3.2 million, or 8%, increase in outside data processing and other service, reflecting higher costs associated with the implementation of strategic initiatives.
$2.4 million, or 14%, increase in marketing expense, reflecting higher advertising costs.

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Partially offset by:
$4.3 million, or 18%, decrease in professional services, reflecting lower legal costs, as collection activities declined, and consulting expenses.
$4.2 million, or 44%, decline in automobile operating lease expense as that portfolio continued to run-off.
$3.5 million, or 10%, decrease in other expense, primarily reflecting a decline in expenses related to representations and warranties losses on mortgage loans sold.
2011 Second Quarter versus 2011 First Quarter
Noninterest expense decreased $2.3 million, or 1%, from the prior quarter.
Table 19 — Noninterest Expense — 2011 Second Quarter vs. 2011 First Quarter
2011 Change
(dollar amounts in thousands) Second Quarter First Quarter Amount Percent
Personnel costs
$ 218,570 $ 219,028 $ (458 ) %
Outside data processing and other services
43,889 40,282 3,607 9
Net occupancy
26,885 28,436 (1,551 ) (5 )
Deposit and other insurance expense
23,823 17,896 5,927 33
Professional services
20,080 13,465 6,615 49
Equipment
21,921 22,477 (556 ) (2 )
Marketing
20,102 16,895 3,207 19
Amortization of intangibles
13,386 13,370 16
OREO and foreclosure expense
4,398 3,931 467 12
Automobile operating lease expense
5,434 6,836 (1,402 ) (21 )
Other expense
29,921 48,083 (18,162 ) (38 )
Total noninterest expense
$ 428,409 $ 430,699 $ (2,290 ) (1 )%
Number of employees (full-time equivalent), at period-end
11,457 11,319 138 1 %
The $2.3 million, or 1%, decrease in total noninterest expense from the prior quarter reflected:
$18.2 million, or 38%, decrease in other expense, primarily reflecting the prior quarter’s $17.0 million addition to litigation reserves.
Partially offset by:
$6.6 million, or 49%, increase in professional services, reflecting higher costs supporting regulatory and litigation efforts.
$5.9 million, or 33%, temporary increase in deposit and other insurance expenses.
$3.6 million, or 9%, increase in outside data processing and other services, reflecting higher appraisal costs and system upgrade expenses.
$3.2 million, or 19%, increase in marketing expense, reflecting higher advertising costs.

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2011 First Six Months versus 2010 First Six Months
Noninterest expense for the first six-month period of 2011 increased $47.2 million, or 6%, from the comparable year-ago period.
Table 20 — Noninterest Expense — 2011 First Six Months vs. 2010 First Six Months
Six Months Ended June 30, Change
(dollar amounts in thousands) 2011 2010 Amount Percent
Personnel costs
$ 437,598 $ 378,517 $ 59,081 16 %
Outside data processing and other services
84,171 79,752 4,419 6
Net occupancy
55,321 54,474 847 2
Deposit and other insurance expense
41,719 50,822 (9,103 ) (18 )
Professional services
33,545 47,085 (13,540 ) (29 )
Equipment
44,398 42,209 2,189 5
Marketing
36,997 28,835 8,162 28
Amortization of intangibles
26,756 30,287 (3,531 ) (12 )
OREO and foreclosure expense
8,329 16,500 (8,171 ) (50 )
Automobile operating lease expense
12,270 19,733 (7,463 ) (38 )
Other expense
78,004 63,689 14,315 22
Total noninterest expense
$ 859,108 $ 811,903 $ 47,205 6 %
The $47.2 million, or 6%, increase in total noninterest expense reflected:
$59.1 million, or 16%, increase in personnel costs, primarily reflecting an increase in full-time equivalent staff in support of strategic initiatives, as well as higher benefit related expenses, including the reinstatement of our 401(k) plan matching contribution in May of 2010.
$14.3 million, or 22%, increase in other expense, primarily reflecting the 2011 first quarter $17.0 million addition to litigation reserves.
$8.2 million, or 28%, increase in marketing expense, reflecting higher advertising costs.
Partially offset by:
$13.5 million, or 29%, decrease in professional services, reflecting lower legal costs, as collection activities declined, and consulting expenses.
$8.2 million, or 50%, decline in OREO and foreclosure expenses as OREO balances declined 72% in the current period.
$7.5 million, or 38%, decline in automobile operating lease expense as that portfolio continued to run-off having exited that business in 2008.
Provision for Income Taxes
(This section should be read in conjunction with Significant Item 2.)
The provision for income taxes in the 2011 second quarter was $49.0 million. This compared with a provision for income taxes of $34.7 million in the 2011 first quarter and a provision for income taxes of $13.3 million in the 2010 second quarter. All three quarters include the benefits from tax-exempt income, tax-advantaged investments, and general business credits. At June 30, 2011, we had a net deferred tax asset of $432.7 million. Based on both positive and negative evidence and our level of forecasted future taxable income, there was no impairment to the deferred tax asset at June 30, 2011. The total disallowed deferred tax asset for regulatory capital purposes decreased to $48.2 million at June 30, 2011, from $89.9 million at March 31, 2011.
The IRS completed audits of our consolidated federal income tax returns for tax years through 2007. The IRS, various states, and other jurisdictions remain open to examination, including Kentucky, Indiana, Michigan, Pennsylvania, West Virginia and Illinois. The IRS and the Commonwealth of Kentucky have proposed adjustments to our previously filed tax returns. We believe that our tax positions related to such proposed adjustments are correct and supported by applicable statutes, regulations, and judicial authority, and intend to vigorously defend them. It is possible the ultimate resolution of the proposed adjustments, if unfavorable, may be material to the results of operations in the period it occurs. However, although no assurance can be given, we believe the resolution of these examinations will not, individually or in the aggregate, have a material adverse impact on our consolidated financial position.

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RISK MANAGEMENT AND CAPITAL
Risk awareness, identification and assessment, reporting, and active management are key elements in overall risk management. We manage risk to an aggregate moderate-to-low risk profile strategy through a control framework and by monitoring and responding to potential risks. We believe that our primary risk exposures are credit, market, liquidity, operational, and compliance risk. More information on risk can be found in the Risk Factors section included in Item 1A of our 2010 Form 10-K and subsequent filings with the SEC. Additionally, the MD&A included in our 2010 Form 10-K should be read in conjunction with this MD&A as this discussion provides only material updates to the 2010 Form 10-K. Our definition, philosophy, and approach to risk management have not materially changed from the discussion presented in the 2010 Form 10-K.
Credit Risk
Credit risk is the risk of financial loss if a counterparty is not able to meet the agreed upon terms of the financial obligation. The majority of our credit risk is associated with lending activities, as the acceptance and management of credit risk is central to profitable lending. We also have significant credit risk associated with our available-for-sale and other investment securities portfolio (see Investment Securities Portfolio discussion) . While there is credit risk associated with derivative activity, we believe this exposure is minimal. The significant change in the economic conditions and the resulting changes in borrower behavior over the past several years resulted in our focusing significant resources to the identification, monitoring, and managing of our credit risk. In addition to the traditional credit risk mitigation strategies of credit policies and processes, market risk management activities, and portfolio diversification, we added more quantitative measurement capabilities utilizing external data sources, enhanced use of modeling technology, and internal stress testing processes. The continued expansion of our portfolio management resources demonstrates our commitment to maintaining an aggregate moderate-to-low risk profile.
Loan and Lease Credit Exposure Mix
At June 30, 2011, our loans and leases totaled $39.1 billion, representing a $1.0 billion, or 3%, increase compared to $38.1 billion at December 31, 2010, primarily reflecting growth in the consumer loan portfolio. The automobile portfolio represented 56% of the total consumer portfolio growth, reflecting an increase in automobile sales across the industry, as well as our expansion into the New England market. The home equity and residential mortgage portfolios both increased modestly compared to December 31, 2010. All of the growth within the consumer portfolio was consistent with our focus on high quality borrowers. Total commercial loans were little changed as the growth in the C&I portfolio was offset by a decline in the CRE portfolio.
At June 30, 2011, commercial loans and leases totaled $19.7 billion, and represented 50% of our total credit exposure. Our commercial portfolio is diversified along product type, size, and geography within our footprint and is comprised of the following ( see Commercial Credit discussion) :
C&I — C&I loans and leases are made to commercial customers for use in normal business operations to finance working capital needs, equipment purchases, or other projects. The majority of these borrowers are customers doing business within our geographic regions. C&I loans and leases are generally underwritten individually and secured with the assets of the company and/or the personal guarantee of the business owners. The financing of owner occupied facilities is considered a C&I loan even though there is improved real estate as collateral. This treatment is a function of the credit decision process, which focuses on cash flow from operations of the business to repay the debt. The operation, sale, rental, or refinancing of the real estate is not considered the primary repayment source for these types of loans. As we look to grow our C&I portfolio, we have further developed our ABL capabilities by adding experienced ABL professionals to take advantage of market opportunities resulting in better leveraging of the manufacturing base in our primary markets. Also, our Equipment Finance area is targeting larger equipment financings in the manufacturing sector in addition to our core products. We also expanded our large corporate banking group with sufficient resources to ensure we appropriately recognize and manage the risks associated with these types of lending.
CRE — CRE loans consist of loans for income-producing real estate properties, real estate investment trusts, and real estate developers. We mitigate our risk on these loans by requiring collateral values that exceed the loan amount and underwriting the loan with projected cash flow in excess of the debt service requirement. These loans are made to finance properties such as apartment buildings, office and industrial buildings, and retail shopping centers, and are repaid through cash flows related to the operation, sale, or refinance of the property.
Construction CRE — Construction CRE loans are loans to individuals, companies, or developers used for the construction of a commercial or residential property for which repayment will be generated by the sale or permanent financing of the property. Our construction CRE portfolio primarily consists of retail, residential (land, single family, and condominiums), office, and warehouse product types. Generally, these loans are for construction projects that have been presold or preleased, or have secured permanent financing, as well as loans to real estate companies with significant equity invested in each project. These loans are underwritten and managed by a specialized real estate lending group that actively monitors the construction phase and manages the loan disbursements according to the predetermined construction schedule.

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Total consumer loans and leases were $19.4 billion at June 30, 2011, and represented 50% of our total loan and lease credit exposure. The consumer portfolio was primarily diversified among home equity loans and lines-of-credit, residential mortgages, and automobile loans and leases (see Consumer Credit discussion) .
Automobile — Automobile loans and leases are primarily comprised of loans made through automotive dealerships and include exposure in selected states outside of our primary banking markets. No state outside of our primary banking markets represented more than 5% of our total automobile portfolio at June 30, 2011. Our automobile lease portfolio represents an immaterial portion of the total portfolio as we exited the automobile leasing business during the 2008 fourth quarter.
Home equity — Home equity lending includes both home equity loans and lines-of-credit. This type of lending, which is secured by a first-lien or second-lien on the borrower’s residence, allows customers to borrow against the equity in their home. Given the current low interest rate environment, many borrowers have utilized the line-of-credit home equity product as the primary source of financing their home. As a result, the proportion of the home equity portfolio secured by a first-lien has increased significantly over the past three years, positively impacting the portfolio’s performance, and providing a positive basis regarding the expected future performance of this portfolio. Real estate market values at the time of origination directly affect the amount of credit extended and, in the event of default, subsequent changes in these values impact the severity of losses. We actively manage the extension of credit and the amount of credit extended through a combination of criteria including debt-to-income policies and LTV policy limits.
Residential mortgage — Residential mortgage loans represent loans to consumers for the purchase or refinance of a residence. These loans are generally financed over a 15-year to 30-year term, and in most cases, are extended to borrowers to finance their primary residence. Generally, our practice is to sell a significant portion of our fixed-rate originations in the secondary market. As such, the majority of the loans in our portfolio are ARMs. These ARMs primarily consist of a fixed-rate of interest for the first 3 to 5 years, and then adjust annually. These loans comprised approximately 54% of our total residential mortgage loan portfolio at June 30, 2011. We are subject to repurchase risk associated with residential mortgage loans sold in the secondary market. This activity has increased recently reflecting the overall market conditions and GSE activity and an appropriate level of allowance has been established to address the repurchase risk inherent in the portfolio (refer to the Operational Risk section for additional discussion).
Other consumer — This portfolio primarily consists of consumer loans not secured by real estate or automobiles, including personal unsecured loans.
Table 21 — Loan and Lease Portfolio Composition
2011 2010
(dollar amounts in millions) June 30, March 31, December 31, September 30, June 30,
Commercial: (1)
Commercial and industrial
$ 13,544 34 % $ 13,299 35 % $ 13,063 34 % $ 12,425 33 % $ 12,392 34 %
Commercial real estate:
Construction
591 2 587 2 650 2 738 2 1,106 3
Commercial
5,573 14 5,711 15 6,001 16 6,174 16 6,078 16
Total commercial real estate
6,164 16 6,298 17 6,651 18 6,912 18 7,184 19
Total commercial
19,708 50 19,597 52 19,714 52 19,337 51 19,576 53
Consumer:
Automobile
6,190 16 5,802 15 5,614 15 5,385 14 4,847 13
Home equity
7,952 20 7,784 20 7,713 20 7,690 21 7,510 20
Residential mortgage
4,751 12 4,517 12 4,500 12 4,511 12 4,354 12
Other consumer
525 2 546 1 566 1 578 2 683 2
Total consumer
19,418 50 18,649 48 18,393 48 18,164 49 17,394 47
Total loans and leases
$ 39,126 100 % $ 38,246 100 % $ 38,107 100 % $ 37,501 100 % $ 36,970 100 %
(1) There were no commercial loans outstanding that would be considered a concentration of lending to a particular industry or group of industries.

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The table below provides our total loan and lease portfolio segregated by the type of collateral securing the loan or lease:
Table 22 — Loan and Lease Portfolio by Collateral Type
2011 2010
(dollar amounts in millions) June 30, March 31, December 31, September 30, June 30,
Secured loans:
Real estate — commercial
$ 9,781 25 % $ 9,931 26 % $ 10,389 27 % $ 10,516 28 % $ 10,698 29 %
Real estate — consumer
12,703 32 12,300 32 12,214 32 12,201 33 11,968 32
Vehicles
7,594 19 7,333 19 7,134 19 6,652 18 6,054 16
Receivables/Inventory
4,171 11 3,819 10 3,763 10 3,524 9 3,511 9
Machinery/Equipment
1,784 5 1,787 5 1,766 5 1,763 5 1,812 5
Securities/Deposits
802 2 778 2 734 2 730 2 780 2
Other
1,095 3 1,139 3 990 2 1,097 2 1,120 4
Total secured loans and leases
37,930 97 37,087 97 36,990 97 36,483 97 35,943 97
Unsecured loans and leases
1,196 3 1,159 3 1,117 3 1,018 3 1,027 3
Total loans and leases
$ 39,126 100 % $ 38,246 100 % $ 38,107 100 % $ 37,501 100 % $ 36,970 100 %
Commercial Credit
In commercial lending, on-going credit management is dependent on the type and nature of the loan. We monitor all significant exposures on an on-going basis. All commercial credit extensions are assigned internal risk ratings reflecting the borrower’s probability-of-default and loss-given-default (severity of loss). This two-dimensional rating methodology provides granularity in the portfolio management process. The probability-of-default is rated and applied at the borrower level. The loss-given-default is rated and applied based on the specific type of credit extension and the quality and lien position associated with the underlying collateral. The internal risk ratings are assessed at origination and updated at each periodic monitoring event. There is also extensive macro portfolio management analysis on an on-going basis. As an example, the retail properties class of the CRE portfolio and manufacturing loans within the C&I portfolio have each received more frequent evaluation at the individual loan level given the weak environment and our portfolio composition. We continually review and adjust our risk-rating criteria based on actual experience, which provides us with the current risk level in the portfolio and is the basis for determining an appropriate allowance amount for this portfolio.
Our Credit Review group performs testing to provide an independent review and assessment of the quality and / or risk of new loan originations. This group is part of our Risk Management area, and conducts portfolio reviews on a risk-based cycle to evaluate individual loans, validate risk ratings, as well as test the consistency of credit processes. Similarly, to provide consistent oversight, a centralized portfolio management team monitors and reports on the performance of small business loans, which are included within the commercial loan portfolio.
All loans categorized as Classified (see Note 3 of Notes to Unaudited Condensed Consolidated Financial Statements) are managed by our SAD. The SAD is a specialized credit group that handles the day-to-day management of workouts, commercial recoveries, and problem loan sales. Its responsibilities include developing and implementing action plans, assessing risk ratings, and determining the adequacy of the allowance, the accrual status, and the ultimate collectability of the Classified loan portfolio.
Our commercial portfolio is diversified by customer size, as well as geographically throughout our footprint. No outstanding commercial loans and leases comprised an industry or geographic concentration of lending. Certain segments of our commercial portfolio are discussed in further detail below.
C&I PORTFOLIO
We manage the risks inherent in this portfolio through origination policies, concentration limits, on-going loan level reviews and portfolio level reviews, recourse requirements, and continuous portfolio risk management activities. Our origination policies for this portfolio include loan product-type specific policies such as LTV and debt service coverage ratios, as applicable.
While C&I borrowers have been challenged by the weak economy, problem loans have trended downward, reflecting a combination of proactive risk identification as well as some relative improvement in the economic conditions. Nevertheless, some borrowers may no longer have sufficient capital to withstand the extended stress. As a result, these borrowers may not be able to comply with the original terms of their credit agreements. We continue to focus attention on the portfolio management process to proactively identify borrowers that may be facing financial difficulty and to assess all potential solutions. The impact of the economic environment is further evidenced by the level of line-of-credit activity, as borrowers continued to maintain relatively low utilization percentages.

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As shown in the following table, C&I loans and leases totaled $13.5 billion at June 30, 2011:
Table 23 — Commercial and Industrial Loans and Leases by Class
June 30, 2011
Commitments Loans Outstanding
(dollar amounts in millions) Amount Percent Amount Percent
Class:
Owner occupied
$ 4,259 21 % $ 3,870 29 %
Other commercial and industrial
16,288 79 9,674 71
Total
$ 20,547 100 % $ 13,544 100 %
The difference in the composition between the commitments and loans and leases outstanding in the other commercial and industrial class results from a significant amount of working capital lines-of-credit and businesses have reduced these borrowings. The funding percentage associated with the lines-of-credit has been a significant indicator of credit quality. Generally, borrowers that fully utilize their line-of-credit consistently, over time, have a higher risk profile. This represents one of many credit risk factors we utilize in assessing the credit risk portfolio of individual borrowers and the overall portfolio.
CRE PORTFOLIO
We manage the risks inherent in this portfolio specific to CRE lending, focusing on the quality of the developer, and the specifics associated with each project. Generally, we: (1) limit our loans to 80% of the appraised value of the commercial real estate, (2) require net operating cash flows to be 125% of required interest and principal payments, and (3) if the commercial real estate is nonowner occupied, require that at least 50% of the space of the project be preleased.
Each CRE loan is classified as either core or noncore. We separated the CRE portfolio into these categories in order to provide more clarity around our portfolio management strategies and to provide an additional level of transparency. We believe segregating the noncore CRE from core CRE improves our ability to understand the nature, performance prospects, and problem resolution opportunities, thus allowing us to continue to deal proactively with any emerging credit issues.
A CRE loan is generally considered core when the borrower is an experienced, well-capitalized developer in our Midwest footprint, and has either an established meaningful relationship with us that generates an acceptable return on capital or demonstrates the prospect of becoming one. The core CRE portfolio was $4.0 billion at June 30, 2011, representing 65% of total CRE loans. The performance of the core portfolio met our expectations based on the consistency of the asset quality metrics within the portfolio. Based on our extensive project level assessment process, including forward-looking collateral valuations, we continue to believe the credit quality of the core portfolio is stable.
A CRE loan is generally considered noncore based on the lack of a substantive relationship outside of the loan product, with no immediate prospects for meeting the core relationship criteria. The noncore CRE portfolio declined from $2.6 billion at December 31, 2010, to $2.2 billion at June 30, 2011, and represented 35% of total CRE loans. Of the loans in the noncore portfolio at June 30, 2011, 62% were categorized as Pass, 95% had guarantors, 99% were secured, and 95% were located within our geographic footprint. However, it is within the noncore portfolio where most of the credit quality challenges exist. For example, $0.3 billion, or 12%, of related outstanding balances, are classified as NALs. SAD administered $1.0 billion, or 45%, of total noncore CRE loans at June 30, 2011. We expect to exit the majority of noncore CRE relationships over time through normal repayments and refinancings, possible sales should economically attractive opportunities arise, or the reclassification to a core CRE relationship if it expands to meet the core criteria.

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The table below provides a segregation of the CRE portfolio as of June 30, 2011:
Table 24 — Core Commercial Real Estate Loans by Property Type and Property Location
June 30, 2011
West
(dollar amounts in millions) Ohio Michigan Pennsylvania Indiana Kentucky Florida Virginia Other Total Amount %
Core portfolio:
Retail properties
$ 488 $ 91 $ 74 $ 93 $ 8 $ 39 $ 30 $ 344 $ 1,167 19 %
Office
330 103 95 18 10 1 38 52 647 10
Multi family
269 85 60 32 30 1 26 60 563 9
Industrial and warehouse
237 81 21 43 3 2 6 83 476 8
Other commercial real estate
725 128 38 48 20 53 120 1,132 18
Total core portfolio
2,049 488 288 234 51 63 153 659 3,985 65
Total noncore portfolio
1,200 366 131 185 30 102 49 116 2,179 35
Total
$ 3,249 $ 854 $ 419 $ 419 $ 81 $ 165 $ 202 $ 775 $ 6,164 100 %
Credit quality data regarding the ACL and NALs, segregated by core CRE loans and noncore CRE loans, is presented in the following table:
Table 25 — Commercial Real Estate — Core vs. Noncore Portfolios
June 30, 2011
Ending Nonaccrual
(dollar amounts in millions) Balance Prior NCOs ACL $ ACL % Credit Mark (1) Loans
Total core
$ 3,985 $ 11 $ 140 3.51 % 3.78 % $ 26
Noncore — SAD (2)
988 322 236 23.89 42.60 240
Noncore — Other
1,191 13 95 7.98 8.97 26
Total noncore
2,179 335 331 15.19 26.49 266
Total commercial real estate
$ 6,164 $ 346 $ 471 7.64 % 12.55 % $ 292
December 31, 2010
Total core
$ 4,042 $ 5 $ 160 3.96 % 4.08 % $ 16
Noncore — SAD (2)
1,400 379 329 23.50 39.80 307
Noncore — Other
1,209 5 105 8.68 9.06 41
Total noncore
2,609 384 434 16.63 27.33 348
Total commercial real estate
$ 6,651 $ 389 $ 594 8.93 % 13.96 % $ 364
(1) Calculated as (Prior NCOs + ACL $) / (Ending Balance + Prior NCOs).
(2) Noncore loans managed by SAD, the area responsible for managing loans and relationships designated as Classified Loans.
As shown in the above table, the ending balance of the CRE portfolio at June 30, 2011, declined $0.5 billion, or 7%, compared with December 31, 2010. Of this decline, 85% occurred in the noncore segment of the portfolio administered by the SAD, and was a result of payoffs and NCOs as we actively focus on the noncore portfolio to reduce our overall CRE exposure. This reduction demonstrates our continued commitment to maintaining an aggregate moderate-to-low risk profile. We anticipate further noncore CRE declines in future periods based on our strategy to reduce our overall CRE exposure. The reduction in the core segment is a result of limited origination activity reflecting our strategy to reduce our overall CRE exposure. We will continue to support our core developer customers as appropriate, however, we do not believe that significant additional CRE activity is appropriate given our current exposure in CRE lending and the current economic conditions.
Also as shown above, substantial reserves for the noncore portfolio have been established. At June 30, 2011, the ACL related to the noncore portfolio was 15.19%. The combination of the existing ACL and prior NCOs represents the total credit actions taken on each segment of the portfolio. From this data, we calculate a credit mark that provides a consistent measurement of the cumulative credit actions taken against a specific portfolio segment. We believe the combined credit activity is appropriate for each of the CRE segments.

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Retail Properties
Our portfolio of total CRE loans secured by retail properties totaled $1.7 billion, or approximately 4%, of total loans and leases, at June 30, 2011. Loans within this portfolio segment declined $0.1 billion, or 5%, from $1.8 billion at December 31, 2010. Credit approval in this portfolio segment is generally dependent on preleasing requirements, and net operating income from the project must cover debt service by specified percentages when the loan is fully funded.
The weakness of the economic environment in our geographic regions continued to impact the projects that secure the loans in this portfolio class. Lower occupancy rates, reduced rental rates, and the expectation these levels will remain stressed for the foreseeable future may adversely affect some of our borrowers’ ability to repay these loans. We have increased the level of credit risk management activity on this portfolio segment, and we analyze our retail property loans in detail by combining property type, geographic location, and other data, to assess and manage our credit risks. We review the majority of this portfolio segment on a monthly basis.
Consumer Credit
Consumer credit approvals are based on, among other factors, the financial strength and payment history of the borrower, type of exposure, and the transaction structure. We make extensive use of portfolio assessment models to continuously monitor the quality of the portfolio, which may result in changes to future origination strategies. The on-going analysis and review process results in a determination of an appropriate allowance for our consumer loan and lease portfolio.
AUTOMOBILE PORTFOLIO
Our strategy in the automobile portfolio continued to focus on high quality borrowers as measured by both FICO and internal custom scores, combined with appropriate LTVs, terms, and a reasonable level of profitability. We discontinued automobile leasing in 2008 with the portfolio in run-off mode thereafter. Our strategy and operational capabilities allow us to appropriately manage the origination quality across the entire portfolio, including our newer markets. Although increased origination volume and the expansion into new markets can be associated with increased risk levels, we believe our strategy and operational capabilities significantly mitigate these risks.
We have continued to consistently execute our value proposition while taking advantage of market opportunities that allow us to grow our automobile loan portfolio. The significant growth in the portfolio over the past two years was accomplished while maintaining our consistently high credit quality metrics. As we further execute our strategies and take advantage of these opportunities, we are developing alternative plans to address any growth in excess of our established portfolio concentration limits, including both securitizations and loan sales.
RESIDENTIAL-SECURED PORTFOLIOS
The properties securing our residential mortgage and home equity portfolios are primarily located within our footprint. The continued stress on home prices has caused the performance in these portfolios to remain weaker than historical levels. We continue to evaluate all of our policies and processes associated with managing these portfolios to provide as much clarity as possible.
In the 2011 first quarter, we implemented a more conservative position regarding NCOs in our residential mortgage portfolio by accelerating the timing of charge-off recognition. In addition, we established an immediate charge-off process regardless of the delinquency status for short sale situations. Both of these policy changes resulted in accelerated recognition of residential mortgage charge-offs totaling $6.8 million in the 2011 first quarter. Further, in the 2011 second quarter, we implemented a policy change regarding the placement of loans on nonaccrual status in both our home equity and residential mortgage portfolios. This policy change resulted in accelerated placement of loans on nonaccrual status totaling $6.7 million in the home equity portfolio and $8.0 million in the residential mortgage portfolio.
Table 26 — Selected Home Equity and Residential Mortgage
Portfolio Data

(dollar amounts in millions)
Home Equity Residential Mortgage
Secured by first-lien Secured by second-lien
06/30/11 12/31/10 06/30/11 12/31/10 06/30/11 12/31/10
Ending balance
$ 3,398 $ 3,041 $ 4,554 $ 4,672 $ 4,751 $ 4,500
Portfolio weighted average LTV ratio (1)
70 % 70 % 80 % 80 % 78 % 77 %
Portfolio weighted average FICO score (2)
748 745 734 733 729 721

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Home Equity Residential Mortgage (3)
Secured by first-lien Secured by second-lien
Six Months Ended June 30,
2011 2010 2011 2010 2011 2010
Originations
$ 918 $ 552 $ 435 $ 329 $ 751 $ 694
Origination weighted average LTV ratio (1)
71 % 69 % 82 % 78 % 84 % 80 %
Origination weighted average FICO score (2)
768 765 758 755 757 761
(1) The LTV ratios for home equity loans and home equity lines-of-credit are cumulative and reflect the balance of any senior loans. LTV ratios reflect collateral values at the time of loan origination.
(2) Portfolio weighted average FICO scores reflect currently updated customer credit scores whereas origination weighted average FICO scores reflect the customer credit scores at the time of loan origination.
(3) Represents only owned-portfolio originations.
Home Equity Portfolio
Our home equity portfolio (loans and lines-of-credit) consists of both first-lien and second-lien mortgage loans with underwriting criteria based on minimum credit scores, debt-to-income ratios, and LTV ratios. We offer closed-end home equity loans which are generally fixed-rate with principal and interest payments, and variable-rate interest-only home equity lines-of-credit which do not require payment of principal during the 10-year revolving period of the line-of-credit.
At June 30, 2011, approximately 43% of our home equity portfolio was secured by first-lien mortgages. The credit risk profile is substantially reduced when we hold a first-lien position. During the first six-month period of 2011, more than 65% of our home equity portfolio originations were secured by a first-lien mortgage. We focus on high quality borrowers primarily located within our footprint. The majority of our home equity line-of-credit borrowers consistently pay more than the required interest-only amount. Additionally, since we focus on developing complete relationships with our customers, many of our home equity borrowers are utilizing other products and services.
We believe we have underwritten credit conservatively within this portfolio. We have not originated home equity loans or lines-of-credit with an LTV at origination greater than 100%, except for infrequent situations with high quality borrowers. However, continued declines in housing prices have decreased the value of the collateral for this portfolio and have caused a portion of the portfolio to have an LTV greater than 100%.
For certain home equity loans and lines-of-credit, we may utilize an AVM or an other model-driven value estimate during the credit underwriting process. We utilize a series of credit parameters to determine the appropriate valuation methodology. While we believe an AVM estimate is an appropriate valuation source for a portion of our home equity lending activities, we continue to re-evaluate all of our policies on an on-going basis, specifically related to the December 2010 FFIEC guidelines regarding property valuation. The intent of these guidelines is to ensure complete independence in the requesting and review of real estate valuations associated with loan decisions. We are committed to appropriate valuations for all of our real estate lending, and do not anticipate significant impacts to our loan decision process as a result of these guidelines. We update values as appropriate, and in compliance with applicable regulations, for loans identified as higher risk. Loans are identified as higher risk based on performance indicators and the updated values are utilized to facilitate our portfolio management processes, as well as our workout and loss mitigation functions.
We continue to make origination policy adjustments based on our assessment of an appropriate risk profile, as well as industry actions. In addition to origination policy adjustments, we take actions, as necessary, to manage the risk profile of this portfolio.
Residential Mortgage Portfolio
We focus on higher quality borrowers and underwrite all applications centrally, often through the use of an automated underwriting system. We do not originate residential mortgages that allow negative amortization or allow the borrower multiple payment options.
All residential mortgages are originated based on a completed full appraisal during the credit underwriting process. We update values on a regular basis in compliance with applicable regulations to facilitate our portfolio management, as well as our workout and loss mitigation functions.
A majority of the loans in our portfolio have adjustable rates. These ARMs comprised approximately 54% of our total residential mortgage loan portfolio at June 30, 2011. At June 30, 2011, ARM loans that were expected to have rates reset totaled $1.6 billion through 2014. These loans scheduled to reset are primarily associated with loans originated subsequent to 2007, and as such, are not subject to the most significant declines in value. Given the quality of our borrowers and the relatively low current interest rates, we believe that we have a relatively limited exposure to ARM reset risk. Nonetheless, we have taken actions to mitigate our risk exposure. We initiate borrower contact at least six months prior to the interest rate resetting, and have been successful in converting many ARMs to fixed-rate loans through this process. Our ARM portfolio has performed substantially better than the fixed-rate portfolio in part due to this proactive management process. Additionally, when borrowers are experiencing payment difficulties, loans may be reunderwritten based on the borrower’s ability to repay the loan.

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Several government actions were enacted that impacted the residential mortgage portfolio, including various refinance programs which positively affected the availability of credit for the industry. We are utilizing these programs to enhance our existing strategy of working closely with our customers.
Credit Quality
We believe the most meaningful way to assess overall credit quality performance is through an analysis of credit quality performance ratios. This approach forms the basis of most of the discussion in the sections immediately following: NPAs and NALs, TDRs, ACL, and NCOs. In addition, we utilize delinquency rates, risk distribution and migration patterns, and product segmentation in the analysis of our credit quality performance.
Credit quality performance in the 2011 second quarter reflected continued improvement in the loan portfolio relating to NCO activity, as well as some improvement in delinquency trends. Key credit quality metrics also showed improvement, including a 5% decline in NPAs and an 11% decline in the level of Criticized commercial loans compared to the prior quarter. The reduction in NPAs was achieved despite a more conservative policy on residential mortgage and home equity loans implemented during the current quarter. New NPA inflows increased in the current quarter compared to the prior quarter as a result of the more conservative policy. We anticipate lower inflows in future quarters.
Our ACL declined $63.3 million to $1,112.2 million, or 2.84% of period-end loans and leases at June 30, 2011, from $1,175.4 million, or 3.07% at March 31, 2011. This decline reflected a reduction to the commercial-related ACL as a result of an overall reduction in the level of commercial Criticized loans and NCOs on loans with specific reserves, partially offset by a slight increase in the consumer-related ACL as a result of consumer loan growth.
NPAs, NALs, AND TDRs
NPAs and NALs
(This section should be read in conjunction with the Franklin-related Impacts section.)
NPAs consist of (1) NALs, which represent loans and leases no longer accruing interest, (2) impaired loans held for sale, (3) OREO properties, and (4) other NPAs. Any loan in our portfolio may be placed on nonaccrual status prior to the policies described below when collection of principal or interest is in doubt.
C&I and CRE loans are placed on nonaccrual status at 90-days past due. With the exception of residential mortgage loans guaranteed by government organizations which continue to accrue interest, residential mortgage loans are placed on nonaccrual status at 150-days past due. First-lien and second-lien home equity loans are placed on nonaccrual status at 150-days past due and 120-days past due, respectively. Automobile and other consumer loans are not placed on nonaccrual status, but are generally charged-off when the loan is 120-days past due. 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. When, in our judgment, the borrower’s ability to make required interest and principal payments has resumed and collectability is no longer in doubt, the loan or lease is returned to accrual status.

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The following table reflects period-end NALs and NPAs detail for each of the last five quarters:
Table 27 — Nonaccrual Loans and Leases and Nonperforming Assets
2011 2010
(dollar amounts in thousands) June 30, March 31, December 31, September 30, June 30,
Nonaccrual loans and leases:
Commercial and industrial
$ 229,327 $ 260,397 $ 346,720 $ 398,353 $ 429,561
Commercial real estate
291,500 305,793 363,692 478,754 663,103
Residential mortgage
59,853 44,812 45,010 82,984 86,486
Home equity
33,545 25,255 22,526 21,689 22,199
Total nonaccrual loans and leases
614,225 636,257 777,948 981,780 1,201,349
Other real estate owned, net
Residential
20,803 28,668 31,649 65,775 71,937
Commercial
17,909 25,961 35,155 57,309 67,189
Total other real estate owned, net
38,712 54,629 66,804 123,084 139,126
Impaired loans held for sale (1)
242,227
Total nonperforming assets
$ 652,937 $ 690,886 $ 844,752 $ 1,104,864 $ 1,582,702
Nonaccrual loans as a % of total loans and leases
1.57 % 1.66 % 2.04 % 2.62 % 3.25 %
Nonperforming assets ratio (2)
1.67 1.80 2.21 2.94 4.24
Nonperforming Franklin assets:
Residential mortgage
$ $ $ $ $
Home equity
OREO
883 5,971 9,477 15,330 24,515
Impaired loans held for sale
242,227
Total nonperforming Franklin assets
$ 883 $ 5,971 $ 9,477 $ 15,330 $ 266,742
(1) The June 30, 2010, figure represents NALs associated with the transfer of Franklin-related residential mortgage and home equity loans to loans held for sale. Loans held for sale are carried at the lower of cost or fair value less costs to sell.
(2) This ratio is calculated as NPAs divided by the sum of loans and leases, impaired loans held for sale, and net other real estate.
The $37.9 million decline in NPAs compared with March 31, 2011, primarily reflected:
$31.1 million, or 12%, decline in C&I NALs, reflecting both NCO activity and problem credit resolutions, including payoffs. The decline was associated with loans throughout our footprint, with no specific geographic concentration. The reduction was achieved despite an increase in the level of new NALs compared to the prior quarter level. The increased inflows was primarily the result of one large relationship.
$14.3 million, or 5%, decline in CRE NALs, reflecting both NCO activity and problem credit resolutions, including borrower payments and payoffs. The reduction was achieved despite an increase in the level of new NALs compared to the prior quarter level. The increased level of inflows was primarily centered in three relatively large relationships, and we do not believe this increase to be an indication of a reversal of the overall declining trend of new NALs. We continue to be focused on early recognition of risks through our on-going portfolio management processes.
$15.9 million, or 29%, decline in OREO, primarily reflecting continued declines in both the commercial and residential segments. We continue to be active in the on-going management of our OREO portfolio as lower inflow levels combined with aggressive sales activities resulted in the continued declining trend in our OREO levels.
Partially offset by:
$15.0 million, or 34%, increase in residential mortgage NALs, primarily reflecting a change to our nonaccrual policy (see Consumer Credit section).
$8.3 million, or 33%, increase in home equity NALs, primarily reflecting a change to our nonaccrual policy (see Consumer Credit section).

