The Quarterly
HBAN 2013 10-K

Huntington Bancshares Inc (HBAN) SEC Annual Report (10-K) for 2014

HBAN Q3 2015 10-Q
HBAN 2013 10-K HBAN Q3 2015 10-Q
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2014

or

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 1-34073

Huntington Bancshares Incorporated

(Exact name of registrant as specified in its charter)

Maryland 31-0724920

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

41 S. High Street, Columbus, Ohio 43287
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (614) 480-8300

Securities registered pursuant to Section 12(b) of the Act:

Title of class

Name of exchange on which registered

8.50% Series A non-voting, perpetual convertible preferred stock NASDAQ
Common Stock-Par Value $0.01 per Share NASDAQ

Securities registered pursuant to Section 12(g) of the Act:

Title of class

Floating Rate Series B Non-Cumulative Perpetual Preferred Stock

Depositary Shares (each representing a 1/40th interest in a share of Floating Rate Series B Non-Cumulative Perpetual Preferred Stock)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Exchange Act.   x     Yes   ¨     No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.   ¨     Yes   x     No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   x     Yes   ¨     No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   x     Yes   ¨     No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of "large accelerated filer", "accelerated filer", and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x Accelerated filer ¨
Non-accelerated filer ¨   (Do not check if a smaller reporting company) Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)   ¨     Yes   x     No

The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2014, determined by using a per share closing price of $9.54, as quoted by NASDAQ on that date, was $7,626,169,305. As of January 31, 2015, there were 810,025,677 shares of common stock with a par value of $0.01 outstanding.

Documents Incorporated By Reference

Part III of this Form 10-K incorporates by reference certain information from the registrant's definitive Proxy Statement for the 2015 Annual Shareholders' Meeting.

Table of Contents

HUNTINGTON BANCSHARES INCORPORATED

INDEX

Part I.
Item 1.

Business

5
Item 1A.

Risk Factors

15
Item 1B.

Unresolved Staff Comments

21
Item 2.

Properties

21
Item 3.

Legal Proceedings

21
Item 4.

Mine Safety Disclosures

21
Part II.
Item 5.

Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

21
Item 6.

Selected Financial Data

23
Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

25

Introduction

25

Executive Overview

25

Discussion of Results of Operations

29

Risk Management and Capital

38

Credit Risk

38

Market Risk

52

Liquidity Risk

53

Operational Risk

59

Compliance Risk

60

Capital

60

Business Segment Discussion

62

Additional Disclosures

83
Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

87
Item 8.

Financial Statements and Supplementary Data

87
Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

177
Item 9A.

Controls and Procedures

177
Item 9B.

Other Information

178
Part III.
Item 10.

Directors, Executive Officers and Corporate Governance

178
Item 11.

Executive Compensation

178
Item 13.

Certain Relationships and Related Transactions, and Director Independence

178
Item 14.

Principal Accountant Fees and Services

178
Part IV.
Item 15.

Exhibits and Financial Statement Schedules

178
Signatures 180

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Glossary of Acronyms and Terms

The following listing provides a comprehensive reference of common acronyms and terms used throughout the document:

ABL Asset Based Lending
ACL Allowance for Credit Losses
AFCRE Automobile Finance and Commercial Real Estate
AFS Available-for-Sale
ALCO Asset-Liability Management Committee
ALLL Allowance for Loan and Lease Losses
ARM Adjustable Rate Mortgage
ASC Accounting Standards Codification
ASU Accounting Standards Update
ATM Automated Teller Machine
AULC Allowance for Unfunded Loan Commitments
Basel III Refers to the final rule issued by the FRB and OCC and published in the Federal Register on October 11, 2013
BHC Bank Holding Companies
C&I Commercial and Industrial
Camco Financial Camco Financial Corp.
CCAR Comprehensive Capital Analysis and Review
CDO Collateralized Debt Obligations
CDs Certificate of Deposit
CFPB Bureau of Consumer Financial Protection
CFTC Commodity Futures Trading Commission
CMO Collateralized Mortgage Obligations
CRE Commercial Real Estate
Dodd-Frank Act Dodd-Frank Wall Street Reform and Consumer Protection Act
EFT Electronic Fund Transfer
EPS Earnings Per Share
EVE Economic Value of Equity
Fannie Mae (see FNMA)
FDIC Federal Deposit Insurance Corporation
FDICIA Federal Deposit Insurance Corporation Improvement Act of 1991
FHA Federal Housing Administration
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FICO Fair Isaac Corporation
FNMA Federal National Mortgage Association
FRB Federal Reserve Bank
Freddie Mac (see FHLMC)
FTE Fully-Taxable Equivalent
FTP Funds Transfer Pricing
GAAP Generally Accepted Accounting Principles in the United States of America
HAMP Home Affordable Modification Program
HARP Home Affordable Refinance Program
HIP Huntington Investment and Tax Savings Plan
HQLA High-Quality Liquid Assets
HTM Held-to-Maturity

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IRS Internal Revenue Service
LCR Liquidity Coverage Ratio
LIBOR London Interbank Offered Rate
LGD Loss-Given-Default
LIHTC Low Income Housing Tax Credit
LTV Loan to Value
NAICS North American Industry Classification System
MD&A Management's Discussion and Analysis of Financial Condition and Results of Operations
MSA Metropolitan Statistical Area
MSR Mortgage Servicing Rights
NALs Nonaccrual Loans
NCO Net Charge-off
NIM Net interest margin
NPAs Nonperforming Assets
N.R. Not relevant. Denominator of calculation is a gain in the current period compared with a loss in the prior period, or vice-versa
OCC Office of the Comptroller of the Currency
OCI Other Comprehensive Income (Loss)
OCR Optimal Customer Relationship
OLEM Other Loans Especially Mentioned
OREO Other Real Estate Owned
OTTI Other-Than-Temporary Impairment
PD Probability-Of-Default
Plan Huntington Bancshares Retirement Plan
Problem Loans Includes nonaccrual loans and leases (Table 13), accruing loans and leases past due 90 days or more (Table 14), troubled debt restructured loans (Table 15), and criticized commercial loans (credit quality indicators section of Footnote 3).
RBHPCG Regional Banking and The Huntington Private Client Group
REIT Real Estate Investment Trust
ROC Risk Oversight Committee
SAD Special Assets Division
SBA Small Business Administration
SEC Securities and Exchange Commission
SERP Supplemental Executive Retirement Plan
SRIP Supplemental Retirement Income Plan
SSFA Simplified Supervisory Formula Approach
TCE Tangible Common Equity
TDR Troubled Debt Restructured loan
U.S. Treasury U.S. Department of the Treasury
UCS Uniform Classification System
UDAP Unfair or Deceptive Acts or Practices
UPB Unpaid Principal Balance
USDA U.S. Department of Agriculture
VA U.S. Department of Veteran Affairs
VIE Variable Interest Entity

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Huntington Bancshares Incorporated

PART I

When we refer to "we", "our", and "us" in this report, we mean Huntington Bancshares Incorporated and our consolidated subsidiaries, unless the context indicates that we refer only to the parent company, Huntington Bancshares Incorporated. When we refer to the "Bank" in this report, we mean our only bank subsidiary, The Huntington National Bank, and its subsidiaries.

Item 1: Business

We are a multi-state diversified regional bank holding company organized under Maryland law in 1966 and headquartered in Columbus, Ohio. We have 11,873 average full-time equivalent employees. Through the Bank, we have 149 years of serving the financial needs of our customers. We provide full-service commercial, small business, consumer, and mortgage banking services, as well as automobile financing, equipment leasing, investment management, trust services, brokerage services, insurance programs, and other financial products and services. The Bank, organized in 1866, is our only bank subsidiary. At December 31, 2014, the Bank had 14 private client group offices and 715 branches as follows:

•    404 branches in Ohio

•    43 branches in Indiana

•    179 branches in Michigan

•    31 branches in West Virginia

•    48 branches in Pennsylvania

•    10 branches in Kentucky

Select financial services and other activities are also conducted in various other states. International banking services are available through the headquarters office in Columbus, Ohio, a limited purpose office located in the Cayman Islands, and another located in Hong Kong. Our foreign banking activities, in total or with any individual country, are not significant.

