Filed Pursuant to Rule 424(b)(2)
Registration Nos. 333-131143 and 333-131143-04

Subject to Completion Dated May 7, 2007.

Prospectus Supplement to Prospectus dated May 7, 2007.

 

Huntington Capital III

 

$            

 

% Trust Preferred Securities

(liquidation amount $1,000 per security)

fully and unconditionally guaranteed, on a subordinated basis, as described herein, by

 

Huntington Bancshares Incorporated

 

Huntington Capital III, a Delaware statutory trust, will issue the Trust Preferred Securities. Each Trust Preferred Security represents an undivided beneficial interest in the Trust. The only assets of the Trust will be the  % Junior Subordinated Notes due 2067 issued by Huntington Bancshares Incorporated, which we refer to as the “JSNs”. The Trust will pay distributions on the Trust Preferred Securities only from the proceeds, if any, of interest payments on the JSNs.

 

The JSNs will bear interest at the annual rate of (i)   % from and including May   , 2007 to but excluding May   , 2017, (ii) three-month LIBOR plus  % from and including May   , 2017 to but excluding May   , 2047, and (iii) one-month LIBOR plus  % thereafter. Huntington will pay that interest semi-annually in arrears on May   and November    of each year, beginning on November   , 2007 until May   , 2017, quarterly in arrears on February   , May   , August   and November    of each year, beginning on August   , 2017 until May   , 2047, and thereafter monthly in arrears on the first day of each month or, if any such day is not a business day, on the next business day. Huntington has the right, on one or more occasions, to defer the payment of interest on the JSNs for one or more consecutive interest periods that do not exceed five years or, if earlier, until the first interest payment date on which it pays current interest without being subject to its obligations under the alternative payment mechanism described in this prospectus supplement and for one or more consecutive interest periods that do not exceed 10 years without giving rise to an event of default. In the event of Huntington’s bankruptcy, holders of the JSNs will have a limited claim for deferred interest.

 

The principal amount of the JSNs will become due on the scheduled maturity date to the extent that Huntington has received proceeds from the sale of certain qualifying capital securities during a 180-day period ending on a notice date not more than 30 or less than 10 business days prior to such date. The scheduled maturity date of the JSNs is initially May   , 2037, but may be extended at Huntington’s option to May   , 2047 upon the satisfaction of certain criteria described in this prospectus supplement. Huntington will use its commercially reasonable efforts, subject to certain market disruption events, to sell enough qualifying capital securities to permit repayment of the JSNs in full on their scheduled maturity date. If any amount is not paid on the scheduled maturity date, it will remain outstanding and Huntington will continue to use its commercially reasonable efforts to sell enough qualifying capital securities to permit repayment of the JSNs in full. Huntington must pay any remaining principal and interest in full on the JSNs on May   , 2067, which is the final repayment date, whether or not it has sold qualifying capital securities.

 

At Huntington’s option, the Trust Preferred Securities may be redeemed at any time. The redemption price will be 100% of the principal amount to be redeemed plus accrued and unpaid interest through the date of redemption for any redemption (i) on May   , 2017 or May   , 2027, (ii) within 90 days of a capital treatment event or investment company event, as defined in this prospectus supplement, (iii) after May   , 2017 and within 90 days of a tax event or (iv) at any time on or after May   , 2037. The redemption price in all other cases will be the applicable make-whole redemption price described in this prospectus supplement.

 

The JSNs will be subordinated upon Huntington’s liquidation to all of its existing and future senior debt other than trade accounts payable and any debt that by its terms does not rank senior to the JSNs upon Huntington’s liquidation, and will be effectively subordinated to all liabilities of its subsidiaries. As a result, the Trust Preferred Securities also will be effectively subordinated to the same debt and liabilities. Huntington will guarantee the Trust Preferred Securities on a subordinated basis to the extent described in this prospectus supplement.

 

Huntington does not intend to apply for listing of the Trust Preferred Securities on the New York Stock Exchange or any other securities exchange.

 

See “Risk Factors” beginning on page S-20 of this prospectus supplement to read about important factors you should consider before buying the Trust Preferred Securities.

 

 

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.

 

 

The Trust Preferred Securities and the JSNs are not savings or deposit accounts or other obligations of any bank and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency.

 

 

 

The underwriters expect to deliver the Trust Preferred Securities in book-entry form only through the facilities of The Depository Trust Company and its participants, including Euroclear and Clearstream, against payment in New York, New York on May   , 2007.

 

 

Prospectus Supplement dated May   , 2007.

 

TABLE OF CONTENTS

 

PROSPECTUS SUPPLEMENT

 

ABOUT THIS PROSPECTUS SUPPLEMENT

 

This document consists of two parts. The first part is the prospectus supplement, which describes the specific terms of this offering. The second part is the prospectus, which describes more general information, some of which may not apply to this offering. You should read both this prospectus supplement and the accompanying prospectus, together with additional information described under the heading “Where You Can Find More Information” in the accompanying prospectus.

 

References in this prospectus supplement to “Huntington”, “we”, “us”, “our” or similar references mean Huntington Bancshares Incorporated and its consolidated subsidiaries, unless the context indicates that we only refer to the parent company, Huntington Bancshares Incorporated. References to the “Trust” mean Huntington Capital III.

 

If the information set forth in this prospectus supplement differs in any way from the information set forth in the accompanying prospectus, you should rely on the information set forth in this prospectus supplement.

 

You should rely only on the information contained in or incorporated by reference in this prospectus supplement and the accompanying prospectus and any Free Writing Prospectus relating to the Trust Preferred Securities offered hereby prepared by or on behalf of us and no one is authorized to give information other than that contained herein and therein. This prospectus supplement may be used only for the purpose for which it has been prepared. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it.

 

We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information appearing in this prospectus supplement, the accompanying prospectus or any document incorporated by reference is accurate as of any date other than the date of the applicable document. Our business, financial condition, results of operations and prospects may have changed since that date. Neither this prospectus supplement nor the accompanying prospectus constitutes an offer, or an invitation on our behalf or on behalf of the underwriters, to subscribe for and purchase, any of the securities and may not be used for or in connection with an offer or solicitation by anyone, in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation.

 

This prospectus supplement and the accompanying prospectus contain or incorporate statements that we believe are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder. These statements relate to our financial condition, results of operations, plans, objectives, future performance or business. They usually can be identified by the use of forward-looking language such as “will likely result”, “may”, “are expected to”, “is anticipated”, “estimate”, “forecast”, “projected”, “intends to”, or may include other similar words or phrases such as “believes”, “plans”, “trend”, “objective”, “continue”, “remain”, or similar expressions, or future or conditional verbs such as “will”, “would”, “should”, “could”, “might”, “can”, or similar verbs. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including but not limited to those described in this prospectus supplement, the accompanying prospectus or the documents incorporated by reference, including the risk factors set forth in our most recent Annual Report on Form 10-K. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements we may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to us.

 

There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to:

 

 

 

You should refer to our periodic and current reports filed with the Securities and Exchange Commission, or “SEC”, for further information on other factors which could cause actual results to be significantly different from those expressed or implied by these forward-looking statements. See “Where You Can Find More Information” in the accompanying prospectus.

 

SUMMARY

	•	issuing the Trust Preferred Securities and common securities representing undivided beneficial interests in the Trust;

	•	investing the gross proceeds of the Trust Preferred Securities and the common securities in the JSNs; and
	•	engaging in only those activities convenient, necessary or incidental thereto.

Issuer		Huntington Capital III
Securities Offered		$         % Trust Preferred Securities, each Trust Preferred Security representing an undivided beneficial interest in Huntington Capital III.
Liquidation Amount		$1,000
Distributions		If you purchase Trust Preferred Securities, you will be entitled to receive periodic distributions on the stated liquidation amount of $1,000 per Trust Preferred Security (the “liquidation amount”) on the same payment dates and in the same amounts as Huntington pays interest to the Trust on a principal amount of JSNs equal to the liquidation amount of such Trust Preferred Security. Distributions will accumulate from May   , 2007. The Trust will make distribution payments on the Trust Preferred Securities:

	•	semi-annually in arrears on each May    and November   , beginning on November   , 2007 until May   , 2017;
	•	quarterly in arrears on each February   , May   , August    and November   , beginning on August   , 2017 until May   , 2047 (or if such day is not a business day, on the next business day); and
	•	thereafter monthly in arrears on the first day of each month (or if such day is not a business day, on the next business day).

		In the event any distribution date on or prior to the regularly scheduled distribution date in May 2017 is not a business day, payment on the following business day shall be made without adjustment. If Huntington defers payment of interest on the JSNs, distributions by the Trust on the Trust Preferred Securities will also be deferred.
Deferral of Distributions		Huntington has the right, on one or more occasions, to defer the payment of interest on the JSNs for one or more consecutive interest periods not exceeding five years without being subject to its obligations described under “Description of the Junior Subordinated Notes — Alternative Payment Mechanism”, and for one or more consecutive interest periods not exceeding 10 years without giving rise to an event of default under the terms of the JSNs or the Trust Preferred Securities. However, no interest deferral may extend beyond the redemption of the JSNs or the final repayment date. Interest on the JSNs will continue to accrue during deferral periods and, as a result, distributions on the Trust Preferred Securities will continue to accumulate at the interest rate on the JSNs, compounded on each distribution date.
		If Huntington exercises its right to defer interest payments on the JSNs, the Trust will also defer paying a corresponding amount of distributions on the Trust Preferred Securities during that deferral period.
		During any deferral period, neither Huntington nor the Trust will generally be permitted to make any payments of deferred interest or distributions from any source other than “eligible proceeds”, as defined under “Description of the Junior Subordinated Notes — Alternative Payment Mechanism”, or required to make any interest or distribution payments other than pursuant to the alternative payment mechanism.
		Following the earlier of (i) the fifth anniversary of the commencement of a deferral period or (ii) a payment of current interest on the JSNs, Huntington will be required, with certain exceptions, to pay deferred interest pursuant to the alternative payment mechanism described under “Description of the Junior Subordinated Notes — Alternative Payment Mechanism”. At any time during a deferral period, Huntington may not pay deferred interest on the JSNs except pursuant to the alternative payment mechanism, subject to limited exceptions. However, it may pay current interest on any interest payment date out of any source of funds free of the limitations of the alternative payment mechanism, even if that interest payment date is during a deferral period.
		If Huntington defers payments of interest on the JSNs, the JSNs will be treated as being issued with original issue discount for U.S. federal income tax purposes. This means that you must include interest income with respect to the deferred distributions on your Trust Preferred Securities in gross income for U.S. federal income tax purposes, prior to