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As part of our loss mitigation process, we reunderwrite, modify, or restructure loans when borrowers are experiencing payment difficulties, based on the borrower’s ability to repay the loan.
Compared with December 31, 2010, NPAs decreased $191.8 million, or 23%, primarily reflecting:
$117.4 million, or 34%, decline in C&I NALs, reflecting both NCO activity and problem credit resolutions, including payoffs. The decline was associated with loans throughout our footprint, with no specific geographic concentration. From an industry perspective, improvement in the manufacturing-related segment accounted for a significant portion of the decrease.
$72.2 million, or 20%, decline in CRE NALs, reflecting both NCO activity and problem credit resolutions, including borrower payments and payoffs. This decline was a direct result of our on-going proactive management of these credits by our SAD.
$28.1 million, or 42%, decrease in OREO properties, reflecting lower inflow levels combined with aggressive sales activities.
Partially offset by:
$14.8 million, or 33%, increase in residential mortgage NALs, primarily reflecting a change in our nonaccrual policy (see Consumer Credit section).
$11.0 million, or 49%, increase in home equity NALs, primarily reflecting a change in our nonaccrual policy (see Consumer Credit section).
NPA activity for each of the past five quarters was as follows:
Table 28 — Nonperforming Asset Activity
2011 2010
(dollar amounts in thousands) Second First Fourth Third Second
Nonperforming assets, beginning of period
$ 690,886 $ 844,752 $ 1,104,864 $ 1,582,702 $ 1,918,368
New nonperforming assets
210,255 192,044 237,802 278,388 171,595
Franklin-related impact, net
(5,088 ) (3,506 ) (5,853 ) (251,412 ) (86,715 )
Returns to accruing status
(68,429 ) (70,886 ) (100,051 ) (111,168 ) (78,739 )
Loan and lease losses
(74,945 ) (128,730 ) (126,047 ) (151,013 ) (173,159 )
Other real estate owned gains (losses)
388 1,492 (5,117 ) (5,302 ) 2,483
Payments
(73,009 ) (87,041 ) (191,296 ) (210,612 ) (140,881 )
Sales
(27,121 ) (57,239 ) (69,550 ) (26,719 ) (30,250 )
Nonperforming assets, end of period
$ 652,937 $ 690,886 $ 844,752 $ 1,104,864 $ 1,582,702
As discussed previously, residential mortgage loans are placed on nonaccrual status at 150-days past due, with the exception of residential mortgage loans guaranteed by government organizations which continue to accrue interest, and first-lien and second-lien home equity loans and lines-of-credit are placed on nonaccrual status at 150-days past due and 120-days past due, respectively.

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The following table reflects period-end accruing loans and leases 90 days or more past due for each of the last five quarters:
Table 29 — Accruing Past Due Loans and Leases
2011 2010
(dollar amounts in thousands) June 30, March 31, December 31, September 30, June 30,
Accruing loans and leases past due 90 days or more:
Commercial and industrial
$ $ $ $ $
Residential mortgage (excluding loans guaranteed by the U.S. government)
33,975 41,858 53,983 56,803 47,036
Home equity
17,451 24,130 23,497 27,160 26,797
Other consumer
6,227 7,578 10,177 11,423 9,533
Total, excl. loans guaranteed by the U.S. government
57,653 73,566 87,657 95,386 83,366
Add: loans guaranteed by the U.S. government
76,979 94,440 98,288 94,249 95,421
Total accruing loans and leases past due 90 days or more, including loans guaranteed by the U.S. government
$ 134,632 $ 168,006 $ 185,945 $ 189,635 $ 178,787
Ratios: (1)
Excluding loans guaranteed by the U.S. government, as a percent of total loans and leases
0.15 % 0.19 % 0.23 % 0.25 % 0.23 %
Guaranteed by the U.S. government, as a percent of total loans and leases
0.19 0.25 0.26 0.26 0.26
Including loans guaranteed by the U.S. government, as a percent of total loans and leases
0.34 0.44 0.49 0.51 0.49
(1) Ratios are calculated as a percentage of related loans and leases.
Loans guaranteed by the U.S. government accrue interest at the rate guaranteed by the government agency. We are reimbursed from the government agency for reasonable expenses incurred in servicing loans. The FHA reimburses us for 66% of expenses, and the VA reimburses us at a maximum percentage of guarantee which is established for each individual loan. We have not experienced either material losses in excess of guarantees caps or significant delays or rejected claims from the related government entity.
The over 90-day delinquency ratio for total loans not guaranteed by a U.S. government agency was 0.15% at June 30, 2011, representing an 8 basis point decline compared with December 31, 2010. This decline reflected the sale of certain loans in this category.
TDR Loans
TDRs are modified loans in which a concession is provided to a borrower experiencing financial difficulties. Loan modifications are considered TDRs when the concessions provided are not available to the borrower through either normal channels or other sources. However, not all loan modifications are TDRs. Our standards relating to loan modifications consider, among other factors, minimum verified income requirements, cash flow analysis, and collateral valuations. Each potential loan modification is reviewed individually and the terms of the loan are modified to meet a borrower’s specific circumstances at a point in time. All loan modifications, including those classified as TDRs, are reviewed and approved. Our ALLL is largely driven by updated risk ratings assigned to commercial loans, updated borrower credit scores on consumer loans, and borrower delinquency history in both the commercial and consumer portfolios. As such, the provision for credit losses is impacted primarily by changes in borrower payment performance rather than the TDR classification. TDRs can be classified as either accrual or nonaccrual loans. Nonaccrual TDRs are included in NALs whereas accruing TDRs are excluded from NALs as it is probable that all contractual principal and interest due under the restructured terms will be collected.
In the workout of a problem loan, many factors are considered when determining the most favorable resolution. For consumer loans, we evaluate the ability and willingness of the borrower to make contractual or reduced payments, the value of the underlying collateral, and the costs associated with the foreclosure or repossession, and remarketing of the collateral. For commercial loans, we consider similar criteria and also evaluate the borrower’s business prospects.

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Residential Mortgage loan TDRs — Residential mortgage TDRs represent loan modifications associated with traditional first-lien mortgage loans in which a concession has been provided to the borrower. Residential mortgages identified as TDRs involve borrowers who are unable to refinance their mortgages through our normal mortgage origination channels or through other independent sources. Some, but not all, of the loans may be delinquent. Modifications can include adjustments to rates and/or principal. Modified loans identified as TDRs are aggregated into pools for analysis. Cash flows and weighted average interest rates are used to calculate impairment at the pooled-loan level. Once the loans are aggregated into the pool, they continue to be classified as TDRs until contractually repaid or charged-off. No consideration is given to removing individual loans from the pools.
Residential mortgage loans not guaranteed by a U.S. government agency such as the FHA, VA, and the USDA, including restructured loans, are reported as accrual or nonaccrual based upon delinquency status. NALs are those that are greater than 150-days contractually past due. Loans guaranteed by U.S. government organizations continue to accrue interest upon delinquency.
Residential mortgage loan TDR classifications resulted in an impairment adjustment of $0.2 million during the 2011 second quarter, and $2.2 million for the first six-month period of 2011. Prior to the TDR classification, residential mortgage loans individually had minimal ALLL associated with them because the ALLL is calculated on a total pooled-portfolio basis.
Other Consumer loan TDRs — Generally, these are TDRs associated with home equity borrowings and automobile loans. We make similar interest rate, term, and principal concessions as with residential mortgage loan TDRs. The TDR classification for these other consumer loans resulted in an impairment adjustment of $0.2 million during the 2011 second quarter, and $0.7 million for the first six-month period of 2011.
Commercial loan TDRs — Commercial accruing TDRs represent loans most often rated as Classified and are no more than 90-days past due on contractual principal and interest, but undergo a modification. Accruing TDRs often result from loans rated as Classified receiving a concession at terms that are not considered a market transaction for us. The TDR remains in accruing status as long as the customer is less than 90 days past due on payments per the restructured loan terms and no loss is probable.
Commercial nonaccrual TDRs result from either: (1) an accruing commercial TDR being placed on nonaccrual status (at June 30, 2011, approximately $7.3 million of our commercial nonaccrual TDRs represented this situation); or (2) a workout where an existing commercial NAL is restructured and a concession is given. At June 30, 2011, approximately $70.4 million of our commercial nonaccrual TDRs resulted from such workouts. Frequently, these workouts restructure the NAL so that two or more new notes are created. The primary note is underwritten based upon our normal underwriting standards at current market rates and is sized so projected cash flows are sufficient to repay contractual principal and interest. The terms on the secondary note(s) vary by situation, and may include notes that defer interest payments until after the primary note is repaid. Creating two or more notes often allows the borrower to continue a project or weather a temporary economic downturn and allows us to right-size a loan based upon the current expectations for a project’s performance. If we believe the outstanding balance will be collected, the note is considered for return to accrual status upon the borrower sustaining sufficient cash flows for a six-month period of time. This six-month period could extend before or after the restructure date. Subordinated notes created in the workout are charged-off immediately. If, during or after the restructuring, a charge-off occurs, any interest or principal payments received are applied to first reduce the outstanding balance. After the outstanding balance has been satisfied, any further payments are recorded as recoveries.
As the loans are already considered Classified, an adequate ALLL has been recorded when appropriate . Consequently, a TDR classification on commercial loans does not usually result in significant additional reserves. We consider removing the TDR status on commercial loans if the loan is at a market rate of interest and after the loan has performed in accordance with the restructured terms for a sustained period of time, generally one year.

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The table below presents our accruing and nonaccruing TDRs at period-end for each of the past five quarters:
Table 30 — Accruing and Nonaccruing Troubled Debt Restructured Loans
2011 2010
(dollar amounts in thousands) June 30, March 31, December 31, September 30, June 30,
Troubled debt restructured loans — accruing:
Residential mortgage
$ 313,772 $ 333,492 $ 328,411 $ 304,356 $ 281,473
Other consumer
75,036 78,488 76,586 73,210 65,061
Commercial
240,126 206,462 222,632 157,971 141,353
Total troubled debt restructured loans — accruing
628,934 618,442 627,629 535,537 487,887
Troubled debt restructured loans — nonaccruing:
Residential mortgage
14,378 8,523 5,789 10,581 11,337
Other consumer
140 14
Commercial
77,745 37,858 33,462 33,236 90,266
Total troubled debt restructured loans — nonaccruing
92,263 46,395 39,251 43,817 101,603
Total troubled debt restructured loans
$ 721,197 $ 664,837 $ 666,880 $ 579,354 $ 589,490
ACL
(This section should be read in conjunction with Note 3 of the Notes to Unaudited Condensed Consolidated Financial Statements.)
We maintain two reserves, both of which in our judgment are appropriate to absorb credit losses inherent in our loan and lease portfolio: the ALLL and the AULC. Combined, these reserves comprise the total ACL. Our Credit Administration group is responsible for developing the methodology assumptions and estimates used in the calculation, as well as determining the appropriateness of the ACL. The ALLL represents the estimate of losses inherent in the loan portfolio at the reported date. Additions to the ALLL result from recording provision expense for loan losses or increased risk levels resulting from loan risk-rating downgrades, while reductions reflect charge-offs, recoveries, decreased risk levels resulting from loan risk-rating upgrades, or the sale of loans. The AULC is determined by applying the transaction reserve process to the unfunded portion of the loan exposures adjusted by an applicable funding expectation.
A provision for credit losses is recorded to adjust the ACL to the level we have determined to be appropriate to absorb credit losses inherent in our loan and lease portfolio. The provision for credit losses in the 2011 second quarter was $35.8 million, compared with $49.4 million in the prior quarter and $193.4 million in the year-ago quarter. The decline in provision expense reflects improved credit migration as shown by a combination of lower NCOs and the reduction of commercial Criticized loans.
We regularly evaluate the appropriateness of the ACL by performing on-going evaluations of the loan and lease portfolio, including such factors as the differing economic risks associated with each loan category, the financial condition of specific borrowers, the level of delinquent loans, the value of any collateral and, where applicable, the existence of any guarantees or other documented support. We evaluate the impact of changes in interest rates and overall economic conditions on the ability of borrowers to meet their financial obligations when quantifying our exposure to credit losses and assessing the appropriateness of our ACL at each reporting date. In addition to general economic conditions and the other factors described above, we also consider the impact of declining residential real estate values and the diversification of CRE loans, particularly loans secured by retail properties.
Our ACL evaluation process includes the on-going assessment of credit quality metrics, and a comparison of certain ACL benchmarks to current performance. While the total ACL balance has declined in recent quarters, all of the relevant benchmarks improved as a result of the asset quality improvement. The coverage ratios of NALs, Criticized, and Classified loans have significantly improved in recent quarters despite the decline in the ACL level. For example, the ACL coverage ratio associated with NALs was 181% at June 30, 2011, compared with 166% at December 31, 2010 and 120% at June 30, 2010.

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The table below reflects activity in the ALLL and the AULC for each of the last five quarters:
Table 31 — Quarterly Allowance for Credit Losses Analysis
2011 2010
(dollar amounts in thousands) Second First Fourth Third Second
Allowance for loan and lease losses, beginning of period
$ 1,133,226 $ 1,249,008 $ 1,336,352 $ 1,402,160 $ 1,477,969
Loan and lease losses
(128,701 ) (199,007 ) (205,587 ) (221,144 ) (312,954 )
Recoveries of loans previously charged-off
31,167 33,924 33,336 36,630 33,726
Net loan and lease losses
(97,534 ) (165,083 ) (172,251 ) (184,514 ) (279,228 )
Provision for loan and lease losses
36,948 49,301 84,907 118,788 203,633
Allowance for assets sold
(1,514 ) (82 ) (214 )
Allowance for loan and lease losses, end of period
$ 1,071,126 $ 1,133,226 $ 1,249,008 $ 1,336,352 $ 1,402,160
Allowance for unfunded loan commitments and letters of credit, beginning of period
$ 42,211 $ 42,127 $ 40,061 $ 39,689 $ 49,916
Provision for (reduction in) unfunded loan commitments and letters of credit losses
(1,151 ) 84 2,066 372 (10,227 )
Allowance for unfunded loan commitments and letters of credit, end of period
$ 41,060 $ 42,211 $ 42,127 $ 40,061 $ 39,689
Total allowance for credit losses, end of period
$ 1,112,186 $ 1,175,437 $ 1,291,135 $ 1,376,413 $ 1,441,849
Allowance for loan and lease losses as % of:
Total loans and leases
2.74 % 2.96 % 3.28 % 3.56 % 3.79 %
Nonaccrual loans and leases
174 178 161 136 117
Nonperforming assets
164 164 148 121 89
Total allowance for credit losses as % of:
Total loans and leases
2.84 % 3.07 % 3.39 % 3.67 % 3.90 %
Nonaccrual loans and leases
181 185 166 140 120
Nonperforming assets
170 170 153 125 91
The reduction in the ALLL, compared with both March 31, 2011, and December 31, 2010, reflected a decline in the commercial portfolio ALLL as a result of NCOs on loans with specific reserves, and an overall reduction in the level of commercial Criticized loans. Commercial Criticized loans are commercial loans rated as OLEM, Substandard, Doubtful, or Loss. As shown in the table below, commercial Criticized loans declined $0.3 billion from March 31, 2011, and $0.7 billion from December 31, 2010, reflecting significant upgrade and payment activity.
Table 32 — Criticized Commercial Loan Activity
2011 2010
(dollar amounts in thousands) Second First Fourth Third Second
Criticized commercial loans, beginning of period
$ 2,660,792 $ 3,074,481 $ 3,637,533 $ 4,106,602 $ 4,608,610
New additions / increases
250,422 169,884 289,850 407,514 280,353
Advances
44,442 61,516 52,282 75,386 79,392
Upgrades to Pass
(271,698 ) (238,518 ) (382,713 ) (391,316 ) (409,092 )
Payments
(231,819 ) (294,564 ) (401,302 ) (408,698 ) (331,145 )
Loan losses
(72,989 ) (112,008 ) (121,169 ) (151,955 ) (121,516 )
Criticized commercial loans, end of period
$ 2,379,150 $ 2,660,792 $ 3,074,481 $ 3,637,533 $ 4,106,602
The entire loan and lease portfolio has shown steadily improving credit quality trends throughout 2010 and 2011, and we believe that early identification of problem loans and aggressive action plans for these problem loans, combined with originating high quality new loans will result in continued improvement in our key credit quality metrics. However, the continued weakness in the residential real estate market and the overall economic conditions remained stressed, and additional risks emerged during the first six-month period of 2011. These additional risks include the U.S. debt ceiling discussions, the budget issues in local governments, the political instability in the Middle East with its ramifications on the cost of oil, European instability, and the flattening of the economic growth in the current quarter compared to the prior quarter. Continued high unemployment, among other factors, has slowed any significant recovery. In the near-term, we anticipate a continued high unemployment rate and the concern around the U.S., state, and local government budget issues will impact the financial condition of some of our retail and commercial borrowers. The pronounced downturn in the residential real estate market that began in early 2007 has resulted in significantly lower residential real estate values. We have significant exposure to loans secured by residential real estate and continue to be an active lender in our communities. The impact of the downturn in real estate values has had a significant impact on some of our borrowers as evidenced by the higher delinquencies and NCOs experienced over the past three years. We do not anticipate any meaningful economic improvement in the near-term. All of these factors are impacting consumer confidence, as well as business investments and acquisitions. Given the combination of these noted factors, we believe that our ACL is appropriate and its coverage level is reflective of the quality of our portfolio and the operating environment.

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The table below reflects the allocation of our ACL among our various loan categories during each of the past five quarters:
Table 33 — Allocation of Allowance for Credit Losses (1)
2011 2010
(dollar amounts in thousands) June 30, March 31, December 31, September 30, June 30,
Commercial
Commercial and industrial
$ 281,016 35 % $ 299,564 35 % $ 340,614 34 % $ 353,431 33 % $ 426,767 34 %
Commercial real estate
463,874 16 511,068 17 588,251 18 654,219 18 695,778 19
Total commercial
744,890 51 810,632 52 928,865 52 1,007,650 51 1,122,545 53
Consumer
Automobile
55,428 16 50,862 15 49,488 15 44,505 14 41,762 13
Home equity
146,444 20 149,370 20 150,630 20 154,323 21 117,708 20
Residential mortgage
98,992 12 96,741 12 93,289 12 93,407 12 79,105 12
Other consumer
25,372 1 25,621 1 26,736 1 36,467 2 41,040 2
Total consumer
326,236 49 322,594 48 320,143 48 328,702 49 279,615 47
Total allowance for loan and lease losses
1,071,126 100 % 1,133,226 100 % 1,249,008 100 % 1,336,352 100 % 1,402,160 100 %
Allowance for unfunded loan commitments
41,060 42,211 42,127 40,061 39,689
Total allowance for credit losses
$ 1,112,186 $ 1,175,437 $ 1,291,135 $ 1,376,413 $ 1,441,849
(1) Percentages represent the percentage of each loan and lease category to total loans and leases.
The consumer-related ALLL at June 30, 2011, increased $6.1 million, or 2%, from December 31, 2010, primarily reflecting increased loan-related balances over the first six-month period of 2011. The home equity-related ALLL decreased slightly as a result of lower delinquency levels, and to a lesser extent, improvement in the weighted average FICO score for the portfolio.
The table below reflects activity in the ALLL and AULC for the first six-month periods ended June 30, 2011 and 2010.
Table 34 — Year to Date Allowance for Credit Losses Analysis
Six Months Ended June 30,
(dollar amounts in thousands) 2011 2010
Allowance for loan and lease losses, beginning of period
$ 1,249,008 $ 1,482,479
Loan and lease losses
(327,708 ) (577,176 )
Recoveries of loans previously charged-off
65,091 59,467
Net loan and lease losses
(262,617 ) (517,709 )
Provision for loan and lease losses
86,249 437,604
Allowance for assets sold
(1,514 ) (214 )
Allowance for loan and lease losses, end of period
$ 1,071,126 $ 1,402,160
Allowance for unfunded loan commitments and letters of credit, beginning of period
$ 42,127 $ 48,879
Provision for (reduction in) unfunded loan commitments and letters of credit losses
(1,067 ) (9,190 )
Allowance for unfunded loan commitments and letters of credit, end of period
$ 41,060 $ 39,689
Total allowance for credit losses
$ 1,112,186 $ 1,441,849
Allowance for loan and lease losses as % of:
Total loans and leases
2.74 % 3.79 %
Nonaccrual loans and leases
174 117
Nonperforming assets
164 89
Total allowance for credit losses as % of:
Total loans and leases
2.84 % 3.90 %
Nonaccrual loans and leases
181 120
Nonperforming assets
170 91

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NCOs
(This section should be read in conjunction with Significant Item 2 and the Franklin-related Impacts section.)
Any loan in any portfolio may be charged-off prior to the policies described below if a loss confirming event has occurred. Loss confirming events include, but are not limited to, bankruptcy (unsecured), continued delinquency, foreclosure, or receipt of an asset valuation indicating a collateral deficiency and that asset is the sole source of repayment.
C&I and CRE loans are either charged-off or written down to net realizable value at 90-days past due. Automobile loans and other consumer loans are charged-off at 120-days past due. First-lien and second-lien home equity loans are charged-off to the estimated fair value of the collateral at 150-days past due and 120-days past due, respectively. Residential mortgages are charged-off to the estimated fair value of the collateral at 150-days past due.

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The following table reflects NCO detail for each of the last five quarters.
Table 35 — Quarterly Net Charge-off Analysis
2011 2010
(dollar amounts in thousands) Second First Fourth Third Second
Net charge-offs by loan and lease type:
Commercial:
Commercial and industrial
$ 18,704 $ 42,191 $ 59,124 $ 62,241 $ 58,128
Commercial real estate:
Construction
4,145 28,400 11,084 17,936 45,562
Commercial
23,450 39,283 33,787 45,725 36,169
Commercial real estate
27,595 67,683 44,871 63,661 81,731
Total commercial
46,299 109,874 103,995 125,902 139,859
Consumer:
Automobile
2,255 4,712 7,035 5,570 5,436
Home equity (1)
25,441 26,715 29,175 27,827 44,470
Residential mortgage (2), (3)
16,455 18,932 26,775 18,961 82,848
Other consumer
7,084 4,850 5,271 6,254 6,615
Total consumer
51,235 55,209 68,256 58,612 139,369
Total net charge-offs
$ 97,534 $ 165,083 $ 172,251 $ 184,514 $ 279,228
Net charge-offs — annualized percentages:
Commercial:
Commercial and industrial
0.56 % 1.29 % 1.85 % 2.01 % 1.90 %
Commercial real estate:
Construction
2.99 18.59 6.19 7.25 14.25
Commercial
1.65 2.66 2.22 3.01 2.38
Commercial real estate
1.77 4.15 2.64 3.60 4.44
Total commercial
0.94 2.24 2.13 2.59 2.85
Consumer:
Automobile
0.15 0.33 0.51 0.43 0.47
Home equity (1)
1.29 1.38 1.51 1.47 2.36
Residential mortgage (2), (3)
1.44 1.70 2.42 1.73 7.19
Other consumer
5.27 3.47 3.66 3.83 3.81
Total consumer
1.08 1.20 1.50 1.32 3.19
Net charge-offs as a % of average loans
1.01 % 1.73 % 1.82 % 1.98 % 3.01 %
(1) The 2010 second quarter included net charge-offs totaling $14,678 thousand associated with the transfer of Franklin-related home equity loans to loans held for sale and $1,262 thousand of other Franklin-related net charge-offs.
(2) The 2010 second quarter included net charge-offs totaling $60,822 thousand associated with the transfer of Franklin-related residential mortgage loans to loans held for sale and $3,403 thousand of other Franklin-related net charge-offs.
(3) The 2010 fourth quarter included net charge-offs of $16,389 thousand related to the sale of certain underperforming residential mortgage loans.
In assessing NCO trends, it is helpful to understand the process of how these loans are treated as they deteriorate over time. The allowance for loans established at origination is consistent with the level of risk associated with the original underwriting. As a part of our normal portfolio management process for commercial loans, the loan is periodically reviewed and the allowance is increased or decreased as warranted. If the quality of a loan has deteriorated, it migrates to a lower quality risk rating, requiring a higher reserve amount. Charge-offs, if necessary, are generally recognized in a period after the specific allowance was established. If the previously established allowance exceeds that needed to satisfactorily resolve the problem loan, a reduction in the overall level of the allowance could be recognized. In summary, if loan quality deteriorates, the typical credit sequence would be periods of allowance building, followed by periods of higher NCOs as the previously established allowance is utilized. Additionally, an increase in the allowance either precedes or is in conjunction with increases in NALs. When a loan is classified as NAL, it is evaluated for specific allowance or charge-off. As a result, an increase in NALs does not necessarily result in an increase in the allowance or an expectation of higher future NCOs.

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2011 Second Quarter versus 2011 First Quarter
C&I NCOs declined $23.5 million, or 56%. CRE NCOs decreased $40.1 million, or 59%. These declines were evident across our geographic footprint and generally associated with small relationships. The performance of both portfolios was consistent with our expectations. Based on asset quality trends, we continue to anticipate this lower level of CRE NCOs in future quarters.
Automobile NCOs declined $2.5 million, or 52%, and reflected historically lower delinquency levels during the current quarter, the continued high credit quality of originations, and a strong resale market for used vehicles.
Home equity NCOs declined $1.3 million, or 5%. This performance was consistent with our expectations for the portfolio given the economic conditions in our markets. We continue to manage the default rate through focused delinquency monitoring as virtually all defaults for second-lien home equity loans incur significant losses primarily due to insufficient equity in the collateral property.
Residential mortgage NCOs declined $2.5 million, or 13%. The current quarter included Franklin-related net charge-offs of $0.6 million, and the prior quarter included $6.8 million of NCOs related to a change in loss recognition policy (see Consumer Credit section) and Franklin-related net recoveries of $3.1 million. Excluding these impacts, residential mortgage NCOs increased $0.7 million, consistent with our expectations.
The following table reflects NCO activity for the first six-month periods ended June 30, 2011 and 2010.

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Table 36 — Year to Date Net Charge-off Analysis
Six Months Ended June 30,
(dollar amounts in thousands) 2011 2010
Net charge-offs by loan and lease type:
Commercial:
Commercial and industrial
$ 60,895 $ 133,567
Commercial real estate:
Construction
32,545 79,988
Commercial
62,733 87,042
Commercial real estate
95,278 167,030
Total commercial
156,173 300,597
Consumer:
Automobile
6,967 13,967
Home equity (1)
52,156 82,371
Residential mortgage (2)
35,387 107,159
Other loans
11,934 13,615
Total consumer
106,444 217,112
Total net charge-offs
$ 262,617 $ 517,709
Net charge-offs — annualized percentages:
Commercial:
Commercial and industrial
0.92 % 2.18 %
Commercial real estate:
Construction
11.18 11.90
Commercial
2.17 2.82
Commercial real estate
2.99 4.44
Total commercial
1.59 3.04
Consumer:
Automobile
0.24 0.63
Home equity (1)
1.34 2.18
Residential mortgage (2)
1.57 4.72
Other loans
4.36 3.84
Total consumer
1.14 2.52
Net charge-offs as a % of average loans
1.37 % 2.80 %
(1) The 2010 first six-month period included net charge-offs totaling $14,678 thousand associated with the transfer of Franklin-related home equity loans to loans held for sale and $4,991 thousand of other Franklin-related net charge-offs.
(2) The 2010 first six-month period included net charge-offs totaling $60,822 thousand associated with the transfer of Franklin-related residential mortgage loans to loans held for sale and $11,525 thousand of other Franklin-related net charge-offs.
2011 First Six Months versus 2010 First Six Months
C&I NCOs decreased $72.7 million, or 54%. CRE NCOs decreased $71.8 million, or 43%. These declines primarily reflected significant credit quality improvement in the underlying portfolio as well as our on-going proactive credit management practices.
Automobile NCOs decreased $7.0 million, or 50%, reflected our consistent high quality origination profile, as well as a continued strong market for used automobiles. This focus on origination quality has been the primary driver for the improvement in this portfolio in the current period compared with the year-ago period. Origination quality remained high.

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Home equity NCOs declined $30.2 million, or 37%. The first six-month period of 2010 included $19.7 million of Franklin-related NCOs compared with no Franklin-related NCOs in the current period. Excluding the Franklin-related impacts, home equity NCOs decreased $10.5 million compared with the first six-month period of 2010. The performance was consistent with our expectations for the portfolio.
Residential mortgage NCOs declined $71.8 million, or 67%. The first six-month period of 2010 included $72.3 million of Franklin-related net charge-offs, while the first six-month period of 2011 included $6.8 million of NCOs related to a change in loss recognition policy (see Consumer Credit section) and Franklin-related net recoveries of $2.5 million. Excluding these impacts, residential mortgage NCOs decreased $3.8 million compared with the first six-month period of 2010. The performance was consistent with our expectations for the portfolio.
AVAILABLE-FOR-SALE AND OTHER SECURITIES PORTFOLIO
(This section should be read in conjunction with Note 4 of Notes to Unaudited Condensed Consolidated Financial Statements.)
During the first six-month period of 2011, we recorded $4.3 million of credit OTTI losses. This amount was comprised of $3.2 million related to the pooled-trust-preferred securities, $0.9 million related to the CMO securities, and $0.2 million related to the Alt-A mortgage-backed securities. Given the continued disruption in the housing markets, we may be required to recognize additional credit OTTI losses in future periods with respect to our available-for-sale and other securities portfolio. The amount and timing of any additional credit OTTI will depend on the decline in the underlying cash flows of the securities. If our intent to hold temporarily impaired securities changes in future periods, we may be required to recognize noncredit OTTI through income, which will negatively impact earnings.
Alt-A Mortgage-Backed, Pooled-Trust-Preferred, and Private-Label CMO Securities
Our three highest risk segments of our investment portfolio are the Alt-A mortgage-backed, pooled-trust-preferred, and private-label CMO portfolios. The Alt-A mortgage-backed securities and pooled-trust-preferred securities are in the asset-backed securities portfolio. The performance of the underlying securities in each of these segments continued to reflect the economic environment. Each of these securities in these three segments is subjected to a rigorous review of its projected cash flows. These reviews are supported with analysis from independent third parties.
The following table presents the credit ratings for our Alt-A mortgage-backed, pooled-trust-preferred, and private label CMO securities as of June 30, 2011:
Table 37 — Credit Ratings of Selected Investment Securities (1)
Amortized Average Credit Rating of Fair Value Amount
(dollar amounts in millions) Cost Fair Value AAA AA +/- A +/- BBB +/- <BBB-
Private-label CMO securities
$ 97.7 $ 88.8 $ 3.3 $ 6.6 $ 20.5 $ 8.2 $ 50.2
Alt-A mortgage-backed securities
62.1 55.5 26.4 10.9 18.2
Pooled-trust-preferred securities
228.7 110.3 26.3 84.0
Total at June 30, 2011
$ 388.5 $ 254.6 $ 3.3 $ 33.0 $ 57.7 $ 8.2 $ 152.4
Total at December 31, 2010
$ 435.8 $ 284.6 $ 41.2 $ 33.8 $ 29.7 $ 15.1 $ 164.8
(1) Credit ratings reflect the lowest current rating assigned by a nationally recognized credit rating agency.
Negative changes to the above credit ratings would generally result in an increase of our risk-weighted assets, and a reduction to our regulatory capital ratios.
The following table summarizes the relevant characteristics of our pooled-trust-preferred securities portfolio at June 30, 2011. Each security is part of a pool of issuers and supports a more senior tranche of securities except for the I-Pre TSL II, MM Comm II and MM Comm III securities which are the most senior class.

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Table 38 — Trust-preferred Securities Data
June 30, 2011
(dollar amounts in thousands)
Actual
Deferrals Expected
and Defaults
# of Issuers Defaults as a % of
Lowest Currently as a % of Remaining
Amortized Fair Unrealized Credit Performing/ Original Performing Excess
Deal Name Par Value Cost Value Loss Rating(2) Remaining(3) Collateral Collateral Subordination(4)
Alesco II (1)
$ 41,447 $ 31,540 $ 11,249 $ (20,291 ) C 32/38 14 % 16 % %
Alesco IV (1)
20,864 8,243 459 (7,784 ) C 31/42 17 26
ICONS
20,000 20,000 13,418 (6,582 ) BB 28/29 3 13 56
I-Pre TSL II
36,680 36,582 26,329 (10,253 ) A 27/28 3 11 74
MM Comm II
20,970 20,041 19,712 (329 ) BB 4/7 5 3 17
MM Comm III
11,081 10,587 7,344 (3,243 ) CC 6/11 7 12 28
Pre TSL IX (1)
5,014 3,995 1,561 (2,434 ) C 33/48 27 22
Pre TSL X (1)
17,684 9,915 3,475 (6,440 ) C 35/55 40 29
Pre TSL XI (1)
25,362 22,725 7,647 (15,078 ) C 44/64 29 21
Pre TSL XIII (1)
28,073 22,703 7,653 (15,050 ) C 45/65 31 22
Reg Diversified (1)
25,500 7,499 484 (7,015 ) D 23/44 46 34
Soloso (1)
12,500 3,906 721 (3,185 ) C 42/68 29 21
Tropic III
31,000 31,000 10,232 (20,768 ) CC 25/45 39 28 28
Total
$ 296,175 $ 228,736 $ 110,284 $ (118,452 )
(1) Security was determined to have OTTI. As such, the book value is net of recorded credit impairment.
(2) For purposes of comparability, the lowest credit rating expressed is equivalent to Fitch ratings even where the lowest rating is based on another nationally recognized credit rating agency.
(3) Includes both banks and/or insurance companies.
(4) Excess subordination percentage represents the additional defaults in excess of both current and projected defaults that the CDO can absorb before the bond experiences credit impairment. Excess subordinated percentage is calculated by (a) determining what percentage of defaults a deal can experience before the bond has credit impairment, and (b) subtracting from this default breakage percentage both total current and expected future default percentages.
Market Risk
Market risk represents the risk of loss due to changes in market values of assets and liabilities. We incur market risk in the normal course of business through exposures to market interest rates, foreign exchange rates, equity prices, credit spreads, and expected lease residual values. We have identified two primary sources of market risk: interest rate risk and price risk.
Interest Rate Risk
OVERVIEW
Interest rate risk is the risk to earnings and value arising from changes in market interest rates. Interest rate risk arises from timing differences in the repricings and maturities of interest-earning assets and interest-bearing liabilities (reprice risk), changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers’ ability to prepay residential mortgage loans at any time and depositors’ ability to redeem certificates of deposit before maturity (option risk), changes in the shape of the yield curve where interest rates increase or decrease in a non-parallel fashion (yield curve risk), and changes in spread relationships between different yield curves, such as U.S. Treasuries and LIBOR (basis risk).
INCOME SIMULATION AND ECONOMIC VALUE ANALYSIS
Interest rate risk measurement is performed monthly. Two broad approaches to modeling interest rate risk are employed: income simulation and economic value analysis. An income simulation analysis is used to measure the sensitivity of forecasted ISE to changes in market rates over a one-year time period. Although bank owned life insurance, automobile operating lease assets, and excess cash balances held at the Federal Reserve Bank are classified as noninterest-earning assets, and the net revenue from these assets is recorded in noninterest income and noninterest expense, these portfolios are included in the interest sensitivity analysis because they have attributes similar to interest-earning assets. EVE analysis is used to measure the sensitivity of the values of period-end assets and liabilities to changes in market interest rates. EVE analysis serves as a complement to ISE analysis as it provides risk exposure estimates for time periods beyond the one-year simulation period.

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The models used for these measurements take into account prepayment speeds on mortgage loans, mortgage-backed securities, and consumer installment loans, as well as cash flows of other assets and liabilities. Balance sheet growth assumptions are also considered in the ISE analysis. The models include the effects of derivatives, such as interest rate swaps, caps, floors, and other types of interest rate options.
The baseline scenario for ISE analysis, with which all other scenarios are compared, is based on market interest rates implied by the prevailing yield curve as of the period-end. Alternative interest rate scenarios are then compared with the baseline scenario. These alternative interest rate scenarios include parallel rate shifts on both a gradual and an immediate basis, movements in interest rates that alter the shape of the yield curve (e.g., flatter or steeper yield curve), and no changes in current interest rates for the entire measurement period. Scenarios are also developed to measure short-term repricing risks, such as the impact of LIBOR-based interest rates rising or falling faster than the prime rate.
The simulations for evaluating short-term interest rate risk exposure are scenarios that model gradual +/-100 and +/-200 basis points parallel shifts in market interest rates over the next one-year period beyond the interest rate change implied by the current yield curve. We assumed market interest rates would not fall below 0% over the next one-year period for the scenarios that used the -100 and -200 basis points parallel shift in market interest rates. The table below shows the results of the scenarios as of June 30, 2011, and December 31, 2010. All of the positions were within the board of directors’ policy limits as of June 30, 2011.
Table 39 — Interest Sensitive Earnings at Risk
Interest Sensitive Earnings at Risk (%)
Basis point change scenario
-200 -100 +100 +200
Board policy limits
-4.0 % -2.0 % -2.0 % -4.0 %
June 30, 2011
-2.5 -1.5 1.3 1.9
December 31, 2010
-3.2 -1.8 0.3 0.0
The ISE at risk reported as of June 30, 2011, for the +200 basis points scenario shows a significant change to an asset sensitive near-term interest rate risk position compared with December 31, 2010. The ALCO’s strategy is to be near-term asset-sensitive to a rising rate scenario. The primary factor contributing to this change is the 2011 first quarter termination of $4.6 billion of interest rate swaps maturing through June 2012.
The following table shows the income sensitivity of select portfolios to changes in market interest rates. A portfolio with 100% sensitivity would indicate that interest income and expense will change with the same magnitude and direction as interest rates. A portfolio with 0% sensitivity is insensitive to changes in interest rates. For the +200 basis points scenario, total interest-sensitive income is 37.7% sensitive to changes in market interest rates, while total interest-sensitive expense is 41.1% sensitive to changes in market interest rates. However, net interest income at risk for the +200 basis points scenario has an asset-sensitive near-term interest rate risk position because of the larger base of total interest-sensitive income relative to total interest-sensitive expense.
Table 40 — Interest Income/Expense Sensitivity
Percent of Percent Change in Interest Income/Expense for a Given
Total Earning Change in Interest Rates
Assets (1) Over / (Under) Base Case Parallel Ramp
Basis point change scenario
-200 -100 +100 +200
Total loans
81 % -17.6 % -24.3 % 42.1 % 41.9 %
Total investments and other earning assets
19 -16.3 -21.0 34.3 24.6
Total interest sensitive income
-16.9 -23.0 39.6 37.7
Total interest-bearing deposits
67 -11.0 -15.7 37.2 37.1
Total borrowings
11 -13.8 -26.6 58.7 61.6
Total interest-sensitive expense
-11.5 -17.5 40.7 41.1
(1) At June 30, 2011.