Our business segments are based on our internally-aligned segment leadership structure, which is how we monitor results and assess performance. For each of our five business segments, we expect the combination of our business model and exceptional service to provide a competitive advantage that supports revenue and earnings growth. Our business model emphasizes the delivery of a complete set of banking products and services offered by larger banks, but distinguished by local delivery and customer service.

A key strategic emphasis has been for our business segments to operate in cooperation to provide products and services to our customers and to build stronger and more profitable relationships using our OCR sales and service process. The objectives of OCR are to:

1. Provide a consultative sales approach to provide solutions that are specific to each customer.

2. Leverage each business segment in terms of its products and expertise to benefit customers.

3. Target prospects who may want to have multiple products and services as part of their relationship with us.

Following is a description of our five business segments and Treasury / Other function:

Retail and Business Banking – The Retail and Business Banking segment provides a wide array of financial products and services to consumer and small business customers including but not limited to checking accounts, savings accounts, money market accounts, certificates of deposit, consumer loans, and small business loans. Other financial services available to consumer and small business customers include investments, insurance, interest rate risk protection, foreign exchange hedging, and treasury management. Huntington serves customers primarily through our network of branches in Ohio, Michigan, Pennsylvania, Indiana, West Virginia, and Kentucky. In addition to our extensive branch network, customers can access Huntington through online banking, mobile banking, telephone banking, and ATMs.

Huntington has established a "Fair Play" banking philosophy and built a reputation for meeting the banking needs of consumers in a manner which makes them feel supported and appreciated. Huntington believes customers are recognizing this and other efforts as key differentiators, and it has earned us more customers, deeper relationships and the J.D. Power retail service excellence award for 2013 and 2014.

Business Banking is a dynamic and growing part of our business, and we are committed to being the bank of choice for small businesses in our markets. Business Banking is defined as serving companies with annual revenues under $20 million and we currently serve approximately 160,000 businesses. Huntington continues to develop products and services that are designed specifically to meet the needs of small business. Huntington continues to look for ways to help companies find solutions to their capital needs and is the number one SBA lender in the country. We have also won the J.D. Power award for small business service excellence in 2012 and 2014.

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Commercial Banking: Through a relationship banking model, this segment provides a wide array of products and services to the middle market, large corporate, and government public sector customers located primarily within our geographic footprint. The segment is divided into seven business units: middle market, large corporate, specialty banking, asset finance, capital markets, treasury management, and insurance. During the 2014 third quarter, we moved our insurance brokerage business from Treasury / Other to Commercial Banking to align with a change in management responsibilities. During the 2014 fourth quarter, we moved the Asset Based Lending group back into the commercial division and combined management with equipment finance and public capital to form the Asset Finance division.

Middle Market Banking primarily focuses on providing banking solutions to companies with annual revenues of $20 million to $250 million. Through a relationship management approach, various products, capabilities and solutions are seamlessly orchestrated in a client centric way.

Corporate Banking works with larger, often more complex, companies with annual revenues greater than $250 million. These entities, many of which are publically traded, require a different and customized approach to their banking needs.

Specialty Banking offers tailored products and services to select industries that have a foothold in the Midwest. Each banking team is comprised of industry experts with a dynamic understanding of the market and industry. Many of these industries are experiencing tremendous change, which creates opportunities for Huntington to leverage our expertise and help clients navigate, adapt and succeed.

Asset Finance is a combination of our Equipment Finance, Public Capital, Asset Based Lending, and Lender Finance divisions that focus on providing financing solutions against these respective asset classes.