		receiving any cash distributions. See “Certain United States Federal Income Tax Consequences — U.S. Holders — Interest Income and Original Issue Discount”.
Redemption of Trust Preferred Securities		The Trust will use the proceeds of any repayment or redemption of the JSNs to redeem, on a proportionate basis, an equal amount of Trust Preferred Securities and common securities.
		For a description of Huntington’s rights to redeem the JSNs, see “Description of the Junior Subordinated Notes — Redemption”.
		Under the current rules of the Board of Governors of the Federal Reserve System (referred to collectively with the Federal Reserve Bank of Cleveland, or any successor federal bank regulatory agency having primary jurisdiction over Huntington, as the “Federal Reserve”), Federal Reserve approval is generally required for the early redemption of preferred stock or trust preferred securities included in regulatory capital. However, under current guidelines, rules and regulations, Federal Reserve approval is not required for the redemption of the Trust Preferred Securities on or after the scheduled maturity date in connection with the repayment of the JSNs since, in this case, the redemption would not be an early redemption but would be pursuant to Huntington’s contractual obligation to repay the JSNs, subject to the limitations described under “Description of the Junior Subordinated Notes — Repayment of Principal”, on the scheduled maturity date.
Liquidation of the Trust and Distribution of JSNs to Holders		Huntington may elect to dissolve the Trust at any time and, after satisfaction of the Trust’s liabilities, to cause the property trustee to distribute the JSNs to the holders of the Trust Preferred Securities and common securities. However, if then required under the risk-based capital guidelines or policies of the Federal Reserve applicable to bank holding companies, it must obtain the approval of the Federal Reserve prior to making that election.
Further Issues		The Trust has the right to issue additional Trust Preferred Securities of this series in the future, subject to the conditions described under “Description of the Trust Preferred Securities — Further Issues”. Any such additional Trust Preferred Securities will have the same terms as the Trust Preferred Securities being offered by this prospectus supplement but may be offered at a different offering price and accrue distributions from a different date than the Trust Preferred Securities being offered hereby. If issued, any such additional Trust Preferred Securities will become part of the same series as the Trust Preferred Securities being offered hereby to the extent such securities bear the same CUSIP number unless such additional securities would not be treated as fungible with the previously issued and outstanding Trust Preferred Securities for U.S. federal income tax purposes.

Guarantee		Huntington will fully and unconditionally guarantee payment of amounts due under the Trust Preferred Securities on a subordinated basis and only to the extent the Trust has funds available for payment of those amounts. We refer to this obligation as the “guarantee”. The guarantee does not cover payments if the Trust does not have sufficient funds to make the distribution payments, including, for example, if Huntington has failed to pay to the Trust amounts due under the JSNs or if it elects to defer payment of interest under the JSNs.
		As issuer of the JSNs, Huntington is also obligated to pay the expenses and other obligations of the Trust, other than its obligations to make payments on the Trust Preferred Securities.
Book-Entry		The Trust Preferred Securities will be represented by one or more global securities registered in the name of and deposited with The Depository Trust Company (“DTC”) or its nominee. This means that you will not receive a certificate for your Trust Preferred Securities and Trust Preferred Securities will not be registered in your name, except under certain limited circumstances described in “Book-Entry System”.
No Listing		Huntington does not intend to apply to list the Trust Preferred Securities on the New York Stock Exchange or any other securities exchange.

(1)		Huntington may extend the Scheduled Maturity Date only upon satisfaction of certain criteria. See “Description of the Junior Subordinated Notes — Repayment of Principal.”
(2)		Latest date by which Huntington is required to repay any unpaid portion of the JSNs. See “Description of the Junior Subordinated Notes — Repayment of Principal.”
(3)		The JSNs are callable by Huntington in whole or in part on the discrete call dates in 2017 and 2027 and at any time after May   , 2037 without the payment of a make-whole premium. In addition, the JSNs are callable by Huntington in whole but not in part without the payment of a make-whole premium under certain circumstances. See “Description of the Junior Subordinated Notes — Redemption.”

Repayment of Principal		Huntington must repay the principal amount of the JSNs, together with accrued and unpaid interest, on the scheduled maturity date, subject to the limitations described below. The “scheduled maturity date” is initially May   , 2037, or if that date is not a business day, the next business day, but may be extended at Huntington’s option to May   , 2047 upon the satisfaction of certain criteria, as described under “Description of the Junior Subordinated Notes — Repayment of Principal”.
		Huntington is required to repay the JSNs on the scheduled maturity date to the extent of the net proceeds that it has raised from the issuance of “qualifying capital securities”, as described under “Replacement Capital Covenant”, during a 180-day period ending on a notice date not more than 30 or less than 10 business days prior to such date. If it has not raised sufficient net proceeds to permit repayment of all principal and accrued and unpaid interest on the JSNs on the scheduled maturity date, it will repay the JSNs to the extent of the net proceeds it has raised and the unpaid portion will

		remain outstanding. Huntington will be required to repay the unpaid portion of the JSNs on each subsequent interest payment date to the extent of the net proceeds it receives from any subsequent issuance of qualifying capital securities or upon the earliest to occur of:

	•	the redemption of the JSNs;
	•	an event of default that results in acceleration of the JSNs; and
	•	May   , 2067, which is the “final repayment date”.

		Huntington will use its commercially reasonable efforts, subject to a “market disruption event”, as described under “Description of the Junior Subordinated Notes — Market Disruption Events”, to raise sufficient net proceeds from the issuance of qualifying capital securities in a 180-day period ending on a notice date not more than 30 or less than 10 business days prior to the scheduled maturity date to permit repayment of the JSNs in full on the scheduled maturity date in accordance with the preceding paragraph. If Huntington is unable for any reason to raise sufficient proceeds, it will use its commercially reasonable efforts, subject to a market disruption event, to raise sufficient proceeds from the sale of qualifying capital securities to permit repayment of the JSNs on the following interest payment date, and on each interest payment date thereafter, until the JSNs are paid in full.
		Any unpaid principal amount of the JSNs, together with accrued and unpaid interest, will be due and payable on the final repayment date, regardless of the amount of qualifying capital securities Huntington has issued and sold by that time.
		Huntington is not required to issue any securities pursuant to the obligation described above other than qualifying capital securities.
		Under the current risk-based capital adequacy guidelines of the Federal Reserve, Federal Reserve approval is generally required for the early redemption of preferred stock or trust preferred securities included in regulatory capital. However, under current guidelines, rules and regulations, Federal Reserve approval is not required for the redemption of the Trust Preferred Securities on or after the scheduled maturity date in connection with the repayment of the JSNs as described above since, in this case, the redemption would not be an early redemption but would be pursuant to our contractual obligation to repay the JSNs.
Interest		The JSNs will bear interest:

	•	at the annual rate of  % from and including May    , 2007 to but excluding May   , 2017, payable semi-annually in arrears on May    and November    of each year, beginning on November   , 2007 until May   , 2017;

	•	at an annual rate equal to three-month LIBOR plus  % from and including May   , 2017 to but excluding May   , 2047, payable quarterly in arrears on February   , May   , August    and November    of each year, beginning on August   , 2017 until May   , 2047 (or if any such day is not a business day, on the next business day); and
	•	thereafter at an annual rate equal to one-month LIBOR plus  %, payable monthly in arrears on the first day of each month (or if any such day is not a business day, on the next business day).

		In the event any interest payment date on or prior to the regularly scheduled interest payment date in May 2017 is not a business day, the interest payment made on the following business day shall be made without adjustment.
Subordination		The JSNs will be unsecured and will be deeply subordinated upon Huntington’s liquidation, including to all of its existing and future senior debt, and will be effectively subordinated to all liabilities of its subsidiaries. Substantially all of Huntington’s existing indebtedness is senior debt. At March 31, 2007, Huntington’s indebtedness for money borrowed ranking senior to the JSNs upon liquidation, on a consolidated basis, was $31.9 billion and its subsidiaries’ direct borrowings and deposit liabilities that would effectively rank senior to the JSNs was $31.4 billion. See “Description of the Junior Subordinated Notes — Subordination” for the definition of “senior debt”.
Certain Payment Restrictions Applicable to Huntington		During any deferral period or period in which Huntington has given notice of its election to defer interest payments on the JSNs but the related deferral period has not yet commenced, Huntington generally may not make payments on or redeem or repurchase its capital stock or its debt securities or guarantees ranking pari passu with or junior to the JSNs, subject to the exceptions described under “Description of the Junior Subordinated Notes — Dividend and Other Payment Stoppages during Interest Deferral and under Certain Other Circumstances”. In addition, if any deferral period lasts longer than one year, Huntington generally may not be permitted to repurchase or acquire any of its securities ranking junior to or pari passu with any “qualifying APM securities” the proceeds of which were used to settle deferred interest during the relevant deferral period until the first anniversary of the date on which all deferred interest has been paid.
		The terms of the JSNs permit Huntington to make any payment of current or deferred interest on its debt securities or guarantees that rank on a parity with the JSNs upon its liquidation (“parity securities”) so long as the payment is made pro rata to the amounts due on parity securities (including the JSNs), subject to the limitations described in the last paragraph under “Description of the Junior Subordinated Notes — Alternative Payment Mechanism” to the extent that they apply,

		and any payment of deferred interest on parity securities that, if not made, would cause it to breach the terms of the instrument governing such parity securities.
Redemption of JSNs		Huntington may redeem the JSNs at any time. The redemption price will be 100% of the principal amount to be redeemed, plus accrued and unpaid interest through the date of redemption, in the case of any redemption:

	•	in whole or in part on May   , 2017 or May   , 2027;
	•	in whole but not in part at any time within 90 days of the occurrence of certain changes relating to the capital treatment of, or investment company laws relating to, the Trust Preferred Securities;
	•	in whole but not in part at any time after May   , 2017 and within 90 days of the occurrence of certain changes relating to the tax treatment of the Trust Preferred Securities; or
	•	in whole or in part at any time on or after May    2037 (including on or after the scheduled maturity date).

		In all other cases, the redemption price will be a make-whole redemption price. The make-whole redemption price may be lower in the case of a redemption of all outstanding JSNs prior to May   , 2017 within 90 days of the occurrence of certain changes relating to the tax treatment of, or the rating agency equity credit accorded to, the Trust Preferred Securities. See “Description of the Junior Subordinated Notes — Redemption”.
		Huntington will be subject to its obligations under the replacement capital covenant (as described below) if it elects to redeem any or all of the JSNs prior to the termination of the replacement capital covenant. In addition, under the current risk-based capital adequacy guidelines of the Federal Reserve applicable to bank holding companies, Federal Reserve approval is generally required for the early redemption of preferred stock or trust preferred securities included in regulatory capital.
Events of Default		The following events are “events of default” with respect to the JSNs:

	•	default in the payment of interest, including compounded interest, in full on any JSNs for a period of 30 days after the conclusion of a 10-year period following the commencement of any deferral period;
	•	bankruptcy of Huntington; or
	•	receivership of a major subsidiary depository institution of Huntington within the meaning of the Federal Reserve’s risk-based capital guidelines applicable to bank holding companies. As of the date of this prospectus supplement,

		The Huntington National Bank is Huntington’s only major subsidiary depository institution.