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The primary simulations for EVE at risk assume immediate +/-100 and +/-200 basis points parallel shifts in market interest rates beyond the interest rate change implied by the current yield curve. The table below outlines the June 30, 2011, results compared with December 31, 2010. All of the positions were within the board of directors’ policy limits.
Table 41 — Economic Value of Equity at Risk
Economic Value of Equity at Risk (%)
Basis point change scenario
-200 -100 +100 +200
Board policy limits
-12.0 % -5.0 % -5.0 % -12.0 %
June 30, 2011
-1.4 1.4 -2.9 -6.8
December 31, 2010
-0.5 1.3 -4.0 -8.9
The EVE at risk reported as of June 30, 2011, for the +200 basis points scenario shows a change to a lower long-term liability sensitive position compared with December 31, 2010. The primary factor contributing to this change is the 2011 first quarter termination of $4.6 billion of interest rate swaps maturing through June 2012.
The following table shows the economic value sensitivity of select portfolios to changes in market interest rates. The change in economic value for each portfolio is measured as the percent change from the base economic value for that portfolio. For the +200 basis points scenario, total net tangible assets decreased in value 3.4% to changes in market interest rates, while total net tangible liabilities increased in value 2.8% to changes in market interest rates.
Table 42 — Economic Value Sensitivity
Percent of
Total Net Percent Change in Economic Value for a Given
Tangible Change in Interest Rates
Assets (1) Over / (Under) Base Case Parallel Shocks
Basis point change scenario
-200 -100 +100 +200
Total loans
74 % 1.4 % 1.1 % -1.4 % -2.7 %
Total investments and other earning assets
17 3.8 2.7 -3.3 -6.6
Total net tangible assets (2)
1.8 1.4 -1.6 -3.4
Total deposits
78 -2.6 -1.4 1.5 3.0
Total borrowings
10 -1.4 -0.8 0.7 1.4
Total net tangible liabilities (3)
-2.4 -1.4 1.4 2.8
(1) At June 30, 2011.
(2) Tangible assets excluding ALLL.
(3) Tangible liabilities excluding AULC.
MSRs
(This section should be read in conjunction with Note 6 of Notes to Unaudited Condensed Consolidated Financial Statements.)
At June 30, 2011, we had a total of $189.7 million of capitalized MSRs representing the right to service $16.3 billion in mortgage loans. Of this $189.7 million, $105.0 million was recorded using the fair value method, and $84.7 million was recorded using the amortization method. When we actively engage in hedging, the MSR asset is recorded using the fair value method.
MSR fair values are very sensitive to movements in interest rates as expected future net servicing income depends on the projected outstanding principal balances of the underlying loans, which can be greatly reduced by prepayments. Prepayments usually increase when mortgage interest rates decline and decrease when mortgage interest rates rise. We have employed strategies to reduce the risk of MSR fair value changes or impairment. In addition, we engage a third party to provide valuation tools and assistance with our strategies with the objective to decrease the volatility from MSR fair value changes. However, volatile changes in interest rates can diminish the effectiveness of these hedges. We typically report MSR fair value adjustments net of hedge-related trading activity in the mortgage banking income category of noninterest income. Changes in fair value between reporting dates are recorded as an increase or a decrease in mortgage banking income.

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MSRs recorded using the amortization method generally relate to loans originated with historically low interest rates, resulting in a lower probability of prepayments and, ultimately, impairment. MSR assets are included in other assets and presented in Table 12 and Table 16.
Price Risk
Price risk represents the risk of loss arising from adverse movements in the prices of financial instruments that are carried at fair value and are subject to fair value accounting. We have price risk from trading securities, securities owned by our broker-dealer subsidiaries, foreign exchange positions, equity investments, investments in securities backed by mortgage loans, and marketable equity securities held by our insurance subsidiaries. We have established loss limits on the trading portfolio, on the amount of foreign exchange exposure that can be maintained, and on the amount of marketable equity securities that can be held by the insurance subsidiaries.
Liquidity Risk
Liquidity risk is the risk of loss due to the possibility that funds may not be available to satisfy current or future commitments resulting from external macro market issues, investor and customer perception of financial strength, and events unrelated to us, such as war, terrorism, or financial institution market specific issues. We manage liquidity risk at both the Bank and the parent company.
Bank Liquidity and Sources of Liquidity
Our primary sources of funding for the Bank are retail and commercial core deposits. At June 30, 2011, these core deposits funded 74% of total assets. At June 30, 2011, total core deposits represented 95% of total deposits, an increase from 93% at December 31, 2010.
Core deposits are comprised of interest-bearing and noninterest-bearing demand deposits, money market deposits, savings and other domestic deposits, consumer certificates of deposit both over and under $250,000, and nonconsumer certificates of deposit less than $250,000. Noncore deposits consist of brokered money market deposits and certificates of deposit, foreign time deposits, and other domestic deposits of $250,000 or more comprised primarily of public fund certificates of deposit more than $250,000.
Core deposits may increase our need for liquidity as certificates of deposit mature or are withdrawn before maturity and as nonmaturity deposits, such as checking and savings account balances, are withdrawn.
Demand deposit overdrafts that have been reclassified as loan balances were $15.9 million, $13.1 million, and $18.2 million at June 30, 2011, December 31, 2010, and June 30, 2010, respectively.
Other domestic time deposits of $250,000 or more and brokered deposits and negotiable CDs totaled $1.9 billion, $2.2 billion, and $2.1 billion at June 30, 2011, December 31, 2010, and June 30, 2010, respectively.

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The following tables reflect deposit composition and short-term borrowings detail for each of the past five quarters:
Table 43 — Deposit Composition
2011 2010
(dollar amounts in millions) June 30, March 31, December 31, September 30, June 30,
By Type
Demand deposits — noninterest-bearing
$ 8,210 20 % $ 7,597 18 % $ 7,217 17 % $ 6,926 17 % $ 6,463 16 %
Demand deposits — interest-bearing
5,642 14 5,532 13 5,469 13 5,347 13 5,850 15
Money market deposits
12,643 31 13,105 32 13,410 32 12,679 31 11,437 29
Savings and other domestic deposits
4,752 11 4,762 12 4,643 11 4,613 11 4,652 12
Core certificates of deposit
7,936 19 8,208 20 8,525 20 8,765 21 8,974 23
Total core deposits
39,183 95 39,204 95 39,264 93 38,330 93 37,376 95
Other domestic deposits of $250,000 or more
436 1 531 1 675 2 730 2 678 2
Brokered deposits and negotiable CDs
1,486 4 1,253 3 1,532 4 1,576 4 1,373 3
Deposits in foreign offices
297 378 1 383 1 436 1 422
Total deposits
$ 41,402 100 % $ 41,366 100 % $ 41,854 100 % $ 41,072 100 % $ 39,849 100 %
Total core deposits:
Commercial
$ 13,541 35 % $ 12,785 33 % $ 12,476 32 % $ 12,262 32 % $ 11,515 31 %
Consumer
25,642 65 26,419 67 26,788 68 26,068 68 25,861 69
Total core deposits
$ 39,183 100 % $ 39,204 100 % $ 39,264 100 % $ 38,330 100 % $ 37,376 100 %
Table 44 — Federal Funds Purchased and Repurchase Agreements
2011 2010
(dollar amounts in millions) June 30, March 31, December 31, September 30, June 30,
Balance at period-end
Federal Funds purchased and securities sold under agreements to repurchase
$ 1,983 $ 2,017 $ 1,966 $ 1,773 $ 1,012
Other short-term borrowings
40 34 75 86 81
Weighted average interest rate at period-end
Federal Funds purchased and securities sold under agreements to repurchase
0.15 % 0.17 % 0.19 % 0.22 % 0.17 %
Other short-term borrowings
0.69 0.92 0.53 0.40 0.36
Maximum amount outstanding at month-end during the period
Federal Funds purchased and securities sold under agreements to repurchase
$ 2,361 $ 2,091 $ 2,084 $ 1,773 $ 1,012
Other short-term borrowings
50 86 108 99 81
Average amount outstanding during the period
Federal Funds purchased and securities sold under agreements to repurchase
$ 2,067 $ 2,064 $ 2,045 $ 1,645 $ 907
Other short-term borrowings
45 69 89 94 59
Weighted average interest rate during the period
Federal Funds purchased and securities sold under agreements to repurchase
0.15 % 0.17 % 0.19 % 0.21 % 0.19 %
Other short-term borrowings
0.58 0.52 0.38 0.35 0.50
To the extent we are unable to obtain sufficient liquidity through core deposits, we may meet our liquidity needs through sources of wholesale funding. These sources include other domestic time deposits of $250,000 or more, brokered deposits and negotiable CDs, deposits in foreign offices, short-term borrowings, FHLB advances, other long-term debt, and subordinated notes. At June 30, 2011, total wholesale funding was $7.6 billion, a decrease from $8.4 billion at December 31, 2010.

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The Bank also has access to the Federal Reserve’s discount window. These borrowings are secured by commercial loans and home equity lines-of-credit. The Bank is also a member of the FHLB, and as such, has access to advances from this facility. These advances are generally secured by residential mortgages, other mortgage-related loans, and available-for-sale securities. Information regarding amounts pledged, for the ability to borrow if necessary, and the unused borrowing capacity at both the Federal Reserve Bank and the FHLB, is outlined in the following table:
Table 45 — Federal Reserve and FHLB Borrowing Capacity
June 30, December 31,
(dollar amounts in billions) 2011 2010
Loans and securities pledged:
Federal Reserve Bank
$ 9.8 $ 9.7
FHLB
7.5 7.8
Total loans and securities pledged
$ 17.3 $ 17.5
Total unused borrowing capacity at Federal Reserve Bank and FHLB
$ 9.6 $ 8.8
We can also obtain funding through other methods including: (1) purchasing federal funds, (2) selling securities under repurchase agreements, (3) the sale or maturity of investment securities, (4) the sale or securitization of loans, (5) the sale of national market certificates of deposit, (6) paydowns and/or securitization arising from the relatively shorter-term structure of our commercial loans and automobile loans, and (7) the issuance of common and preferred stock.
The Company is currently considering an automobile loan securitization transaction during the second half of 2011. The potential securitization is expected to be between $1.0 billion and $1.3 billion depending on existing liquidity needs, capital planning decisions, and market pricing. At June 30, 2011, and through the date of this filing, the Company has not yet identified the specific loans that would be securitized or finalized terms of the securitization, including whether the securitization would be recorded as a sale or as secured financing and, therefore, has not reclassified the loans to loans held for sale.
At June 30, 2011, we believe the Bank has sufficient liquidity to meet its cash flow obligations for the foreseeable future.
Parent Company Liquidity
The parent company’s funding requirements consist primarily of dividends to shareholders, debt service, income taxes, operating expenses, funding of nonbank subsidiaries, repurchases of our stock, and acquisitions. The parent company obtains funding to meet obligations from interest received from the Bank, interest and dividends received from direct subsidiaries, net taxes collected from subsidiaries included in the federal consolidated tax return, fees for services provided to subsidiaries, and the issuance of debt securities.
At June 30, 2011, December 31, 2010, and June 30, 2010, the parent company had $0.6 billion, $0.6 billion and $0.9 billion, respectively, in cash and cash equivalents. The decrease from June 30, 2010, primarily reflected the net impact of the equity and debt public offerings offset by repurchase of our TARP Capital in the 2010 fourth quarter, along with dividend payments on our common and preferred stock. Appropriate limits and guidelines are in place to ensure the parent company has sufficient cash to meet operating expenses and other commitments during 2011 without relying on subsidiaries or capital markets for funding.
During the 2010 fourth quarter, we completed a public offering and sale of 146.0 million shares of common stock at a price of $6.30 per share, or $920.0 million in aggregate gross proceeds. Also during the 2010 fourth quarter, we completed the public offering and sale of $300.0 million aggregate principal amount of 7.00% Subordinated Notes due 2020. We used the net proceeds from these transactions to repurchase our TARP Capital. On January 19, 2011, we repurchased the warrant we had issued to the Treasury at an agreed upon purchase price of $49.1 million. The warrant had entitled the Treasury to purchase 23.6 million shares of common stock.
On July 21, 2011, we announced that the board of directors had declared a quarterly common stock cash dividend of $0.04 per common share, up from the prior quarterly dividend of $0.01. The dividend is payable on October 3, 2011, to shareholders of record on September 19, 2011. Based on the dividend increase to $0.04 per common share, cash demands required for common stock dividends are estimated to be approximately $34.5 million per quarter, up from $8.6 million per quarter. Based on the current dividend, cash demands required for Series A Preferred Stock are estimated to be approximately $7.7 million per quarter.
Based on a regulatory dividend limitation, the Bank could not have declared and paid a dividend to the parent company at June 30, 2011, without regulatory approval. We do not anticipate that the Bank will need to request regulatory approval to pay dividends in the near future. To help meet any additional liquidity needs, we have an open-ended, automatic shelf registration statement filed and effective with the SEC, which permits us to issue an unspecified amount of debt or equity securities.
With the exception of the common and preferred dividends previously discussed, the parent company does not have any significant cash demands. There are no maturities of parent company obligations until 2013, when a debt maturity of $50.0 million is payable. There are no maturities of Bank obligations until 2012, when a debt maturity of $64.9 million is payable. It is our policy to keep operating cash on hand at the parent company to satisfy any cash demands for the next 12 months.
Considering the factors discussed above, and other analyses that we have performed, we believe the parent company has sufficient liquidity to meet its cash flow obligations for the foreseeable future.

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Off-Balance Sheet Arrangements
In the normal course of business, we enter into various off-balance sheet arrangements. These arrangements include financial guarantees contained in standby letters-of-credit issued by the Bank and commitments by the Bank to sell mortgage loans.
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 and are expected to expire without being drawn upon. Standby letters-of-credit are included in the determination of the amount of risk-based capital that the parent company and the Bank are required to hold.
Through our credit process, we monitor the credit risks of outstanding standby letters-of-credit. When it is probable that a standby letter of credit will be drawn and not repaid in full, losses are recognized in the provision for credit losses. At June 30, 2011, we had $0.6 billion of standby letters-of-credit outstanding, of which 79% were collateralized. Included in this $0.6 billion are letters-of-credit issued by the Bank that support securities that were issued by our customers and remarketed by The Huntington Investment Company, our broker-dealer subsidiary.
We enter into forward contracts relating to the mortgage banking business to hedge the exposures we have from commitments to extend new residential mortgage loans to our customers and from our mortgage loans held for sale. At June 30, 2011, December 31, 2010, and June 30, 2010, we had commitments to sell residential real estate loans of $400.2 million, $998.7 million, and $735.1 million, respectively. These contracts mature in less than one year.
We do not believe that off-balance sheet arrangements will have a material impact on our liquidity or capital resources.
Operational Risk
As with all companies, we are subject to operational risk. Operational risk is the risk of loss due to human error; inadequate or failed internal systems and controls; violations of, or noncompliance with, laws, rules, regulations, prescribed practices, or ethical standards; and external influences such as market conditions, fraudulent activities, disasters, and security risks. We continuously strive to strengthen our system of internal controls to ensure compliance with laws, rules, and regulations, and to improve the oversight of our operational risk.
To mitigate operational risks, we have established a senior management Operational Risk Committee and a senior management Legal, Regulatory, and Compliance Committee. The responsibilities of these committees, among other duties, include establishing and maintaining management information systems to monitor material risks and to identify potential concerns, risks, or trends that may have a significant impact and ensuring that recommendations are developed to address the identified issues. Both of these committees report any significant findings and recommendations to the Risk Management Committee. Additionally, potential concerns may be escalated to our Board Risk Oversight Committee, as appropriate.
The goal of this framework is to implement effective operational risk techniques and strategies, minimize operational and fraud losses, and enhance our overall performance.
Representation and Warranty Reserve
We primarily conduct our loan sale and securitization activity with FNMA and FHLMC. In connection with these and other securitization transactions, we make certain representations and warranties that the loans meet certain criteria, such as collateral type and underwriting standards. We may be required to repurchase individual loans and / or indemnify these organizations against losses due to a loan not meeting the established criteria. We have a reserve for such losses, which is included in accrued expenses and other liabilities. The reserves were estimated based on historical and expected repurchase activity, average loss rates, and current economic trends. The level of mortgage loan repurchase losses depends upon economic factors, investor demand strategies and other external conditions containing a level of uncertainty and risk that may change over the life of the underlying loans. We do not believe we have sufficient information to estimate the range of reasonably possible loss related to representation and warranty exposure.

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The table below reflects activity in the representations and warranties reserve:
Table 46 — Summary of Reserve for Representations and Warranties on Mortgage Loans Serviced for Others
2011 2010
(dollar amounts in thousands) Second First Fourth Third Second
Reserve for representations and warranties, beginning of period
$ 23,785 $ 20,170 $ 18,026 $ 10,519 $ 5,920
Assumed reserve for representations and warranties
7,000
Reserve charges
(365 ) (270 ) (4,242 ) (1,787 ) (1,875 )
Provision for representations and warranties
1,076 3,885 6,386 2,294 6,474
Reserve for representations and warranties, end of period
$ 24,496 $ 23,785 $ 20,170 $ 18,026 $ 10,519
Foreclosure Documentation
Compared to the high volume servicers, we service a relatively low volume of residential mortgage foreclosures, with approximately 4,400 foreclosure cases as of June 30, 2011, in states that require foreclosures to proceed through the courts. We have reviewed and are continuing to review our residential foreclosure process. We have no reason to conclude that foreclosures were filed that should not have been filed. We have and are strengthening our processes and controls to ensure that our foreclosure processes do not have the deficiencies identified in those institutions which are the subject of the consent orders between the high volume servicers and their respective federal regulators.
Compliance Risk
Financial institutions are subject to several laws, rules, and regulations emanating at both the federal and state levels. These broad-based mandates include, but are not limited to, expectations on anti-money laundering, lending limits, client privacy, fair lending, community reinvestment, and other important areas. Recently, the volume and complexity of regulatory changes has added to the overall compliance risk. We have invested in various resources to help ensure we meet expectations, and we have a team of compliance experts dedicated to ensuring our conformance. We require training for our colleagues for several broad-based laws and regulations. For example, all of our colleagues are expected to pass courses on anti-money laundering and customer privacy. Those colleagues who are engaged in lending activities must also take training related to flood disaster protection, equal credit opportunity, fair lending, and / or a variety of other courses related to the extension of credit. We set a high standard of expectation for adherence to compliance management and seek to continuously enhance our performance.
Capital
Capital is managed both at the Bank and on a consolidated basis. Capital levels are maintained based on regulatory capital requirements and the economic capital required to support credit, market, liquidity, and operational risks inherent in our business, and to provide the flexibility needed for future growth and new business opportunities. Shareholders’ equity totaled $5.3 billion at June 30, 2011, an increase of $0.3 billion, or 5%, from December 31, 2010, primarily reflecting an increase in retained earnings. We believe our current level of capital is adequate.
TARP Capital
As discussed in our 2010 Form 10-K, we fully exited our TARP relationship during the 2011 first quarter by repurchasing for $49.1 million the ten-year warrant we had issued to the Treasury as part of the TARP. Refer to the 2010 Form 10-K for a complete discussion regarding the issuing and repayment of our TARP Capital.

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Capital Adequacy
The following table presents risk-weighted assets and other financial data necessary to calculate certain financial ratios that we use to measure capital adequacy:
Table 47 — Capital Adequacy
2011 2010
(dollar amounts in millions) June 30, March 31, December 31, September 30, June 30,
Consolidated capital calculations:
Common shareholders’ equity
$ 4,890 $ 4,676 $ 4,618 $ 3,867 $ 3,742
Preferred shareholders’ equity
363 363 363 1,700 1,696
Total shareholders’ equity
5,253 5,039 4,981 5,567 5,438
Goodwill
(444 ) (444 ) (444 ) (444 ) (444 )
Other intangible assets
(202 ) (215 ) (229 ) (244 ) (259 )
Other intangible assets deferred tax liability (1)
71 75 80 85 91
Total tangible equity (2)
4,678 4,455 4,388 4,964 4,826
Preferred shareholders’ equity
(363 ) (363 ) (363 ) (1,700 ) (1,696 )
Total tangible common equity (2)
$ 4,315 $ 4,092 $ 4,025 $ 3,264 $ 3,130
Total assets
$ 53,050 $ 52,949 $ 53,820 $ 53,247 $ 51,771
Goodwill
(444 ) (444 ) (444 ) (444 ) (444 )
Other intangible assets
(202 ) (215 ) (229 ) (244 ) (259 )
Other intangible assets deferred tax liability (1)
71 75 80 85 91
Total tangible assets (2)
$ 52,475 $ 52,365 $ 53,227 $ 52,644 $ 51,159
Tier 1 capital
$ 5,352 $ 5,179 $ 5,022 $ 5,480 $ 5,317
Preferred shareholders’ equity
(363 ) (363 ) (363 ) (1,700 ) (1,696 )
Trust-preferred securities
(565 ) (570 ) (570 ) (570 ) (570 )
REIT-preferred stock
(50 ) (50 ) (50 ) (50 ) (50 )
Tier 1 common equity (2)
$ 4,374 $ 4,196 $ 4,039 $ 3,160 $ 3,001
Risk-weighted assets (RWA)
$ 44,080 $ 43,024 $ 43,471 $ 42,759 $ 42,486
Tier 1 common equity / RWA ratio (2)
9.92 % 9.75 % 9.29 % 7.39 % 7.06 %
Tangible equity / tangible asset ratio (2)
8.91 8.51 8.24 9.43 9.43
Tangible common equity / tangible asset ratio (2)
8.22 7.81 7.56 6.20 6.12
Tangible common equity / RWA ratio (2)
9.79 9.51 9.26 7.63 7.37
(1) Other intangible assets are net of deferred tax liability, and calculated assuming a 35% tax rate.
(2) Tangible equity, Tier 1 common equity, tangible common equity, and tangible assets are non-GAAP financial measures. Additionally, any ratios utilizing these financial measures are also non-GAAP. These financial measures have been included as they are considered to be critical metrics with which to analyze and evaluate financial condition and capital strength. Other companies may calculate these financial measures differently.
Capital continued to strengthen as period-end capital ratios improved compared to December 31, 2010. Our Tier 1 common risk-based ratio improved 63 basis points to 9.92% at June 30, 2011 compared to 9.29% at December 31, 2010. This increase primarily reflected the combination of an increase in retained earnings and an improvement in OCI.
The Tier 1 common risk-based ratio is the metric that has gained prominence with regulators. The recent international banking Basel III accord sets this ratio minimum at 7.0% with an additional buffer of up to 2.5% for a GSIFI. While we are not a GSIFI, the Dodd-Frank Act requires that any bank with assets over $50.0 billion would be subject to additional scrutiny. U.S. regulators have identified such qualifying banks as SIFIs. With $53.1 billion in assets at June 30, 2011, we are at the lower range of the SIFI group. Although we do not know at this time how much, if any, our required buffer will be, we believe that our current period-end capital ratios are well positioned.
Regulatory Capital
Regulatory capital ratios are the primary metrics used by regulators in assessing the safety and soundness of banks. We intend to maintain both our and the Bank’s risk-based capital ratios at levels at which both would be considered Well-capitalized by regulators. The Bank is primarily supervised and regulated by the OCC, which establishes regulatory capital guidelines for banks similar to those established for bank holding companies by the Federal Reserve Board.
Regulatory capital primarily consists of Tier 1 capital and Tier 2 capital. The sum of Tier 1 capital and Tier 2 capital equals our total risk-based capital. The following table reflects changes and activity to the various components utilized in the calculation of our consolidated Tier 1, Tier 2, and total risk-based capital amounts during the first six-month period of 2011.

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Table 48 — Consolidated Regulatory Capital Activity
Tier 1 Capital
Common Preferred Disallowed Disallowed Total
Shareholders’ Shareholders’ Qualifying Goodwill & Other Tier 1
(dollar amounts in millions) Equity (1) Equity Core Capital (2) Intangible assets Adjustments (net) Capital
Balance at December 31, 2010
$ 4,815 $ 363 $ 620 $ (607 ) $ (169 ) $ 5,022
Earnings
272 272
Changes to disallowed adjustments
31 (6 ) 25
Dividends
(33 ) (33 )
Repurchase of TARP Capital warrant
(49 ) (49 )
Repurchase of qualifying trust preferred securities
(5 ) (5 )
Disallowance of deferred tax assets
113 113
Other
7 7
Balance at June 30, 2011
$ 5,012 $ 363 $ 615 $ (576 ) $ (62 ) $ 5,352
Total risk-based capital
Qualifying Total
Qualifying Subordinated Tier 1 Capital risk-based
ACL Debt Tier 2 Capital (from above) capital
Balance at December 31, 2010
$ 552 $ 711 $ 1,263 $ 5,022 $ 6,285
Change in qualifying subordinated debt
(56 ) (56 ) (56 )
Change in qualifying ACL
6 6 6
Changes to Tier 1 Capital (see above)
330 330
Balance at June 30, 2011
$ 558 $ 655 $ 1,213 $ 5,352 $ 6,565
(1) Excludes accumulated other comprehensive income and minority interest.
(2) Includes minority interest.
The following table presents our regulatory capital ratios at both the consolidated and Bank levels for each of the past five quarters:
Table 49 — Regulatory Capital Ratios
2011 2010
June 30, March 31, December 31, September 30, June 30,
Total risk-weighted assets (in millions)
Consolidated $ 44,080 $ 43,024 $ 43,471 $ 42,759 42,486
Bank 43,907 42,750 43,281 42,503 42,249
Tier 1 leverage ratio
Consolidated 10.25 % 9.80 % 9.41 % 10.54 % 10.45 %
Bank 7.62 7.23 6.97 6.85 6.54
Tier 1 risk-based capital ratio
Consolidated 12.14 12.04 11.55 12.82 12.51
Bank 9.01 8.87 8.51 8.28 7.80
Total risk-based capital ratio
Consolidated 14.89 14.85 14.46 15.08 14.79
Bank 13.17 13.11 12.82 12.69 12.23
The increase in our consolidated Tier 1 risk-based capital ratios compared with December 31, 2010 primarily reflected earnings from the first six-month period of 2011 and a reduction in the disallowed deferred tax asset, partially offset by a slight increase in risk-weighted assets and the negative impact related to the repurchase of the TARP warrants.

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At June 30, 2011, our Tier 1 and total risk-based capital in excess of the minimum level required to be considered Well-capitalized were $2.7 billion and $2.2 billion, respectively. The Bank had Tier 1 and total risk-based capital in excess of the minimum level required to be considered Well-capitalized of $1.3 billion and $1.4 billion, respectively, at June 30, 2011.
Other Capital Matters
On July 21, 2011, our board of directors declared a quarterly cash dividend of $0.04 per common share, payable in October 2011. This represented an increase from a cash dividend of $0.01 per common share that has been declared for the past several quarters.
We consider disciplined capital management as a key objective, with dividends representing one component. Our strong capital ratios and expectations for continued earnings growth positions us to continue to actively explore additional capital management opportunities.

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BUSINESS SEGMENT DISCUSSION
Overview
This section reviews financial performance from a business segment perspective and should be read in conjunction with the Discussion of Results of Operations, Note 18 of the Notes to Unaudited Condensed Consolidated Financial Statements, and other sections for a full understanding of our consolidated financial performance.
Business segment results are determined based upon our management reporting system, which assigns balance sheet and income statement items to each of the business segments. The process is designed around our organizational and management structure and, accordingly, the results derived are not necessarily comparable with similar information published by other financial institutions.
Funds Transfer Pricing
We use an active and centralized FTP methodology to attribute appropriate net interest income to the business segments. The intent of the FTP methodology is to eliminate all interest rate risk from the business segments by providing matched duration funding of assets and liabilities. The result is to centralize the financial impact, management, and reporting of interest rate and liquidity risk in the Treasury / Other function where it can be centrally monitored and managed. The Treasury / Other function charges (credits) an internal cost of funds for assets held in (or pays for funding provided by) each business segment. The FTP rate is based on prevailing market interest rates for comparable duration assets (or liabilities), and includes an estimate for the cost of liquidity (liquidity premium). Deposits of an indeterminate maturity receive an FTP credit based on a combination of vintage-based average lives and replicating portfolio pool rates. Other assets, liabilities, and capital are charged (credited) with a four-year moving average FTP rate. The denominator in the net interest margin calculation has been modified to add the amount of net funds provided by each business segment for all periods presented.
Optimal Customer Relationship (OCR)
Our OCR initiative is a cross-business segment strategy designed to increase overall customer profitability and retention by deepening product and service penetration. We believe this can be accomplished by taking our broad array of services and products and delivering them through a rigorous and disciplined sales management process that is supported by robust sales and cross-referral technology.
OCR was introduced in late 2009. To date much effort has been spent on defining processes, sales training, and systems development to fully capture and measure OCR performance metrics. This quarter, we are introducing OCR-related metrics for consumers. We anticipate introducing OCR-related metrics for commercial customers later this year. This timing reflects the more complex nature of commercial relationships.
Consumer OCR Performance
For retail customers, there are two key performance metrics: (1) the number of services penetration per consumer checking account household, and (2) the annualized revenue generated.
We use the checking account since it typically represents the primary banking relationship product. Further, in our definition of a checking account household, we only count a product or service once. We believe this is a better metric in that consumer behavior and loyalty are driven more by the variety of products used rather than just the number of products. For example, a household that has one checking account and one mortgage, we count as having two services. A household with four checking accounts, we count as having one service. The household relationship utilizing two services is viewed likely to be more profitable and loyal, even though it has a smaller number of accounts. The overall objective, therefore, is to decrease the percentage 1-3 services per consumer checking account households, while increasing the percentage of those with over 4 services.
The second key performance metric is the number of consumer checking account households. The growth in number of households is a result of both new sales of checking accounts and improved retention of checking account households. The overall objective is to grow the number of households, along with an increase in product penetration.

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The following table presents consumer checking account household OCR metrics:
Table 50 — Consumer Checking Household OCR Cross-sell Report
2011 2010
Second First Fourth Third Second
Number of households
1,042,424 1,015,951 993,272 980,167 962,328
Product Penetration by Number of Services
1 Service
4.5 % 4.9 % 5.3 % 5.5 % 5.4 %
2-3 Services
24.2 24.6 25.3 26.0 26.4
4+ Services
71.3 70.5 69.4 68.5 68.2
Total revenue (in millions)
$ 260.0 $ 248.6 $ 240.3 $ 239.6 $ 245.0
Table 51 — Net Income by Business Segment
Six Months Ended June 30,
(dollar amounts in thousands) 2011 2010
Retail and Business Banking
$ 101,895 $ 56,407
Regional and Commercial Banking
51,184 17,395
AFCRE
85,425 (26,576 )
WGH
17,595 22,305
Treasury/Other
16,265 18,970
Total net income
$ 272,364 $ 88,501
Average Loans/Leases and Deposits by Business Segment
The segregation of total average loans and leases and total average deposits by business segment for the first six-month period of 2011, is presented in the following table:
Table 52 — Average Loans/Leases and Deposits by Business Segment
Six Months Ended June 30, 2011
Regional and
Retail and Commercial Treasury /
(dollar amounts in millions) Business Banking Banking AFCRE WGH Other TOTAL
Average Loans/Leases
Commercial and industrial
$ 3,002 $ 7,599 $ 1,789 $ 766 $ 90 $ 13,246
Commercial real estate
448 327 5,425 177 6,377
Total commercial
3,450 7,926 7,214 943 90 19,623
Automobile
5,829 5,829
Home equity
6,977 12 1 786 25 7,801
Residential mortgage
1,035 4 3,472 5 4,516
Other consumer
402 5 133 43 (35 ) 548
Total consumer
8,414 21 5,963 4,301 (5 ) 18,694
Total loans and leases
$ 11,864 $ 7,947 $ 13,177 $ 5,244 $ 85 $ 38,317
Average Deposits
Demand deposits — noninterest-bearing
$ 3,630 $ 2,017 $ 410 $ 1,369 $ 145 $ 7,571
Demand deposits — interest-bearing
4,471 90 44 851 6 5,462
Money market deposits
8,044 1,214 256 3,670 13,184
Savings and other domestic deposits
4,577 14 12 137 4,740
Core certificates of deposit
8,048 29 3 150 4 8,234
Total core deposits
28,770 3,364 725 6,177 155 39,191
Other deposits
189 210 49 1,253 567 2,268
Total deposits
$ 28,959 $ 3,574 $ 774 $ 7,430 $ 722 $ 41,459

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Retail and Business Banking
Table 53 — Key Performance Indicators for Retail and Business Banking
Six Months Ended June 30, Change
(dollar amounts in thousands unless otherwise noted) 2011 2010 Amount Percent
Net interest income
$ 473,053 $ 417,671 $ 55,382 13 %
Provision for credit losses
58,358 91,004 (32,646 ) (36 )
Noninterest income
200,842 198,544 2,298 1
Noninterest expense
458,775 438,430 20,345 5
Provision for income taxes
54,867 30,374 24,493 81
Net income
$ 101,895 $ 56,407 $ 45,488 81 %
Number of employees (full-time equivalent)
5,853 5,398 455 8 %
Total average assets (in millions)
$ 13,243 $ 13,158 $ 85 1
Total average loans/leases (in millions)
11,864 11,795 69 1
Total average deposits (in millions)
28,959 28,482 477 2
Net interest margin
3.28 % 2.96 % 0.32 % 11
NCOs
$ 83,012 $ 190,651 $ (107,639 ) (56 )
NCOs as a % of average loans and leases
1.40 % 3.23 % (1.83 )% (57 )
Return on average common equity
14.4 8.0 6.4 80
eop — End of Period.
2011 First Six Months vs. 2010 First Six Months
Retail and Business Banking reported net income of $101.9 million for the first six-month period of 2011. This was an increase of $45.5 million, or 81%, compared with the year-ago period.
Results for the current year continued to be positively impacted by an increase in the number of households and improved product penetration, along with deposit balance growth and deposit spread management. The positive impact has been attained through increased marketing expenses related to direct mail and media strategy changes implemented in early 2011 that continue to drive higher deposit spreads with a 33 basis point increase over the year-ago period. The marketing efforts created strong account and household production when compared to the year-ago period. Provision for credit losses for the first six-month period was lower than the year-ago period as loan credit quality benefitted from aggressive account management and disciplined centralized underwriting. Finally, loan balances are up 1% over the year-ago period, and also have a 10 basis point improvement in the portfolio spread.
The increase in net income reflected a combination of factors including:
$55.4 million, or 13%, increase in net interest income.
$32.6 million, or 36%, decline in the provision of credit losses.
Partially offset by:
$20.3 million, or 5%, increase in noninterest expense.
The increase in net interest income from the year-ago period reflected:
$0.5 billion, or 2%, increase in average total deposits.
33 basis point increase in our deposit spread.

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Partially offset by:
$6.0 million of lower equity funding related to lower rate environment.
Total average loans and leases were up slightly in the first six-month period of 2011, compared to the first six-month period in 2010. This reflected:
$95 million sale of SBA loans involving an $11.6 million gain referenced below.
$87 million, or 3%, increase in our C&I (Business Banking) portfolio.
$82 million, or 1%, increase in the consumer portfolio.
Partially offset by:
$0.1 billion, or 18%, decrease in the CRE portfolio reflecting our commitment to reduce exposure to CRE loans.
The increase in total average deposits from the year-ago period reflected:
$1.0 billion, or 14%, increase in average money market deposits.
$0.4 billion, or 13%, increase in noninterest-bearing demand deposits.
$0.3 billion, or 8%, increase in interest-bearing demand deposits.
Partially offset by:
$1.3 billion, or 14% decrease in core certificates of deposit.
The decrease in the provision for credit losses from the year-ago period reflected:
$107.6 million, or 56%, decrease in commercial NCOs. Expressed as an annualized percentage of related average balance, NCOs decreased to 1.40% in the first six-month period of 2011 from 3.23% in the year-ago period. The overall decline in NCOs was the result of improved credit quality of the portfolio.
The increase in noninterest income from the year-ago period reflected:
$19.9 million, or 191%, increase in other income, which reflected increased gains on sale of SBA loans and loan fees.
$7.2 million, or 14%, increase in electronic banking income, which reflected higher activation rates on new and existing cards coupled with higher transaction volumes.
$2.3 million, or 28%, increase in mortgage banking income driven by higher refinance requests beginning late in the 2010 second quarter.
Partially offset by:
$28.8 million, or 25%, decrease in deposit service charge income due to changes in Reg E and the launch of Huntington’s 24-Hour Grace ® feature on all consumer checking accounts in September 2010.
The increase in noninterest expense from the year-ago period reflected:
$12.0 million, or 9%, increase in personnel costs, which represent an 8% increase in full-time equivalent employees in support of strategic initiatives, such as the introduction of the in-store branches during the 2010 fourth quarter and the first six-month period of 2011.
$7.8 million, or 35%, increase in marketing expenses, which primarily reflected a greater focus on direct mail and media campaigns to drive deposit account growth. Our brand advertising did not start until June 2010, so 2011 is a more normalized run rate.
Partially offset by:
$8.3 million, or 3%, decrease in other expenses, primarily due to a $2.6 million decrease in OREO losses, $2.7 million decrease in amortization of intangibles, and $1.0 million decrease in foreclosure-related expenses.