Capital Markets has two distinct product capabilities: corporate risk management services and institutional sales, trading and underwriting. The Capital Markets Group offers a full suite of risk management tools including commodities, foreign exchange and interest rate hedging services. The Institutional Sales, Trading & Underwriting team provides access to capital and investment solutions for both municipal and corporate institutions.

Treasury Management teams help businesses manage their working capital programs and reduce expenses. Our liquidity solutions help customers save and invest wisely, while our payables and receivables capabilities help them manage purchases and the receipt of payments for goods and services. All of this is provided while helping customers take a sophisticated approach to managing their overhead, inventory, equipment and labor.

Insurance brokerage business specializes in commercial property and casualty, employee benefits, personal lines, life and disability and specialty lines of insurance. We also provide brokerage and agency services for residential and commercial title insurance and excess and surplus product lines of insurance. As an agent and broker, we do not assume underwriting risks; instead, we provide our customers with quality, noninvestment insurance contracts.

Automobile Finance and Commercial Real Estate: This segment provides lending and other banking products and services to customers outside of our traditional retail and commercial banking segments. Our products and services include providing financing for the purchase of vehicles by customers at franchised automotive dealerships, financing the acquisition of new and used vehicle inventory of franchised automotive dealerships, and financing for land, buildings, and other commercial real estate owned or constructed by real estate developers, automobile dealerships, or other customers with real estate project financing needs. Products and services are delivered through highly specialized relationship-focused bankers and product partners. Huntington creates well-defined relationship plans which identify needs where solutions are developed and customer commitments are obtained.

The Automotive Finance team services automobile dealerships, its owners, and consumers buying automobiles through these franchised dealerships. Huntington has provided new and used automobile financing and dealer services throughout the Midwest since the early 1950s. This consistency in the market and our focus on working with strong dealerships has allowed us to expand into selected markets outside of the Midwest and to actively deepen relationships while building a strong reputation.

The Commercial Real Estate team serves real estate developers, REITs, and other customers with borrowing needs that are secured by commercial properties. Most of these customers are located within our footprint.

Regional Banking and The Huntington Private Client Group: RBHPCG business segment was created as the result of an organizational and management realignment that occurred in January 2014. Regional Banking and The Huntington

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Private Client Group is well positioned competitively as we have closely aligned with our eleven regional banking markets. A fundamental point of differentiation is our commitment to be actively engaged within our local markets - building connections with community and business leaders and offering a uniquely personal experience delivered by colleagues working within those markets.

The Huntington Private Client Group is organized into units consisting of The Huntington Private Bank, The Huntington Trust, The Huntington Investment Company, Huntington Community Development, Huntington Asset Advisors, and Huntington Asset Services. Our private banking, trust, investment and community development functions focus their efforts in our Midwest footprint and Florida, while our proprietary funds and ETFs, fund administration, custody and settlements functions target a national client base.

The Huntington Private Bank provides high net-worth customers with deposit, lending (including specialized lending options) and other banking services.

The Huntington Trust also serves high net-worth customers and delivers wealth management and legacy planning through investment and portfolio management, fiduciary administration, trust services and trust operations. This group also provides retirement plan services and corporate trust to businesses and municipalities.

The Huntington Investment Company, a dually registered broker-dealer and registered investment advisor, employs representatives who work with our Retail and Private Bank to provide investment solutions for our customers. This team offers a wide range of products and services, including brokerage, annuities, advisory and other investment products.

Huntington Community Development focuses on improving the quality of life for our communities and the residents of low-to moderate-income neighborhoods by developing and delivering innovative products and services to support affordable housing and neighborhood stabilization.

Huntington Asset Advisors provides investment management services solely advising The Huntington Funds, our proprietary family of mutual funds, and Huntington Strategy Shares, our Exchange Trade Funds.