		If an event of default under the indenture occurs and continues, the indenture trustee or the holders of at least 25% in aggregate principal amount of the outstanding JSNs may declare the entire principal and all accrued but unpaid interest of all JSNs to be due and payable immediately. If the indenture trustee or the holders of JSNs do not make such declaration and the JSNs are beneficially owned by the Trust or a trustee of the Trust, the property trustee or the holders of at least 25% in aggregate liquidation amount of the Trust Preferred Securities shall have such right. The property trustee may annul the declaration and waive the default, provided all defaults have been cured and all payment obligations have been made current. Should the property trustee fail to annul the declaration and waive the default, the holders of a majority in aggregate liquidation amount of the Trust Preferred Securities have the right to do so.
Tax Treatment		In connection with the issuance of the JSNs, Shearman & Sterling LLP, Huntington’s special tax counsel, has advised us that, under current law and assuming full compliance with the terms of the indenture and other relevant documents, and based on the representations, facts and assumptions set forth in its opinion, although the matter is not free from doubt, the JSNs will be characterized as indebtedness for U.S. federal income tax purposes. The Trust Preferred Securities are novel financial instruments, and there is no statutory, judicial or administrative authority that directly addresses the U.S. federal income tax treatment of securities similar to the Trust Preferred Securities. Thus, no assurance can be given that the Internal Revenue Service or a court will agree with this characterization. By purchasing the Trust Preferred Securities, each holder of the Trust Preferred Securities agrees, and Huntington and the Trust agree, to treat the JSNs as indebtedness for all U.S. federal income tax purposes. See “Certain United States Federal Income Tax Consequences”.

	•	in the case of a redemption or purchase prior to the scheduled maturity date, Huntington has obtained the prior approval of the Federal Reserve if such approval is then required under the Federal Reserve’s capital guidelines or policies applicable to bank holding companies; and

	•	the principal amount repaid or the applicable redemption or purchase price does not exceed a maximum amount determined by reference to:

	•	the applicable percentage of the aggregate amount of (i) net cash proceeds Huntington and its subsidiaries have received from the sale of common stock or rights to acquire common stock (including common stock or rights to acquire common stock issued pursuant to Huntington’s dividend reinvestment plan or employee benefit plans), (ii) the market value of any common stock that Huntington or any of its subsidiaries have delivered as consideration for property or assets in an arm’s-length transaction and (iii) the market value of any common stock that Huntington or any of its subsidiaries issued in connection with the conversion or exchange of any convertible or exchangeable securities, other than securities for which Huntington or any of its subsidiaries has received equity credit from any rating agency, plus
	•	100% of the aggregate amount of net cash proceeds Huntington and its subsidiaries have received from the sale of “debt exchangeable for common equity”, “debt exchangeable for preferred equity”, “mandatorily convertible preferred stock” or “REIT preferred securities”, plus
	•	100% of the aggregate amount of net cash proceeds Huntington and its subsidiaries have received from the sale of “qualifying capital securities”,

		Three Months Ended March 31,								Year Ended December 31,
		2007				2006				2006				2005				2004				2003				2002
Statements of Income:
Interest income		$	534,949			$	464,787			$	2,070,519			$	1,641,765			$	1,347,315			$	1,305,756			$	1,293,195
Interest expense			279,394				221,107				1,051,342				679,354				435,941				456,770				543,621
Net interest income			255,555				243,680				1,019,177				962,411				911,374				848,986				749,574
Provision for loan and lease losses			29,406				19,540				65,191				81,299				55,062				163,993				194,426
Net interest income after provision for loan and lease losses			226,149				224,140				953,986				881,112				856,312				684,993				555,148
Non-interest income			145,177				159,534				561,069				632,282				818,598				1,069,153				1,341,704
Non-interest expense			242,072				238,415				1,000,994				969,820				1,122,244				1,230,159				1,374,147
Income before taxes			129,254				145,259				514,061				543,574				552,666				523,987				522,705
Provision for income taxes			33,528				40,803				52,840				131,483				153,741				138,294				198,974
Income before cumulative effect of change in accounting principle			95,726				104,456				461,221				412,091				398,925				385,693				323,731
Cumulative effect of change in accounting principle, net of tax(1)			—				—				—				—				—				(13,330	)			—
Net income		$	95,726			$	104,456			$	461,221			$	412,091			$	398,925			$	372,363			$	323,731
Per Common Share:
Income before cumulative effect of change in accounting principle
Basic		$	0.41			$	0.45			$	1.95			$	1.79			$	1.74			$	1.68			$	1.34
Diluted			0.40				0.45				1.92				1.77				1.71				1.67				1.33
Net income
Basic			0.41				0.45				1.95				1.79				1.74				1.62				1.34
Diluted			0.40				0.45				1.92				1.77				1.71				1.61				1.33
Weighted average shares outstanding
Basic			235,586,000				230,968,000				236,699,000				230,142,000				229,913,000				229,401,000				242,279,000
Diluted			238,754,000				234,363,000				239,920,000				233,475,000				233,856,000				231,582,000				244,012,000
Book value		$	12.95			$	12.56			$	12.80			$	11.41			$	10.96			$	9.93			$	9.40
Dividends declared			0.265				0.25				1.00				0.845				0.75				0.67				0.64
Financial Ratios:
Return on average assets			1.11	%			1.26	%			1.31	%			1.26	%			1.27	%			1.29	%			1.24	%
Return on average shareholders’ equity			12.9				15.5				15.7				16.0				16.8				17.0				14.5
Net interest margin			3.36				3.32				3.29				3.33				3.33				3.49				3.62
Efficiency ratio			59.2				58.3				59.4				60.0				65.0				63.9				65.6
Effective tax rate			25.9				28.1				10.3				24.2				27.8				26.4				38.1
Net charge-offs to average loans			0.28				0.39				0.32				0.33				0.35				0.81				1.13
Allowance for loan and lease losses as a percentage of total loans and leases			1.08				1.09				1.04				1.10				1.15				1.42				1.62
Tier 1 risk-based capital			8.97				8.94				8.93				9.13				9.08				8.53				8.34
Total risk-based capital			12.81				12.91				12.79				12.42				12.48				11.95				11.25
Tangible equity to tangible assets			7.06				6.97				6.87				7.19				7.18				6.79				7.22
Balance Sheet Information:
Average loans and leases		$	26,204,133			$	24,931,138			$	25,943,554			$	24,309,768			$	22,126,894			$	20,028,779			$	17,417,455
Average earning assets			31,274,869				30,181,627				31,451,041				29,307,603				27,697,075				24,592,170				20,846,090
Average total assets			34,929,961				33,488,628				35,111,236				32,639,011				31,432,746				28,990,899				26,063,281
Average total deposits			24,450,968				23,028,078				24,183,624				22,011,445				19,494,418				18,158,056				17,184,661
Average shareholders’ equity			3,014,229				2,729,188				2,945,597				2,582,721				2,374,137				2,196,348				2,238,761
Period-end loans and leases			26,266,747				26,145,589				26,153,425				24,472,166				23,560,277				21,075,118				18,587,403
Period-end allowance for loan losses			282,976				283,839				272,068				268,347				271,211				299,732				300,503
Period-end assets			34,979,299				35,665,909				35,329,019				32,764,805				32,565,497				30,519,326				27,539,753
Period-end shareholders’ equity			3,051,360				3,080,180				3,014,326				2,557,501				2,537,638				2,275,002				2,189,793

(1)		Due to the adoption of FASB Interpretation No. 46, “Consolidation of Variable Interest Entities.”

 

SELECTED HISTORICAL FINANCIAL DATA OF SKY

		Three Months Ended March 31,								Year Ended December 31,
		2007				2006				2006				2005				2004				2003				2002
Statements of Income:
Interest income		$	281,267			$	234,044			$	1,013,491			$	830,224			$	661,943			$	594,063			$	576,397
Interest expense			138,501				101,208				471,945				315,572				210,632				202,820				235,162
Net interest income			142,766				132,836				541,546				514,652				451,311				391,243				341,235
Provision for loan and lease losses			10,703				7,154				36,854				52,249				37,660				34,125				37,659
Net interest income after provision for loan and lease losses			132,063				125,682				504,692				462,403				413,651				357,118				303,576
Non-interest income			68,813				56,659				218,870				211,382				203,417				178,898				147,984
Non-interest expense			122,880				106,178				438,555				400,047				356,524				307,186				253,700
Income from continuing operations before taxes			77,996				76,163				285,007				273,738				260,544				228,830				197,860
Provision for income taxes			26,375				25,523				94,669				91,547				85,344				76,150				65,712
Income from continuing operations			51,621				50,640				190,338				182,191				175,200				152,680				132,148
Income from discontinued operations(2) (net of tax)			—												372				19,155				3,937				(4,341	)
Net income		$	51,621			$	50,640			$	190,338			$	182,563			$	194,355			$	156,617			$	127,807
Per Common Share:
Income from continuing operations
Basic		$	0.44			$	0.47			$	1.73			$	1.71			$	1.76			$	1.70			$	1.58
Diluted			0.44				0.46				1.72				1.69				1.74				1.69				1.57
Net income
Basic			0.44				0.47				1.73				1.71				1.95				1.75				1.53
Diluted			0.44				0.46				1.72				1.69				1.93				1.73				1.52
Weighted average shares outstanding
Basic			117,291,000				108,337,000				110,107,000				106,796,000				99,461,000				89,630,000				83,439,000
Diluted			118,329,000				109,287,000				110,954,000				107,973,000				100,568,000				90,404,000				84,096,000
Book value		$	16.38			$	14.41			$	16.08			$	14.35			$	13.77			$	10.80			$	9.54
Dividends declared			0.25				0.23				0.94				0.89				0.85				0.81				0.77
Financial Ratios:
Return on average assets			1.18	%			1.31	%			1.18	%			1.21	%			1.43	%			1.29	%			1.29	%
Return on average shareholders’ equity			11.0				13.1				11.6				12.3				15.8				17.2				17.7
Net interest margin			3.64				3.78				3.69				3.73				3.69				3.70				3.90
Efficiency ratio			55.8				53.8				53.9				53.1				53.7				52.5				51.6
Effective tax rate			33.8				33.5				33.2				33.4				32.7				33.3				33.2
Net charge-offs to average loans			0.36				0.29				0.34				0.57				0.37				0.40				0.47
Allowance for loan and lease losses as a percentage of total loans and leases			1.34				1.29				1.35				1.30				1.43				1.45				1.45
Tier 1 risk-based capital			10.28				9.66				9.98				9.32				9.27				9.00				8.39
Total risk-based capital			12.29				11.80				12.07				11.53				11.73				11.83				11.02
Tangible equity to tangible assets			6.73				6.50				6.38				6.39				6.42				5.99				6.24
Balance Sheet Information:
Average loans and leases		$	12,854,247			$	11,176,494			$	11,523,336			$	10,766,796			$	9,462,682			$	8,103,732			$	6,532,756
Average earning assets			16,035,694				14,318,916				14,770,157				13,876,315				12,327,954				10,653,006				8,835,842
Average assets			17,691,975				15,659,322				16,192,790				15,145,698				13,571,916				12,166,747				9,915,710
Average total deposits			13,103,394				10,759,788				11,493,468				10,626,218				9,504,848				8,400,743				7,016,506
Average shareholders’ equity			1,898,622				1,570,789				1,646,132				1,487,624				1,229,933				908,756				723,242
Period-end loans and leases			12,837,735				11,093,918				12,826,817				11,149,222				10,616,118				8,644,645				7,347,988
Period-end allowance for loan losses			172,407				143,383				172,990				144,461				151,389				124,943				106,675
Period-end assets			17,623,009				15,658,551				17,726,094				15,683,291				14,944,423				12,946,978				11,050,120
Period-end shareholders’ equity			1,930,632				1,566,571				1,880,648				1,553,877				1,470,955				998,576				832,433