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Regional and Commercial Banking
Table 54 — Key Performance Indicators for Regional and Commercial Banking
Six Months Ended June 30, Change
(dollar amounts in thousands unless otherwise noted) 2011 2010 Amount Percent
Net interest income
$ 117,467 $ 101,716 $ 15,751 15 %
Provision for credit losses
7,427 53,876 (46,449 ) (86 )
Noninterest income
60,627 53,667 6,960 13
Noninterest expense
91,922 74,746 17,176 23
Provision for income taxes
27,561 9,366 18,195 194
Net income
$ 51,184 $ 17,395 $ 33,789 194 %
Number of employees (full-time equivalent)
642 502 140 28 %
Total average assets (in millions)
$ 8,851 $ 8,070 $ 781 10
Total average loans/leases (in millions)
7,947 7,290 657 9
Total average deposits (in millions)
3,574 3,065 509 17
Net interest margin
3.00 % 2.79 % 0.21 % 8
NCOs
$ 26,089 $ (12,127 ) $ 38,216 N.R.
NCOs as a % of average loans and leases
0.66 % (0.33 )% 0.99 % N.R.
Return on average common equity
15.0 5.2 9.8 188
N.R. — Not relevant, as denominator of calculation is a loss in prior period compared with income in current period.
2011 First Six Months vs. 2010 First Six Months
Regional and Commercial Banking reported net income of $51.2 million for the first six-month period of 2011. This was an increase of $33.8 million, or 194%, compared with the year-ago period.
Contributing to the increase in net income was growth in both net interest income and noninterest income due to the successful execution of our strategic initiatives. In addition, current year results continue to reflect significant improvement in provision for credit losses, resulting from the proactive treatment of problem credits since mid-2009, an improved credit environment, and increased recoveries.
Significant investments have been made in our sales process, which entails robust customer relationship planning, as well as a renewed investment in technology, including a referral tracking system and new customer relationship management system. These investments have resulted in a 45% increase in loan originations in the first six-month period of 2011 compared to the year-ago period. Additionally, the Commercial Relationship Manager sales teams were educated on the importance of liquidity solutions by partnering with Treasury Management to deliver customer-focused solutions. This partnership, combined with the value of depository solutions, enabled our relationship managers to shift from a lending focus to a broader solutions-based, cross-selling approach including depository solutions.
The increase in net income reflected a combination of factors including:
$15.8 million, or 15%, increase in net interest income.
$7.0 million, or 13%, increase in noninterest income.
$46.4 million, or 86%, decline in the provision of credit losses.
Partially offset by:
$17.2 million, or 23%, increase in noninterest expense, due to our strategic initiatives investments.

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The increase in net interest income from the year-ago period reflected:
$0.7 billion, or 9%, increase in total average loans and leases.
$0.6 billion, or 21%, increase in average core deposits.
21 basis point increase in the net interest margin due to a 38 basis point increase in the commercial loan spread. The commercial loan spread increase reflected lower cost of funds on our renewals. In addition, as the liquidity position of the Bank improved in 2010, the liquidity premium was lowered for new and renewed loans.
The increase in total average loans and leases from the year-ago period reflected:
$0.4 billion, or 10%, increase in the core middle market loan portfolio average balance. The majority of this growth was due to marketing efforts and community development within our Michigan and Cleveland markets.
$0.3 billion, or 49%, increase in the large corporate portfolio average balance due to establishing relationships with targeted prospects within our footprint.
$0.2 billion, or 21%, increase in the equipment finance portfolio average balance which reflected our focus on developing vertical strategies in business aircraft, rail, and syndications.
The increase in total average deposits from the year-ago period reflected:
$0.6 billion, or 21%, increase in average core deposits reflected a $0.5 billion increase in average money market deposits.
Strategic initiatives to deepen customer relationships, new and innovative product offerings, pricing discipline, and sales and retention initiatives.
Targeted money market promotions and sales campaigns for loans and other products. They served as an effective “door opener” to drive success in ultimately obtaining operating accounts supported with treasury management solutions to promote customer retention.
Best practices from each region were shared and institutionalized.
A money desk was created to assist commercial bankers with tailored pricing solutions for customers having complex large dollar depository needs. This additional support and expertise provided additional value and helped our bankers win relationships and encouraged their expanded prospecting efforts.
The decrease in the provision for credit losses from the year-ago period reflected:
Improved credit quality of the portfolio.
Partially offset by:
$38.2 million increase in NCOs. Expressed as a percentage of related average balance, NCOs increased to 0.66% in the first six-month period of 2011 from net recoveries of 0.33% in the year-ago period. The increase in NCOs was the result of proactive treatment of problem credits in the portfolio.

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The increase in noninterest income from the year-ago period reflected:
$4.4 million, or 108%, increase in derivatives revenue which reflected increased sales and trading activities.
$2.9 million, or 284%, increase in brokerage income due to the transfer of our institutional sales business to our business segment from WGH during the six-month period of 2011.
$2.1 million, or 87%, increase in capital markets income resulting from strategic investments made over the last year in these types of products and services.
Partially offset by:
$1.4 million, or 46%, decrease in operating lease income as lease originations were structured as direct finance leases beginning in the 2009 second quarter.
$1.4 million, or 6%, decrease in deposit service charge income.
The increase in noninterest expense from the year-ago period reflected:
$14.4 million, or 50%, increase in personnel costs, which represent a 28% increase in FTE employees. This increase in personnel is attributable to our strategic investments in our core footprint markets, vertical strategies, and product capabilities.
$3.8 million, or 9%, increase in other expenses, which reflected increased marketing and business development expenses due to expanded marketing efforts and community development.
Partially offset by:
$1.0 million, or 42%, decrease in operating lease expense.

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Automobile Finance and Commercial Real Estate
Table 55 — Key Performance Indicators for Automobile Finance and Commercial Real Estate
Six Months Ended June 30, Change
(dollar amounts in thousands unless otherwise noted) 2011 2010 Amount Percent
Net interest income
$ 177,130 $ 161,214 $ 15,916 10 %
Provision for credit losses
(10,071 ) 165,308 (175,379 ) 106
Noninterest income
29,525 37,256 (7,731 ) (21 )
Noninterest expense
85,304 74,048 11,256 15
Provision (benefit) for income taxes
45,997 (14,310 ) 60,307 N.R.
Net income (loss)
$ 85,425 $ (26,576 ) $ 112,001 N.R. %
Number of employees (full-time equivalent)
281 255 26 10 %
Total average assets (in millions)
$ 13,156 $ 12,725 $ 431 3
Total average loans/leases (in millions)
13,177 12,854 323 3
Total average deposits (in millions)
774 654 120 18
Net interest margin
2.66 % 2.47 % 0.19 % 8
NCOs
$ 102,160 $ 215,344 $ (113,184 ) (53 )
NCOs as a % of average loans and leases
1.55 % 3.35 % (1.80 )% (54 )
Return on average common equity
24.4 (6.1 ) 30.5 N.R.
N.R. — Not relevant, as denominator of calculation is a loss in prior period compared with income in current period.
2011 First Six Months vs. 2010 First Six Months
AFCRE reported net income of $85.4 million for the first six-month period of 2011. This was an increase of $112.0 million compared with the year-ago period.
Results for the current year continued to be significantly and positively impacted by lower provisions for credit losses due to reductions in required reserve levels as the underlying credit quality of the portfolios continued to improve and / or stabilize. This was in contrast to the year-ago period, which included higher provisions for credit losses in order to increase reserves due to economic and CRE-related weaknesses in our markets. Also contributing to the increase in net income, was growth in net interest income. This primarily reflected the benefit of a higher net interest margin due to improved risk-based pricing. Growth in average total loans and leases reflected the positive impact of an increase in auto finance loan production, which is on pace to exceed the record production levels in 2010, partially offset by the planned continued reduction in our CRE exposure.
The increase in net income reflected a combination of factors including:
$15.9 million, or 10%, increase in net interest income.
$175.4 million, or 106%, decline in the provision of credit losses.
Partially offset by:
$11.3 million, or 15%, increase in noninterest expense.
The increase in net interest income from the year-ago period reflected:
19 basis point increase in the net interest margin. This increase primarily reflected the continuation of a risk-based pricing strategy in the CRE portfolio that began in early 2009 and has resulted in improved spreads on CRE loan renewals as well as new business originated.
$0.3 billion, or 3%, increase in total average loans and leases.

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The increase in total average loans and leases from the year-ago period reflected:
$1.4 billion, or 31%, increase in the average consumer automobile portfolio. This increase resulted from continued strong origination levels. Total production for the first six months of 2011 was $1.8 billion compared to $1.6 billion for the year-ago period. Contributing to this increase was the positive impact of our expansion into eastern Pennsylvania and New England.
Partially offset by:
$1.0 billion, or 13%, decrease in our average commercial portfolio. This decrease primarily reflected a $1.1 billion decrease in CRE loans offset, in part, by a $0.4 billion increase in automobile floor plan loans. The decline in CRE loans continued to reflect our managed reduction of this overall exposure.
The increase in total average deposits from the year-ago period reflected:
$100 million, or 16%, increase in average core deposits reflecting our commitment to strengthening relationships with core customers and prospects as well as new commercial automobile dealer relationships developed in 2010 and 2011.
The decrease in the provision for credit losses from the year-ago period reflected:
$105.9 million, or 53%, decrease in commercial NCOs. Expressed as a percentage of related average balances, commercial NCO’s decreased to 2.62% in the first six months of 2011 from 4.86% in the year-ago period.
$7.0 million, or 50%, decrease in indirect automobile-related NCOs. As a percentage of related average balances, indirect automobile-related NCO’s were 0.24% in the first six months of 2011 compared to 0.63% in the year-ago period. This decrease reflected our consistent focus on high credit quality of originations combined with a very strong resale market for used vehicles.
A reduction in required reserve levels, primarily due to lower levels of commercial NALs which totaled $293 million at June 30, 2011, down 58% compared to $703 million a year earlier.
The decrease in noninterest income from the year-ago period reflected:
$8.0 million, or 33%, decrease in operating lease income resulting from the continued runoff of that portfolio as we exited that business at the end of 2008.
The increase in noninterest expense from the year-ago period reflected:
$15.3 million, or 36%, increase in other expenses, primarily reflecting a $10.4 million increase in allocated costs associated with higher production and other activity levels. In addition, other expense in the year-ago period was reduced by $3.8 million of OREO-related gains. There were no comparable OREO gains in the current six-month period.
$3.4 million, or 30%, increase in personnel costs, which primarily related to higher origination related activities, including automobile lending market expansion and the rebuilding of the CRE team.
Partially offset by:
$7.5 million, or 38%, decrease in operating lease expense resulting from the continued runoff of that portfolio.

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Wealth Advisors, Government Finance, and Home Lending
Table 56 — Key Performance Indicators for Wealth Advisors, Government Finance, and Home Lending
Six Months Ended June 30, Change
(dollar amounts in thousands unless otherwise noted) 2011 2010 Amount Percent
Net interest income
$ 95,930 $ 76,885 $ 19,045 25 %
Provision for credit losses
29,468 26,717 2,751 10
Noninterest income
133,592 157,401 (23,809 ) (15 )
Noninterest expense
172,985 173,253 (268 )
Provision for income taxes
9,474 12,011 (2,537 ) (21 )
Net income
$ 17,595 $ 22,305 $ (4,710 ) (21 )%
Number of employees (full-time equivalent)
2,114 2,145 (31 ) (1 )%
Total average assets (in millions)
$ 6,549 $ 6,066 $ 483 8
Total average loans/leases (in millions)
5,244 4,679 565 12
Total average deposits (in millions)
7,430 6,877 553 8
Net interest margin
2.24 % 2.25 % (0.01 )%
NCOs
$ 35,440 $ 32,470 $ 2,970 9
NCOs as a % of average loans and leases
1.35 % 1.39 % (0.04 )% (3 )
Return on average common equity
5.3 7.7 (2.4 ) (31 )
Mortgage banking origination volume (in millions)
$ 1,844 $ 2,030 $ (186 ) (9 )
Noninterest income shared with other business segments (1)
$ 20,447 $ 18,692 $ 1,755 9
Total assets under management (in billions) — eop
15.2 12.7 2.5 20
Total trust assets (in billions) — eop
61.2 50.9 10.3 20
(1) Amount is not included in noninterest income reported above.
eop — End of Period.
2011 First Six Months vs. 2010 First Six Months
WGH reported net income of $17.6 million for the first six-month period of 2011. This was a decrease of $4.7 million, or 21%, compared with the year-ago period.
Results for the current year were impacted by a decrease in mortgage banking revenue which reflected a decline in the net impact of MSR hedging. The other businesses within the WGH segment experienced significant growth, with increased revenues for the six-month period in 2011 when compared to the year-ago period. For first the six-month period in 2011, an increase in residential charge-offs reflected a policy change, whereas non-residential NCO activity has decreased when compared to the same period in 2010. A focus on structured investment sales increased brokerage commissions and market value improvements contributed to an increase in trust income in the first six-month period of 2011 when compared to the year-ago period.
The decrease in net income reflected a combination of factors including:
$23.8 million, or 15%, decrease in noninterest income.
$2.8 million, or 10%, increase in the provision for credit losses.
Partially offset by:
$19.0 million, or 25%, increase in net interest income.

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The increase in net interest income from the year-ago period reflected:
$0.6 billion, or 12%, increase in average total loans and leases.
$0.6 billion, or 8%, increase in average total deposits.
Partially offset by:
1 basis point decrease in the net interest margin.
The increase in total average loans and leases from the year-ago period reflected:
$0.4 billion, or 15%, increase in the residential mortgage portfolio.
The increase in average total deposits from the year-ago period reflected:
Increased money market, demand deposit, and brokered deposit balances.
The increase in the provision for credit losses from the year-ago period reflected:
$4.3 million, or 15%, increase in our consumer NCOs. During the 2011 first quarter, we implemented a more conservative position regarding NCOs by accelerating the timing of charge-off recognition. This policy change resulted in an $8.1 million increase in NCOs when compared with the first six-month period of 2010.
Partially offset by:
$1.4 million, or 52%, decrease in total commercial NCOs.
The decrease in noninterest income from the year-ago period reflected:
$26.4 million, or 42%, decrease in mortgage banking income due primarily to a $24.9 million decline in the net impact of MSR hedging.
$2.8 million, or 49%, decrease in other income, which reflected Institutional Sales revenue recorded in WGH during 2010, and recorded in Regional and Commercial Banking in 2011.
Partially offset by:
$5.0 million, or 9%, increase in trust service income reflected a $10.3 billion increase in total trust assets (including $2.5 billion increase in assets under management) due to improved market values and net growth in accounts.
$1.4 million, or 6%, increase in brokerage income. Brokerage commissions increased $2.1 million, and were offset by $0.7 million of higher commissions shared with other segments. The increase in brokerage commissions reflected improved sales of structured investment products.
The decrease in noninterest expense from the year-ago period reflected:
$10.3 million, or 13%, decrease in other expenses.
Partially offset by:
$10.0 million, or 11%, increase in personnel costs, which reflected higher benefit related expenses, including the reinstatement of our 401(k) plan matching contribution in May 2010.

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FRANKLIN-RELATED IMPACTS
Provision for Credit Losses
The following table details the Franklin-related impact to the provision for credit losses for each of the past five quarters:
Table 57 — Provision for Credit Losses — Franklin-Related Impact
2011 2010
(dollar amounts in millions) Second First Fourth Third Second
Provision for (reduction to) credit losses:
Franklin
$ 0.6 $ (3.1 ) $ (4.6 ) $ $ 80.0
Non-Franklin
35.2 52.5 91.6 119.2 113.4
Total
$ 35.8 $ 49.4 $ 87.0 $ 119.2 $ 193.4
Total net charge-offs (recoveries):
Franklin — related to transfer to loans held for sale
$ $ $ $ $ 75.5
Franklin — unrelated to transfer to loans held for sale
0.6 (3.1 ) (4.6 ) 4.5
Non-Franklin
96.9 168.2 176.9 184.5 199.2
Total
$ 97.5 $ 165.1 $ 172.3 $ 184.5 $ 279.2
Provision for (reduction to) credit losses in excess of net charge-offs:
Franklin
$ $ $ $ $
Non-Franklin
(61.7 ) (115.7 ) (85.3 ) (65.3 ) (85.8 )
Total
$ (61.7 ) $ (115.7 ) $ (85.3 ) $ (65.3 ) $ (85.8 )
NPAs
The table below details the Franklin-related impact to NPAs for each of the last five quarters:
Table 58 — Nonperforming Assets — Franklin-Related Impact
2011 2010
(dollar amounts in millions) Second First Fourth Third Second
Nonperforming assets
Franklin
$ 0.8 $ 6.0 $ 9.5 $ 15.3 $ 266.7
Non-Franklin
652.1 684.9 835.3 1,089.6 1,316.0
Total
$ 652.9 $ 690.9 $ 844.8 $ 1,104.9 $ 1,582.7
Total loans and leases
$ 39,126.4 $ 38,245.8 $ 38,106.5 $ 37,500.6 $ 36,969.7
Total other real estate, net
38.7 54.6 66.8 123.1 139.1
Impaired loans held for sale
242.2
Total
39,165.1 38,300.4 38,173.3 37,623.7 37,351.0
Franklin
0.8 6.0 9.5 15.3 266.7
Non-Franklin
$ 39,164.3 $ 38,294.4 $ 38,163.8 $ 37,608.4 $ 37,084.3
NPA ratio
Total
1.67 % 1.80 % 2.21 % 2.94 % 4.24 %
Non-Franklin
1.67 1.79 2.19 2.90 3.55

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NCOs
The following table details the Franklin-related impact to NCOs for each of the past five quarters:
Table 59 — Quarterly Net Charge-off Analysis — Franklin-Related Impact
2011 2010
(dollar amounts in millions) Second First Fourth Third Second
Total home equity net charge-offs (recoveries):
Franklin
$ $ $ $ 1.1 $ 15.9
Non-Franklin
25.4 26.7 29.2 26.7 28.6
Total
$ 25.4 $ 26.7 $ 29.2 $ 27.8 $ 44.5
Total home equity net charge-offs — annualized percentages:
Total
1.29 % 1.38 % 1.51 % 1.47 % 2.36 %
Non-Franklin
1.29 1.38 1.51 1.41 1.53
Total residential mortgage net charge-offs (recoveries):
Franklin
$ 0.6 $ (3.1 ) $ (4.4 ) $ 3.4 $ 64.2
Non-Franklin
15.9 22.0 31.2 15.6 18.6
Total
$ 16.5 $ 18.9 $ 26.8 $ 19.0 $ 82.8
Total residential mortgage net charge-offs — annualized percentages:
Total
1.44 % 1.70 % 2.42 % 1.73 % 7.19 %
Non-Franklin
1.39 1.98 2.82 1.42 1.74
Total consumer net charge-offs (recoveries):
Franklin
$ 0.6 $ (3.1 ) $ (4.4 ) $ 4.5 $ 80.2
Non-Franklin
50.6 58.3 72.7 54.1 59.2
Total
$ 51.2 $ 55.2 $ 68.3 $ 58.6 $ 139.4
Total consumer net charge-offs — annualized percentages:
Total
1.08 % 1.20 % 1.50 % 1.32 % 3.19 %
Non-Franklin
1.07 1.26 1.59 1.22 1.39
Total net charge-offs (recoveries):
Franklin
$ 0.6 $ (3.1 ) $ (4.6 ) $ $ 80.0
Non-Franklin
96.9 168.2 176.9 184.5 199.2
Total
$ 97.5 $ 165.1 $ 172.3 $ 184.5 $ 279.2
Total net charge-offs — annualized percentages:
Total
1.01 % 1.73 % 1.82 % 1.98 % 3.01 %
Non-Franklin
1.01 1.77 1.87 1.98 2.17

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The following table reflects the Franklin-related impact to NCOs for the first six-month periods of 2011 and 2010:
Table 60 — Year to Date Net Charge-off Analysis — Franklin-Related Impact
Six Months Ended June 30,
(dollar amounts in millions) 2011 2010
Total home equity net charge-offs (recoveries):
Franklin
$ $ 19.7
Non-Franklin
52.2 62.7
Total
$ 52.2 $ 82.4
Total home equity net charge-offs — annualized percentages:
Total
1.34 % 2.18 %
Non-Franklin
1.34 1.68
Total residential mortgage net charge-offs (recoveries):
Franklin
$ (2.5 ) $ 72.3
Non-Franklin
37.9 34.9
Total
$ 35.4 $ 107.2
Total residential mortgage net charge-offs — annualized percentages:
Total
1.57 % 4.72 %
Non-Franklin
1.68 1.66
Total consumer net charge-offs (recoveries):
Franklin
$ (2.5 ) $ 92.1
Non-Franklin
108.9 125.0
Total
$ 106.4 $ 217.1
Total consumer net charge-offs — annualized percentages:
Total
1.14 % 2.52 %
Non-Franklin
1.17 1.49
Total net charge-offs (recoveries):
Franklin
$ (2.5 ) $ 91.5
Non-Franklin
265.1 426.2
Total
$ 262.6 $ 517.7
Total net charge-offs — annualized percentages:
Total
1.37 % 2.80 %
Non-Franklin
1.38 2.33

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ADDITIONAL DISCLOSURES
Forward-Looking Statements
This report, including MD&A, contains certain forward-looking statements, including certain plans, expectations, goals, projections, and statements, which are subject to numerous assumptions, risks, and uncertainties. Statements that do not describe historical or current facts, including statements about beliefs and expectations, are forward-looking statements. Forward-looking statements may be identified by words such as expect, anticipate, believe, intend, estimate, plan, target, goal, or similar expressions, or future or conditional verbs such as will, may, might, should, would, could, or similar variations. The forward-looking statements are intended to be subject to the safe harbor provided by Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995.
While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those contained or implied in the forward-looking statements: (1) worsening of credit quality performance due to a number of factors such as the underlying value of the collateral could prove less valuable than otherwise assumed and assumed cash flows may be worse than expected; (2) changes in economic conditions; (3) movements in interest rates; (4) competitive pressures on product pricing and services; (5) success, impact, and timing of our business strategies, including market acceptance of any new products or services introduced to implement our “Fair Play” banking philosophy; (6) changes in accounting policies and principles and the accuracy of our assumptions and estimates used to prepare our financial statements; (7) extended disruption of vital infrastructure; (8) the final outcome of significant litigation; (9) the nature, extent, and timing of governmental actions and reforms, including the Dodd-Frank Act, as well as future regulations which will be adopted by the relevant regulatory agencies, including the CFPB, to implement the Dodd-Frank Act’s provisions; and (10) the outcome of judicial and regulatory decisions regarding practices in the residential mortgage industry, including among other things the processes followed for foreclosing residential mortgages. Additional factors that could cause results to differ materially from those described above can be found in our 2010 Annual Report on Form 10-K, and documents subsequently filed by us with the Securities and Exchange Commission.
All forward-looking statements speak only as of the date they are made and are based on information available at that time. We assume no obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.
Risk Factors
Information on risk is discussed in the Risk Factors section included in Item 1A of our 2010 Form 10-K. Additional information regarding risk factors can also be found in the Risk Management and Capital discussion of this report.
Critical Accounting Policies and Use of Significant Estimates
Our financial statements are prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires us to establish critical accounting policies and make accounting estimates, assumptions, and judgments that affect amounts recorded and reported in our financial statements. Note 1 of Notes to Consolidated Financial Statements included in our 2010 Form 10-K as supplemented by this report lists significant accounting policies we use in the development and presentation of our financial statements. This MD&A, the significant accounting policies, and other financial statement disclosures identify and address key variables and other qualitative and quantitative factors necessary for an understanding and evaluation of our company, financial position, results of operations, and cash flows.
An accounting estimate requires assumptions about uncertain matters that could have a material effect on the financial statements if a different amount within a range of estimates were used or if estimates changed from period to period. Estimates are made under facts and circumstances at a point in time, and changes in those facts and circumstances could produce results that significantly differ from when those estimates were made.
Our most significant accounting estimates relate to our ACL, fair value measurements, and income taxes and deferred tax assets. These significant accounting estimates and their related application are discussed in our 2010 Form 10-K.

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Fair Value Measurements
The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Assets and liabilities carried at fair value inherently result in a higher degree of financial statement volatility. We estimate the fair value of a financial instrument using a variety of valuation methods. Where financial instruments are actively traded and have quoted market prices, quoted market prices are used for fair value. We characterize active markets as those where transaction volumes are sufficient to provide objective pricing information, with reasonably narrow bid/ask spreads, and where received quoted prices do not vary widely. When the financial instruments are not actively traded, other observable market inputs, such as quoted prices of securities with similar characteristics, may be used, if available, to determine fair value. Inactive markets are characterized by low transaction volumes, price quotations that vary substantially among market participants, or in which minimal information is released publicly. When observable market prices do not exist, we estimate fair value primarily by using cash flow and other financial modeling methods. Our valuation methods consider factors such as liquidity and concentration concerns and, for the derivatives portfolio, counterparty credit risk. Other factors such as model assumptions, market dislocations, and unexpected correlations can affect estimates of fair value. Changes in these underlying factors, assumptions, or estimates in any of these areas could materially impact the amount of revenue or loss recorded.
The FASB ASC Topic 820, Fair Value Measurements, establishes a framework for measuring the fair value of financial instruments that considers the attributes specific to particular assets or liabilities and establishes a three-level hierarchy for determining fair value based on the transparency of inputs to each valuation as of the fair value measurement date. The three levels are defined as follows:
Level 1 — quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 — inputs include quoted prices for similar assets and liabilities in active markets, quoted prices of identical or similar assets or liabilities in markets that are not active, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 — inputs that are unobservable and significant to the fair value measurement. Financial instruments are considered Level 3 when values are determined using pricing models, discounted cash flow methodologies, or similar techniques, and at least one significant model assumption or input is unobservable.
At the end of each quarter, we assess the valuation hierarchy for each asset or liability measured. As necessary, assets or liabilities may be transferred within hierarchy levels due to changes in availability of observable market inputs at the measurement date. The fair values measured at each level of the fair value hierarchy, as well as additional discussion regarding fair value measurements, can be found in Note 13 of the Notes to the Unaudited Condensed Consolidated Financial Statements.
Below is a brief description of how fair value is determined for categories that have unobservable inputs.
Available-for-sale securities
Consist of certain asset-backed securities, pooled-trust-preferred securities, private-label CMOs, and municipal securities for which fair value is estimated. Assumptions used to determine the fair value of these securities have greater subjectivity due to the lack of observable market transactions. Generally, there are only limited trades of similar instruments and a discounted cash flow approach is used to determine fair value.
MSRs
MSRs do not trade in an active, open market with readily observable prices. Although sales of MSRs do occur, the precise terms and conditions typically are not readily available. Fair value is determined on an income approach model based upon month-end interest rate curve and prepayment assumptions.
Automobile loans
Effective January 1, 2010, we consolidated an automobile loan securitization that previously had been accounted for as an off-balance sheet transaction. We elected to account for the automobile loan receivables and the associated notes payable at fair value per guidance supplied in ASC 825, “Financial Instruments”.
The key assumptions used to determine the fair value of the automobile loan receivables included a projection of expected losses and prepayment of the underlying loans in the portfolio and a market assumption of interest rate spreads. Certain interest rates are available from similarly traded securities while other interest rates are developed internally based on similar asset-backed security transactions in the market. The associated notes payable are valued based upon interest rates for similar financial instruments.
Recent Accounting Pronouncements and Developments
Note 2 to the Unaudited Condensed Consolidated Financial Statements discusses new accounting pronouncements adopted during 2011 and the expected impact of accounting pronouncements recently issued but not yet required to be adopted. To the extent the adoption of new accounting standards materially affect financial condition, results of operations, or liquidity, the impacts are discussed in the applicable section of this MD&A and the Notes to Unaudited Condensed Consolidated Financial Statements.

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Item 1: Financial Statements
Huntington Bancshares Incorporated
Condensed Consolidated Balance Sheets
(Unaudited)
2011 2010
(dollar amounts in thousands, except number of shares) June 30, December 31, June 30,
Assets
Cash and due from banks
$ 983,882 $ 847,888 $ 1,125,776
Interest-bearing deposits in banks
116,698 135,038 289,468
Trading account securities
98,771 185,404 106,858
Loans held for sale (includes $222,880, $754,117 and $404,817 respectively, measured at fair value) (1)
224,860 793,285 777,843
Available-for-sale and other securities
8,099,716 9,895,244 8,803,718
Held-to-maturity securities
670,478
Loans and leases (includes $400,935, $522,717 and $657,213 respectively, measured at fair value) (2)
39,126,452 38,106,507 36,969,695
Allowance for loan and lease losses
(1,071,126 ) (1,249,008 ) (1,402,160 )
Net loans and leases
38,055,326 36,857,499 35,567,535
Bank owned life insurance
1,480,203 1,458,224 1,436,433
Premises and equipment
528,590 491,602 492,859
Goodwill
444,268 444,268 444,268
Other intangible assets
201,864 228,620 258,811
Accrued income and other assets
2,145,383 2,482,570 2,467,269
Total assets
$ 53,050,039 $ 53,819,642 $ 51,770,838
Liabilities and shareholders’ equity
Liabilities
Deposits
$ 41,402,355 $ 41,853,898 $ 39,848,507
Short-term borrowings
2,022,946 2,040,732 1,093,218
Federal Home Loan Bank advances
220,224 172,519 599,798
Other long-term debt (includes $231,017, $356,089 and $494,512 respectively, measured at fair value) (2)
1,635,247 2,144,092 2,569,934
Subordinated notes
1,496,461 1,497,216 1,195,210
Accrued expenses and other liabilities
1,020,163 1,130,643 1,025,735
Total liabilities
47,797,396 48,839,100 46,332,402
Shareholders’ equity
Preferred stock — authorized 6,617,808 shares;
5.00% Series B Non-voting, Cumulative Preferred Stock, par value of $0.01 and liquidation value per share of $1,000
1,333,433
8.50% Series A Non-cumulative Perpetual Convertible Preferred Stock, par value of $0.01 and liquidation value per share of $1,000
362,507 362,507 362,507
Common stock
8,643 8,642 7,175
Capital surplus
7,588,248 7,630,093 6,739,069
Less treasury shares, at cost
(9,357 ) (8,771 ) (9,235 )
Accumulated other comprehensive loss
(122,543 ) (197,496 ) (84,398 )
Retained (deficit) earnings
(2,574,855 ) (2,814,433 ) (2,910,115 )
Total shareholders’ equity
5,252,643 4,980,542 5,438,436
Total liabilities and shareholders’ equity
$ 53,050,039 $ 53,819,642 $ 51,770,838
Common shares authorized (par value of $0.01)
1,500,000,000 1,500,000,000 1,500,000,000
Common shares issued
864,310,281 864,195,369 717,487,003
Common shares outstanding
863,323,099 863,319,435 716,622,592
Treasury shares outstanding
987,182 875,934 864,411
Preferred shares issued
1,967,071 1,967,071 1,967,071
Preferred shares outstanding
362,507 362,507 1,760,578
(1) Amounts represent loans for which Huntington has elected the fair value option. See Note 13.
(2) Amounts represent certain assets and liabilities of a consolidated VIE for which Huntington has elected the fair value option. See Note 15.
See Notes to Unaudited Condensed Consolidated Financial Statements

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Huntington Bancshares Incorporated
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
(dollar amounts in thousands, except per share amounts) 2011 2010 2011 2010
Interest and fee income
Loans and leases
Taxable
$ 428,266 $ 467,268 $ 862,227 $ 946,389
Tax-exempt
3,028 1,302 5,731 2,015
Available-for-sale and other securities
Taxable
54,603 59,614 112,254 118,601
Tax-exempt
2,320 2,859 5,196 5,950
Held-to-maturity securities — taxable
1,287 1,287
Other
2,633 4,610 7,319 9,477
Total interest income
492,137 535,653 994,014 1,082,432
Interest expense
Deposits
68,304 114,822 144,100 243,124
Short-term borrowings
856 515 1,805 991
Federal Home Loan Bank advances
215 1,035 435 2,247
Subordinated notes and other long-term debt
19,425 19,625 40,007 42,521
Total interest expense
88,800 135,997 186,347 288,883
Net interest income
403,337 399,656 807,667 793,549
Provision for credit losses
35,797 193,406 85,182 428,414
Net interest income after provision for credit losses
367,540 206,250 722,485 365,135
Service charges on deposit accounts
60,675 75,934 114,999 145,273
Mortgage banking income
23,835 45,530 46,519 70,568
Trust services income
30,392 28,399 61,134 56,164
Electronic banking income
31,728 28,107 60,514 53,244
Insurance income
16,399 18,074 34,344 36,934
Brokerage income
20,819 18,424 41,330 35,326
Bank owned life insurance income
17,602 14,392 32,421 30,862
Automobile operating lease income
7,307 11,842 16,154 24,145
Net gains on sales of investment securities
1,689 2,980 5,894 9,410
Impairment losses on investment securities:
Impairment recoveries (losses) on investment securities
1,218 5,193 11,094 (3,207 )
Noncredit-related (recoveries) losses on securities not expected to be sold (recognized in other comprehensive income)
(1,400 ) (8,017 ) (15,441 ) (6,078 )
Net impairment losses on investment securities
(182 ) (2,824 ) (4,347 ) (9,285 )
Other income
45,503 28,785 83,750 57,854
Total noninterest income
255,767 269,643 492,712 510,495
Personnel costs
218,570 194,875 437,598 378,517
Outside data processing and other services
43,889 40,670 84,171 79,752
Net occupancy
26,885 25,388 55,321 54,474
Deposit and other insurance expense
23,823 26,067 41,719 50,822
Professional services
20,080 24,388 33,545 47,085
Equipment
21,921 21,585 44,398 42,209
Marketing
20,102 17,682 36,997 28,835
Amortization of intangibles
13,386 15,141 26,756 30,287
OREO and foreclosure expense
4,398 4,970 8,329 16,500
Automobile operating lease expense
5,434 9,667 12,270 19,733
Other expense
29,921 33,377 78,004 63,689
Total noninterest expense
428,409 413,810 859,108 811,903
Income before income taxes
194,898 62,083 356,089 63,727
Provision (benefit) for income taxes
48,980 13,319 83,725 (24,774 )
Net income
145,918 48,764 272,364 88,501
Dividends on preferred shares
7,704 29,426 15,407 58,783
Net income applicable to common shares
$ 138,214 $ 19,338 $ 256,957 $ 29,718
Average common shares — basic
863,358 716,580 863,358 716,450
Average common shares — diluted
867,469 719,387 867,353 718,990
Per common share:
Net income — basic
$ 0.16 $ 0.03 $ 0.30 $ 0.04
Net income — diluted
0.16 0.03 0.30 0.04
Cash dividends declared
0.01 0.01 0.02 0.02
See Notes to Unaudited Condensed Consolidated Financial Statements

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Huntington Bancshares Incorporated
Condensed Consolidated Statements of Changes in Shareholders’ Equity
(Unaudited)
Accumulated
Preferred Stock Other Retained
(All amounts in thousands, Series B Series A Common Stock Capital Treasury Stock Comprehensive Earnings
except for per share amounts) Shares Amount Shares Amount Shares Amount Surplus Shares Amount Loss (Deficit) Total
Six Months Ended June 30, 2010
Balance, beginning of period
1,398 $ 1,325,008 363 $ 362,507 716,741 $ 7,167 $ 6,731,796 (980 ) $ (11,465 ) $ (156,985 ) $ (2,922,026 ) $ 5,336,002
Cumulative effect of change in accounting principle for consolidation of variable interest entities, net of tax of $3,980
(4,249 ) (3,462 ) (7,711 )
Balance, beginning of period — as adjusted
1,398 $ 1,325,008 363 $ 362,507 716,741 $ 7,167 $ 6,731,796 (980 ) $ (11,465 ) (161,234 ) $ (2,925,488 ) $ 5,328,291
Comprehensive Income:
Net income
88,501 88,501
Noncredit-related impairment recoveries
(losses) on debt securities not expected to be sold
3,951 3,951
Unrealized net gains (losses) on available-for-sale and other securities arising during the period, net of reclassification for net realized gains
69,779 69,779
Unrealized gains (losses) on cash flow hedging derivatives
774 774
Change in accumulated unrealized losses for pension and other post- retirement obligations
2,332 2,332
Total comprehensive loss
165,337
Issuance of common stock
537 5 2,264 2,269
Preferred Series B stock discount accretion
8,425 (8,425 )
Cash dividends declared:
Common ($0.02 per share)
(14,332 ) (14,332 )
Preferred Series B ($25.00 per share)
(34,952 ) (34,952 )
Preferred Series A ($42.50 per share)
(15,406 ) (15,406 )
Recognition of the fair value of share-based compensation
6,609 6,609
Other share-based compensation activity
209 3 199 (22 ) 180
Other
(1,799 ) 116 2,230 9 440
Balance, end of period
1,398 $ 1,333,433 363 $ 362,507 717,487 $ 7,175 $ 6,739,069 (864 ) $ (9,235 ) $ (84,398 ) $ (2,910,115 ) $ 5,438,436
Six Months Ended June 30, 2011
Balance, beginning of period
$ 363 $ 362,507 864,195 $ 8,642 $ 7,630,093 (876 ) $ (8,771 ) $ (197,496 ) $ (2,814,433 ) $ 4,980,542
Comprehensive Income:
Net income
272,364 272,364
Noncredit-related impairment recoveries (losses) on debt securities not expected to be sold
10,037 10,037
Unrealized net gains (losses) on available-for-sale and other securities arising during the period, net of reclassification for net realized gains
57,504 57,504
Unrealized gains (losses) on cash flow hedging derivatives
2,212 2,212
Change in accumulated unrealized losses for pension and other post- retirement obligations
5,200 5,200
Total comprehensive income
347,317
Repurchase of warrants convertible to common stock
(49,100 ) (49,100 )
Cash dividends declared:
Common ($0.02 per share)
(17,269 ) (17,269 )
Preferred Series A ($42.50 per share)
(15,407 ) (15,407 )
Recognition of the fair value of share-based compensation
7,523 7,523
Other share-based compensation activity
115 1 56 (40 ) 17
Other
(324 ) (111 ) (586 ) (70 ) (980 )
Balance, end of period
$ 363 $ 362,507 864,310 $ 8,643 $ 7,588,248 (987 ) $ (9,357 ) $ (122,543 ) $ (2,574,855 ) $ 5,252,643
See Notes to Unaudited Condensed Consolidated Financial Statements

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Huntington Bancshares Incorporated
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
(dollar amounts in thousands) 2011 2010
Operating activities
Net income
$ 272,364 $ 88,501
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses
85,182 428,414
Depreciation and amortization
142,800 135,957
Change in current and deferred income taxes
40,889 123,436
Net sales (purchases) of trading account securities
86,633 (23,201 )
Originations of loans held for sale
(1,093,814 ) (1,336,732 )
Principal payments on and proceeds from loans held for sale
1,612,097 1,383,151
Securities (gains) losses
(1,547 ) (125 )
Other, net
45,751 (14,752 )
Net cash provided by (used for) operating activities
1,190,355 784,649
Investing activities
Increase (decrease) in interest bearing deposits in banks
9,471 18,042
Proceeds from:
Maturities and calls of available-for-sale and other securities
1,054,306 1,691,002
Maturities of held-to-maturity securities
2,738
Sales of available-for-sale and other securities
2,697,629 2,303,397
Purchases of available-for-sale and other securities
(2,342,790 ) (3,985,907 )
Purchases of held-to-maturity securities
(204,040 )
Net proceeds from sales of loans
305,950 199,196
Net loan and lease activity, excluding sales
(1,602,756 ) (814,944 )
Proceeds from sale of operating lease assets
36,184 11,783
Purchases of premises and equipment
(71,827 ) (32,121 )
Proceeds from sales of other real estate
40,060 44,888
Other, net
122 1,442
Net cash provided by (used for) investing activities
(74,953 ) (563,222 )
Financing activities
Increase (decrease) in deposits
(456,356 ) (650,432 )
Increase (decrease) in short-term borrowings
17,698 166,533
Maturity/redemption of subordinated notes
(5,000 ) (83,870 )
Proceeds from Federal Home Loan Bank advances
200,000 450,000
Maturity/redemption of Federal Home Loan Bank advances
(152,397 ) (19,317 )
Maturity/redemption of long-term debt
(501,575 ) (415,484 )
Repurchase of Warrant to the Treasury
(49,100 )
Dividends paid on preferred stock
(15,407 ) (50,358 )
Dividends paid on common stock
(17,244 ) (14,247 )
Other, net
(27 ) 180
Net cash provided by (used for) financing activities
(979,408 ) (616,995 )
Increase (decrease) in cash and cash equivalents
135,994 (395,568 )
Cash and cash equivalents at beginning of period
847,888 1,521,344
Cash and cash equivalents at end of period
$ 983,882 $ 1,125,776
Supplemental disclosures:
Income taxes paid (refunded)
$ 42,817 $ (148,210 )
Interest paid
221,191 309,420
Non-cash activities
Dividends accrued, paid in subsequent quarter
15,941 23,390
See Notes to Unaudited Condensed Consolidated Financial Statements.