Huntington Asset Services has a national clientele and offers administrative and operational support to fund complexes, including fund accounting, transfer agency, administration, custody, and distribution services. This group also includes National Settlements, which works with law firms and the court system to provide custody and settlement distribution services.

Home Lending: Home Lending originates and services consumer loans and mortgages for customers who are generally located in our primary banking markets. Consumer and mortgage lending products are primarily distributed through the Retail and Business Banking segment, as well as through commissioned loan originators. Home Lending earns interest on loans held in the warehouse and portfolio, earns fee income from the origination and servicing of mortgage loans, and recognizes gains or losses from the sale of mortgage loans. Home Lending supports the origination and servicing of mortgage loans across all segments.

The Treasury / Other function includes technology and operations, other unallocated assets, liabilities, revenue, and expense.

The financial results for each of these business segments are included in Note 24 of Notes to Consolidated Financial Statements and are discussed in the Business Segment Discussion of our MD&A.

Competition

We compete with other banks and financial services companies such as savings and loans, credit unions, and finance and trust companies, as well as mortgage banking companies, automobile and equipment financing companies (including captive automobile finance companies), insurance companies, mutual funds, investment advisors, and brokerage firms, both within and outside of our primary market areas. Internet companies are also providing nontraditional, but increasingly strong, competition for our borrowers, depositors, and other customers.

We compete for loans primarily on the basis of a combination of value and service by building customer relationships as a result of addressing our customers' entire suite of banking needs, demonstrating expertise, and providing convenience to our customers. We also consider the competitive pricing pressures in each of our markets.

We compete for deposits similarly on a basis of a combination of value and service and by providing convenience through a banking network of branches and ATMs within our markets and our website at www.huntington.com. We have also instituted customer friendly practices, such as our 24-Hour Grace ® account feature, which gives customers an additional business day to cover overdrafts to their consumer account without being charged overdraft fees.

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The table below shows our competitive ranking and market share based on deposits of FDIC-insured institutions as of June 30, 2014, in the top 10 metropolitan statistical areas (MSA) in which we compete:

MSA Rank Deposits (in
millions)
Market Share

Columbus, OH

1 $ 14,879 28

Cleveland, OH

5 4,782 8

Detroit, MI

6 4,753 5

Indianapolis, IN

4 2,852 7

Pittsburgh, PA

8 2,487 3

Cincinnati, OH

4 2,274 3

Toledo, OH

2 2,238 23

Grand Rapids, MI

2 2,111 12

Youngstown, OH

1 2,017 23

Canton, OH

1 1,610 26

Source: FDIC.gov , based on June 30, 2014 survey.

Many of our nonfinancial institution competitors have fewer regulatory constraints, broader geographic service areas, greater capital, and, in some cases, lower cost structures. In addition, competition for quality customers has intensified as a result of changes in regulation, advances in technology and product delivery systems, consolidation among financial service providers, bank failures, and the conversion of certain former investment banks to bank holding companies.

Regulatory Matters

We are subject to regulation by the SEC, the Federal Reserve, the OCC, the CFPB, and other federal and state regulators.

Because we are a public company, we are subject to regulation by the SEC. The SEC has established five categories of issuers for the purpose of filing periodic and annual reports. Under these regulations, we are considered to be a large accelerated filer and, as such, must comply with SEC accelerated reporting requirements.

We are a bank holding company and are qualified as a financial holding company with the Federal Reserve. We are subject to examination and supervision by the Federal Reserve pursuant to the Bank Holding Company Act. We are required to file reports and other information regarding our business operations and the business operations of our subsidiaries with the Federal Reserve.

The Federal Reserve maintains a bank holding company rating system that emphasizes risk management, introduces a framework for analyzing and rating financial factors, and provides a framework for assessing and rating the potential impact of non-depository entities of a holding company on its subsidiary depository institution(s). The ratings assigned to us, like those assigned to other financial institutions, are confidential and may not be disclosed, except to the extent required by law.