(1)		For comparison purposes, Sky’s efficiency ratio has been calculated using the same definition used by Huntington and as a result may differ from efficiency ratios included in previous Sky public filings.
(2)		Sky Financial Solutions, sold March 31, 2004, has been reflected as a discontinued operation.

 

SELECTED CONSOLIDATED UNAUDITED PRO FORMA FINANCIAL INFORMATION

		Three Months Ended March 31, 2007
		Huntington				Sky				Adjustments				Pro Forma
Statements of Income:
Interest income		$	534,949			$	281,267			$	8,159			$	824,375
Interest expense			279,394				138,501				4,189				422,084
Net interest income			255,555				142,766				3,970				402,291
Provision for credit losses			29,406				10,703				—				40,109
Net interest income after provision for loan and lease losses			226,149				132,063				3,970				362,182
Non-interest income			145,177				68,813				—				213,990
Non-interest expense			242,072				122,880				9,986				374,938
Income before taxes			129,254				77,996				(6,016	)			201,234
Provision for income taxes			33,528				26,375				(2,106	)			57,797
Net income		$	95,726			$	51,621			$	(3,910	)		$	143,437
Per Common Share:
Net income
Basic		$	0.41			$	0.44							$	0.39
Diluted			0.40				0.44								0.39
Weighted average shares outstanding
Basic			235,586,000				117,291,000				11,494,518				364,371,518
Diluted			238,754,000				118,329,000				11,596,242				368,679,242
Book value		$	12.95			$	16.38							$	16.93
Financial Ratios:
Return on average assets			1.11	%			1.18	%							1.07	%
Return on average shareholders’ equity			12.9				11.0								9.5
Net interest margin			3.36				3.64								3.50
Efficiency ratio			59.2				55.8								57.7
Effective tax rate			25.9				33.8								28.7
Net charge-offs to average loans			0.28				0.36								0.30
Allowance for loan and lease losses as a percentage of total loans and leases			1.08				1.34								1.13
Tier 1 risk-based capital			8.97				10.28								8.78
Total risk-based capital			12.81				12.29								12.02
Tangible equity to tangible assets			7.06				6.73								5.72
Balance Sheet Information:
Average loans and leases		$	26,204,133			$	12,854,247			$	(108,416	)		$	38,949,964
Average earning assets			31,274,869				16,035,694				(108,416	)			47,202,147
Average assets			34,929,961				17,691,975				1,659,960				54,281,896
Average total deposits			24,450,968				13,103,394				5,500				37,559,862
Average shareholders’ equity			3,014,229				1,898,622				1,200,155				6,113,006
Period-end loans and leases			26,266,747				12,837,735				(108,416	)			38,996,066
Period-end allowance for loan losses			282,976				172,407				(13,416	)			441,967
Period-end assets			34,979,299				17,623,009				1,659,960				54,262,268
Period-end shareholders’ equity			3,051,360				1,930,632				1,200,155				6,182,147

(1)		Net interest margin is determined on a fully taxable equivalent basis, assuming a 35% tax rate.
(2)		For comparison purposes, Sky’s efficiency ratio has been calculated using the same definition used by Huntington and as a result may differ from efficiency ratios included in previous Sky public filings.

		Year Ended December 31, 2006
		Huntington				Sky				Adjustments				Pro Forma
(dollars in thousands, except per share amounts)
Statements of Income:
Interest income		$	2,070,519			$	1,013,491			$	32,633			$	3,116,643
Interest expense			1,051,342				471,945				16,758				1,540,045
Net interest income			1,019,177				541,546				15,875				1,576,598
Provision for loan and lease losses			65,191				36,854				—				102,045
Net interest income after provision for loan and lease losses			953,986				504,692				15,875				1,474,553
Non-interest income			561,069				218,870				—				779,939
Non-interest expense			1,000,994				438,555				42,379				1,481,928
Income before taxes			514,061				285,007				(26,504	)			772,564
Provision for income taxes			52,840				94,669				(9,276	)			138,233
Net income		$	461,221			$	190,338			$	(17,228	)		$	634,331
Per Common Share:
Net income
Basic		$	1.95			$	1.73							$	1.77
Diluted			1.92				1.72								1.75
Weighted average shares outstanding
Basic			236,699,000				110,107,000				10,790,486				357,596,486
Diluted			239,920,000				110,954,000				10,873,492				361,747,492
Book value		$	12.80			$	16.08							$	17.00
Financial Ratios:
Efficiency ratio(1)			59.4				53.9								57.2
Effective tax rate			10.3				33.2								17.9

(1)		For comparison purposes, Sky’s efficiency ratio has been calculated using the same definition used by Huntington and as a result may differ from efficiency ratios included in previous Sky public filings.

														Per
		Huntington				Sky				Pro Forma				Equivalent
		Historical				Historical				Combined				Sky Share
Net income per share for three months ended March 31, 2007
Basic		$	0.41			$	0.44			$	0.39			$	0.43
Diluted			0.40				0.44				0.39				0.43
Cash Dividends per share declared for three months ended March 31, 2007			0.265				0.25				0.265				0.29
Book Value per share as of March 31, 2007			12.95				16.38				16.93				18.59
Net income per share for the year ended
December 31, 2006
Basic		$	1.95			$	1.73			$	1.77			$	1.95
Diluted			1.92				1.72				1.75				1.93
Cash Dividends per share declared for the year ended December 31, 2006			1.00				0.94				1.00				1.10

RISK FACTORS

 

 

 

The indenture does not limit the amount of indebtedness for money borrowed Huntington may issue that ranks senior to the JSNs upon its liquidation or in right of payment as to principal or interest.

 

The JSNs will be subordinate and junior upon Huntington’s liquidation to its obligations under all of its indebtedness for money borrowed that does not by its terms rank equal with or junior to the JSNs upon liquidation. At March 31, 2007, Huntington’s indebtedness for money borrowed ranking senior to the JSNs on liquidation, on a consolidated basis, was $31.9 billion.

 

“Parity securities” means debt securities or guarantees that rank on a parity with the JSNs upon Huntington’s liquidation. Huntington may issue parity securities as to which it is required to make payments of interest during a deferral period on the JSNs that, if not made, would cause it to breach the terms of the instrument governing such parity securities. The terms of the JSNs permit Huntington to make any payment of deferred interest on parity securities that, if not made, would cause it to breach the terms of the instrument governing such parity securities. They also permit Huntington to make any payment of current or deferred interest on parity securities and on the JSNs during a deferral period that is made pro rata to the amounts due on such parity securities and the JSNs, subject to the limitations described in the last paragraph under “Description of the Junior Subordinated Notes — Alternative Payment Mechanism” to the extent that they apply.

 

The JSNs beneficially owned by the Trust will be effectively subordinated to the obligations of Huntington’s subsidiaries.

 

Huntington receives a significant portion of its revenue from dividends from its subsidiaries. Because it is a holding company, its right to participate in any distribution of the assets of its banking or nonbanking subsidiaries, upon a subsidiary’s dissolution, winding-up, liquidation or reorganization or otherwise, and thus your ability to benefit indirectly from such distribution, is subject to the prior claims of creditors of any such subsidiary, except to the extent that Huntington may be a creditor of that subsidiary and its claims are recognized. There are also legal limitations on the extent to which some of its subsidiaries may extend credit, pay dividends or otherwise supply funds to, or engage in transactions with, it or some of its other subsidiaries. Huntington’s subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay amounts due under Huntington’s contracts or otherwise to make any funds available to it. Accordingly, the payments on the JSNs, and therefore the Trust Preferred Securities, effectively will be subordinated to all existing and future liabilities of Huntington’s subsidiaries. At March 31, 2007, Huntington’s subsidiaries’ direct borrowings and deposit liabilities were approximately $31.4 billion.

 

Huntington’s ability to make distributions on or redeem the Trust Preferred Securities is restricted.

 

Federal banking authorities have the right to examine the Trust and its activities because it is Huntington’s subsidiary. Under certain circumstances, including any determination that Huntington’s relationship to the Trust would result in an unsafe and unsound banking practice, these banking authorities have the authority to issue orders that could restrict the Trust’s ability to make distributions on or to redeem the Trust Preferred Securities.

 

Huntington guarantees distributions on the Trust Preferred Securities only if the Trust has cash available.

 

If you hold any of the Trust Preferred Securities, Huntington will guarantee, on an unsecured and junior subordinated basis, the payment of the following:

 

 

 

If Huntington does not make a required interest payment on the JSNs or elects to defer interest payments on the JSNs, the Trust will not have sufficient funds to make the related distribution on the Trust Preferred Securities. The guarantee does not cover payments on the Trust Preferred Securities when the Trust does not have sufficient funds to make them. If Huntington does not pay any amounts on the JSNs when due, holders of the Trust Preferred Securities will have to rely on the enforcement by the property trustee of the property trustee’s rights as owner of the JSNs, or proceed directly against Huntington for payment of any amounts due on the JSNs.