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Huntington Bancshares Incorporated
Notes to Unaudited Condensed Consolidated Financial Statements
1. BASIS OF PRESENTATION
The accompanying Unaudited Condensed Consolidated Financial Statements of Huntington reflect all adjustments consisting of normal recurring accruals which are, in the opinion of Management, necessary for a fair presentation of the consolidated financial position, the results of operations, and cash flows for the periods presented. These Unaudited Condensed Consolidated Financial Statements have been prepared according to the rules and regulations of the SEC and, therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted. The Notes to Consolidated Financial Statements appearing in Huntington’s 2010 Annual Report on Form 10-K (2010 Form 10-K), which include descriptions of significant accounting policies, as updated by the information contained in this report, should be read in conjunction with these interim financial statements.
For statement of cash flows purposes, cash and cash equivalents are defined as the sum of “Cash and due from banks” which includes amounts on deposit with the Federal Reserve and “Federal funds sold and securities purchased under resale agreements.”
In conjunction with applicable accounting standards, all material subsequent events have been either recognized in the Unaudited Condensed Consolidated Financial Statements or disclosed in the Notes to Unaudited Condensed Consolidated Financial Statements.
2. ACCOUNTING STANDARDS UPDATE
Accounting Standards Update (ASU) 2010-6 — Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. The ASU amends Subtopic 820-10 with new disclosure requirements and clarification of existing disclosure requirements. New disclosures include the amount of significant transfers in and out of levels 1 and 2 fair value measurements and the reasons for the transfers. In addition, the reconciliation for level 3 activity is required on a gross rather than net basis. The ASU provides additional guidance related to the level of disaggregation in determining classes of assets and liabilities and disclosures about inputs and valuation techniques. The amendments are effective for annual or interim reporting periods beginning after December 15, 2009, except for the requirement to provide the reconciliation for level 3 activity on a gross basis which is effective for annual or interim reporting periods beginning after December 15, 2010 (See Note 13).
ASU 2010-20 — Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. The ASU requires expanded disclosure about the credit quality of the loan portfolio in the notes to financial statements, such as aging information and credit quality indicators. Both new and existing disclosures must be disaggregated by portfolio segment or class. The disaggregation of information is based on how the lender develops its ACL and how it manages its credit exposure. The disclosures related to period-end balances are effective for annual or interim reporting periods ending after December 15, 2010, and were first included in the 2010 Form 10-K. The disclosures of activity that occurs during the reporting period are effective for annual or interim reporting periods beginning after December 15, 2010 (See Note 3).
ASU 2011-02 — Receivables (Topic 310), A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring . The ASU amends Subtopic 310-40 to clarify existing guidance related to a creditor’s evaluation of whether a restructuring of debt is considered a TDR. The amendments add additional clarity in determining whether a creditor has granted a concession and whether a debtor is experiencing financial difficulties. The updated guidance and related disclosure requirements are effective for financial statements issued for the first interim or annual period beginning on or after June 15, 2011, and should be applied retroactively to the beginning of the annual period of adoption. As a result of applying these amendments, Huntington may identify receivables that are considered newly impaired. For the purposes of measuring impairment on those receivables, Huntington would apply the amendments prospectively for the first interim or annual period beginning on or after June 15, 2011. Management is currently evaluating the impact of the guidance on Huntington’s Condensed Consolidated Financial Statements.
ASU 2011-03 — Transfers and Servicing (Topic 860), Reconsideration of Effective Control for Repurchase Agreements. The ASU amends Topic 860 to remove from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance implementation guidance related to that criterion. The updated guidance and requirements are effective for financial statements issued for the first interim or annual period beginning after December 15, 2011, and should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted. Management does not believe the amendment will have a material impact on Huntington’s Condensed Consolidated Financial Statements.

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ASU 2011-04 — Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The ASU amends Topic 820 to add both additional clarifications to existing fair value measurement and disclosure requirements and changes to existing principles and disclosure guidance. Clarifications were made to the relevancy of the highest and best use valuation concept, measurement of an instrument classified in an entity’s shareholder’s equity and disclosure of quantitative information about the unobservable inputs for level 3 fair value measurements. Changes to existing principles and disclosures included measurement of financial instruments managed within a portfolio, the application of premiums and discounts in fair value measurement, and additional disclosures related to fair value measurements. The updated guidance and requirements are effective for financial statements issued for the first interim or annual period beginning after December 15, 2011, and should be applied prospectively. Early adoption is permitted. Management does not believe the principle amendments will have a material impact on Huntington’s Condensed Consolidated Financial Statements.
ASU 2011-05 — Other Comprehensive Income (Topic 220), Presentation of Comprehensive Income. The ASU amends Topic 220 to require an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. An entity is also required to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. The amendments do not change items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income, only the format for presentation. The updated guidance and requirements are effective for financial statements issued for the fiscal years, and the interim periods within those years, beginning after December 15, 2011. The amendments should be applied retrospectively. Early adoption is permitted.
3. LOANS / LEASES AND ALLOWANCE FOR CREDIT LOSSES
Loan and Lease Portfolio Composition
The following table provides a detail listing of Huntington’s loan and lease portfolio at June 30, 2011, December 31, 2010, and June 30, 2010:
June 30, December 31, June 30,
(dollar amounts in thousands) 2011 2010 2010
Loans and leases:
Commercial and industrial
$ 13,544,366 $ 13,063,293 $ 12,392,309
Commercial real estate
6,164,084 6,651,156 7,183,817
Automobile
6,190,245 5,614,711 4,846,566
Home equity
7,952,350 7,713,154 7,510,393
Residential mortgage
4,751,083 4,500,366 4,354,287
Other consumer
524,324 563,827 682,323
Loans and leases
39,126,452 38,106,507 36,969,695
Allowance for loan and lease losses
(1,071,126 ) (1,249,008 ) (1,402,160 )
Net loans and leases
$ 38,055,326 $ 36,857,499 $ 35,567,535
As shown in the table above, the primary loan and lease portfolios are: C&I, CRE, automobile, home equity, residential mortgage, and other consumer. For ACL purposes, these portfolios are further disaggregated into classes. The classes within the C&I portfolio are: owner occupied and other C&I. The classes within the CRE portfolio are: retail properties, multi family, office, industrial and warehouse, and other CRE. The classes within the home equity portfolio are: first-lien loans and second-lien loans. The automobile, residential mortgage, and other consumer portfolios are not further segregated into classes.
Pledged Loans and Leases
The Bank has access to the Federal Reserve’s discount window and advances from the FHLB — Cincinnati. As of June 30, 2011, these borrowings and advances are secured by $17.3 billion of loans and securities.
Franklin Relationship
Franklin is a specialty consumer finance company. On March 31, 2009, Huntington entered into a transaction with Franklin in which a Huntington wholly-owned REIT subsidiary (REIT) exchanged certain noncontrolling equity interests for a 100% interest in Franklin Asset Merger Sub, LLC (Merger Sub), a wholly-owned subsidiary of Franklin. The equity interests provided to Franklin by REIT were pledged by Franklin as collateral for the Franklin commercial loans.

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During the 2011 second quarter, Franklin’s equity interests in REIT were voluntarily surrendered in return for a reduction of a portion of defaulted commercial loans as a result of a default under the Legacy Credit Agreement. As of June 30, 2011, Franklin does not own any equity interests in REIT.
Loan Purchases and Sales
The following table summarizes significant portfolio loan purchase and sale activity for the six-month period ended June 30, 2011:
Commercial Commercial Home Residential Other
(dollar amounts in thousands) and Industrial Real Estate Automobile Equity Mortgage Consumer Total
Portfolio loans purchased during the:
Three-month period ended June 30, 2011
$ $ $ $ $ $ $
Six-month period ended June 30, 2011
Portfolio loans with allowance sold or transferred to loans held for sale during the:
Three-month period ended June 30, 2011
87,215 87,215
Six-month period ended June 30, 2011
87,215 87,215
Portfolio loans without allowance sold or transferred to loans held for sale during the:
Three-month period ended June 30, 2011
69,483 8,330 77,813
Six-month period ended June 30, 2011
155,482 56,123 83,542 295,147
NALs and Past Due Loans
Loans are considered past due when the contractual amounts due with respect to principal and interest are not received within 30 days of the contractual due date.
Any loan in any portfolio may be placed on nonaccrual status prior to the policies described below when collection of principal or interest is in doubt.
All classes within the C&I and CRE portfolios are placed on nonaccrual status at 90-days past due. Residential mortgage loans are placed on nonaccrual status at 150-days past due, with the exception of residential mortgages guaranteed by government organizations which continue to accrue interest. First-lien and second-lien home equity portfolio are placed on nonaccrual status at 150-days past due and 120-days past due, respectively. Automobile and other consumer loans are not placed on nonaccrual status, but are generally charged-off when the loan is 120-days past due. For all classes within all loan portfolios, when a loan is placed on nonaccrual status, any accrued interest income is reversed with current year accruals charged to interest income, and prior year amounts charged-off as a credit loss.
For all classes within all loan portfolios, cash receipts received on NALs 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.

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Regarding all classes within all portfolios, when, in Management’s judgment, the borrower’s ability to make required principal and interest payments resumes and collectability is no longer in doubt, and the loan has been brought current with respect to principal and interest, the loan or lease is returned to accrual status. For these loans that have been returned to accrual status, cash receipts are applied according to the contractual terms of the loan.
The following table presents NALs by loan class:
2011 2010
(dollar amounts in thousands) June 30, December 31,
Commercial and industrial:
Owner occupied
$ 113,211 $ 138,822
Other commercial and industrial
116,116 207,898
Total commercial and industrial
229,327 346,720
Commercial real estate:
Retail properties
51,354 96,644
Multi family
42,467 44,819
Office
38,943 47,950
Industrial and warehouse
54,621 39,770
Other commercial real estate
104,115 134,509
Total commercial real estate
291,500 363,692
Automobile
Home equity:
Secured by first-lien
14,897 10,658
Secured by second-lien
18,648 11,868
Residential mortgage
59,853 45,010
Other consumer
Total nonaccrual loans
$ 614,225 $ 777,948

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The following table presents an aging analysis of loans and leases, including past due loans, by loan class: (1)
June 30, 2011
90 or more
Past Due Total Loans and days past due
(dollar amounts in thousands) 30-59 Days 60-89 Days 90 or more days Total Current Leases and accruing
Commercial and industrial:
Owner occupied
$ 16,087 $ 9,357 $ 67,787 $ 93,231 $ 3,777,056 $ 3,870,287 $
Other commercial and industrial
16,229 9,334 71,642 97,205 9,576,874 9,674,079
Total commercial and industrial
$ 32,316 $ 18,691 $ 139,429 $ 190,436 $ 13,353,930 $ 13,544,366 $
Commercial real estate:
Retail properties
$ 6,129 $ 6,036 $ 39,315 $ 51,480 $ 1,626,467 $ 1,677,947 $
Multi family
8,227 1,358 29,057 38,642 1,020,775 1,059,417
Office
4,096 2,065 31,930 38,091 978,582 1,016,673
Industrial and warehouse
4,673 31,232 35,905 737,324 773,229
Other commercial real estate
5,320 3,020 78,922 87,262 1,549,556 1,636,818
Total commercial real estate
$ 28,445 $ 12,479 $ 210,456 $ 251,380 $ 5,912,704 $ 6,164,084 $
Automobile
$ 38,764 9,314 $ 4,419 $ 52,497 $ 6,137,748 $ 6,190,245 $ 4,419
Home equity:
Secured by first-lien
14,215 8,302 23,206 45,723 3,352,931 3,398,654 8,309
Secured by second-lien
29,936 16,571 27,790 74,297 4,479,399 4,553,696 9,142
Residential mortgage
141,599 37,854 164,806 344,259 4,406,824 4,751,083 110,954 (2)
Other consumer
7,644 2,458 1,808 11,910 512,414 524,324 1,808
December 31, 2010
90 or more
Past Due Total Loans and days past due
(dollar amounts in thousands) 30-59 Days 60-89 Days 90 or more days Total Current Leases and accruing
Commercial and industrial:
Owner occupied
$ 16,393 $ 9,084 $ 80,114 $ 105,591 $ 3,717,872 $ 3,823,463 $
Other commercial and industrial
34,723 35,698 110,491 180,912 9,058,918 9,239,830
Total commercial and industrial
$ 51,116 $ 44,782 $ 190,605 $ 286,503 $ 12,776,790 $ 13,063,293 $
Commercial real estate:
Retail properties
$ 23,726 $ 694 $ 72,856 $ 97,276 $ 1,664,941 $ 1,762,217 $
Multi family
8,993 8,227 31,519 48,739 1,072,877 1,121,616
Office
20,888 6,032 36,401 63,321 1,059,806 1,123,127
Industrial and warehouse
4,073 7,782 13,006 24,861 828,091 852,952
Other commercial real estate
45,792 9,243 91,718 146,753 1,644,491 1,791,244
Total commercial real estate
$ 103,472 $ 31,978 $ 245,500 $ 380,950 $ 6,270,206 $ 6,651,156 $
Automobile
$ 47,981 12,246 $ 7,721 $ 67,948 $ 5,546,763 $ 5,614,711 $ 7,721
Home equity:
Secured by first-lien
14,810 8,166 18,630 41,606 2,999,146 3,040,752 7,972
Secured by second-lien
36,488 16,551 27,392 80,431 4,591,971 4,672,402 15,525
Residential mortgage
115,290 57,580 197,280 370,150 4,130,216 4,500,366 152,271 (3)
Other consumer
7,204 2,280 2,456 11,940 551,887 563,827 2,456
(1) NALs are included in this aging analysis based on the loan’s past due status.
(2) Includes $76,979 thousand guaranteed by the U.S. government.
(3) Includes $98,288 thousand guaranteed by the U.S. government.

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Allowance for Credit Losses
Huntington maintains two reserves, both of which reflect Management’s judgment regarding the appropriate level necessary to absorb credit losses inherent in our loan and lease portfolio: the ALLL and the AULC. Combined, these reserves comprise the total ACL. The determination of the ACL requires 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 appropriateness of the ACL is based on Management’s current judgments about the credit quality of the loan portfolio. These judgments consider on-going evaluations of the loan and lease portfolio, including such factors as the differing economic risks associated with each loan category, the financial condition of specific borrowers, the level of delinquent loans, the value of any collateral and, where applicable, the existence of any guarantees or other documented support. Further, Management evaluates the impact of changes in interest rates and overall economic conditions on the ability of borrowers to meet their financial obligations when quantifying our exposure to credit losses and assessing the appropriateness of our ACL at each reporting date. In addition to general economic conditions and the other factors described above, additional factors also considered include: the impact of declining residential real estate values; the diversification of CRE loans, particularly loans secured by retail properties; and the amount of C&I loans to businesses in areas of Ohio and Michigan that have historically experienced less economic growth compared with other footprint markets. Also, the ACL assessment includes the on-going assessment of credit quality metrics, and a comparison of certain ACL benchmarks to current performance. Management’s determinations regarding the appropriateness of the ACL are reviewed and approved by the Company’s board of directors.
The ACL is increased through a provision for credit losses 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 ACL associated with securitized or sold loans.
The ALLL consists of two components: (1) the transaction reserve, which includes specific reserves related to loans considered to be impaired and loans involved in troubled debt restructurings, and (2) the general reserve. The transaction reserve component includes both (1) an estimate of loss based on pools of commercial and consumer loans and leases with similar characteristics and (2) an estimate of loss based on an impairment review of each C&I and CRE loan greater than $1 million. For the C&I and CRE portfolios, the estimate of loss based on pools of loans and leases with similar characteristics is made by applying a PD factor and a LGD factor to each individual loan based on a continuously updated loan grade, using a standardized loan grading system. The PD factor and LGD factor are determined for each loan grade using statistical models based on historical performance data. The PD factor considers on-going reviews of the financial performance of the specific borrower, including cash flow, debt-service coverage ratio, earnings power, debt level, and equity position, in conjunction with an assessment of the borrower’s industry and future prospects. The LGD factor considers analysis of the type of collateral and the relative LTV ratio. These reserve factors are developed based on credit migration models that track historical movements of loans between loan ratings over time and a combination of long-term average loss experience of our own portfolio and external industry data using a 24-month calculation period.
In the case of more homogeneous portfolios, such as automobile loans, home equity loans, and residential mortgage loans, the determination of the transaction reserve also incorporates PD and LGD factors, however, the estimate of loss is based on pools of loans and leases with similar characteristics. The PD factor considers current credit scores unless the account is delinquent, in which case a higher PD factor is used. The LGD factor considers analysis of the type of collateral and the relative LTV ratio. Credit scores, models, analyses, and other factors used to determine both the PD and LGD factors are updated frequently to capture the recent behavioral characteristics of the subject portfolios, as well as any changes in loss mitigation or credit origination strategies, and adjustments to the reserve factors are made as needed.
The general reserve consists of economic reserve and risk-profile reserve components. The economic reserve component considers the potential impact of changing market and economic conditions on portfolio performance. The risk-profile component considers items unique to our structure, policies, processes, and portfolio composition, as well as qualitative measurements and assessments of the loan portfolios including, but not limited to, management quality, concentrations, portfolio composition, industry comparisons, and internal review functions.
The estimate for the AULC is determined using the same procedures and methodologies as used for the ALLL. The loss factors used in the AULC are the same as the loss factors used in the ALLL while also considering a historical utilization of unused commitments. The AULC is reflected in accrued expenses and other liabilities in the Unaudited Condensed Consolidated Balance Sheet.

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The following table presents ALLL and AULC activity by portfolio segment for the three-month and six-month periods ended June 30, 2011:
Commercial Commercial Home Residential Other
(dollar amounts in thousands) and Industrial Real Estate Automobile Equity Mortgage Consumer Total
Three-month period ended June 30, 2011:
ALLL balance, beginning of period
$ 299,563 $ 511,068 $ 50,862 $ 149,371 $ 96,741 $ 25,621 $ 1,133,226
Loan charge-offs
(28,230 ) (40,723 ) (6,877 ) (27,359 ) (17,330 ) (8,182 ) (128,701 )
Recoveries of loans previously charged-off
9,526 13,128 4,622 1,918 875 1,098 31,167
Provision for loan and lease losses
157 (19,599 ) 6,821 22,514 20,220 6,835 36,948
Allowance for loans sold or transferred to loans held for sale
(1,514 ) (1,514 )
ALLL balance, end of period
$ 281,016 $ 463,874 $ 55,428 $ 146,444 $ 98,992 $ 25,372 $ 1,071,126
AULC balance, beginning of period
$ 30,706 $ 8,433 $ $ 2,241 $ 1 $ 830 $ 42,211
Provision for unfunded loan commitments and letters of credit
635 (1,801 ) 8 7 (1,151 )
AULC balance, end of period
$ 31,341 $ 6,632 $ $ 2,249 $ 1 $ 837 $ 41,060
ACL balance, end of period
$ 312,357 $ 470,506 $ 55,428 $ 148,693 $ 98,993 $ 26,209 $ 1,112,186
Six-month period ended June 30, 2011:
ALLL balance, beginning of period
$ 340,614 $ 588,251 $ 49,488 $ 150,630 $ 93,289 $ 26,736 $ 1,249,008
Loan charge-offs
(81,965 ) (117,371 ) (16,852 ) (55,682 ) (40,351 ) (15,487 ) (327,708 )
Recoveries of loans previously charged-off
21,070 22,093 9,885 3,526 4,964 3,553 65,091
Provision for loan and lease losses
1,297 (29,099 ) 12,907 47,970 42,604 10,570 86,249
Allowance for loans sold or transferred to loans held for sale
(1,514 ) (1,514 )
ALLL balance, end of period
$ 281,016 $ 463,874 $ 55,428 $ 146,444 $ 98,992 $ 25,372 $ 1,071,126
AULC balance, beginning of period
$ 32,726 $ 6,158 $ $ 2,348 $ 1 $ 894 $ 42,127
Provision for unfunded loan commitments and letters of credit
(1,385 ) 474 (99 ) (57 ) (1,067 )
AULC balance, end of period
$ 31,341 $ 6,632 $ $ 2,249 $ 1 $ 837 $ 41,060
ACL balance, end of period
$ 312,357 $ 470,506 $ 55,428 $ 148,693 $ 98,993 $ 26,209 $ 1,112,186
Any loan in any portfolio may be charged-off prior to the policies described below if a loss confirming event has occurred. Loss confirming events include, but are not limited to, bankruptcy (unsecured), continued delinquency, foreclosure, or receipt of an asset valuation indicating a collateral deficiency and that asset is the sole source of repayment.
C&I and CRE loans are either charged-off or written down to net realizable value at 90-days past due. Automobile loans and other consumer loans are charged-off at 120-days past due. First-lien and second-lien home equity loans are charged-off to the estimated fair value of the collateral at 150-days past due and 120-days past due, respectively. Residential mortgages are charged-off to the estimated fair value of the collateral at 150-days past due.

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Credit Quality Indicators
To facilitate the monitoring of credit quality for C&I and CRE loans, and for purposes of determining an appropriate ACL level for these loans, Huntington utilizes the following categories of credit grades:
Pass = Higher quality loans that do not fit any of the other categories described below.
OLEM = Potentially weak loans. The credit risk may be relatively minor yet represent a risk given certain specific circumstances. If the potential weaknesses are not monitored or mitigated, the asset may weaken or inadequately protect Huntington’s position in the future.
Substandard = Inadequately protected loans by the borrower’s ability to repay, equity, and/or the collateral pledged to secure the loan. These loans have identified weaknesses that could hinder normal repayment or collection of the debt. It is likely Huntington will sustain some loss if any identified weaknesses are not mitigated.
Doubtful = Loans that have all of the weaknesses inherent in those loans classified as Substandard, with the added elements of the full collection of the loan is improbable and that the possibility of loss is high.
The categories above, which are derived from standard regulatory rating definitions, are assigned upon initial approval of the loan or lease and subsequently updated as appropriate.
Commercial loans categorized as OLEM, Substandard, or Doubtful are considered Criticized loans. Commercial loans categorized as Substandard or Doubtful are also considered Classified loans.
For all classes within all consumer loan portfolios, each loan is assigned a specific PD factor that is generally based on the borrower’s most recent credit bureau score (FICO), which we update quarterly. A FICO credit bureau score is a credit score developed by Fair Isaac Corporation based on data provided by the credit bureaus. The FICO credit bureau score is widely accepted as the standard measure of consumer credit risk used by lenders, regulators, rating agencies, and consumers. The higher the FICO credit bureau score, the higher likelihood of repayment and therefore, an indicator of lower credit risk.

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The following table presents loan and lease balances by credit quality indicator:
June 30, 2011
Credit Risk Profile by UCS classification
(dollar amounts in millions) Pass OLEM Substandard Doubtful Total
Commercial and industrial:
Owner occupied
$ 3,407 $ 121 $ 341 $ 1 $ 3,870
Other commercial and industrial
9,022 203 442 7 9,674
Total commercial and industrial
$ 12,429 $ 324 $ 783 $ 8 $ 13,544
Commercial real estate:
Retail properties
$ 1,382 $ 101 $ 195 $ $ 1,678
Multi family
878 60 121 1,059
Office
835 99 83 1,017
Industrial and warehouse
650 32 91 773
Other commercial real estate
1,154 126 355 2 1,637
Total commercial real estate
$ 4,899 $ 418 $ 845 $ 2 $ 6,164
Credit Risk Profile by FICO score (1)
750+ 650-749 <650 Other (2) Total
Automobile
$ 2,889 $ 2,489 $ 689 $ 123 $ 6,190
Home equity:
Secured by first-lien
1,916 1,166 306 10 3,398
Secured by second-lien
2,192 1,719 642 1 4,554
Residential mortgage
2,205 1,635 743 168 4,751
Other consumer
197 221 90 16 524
December 31, 2010
Credit Risk Profile by UCS classification
(dollar amounts in millions) Pass OLEM Substandard Doubtful Total
Commercial and industrial:
Owner occupied
$ 3,265 $ 159 $ 393 $ 6 $ 3,823
Other commercial and industrial
8,435 265 525 15 9,240
Total commercial and industrial
$ 11,700 $ 424 $ 918 $ 21 $ 13,063
Commercial real estate:
Retail properties
$ 1,284 $ 128 $ 350 $ $ 1,762
Multi family
899 79 144 1,122
Office
868 122 133 1,123
Industrial and warehouse
668 72 113 853
Other commercial real estate
1,221 88 481 1 1,791
Total commercial real estate
$ 4,940 $ 489 $ 1,221 $ 1 $ 6,651
Credit Risk Profile by FICO score (1)
750+ 650-749 <650 Other (2) Total
Automobile
$ 2,516 $ 2,267 $ 725 $ 107 $ 5,615
Home equity:
Secured by first-lien
1,644 1,082 314 1 3,041
Secured by second-lien
2,224 1,768 679 1 4,672
Residential mortgage
1,978 1,580 796 146 4,500
Other consumer
207 235 102 20 564
(1) Reflects currently updated customer credit scores.
(2) Reflects deferred fees and costs, loans in process, loans to legal entities, etc.

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Impaired Loans
For all classes within the C&I and CRE portfolios, all loans with an outstanding balance of $1 million or greater are evaluated on a quarterly basis for impairment. Generally, consumer loans within any class are not individually evaluated on a regular basis for impairment.
Once a loan has been identified for an assessment of impairment, the loan is considered impaired when, based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. This determination requires significant judgment and use of estimates, and the eventual outcome may differ significantly from those estimates.
When a loan in any class has been determined to be impaired, the amount of the impairment is measured using the present value of expected future cash flows discounted at the loan’s effective interest rate or, as a practical expedient, the observable market price of the loan, or the fair value of the collateral if the loan is collateral dependent. When the present value of expected future cash flows is used, the effective interest rate is the original contractual interest rate of the loan adjusted for any premium or discount. When the contractual interest rate is variable, the effective interest rate of the loan changes over time. A specific reserve is established as a component of the ALLL when a loan has been determined to be impaired. Subsequent to the initial measurement of impairment, if there is a significant change to the impaired loan’s expected future cash flows, or if actual cash flows are significantly different from the cash flows previously estimated, Huntington recalculates the impairment and appropriately adjusts the specific reserve. Similarly, if Huntington measures impairment based on the observable market price of an impaired loan or the fair value of the collateral of an impaired collateral dependent loan, Huntington will adjust the specific reserve if there is a significant change in either of those bases.
When a loan within any class is impaired, the accrual of interest income is discontinued unless the receipt of principal and interest is no longer in doubt. Interest income on TDRs is accrued when all principal and interest is expected to be collected under the post-modification terms. Cash receipts received on nonaccruing impaired loans within any class are generally applied entirely against principal until the loan has been collected in full, after which time any additional cash receipts are recognized as interest income. Cash receipts received on accruing impaired loans within any class are applied in the same manner as accruing loans that are not considered impaired.

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The following table presents summarized data for impaired loans and the related ALLL by portfolio segment:
Commercial and Commercial Residential Other
Industrial Real Estate Automobile Home Equity Mortgage Consumer Total
ALLL at June 30, 2011:
(dollar amounts in thousands)
Portion of ending balance:
Attributable to loans individually evaluated for impairment
$ 36,307 $ 61,445 $ 994 $ 1,511 $ 14,974 $ 527 $ 115,758
Attributable to loans collectively evaluated for impairment
244,709 402,429 54,434 144,933 84,018 24,845 955,368
Total ALLL balance at June 30, 2011
$ 281,016 $ 463,874 $ 55,428 $ 146,444 $ 98,992 $ 25,372 $ 1,071,126
ALLL associated with portfolio loans acquired with deteriorated credit quality
$ $ $ $ $ $ $
Loans and Leases at June 30, 2011:
(dollar amounts in thousands)
Portion of loans and leases at June 30, 2011:
Individually evaluated for impairment
165,909 394,930 29,059 37,067 334,150 8,910 970,025
Collectively evaluated for impairment
13,378,457 5,769,154 6,161,186 7,915,283 4,416,933 515,414 38,156,427
Total loans evaluated for impairment
$ 13,544,366 $ 6,164,084 $ 6,190,245 $ 7,952,350 $ 4,751,083 $ 524,324 $ 39,126,452
Portfolio loans acquired with deteriorated credit quality
$ $ $ $ $ $ $

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Commercial and Commercial Residential Other
Industrial Real Estate Automobile Home Equity Mortgage Consumer Total
ALLL at December 31, 2010
(dollar amounts in thousands)
Portion of ALLL balance at December 31, 2010:
Attributable to loans individually evaluated for impairment
$ 63,307 $ 65,130 $ 1,477 $ 1,498 $ 11,780 $ 668 $ 143,860
Attributable to loans collectively evaluated for impairment
277,307 523,121 48,011 149,132 81,509 26,068 1,105,148
ALLL balance at December 31, 2010:
$ 340,614 $ 588,251 $ 49,488 $ 150,630 $ 93,289 $ 26,736 $ 1,249,008
ALLL associated with portfolio loans acquired with deteriorated credit quality
$ $ $ $ $ $ $
Loans and Leases at December 31, 2010:
(dollar amounts in thousands)
Portion of loans and leases at December 31, 2010:
Individually evaluated for impairment
198,120 310,668 29,764 37,257 334,207 9,565 919,581
Collectively evaluated for impairment
12,865,173 6,340,488 5,584,947 7,675,897 4,166,159 554,262 37,186,926
Total loans evaluated for impairment
$ 13,063,293 $ 6,651,156 $ 5,614,711 $ 7,713,154 $ 4,500,366 $ 563,827 $ 38,106,507
Portfolio loans acquired with deteriorated credit quality
$ $ $ $ $ $ $

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The following tables present detailed impaired loan information by class: (1), (2)
Three Months Ended Six Months Ended
June 30, 2011 June 30, 2011 June 30, 2011
Unpaid Interest Interest
Ending Principal Related Average Income Average Income
(dollar amounts in thousands) Balance Balance Allowance Balance Recognized Balance Recognized
With no related allowance recorded:
Commercial and industrial:
Owner occupied
$ 1,762 $ 1,976 $ $ 4,863 $ 11 $ 8,540 $ 17
Other commercial and industrial
4,511 4,740 6,303 86 7,491 125
Total commercial and industrial
$ 6,273 $ 6,716 $ $ 11,166 $ 97 $ 16,031 $ 142
Commercial real estate:
Retail properties
$ 24,501 $ 40,136 $ $ 13,465 $ 13 $ 16,790 $ 13
Multi family
13,788 14,348 14,401 155 11,332 311
Office
3,305 3,639 1,937 1,935
Industrial and warehouse
3,940 3,952 2,383 5 2,584 5
Other commercial real estate
32,347 66,065 25,637 161 25,202 358
Total commercial real estate
$ 77,881 $ 128,140 $ $ 57,823 $ 334 $ 57,843 $ 687
Automobile
$ $ $ $ $ $ $
Home equity:
Secured by first-lien
Secured by second-lien
Residential mortgage
Other consumer
With an allowance recorded:
Commercial and industrial:
Owner occupied
$ 57,220 $ 82,153 $ 11,025 $ 57,007 $ 648 $ 64,712 $ 862
Other commercial and industrial
102,416 139,282 25,282 97,528 824 106,087 1,301
Total commercial and industrial
$ 159,636 $ 221,435 $ 36,307 $ 154,535 $ 1,472 $ 170,799 $ 2,163
Commercial real estate:
Retail properties
$ 89,801 $ 115,219 $ 14,826 $ 101,804 $ 731 $ 94,802 $ 1,111
Multi family
26,070 30,532 4,449 28,600 264 33,078 495
Office
24,996 41,298 4,686 29,746 37 29,210 143
Industrial and warehouse
59,781 69,742 14,418 44,774 251 40,595 422
Other commercial real estate
116,401 151,593 23,066 83,647 542 76,843 637
Total commercial real estate
$ 317,049 $ 408,384 $ 61,445 $ 288,571 $ 1,825 $ 274,528 $ 2,808
Automobile
$ 29,059 $ 29,059 $ 994 $ 29,335 $ 647 $ 29,478 $ 1,307
Home equity:
Secured by first-lien
22,835 22,835 678 22,851 236 22,085 462
Secured by second-lien
14,232 14,232 833 15,542 176 15,930 363
Residential mortgage
334,150 356,418 14,974 342,576 3,353 338,535 6,810
Other consumer
8,910 8,910 527 9,041 161 9,216 332

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December 31, 2010
Unpaid
Ending Principal Related
(dollar amounts in thousands) Balance Balance Allowance
With no related allowance recorded:
Commercial and industrial:
Owner occupied
$ 13,750 $ 26,603 $
Other commercial and industrial
11,127 22,688
Total commercial and industrial
$ 24,877 $ 49,291 $
Commercial real estate:
Retail properties
$ 31,972 $ 67,487 $
Multi family
5,058 5,675
Office
2,270 3,562
Industrial and warehouse
3,305 6,912
Other commercial real estate
26,807 58,996
Total commercial real estate
$ 69,412 $ 142,632 $
Automobile
$ $ $
Home equity:
Secured by first-lien
Secured by second-lien
Residential mortgage
Other consumer
With an allowance recorded:
Commercial and industrial:
Owner occupied
$ 63,951 $ 85,279 $ 14,322
Other commercial and industrial
109,292 154,424 48,986
Total commercial and industrial
$ 173,243 $ 239,703 $ 63,308
Commercial real estate:
Retail properties
$ 74,732 $ 120,051 $ 14,846
Multi family
38,758 39,299 7,760
Office
26,595 31,261 9,466
Industrial and warehouse
34,588 44,168 10,453
Other commercial real estate
66,583 104,485 22,604
Total commercial real estate
$ 241,256 $ 339,264 $ 65,129
Automobile
$ 29,764 $ 29,764 $ 1,477
Home equity:
Secured by first-lien
20,553 20,675 511
Secured by second-lien
16,704 17,060 987
Residential mortgage
334,207 347,571 11,780
Other consumer
9,565 9,565 668
(1) These tables do not include loans fully charged-off.
(2) All automobile, home equity, residential mortgage, and other consumer impaired loans included in the tables below are considered impaired due to their status as a TDR.