The Federal Reserve utilizes an updated framework for the consolidated supervision of large financial institutions, including bank holding companies with consolidated assets of $50 billion or more. The objectives of the framework are to enhance the resilience of a firm, lower the probability of its failure, and reduce the impact on the financial system in the event of an institution's failure. With regard to resiliency, each firm is expected to ensure that the consolidated organization and its core business lines can survive under a broad range of internal or external stresses. This requires financial resilience by maintaining sufficient capital and liquidity, and operational resilience by maintaining effective corporate governance, risk management, and recovery planning. With respect to lowering the probability of failure, each firm is expected to ensure the sustainability of its critical operations and banking offices under a broad range of internal or external stresses. This requires, among other things, that we have robust, forward-looking capital-planning processes that account for our unique risks.

The Bank, which is chartered by the OCC, is a national bank and our only bank subsidiary. It is subject to examination and supervision by the OCC and also by the CFPB, which was established by the Dodd-Frank Act in 2010. Our nonbank subsidiaries are also subject to examination and supervision by the Federal Reserve or, in the case of nonbank subsidiaries of the Bank, by the OCC. All subsidiaries are subject to examination and supervision by the CFPB to the extent they offer any consumer financial products or services. Our subsidiaries are subject to examination by other federal and state agencies, including, in the case of certain securities and investment management activities, regulation by the SEC and the Financial Industry Regulatory Authority.

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In September 2014, the OCC published final guidelines to strengthen the governance and risk management practices of large financial institutions, including the Bank. The guidelines became effective November 10, 2014, and require covered banks to establish and adhere to a written governance framework in order to manage and control their risk-taking activities. In addition, the guidelines provide standards for the institutions' boards of directors to oversee the risk governance framework. Given its size and the phased implementation schedule, the Bank is subject to these heightened standards effective May 2016. As discussed in Item 1A: Risk Factors, the Bank currently has a written governance framework and associated controls.

Legislative and regulatory reforms continue to have significant impacts throughout the financial services industry.

The Dodd-Frank Act, enacted in 2010, is complex and broad in scope and several of its provisions are still being implemented. The Dodd-Frank Act established the CFPB, which has extensive regulatory and enforcement powers over consumer financial products and services, and the Financial Stability Oversight Council, which has oversight authority for monitoring and regulating systemic risk. In addition, the Dodd-Frank Act altered the authority and duties of the federal banking and securities regulatory agencies, implemented certain corporate governance requirements for all public companies including financial institutions with regard to executive compensation, proxy access by shareholders, and certain whistleblower provisions, and restricted certain proprietary trading, and hedge fund and private equity activities of banks and their affiliates. The Dodd-Frank Act also required the issuance of numerous implementing regulations, many of which have not yet been issued. The regulations will continue to take effect over several more years, continuing to make it difficult to anticipate the overall impact to us, our customers, or the financial industry in general.

In January 2014, seven final regulations issued by the CFPB, including the ability to repay and qualified mortgage standards, various mortgage servicing rules, a rule expanding the scope of the high-cost mortgage provision in the Truth in Lending Act, loan originator compensation requirements and appraisal rules, became effective and were successfully implemented by Huntington. On November 20, 2013, the CFPB issued its final rule on integrated mortgage disclosures under the Truth in Lending Act and the Real Estate Settlement Procedures Act, for which compliance is required by August 1, 2015. The CFPB finalized amendments to the integrated mortgage disclosures on January 20, 2015, which are also effective on August 1, 2015. On October 22, 2014, the CFPB finalized minor Amendments to the 2013 Mortgage Rules under the Truth in Lending Act (Regulation Z), making certain nonprofits exempt from some servicing rules and the ability to repay rule, and allowing a cure period for points and fees in Qualified Mortgages. These changes were effective as of November 3, 2014. In addition, the CFPB proposed changes to its servicing rules. We continue to monitor, evaluate and implement these new regulations.