 

Huntington’s obligations under the guarantee are unsecured and are subordinated to and junior in right of payment to all of its secured and senior indebtedness, and will rank equally with any similar guarantees of parity securities it may issue in the future.

 

Huntington’s right to redeem the JSNs prior to May   , 2047 is limited by the replacement capital covenant.

 

Huntington may redeem any or all of the JSNs at any time, as described under “Description of the Junior Subordinated Notes — Redemption” below. However, the replacement capital covenant described under “Replacement Capital Covenant” will limit its right to redeem or purchase JSNs prior to May   , 2047, which date Huntington may extend up to 10 years without the consent of the holders of the JSNs. In the replacement capital covenant, Huntington covenants, for the benefit of holders of a designated series of its indebtedness that ranks senior to the JSNs, or in certain limited cases holders of a designated series of indebtedness of The Huntington National Bank, that neither it nor any of its subsidiaries will redeem, repay or purchase the JSNs or the Trust Preferred Securities unless:

 

 

 

 

in each case within the applicable measurement period (as described in “Replacement Capital Covenant”). Accordingly, there could be circumstances in which it would be in the interest of both you and Huntington that some or all of the JSNs or the Trust Preferred Securities be redeemed, and sufficient cash is available for that purpose, but Huntington will be restricted from doing so because it did not obtain proceeds from the sale of “replacement capital securities”, which are described in “Replacement Capital Covenant”, or otherwise deliver or issue common stock in connection with the acquisition of property or assets or the conversion or exchange of convertible or exchangeable securities.

 

Huntington may extend the scheduled maturity date, and its obligation to repay the JSNs on the scheduled maturity date is subject to issuance of qualifying capital securities.

 

The scheduled maturity date is initially May   , 2037, but, on May   , 2017, Huntington may elect to extend the scheduled maturity date to May   , 2047, if:

 

 

Huntington has no obligation to repay the JSNs prior to the scheduled maturity date and accordingly, any extension of the scheduled maturity date will delay its obligation to repay the JSNs.

 

Moreover, Huntington’s obligation to repay the JSNs on the scheduled maturity date is limited. Huntington is required to repay the JSNs on the scheduled maturity date only to the extent that it has raised sufficient net proceeds from the issuance of qualifying capital securities (as defined under “Replacement Capital Covenant”) within a 180-day period ending on a notice date not more than 30 or less than 10 business days prior to such date. If it has not raised sufficient proceeds from the issuance of qualifying capital securities to permit repayment of the JSNs on the scheduled maturity

date, it will repay the JSNs to the extent of the net proceeds it has received and the unpaid portion will remain outstanding. Moreover, Huntington may only pay deferred interest out of the net proceeds from the sale of qualifying APM securities, as described under “— Huntington’s ability to pay deferred interest is limited by the terms of the alternative payment mechanism, and is subject to market disruption events and other factors beyond its control”. Huntington will be required to repay the unpaid principal amount of the JSNs on each subsequent interest payment date to the extent of net proceeds it receives from any subsequent issuance of qualifying capital securities until: (i) it has raised sufficient net proceeds to permit repayment in full in accordance with this requirement, (ii) payment of the JSNs is accelerated upon the occurrence of an event of default or (iii) the final repayment date for the JSNs. Huntington’s ability to issue qualifying capital securities in connection with this obligation to repay the JSNs will depend on, among other things, legal and regulatory requirements, market conditions at the time the obligation arises, as well as the acceptability to prospective investors of the terms of these qualifying capital securities. Although Huntington has agreed to use its commercially reasonable efforts to issue sufficient qualifying capital securities during the 180-day period referred to above to repay the JSNs and from month to month after that period until the JSNs are repaid in full, its failure to do so would not be an event of default or give rise to a right of acceleration or similar remedy until the final repayment date, and it will be excused from using its commercially reasonable efforts if certain market disruption events occur.

 

Moreover, at or around the time of issuance of the Trust Preferred Securities, Huntington will enter into the replacement capital covenant described above pursuant to which Huntington will make a covenant restricting its right to repay, redeem or purchase JSNs or Trust Preferred Securities at any time prior to a termination date that is initially May   , 2047. Huntington may postpone the termination date of the replacement capital covenant for up to 10 years and may modify the replacement capital covenant without your consent if the modification does not further restrict its ability to repay the JSNs in connection with an issuance of qualifying capital securities. See “Replacement Capital Covenant”.

 

Huntington has no obligation to issue any securities other than qualifying capital securities in connection with its obligation to repay the JSNs on or after the scheduled maturity date.

 

Huntington has the right to defer interest for 10 years without causing an event of default.

 

Huntington has the right to defer interest on the JSNs for one or more consecutive interest periods of not more than 10 years. Although it would be subject to the alternative payment mechanism after the earlier of the fifth anniversary of the commencement of the deferral period and the first interest payment date on which it makes any payment of current interest during a deferral period, if it is unable to raise sufficient eligible proceeds, it may fail to pay accrued interest on the JSNs for a period of up to 10 consecutive years without causing an event of default. During any such deferral period, holders of Trust Preferred Securities will receive limited or no current payments on the Trust Preferred Securities and, so long as Huntington is otherwise in compliance with its obligations, such holders will have no remedies against the Trust or Huntington for nonpayment unless Huntington fails to pay all deferred interest (including compounded interest) within 30 days of the conclusion of a 10-year deferral period.

 

Huntington’s ability to pay deferred interest is limited by the terms of the alternative payment mechanism, and is subject to market disruption events and other factors beyond its control.

 

If Huntington elects to defer interest payments, it will not be permitted to pay deferred interest on the JSNs (and compounded interest thereon) during the deferral period, which may last up to 10 years, from any source other than the issuance of common stock and “qualifying warrants” up to the “common equity issuance cap,” and, “qualifying preferred stock” up to the “preferred stock issuance cap” (each as defined under “Description of the Junior Subordinated Notes — Alternative Payment Mechanism”), except in limited circumstances. Those limited circumstances are (i) the occurrence and continuance of a supervisory event (i.e., the Federal Reserve has disapproved of such issuance or disapproved of the use of proceeds of such issuance to pay deferred interest), (ii) the deferral period

is terminated as permitted under the indenture on the next interest payment date following certain business combinations (or, if later than such interest payment date, within 90 days following the date of consummation of the business combination) and (iii) an event of default has occurred and is continuing. In those circumstances, Huntington will be permitted, but not required, to pay deferred interest with cash from any source, all as described under “Description of the Junior Subordinated Notes — Alternative Payment Mechanism”. Common stock, qualifying preferred stock, qualifying warrants and mandatorily convertible preferred stock issuable under the alternative payment mechanism are referred to as “qualifying APM securities”. The “preferred stock issuance cap” limits the issuance of qualifying preferred stock and mandatorily convertible preferred stock pursuant to the alternative payment mechanism to an amount the net proceeds of which, together with the net proceeds of all qualifying preferred stock issued during any deferral period and applied to pay deferred interest, are equal to 25% of the aggregate principal amount of the outstanding JSNs. The occurrence of a market disruption event or supervisory event may prevent or delay a sale of qualifying APM securities pursuant to the alternative payment mechanism and, consequently, the payment of deferred interest on the JSNs. Market disruption events include events and circumstances both within and beyond Huntington’s control, such as the failure to obtain approval of a regulatory body or governmental authority to issue qualifying APM securities and notwithstanding its commercially reasonable efforts. Moreover, Huntington may encounter difficulties in successfully marketing its qualifying APM securities, particularly during times it is subject to the restrictions on dividends as a result of the deferral of interest. If Huntington does not sell sufficient qualifying APM securities to fund deferred interest payments in these circumstances (other than as a result of a supervisory event), Huntington will not be permitted to pay deferred interest to the Trust and, accordingly, no payment of distributions may be made on the Trust Preferred Securities, even if Huntington has cash available from other sources. See “Description of the Junior Subordinated Notes — Option to Defer Interest Payments”, “— Alternative Payment Mechanism” and “— Market Disruption Events”.

 

The terms of Huntington’s outstanding junior subordinated debentures prohibit it from making any payment of principal or interest on the JSNs or the guarantee relating to the Trust Preferred Securities and from repaying, redeeming or repurchasing any JSNs if there has occurred any event that would constitute an event of default under the applicable junior subordinated indenture or the related guarantee or at any time when it has deferred any interest thereunder.

 

Huntington must notify the Federal Reserve before using the alternative payment mechanism and may not use it if the Federal Reserve disapproves.

 

The indenture for the JSNs provides that Huntington must notify the Federal Reserve if the alternative payment mechanism is applicable and that it may not sell its qualifying APM securities or apply any eligible proceeds to pay interest pursuant to the alternative payment mechanism if a supervisory event has occurred and is continuing (i.e., the Federal Reserve disapproves of such issuance or disapproves of the use of proceeds of such issuance to pay deferred interest). The Federal Reserve may allow the issuance of qualifying APM securities but not allow use of the proceeds to pay deferred interest on the JSNs and require that the proceeds be applied to other purposes, including supporting a troubled bank subsidiary. Accordingly, if Huntington elects to defer interest on the JSNs and the Federal Reserve disapproves of the issuance of qualifying APM securities or the application of the proceeds to pay deferred interest, it may be unable to pay the deferred interest on the JSNs.

 

In the event the Federal Reserve disapproves of all or part of the alternative payment mechanism, Huntington may continue to defer interest until 10 years have elapsed since the beginning of the deferral period without triggering an event of default under the indenture. As a result, Huntington could defer interest for up to 10 years without being required to sell qualifying APM securities and to apply the proceeds to pay deferred interest.

 

The indenture limits the number of shares of common stock that we may sell to pay deferred interest.

 

The indenture limits the amount of our common stock that we are permitted to sell to pay deferred interest to the then-current “share cap amount”, as described under “Summary of Terms of the JSNs — Alternative Payment Mechanism”, which will initially be 45 million shares. If the share cap amount has been reached and it is not sufficient to allow us to raise sufficient proceeds to pay deferred interest in full, we have agreed to use commercially reasonable efforts to increase the share cap amount (i) only to the extent that we can do so and simultaneously satisfy our future fixed or contingent obligations under other securities and derivative instruments that provide for settlement or payment in shares of our common stock or (ii) if we cannot increase the share cap amount as contemplated in the preceding clause, by requesting our board of directors to adopt a resolution for a shareholder vote at the next occurring annual shareholders meeting to increase the number of shares of our authorized common stock for purposes of satisfying our obligations to pay deferred interest. If the number of shares of our common stock that we need to sell in order to pay deferred interest in full exceeds the share cap amount, we may continue to defer interest, and such deferral will not constitute an event of default or give rise to a right of acceleration or similar remedy unless it extends beyond the date which is 10 years following the first interest payment date on which we deferred interest.