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4. AVAILABLE-FOR-SALE AND OTHER SECURITIES
Listed below are the contractual maturities (under 1 year, 1-5 years, 6-10 years, and over 10 years) of available-for-sale and other securities at June 30, 2011, December 31, 2010, and June 30, 2010:
June 30, 2011 December 31, 2010 June 30, 2010
Amortized Amortized Amortized
(dollar amounts in thousands) Cost Fair Value Cost Fair Value Cost Fair Value
U.S. Treasury:
Under 1 year
$ $ $ $ $ $
1-5 years
52,103 52,301 52,425 51,781 49,997 50,328
6-10 years
Over 10 years
Total U.S. Treasury
52,103 52,301 52,425 51,781 49,997 50,328
Federal agencies: mortgage-backed securities:
Under 1 year
1-5 years
48,243 48,332
6-10 years
440,304 451,708 656,176 664,793 716,844 731,350
Over 10 years
3,360,382 3,422,665 4,077,655 4,089,611 3,689,229 3,774,601
Total Federal agencies: mortgage-backed securities
3,848,929 3,922,705 4,733,831 4,754,404 4,406,073 4,505,951
TLGP securities:
Under 1 year
155,637 156,303 156,450 157,931
1-5 years
25,230 25,536 182,552 184,757
6-10 years
Over 10 years
Total TLGP securities
155,637 156,303 181,680 183,467 182,552 184,757
Other agencies:
Under 1 year
153,241 154,039 158,273 159,288 187,627 188,549
1-5 years
1,059,456 1,054,447 1,898,867 1,885,230 1,692,684 1,703,421
6-10 years
13,391 13,788 13,082 13,359 11,030 11,478
Over 10 years
500 499
Total other agencies
1,226,088 1,222,274 2,070,722 2,058,376 1,891,341 1,903,448
Total U.S. Government backed agencies
5,282,757 5,353,583 7,038,658 7,048,028 6,529,963 6,644,484
Municipal securities:
Under 1 year
855 855
1-5 years
150,878 152,783 149,151 148,587 26,393 27,164
6-10 years
143,735 145,798 124,552 125,656 87,428 90,904
Over 10 years
130,948 133,260 182,341 181,472 254,786 257,848
Total municipal securities
426,416 432,696 456,044 455,715 368,607 375,916
Private-label CMO:
Under 1 year
1-5 years
6-10 years
14,140 14,374 10,429 10,887 13,820 14,031
Over 10 years
83,597 74,396 124,080 111,038 412,882 380,580
Total private-label CMO
97,737 88,770 134,509 121,925 426,702 394,611
Asset-backed securities:
Under 1 year
19,669 19,694 40,000 40,138
1-5 years
553,221 557,370 697,001 700,749 588,876 592,301
6-10 years
124,826 126,418 323,411 323,995 168,382 169,246
Over 10 years
290,794 165,742 301,326 162,684 365,201 218,940
Total asset-backed securities (1)
968,841 849,530 1,341,407 1,207,122 1,162,459 1,020,625
Covered bonds:
Under 1 year
1-5 years
600,888 600,055 379,711 367,209
6-10 years
Over 10 years
Total covered bonds
600,888 600,055 379,711 367,209
Corporate debt:
Under 1 year
1-5 years
409,283 407,969 329,988 323,389
6-10 years
Over 10 years
Total corporate debt
409,283 407,969 329,988 323,389
Other:
Under 1 year
750 750 800 802 300 308
1-5 years
8,220 8,447 7,810 8,009 6,722 6,884
6-10 years
704 735 1,007 1,037 1,104 1,222
Over 10 years
Non-marketable equity securities
303,661 303,661 308,722 308,722 304,915 304,915
Marketable equity securities
54,126 53,520 53,944 53,286 55,436 54,753
Total other
367,461 367,113 372,283 371,856 368,477 368,082
Total available-for-sale and other securities
$ 8,153,383 $ 8,099,716 $ 10,052,600 $ 9,895,244 $ 8,856,208 $ 8,803,718
(1) Amounts at June 30, 2011, December 31, 2010, and June 30, 2010 include automobile asset backed securities with a fair value of $239 million, $509 million and $562 million, respectively, which meet the eligibility requirements for the Term Asset-Backed Securities Loan Facility, or “TALF,” administered by the Federal Reserve Bank of New York.

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Other securities at June 30, 2011, December 31, 2010, and June 30, 2010 include $165.6 million of stock issued by the FHLB of Cincinnati, $29.3 million, $37.4 million, and $45.7 million, respectively, of stock issued by the FHLB of Indianapolis, and $108.8 million, $105.7 million and $93.6 million, respectively, of Federal Reserve Bank stock. Other securities also include corporate debt and marketable equity securities. Non-marketable equity securities are valued at amortized cost. At June 30, 2011, December 31, 2010, and June 30, 2010, Huntington did not have any material equity positions in FNMA or FHLMC.
The following tables provide amortized cost, fair value, and gross unrealized gains and losses recognized in accumulated other comprehensive income by investment category at June 30, 2011, December 31, 2010, and June 30, 2010.
Unrealized
Amortized Gross Gross Fair
(dollar amounts in thousands) Cost Gains Losses Value
June 30, 2011
U.S. Treasury
$ 52,103 $ 198 $ $ 52,301
Federal Agencies:
Mortgage-backed securities
3,848,929 80,855 (7,079 ) 3,922,705
TLGP securities
155,637 666 156,303
Other agencies
1,226,088 2,288 (6,102 ) 1,222,274
Total U.S. Government backed securities
5,282,757 84,007 (13,181 ) 5,353,583
Municipal securities
426,416 7,698 (1,418 ) 432,696
Private-label CMO
97,737 994 (9,961 ) 88,770
Asset-backed securities
968,841 5,801 (125,112 ) 849,530
Covered bonds
600,888 3,193 (4,026 ) 600,055
Corporate debt
409,283 454 (1,768 ) 407,969
Other securities
367,461 424 (772 ) 367,113
Total available-for-sale and other securities
$ 8,153,383 $ 102,571 $ (156,238 ) $ 8,099,716
Unrealized
Amortized Gross Gross Fair
(dollar amounts in thousands) Cost Gains Losses Value
December 31, 2010
U.S. Treasury
$ 52,425 $ $ (644 ) $ 51,781
Federal Agencies:
Mortgage-backed securities
4,733,831 71,901 (51,328 ) 4,754,404
TLGP securities
181,680 1,787 183,467
Other agencies
2,070,722 4,874 (17,220 ) 2,058,376
Total U.S. Government backed securities
7,038,658 78,562 (69,192 ) 7,048,028
Municipal securities
456,044 6,154 (6,483 ) 455,715
Private-label CMO
134,509 1,236 (13,820 ) 121,925
Asset-backed securities
1,341,407 6,563 (140,848 ) 1,207,122
Covered bonds
379,711 (12,502 ) 367,209
Corporate debt
329,988 24 (6,623 ) 323,389
Other securities
372,283 364 (791 ) 371,856
Total available-for-sale and other securities
$ 10,052,600 $ 92,903 $ (250,259 ) $ 9,895,244

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Unrealized
Amortized Gross Gross Fair
(dollar amounts in thousands) Cost Gains Losses Value
June 30, 2010
U.S. Treasury
$ 49,997 $ 331 $ $ 50,328
Federal Agencies:
Mortgage-backed securities
4,406,073 102,435 (2,557 ) 4,505,951
TLGP securities
182,552 2,205 184,757
Other agencies
1,891,341 12,108 (1 ) 1,903,448
Total U.S. Government backed securities
6,529,963 117,079 (2,558 ) 6,644,484
Municipal securities
368,607 7,334 (25 ) 375,916
Private-label CMO
426,702 534 (32,625 ) 394,611
Asset-backed securities
1,162,459 4,805 (146,639 ) 1,020,625
Covered bonds
Corporate debt
Other securities
368,477 367 (762 ) 368,082
Total available-for-sale and other securities
$ 8,856,208 $ 130,119 $ (182,609 ) $ 8,803,718
The following tables provide detail on investment securities with unrealized losses aggregated by investment category and length of time the individual securities have been in a continuous loss position, at June 30, 2011, December 31, 2010, and June 30, 2010.
Less than 12 Months Over 12 Months Total
Fair Unrealized Fair Unrealized Fair Unrealized
(dollar amounts in thousands) Value Losses Value Losses Value Losses
June 30, 2011
U.S. Treasury
$ $ $ $ $ $
Federal agencies:
Mortgage-backed securities
647,974 (7,079 ) 647,974 (7,079 )
TLGP securities
Other agencies
753,680 (6,057 ) 4,169 (45 ) 757,849 (6,102 )
Total U.S. Government backed securities
1,401,654 (13,136 ) 4,169 (45 ) 1,405,823 (13,181 )
Municipal securities
133,740 (1,358 ) 3,760 (60 ) 137,500 (1,418 )
Private-label CMO
59,611 (9,961 ) 59,611 (9,961 )
Asset-backed securities
154,837 (125,112 ) 154,837 (125,112 )
Covered bonds
239,895 (4,026 ) 239,895 (4,026 )
Corporate debt
338,080 (1,768 ) 338,080 (1,768 )
Other securities
1,494 (11 ) 2,383 (761 ) 3,877 (772 )
Total temporarily impaired securities
$ 2,114,863 $ (20,299 ) $ 224,760 $ (135,939 ) $ 2,339,623 $ (156,238 )

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Less than 12 Months Over 12 Months Total
Fair Unrealized Fair Unrealized Fair Unrealized
(dollar amounts in thousands) Value Losses Value Losses Value Losses
December 31, 2010
U.S. Treasury
$ 51,781 $ (644 ) $ $ $ 51,781 $ (644 )
Federal agencies:
Mortgage-backed securities
1,424,431 (51,328 ) 1,424,431 (51,328 )
TLGP securities
Other agencies
1,217,074 (17,134 ) 4,771 (86 ) 1,221,845 (17,220 )
Total U.S. Government backed securities
2,693,286 (69,106 ) 4,771 (86 ) 2,698,057 (69,192 )
Municipal securities
201,370 (6,363 ) 3,700 (120 ) 205,070 (6,483 )
Private-label CMO
85,617 (13,820 ) 85,617 (13,820 )
Asset-backed securities
214,983 (2,129 ) 146,866 (138,719 ) 361,849 (140,848 )
Covered bonds
367,209 (12,502 ) 367,209 (12,502 )
Corporate debt
288,660 (6,623 ) 288,660 (6,623 )
Other securities
41,218 (791 ) 41,218 (791 )
Total temporarily impaired securities
$ 3,765,508 $ (96,723 ) $ 282,172 $ (153,536 ) $ 4,047,680 $ (250,259 )
Less than 12 Months Over 12 Months Total
Fair Unrealized Fair Unrealized Fair Unrealized
(dollar amounts in thousands) Value Losses Value Losses Value Losses
June 30, 2010
U.S. Treasury
$ $ $ $ $ $
Federal agencies:
Mortgage-backed securities
257,773 (2,557 ) 257,773 (2,557 )
TLGP securities
Other agencies
250 (1 ) 250 (1 )
Total U.S. Government backed securities
257,773 (2,557 ) 250 (1 ) 258,023 (2,558 )
Municipal securities
3,992 (8 ) 3,803 (17 ) 7,795 (25 )
Private-label CMO
337,044 (32,625 ) 337,044 (32,625 )
Asset-backed securities
77,834 (7,990 ) 206,835 (138,649 ) 284,669 (146,639 )
Covered bonds
Corporate debt
Other securities
39,427 (519 ) 811 (243 ) 40,238 (762 )
Total temporarily impaired securities
$ 379,026 $ (11,074 ) $ 548,743 $ (171,535 ) $ 927,769 $ (182,609 )
The following table is a summary of realized securities gains and losses for the three-month and six-month periods ended June 30, 2011 and 2010:
Three Months Ended Six Months Ended
June 30, June 30,
(dollar amounts in thousands) 2011 2010 2011 2010
Gross gains on sales of securities
$ 9,623 $ 8,105 $ 16,358 $ 14,881
Gross (losses) on sales of securities
(7,934 ) (5,125 ) (10,464 ) (5,471 )
Net gain on sales of securities
1,689 2,980 5,894 9,410
Other-than-temporary impairment recorded
(182 ) (2,824 ) (4,347 ) (9,285 )
Total securities gain (loss)
$ 1,507 $ 156 $ 1,547 $ 125
Security Impairment
Huntington evaluates its available-for-sale securities portfolio on a quarterly basis for OTTI. Huntington assesses whether OTTI has occurred when the fair value of a debt security is less than the amortized cost basis at period-end. Under these circumstances, OTTI is considered to have occurred; (1) if Huntington intends to sell the security; (2) if it is more likely than not Huntington will be required to sell the security before recovery of its amortized cost basis; or (3) the present value of the expected cash flows is not sufficient to recover the entire amortized cost basis.
For securities Huntington does not expect to sell or it is not more likely than not to be required to sell, credit-related OTTI, represented by the expected loss in principal, is recognized in earnings, while noncredit-related OTTI is recognized in OCI. For securities which Huntington does expect to sell, all OTTI is recognized in earnings. Noncredit-related OTTI results from other factors, including increased liquidity spreads and extension of the security. Presentation of OTTI is made in the Unaudited Condensed Consolidated Statements of Income on a gross basis with a reduction for the amount of OTTI recognized in OCI.

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Huntington applied the related OTTI guidance on the debt security types listed below.
Alt-A mortgage-backed and private-label CMO securities are collateralized by first-lien residential mortgage loans. The securities are valued by a third party specialist using a discounted cash flow approach and proprietary pricing model. The model uses inputs such as estimated prepayment speeds, losses, recoveries, default rates that are implied by the underlying performance of collateral in the structure or similar structures, discount rates that are implied by market prices for similar securities, collateral structure types, and house price depreciation / appreciation rates that are based upon macroeconomic forecasts.
Pooled-trust-preferred securities are CDOs backed by a pool of debt securities issued by financial institutions. The collateral generally consists of trust-preferred securities and subordinated debt securities issued by banks, bank holding companies, and insurance companies. A full cash flow analysis is used to estimate fair values and assess impairment for each security within this portfolio. We engaged a third party specialist with direct industry experience in pooled-trust-preferred securities valuations to provide assistance in estimating the fair value and expected cash flows for each security in this portfolio. Relying on cash flows is necessary because there was a lack of observable transactions in the market and many of the original sponsors or dealers for these securities are no longer able to provide a fair value that is compliant with ASC 820.
For the three-month and six-month periods ended June 30, 2011 and 2010, the following tables summarize by debt security type, total OTTI losses, unrealized OTTI losses included in OCI, and OTTI recognized in the Unaudited Condensed Consolidated Statements of Income for securities evaluated for impairment as described above.
Three Months Ended June 30,
Alt-A Pooled- Private-
(dollar amounts in thousands) Mortgage-backed trust-preferred label CMO Total
2011
Total OTTI recoveries (losses) (unrealized and realized)
$ (166 ) $ 432 $ 952 $ 1,218
Unrealized OTTI (recoveries) losses recognized in OCI
108 (432 ) (1,076 ) (1,400 )
Net impairment losses recognized in earnings
$ (58 ) $ $ (124 ) $ (182 )
2010
Total OTTI recoveries (losses) (unrealized and realized)
$ 399 $ 3,001 $ 1,793 $ 5,193
Unrealized OTTI (recoveries) losses recognized in OCI
(959 ) (3,001 ) (4,057 ) (8,017 )
Net impairment losses recognized in earnings
$ (560 ) $ $ (2,264 ) $ (2,824 )
Six Months Ended June 30,
Alt-A Pooled- Private-
(dollar amounts in thousands) Mortgage-backed trust-preferred label CMO Total
2011
Total OTTI (losses) recoveries (unrealized and realized)
$ 936 $ 6,830 $ 3,328 $ 11,094
Unrealized OTTI losses (recoveries) recognized in OCI
(1,166 ) (10,037 ) (4,238 ) (15,441 )
Net impairment losses recognized in earnings
$ (230 ) $ (3,207 ) $ (910 ) $ (4,347 )
2010
Total OTTI (losses) recoveries (unrealized and realized)
$ (4,177 ) $ 2,352 $ (1,382 ) $ (3,207 )
Unrealized OTTI losses (recoveries) recognized in OCI
2,975 (5,567 ) (3,486 ) (6,078 )
Net impairment losses recognized in earnings
$ (1,202 ) $ (3,215 ) $ (4,868 ) $ (9,285 )

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The following table rolls forward the unrealized OTTI recognized in OCI on debt securities held by Huntington for the three-month and six-month periods ended June 30, 2011 and 2010:
Three Months Ended Six Months Ended
June 30, June 30,
(dollar amounts in thousands) 2011 2010 2011 2010
Balance, beginning of period
$ 86,797 $ 126,347 $ 100,838 $ 124,408
Reductions from sales of securities with credit impairment
(1,054 ) (1,054 )
Noncredit impairment on securities not previously considered credit impaired
786 8,909
Change due to improvement in expected cash flows
(1,996 ) (9,513 ) (16,037 ) (17,660 )
Additional noncredit impairment on securities with previous credit impairment
1,650 710 1,650 2,673
Balance, end of period
$ 85,397 $ 118,330 $ 85,397 $ 118,330
The following table rolls forward the OTTI recognized in earnings on debt securities held by Huntington for the three-month and six-month periods ended June 30, 2011 and 2010 as follows.
Three Months Ended Six Months Ended
June 30, June 30,
(dollar amounts in thousands) 2011 2010 2011 2010
Balance, beginning of period
$ 58,701 $ 57,781 $ 54,536 $ 53,801
Reductions from sales
(4,481 ) (1,993 ) (4,481 ) (4,474 )
Credit losses not previously recognized
392 1,558
Additional credit losses
182 2,432 4,347 7,727
Balance, end of period
$ 54,402 $ 58,612 $ 54,402 $ 58,612
The fair values of these assets have been impacted by various market conditions. The unrealized losses were primarily the result of wider liquidity spreads on asset-backed securities and increased market volatility on nonagency mortgage and asset-backed securities that are collateralized by certain mortgage loans. In addition, the expected average lives of the asset-backed securities backed by trust-preferred securities have been extended, due to changes in the expectations of when the underlying securities would be repaid. The contractual terms and / or cash flows of the investments do not permit the issuer to settle the securities at a price less than the amortized cost. Huntington does not intend to sell, nor does it believe it will be required to sell these securities until the fair value is recovered, which may be maturity and, therefore, does not consider them to be other-than-temporarily impaired at June 30, 2011.
As of June 30, 2011, Management has evaluated all other investment securities with unrealized losses and all non-marketable securities for impairment and concluded no additional OTTI is required.
5. HELD-TO-MATURITY SECURITIES
These are debt securities that Huntington has the intent and ability to hold until maturity. The debt securities are carried at amortized cost and adjusted for amortization of premiums and accretion of discounts using the interest method.
Huntington transferred $469.1 million of federal agencies, mortgage-backed securities from the available-for-sale securities portfolio to the held-to-maturity securities portfolio in the 2011 second quarter. The securities were reclassified at fair value at the date of transfer. At the time of the transfer, $0.5 million of unrealized net gains were recognized in OCI. The amounts in OCI will be recognized in earnings over the remaining life of the securities as an offset to the adjustment of yield in a manner consistent with the amortization of the premium on the same transferred securities, resulting in an immaterial impact on net income.
Additionally, during the 2011 second quarter, Huntington purchased $204.3 million of federal agencies, mortgage-backed securities which were classified directly into the held-to-maturity portfolio.

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Listed below are the contractual maturities (under 1 year, 1-5 years, 6-10 years, and over 10 years) of held-to-maturity securities at June 30, 2011. There were no securities classified as held-to-maturity at December 31, 2010 or June 30, 2010.
June 30, 2011
Amortized Fair
(dollar amounts in thousands) Cost Value
Federal agencies: mortgage-backed securities:
Under 1 year
$ $
1-5 years
6-10 years
Over 10 years
670,478 670,145
Total Federal agencies: mortgage-backed securities
670,478 670,145
Total U.S. Government backed agencies
670,478 670,145
Total held-to-maturity securities
$ 670,478 $ 670,145
The following table provides amortized cost, gross unrealized gains and losses, and fair value by investment category at June 30, 2011:
Unrealized
Amortized Gross Gross Fair
(dollar amounts in thousands) Cost Gains Losses Value
June 30, 2011
Federal Agencies:
Mortgage-backed securities
$ 670,478 $ 1,947 $ (2,280 ) $ 670,145
Total U.S. Government backed securities
670,478 1,947 (2,280 ) 670,145
Total held-to-maturity securities
$ 670,478 $ 1,947 $ (2,280 ) $ 670,145
6. LOAN SALES AND SECURITIZATIONS
Residential Mortgage Loans
The following table summarizes activity relating to residential mortgage loans sold with servicing retained for the three-month and six-month periods ended June 30, 2011 and 2010:
Three Months Ended Six Months Ended
June 30, June 30,
(dollar amounts in thousands) 2011 2010 2011 2010
Residential mortgage loans sold with servicing retained
$ 492,015 $ 803,000 $ 1,749,518 $ 1,539,015
Pretax gains resulting from above loan sales (1)
12,565 18,661 45,244 33,424
(1) Recorded in other noninterest income.
A MSR is established only when the servicing is contractually separated from the underlying mortgage loans by sale or securitization of the loans with servicing rights retained. At initial recognition, the MSR asset is established at its fair value using assumptions consistent with assumptions used to estimate the fair value of existing MSRs carried at fair value in the portfolio. At the time of initial capitalization, MSRs are grouped into one of two categories depending on whether or not Huntington intends to actively hedge the asset. MSR assets are recorded using the fair value method if Huntington will actively engage in hedging the asset and recorded using the amortization method if no active hedging will be performed. MSRs are included in accrued income and other assets. Any increase or decrease in the fair value of MSRs carried under the fair value method, as well as amortization or impairment of MSRs recorded using the amortization method, is recorded as an increase or decrease in mortgage banking income, which is included in noninterest income.

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The following tables summarize the changes in MSRs recorded using either the fair value method or the amortization method for the three-month and six-month periods ended June 30, 2011 and 2010:
Fair Value Method:
Three Months Ended Six Months Ended
June 30, June 30,
(dollar amounts in thousands) 2011 2010 2011 2010
Fair value, beginning of period
$ 119,207 $ 162,106 $ 125,679 $ 176,427
Change in fair value during the period due to:
Time decay (1)
(1,390 ) (1,536 ) (2,764 ) (3,208 )
Payoffs (2)
(4,528 ) (6,800 ) (10,400 ) (13,677 )
Changes in valuation inputs or assumptions (3)
(8,292 ) (21,365 ) (7,518 ) (27,137 )
Fair value, end of period:
$ 104,997 $ 132,405 $ 104,997 $ 132,405
(1) Represents decrease in value due to passage of time, including the impact from both regularly scheduled loan principal payments and partial loan paydowns.
(2) Represents decrease in value associated with loans that paid off during the period.
(3) Represents change in value resulting primarily from market-driven changes in interest rates and prepayment spreads.
Amortization Method:
Three Months Ended Six Months Ended
June 30, June 30,
(dollar amounts in thousands) 2011 2010 2011 2010
Carrying value, beginning of year
$ 83,352 $ 45,446 $ 70,516 $ 38,165
New servicing assets created
4,525 7,944 19,978 16,741
Impairment charge
(4,856 ) (4,856 )
Amortization and other
(3,135 ) (1,801 ) (5,752 ) (3,317 )
Carrying value, end of period
$ 84,742 $ 46,733 $ 84,742 $ 46,733
Fair value, end of period
$ 95,829 $ 47,565 $ 95,829 $ 47,565
MSRs do not trade in an active, open market with readily observable prices. While sales of MSRs occur, the precise terms and conditions are typically not readily available. Therefore, the fair value of MSRs is estimated using a discounted future cash flow model. The model considers portfolio characteristics, contractually specified servicing fees and assumptions related to prepayments, delinquency rates, late charges, other ancillary revenues, costs to service, and other economic factors. Changes in the assumptions used may have a significant impact on the valuation of MSRs.
A summary of key assumptions and the sensitivity of the MSR value at June 30, 2011, to changes in these assumptions follows:
Decline in fair value due to
10% 20%
adverse adverse
(dollar amounts in thousands) Actual change change
Constant prepayment rate
11.93 % $ (5,954 ) $ (11,214 )
Spread over forward interest rate swap rates
494 bps (2,279 ) (4,557 )
MSR values are very sensitive to movements in interest rates as expected future net servicing income depends on the projected outstanding principal balances of the underlying loans, which can be greatly impacted by the level of prepayments. Huntington hedges the fair value portfolio of MSRs against changes in value attributable to changes in interest rates through a combination of derivative instruments and trading securities.
Total servicing fees included in mortgage banking income amounted to $12.4 million and $12.2 million for the three-month periods ended June 30, 2011 and 2010, respectively. For the six-month periods ending June 30, 2011 and 2010, servicing fees totaled $25.0 million and $24.6 million, respectively.
Automobile Loans and Leases
The Company is currently considering an automobile loan securitization transaction during the second half of 2011. The potential securitization is expected to be between $1.0 billion and $1.3 billion. At June 30, 2011, and through the date of this filing, the Company has not yet identified the specific loans that would be securitized or finalized terms of the securitization, including whether the securitization would be recorded as a sale or as secured financing and, therefore, has not reclassified the loans to loans held for sale.

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7. GOODWILL AND OTHER INTANGIBLE ASSETS
A rollforward of goodwill by business segment for the first six-month period of 2011 was as follows:
Retail & Regional &
Business Commercial Treasury/ Huntington
(dollar amounts in thousands) Banking Banking AFCRE WGH Other Consolidated
Balance, beginning of period
$ 286,824 $ 16,169 $ $ 98,951 $ 42,324 $ 444,268
Adjustments
Balance, end of period
$ 286,824 $ 16,169 $ $ 98,951 $ 42,324 $ 444,268
Goodwill is not amortized but is evaluated for impairment on an annual basis at October 1 of each year or whenever events or changes in circumstances indicate the carrying value may not be recoverable. No events or changes in circumstances since the October 1, 2010, annual impairment test were noted that would indicate it was more likely than not a goodwill impairment exists.
At June 30, 2011, December 31, 2010, and June 30, 2010, Huntington’s other intangible assets consisted of the following:
Gross Net
Carrying Accumulated Carrying
(dollar amounts in thousands) Amount Amortization Value
June 30, 2011
Core deposit intangible
$ 376,846 $ (241,368 ) $ 135,478
Customer relationship
104,574 (38,912 ) 65,662
Other
25,164 (24,440 ) 724
Total other intangible assets
$ 506,584 $ (304,720 ) $ 201,864
December 31, 2010
Core deposit intangible
$ 376,846 $ (219,311 ) $ 157,535
Customer relationship
104,574 (34,751 ) 69,823
Other
25,164 (23,902 ) 1,262
Total other intangible assets
$ 506,584 $ (277,964 ) $ 228,620
June 30, 2010
Core deposit intangible
$ 376,846 $ (193,989 ) $ 182,857
Customer relationship
104,574 (30,386 ) 74,188
Other
25,164 (23,398 ) 1,766
Total other intangible assets
$ 506,584 $ (247,773 ) $ 258,811
The estimated amortization expense of other intangible assets for the remainder of 2011 and the next five years is as follows:
Amortization
(dollar amounts in thousands) Expense
2011
$ 26,570
2012
46,075
2013
40,511
2014
35,858
2015
19,758
2016
6,606

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8. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income for the three-month and six-month periods ended June 30, 2011 and 2010, were as follows:
Three Months Ended
June 30, 2011
Tax (Expense)
(dollar amounts in thousands) Pretax Benefit After-tax
Noncredit-related impairment recoveries (losses) on debt securities not expected to be sold
$ 1,400 $ (490 ) $ 910
Unrealized holding gains (losses) on available-for-sale debt securities arising during the period
95,468 (33,242 ) 62,226
Less: Reclassification adjustment for net losses (gains) included in net income
(1,507 ) 527 (980 )
Net change in unrealized holding gains (losses) on available-for-sale debt securities
95,361 (33,205 ) 62,156
Net change in unrealized holding gains (losses) on available-for-sale equity securities
(18 ) 6 (12 )
Unrealized gains (losses) on derivatives used in cash flow hedging relationships arising during the period
25,590 (8,956 ) 16,634
Change in pension and post-retirement benefit plan assets and liabilities
4,000 (1,400 ) 2,600
Total other comprehensive income
$ 124,933 $ (43,555 ) $ 81,378
Three Months Ended
June 30, 2010
Tax (Expense)
(dollar amounts in thousands) Pretax Benefit After-tax
Noncredit-related impairment recoveries (losses) on debt securities not expected to be sold
$ 8,017 (2,806 ) 5,211
Unrealized holding gains (losses) on available-for-sale debt securities arising during the period
70,354 (24,897 ) 45,457
Less: Reclassification adjustment for net losses (gains) included in net income
(156 ) 55 (101 )
Net change in unrealized holding gains (losses) on available-for-sale debt securities
78,215 (27,648 ) 50,567
Net change in unrealized holding gains (losses) on available-for-sale equity securities
(206 ) 72 (134 )
Unrealized gains (losses) on derivatives used in cash flow hedging relationships arising during the period
(3,883 ) 1,359 (2,524 )
Change in pension and post-retirement benefit plan assets and liabilities
1,794 (628 ) 1,166
Total other comprehensive income
$ 75,920 $ (26,845 ) $ 49,075
Six Months Ended
June 30, 2011
Tax (expense)
(dollar amounts in thousands) Pretax Benefit After-tax
Non credit related impairment recoveries (losses) on debt securities not expected to be sold
$ 15,441 (5,404 ) 10,037
Unrealized holding gains (losses) on available-for-sale debt securities arising during the period
89,743 (31,266 ) 58,477
Less: Reclassification adjustment for net losses (gains) included in net income
(1,547 ) 541 (1,006 )
Net change in unrealized holding gains (losses) on available-for-sale debt securities
103,637 (36,129 ) 67,508
Net change in unrealized holding gains (losses) on available-for-sale equity securities
52 (19 ) 33
Unrealized gains (losses) on derivatives used in cash flow hedging relationships arising during the period
3,404 (1,192 ) 2,212
Change in pension and post-retirement benefit plan assets and liabilities
8,000 (2,800 ) 5,200
Total other comprehensive income
$ 115,093 $ (40,140 ) $ 74,953

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Six Months Ended
June 30, 2010
Tax (expense)
(dollar amounts in thousands) Pretax Benefit After-tax
Cumulative effect of change in accounting principle for consolidation of variable interest entities
$ (6,365 ) $ 2,116 $ (4,249 )
Non credit related impairment recoveries (losses) on debt securities not expected to be sold
6,078 (2,127 ) 3,951
Unrealized holding gains (losses) on available-for-sale debt securities arising during the period
108,281 (38,301 ) 69,980
Less: Reclassification adjustment for net losses (gains) included in net income
(125 ) 44 (81 )
Net change in unrealized holding gains (losses) on available-for-sale debt securities
114,234 (40,384 ) 73,850
Net change in unrealized holding gains (losses) on available-for-sale equity securities
(185 ) 65 (120 )
Unrealized gains (losses) on derivatives used in cash flow hedging relationships arising during the period
1,190 (416 ) 774
Change in pension and post-retirement benefit plan assets and liabilities
3,588 (1,256 ) 2,332
Total other comprehensive income
$ 112,462 $ (39,875 ) $ 72,587
Activity in accumulated other comprehensive income, net of tax, for the six-month periods ended June 30, 2011 and 2010, were as follows:
Unrealized gains
Unrealized gains (losses) for
Unrealized Unrealized gains and (losses) on pension and other
gains and (losses) and (losses) on cash flow hedging post-retirement
(dollar amounts in thousands) on debt securities (1) equity securities derivatives obligations Total
Balance, December 31, 2009
$ (103,060 ) $ (322 ) $ 58,865 $ (112,468 ) $ (156,985 )
Cumulative effect of change in accounting principle for consolidation of variable interest entities
(4,249 ) (4,249 )
Period change
73,850 (120 ) 774 2,332 76,836
Balance, June 30, 2010
$ (33,459 ) $ (442 ) $ 59,639 $ (110,136 ) $ (84,398 )
Balance, December 31, 2010
$ (101,290 ) (427 ) 35,710 (131,489 ) $ (197,496 )
Period change
67,508 33 2,212 5,200 74,953
Balance, June 30, 2011
$ (33,782 ) $ (394 ) $ 37,922 $ (126,289 ) $ (122,543 )
(1) Amount at June 30, 2011 includes $0.5 million of net unrealized gains on securities transferred from the available-for-sale securities portfolio to the held-to-maturity securities portfolio. The net unrealized gains will be recognized in earnings over the remaining life of the security using the effective interest method.
9. SHAREHOLDERS’ EQUITY
Repurchase of Outstanding TARP Capital and Warrant to Repurchase Common Stock
In 2008, Huntington received $1.4 billion of equity capital by issuing to the Treasury 1.4 million shares of TARP Capital and a ten-year warrant to purchase up to 23.6 million shares of Huntington’s common stock, par value $0.01 per share, at an exercise price of $8.90 per share. As approved by the Federal Reserve Board, the Treasury, and our other banking regulators, on December 22, 2010, Huntington repurchased all 1.4 million shares of our TARP Capital held by the Treasury totaling $1.4 billion. Huntington used the net proceeds from the issuance of common stock and subordinated debt, as well as other funds, to redeem the TARP Capital. On January 19, 2011, Huntington repurchased the warrant originally issued to the Treasury for a purchase price of $49.1 million.
Share Repurchase Program
Huntington did not repurchase any shares for the three-month or six-month periods ended June 30, 2011 and 2010.
Dividends on common stock
On July 21, 2011, Huntington announced that the board of directors had declared a quarterly common stock cash dividend of $0.04 per common share, up from the prior quarterly dividend of $0.01. The dividend is payable on October 3, 2011, to shareholders of record on September 19, 2011.

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10. EARNINGS PER SHARE
Basic earnings per share is the amount of earnings (adjusted for dividends declared on preferred stock) available to each share of common stock outstanding during the reporting period. Diluted earnings per share is the amount of earnings available to each share of common stock outstanding during the reporting period adjusted to include the effect of potentially dilutive common shares. Potentially dilutive common shares include incremental shares issued for stock options, restricted stock units and awards, distributions from deferred compensation plans, and the conversion of Huntington’s convertible preferred stock. Potentially dilutive common shares are excluded from the computation of diluted earnings per share in periods in which the effect would be antidilutive. For diluted earnings per share, net income available to common shares can be affected by the conversion of Huntington’s convertible preferred stock. Where the effect of this conversion would be dilutive, net income available to common shareholders is adjusted by the associated preferred dividends and deemed dividend. The calculation of basic and diluted earnings per share for each of the three-month and six-month periods ended June 30, 2011 and 2010, was as follows:
Three Months Ended Six Months Ended
June 30, June 30,
(dollar amounts in thousands, except per share amounts) 2011 2010 2011 2010
Basic earnings per common share:
Net income
$ 145,918 $ 48,764 $ 272,364 $ 88,501
Preferred stock dividends, deemed dividend and accretion of discount
(7,704 ) (29,426 ) (15,407 ) (58,783 )
Net income available to common shareholders
$ 138,214 $ 19,338 $ 256,957 $ 29,718
Average common shares issued and outstanding
863,358 716,580 863,358 716,450
Basic earnings per common share
$ 0.16 $ 0.03 $ 0.30 $ 0.04
Diluted earnings per common share
Net income available to common shareholders
$ 138,214 $ 19,338 $ 256,957 $ 29,718
Effect of assumed preferred stock conversion
Net income applicable to diluted earnings per share
$ 138,214 $ 19,338 $ 256,957 $ 29,718
Average common shares issued and outstanding
863,358 716,580 863,358 716,450
Dilutive potential common shares:
Stock options and restricted stock units and awards
3,171 1,957 3,084 1,685
Shares held in deferred compensation plans
940 850 911 855
Conversion of preferred stock
Dilutive potential common shares:
4,111 2,807 3,995 2,540
Total diluted average common shares issued and outstanding
867,469 719,387 867,353 718,990
Diluted earnings per common share
$ 0.16 $ 0.03 $ 0.30 $ 0.04
Approximately 15.3 million and 19.2 million options to purchase shares of common stock outstanding at the end of June 30, 2011 and 2010, 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 $19.69 per share and $19.22 per share at the end of each respective period.
11. SHARE-BASED COMPENSATION
Huntington sponsors nonqualified and incentive share-based compensation plans. These plans provide for the granting of stock options and other awards to officers, directors, and other employees. Compensation costs are included in personnel costs on the Condensed Consolidated Statements of Income. Stock options are granted at the closing market price on the date of the grant. Options granted typically vest ratably over three years or when other conditions are met. Options granted prior to May 2004 have a term of ten years. All options granted after May 2004 have a term of seven years.
Huntington uses the Black-Scholes option pricing model to value share-based compensation expense. Forfeitures are estimated at the date of grant based on historical rates and reduce the compensation expense recognized. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant. Expected volatility is based on the estimated volatility of Huntington’s stock over the expected term of the option. The expected dividend yield is based on the dividend rate and stock price at the date of the grant. The following table illustrates the weighted-average assumptions used in the option-pricing model for options granted in the three-month and six-month periods ended June 30, 2011 and 2010.

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Three Months Ended Six Months Ended
June 30, June 30,
2011 2010 2011 2010
Assumptions
Risk-free interest rate
2.20 % 2.83 % 2.35 % 2.90 %
Expected dividend yield
0.61 0.69 0.59 0.81
Expected volatility of Huntington’s common stock
30.0 60.0 31.3 60.0
Expected option term (years)
6.0 6.0 6.0 6.0
Weighted-average grant date fair value per share
$ 2.05 $ 3.19 $ 2.20 $ 2.76
The following table illustrates total share-based compensation expense and related tax benefit for the three-month and six-month periods ended June 30, 2011 and 2010:
Three Months Ended Six Months Ended
June 30, June 30,
(dollar amounts in thousands) 2011 2010 2011 2010
Share-based compensation expense
$ 3,898 $ 3,676 $ 7,523 $ 6,609
Tax (expense) benefit
1,364 1,287 2,633 2,313
Huntington’s stock option activity and related information for the six-month period ended June 30, 2011, was as follows:
Weighted-
Weighted- Average
Average Remaining Aggregate
Exercise Contractual Intrinsic
(amounts in thousands, except years and per share amounts) Options Price Life (Years) Value
Outstanding at January 1, 2011
21,862 $ 15.96
Granted
128 6.79
Exercised
(47 ) 4.21
Forfeited/expired
(1,362 ) 15.18
Outstanding at June 30, 2011
20,581 $ 15.98 2.6 $ 7,576
Vested and expected to vest at June 30, 2011 (1)
20,322 $ 16.11 2.6 $ 7,303
Exercisable at June 30, 2011
15,900 $ 19.07 1.8 $ 2,329
(1) The number of options expected to vest includes an estimate of expected forfeitures.
The aggregate intrinsic value represents the amount by which the fair value of underlying stock exceeds the “in-the-money” option exercise price. For the six-month period ended June 30, 2011, cash received for the exercises of stock options was $0.2 million and the tax benefit realized from stock option exercises was less than $0.1 million. There were no exercises of stock options for the six-month period ended June 30, 2010.
Huntington also grants restricted stock units and awards. Restricted stock units and awards are issued at no cost to the recipient, and can be settled only in shares at the end of the vesting period. Restricted stock awards provide the holder with full voting rights and cash dividends during the vesting period. Restricted stock units do not provide the holder with voting rights or cash dividends during the vesting period, but do accrue a dividend equivalent that is paid upon vesting, and are subject to certain service restrictions. The fair value of the restricted stock units and awards is the closing market price of the Huntington’s common stock on the date of award.