Throughout 2014, the CFPB has continued its focus on fair lending practices of indirect automobile lenders. This focus has led to some lenders acknowledging that the CFPB and Department of Justice are considering taking public enforcement actions against them for their fair lending practices. Indirect automobile lenders have also received continuing pressure from the CFPB to limit or eliminate discretionary pricing by dealers. Finally, the CFPB has proposed its larger participant rule for indirect automobile lending which will bring larger non-bank indirect automobile lenders under CFPB supervision.

Banking regulatory agencies have increasingly over the last few years used their authority under Section 5 of the Federal Trade Commission Act to take supervisory or enforcement action with respect to UDAP by banks under standards developed many years ago by the Federal Trade Commission in order to address practices that may not necessarily fall within the scope of a specific banking or consumer finance law. The Dodd-Frank Act also gave to the CFPB similar authority to take action in connection with unfair, deceptive or abusive acts or practices by entities subject to CFPB supervisory or enforcement authority.

Large bank holding companies and national banks are required to submit annual capital plans to the Federal Reserve and OCC, respectively, and conduct stress tests.

The Federal Reserve's Regulation Y requires large bank holding companies to submit capital plans to the Federal Reserve on an annual basis and to require such bank holding companies to obtain approval from the Federal Reserve under certain circumstances before making a capital distribution. This rule applies to us and all other bank holding companies with $50 billion or more of total consolidated assets.

A large bank holding company's capital plan must include an assessment of the expected uses and sources of capital over at least the next nine quarters, a description of all planned capital actions over the planning horizon, a detailed description of the entity's process for assessing capital adequacy, the entity's capital policy, and a discussion of any expected changes to the bank holding company's business plan that are likely to have a material impact on the firm's capital adequacy or liquidity. The planning horizon for the most recent capital planning and stress testing cycle encompasses the 2014 fourth quarter through the 2016 fourth quarter as was submitted in our capital plan in January 2015. Rules to implement the Basel III capital reforms in the United States were finalized in July 2013 and will be phased-in by us beginning with 1Q 2015 results under the standardized approach. As such, the most recent

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CCAR cycle, which began October 1, 2014, overlaps with the implementation of the Basel III capital reforms based on the required nine quarter projection horizon. In accordance with stress test rules, we incorporated the revised capital framework into the capital planning projections and into the stress tests required under the Dodd-Frank Act. Capital adequacy at large banking organizations, including us, is assessed against a minimum 4.5 percent tier 1 common ratio and a 5 percent tier 1 leverage ratio as determined by the Federal Reserve.

Capital plans for 2015 were required to be submitted by January 5, 2015. The Federal Reserve will either object to a capital plan, in whole or in part, or provide a notice of non-objection no later than March 31, 2015, for plans submitted by the January 5, 2015, submission date. If the Federal Reserve objects to a capital plan, the bank holding company may not make any capital distributions other than those with respect to which the Federal Reserve has indicated its non-objection. While we can give no assurances as to the outcome or specific interactions with the regulators, based on the capital plan we submitted on January 5, 2015, we believe we have a strong capital position and that our capital adequacy process is robust.

In addition to the CCAR submission, section 165 of the Dodd-Frank Act requires that national banks, like The Huntington National Bank, conduct annual stress tests for submission in January 2015. The results of the stress tests will provide the OCC with forward-looking information that will be used in bank supervision and will assist the agency in assessing a company's risk profile and capital adequacy. We submitted our stress test results to the OCC on January 5, 2015.

The regulatory capital rules indicate that common stockholders' equity should be the dominant element within Tier 1 capital and that banking organizations should avoid overreliance on non-common equity elements. Under the Dodd-Frank Act, the ratio of common equity Tier 1 to risk-weighted assets became significant as a measurement of the predominance of common equity in Tier 1 capital and an indication of the quality of capital.

Conforming Covered Activities to implement the Volcker Rule.