 

The indenture limits Huntington’s obligation to raise proceeds from the sale of common stock or qualifying warrants to pay deferred interest during the first nine years of a deferral period and generally does not obligate it to issue qualifying warrants.

 

The indenture limits Huntington’s obligation to raise proceeds from the sale of shares of common stock or qualifying warrants to pay deferred interest attributable to the first five years of any deferral period (including compounded interest thereon) prior to the ninth anniversary of the commencement of a deferral period in excess of an amount we refer to as the “common equity issuance cap”. The common equity issuance cap takes into account all sales of common stock and qualifying warrants under the alternative payment mechanism for that deferral period. Once Huntington reaches the common equity issuance cap for a deferral period, it will no longer be obligated to sell common stock to pay deferred interest relating to such deferral period unless such deferral extends beyond the date which is nine years following the commencement of the deferral period. Although Huntington has the right to sell common stock if it has reached the common equity issuance cap but has not reached the share cap amount, it has no obligation to do so. Huntington also has the option of selling qualifying warrants to raise proceeds to pay deferred interest, but in general it is not obligated to sell qualifying warrants and no party may require it to do so. See “Description of the Junior Subordinated Notes — Alternative Payment Mechanism”.

 

Huntington has the ability under certain circumstances to narrow the definition of qualifying APM securities.

 

Huntington may, without the consent of the holders of the Trust Preferred Securities or the JSNs, amend the definition of “qualifying APM securities” for purposes of the alternative payment mechanism to eliminate common stock or mandatorily convertible preferred stock (or both) from the definition if, after the issue date of the Trust Preferred Securities, an accounting standard or interpretive guidance of an existing accounting standard issued by an organization or regulator that has responsibility for establishing or interpreting accounting standards in the United States becomes effective such that there is more than an insubstantial risk that the failure to do so would result in a reduction in Huntington’s earnings per share as calculated in accordance with generally accepted accounting principles in the United States. The elimination of common stock or mandatorily convertible preferred stock or both from the definition of qualifying APM securities, together with the continued application of the preferred stock issuance cap, may make it more difficult for Huntington to sell sufficient qualifying APM securities to fund the payment of deferred interest.

 

Deferral of interest payments could adversely affect the market price of the Trust Preferred Securities.

 

Huntington currently does not intend to exercise its right to defer payments of interest on the JSNs. However, if it exercises that right in the future, the market price of the Trust Preferred Securities is likely to be affected. As a result of the existence of this deferral right, the market price of the Trust Preferred Securities, payments on which depend solely on payments being made on the JSNs, may be more volatile than the market prices of other securities that are not subject to optional deferral. If Huntington does defer interest on the JSNs and you elect to sell Trust Preferred Securities during the deferral period, you may not receive the same return on your investment as a holder that continues to hold its Trust Preferred Securities and receives the payment of interest at the end of the deferral period.

 

If Huntington does defer interest payments on the JSNs, you will be required to accrue income, in the form of original issue discount, for U.S. federal income tax purposes during the period of the deferral in respect of your proportionate share of the JSNs, even if you normally report income when received and even though you may not receive the cash attributable to that income during the deferral period. You will also not receive the cash distribution related to any accrued and unpaid interest from the Trust if you sell the Trust Preferred Securities before the record date for any deferred distributions, even if you held the Trust Preferred Securities on the date that the payments would normally have been paid. See “Certain United States Federal Income Tax Consequences — U.S. Holders — Interest Income and Original Issue Discount”.

 

Claims would be limited upon bankruptcy, insolvency or receivership.

 

In certain events of Huntington’s bankruptcy, insolvency or receivership prior to the redemption or repayment of any JSNs, whether voluntary or not, a holder of JSNs will have no claim for, and thus no right to receive, deferred and unpaid interest (including compounded interest thereon) that has not been settled through the application of the alternative payment mechanism to the extent the amount of such interest exceeds the sum of (x) interest that relates to the earliest two years of the portion of the deferral period for which interest has not been paid (including compounded interest thereon) and (y) an amount equal to such holder’s pro rata share of the excess, if any, of the preferred stock issuance cap over the aggregate amount of net proceeds from the sale of qualifying preferred stock that Huntington has applied to pay such deferred interest pursuant to the alternative payment mechanism. Each holder of JSNs is deemed to agree that, to the extent the remaining claim exceeds the amount set forth in clause (x), the amount it receives in respect of such excess shall not exceed the amount it would have received had the claim for such excess ranked equally with the interests of the holders, if any, of qualifying preferred stock.

 

Holders of the Trust Preferred Securities have limited rights under the JSNs.

 

Except as described below, you, as a holder of the Trust Preferred Securities, will not be able to exercise directly any rights under the JSNs.

 

If an event of default under the amended declaration of trust were to occur and be continuing, holders of the Trust Preferred Securities would rely on the enforcement by the property trustee of its rights as the registered holder of the JSNs against Huntington. In addition, the holders of a majority in liquidation amount of the Trust Preferred Securities would have the right to direct the time, method and place of conducting any proceeding for any remedy available to the property trustee or to direct the exercise of any trust or power conferred upon the property trustee under the amended declaration of trust, including the right to direct the property trustee to exercise the remedies available to it as the holder of the JSNs.

 

The indenture for the JSNs provides that the indenture trustee must give holders notice of all defaults or events of default within 30 days after they become known to the indenture trustee. However, except in the cases of a default or an event of default in payment on the JSNs, the indenture

trustee will be protected in withholding the notice if its responsible officers determine that withholding of the notice is in the interest of the holders.

 

If the property trustee were to fail to enforce its rights under the JSNs in respect of an event of default under the JSNs after a record holder of the Trust Preferred Securities has made a written request, that record holder may, to the extent permitted by applicable law, institute a legal proceeding against Huntington to enforce the property trustee’s rights under the JSNs. In addition, if Huntington were to fail to pay interest or principal on the JSNs on the date that interest or principal is otherwise payable, except for deferrals permitted by the amended declaration of trust and the indenture, and this failure to pay were continuing, holders of the Trust Preferred Securities would have the right to directly institute a proceeding for enforcement of Huntington’s obligations to issue qualifying APM securities pursuant to the alternative payment mechanism or to use commercially reasonable efforts to sell qualifying capital securities as described under “Description of the Junior Subordinated Notes — Repayment of Principal”, in each case subject to a market disruption event, and for payment of the principal or interest on the JSNs having a principal amount equal to the aggregate liquidation amount of their Trust Preferred Securities (a “direct action”) after the respective due dates specified in the JSNs. In connection with a direct action, Huntington would have the right under the indenture and the amended declaration of trust to set off any payment made to that holder by it.

 

The property trustee, as holder of the JSNs on behalf of the Trust, has only limited rights of acceleration.

 

The property trustee, as holder of the JSNs on behalf of the Trust, may accelerate payment of the principal and accrued and unpaid interest on the JSNs only upon the occurrence and continuation of an event of default under the JSNs. An event of default under the JSNs is generally limited to payment defaults after 10 years of interest deferral, and specific events of bankruptcy, insolvency and reorganization relating to Huntington, or the receivership of a major subsidiary depository institution.

 

There is no right of acceleration upon Huntington’s breach of other covenants under the indenture or default on its payment obligations under the guarantee. In addition, the indenture does not protect holders from a sudden and dramatic decline in credit quality resulting from takeovers, recapitalizations, or similar restructurings or other highly leveraged transactions.

 

There may be no trading market for the Trust Preferred Securities.

 

Huntington does not intend to apply for listing of the Trust Preferred Securities on the New York Stock Exchange or any other securities exchange. Although Huntington has been advised that the underwriters intend to make a market in the Trust Preferred Securities, the underwriters are not obligated to do so and may discontinue market making at any time. Accordingly, no assurance can be given as to the liquidity of, or trading markets for, the Trust Preferred Securities.

 

The general level of interest rates and Huntington’s credit quality will directly affect the value of the Trust Preferred Securities.

 

The trading prices of the Trust Preferred Securities will be directly affected by, among other things, interest rates generally and Huntington’s credit quality. It is impossible to predict whether interest rates will rise or fall. Huntington’s operating results and prospects and its financial condition, among other factors, will affect the value of the Trust Preferred Securities.

 

General market conditions and unpredictable factors could adversely affect market prices for the Trust Preferred Securities.

 

There can be no assurance about the market prices for the Trust Preferred Securities. Several factors, many of which are beyond our control, will influence the market value of the Trust Preferred Securities. Factors that might influence the market value of the Trust Preferred Securities include:

 

 

Accordingly, the Trust Preferred Securities that an investor purchases, whether in this offering or in the secondary market, may trade at a discount to their cost.

 

Huntington may redeem the JSNs at any time. In certain circumstances, the redemption price will not include a “make-whole” amount and, prior to May   , 2017, may be less than would otherwise apply if there is a challenge to the tax characterization or certain changes occur relating to the rating agency treatment of the JSNs.

 

Huntington may redeem any or all of the JSNs at any time. The redemption price will be 100% of the principal amount of the JSNs to be redeemed plus accrued interest through the date of redemption in the case of a redemption: (i) of any JSNs on May   , 2017 or May   , 2027; (ii) of all but not less than all the JSNs within 90 days of the occurrence of certain changes relating to the capital treatment of the Trust Preferred Securities or the investment company laws; (iii) of all but not less than all the JSNs after May   , 2017 and within 90 days of the occurrence of certain changes in the tax treatment accorded to the Trust Preferred Securities; or (iv) of any JSNs at any time on or after May   , 2037. The redemption price will be a make-whole redemption price in the case of any other redemption. In the case of a redemption of all of the JSNs prior to May   , 2017 within 90 days of the occurrence of certain changes in the rating agency credit or tax treatment accorded to the Trust Preferred Securities, the make-whole redemption price may be lower than would otherwise apply. If the Trust Preferred Securities were redeemed, the redemption would be a taxable event to you. In addition, you might not be able to reinvest the money you receive upon redemption of the Trust Preferred Securities at the same rate as the rate of return on the Trust Preferred Securities. See “Description of the Junior Subordinated Notes — Redemption”.

 

An Internal Revenue Service pronouncement or threatened challenge resulting in a tax event could occur at any time. Similarly, changes in rating agency methodology or the treatment of the Trust Preferred Securities for Federal Reserve capital adequacy purposes, and changes relating to the treatment of the trust as an “investment company”, under the Investment Company Act of 1940 (the “Investment Company Act”) could result in the JSNs being redeemed earlier or at a lower redemption price than would otherwise be the case. See “Description of the Junior Subordinated Notes — Redemption” for a further description of those events.