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The following table summarizes the status of Huntington’s restricted stock units and restricted stock awards as of June 30, 2011, and activity for the six-month period ended June 30, 2011:
Weighted- Weighted-
Average Average
Restricted Grant Date Restricted Grant Date
Stock Fair Value Stock Fair Value
(amounts in thousands, except per share amounts) Units Per Share Awards (1) Per Share
Nonvested at January 1, 2011
5,511 $ 5.78 466 $ 5.24
Granted
697 7.45
Vested
(42 ) 8.76 (376 ) 5.72
Forfeited
(156 ) 6.04
Nonvested at June 30, 2011
6,010 $ 5.94 90 $ 3.24
(1) Includes restricted stock awards granted under the Second Amended and Restated 2007 Stock and Long-Term Incentive Plan to certain executives as a portion of their annual base salary. These awards are 100% vested as of the grant date and are not subject to any requirement of future service. However, the shares are subject to restrictions regarding sale, transfer, pledge, or disposition until certain conditions are met. All awards vested in the 2011 second quarter.
The weighted-average grant date fair value of nonvested shares granted for the six-month periods ended June 30, 2011 and 2010, were $7.45 and $5.64, respectively. The total fair value of awards vested was $2.7 million and $0.3 million during the six-month periods ended June 30, 2011, and 2010, respectively. As of June 30, 2011, the total unrecognized compensation cost related to nonvested awards was $18.9 million with a weighted-average expense recognition period of 1.5 years.
Of the remaining 43.4 million shares of common stock authorized for issuance at June 30, 2011, 27.1 million were outstanding and 16.3 million were available for future grants. Huntington issues shares to fulfill stock option exercises and restricted stock units from available authorized shares. At June 30, 2011, Management believes there are adequate authorized shares available to satisfy anticipated stock option exercises in 2011.
12. BENEFIT PLANS
Huntington sponsors the Plan, a non-contributory defined benefit pension plan covering substantially all employees hired or rehired prior to January 1, 2010. 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 the amount deductible under the Internal Revenue Code. There is no required minimum contribution for 2011, although Huntington contributed $50.0 million to the Plan in March 2011.
In addition, Huntington has an unfunded defined benefit post-retirement plan that provides certain healthcare and life insurance benefits to retired employees who have attained the age of 55 and have at least 10 years of vesting service under this plan. For any employee retiring on or after January 1, 1993, post-retirement healthcare benefits are based upon the employee’s number of months of service and are limited to the actual cost of coverage. Life insurance benefits are a percentage of the employee’s base salary at the time of retirement, with a maximum of $50,000 of coverage. The employer paid portion of the post-retirement health and life insurance plan was eliminated for employees retiring on and after March 1, 2010. Eligible employees retiring on and after March 1, 2010, who elect retiree medical coverage, will pay the full cost of this coverage. Huntington will not provide any employer paid life insurance to employees retiring on and after March 1, 2010. Eligible employees will be able to convert or port their existing life insurance at their own expense under the same terms that are available to all terminated employees.
The following table shows the components of net periodic benefit expense of the Plan and the Post-Retirement Benefit Plan:
Pension Benefits Post Retirement Benefits
Three Months Ended Three Months Ended
June 30, June 30,
(dollar amounts in thousands) 2011 2010 2011 2010
Service cost
$ 5,413 $ 5,051 $ $
Interest cost
7,518 7,217 405 433
Expected return on plan assets
(10,823 ) (10,528 )
Amortization of transition asset
(1 ) 2
Amortization of prior service cost
(1,442 ) (1,442 ) (338 ) (338 )
Amortization of gains
5,874 3,747 (106 ) (176 )
Settlements
1,750 1,725
Benefit expense
$ 8,289 $ 5,772 $ (39 ) $ (81 )

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Pension Benefits Post Retirement Benefits
Six Months Ended Six Months Ended
June 30, June 30,
(dollar amounts in thousands) 2011 2010 2011 2010
Service cost
$ 10,826 $ 10,102 $ $
Interest cost
15,036 14,434 810 866
Expected return on plan assets
(21,646 ) (21,056 )
Amortization of transition asset
(2 ) 4
Amortization of prior service cost
(2,884 ) (2,884 ) (676 ) (676 )
Amortization of gains
11,748 7,494 (212 ) (351 )
Settlements
3,500 3,450
Benefit expense
$ 16,578 $ 11,544 $ (78 ) $ (161 )
The Bank, as trustee, held all Plan assets at June 30, 2011, and December 31, 2010. The Plan assets consisted of investments in a variety of Huntington mutual funds and Huntington common stock as follows:
Fair Value
(dollar amounts in thousands) June 30, 2011 December 31, 2010 June 30, 2010
Cash
$ 26 % $ % $ %
Cash equivalents:
Huntington funds — money market
1,255 25 2,736 1
Other
26
Fixed income:
Huntington funds — fixed income funds
173,781 33 133,330 28 132,883 31
Corporate obligations
1,084
U.S. Government Agencies
1,013
Equities:
Huntington funds
328,476 62 318,155 66 266,183 63
Other — equity mutual funds
4,267 1
Huntington common stock
25,754 4 26,969 6 21,756 5
Fair value of plan assets
$ 533,559 100 % $ 478,479 100 % $ 425,681 100 %
Investments of the Plan are accounted for at cost on the trade date and are reported at fair value. All of the Plan’s investments at June 30, 2011, are classified as Level 1 within the fair value hierarchy. In general, investments of the Plan are exposed to various risks, such as interest rate risk, credit risk, and overall market volatility. Due to the level of risk associated with certain investments, it is reasonably possible changes in the values of investments will occur in the near term and such changes could materially affect the amounts reported in the Plan assets.
The investment objective of the Plan is to maximize the return on Plan assets over a long time period, while meeting the Plan obligations. At June 30, 2011, Plan assets were invested 67% in equity investments and 33% in bonds, with an average duration of 3.5 years on bond investments. Although it may fluctuate with market conditions, Management has targeted a long-term allocation of Plan assets of 69% in equity investments and 31% in bond investments.
Huntington also sponsors other nonqualified retirement plans, the most significant being the SERP and the SRIP. The SERP provides certain former officers and directors, and the SRIP provides certain current officers and directors of Huntington and its subsidiaries with defined pension benefits in excess of limits imposed by federal tax law.
Huntington has a defined contribution plan that is available to eligible employees. In the 2009 first quarter, the Plan was amended to eliminate employer matching contributions effective on or after March 15, 2009. Prior to March 15, 2009, Huntington matched participant contributions, up to the first 3% of base pay contributed to the Plan. Half of the employee contribution was matched on the 4th and 5th percent of base pay contributed to the Plan. Effective May 1, 2010, Huntington reinstated the employer matching contribution to the defined contribution Plan.

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The following table shows the costs of providing the SERP, SRIP, and defined contribution plans:
Three Months Ended Six Months Ended
June 30, June 30,
(dollar amounts in millions) 2011 2010 2011 2010
SERP & SRIP
$ 0.7 $ 0.9 $ 1.4 $ 1.6
Defined Contribution Plan
3.8 2.1 7.5 2.1
Benefit Cost
$ 4.5 $ 3.0 $ 8.9 $ 3.7
13. FAIR VALUES OF ASSETS AND LIABILITIES
Huntington follows the fair value accounting guidance under ASC 820 and ASC 825.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A three-level valuation hierarchy was established for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:
Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Transfers in and out of Level 1, 2, or 3 are recorded at fair value at the beginning of the reporting period.
Following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy.
Financial Instrument Hierarchy Valuation methodology
Mortgage loans held for sale
Level 2 Huntington elected to apply the fair value option for mortgage loans originated with the intent to sell which are included in loans held for sale. Mortgage loans held for sale are estimated using security prices for similar product types. At June 30, 2011, mortgage loans held for sale had an aggregate fair value of $222.9 million and an aggregate outstanding principal balance of $214.7 million. Interest income on these loans is recorded in interest and fee income — loans and leases. Included in mortgage banking income were net gains resulting from origination and sale of these loans, including net realized gains of $11.7 million and $19.4 million for the three-month periods ended June 30, 2011, and 2010, respectively. Of such gains, the change in fair value while held as loans were $1.8 million and $8.8 million for the three-month periods ended June 30, 2011 and 2010, respectively. Net gains resulting from origination and sale of these loans, including net realized gains of $44.5 million and $34.5 million for the six-month periods ended June 30, 2011, and 2010, respectively. Of such gains, the change in fair value while held as loans were $7.9 million and $11.3 million for the six-month periods ended June 30, 2011 and 2010, respectively.
Available-for-sale securities &
trading account securities
Level 1 Consist primarily of U.S. Treasury and money market mutual funds, which have quoted prices.
Level 2 Consist of U.S. Government and agency mortgage-backed and other agency securities, municipal securities, and other securities for which an active market is not available. Third party pricing services provide a fair value estimate based upon trades of similar financial instruments.
Level 3 Consist of certain asset-backed securities, pooled-trust-preferred securities, private-label CMOs, and municipal securities for which fair value is estimated. Assumptions used to determine the fair value of these securities have greater subjectivity due to the lack of observable market transactions. Generally, there are only limited trades of similar instruments and a discounted cash flow approach is used to determine fair value.

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Financial Instrument Hierarchy Valuation methodology
Automobile loans
Level 3 Consists of automobile loan receivables measured at fair value. The key assumptions used to determine the fair value of the automobile loan receivables included projections of expected losses and prepayment of the underlying loans in the portfolio and a market assumption of interest rate spreads. The net gains and losses, before tax, from fair value changes reflected in interest and fee income — other and noninterest income for the three-month periods ended June 30, 2011 and 2010 was $1.1 million and $(3.3) million, respectively, which is net of a $2.1 million and $0.1 million, respectively net gain associated with instrument specific credit risk. The net gains and losses, before tax, from fair value changes for the six-month periods ended June 30, 2011 and 2010 was $(1.4) million and $4.3 million, respectively, which is net of a $2.2 million and $0.6 million, respectively net gain associated with instrument specific credit risk. Instrument specific credit risk was determined based on estimated credit losses inherent in the beginning period fair value calculation as compared to actual credit losses incurred during the period plus estimated credit losses inherent in the end of period fair value calculation.
MSRs
Level 3 MSRs do not trade in an active, open market with readily observable prices. Although sales of MSRs do occur, the precise terms and conditions typically are not readily available. Fair value is determined on an income approach model based upon month-end interest rate curve and prepayment assumptions.
Derivatives
Level 1 Consist of exchange traded options and forward commitments to deliver mortgage-backed securities which are valued using quoted prices.
Level 2 Consist of basic asset and liability conversion swaps and options, and interest rate caps. These derivative positions are valued using a discounted cash flow method that incorporates current market interest rates.
Level 3 Consist primarily of interest rate lock agreements related to mortgage loan commitments. The determination of fair value includes assumptions related to the likelihood that a commitment will ultimately result in a closed loan, which is a significant unobservable assumption.
Securitization trust notes
payable
Level 2 Consists of certain securitization trust notes payable related to the automobile loans measured at fair value. The notes payable are valued based on interest rates for similar financial instruments. The net gains and losses, before tax, from fair value changes reflected in interest expense - subordinated notes and other long-term debt and noninterest income for the three-month periods ended June 30, 2011 and 2010 was $(1.4) million and $(5.9) million, respectively. The net gains and losses, before tax, from fair value changes for the six-month periods ended June 30, 2011 and 2010 was $(3.6) million and $(2.2) million, respectively.

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Assets and Liabilities measured at fair value on a recurring basis
Assets and liabilities measured at fair value on a recurring basis at June 30, 2011, December 31, 2010, and June 30, 2010 are summarized below:
Fair Value Measurements at Reporting Date Using Netting Balance at
(dollar amounts in thousands) Level 1 Level 2 Level 3 Adjustments (1) June 30, 2011
Assets
Mortgage loans held for sale
$ $ 222,880 $ $ $ 222,880
Trading account securities:
U.S. Treasury securities
Federal agencies: Mortgage-backed
7,917 7,917
Federal agencies: Other agencies
Municipal securities
35,719 35,719
Other securities
53,039 2,096 55,135
53,039 45,732 98,771
Available-for-sale and other securities:
U.S. Treasury securities
52,301 52,301
Federal agencies: Mortgage-backed (2)
3,922,705 3,922,705
TLGP securities
156,303 156,303
Federal agencies: Other agencies (2)
1,222,274 1,222,274
Municipal securities
308,896 123,800 432,696
Private-label CMO
88,770 88,770
Asset-backed securities
683,788 165,742 849,530
Covered bonds
600,055 600,055
Corporate debt
407,969 407,969
Other securities
53,520 9,932 63,452
105,821 7,311,922 378,312 7,796,055
Automobile loans
400,935 400,935
MSRs
104,997 104,997
Derivative assets
4,373 377,969 2,102 (77,904 ) 306,540
Liabilities
Securitization trust notes payable
231,017 231,017
Derivative liabilities
6,582 207,567 1,684 215,833
Other liabilities
2,064 2,064
Fair Value Measurements at Reporting Date Using Netting Balance at
(dollar amounts in thousands) Level 1 Level 2 Level 3 Adjustments (1) December 31, 2010
Assets
Mortgage loans held for sale
$ $ 754,117 $ $ $ 754,117
Trading account securities:
U.S. Treasury securities
47,430 47,430
Federal agencies: Mortgage-backed
10,860 10,860
Federal agencies: Other agencies
24,853 24,853
Municipal securities
30,205 30,205
Other securities
69,017 3,039 72,056
116,447 68,957 185,404
Available-for-sale and other securities:
U.S. Treasury securities
51,781 51,781
Federal agencies: Mortgage-backed
4,754,404 4,754,404
TLGP securities
183,467 183,467
Federal agencies: Other agencies (3)
2,058,376 2,058,376
Municipal securities
305,909 149,806 455,715
Private-label CMO
121,925 121,925
Asset-backed securities
1,044,438 162,684 1,207,122
Covered bonds
367,209 367,209
Corporate debt
323,389 323,389
Other securities
53,286 9,848 63,134
105,067 9,047,040 434,415 9,586,522
Automobile loans
522,717 522,717
MSRs
125,679 125,679
Derivative assets
23,514 390,361 2,817 (70,559 ) 346,133
Liabilities
Securitization trust notes payable
356,089 356,089
Derivative liabilities
3,990 233,399 1,851 239,240
Other liabilities

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Fair Value Measurements at Reporting Date Using Netting Balance at
(dollar amounts in thousands) Level 1 Level 2 Level 3 Adjustments (1) June 30, 2010
Assets
Mortgage loans held for sale
$ $ 404,817 $ $ $ 404,817
Trading account securities:
U.S. Treasury securities
Federal agencies: Mortgage-backed
15,026 15,026
Federal agencies: Other agencies
Municipal securities
23,170 23,170
Other securities
64,285 4,377 68,662
64,285 42,573 106,858
Available-for-sale and other securities:
U.S. Treasury securities
50,328 50,328
Federal agencies: Mortgage-backed
4,505,951 4,505,951
TLGP securities
184,757 184,757
Federal agencies: Other agencies
1,874,835 28,613 1,903,448
Municipal securities
113,788 262,128 375,916
Private-label CMO
394,611 394,611
Asset-backed securities
801,685 218,940 1,020,625
Covered bonds
Corporate debt
Other securities
55,061 8,106 63,167
2,164,981 5,458,143 875,679 8,498,803
Automobile loans
470,825 186,388 657,213
MSRs
132,405 132,405
Derivative assets
1,663 454,249 8,469 (84,912 ) 379,469
Liabilities
Securitization trust notes payable
494,512 494,512
Derivative liabilities
13,682 265,499 1,977 281,158
Other liabilities
(1) Amounts represent the impact of legally enforceable master netting agreements that allow the Company to settle positive and negative positions and cash collateral held or placed with the same counterparties.
(2) During the 2011 second quarter, Huntington transferred $469.1 million of federal agencies, mortgage-backed securities from the available-for-sale securities portfolio to the held-to-maturity securities portfolio. These securities are valued at amortized cost and no longer classified within the fair value hierarchy. All amounts were previously classified as level 2 in the fair value hierarchy.
(3) Amounts were transferred from Level 1 to Level 2 in the 2010 fourth quarter due to lack of sufficient market activity for these securities.
The tables below present a rollforward of the balance sheet amounts for the three-month and six-month periods ended June 30, 2011 and 2010, for financial instruments measured on a recurring basis and classified as Level 3. The classification of an item as Level 3 is based on the significance of the unobservable inputs to the overall fair value measurement. However, Level 3 measurements may also include observable components of value that can be validated externally. Accordingly, the gains and losses in the table below include changes in fair value due in part to observable factors that are part of the valuation methodology.

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Level 3 Fair Value Measurements
Three Months Ended June 30, 2011
Available-for-sale securities
Asset-
Derivative Municipal Private- backed Automobile Equity
(dollar amounts in thousands) MSRs instruments securities label CMO securities loans investments
Balance, beginning of period
$ 119,207 $ (832 ) $ 135,276 $ 115,546 $ 165,599 $ 458,851 $
Total gains / losses:
Included in earnings
(14,210 ) 1,411 59 9 1,127
Included in OCI
(110 ) 3,293
Purchases
1,760
Sales
(20,958 )
Repayments
(59,043 )
Issuances
Settlements
(161 ) (13,236 ) (5,767 ) (3,159 )
Transfers in / out of Level 3
Balance, end of period
$ 104,997 $ 418 $ 123,800 $ 88,770 $ 165,742 $ 400,935 $
The amount of total gains or losses for the period included in earnings (or OCI) attributable to the change in unrealized gains or losses relating to assets still held at reporting date
$ (14,210 ) $ 1,250 $ $ (1,164 ) $ 3,293 $ 1,127 $
Level 3 Fair Value Measurements
Three Months Ended June 30, 2010
Available-for-sale securities
Asset-
Derivative Municipal Private- backed Automobile Equity
(dollar amounts in thousands) MSRs instruments securities label CMO securities loans investments
Balance, beginning of period
$ 162,106 $ (833 ) $ 318,597 $ 462,731 $ 219,079 $ 183,845 $
Total gains / losses:
Included in earnings
(29,701 ) 5,547 (1,742 ) (445 ) 4,845
Included in OCI
14,277 4,387
Purchases
Sales
(57,394 ) (793 )
Repayments
(2,302 )
Issuances
Settlements
1,778 (56,469 ) (23,261 ) (3,288 )
Transfers in / out of Level 3
Balance, end of period
$ 132,405 $ 6,492 $ 262,128 $ 394,611 $ 218,940 $ 186,388 $
The amount of total gains or losses for the period included in earnings (or OCI) attributable to the change in unrealized gains or losses relating to assets still held at reporting date
$ (29,701 ) $ 5,330 $ $ 12,535 $ 3,942 $ 4,845 $

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Level 3 Fair Value Measurements
Six Months Ended June 30, 2011
Available-for-sale securities
Asset-
Derivative Municipal Private- backed Automobile Equity
(dollar amounts in thousands) MSRs instruments securities label CMO securities loans investments
Balance, beginning of period
$ 125,679 $ 966 $ 149,806 $ 121,925 $ 162,684 $ 522,717 $
Total gains / losses:
Included in earnings
(20,682 ) (293 ) (383 ) (3,261 ) (1,384 )
Included in OCI
3,617 13,590
Purchases
1,760
Sales
(20,958 )
Repayments
(120,398 )
Issuances
Settlements
(255 ) (27,766 ) (15,431 ) (7,271 )
Transfers in / out of Level 3
Balance, end of period
$ 104,997 $ 418 $ 123,800 $ 88,770 $ 165,742 $ 400,935 $
The amount of total gains or losses for the period included in earnings (or OCI) attributable to the change in unrealized gains or losses relating to assets still held at reporting date
$ (20,682 ) $ (548 ) $ $ 1,774 $ 13,590 $ (1,384 ) $
Level 3 Fair Value Measurements
Six Months Ended June 30, 2010
Available-for-sale securities
Asset-
Derivative Municipal Private- backed Automobile Equity
(dollar amounts in thousands) MSRs instruments securities label CMO securities loans investments
Balance, beginning of period
$ 176,427 $ (4,236 ) $ 11,515 $ 477,319 $ 407,098 $ $ 25,872
Total gains / losses:
Included in earnings
(44,022 ) 8,939 (3,832 ) (4,495 ) 10,104
Included in OCI
24,967 8,574
Purchases
Sales
(57,394 ) (2,631 )
Repayments
(3,735 )
Issuances
Settlements
1,789 (73,024 ) (46,449 ) (5,533 )
Transfers in / out of Level 3 (1)
323,637 (184,073 ) 180,019 (25,872 )
Balance, end of period
$ 132,405 $ 6,492 $ 262,128 $ 394,611 $ 218,940 $ 186,388 $
The amount of total gains or losses for the period included in earnings (or OCI) attributable to the change in unrealized gains or losses relating to assets still held at reporting date
$ (44,022 ) $ 8,733 $ $ 21,135 $ 4,079 $ 10,104 $
(1) Transfers in / out of Level 3 include a transfer in of $323.6 million relating to municipal securities, due to lack of observable market data, a transfer out of $184.1 million of securities, and a transfer in of $180.0 million of loans both related to the consolidation of a 2009 automobile trust.

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The table below summarizes the classification of gains and losses due to changes in fair value, recorded in earnings for Level 3 assets and liabilities for the three-month and six-month periods ended June 30, 2011 and 2010:
Level 3 Fair Value Measurements
Three Months Ended June 30, 2011
Available-for-sale securities
Asset-
Derivative Municipal Private- backed Automobile Equity
(dollar amounts in thousands) MSRs instruments securities label CMO securities loans investments
Classification of gains and losses in earnings:
Mortgage banking income (loss)
$ (14,210 ) $ (774 ) $ $ $ $ $
Securities gains (losses)
(124 ) (59 )
Interest and fee income
183 68 (2,786 )
Noninterest income
2,185 3,913
Total
$ (14,210 ) $ 1,411 $ $ 59 $ 9 $ 1,127 $
Level 3 Fair Value Measurements
Three Months Ended June 30, 2010
Available-for-sale securities
Asset-
Derivative Municipal Private- backed Automobile Equity
(dollar amounts in thousands) MSRs instruments securities label CMO securities loans investments
Classification of gains and losses in earnings:
Mortgage banking income (loss)
$ (29,701 ) $ 5,547 $ $ $ $ $
Securities gains (losses)
(2,264 ) (560 )
Interest and fee income
522 115 (3,180 )
Noninterest income
8,025
Total
$ (29,701 ) $ 5,547 $ $ (1,742 ) $ (445 ) $ 4,845 $
Level 3 Fair Value Measurements
Six Months Ended June 30, 2011
Available-for-sale securities
Asset-
Derivative Municipal Private- backed Automobile Equity
(dollar amounts in thousands) MSRs instruments securities label CMO securities loans investments
Classification of gains and losses in earnings:
Mortgage banking income (loss)
$ (20,682 ) $ 662 $ $ $ $ $
Securities gains (losses)
(912 ) (3,436 )
Interest and fee income
529 175 (5,225 )
Noninterest income
(955 ) 3,841
Total
$ (20,682 ) $ (293 ) $ $ (383 ) $ (3,261 ) $ (1,384 ) $
Level 3 Fair Value Measurements
Six Months Ended June 30, 2010
Available-for-sale securities
Asset-
Derivative Municipal Private- backed Automobile Equity
(dollar amounts in thousands) MSRs instruments securities label CMO securities loans investments
Classification of gains and losses in earnings:
Mortgage banking income (loss)
$ (44,022 ) $ 8,939 $ $ $ $ $
Securities gains (losses)
(4,868 ) (4,417 )
Interest and fee income
1,036 (78 ) (4,400 )
Noninterest income
14,504
Total
$ (44,022 ) $ 8,939 $ $ (3,832 ) $ (4,495 ) $ 10,104 $

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Assets and Liabilities measured at fair value on a nonrecurring basis
Certain assets and liabilities may be required to be measured at fair value on a nonrecurring basis in periods subsequent to their initial recognition. These assets and liabilities are not measured at fair value on an ongoing basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment. At June 30, 2011, assets measured at fair value on a nonrecurring basis were as follows:
Fair Value Measurements Using
Quoted Prices Significant Significant Total
In Active Other Other Gains/(Losses)
Markets for Observable Unobservable For the Six
Fair Value at Identical Assets Inputs Inputs Months Ended
(dollar amounts in millions) June 30, 2011 (Level 1) (Level 2) (Level 3) June 30, 2011
Impaired loans
$ 83.7 $ $ $ 83.7 $ (21.2 )
Accrued income and other assets
38.7 38.7 $ (1.1 )
Periodically, Huntington records nonrecurring adjustments of collateral-dependent loans measured for impairment when establishing the ACL. Such amounts are generally based on the fair value of the underlying collateral supporting the loan. Appraisals are generally obtained to support the fair value of the collateral and incorporate measures such as recent sales prices for comparable properties and cost of construction. In cases where the carrying value exceeds the fair value of the collateral less cost to sell, an impairment charge is recognized. At June 30, 2011, Huntington identified $83.7 million of impaired loans for which the fair value is recorded based upon collateral value. For the six-month period ended June 30, 2011, nonrecurring fair value impairment of $21.2 million were recorded within the provision for credit losses.
Other real estate owned properties are initially valued based on appraisals and third party price opinions, less estimated selling costs. At June 30, 2011, Huntington had $38.7 million of OREO assets. For the six-month period ended June 30, 2011, fair value losses of $1.1 million were recorded within noninterest expense.
Fair values of financial instruments
The carrying amounts and estimated fair values of Huntington’s financial instruments at June 30, 2011, December 31, 2010, and June 30, 2010, are presented in the following table:
June 30, 2011 December 31, 2010 June 30, 2010
Carrying Fair Carrying Fair Carrying Fair
(dollar amounts in thousands) Amount Value Amount Value Amount Value
Financial Assets:
Cash and short-term assets
$ 1,100,580 $ 1,100,580 $ 982,926 $ 982,926 $ 1,415,244 $ 1,415,244
Trading account securities
98,771 98,771 185,404 185,404 106,858 106,858
Loans held for sale
224,860 224,860 793,285 793,285 777,843 777,843
Available-for-sale and other securities
8,099,716 8,099,716 9,895,244 9,895,244 8,803,718 8,803,718
Held-to-maturity securities
670,478 670,145
Net loans and direct financing leases
38,055,326 36,738,480 36,857,499 35,403,910 35,567,535 34,048,771
Derivatives
306,540 306,540 346,133 346,133 379,469 379,469
Financial Liabilities:
Deposits
(41,402,355 ) (41,566,202 ) (41,853,898 ) (41,993,567 ) (39,848,507 ) (40,110,589 )
Short-term borrowings
(2,022,946 ) (1,990,819 ) (2,040,732 ) (1,982,545 ) (1,093,218 ) (1,085,958 )
Federal Home Loan Bank advances
(220,224 ) (220,224 ) (172,519 ) (172,519 ) (599,798 ) (599,798 )
Other long-term debt
(1,635,247 ) (1,644,067 ) (2,144,092 ) (2,157,358 ) (2,569,934 ) (2,562,062 )
Subordinated notes
(1,496,461 ) (1,457,274 ) (1,497,216 ) (1,377,851 ) (1,195,210 ) (1,008,921 )
Derivatives
(215,833 ) (215,833 ) (239,240 ) (239,240 ) (281,158 ) (281,158 )
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, FHLB 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. Not all the financial instruments listed in the table above are subject to the disclosure provisions of ASC Topic 820.

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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 nonmortgage servicing rights, deposit base, and other customer relationship intangibles are not considered financial instruments and are not included above. 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:
Held-to-maturity securities
Fair values are determined by using models that are based on security-specific details, as well as relevant industry and economic factors. The most significant of these inputs are quoted market prices, and interest rate spreads on relevant benchmark securities.
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 and the credit risk associated in the loan and lease portfolio. The valuation of the loan portfolio reflected discounts that Huntington believed are consistent with transactions occurring in the market place.
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, which are inclusive of Huntington’s credit risk. In the absence of quoted market prices, discounted cash flows using market rates for similar debt with the same maturities are used in the determination of fair value.
14. DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments are recorded in the Unaudited Condensed Consolidated Balance Sheet as either an asset or a liability (in accrued income and other assets or accrued expenses and other liabilities, respectively) and measured at fair value.
Derivatives used in Asset and Liability Management Activities
A variety of derivative financial instruments, principally interest rate swaps, caps, floors, and collars are used in asset and liability management activities to protect against the risk of adverse price or interest rate movements. These instruments provide flexibility in adjusting Huntington’s sensitivity to changes in interest rates without exposure to loss of principal and higher funding requirements. Huntington records derivatives at fair value, as further described in Note 13. Collateral agreements are regularly entered into as part of the underlying derivative agreements with Huntington’s counterparties to mitigate counterparty credit risk. At June 30, 2011, December 31, 2010, and June 30, 2010, aggregate credit risk associated with these derivatives, net of collateral that has been pledged by the counterparty, was $38.5 million, $39.9 million, and $42.8 million, respectively. The credit risk associated with interest rate swaps is calculated after considering master netting agreements.
At June 30, 2011, Huntington pledged $201.4 million of investment securities and cash collateral to counterparties, while other counterparties pledged $101.3 million of investment securities and cash collateral to Huntington to satisfy collateral netting agreements. In the event of credit downgrades, Huntington could be required to provide $4.3 million of additional collateral.

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The following table presents the gross notional values of derivatives used in Huntington’s asset and liability management activities at June 30, 2011, identified by the underlying interest rate-sensitive instruments:
Fair Value Cash Flow
(dollar amounts in thousands ) Hedges Hedges Total
Instruments associated with:
Loans
$ $ 5,555,000 $ 5,555,000
Investment securities
50,000 50,000
Deposits
958,912 958,912
Subordinated notes
598,000 598,000
Other long-term debt
35,000 35,000
Total notional value at June 30, 2011
$ 1,591,912 $ 5,605,000 $ 7,196,912
The following table presents additional information about the interest rate swaps used in Huntington’s asset and liability management activities at June 30, 2011:
Average Weighted-Average
Notional Maturity Fair Rate
(dollar amounts in thousands ) Value (years) Value Receive Pay
Asset conversion swaps — receive fixed — generic
$ 5,605,000 1.9 $ 55,374 1.65 % 0.65 %
Liability conversion swaps — receive fixed — generic
1,591,912 4.1 69,285 2.53 0.32
Total swap portfolio
$ 7,196,912 2.4 $ 124,659 1.84 % 0.58 %
These derivative financial instruments were entered into for the purpose of managing the interest rate risk of assets and liabilities. Consequently, net amounts receivable or payable on contracts hedging either interest earning assets or interest bearing liabilities were accrued as an adjustment to either interest income or interest expense. The net amounts resulted in an increase to net interest income of $28.1 million and $48.4 million for the three-month periods ended June 30, 2011, and 2010, respectively. For the six-month periods ended June 30, 2011 and 2010, the net amounts resulted in an increase to net interest income of $62.0 million and $106.4 million, respectively.
In connection with securitization activities, Huntington purchased interest rate caps with a notional value totaling $0.9 billion. These purchased caps were assigned to the securitization trust for the benefit of the security holders. Interest rate caps were also sold totaling $0.9 billion outside the securitization structure. Both the purchased and sold caps are marked to market through income.
In connection with the sale of Huntington’s Class B Visa ® shares, Huntington entered into a swap agreement with the purchaser of the shares. The swap agreement adjusts for dilution in the conversion ratio of Class B shares resulting from the Visa ® litigation. At June 30, 2011, the fair value of the swap liability of $1.4 million is an estimate of the exposure liability based upon Huntington’s assessment of the probability-weighted potential Visa ® litigation losses and certain fixed payments required to be made through the term of the swap.
The following table presents the fair values at June 30, 2011, December 31, 2010, and June 30, 2010 of Huntington’s derivatives that are designated and not designated as hedging instruments. Amounts in the table below are presented gross without the impact of any net collateral arrangements.

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Asset derivatives included in accrued income and other assets:
June 30, December 31, June 30,
(dollar amounts in thousands) 2011 2010 2010
Interest rate contracts designated as hedging instruments
$ 124,659 $ 127,346 $ 119,483
Interest rate contracts not designated as hedging instruments
253,310 263,015 334,766
Foreign exchange contracts not designated as hedging instruments
3,793 2,845 1,554
Total contracts
$ 381,762 $ 393,206 $ 455,803
Liability derivatives included in accrued expenses and other liabilities
June 30, December 31, June 30,
(dollar amounts in thousands) 2011 2010 2010
Interest rate contracts designated as hedging instruments
$ $ $
Interest rate contracts not designated as hedging instruments
208,928 233,805 267,397
Foreign exchange contracts not designated as hedging instruments
4,336 3,107
Total contracts
$ 213,264 $ 236,912 $ 267,397
Fair value hedges are purchased to convert deposits and subordinated and other long-term debt from fixed-rate obligations to floating rate. The changes in fair value of the derivative are, to the extent that the hedging relationship is effective, recorded through earnings and offset against changes in the fair value of the hedged item.
The following table presents the change in fair value for derivatives designated as fair value hedges as well as the offsetting change in fair value on the hedged item for the three-month and six-month periods ended June 30, 2011 and 2010:
Three Months Ended Six Months Ended
June 30, June 30,
(dollar amounts in thousands) 2011 2010 2011 2010
Interest rate contracts
Change in fair value of interest rate swaps hedging deposits (1)
$ 7,185 $ 2,269 $ 909 $ 5,581
Change in fair value of hedged deposits (1)
(7,117 ) (1,856 ) (1,080 ) (5,012 )
Change in fair value of interest rate swaps hedging subordinated notes (2)
14,392 12,718 5,237 16,361
Change in fair value of hedged subordinated notes (2)
(14,392 ) (12,718 ) (5,237 ) (16,361 )
Change in fair value of interest rate swaps hedging other long-term debt (2)
969 2,035 389 2,553
Change in fair value of hedged other long-term debt (2)
(969 ) (2,035 ) (389 ) (2,553 )
(1) Effective portion of the hedging relationship is recognized in Interest expense — deposits in the Unaudited Condensed Consolidated Statements of Income. Any resulting ineffective portion of the hedging relationship is recognized in noninterest income in the Unaudited Condensed Consolidated Statements of Income.
(2) Effective portion of the hedging relationship is recognized in Interest expense - subordinated notes and other long-term debt in the Unaudited Condensed Consolidated Statements of Income. Any resulting ineffective portion of the hedging relationship is recognized in noninterest income in the Unaudited Condensed Consolidated Statements of Income.
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 a fixed-rate debt. This reduces the potentially adverse impact of increases in interest rates on future interest expense. Other LIBOR-based commercial and industrial loans as well as investment securities were effectively converted to fixed-rate by entering into contracts that swap certain variable-rate interest payments for fixed-rate interest payments at designated times.
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 OCI in the Unaudited Condensed Consolidated Statements of 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 noninterest income.

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The following table presents the gains and (losses) recognized in OCI and the location in the Unaudited Condensed Consolidated Statements of Income of gains and (losses) reclassified from OCI into earnings for the six-month periods ended June 30, 2011 and 2010 for derivatives designated as effective cash flow hedges:
Amount of (gain) or loss
Amount of gain or reclassified from
(loss) recognized in accumulated OCI into
Derivatives in cash flow OCI on derivatives Location of gain or (loss) reclassified from earnings (effective
hedging relationships (effective portion) accumulated OCI into earnings (effective portion) portion)
Six Months Ended Six Months Ended
June 30, June 30,
(dollar amounts in thousands) 2011 2010 2011 2010
Interest rate contracts
Loans
$ (3,210 ) $ 47,434 Interest and fee income — loans and leases $ 7,627 $ (73,381 )
Investment Securities
468 Interest and fee income — investment securities
FHLB Advances
Interest expense — subordinated notes and other long-term debt 2,216
Deposits
Interest expense — deposits
Subordinated notes
Interest expense — subordinated notes and other long-term debt (837 )
Other long term debt
Interest expense — subordinated notes and other long-term debt 13
Total
$ (2,742 ) $ 47,434 $ 7,640 $ (72,002 )
During the next twelve months, Huntington expects to reclassify to earnings $35.0 million of after-tax unrealized gains on cash flow hedging derivatives currently in OCI.
The following table details the gains and (losses) recognized in noninterest income on the ineffective portion on interest rate contracts for derivatives designated as cash flow hedges for the three-month and six-month periods ended June 30, 2011 and 2010.
Three Months Ended Six Months Ended
June 30, June 30,
(dollar amounts in thousands) 2011 2010 2011 2010
Derivatives in cash flow hedging relationships
Interest rate contracts
Loans
(350 ) (293 ) 114 574
FHLB Advances
Derivatives used in trading activities
Various derivative financial instruments are offered to enable customers to meet their financing and investing objectives and for their risk management purposes. Derivative financial instruments used in trading activities consisted predominantly of interest rate swaps, but also included interest rate caps, floors, and futures, as well as foreign exchange options. Interest rate options grant the option holder the right to buy or sell an underlying financial instrument for a predetermined price before the contract expires. Interest rate futures are commitments to either purchase or sell a financial instrument at a future date for a specified price or yield and may be settled in cash or through delivery of the underlying financial instrument. Interest rate caps and floors are option-based contracts that entitle the buyer to receive cash payments based on the difference between a designated reference rate and a strike price, applied to a notional amount. Written options, primarily caps, expose Huntington to market risk but not credit risk. Purchased options contain both credit and market risk. The interest rate risk of these customer derivatives is mitigated by entering into similar derivatives having offsetting terms with other counterparties. The credit risk to these customers is evaluated and included in the calculation of fair value.
The net fair values of these derivative financial instruments, for which the gross amounts are included in accrued income and other assets or accrued expenses and other liabilities at June 30, 2011, December 31, 2010, and June 30, 2010, were $46.4 million, $46.3 million, and $43.5 million, respectively. The total notional values of derivative financial instruments used by Huntington on behalf of customers, including offsetting derivatives, were $9.8 billion, $9.8 billion, and $9.5 billion at June 30, 2011, December 31, 2010, and June 30, 2010, respectively. Huntington’s credit risks from interest rate swaps used for trading purposes were $252.8 million, $263.0 million, and $334.8 million at the same dates, respectively.

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Derivatives used in mortgage banking activities
Huntington also uses certain derivative financial instruments to offset changes in value of its MSRs. These derivatives consist primarily of forward interest rate agreements and forward mortgage securities. The derivative instruments used are not designated as hedges. Accordingly, such derivatives are recorded at fair value with changes in fair value reflected in mortgage banking income . The following table summarizes the derivative assets and liabilities used in mortgage banking activities:
June 30, December 31, June 30,
(dollar amounts in thousands) 2011 2010 2010
Derivative assets:
Interest rate lock agreements
$ 2,102 $ 2,817 $ 8,469
Forward trades and options
580 20,669 109
Total derivative assets
2,682 23,486 8,578
Derivative liabilities:
Interest rate lock agreements
(323 ) (1,445 ) (79 )
Forward trades and options
(2,246 ) (883 ) (13,682 )
Total derivative liabilities
(2,569 ) (2,328 ) (13,761 )
Net derivative asset (liability)
$ 113 $ 21,158 $ (5,183 )
The total notional value of these derivative financial instruments at June 30, 2011, December 31, 2010, and June 30, 2010, was $1.7 billion, $2.6 billion, and $3.1 billion, respectively. The total notional amount at June 30, 2011, corresponds to trading assets with a fair value of $8.4 million and trading liabilities with a fair value of $0.8 million. Total MSR hedging gains and (losses) for the three-month periods ended June 30, 2011 and 2010, were $13.1 million and $46.3 million, respectively, and $8.8 million and $58.2 million for the six-month periods ended June 30, 2011 and June 30, 2010, respectively. Included in total MSR hedging gains and losses for the three-month periods ended June 30, 2011 and 2010 were gains and (losses) related to derivative instruments of $12.6 million and $46.1 million, respectively, and $9.0 million and $57.6 million for the six-month periods ended June 30, 2011, and June 30, 2010, respectively. These amounts are included in mortgage banking income in the Unaudited Condensed Consolidated Statements of Income.
15. VIEs
Consolidated VIEs
Consolidated VIEs at June 30, 2011, consisted of the Franklin 2009 Trust and certain loan securitization trusts. Loan securitizations include automobile loan and lease securitization trusts formed in 2009, 2008, and 2006. Huntington has determined the trusts are VIEs. Huntington has concluded that it is the primary beneficiary of these trusts because it has the power to direct the activities of the entity that most significantly affect the entity’s economic performance and it has either the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE.
The carrying amount and classification of the trusts’ assets and liabilities included in the Unaudited Condensed Consolidated Balance Sheet are as follows:
June 30, 2011
Franklin
(dollar amounts in thousands) 2009 Trust 2009 Trust 2008 Trust 2006 Trust Total
Assets:
Cash
$ $ 23,767 $ 17,097 $ 62,862 $ 103,726
Loans and leases
400,935 201,795 928,688 1,531,418
Allowance for loan and lease losses
(1,796 ) (8,265 ) (10,061 )
Net loans and leases
400,935 199,999 920,423 1,625,083
Accrued income and other assets
1,588 1,839 839 3,694 7,960
Total assets
$ 1,588 $ 426,541 $ 217,935 $ 986,979 $ 1,736,769
Liabilities:
Other long-term debt
$ $ 231,017 $ 67,142 $ 581,944 $ 880,103
Accrued interest and other liabilities
1,096 480 131 123 1,830
Total liabilities
$ 1,096 $ 231,497 $ 67,273 $ 582,067 $ 881,933

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Trust-Preferred Securities
Huntington has certain wholly-owned trusts whose assets, liabilities, equity, income, and expenses are not included within Huntington’s Unaudited Condensed Consolidated Financial Statements. These trusts have been formed for the sole purpose of issuing trust-preferred securities, from which the proceeds are then invested in Huntington junior subordinated debentures, which are reflected in Huntington’s Unaudited Condensed Consolidated Balance Sheet as subordinated notes. The trust securities are the obligations of the trusts, and as such, are not consolidated within Huntington’s Unaudited Condensed Consolidated Financial Statements. A list of trust-preferred securities outstanding at June 30, 2011, follows:
Principal amount of Investment in
subordinated note/ unconsolidated
(dollar amounts in thousands) Rate debenture issued to trust (1) subsidiary (2)
Huntington Capital I
0.97 %(3) $ 138,816 $ 6,186
Huntington Capital II
0.87 (4) 55,093 3,093
Huntington Capital III
6.69 114,086 10
BancFirst Ohio Trust Preferred
8.54 23,220 619
Sky Financial Capital Trust I
8.56 64,333 1,856
Sky Financial Capital Trust II
3.22 (5) 30,929 929
Sky Financial Capital Trust III
1.65 (6) 77,320 2,320
Sky Financial Capital Trust IV
1.70 (6) 77,320 2,320
Prospect Trust I
3.53 (7) 6,186 186
Total
$ 587,303 $ 17,519
(1) Represents the principal amount of debentures issued to each trust, including unamortized original issue discount.
(2) Huntington’s investment in the unconsolidated trusts represents the only risk of loss.
(3) Variable effective rate at June 30, 2011, based on three month LIBOR + 0.70.
(4) Variable effective rate at June 30, 2011, based on three month LIBOR + 0.625.
(5) Variable effective rate at June 30, 2011, based on three month LIBOR + 2.95.
(6) Variable effective rate at June 30, 2011, based on three month LIBOR + 1.40.
(7) Variable effective rate at June 30, 2011, based on three month LIBOR + 3.25.
Each issue of the junior subordinated debentures has an interest rate equal to the corresponding trust securities distribution rate. Huntington has the right to defer payment of interest on the debentures at any time, or from time-to-time for a period not exceeding five years, provided that no extension period may extend beyond the stated maturity of the related debentures. During any such extension period, distributions to the trust securities will also be deferred and Huntington’s ability to pay dividends on its common stock will be restricted. Periodic cash payments and payments upon liquidation or redemption with respect to trust securities are guaranteed by Huntington to the extent of funds held by the trusts. The guarantee ranks subordinate and junior in right of payment to all indebtedness of the Company to the same extent as the junior subordinated debt. The guarantee does not place a limitation on the amount of additional indebtedness that may be incurred by Huntington.
Low Income Housing Tax Credit Partnerships
Huntington makes certain equity investments in various limited partnerships that sponsor affordable housing projects utilizing the Low Income Housing Tax Credit (LIHTC) pursuant to Section 42 of the Internal Revenue Code. The purpose of these investments is to achieve a satisfactory return on capital, to facilitate the sale of additional affordable housing product offerings, and to assist in achieving goals associated with the Community Reinvestment Act. The primary activities of the limited partnerships include the identification, development, and operation of multi family housing that is leased to qualifying residential tenants. Generally, these types of investments are funded through a combination of debt and equity.
Huntington does not have the power to direct the activities of these VIEs that most significantly affect their economic performance and is not the primary beneficiary. Huntington uses the equity method to account for the majority of its investments in these entities. These investments are included in accrued income and other assets. At June 30, 2011, December 31, 2010, and June 30, 2010, Huntington had commitments of $326.9 million, $316.0 million, and $232.9 million, respectively, of which $279.0 million, $260.1 million, and $222.5 million, respectively, were funded. The unfunded portion is included in accrued expenses and other liabilities.

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16. 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 Unaudited Condensed Consolidated Financial Statements. The contractual amounts of these financial agreements at June 30, 2011, December 31, 2010, and June 30, 2010, were as follows:
June 30, December 31, June 30,
(dollar amounts in millions) 2011 2010 2010
Contract amount represents credit risk:
Commitments to extend credit
Commercial
$ 7,003 $ 5,933 $ 5,703
Consumer
5,708 5,406 4,936
Commercial real estate
474 546 773
Standby letters of credit
573 607 516
Commitments to extend credit generally have fixed expiration dates, are variable-rate, and contain clauses that permit Huntington to terminate or otherwise renegotiate the contracts in the event of a significant deterioration in the customer’s credit quality. These arrangements normally require the payment of a fee by the customer, the pricing of which is based on prevailing market conditions, credit quality, probability of funding, and other relevant factors. Since many of these commitments are expected to expire without being drawn upon, the contract amounts are not necessarily indicative of future cash requirements. The interest rate risk arising from these financial instruments is insignificant as a result of their predominantly short-term, variable-rate nature.
Standby letters-of-credit are conditional commitments issued to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. Most of these arrangements mature within two years. The carrying amount of deferred revenue associated with these guarantees was $1.5 million, $2.2 million, and $2.1 million at June 30, 2011, December 31, 2010, and June 30, 2010, respectively.
Through the Company’s credit process, Huntington monitors the credit risks of outstanding standby letters-of-credit. When it is probable that a standby letter-of-credit will be drawn and not repaid in full, losses are recognized in the provision for credit losses. At June 30, 2011, Huntington had $0.6 billion of standby letters-of-credit outstanding, of which 79% were collateralized. Included in this $0.6 billion total are letters-of-credit issued by the Bank that support securities that were issued by customers and remarketed by The Huntington Investment Company, the Company’s broker-dealer subsidiary.
Huntington uses an internal grading system to assess an estimate of loss on its loan and lease portfolio. This same grading system is used to monitor credit risk associated with standby letters-of-credit. Under this grading system as of June 30, 2011, approximately $72.4 million of the standby letters-of-credit were rated strong with sufficient asset quality, liquidity, and good debt capacity and coverage; approximately $441.7 million were rated average with acceptable asset quality, liquidity, and modest debt capacity; and approximately $58.5 million were rated substandard with negative financial trends, structural weaknesses, operating difficulties, and higher leverage.
Commercial letters-of-credit represent short-term, self-liquidating instruments that facilitate customer trade transactions and generally have maturities of no longer than 90 days. The goods or cargo being traded normally secures these instruments.
Commitments to sell loans
Huntington enters into forward contracts relating to its mortgage banking business to hedge the exposures from commitments to make new residential mortgage loans with existing customers and from mortgage loans classified as loans held for sale. At June 30, 2011, December 31, 2010, and June 30, 2010, Huntington had commitments to sell residential real estate loans of $400.2 million, $998.7 million, and $735.1 million, respectively. These contracts mature in less than one year.
Income Taxes
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state, city and foreign jurisdictions. Federal income tax audits have been completed through 2007. Various state and other jurisdictions remain open to examination for tax years 2005 and forward.

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The IRS and the Commonwealth of Kentucky have proposed adjustments to the Company’s previously filed tax returns. Management believes the tax positions taken by the Company related to such proposed adjustments were correct and supported by applicable statutes, regulations, and judicial authority, and intends to vigorously defend them. It is possible the ultimate resolution of the proposed adjustments, if unfavorable, may be material to the results of operations in the period it occurs. However, although no assurance can be given, Management believes the resolution of these examinations will not, individually or in the aggregate, have a material adverse impact on our consolidated financial position.
Huntington accounts for uncertainties in income taxes in accordance with ASC 740, Income Taxes. At June 30, 2011, Huntington had gross unrecognized tax benefits of $12.5 million in income tax liability related to tax positions. Total interest accrued on the unrecognized tax benefits amounted to $2.1 million as of June 30, 2011. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities. However, any ultimate settlement is not expected to be material to the Unaudited Condensed Consolidated Financial Statements as a whole. Huntington recognizes interest and penalties on income tax assessments or income tax refunds in the financial statements as a component of its provision for income taxes. Huntington does not anticipate the total amount of unrecognized tax benefits to significantly change within the next 12 months.
Litigation
The nature of Huntington’s business ordinarily results in a certain amount of claims, litigation, investigations, and legal and administrative cases and proceedings, all of which are considered incidental to the normal conduct of business. When the Company determines it has meritorious defenses to the claims asserted, it vigorously defends itself. The Company will consider settlement of cases when, in Management’s judgment, it is in the best interests of both the Company and its shareholders to do so.
On at least a quarterly basis, Huntington assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. For matters where it is probable the Company will incur a loss and the amount can be reasonably estimated, Huntington establishes an accrual for the loss. Once established, the accrual is adjusted as appropriate to reflect any relevant developments. For matters where a loss is not probable or the amount of the loss cannot be estimated, no accrual is established.
In certain cases, exposure to loss exists in excess of the accrual to the extent such loss is reasonably possible, but not probable. Management believes an estimate of the aggregate range of reasonably possible losses, in excess of amounts accrued, for current legal proceedings is from $0 to approximately $160.0 million at June 30, 2011. For certain other cases, Management cannot reasonably estimate the possible loss at this time. Any estimate involves significant judgment, given the varying stages of the proceedings (including the fact that many of them are currently in preliminary stages), the existence of multiple defendants in several of the current proceedings whose share of liability has yet to be determined, the numerous unresolved issues in many of the proceedings, and the inherent uncertainty of the various potential outcomes of such proceedings. Accordingly, Management’s estimate will change from time-to-time, and actual losses may be more or less than the current estimate.
While the final outcome of legal proceedings is inherently uncertain, based on information currently available, advice of counsel, and available insurance coverage, Management believes that the amount it has already accrued is adequate and any incremental liability arising from the Company’s legal proceedings will not have a material adverse effect on the Company’s consolidated financial position as a whole. However, in the event of unexpected future developments, it is possible that the ultimate resolution of these matters, if unfavorable, may be material to the Company’s consolidated financial position in a particular period.
The Bank is a defendant in three lawsuits, which collectively may be material, arising from its commercial lending, depository, and equipment leasing relationships with Cyberco Holdings, Inc. (Cyberco), based in Grand Rapids, Michigan. In November 2004, the Federal Bureau of Investigation and the IRS raided the Cyberco facilities and Cyberco’s operations ceased. An equipment leasing fraud was uncovered, whereby Cyberco sought financing from equipment lessors and financial institutions, including the Bank, allegedly to purchase computer equipment from Teleservices Group, Inc. (Teleservices). Cyberco created fraudulent documentation to close the financing transactions while, in fact, no computer equipment was ever purchased or leased from Teleservices which proved to be a shell corporation.
The following supplements the discussion of certain matters previously reported in Item 3 (Legal Proceedings) of the 2010 Form 10-K for events occurring during the first six-month period of 2011:
On June 22, 2007, a complaint in the United States District Court for the Western District of Michigan (District Court) was filed by El Camino Resources, Ltd, ePlus Group, Inc., and Bank Midwest, N.A., all of whom had lending relationships with Teleservices, against Cyberco and the Bank, alleging that Cyberco defrauded plaintiffs and converted plaintiffs’ property through various means in connection with the equipment leasing scheme and alleges that the Bank aided and abetted Cyberco in committing the alleged fraud and conversion. The complaint further alleges that the Bank’s actions entitle one of the plaintiffs to recover $1.9 million from the Bank as a form of unjust enrichment. In addition, plaintiffs claimed direct damages of approximately $32.0 million and additional consequential damages in excess of $20.0 million. On July 1, 2010, the District Court issued an Opinion and Order adopting in full a federal magistrate’s recommendation for summary judgment in favor of the Bank on all claims except the unjust enrichment claim, and a partial summary judgment was entered on July 1, 2010. The Bank has requested an opportunity to file a motion for summary judgment on the remaining unjust enrichment claim against it. A motion for reconsideration filed by the plaintiffs regarding the partial summary judgment was denied. Pre-motion conferences have not yet been scheduled.

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The Bank is also involved with the Chapter 7 bankruptcy proceedings of both Cyberco, filed on December 9, 2004, and Teleservices, filed on January 21, 2005. The Cyberco bankruptcy trustee commenced an adversary proceeding against the Bank on December 8, 2006, seeking over $70.0 million he alleges was transferred to the Bank. The Bank responded with a motion to dismiss and all but the preference claims were dismissed on January 29, 2008. The Cyberco bankruptcy trustee alleges preferential transfers in the amount of $9.7 million. Since January 2008, the case has not progressed due, principally, to the adversary proceeding in the Teleservices bankruptcy case.
The Teleservices bankruptcy trustee filed an adversary proceeding against the Bank on January 19, 2007, seeking to avoid and recover alleged transfers that occurred in two ways: (1) checks made payable to the Bank to be applied to Cyberco’s indebtedness to the Bank, and (2) deposits into Cyberco’s bank accounts with the Bank. A trial was held as to only the Bank’s defenses in the 2010 fourth quarter. Subsequently, the trustee filed a summary judgment motion on her affirmative case, alleging the fraudulent transfers to the Bank totaled approximately $73.0 million and seeking judgment in that amount (which includes the $9.7 million alleged to be preferential transfers by the Cyberco bankruptcy trustee). On March 17, 2011, the Bankruptcy Court issued an Opinion determining the alleged transfers made to the Bank were not received in good faith from the time period of April 30, 2004, through November 2004, and that the Bank had failed to show a lack of knowledge of the avoidability of the alleged transfers from November 17, 2003, through April 30, 2004.
In the pending bankruptcy cases of Cyberco and Teleservices, the Bank moved to substantively consolidate the two bankruptcy estates, principally on the ground that Teleservices was the alter ego and a mere instrumentality of Cyberco at all times. On July 2, 2010, the Bankruptcy Court issued an Opinion denying the Bank’s motions for substantive consolidation of the two bankruptcy estates. The Bank has appealed this ruling and the appeal is pending.
17. PARENT COMPANY FINANCIAL STATEMENTS
The parent company condensed financial statements, which include transactions with subsidiaries, are as follows.
Balance Sheets
June 30, December 31, June 30,
(dollar amounts in thousands) 2011 2010 2010
Assets
Cash and cash equivalents (1)
$ 644,183 $ 615,167 $ 933,546
Due from The Huntington National Bank
954,565 954,565 954,565
Due from non-bank subsidiaries
223,408 225,560 254,352
Investment in The Huntington National Bank
3,846,588 3,515,597 3,304,908
Investment in non-bank subsidiaries
791,230 790,248 810,228
Accrued interest receivable and other assets
114,076 110,181 164,589
Total assets
$ 6,574,050 $ 6,211,318 $ 6,422,188
Liabilities and Shareholders’ Equity
Short-term borrowings
$ $ 100 $ 687
Long-term borrowings
932,434 937,434 637,434
Dividends payable, accrued expenses, and other liabilities
388,973 293,242 345,631
Total liabilities
1,321,407 1,230,776 983,752
Shareholders’ equity (2)
5,252,643 4,980,542 5,438,436
Total liabilities and shareholders’ equity
$ 6,574,050 $ 6,211,318 $ 6,422,188
(1) Includes restricted cash of $125,000.
(2) See Huntington’s Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity.

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Statements of Income
Three Months Ended Six Months Ended
June 30, June 30,
(dollar amounts in thousands) 2011 2010 2011 2010
Income
Dividends from
The Huntington National Bank
$ $ $ $
Non-bank subsidiaries
25,000 31,000 18,000
Interest from
The Huntington National Bank
20,211 20,724 40,396 41,740
Non-bank subsidiaries
2,259 2,986 4,955 6,449
Other
439 379 1,040 2,076
Total income
47,909 24,089 77,391 68,265
Expense
Personnel costs
9,575 11,981 14,330 13,018
Interest on borrowings
8,728 5,734 17,422 11,275
Other
10,465 13,212 20,030 25,905
Total expense
28,768 30,927 51,782 50,198
Income (loss) before income taxes and equity in undistributed net income of subsidiaries
19,141 (6,838 ) 25,609 18,067
Income taxes
(3,051 ) (105 ) (1,015 ) 15,744
Income (loss) before equity in undistributed net income of subsidiaries
22,192 (6,733 ) 26,624 2,323
Increase (decrease) in undistributed net income of:
The Huntington National Bank
140,784 60,891 258,900 101,058
Non-bank subsidiaries
(17,058 ) (5,394 ) (13,160 ) (14,880 )
Net income
$ 145,918 $ 48,764 $ 272,364 $ 88,501

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Statements of Cash Flows
Six Months Ended
June 30,
(dollar amounts in thousands) 2011 2010
Operating activities
Net income
$ 272,364 $ 88,501
Adjustments to reconcile net income to net cash provided by operating activities
Equity in undistributed net income of subsidiaries
(284,538 ) (104,178 )
Depreciation and amortization
369 510
Other, net
87,922 (87,960 )
Net cash provided by (used for) operating activities
76,117 (103,127 )
Investing activities
Repayments from subsidiaries
63,198 31,572
Advances to subsidiaries
(23,535 ) (307,051 )
Net cash provided by (used for) investing activities
39,663 (275,479 )
Financing activities
Payment of borrowings
(5,000 ) (604 )
Dividends paid on preferred stock
(15,407 ) (50,358 )
Dividends paid on common stock
(17,244 ) (14,247 )
Redemption of Warrant to the Treasury
(49,100 )
Other, net
(13 ) 822
Net cash provided by (used for) financing activities
(86,764 ) (64,387 )
Change in cash and cash equivalents
29,016 (442,993 )
Cash and cash equivalents at beginning of period
615,167 1,376,539
Cash and cash equivalents at end of period
$ 644,183 $ 933,546
Supplemental disclosure:
Interest paid
$ 17,422 $ 11,275
18. SEGMENT REPORTING
During the 2010 fourth quarter, Huntington reorganized our business segments to better align certain business unit reporting with segment executives to accelerate cross-sell results and provide greater focus on the execution of strategic plans. We have four major business segments: Retail and Business Banking, Regional and Commercial Banking, Automobile Finance and Commercial Real Estate, and Wealth Advisors, Government Finance, and Home Lending. A Treasury / Other function includes our insurance business and other unallocated assets, liabilities, revenue, and expense. All periods have been reclassified to conform to the current period classification.
Segment results are determined based upon the Company’s management reporting system, which assigns balance sheet and income statement items to each of the business segments. The process is designed around the Company’s organizational and management structure and, accordingly, the results derived are not necessarily comparable with similar information published by other financial institutions. A description of each segment and table of financial results is presented below.
Retail and Business Banking : The Retail and Business Banking segment provides a wide array of financial products and services including but not limited to loans, deposits, investment, and treasury management services to our consumer and small business customers. Huntington serves customers primarily through our traditional banking network of over 600 branches as well as our convenience branches located in grocery stores and retirement centers in Ohio, Michigan, Pennsylvania, Indiana, West Virginia, and Kentucky. In addition to our extensive branch network, customers can access Huntington through online banking, mobile banking, 24-hour telephone banking, and over 1,300 ATMs.
Huntington has established a “Fair Play” banking philosophy and is building a reputation for meeting the banking needs of consumers in a manner which makes them feel supported and appreciated. In 2010, Huntington brought innovation to the checking account by providing consumers with a 24-hour grace period to correct a shortfall in an account and avoid the associated overdraft fees. Huntington believes customers are recognizing this and other efforts as key differentiators and it is earning us more customers and deeper relationships.

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Business Banking is a dynamic and growing part of Huntington’s business and we are committed to being the bank of choice for small businesses in our markets. Business Banking is defined as companies with revenues less than $15 million and consists of approximately 130,000 businesses. Huntington continues to develop products and services that are designed specifically to meet the needs of small business. Huntington continues to look for ways to help companies find solutions to their capital needs, from our program helping businesses that had struggled in the economic downturn but are now showing several quarters of profitability, to our participation in the Small Business Administration programs. As of March 31, 2011, the SBA reported Huntington ranked first in our footprint and third in the nation in the number of SBA loans originated for the first six months of the SBA fiscal year.
Regional and Commercial Banking: This segment provides a variety of banking products and services to customers within our primary banking markets that generally have larger credit exposures and sales revenues compared with our Retail and Business Banking customers. Huntington products in this segment include commercial loans, international trade, treasury management, leasing, capital market services including interest rate risk protection products, and mezzanine investment capabilities. Regional and Commercial Banking also focuses on financial solutions for corporate and institutional customers including investment banking, sales and trading of securities, and retirement plan services. The Regional and Commercial Banking team has significantly expanded its equipment leasing capabilities , as well as focused on serving the commercial banking needs of key verticals including not-for-profit organizations, healthcare entities, and large corporations. Commercial bankers personally deliver these products and services directly and with cross-segment product partners. Huntington consistently strives to develop extensive relationships with clients creating defined relationship plans which identify needs and offer solutions.
The primary focus for Regional and Commercial Banking is our ability to gain a deeper relationship with our existing customers and to increase our market share through our unique customer solution strategy. This includes a comprehensive cross-sell approach to capture the untapped opportunities within our customer and prospect community. This strategy embodies a shift from credit-only focus, to a total customer solution approach with an increasing share-of-wallet.
The Regional and Commercial Banking business model includes eleven regional markets driven by local execution. These markets are supported by expertise in large corporate and middle market segments, by capabilities in treasury management and equipment finance, and by vertical strategies within the healthcare and not-for-profit industries.
The commercial portfolio includes a distribution across industries and segments which resembles the market demographics of our footprint. A strategic focus of Regional and Commercial Banking is to target underpenetrated markets within our footprint and capitalize on opportunities in industries such as not-for-profit and healthcare.
In addition, Regional and Commercial Banking expanded the leadership, investment, and capabilities for treasury management and equipment finance. With our investments in treasury management, Huntington differentiated itself through our implementation experience and the speed at which products and services are delivered to our customers. In equipment finance, Huntington distinguished itself through aggressive business development and local service delivery and by strategically aligning with our bank partners to drive market share. The increase in originations during the current period reflected the strategic decision to enter three new markets: business aircraft finance, rail industry finance, and lender finance.
Automobile Finance and Commercial Real Estate : This segment provides lending and other banking products and services to customers outside of our normal retail and commercial banking segments. Our products and services are delivered through highly specialized relationship-focused bankers and our cross segment product partners. Huntington creates well-defined relationship plans which identify needs where solutions are developed and customer commitments are obtained.
The Automotive Finance team services automobile dealerships, its owners, and consumers buying automobiles through these dealerships. Huntington has provided new and used automobile financing and dealer services throughout the Midwest since the early 1950s. This consistency in the market and our focus on working with strong dealerships, has allowed us to actively deepen relationships while building a strong reputation. Huntington has a dominant market share position within our Midwest footprint as evidenced by a #1 share in two of our core states: Ohio and Kentucky (AutoCount 2010). The Automotive team serves customers within our footprint and we have recently expanded into the New England area.
The Commercial Real Estate team serves professional real estate developers, and REITs. Huntington has a clear focus on experienced, well-managed, well-capitalized top tier real estate developers who are capable of operating in all economic phases of the real estate industry. Most of our customers are located within our footprint.

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Wealth Advisors, Government Finance, and Home Lending: This segment consists of our wealth management, government banking, and home lending businesses. In wealth management, Huntington provides financial services to high net worth clients in our primary banking markets and Florida. Huntington Wealth Advisors delivers a comprehensive solution through a unified sales team providing private banking, investment, insurance, and trust services. Aligned with the eleven regional commercial banking markets, this coordinated service model delivers products and services directly and through the other segment product partners. A fundamental point of differentiation is our commitment to be in the market, working closely with clients and their other advisors to identify needs, offer solutions and provide ongoing advice in an optimal client experience.
The Government Finance Group provides financial products and services to government and other public sector entities in our primary banking markets. A locally based team of relationship managers works with clients to meet their public finance, brokerage, trust, lending, and treasury management needs.
Home Lending originates and services consumer loans and mortgages for customers who are generally located in our primary banking markets. Consumer and mortgage lending products are primarily distributed through the Retail and Business Banking segment, as well as through commissioned loan originators. Closely aligned, our Community Development group serves an important role as it focuses on delivering on our commitment to the communities Huntington serves.
The segment also includes the related businesses of investment management, investment servicing, custody, corporate trust and retirement plan services. Huntington Asset Advisors provides investment management services through a variety of internal and external channels, including advising the Huntington Funds, our proprietary family of funds. Huntington Asset Services offers administrative and operational support to fund complexes, including fund accounting, transfer agency, administration, and distribution services. Our retirement plan services business offers fully bundled and third party distribution of a variety of qualified and non-qualified plan solutions, and the national settlements business focuses on providing banking solutions to the litigation settlement market.

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Listed below is certain operating basis financial information reconciled to Huntington’s June 30, 2011, December 31, 2010, and June 30, 2010, reported results by business segment:
Three Months Ended June 30,
Retail & Regional &
Income Statements Business Commercial Treasury/ Huntington
(dollar amounts in thousands) Banking Banking AFCRE WGH Other Consolidated
2011
Net interest income
$ 237,208 60,029 89,281 47,030 (30,211 ) $ 403,337
Provision for credit losses
34,664 1,458 (14,855 ) 14,530 35,797
Noninterest income
106,414 31,389 16,146 66,841 34,977 255,767
Noninterest expense
236,638 48,241 42,177 86,807 14,546 428,409
Income taxes
25,312 14,602 27,337 4,387 (22,658 ) 48,980
Operating/reported net income (loss)
$ 47,008 $ 27,117 $ 50,768 $ 8,147 $ 12,878 $ 145,918
2010
Net interest income
$ 214,266 $ 50,885 84,170 38,958 11,377 $ 399,656
Provision for credit losses
23,030 12,669 47,669 30,028 80,010 193,406
Noninterest income
103,899 28,274 20,156 87,190 30,124 269,643
Noninterest expense
223,653 39,192 35,023 89,378 26,564 413,810
Income taxes
25,019 9,554 7,572 2,360 (31,186 ) 13,319
Operating/reported net income (loss)
$ 46,463 $ 17,744 $ 14,062 $ 4,382 $ (33,887 ) $ 48,764
Six Months Ended June 30,
Retail & Regional &
Income Statements Business Commercial Treasury/ Huntington
(dollar amounts in thousands) Banking Banking AFCRE WGH Other Consolidated
2011
Net interest income
$ 473,053 117,467 177,130 95,930 (55,913 ) $ 807,667
Provision for credit losses
58,358 7,427 (10,071 ) 29,468 85,182
Noninterest income
200,842 60,627 29,525 133,592 68,126 492,712
Noninterest expense
458,775 91,922 85,304 172,985 50,122 859,108
Income taxes
54,867 27,561 45,997 9,474 (54,174 ) 83,725
Operating/reported net income (loss)
$ 101,895 $ 51,184 $ 85,425 $ 17,595 $ 16,265 $ 272,364
2010
Net interest income
$ 417,671 101,716 161,214 $ 76,885 $ 36,063 $ 793,549
Provision for credit losses
91,004 53,876 165,308 26,717 91,509 428,414
Noninterest income
198,544 53,667 37,256 157,401 63,627 510,495
Noninterest expense
438,430 74,746 74,048 173,253 51,426 811,903
Income taxes
30,374 9,366 (14,310 ) 12,011 (62,215 ) (24,774 )
Operating/reported net income (loss)
$ 56,407 $ 17,395 $ (26,576 ) $ 22,305 $ 18,970 $ 88,501
Assets at Deposits at
June 30, December 31, June 30, June 30, December 31, June 30,
(dollar amounts in millions) 2011 2010 2010 2011 2010 2010
Retail & Business Banking
$ 13,456 $ 13,088 $ 13,169 $ 28,325 $ 29,298 $ 28,467
Regional & Commercial Banking
9,223 8,720 8,137 3,539 3,538 2,850
AFCRE
13,296 13,233 12,834 819 753 761
WGH
6,748 6,971 6,299 7,708 7,449 6,784
Treasury / Other
10,327 11,808 11,332 1,011 816 987
Total
$ 53,050 $ 53,820 $ 51,771 $ 41,402 $ 41,854 $ 39,849

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Item 3: Quantitative and Qualitative Disclosures about Market Risk
Quantitative and qualitative disclosures for the current period can be found in the Market Risk section of this report, which includes changes in market risk exposures from disclosures presented in Huntington’s 2010 Form 10-K.
Item 4: Controls and Procedures
Disclosure Controls and Procedures
Huntington maintains disclosure controls and procedures designed to ensure that the information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Huntington’s Management, with the participation of its Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of Huntington’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon such evaluation, Huntington’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, Huntington’s disclosure controls and procedures were effective.
There have not been any significant changes in Huntington’s internal controls over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, Huntington’s internal controls over financial reporting.
PART II. OTHER INFORMATION
In accordance with the instructions to Part II, the other specified items in this part have been omitted because they are not applicable or the information has been previously reported.
Item 1: Legal Proceedings
Information required by this item is set forth in Note 16 of the Notes to Unaudited Condensed Consolidated Financial Statements included in Item 1 of this report and incorporated herein by reference.
Item 1A: Risk Factors
Information required by this item is set forth in Part 1 Item 2.- Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report and incorporated herein by reference.
Item 6. Exhibits
Exhibit Index
This report incorporates by reference the documents listed below that we have previously filed with the SEC. The SEC allows us to incorporate by reference information in this document. The information incorporated by reference is considered to be a part of this document, except for any information that is superseded by information that is included directly in this document.

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This information may be read and copied at the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549. The SEC also maintains an Internet web site that contains reports, proxy statements, and other information about issuers, like us, who file electronically with the SEC. The address of the site is http://www.sec.gov . The reports and other information filed by us with the SEC are also available at our Internet web site. The address of the site is http://www.huntington.com . Except as specifically incorporated by reference into this Quarterly Report on Form 10-Q, information on those web sites is not part of this report. You also should be able to inspect reports, proxy statements, and other information about us at the offices of the NASDAQ National Market at 33 Whitehall Street, New York, New York.
SEC File or
Exhibit Report or Registration Registration Exhibit
Number Document Description Statement Number Reference
2.1
Agreement and Plan of Merger, dated December 20, 2006 by and among Huntington Bancshares Incorporated, Penguin Acquisition, LLC and Sky Financial Group, Inc.
Current Report on Form 8-K dated December 22, 2006. 000-02525 2.1
3.1
Articles of Restatement of Charter.
Annual Report on Form 10-K for the year ended December 31, 1993. 000-02525 3 (i)
3.2
Articles of Amendment to Articles of Restatement of Charter.
Current Report on Form 8-K dated May 31, 2007 000-02525 3.1
3.3
Articles of Amendment to Articles of Restatement of Charter.
Current Report on Form 8-K dated May 7, 2008 000-02525 3.1
3.4
Articles of Amendment to Articles of Restatement of Charter.
Current Report on Form 8-K dated April 27, 2010 001-34073 3.1
3.5
Articles Supplementary of Huntington Bancshares Incorporated, as of April 22, 2008.
Current Report on Form 8-K dated April 22, 2008 000-02525 3.1
3.6
Articles Supplementary of Huntington Bancshares Incorporated, as of April 22. 2008.
Current Report on Form 8-K dated April 22, 2008 000-02525 3.2
3.7
Articles Supplementary of Huntington Bancshares Incorporated, as of November 12, 2008.
Current Report on Form 8-K dated November 12, 2008 001-34073 3.1
3.8
Articles Supplementary of Huntington Bancshares Incorporated, as of December 31, 2006.
Annual Report on Form 10-K for the year ended December 31, 2006 000-02525 3.4
3.9
Bylaws of Huntington Bancshares Incorporated, as amended and restated, as of April 22, 2010.
Current Report on Form 8-K dated April 27, 2010. 001-34073 3.2
4.1
Instruments defining the Rights of Security Holders — reference is made to Articles Fifth, Eighth, and Tenth of Articles of Restatement of Charter, as amended and supplemented. Instruments defining the rights of holders of long-term debt will be furnished to the Securities and Exchange Commission upon request.
10.1
* Management Incentive Plan for Covered Officers
Definitive Proxy Statement for the 2011 Annual Meeting of Shareholders 001-34073 A
12.1
Ratio of Earnings to Fixed Charges.
12.2
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends.
31.1
Rule 13a-14(a) Certification — Chief Executive Officer.
31.2
Rule 13a-14(a) Certification — Chief Financial Officer.
32.1
Section 1350 Certification — Chief Executive Officer.
32.2
Section 1350 Certification — Chief Financial Officer.
101 **
The following material from Huntington’s Form 10-Q Report for the quarterly period ended June 30, 2011, formatted in XBRL: (i) Unaudited Condensed Consolidated Balance Sheets, (ii) Unaudited Condensed Consolidated Statements of Income, (iii) Unaudited Condensed Consolidated Statement of Changes in Shareholders’ Equity, (iv) Unaudited Condensed Consolidated Statements of Cash Flows, and (v) the Notes to Unaudited Condensed Consolidated Financial Statements.
* Denotes management contract or compensatory plan or arrangement.
** Furnished, not filed.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Huntington Bancshares Incorporated
(Registrant)
Date: August 8, 2011 /s/ Stephen D. Steinour
Stephen D. Steinour
Chairman, Chief Executive Officer and President
Date: August 8, 2011 /s/ Donald R. Kimble
Donald R. Kimble
Sr. Executive Vice President and Chief Financial Officer

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