 

Risks related to Huntington

 

For risks related to Huntington, please see the section entitled “Risk Factors” in Huntington’s Annual Report on Form 10-K for the year ended December 31, 2006, which is incorporated by reference in this prospectus supplement and the accompanying prospectus.

 

Huntington Bancshares Incorporated is a multi-state diversified financial holding company organized under Maryland law in 1966 and headquartered in Columbus, Ohio. Through its subsidiaries, it provides full-service commercial and consumer banking services, mortgage banking services, automobile financing, equipment leasing, investment management, trust services, brokerage services, private mortgage insurance; reinsure credit life and disability insurance; and other insurance and financial products and services. Its banking offices are located in Ohio, Michigan, West Virginia, Indiana, and Kentucky. Certain activities are also conducted in Arizona, Florida, Georgia, Maryland, Nevada, New Jersey, North Carolina, Pennsylvania, South Carolina, Tennessee, and Vermont. It has a foreign office in the Cayman Islands and another in Hong Kong. The Huntington National Bank (the Bank), organized in 1866, is its only bank subsidiary.

 

As a registered financial holding company, Huntington is subject to the supervision of the Board of Governors of the Federal Reserve System. Huntington is required to file with the Federal Reserve Board reports and other information regarding its business operations and the business operations of its subsidiaries.

 

Huntington is a separate and distinct legal entity from its bank subsidiary and other subsidiaries. Huntington’s principal source of funds to make payments on Huntington’s securities is dividends, loan payments, and other funds from its subsidiaries. Various federal and state statutes and regulations limit the amount of dividends that its banking and other subsidiaries may pay to Huntington without regulatory approval. In addition, if any of its subsidiaries becomes insolvent, the direct creditors of that subsidiary will have a prior claim on its assets. Huntington’s rights and the rights of Huntington’s creditors will be subject to that prior claim, unless Huntington is also a direct creditor of that subsidiary. The notes to Huntington’s consolidated financial statements contained in its annual and quarterly filings with the SEC, which are incorporated by reference into this prospectus supplement and the accompanying prospectus, describe the legal and contractual restrictions on the ability of Huntington’s subsidiaries to make payment to Huntington of dividends, loans, or advances.

 

At March 31, 2007, Huntington had, on a consolidated basis total assets of $35.0 billion, total deposits of $24.6 billion and shareholders’ equity of $3.1 billion.

 

Huntington’s principal executive office is located at Huntington Center, 41 South High Street, Columbus, Ohio 43287, telephone number: (614) 480-8300.

 

Sky is a diversified financial holding company with total assets of $17.6 billion at March 31, 2007. Sky is headquartered in Bowling Green, Ohio and owns one commercial bank primarily engaged in commercial and consumer banking business at over 330 financial centers and over 400 ATMs located in Ohio, western Pennsylvania, central Indiana, southern Michigan, and northern West Virginia. Sky also operates businesses relating to insurance, trust and other related financial services.

 

Sky’s corporate philosophy is to operate as a locally-oriented, community-based financial service organization, augmented by centralized support in select critical areas. This local market orientation is reflected in its financial centers and regional advisory boards comprised of local business persons, professionals and other community representatives that assist the bank in responding to local banking needs. Sky’s bank subsidiary concentrates on client service and business development, while relying upon the support of Sky for operational functions that are not readily visible to clients and those that are critical to risk management. Asset quality review, mortgage banking activities, financial reporting, investment activities, internal audit, compliance and funds management are among the functions that are overseen at the holding company level.

 

Sky, its banking subsidiary and many of its non-banking subsidiaries, are subject to extensive regulation by federal and state agencies. The regulation of bank holding companies and their subsidiaries is intended primarily for the protection of depositors, federal deposit insurance funds and the banking system as a whole and not for the protection of security holders. Sky is a financial holding company subject to regulation under the Bank Holding Company Act, and to inspection, examination and supervision by the Federal Reserve under the Bank Holding Company Act. This regulatory environment, among other things, may restrict Sky’s ability to diversify into certain areas of financial services, acquire depository institutions in certain states and pay dividends on its capital stock. It may also require Sky to provide financial support to its banking subsidiary, maintain capital balances in excess of those desired by management and pay higher deposit insurance premiums as a result of the deterioration in the financial condition of depository institutions in general.

 

Sky’s principal executive office is: Sky Financial Group, 221 South Church Street, P.O. Box 428, Bowling Green, OH 43402, telephone number: (419) 327-6300.

 

Merger Agreement

 

On December 20, 2006, Huntington, Sky, and Penguin Acquisition, LLC (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which Sky will be merged with and into Merger Sub (the “Merger”). Upon consummation of the Merger, the separate existence of Sky will cease, and Merger Sub will be the surviving company and be a direct, wholly owned subsidiary of Huntington. The merger was unanimously approved by both companies’ boards of directors and is expected to close early in the third quarter of 2007, pending customary regulatory approvals, as well as the approval of Huntington’s and Sky’s shareholders.

 

Pursuant to the Merger Agreement, at the effective time of the Merger, each outstanding share of common stock, without par value, of Sky (“Sky Common Stock”), will be converted into the right to receive 1.098 shares of common stock, without par value, of Huntington (“Huntington Common Stock”), and $3.023 in cash, without interest (collectively, the “Merger Consideration”). Pursuant to the Merger Agreement, at the effective time of the Merger, (i) each outstanding option to acquire Sky Common Stock will immediately vest and become exercisable and will be converted into an option to purchase a number of shares of Huntington Common Stock equal to the number of shares of Sky Common Stock underlying such option immediately prior to the Merger multiplied by the Exchange Ratio (as defined below), with an exercise price that equals the exercise price of such option immediately prior to the Merger divided by the Exchange Ratio; (ii) each restricted share of Sky Common Stock will immediately vest and be converted into the right to receive the Merger Consideration, subject to applicable withholding tax; and (iii) each stock unit denominated in shares of Sky Common Stock will immediately vest and be converted into the right to receive a number of shares of Huntington Common Stock equal to the number of shares of Sky Common Stock underlying such unit immediately prior to the Merger multiplied by the Exchange Ratio. “Exchange Ratio” is the sum of (x) 1.098 and (y) the quotient of 3.023 divided by the average closing sale price of Huntington Common Stock over the five trading days immediately preceding the Merger.

 

The Merger Agreement includes customary representations, warranties and covenants of the parties. The covenants of the parties include, subject to certain exceptions, covenants not to (i) solicit, initiate, encourage, facilitate or take any other action designed to facilitate any inquiries or proposals regarding any alternative transaction, (ii) participate in any discussions or negotiations regarding an alternative transaction, or (iii) enter into any agreement regarding an alternative transaction. In addition, each party has agreed to submit the transaction to its shareholders for approval and use reasonable best efforts to obtain such approval.

 

The consummation of the Merger is subject to customary conditions, including obtaining the required approvals from the holders of Huntington Common Stock and Sky Common Stock, the

absence of any legal prohibition on consummation of the Merger, obtaining required governmental and regulatory approvals, effectiveness of the Registration Statement on Form S-4 to be filed with the Securities and Exchange Commission, approval of Huntington’s common stock to be issued in the Merger for listing on the Nasdaq Stock Market, the accuracy of the representations and warranties of the parties to the Merger Agreement (subject to the materiality standards set forth in the Merger Agreement), material performance of all the covenants of the parties to the Merger Agreement, and the delivery of customary legal opinions as to the federal tax treatment of the Merger. In addition, Huntington’s obligation to close is subject to the condition that none of the required governmental or regulatory approvals results in the imposition of conditions that would reasonably be expected to have a material adverse effect on Huntington and Sky taken as a whole after the Merger.

 

Pursuant to the Merger Agreement, at the effective time of the Merger, the Board of Directors of Huntington will consist of fifteen members comprised of (i) Mr. Thomas Hoaglin, the current chief executive officer of Huntington, plus nine current non-employee directors of Huntington designated by Huntington and (ii) Mr. Marty Adams, the current chief executive officer of Sky, plus four current non-employee directors of Sky designated by Sky. At the effective time of the Merger, Mr. Hoaglin will continue to serve as Huntington’s chief executive officer and the chairman of the Board of Directors, and Mr. Adams will become Huntington’s president and chief operating officer. Mr. Adams will be the successor to Mr. Hoaglin as chief executive officer of Huntington on December 31, 2009 or such earlier date as of which Mr. Hoaglin ceases for any reason to serve as chief executive officer of Huntington. The above provisions will be contained in a bylaw provision that until December 31, 2009 can only be amended by an affirmative vote of at least 75% of the directors that constitute the entire Board of Directors of Huntington.

 

The Merger Agreement contains certain termination rights of Huntington and Sky and further provides that, upon termination of the Merger Agreement under specified circumstances, Huntington or Sky (whichever of the two is terminating the agreement) may be required to pay the other party a termination fee of $125 million.

 

Huntington currently expects that its 2007 annual meeting of shareholders will be held on or about May 30, 2007. Sky currently expects that a special meeting of shareholders will be held on or about June 4, 2007.

 

You should also refer to Sky’s audited consolidated financial statements and related notes and the unaudited pro forma condensed combined consolidated financial information for Huntington and Sky presented elsewhere in this document.

 

The following is a summary of some of the terms of Huntington Capital III, or the Trust. This summary, together with the summary of some of the provisions of the related documents described below, contains a description of the material terms of the Trust but is not necessarily complete. We refer you to the documents referred to in the following description, copies of which are available upon request as described in the accompanying prospectus under “Where You Can Find More Information”.

 

Huntington Capital III, or the “Trust”, is a statutory trust formed under Delaware law pursuant to a Declaration of Trust signed by Huntington, as sponsor of the Trust, and the Delaware trustee and the filing of a Certificate of Trust with the Delaware Secretary of State on May 21,1998. The Declaration of Trust will be amended and restated in its entirety on May   , 2007. We refer to the Declaration of Trust, as so amended and restated, as the “Amended Declaration”. The Amended Declaration will be qualified as an indenture under the Trust Indenture Act of 1939, as amended, or “Trust Indenture Act”. Huntington will acquire common securities in an aggregate liquidation amount equal to $10,000. The term of the Trust will be approximately 65 years.

 

The Trust was established solely for the following purposes:

 

 

Huntington will own all of the Trust’s common securities, either directly or indirectly. The common securities rank equally with the Trust Preferred Securities and the Trust will make payment on its Trust securities pro rata, except that, upon certain events of default under the Amended Declaration relating to payment defaults on the JSNs, the rights of the holders of the common securities to payment in respect of distributions and payments upon liquidation and otherwise will be subordinated to the rights of the holders of the Trust Preferred Securities. Huntington will acquire common securities of the Trust in an aggregate liquidation amount equal to $10,000.

 

The Trust’s business and affairs will be conducted by its trustees, each appointed by Huntington as sponsor of the Trust. The trustees will be The Bank of New York, as the property trustee, or “property trustee”, The Bank of New York (Delaware), as the Delaware trustee, or “Delaware trustee”, and two or more individual trustees, or “administrative trustees”, who are employees or officers of or affiliated with Huntington. The property trustee will act as sole trustee under the Amended Declaration for purposes of compliance with the Trust Indenture Act and will also act as trustee under the guarantee and the indenture. See “Description of the Guarantee”.

 

Unless an event of default under the indenture has occurred and is continuing at a time that the Trust owns any JSNs, the holders of the common securities will be entitled to appoint, remove or replace the property trustee and/or the Delaware trustee.

 

The property trustee and/or the Delaware trustee may be removed or replaced for cause by the holders of a majority in liquidation amount of the Trust Preferred Securities. In addition, holders of a majority in liquidation amount of the Trust Preferred Securities will be entitled to appoint, remove or replace the property trustee and/or the Delaware trustee if an event of default under the indenture has occurred and is continuing.

 

The right to vote to appoint, remove or replace the administrative trustees is vested exclusively in the holders of the Trust’s common securities, and in no event will the holders of the Trust Preferred Securities have such right.

 

The Trust is a “finance subsidiary” of Huntington within the meaning of Rule 3-10 of Regulation S-X under the Securities Act of 1933, or “Securities Act”. As a result, no separate financial statements of the Trust are included in this prospectus supplement, and Huntington does not expect that the Trust will file reports with the SEC under the Securities Exchange Act of 1934, or “Exchange Act”.

 

Huntington will pay all fees and expenses related to the Trust and the offering of the Trust Preferred Securities.

 

The principal executive office of the Trust is 41 South High Street, Columbus, Ohio 43287, telephone number: (614)-480-8300.

 

The Trust will invest the proceeds from its sale of the Trust Preferred Securities through the underwriters to investors and its common securities to Huntington in the JSNs issued by Huntington. Huntington expects to use the net proceeds it will receive upon issuance of the JSNs, expected to be approximately $           after expenses and underwriting commissions, for general corporate purposes, including the financing of a part of the cash consideration to be paid by Huntington for the proposed acquisition of Sky Financial Group, Inc.

 

The Federal Reserve regulates, supervises and examines Huntington as a financial holding company and a bank holding company under the Bank Holding Company Act of 1956, as amended (the “Bank Holding Company Act”). Huntington’s bank subsidiary is also regulated by various other federal and state banking regulators. For a discussion of the material elements of the regulatory framework applicable to financial holding companies, bank holding companies, banks and their subsidiaries and specific information relevant to Huntington, please refer to Huntington’s Annual Report on Form 10-K for the year ended December 31, 2006, which is incorporated by reference in this prospectus supplement. This regulatory framework is intended primarily for the protection of depositors and the federal deposit insurance funds and not for the protection of security holders. As a result of this regulatory framework, Huntington’s earnings are affected by actions of the Federal Reserve, the Federal Deposit Insurance Corporation, which insures the deposits of its banking subsidiary within certain limits, and the SEC, which regulates the activities of certain subsidiaries engaged in the securities business.

 

Depository institutions, like Huntington’s bank subsidiary, are also affected by various federal and state laws, including those relating to consumer protection and similar matters. Huntington also has other financial services subsidiaries regulated, supervised and examined by the Federal Reserve, as well as other relevant state and federal regulatory agencies and self-regulatory organizations. Huntington’s non-bank subsidiaries may be subject to other laws and regulations of the federal government or the various states in which they are authorized to do business.

 

The Trust will not be consolidated on Huntington’s balance sheet as a result of the accounting changes reflected in FASB Interpretation No. 46, “Consolidation of Variable Interest Entities”, as revised in December 2003. Accordingly, for balance sheet purposes, Huntington will recognize the aggregate principal amount, net of discount, of the JSNs it issues to the Trust as a liability and the amount it invests in the Trust’s common securities as an asset. The interest paid on the JSNs will be recorded as interest expense on Huntington’s income statement.

 

On March 1, 2005, the Federal Reserve adopted amendments to its risk-based capital guidelines. Among other things, the amendments confirm the continuing inclusion of outstanding and prospective issuances of trust preferred securities in the Tier 1 capital of bank holding companies, but make the qualitative requirements for trust preferred securities issued on or after April 15, 2005 more restrictive in certain respects and make the quantitative limits applicable to the aggregate amount of trust preferred securities and other restricted core capital elements that may be included in Tier 1 capital of bank holding companies more restrictive. The Trust Preferred Securities will qualify as Tier 1 capital for Huntington.

 

The following table sets forth the consolidated capitalization of Huntington at March 31, 2007, as adjusted to give effect to the issuance of the Trust Preferred Securities and the JSNs. You should read the following table together with Huntington’s consolidated financial statements and notes thereto included in Huntington’s Annual Report on Form 10-K for the year ended December 31, 2006 and Quarterly Report on Form 10-Q for the three months ended March 31, 2007, both of which are incorporated by reference in this prospectus supplement and the accompanying prospectus.

 

 

 

 

General

 

The Trust Preferred Securities will be issued pursuant to the Amended Declaration. The property trustee, The Bank of New York, will act as indenture trustee for the Trust Preferred Securities under the Amended Declaration for purposes of compliance with the provisions of the Trust Indenture Act. The terms of the Trust Preferred Securities will include those stated in the Amended Declaration, including any amendments thereto, and those made part of the Amended Declaration by the Trust Indenture Act and the Delaware Statutory Trust Act. The Trust will own all of Huntington’s JSNs.

 

In addition to the Trust Preferred Securities, the Amended Declaration authorizes the administrative trustees of the Trust to issue common securities on behalf of the Trust. Huntington will own, directly or indirectly, all of the Trust’s common securities. The common securities rank equally, and payments upon redemption, liquidation or otherwise will be made on a proportionate basis, with the Trust Preferred Securities except as set forth under “— Ranking of Common Securities”. The Amended Declaration does not permit the Trust to issue any securities other than the common securities and the Trust Preferred Securities or to incur any indebtedness.

 

The payment of distributions out of money held by the Trust, and payments upon redemption of the Trust Preferred Securities or liquidation of the Trust, are guaranteed by Huntington to the extent described under “Description of the Guarantee”. The guarantee, when taken together with Huntington’s obligations under the JSNs and the indenture and its obligations under the Amended Declaration, including its obligations to pay costs, expenses, debts and liabilities of the Trust, other than with respect to the common securities and the Trust Preferred Securities, has the effect of providing a full and unconditional guarantee of amounts due on the Trust Preferred Securities. The Bank of New York, as the guarantee trustee, will hold the guarantee for the benefit of the holders of the Trust Preferred Securities. The guarantee does not cover payment of distributions when the Trust does not have sufficient available funds to pay those distributions. In the event the Trust does not have sufficient available funds, except in the limited circumstances in which the holder may take direct action, the remedy of a holder of the Trust Preferred Securities is to vote to direct the property trustee to enforce the property trustee’s rights under the JSNs.

 

The term “holder” in this prospectus supplement with respect to a Trust Preferred Security means the person in whose name such Trust Preferred Security is registered in the security register. The Trust Preferred Securities will be held in book-entry form only, as described under “Clearance and Settlement”, except in the circumstances described in that section, and will be held in the name of DTC or its nominee.

 

Distributions

 

A holder of record of the Trust Preferred Securities will be entitled to receive periodic distributions on the stated liquidation amount of $1,000 per Trust Preferred Security on the same payment dates and in the same amounts as Huntington pays interest on a principal amount of JSNs equal to the

liquidation amount of such Trust Preferred Security. Distributions will accumulate from May   , 2007. The Trust will make distribution payments on the Trust Preferred Securities:

 

 

In the event any distribution date on or prior to          , 2017 is not a business day, the payment made on the following business day shall be made without adjustment. If Huntington defers payment of interest on the JSNs, distributions by the Trust on the Trust Preferred Securities will also be deferred but shall continue to accumulate.

 

On each distribution date, the Trust will pay the applicable distribution to the holders of the Trust Preferred Securities on the record date for that distribution date, which shall be the business day prior to the distribution date, provided that, if the Trust Preferred Securities do not remain in book-entry form, the relevant record date shall be the date 15 days prior to the distribution date, whether or not a business day. Distributions on the Trust Preferred Securities will be cumulative, which means that they continue to accumulate until they are paid. See “— Redemption Procedures” below. The Trust Preferred Securities will be effectively subordinated to the same debts and liabilities to which the JSNs are subordinated, as described under “Description of the Junior Subordinated Notes — Subordination”.

 

For purposes of this prospectus supplement, “business day” means any day other than a Saturday, Sunday or other day on which banking institutions in New York, New York or Columbus, Ohio are authorized or required by law or executive order to remain closed, or, on or after          , 2017, a day that is not a London banking day. “London banking day” means any day on which commercial banks are open for general business (including dealings in deposits in U.S. dollars) in London, England.

 

Each date on which distributions are payable in accordance with the foregoing is referred to as a “distribution date”. The term “distribution” includes any interest payable on unpaid distributions unless otherwise stated. The period beginning on and including          , 2007 and ending on but excluding the first distribution date,          , 2007, and each period after that period beginning on and including a distribution date and ending on but excluding the next distribution date, is called a “distribution period”. Distributions to which holders of Trust Preferred Securities are entitled but are not paid will accumulate additional distributions at the annual rate to the extent permitted by law.

 

The funds available to the Trust for distribution to holders of the Trust Preferred Securities will be limited to payments under the JSNs. If Huntington does not make interest payments on the JSNs, the property trustee will not have funds available to pay distributions on the Trust Preferred Securities. The Trust will pay distributions through the property trustee, which will hold amounts received from the JSNs in a payment account for the benefit of the holders of the Trust Preferred Securities and the common securities.

 

Deferral of Distributions

 

Huntington has the right, on one or more occasions, to defer payment of interest on the JSNs for one or more consecutive interest periods not exceeding 10 years. If it exercises this right, the Trust will also defer paying a corresponding amount of distributions on the Trust Preferred Securities during that period of deferral. No deferral period may extend beyond the final repayment date of the JSNs or the earlier redemption in full of the JSNs. The Trust will pay deferred distributions on the