On December 10, 2013, the Federal Reserve, the OCC, the FDIC, the CFTC and the SEC issued final rules to implement the Volcker Rule contained in section 619 of the Dodd-Frank Act, and established July 21, 2015, as the end of the conformance period. Section 619 generally prohibits insured depository institutions and any company affiliated with an insured depository institution from engaging in proprietary trading and from acquiring or retaining ownership interests in, sponsoring, or having certain relationships with a hedge fund or private equity fund. These prohibitions are subject to a number of statutory exemptions, restrictions, and definitions. On December 18, 2014, The Federal Reserve Board announced it acted under Section 619 to give banking entities until July 21, 2016, to conform investments in and relationships with covered funds and foreign funds that were in place prior to December 31, 2013 ("legacy covered funds"). The Board also announced its intention to act next year to grant banking entities an additional one-year extension of the conformance period until July 21, 2017, to conform ownership interests in and relationships with legacy covered funds. The Bank continues its "good faith" efforts to conform with proprietary trading prohibitions and associated compliance requirements. The company does not expect Volcker compliance to have a material impact on its business model.

The Volcker Rule prohibits an insured depository institution and any company that controls an insured depository institution (such as a bank holding company), and any of their subsidiaries and affiliates (referred to as "banking entities") from: (i) engaging in "proprietary trading" and (ii) investing in or sponsoring certain types of funds ("covered funds") subject to certain limited exceptions. These prohibitions impact the ability of U.S. banking entities to provide investment management products and services that are competitive with nonbanking firms generally and with non-U.S. banking organizations in overseas markets. The rule also effectively prohibits short-term trading strategies by any U.S. banking entity if those strategies involve instruments other than those specifically permitted for trading.

The final Volcker Rule regulations do provide certain exemptions allowing banking entities to continue underwriting, market-making and hedging activities and trading certain government obligations, as well as various exemptions and exclusions from the definition of "covered funds". The level of required compliance activity depends on the size of the banking entity and the extent of its trading. CEOs of larger banking entities, including Huntington, will have to attest annually in writing that their organization has in place processes to establish, maintain, enforce, review, test and modify compliance with the Volcker Rule regulations. Banking entities with significant permitted trading operations will have to report certain quantitative information, beginning between June 30, 2014 and December 31, 2016, depending on the size of the banking entity's trading assets and liabilities.

On January 14, 2014, the five federal agencies approved an interim final rule to permit banking entities to retain interests in certain collateralized debt obligations backed primarily by trust preferred securities from the investment prohibitions of the Volcker Rule. Under the interim final rule, the agencies permit the retention of an interest in or sponsorship of covered funds by banking entities if certain qualifications are met. In addition, the agencies released a non-exclusive list of issuers that meet the requirements of the interim final rule. At December 31, 2014, we had investments in nine different pools of trust preferred securities. Eight of our pools are included in the list of non-exclusive issuers. We have analyzed the other pool that was not included on the list and believe that we will continue to be able to own this investment under the final Volcker Rule regulations.

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There are restrictions on our ability to pay dividends.

Dividends from the Bank to the parent company are the primary source of funds for payment of dividends to our shareholders. However, there are statutory limits on the amount of dividends that the Bank can pay to the holding company. Regulatory approval is required prior to the declaration of any dividends in an amount greater than its undivided profits or if the total of all dividends declared in a calendar year would exceed the total of its net income for the year combined with its retained net income for the two preceding years, less any required transfers to surplus or common stock. The Bank is currently able to pay dividends to the holding company subject to these limitations.

If, in the opinion of the applicable regulatory authority, a bank under its jurisdiction is engaged in, or is about to engage in, an unsafe or unsound practice, such authority may require, after notice and hearing, that such bank cease and desist from such practice. Depending on the financial condition of the Bank, the applicable regulatory authority might deem us to be engaged in an unsafe or unsound practice if the Bank were to pay dividends to the holding company.

The Federal Reserve and the OCC have issued policy statements that provide that insured banks and bank holding companies should generally only pay dividends out of current operating earnings. Additionally, the Federal Reserve may prohibit or limit bank holding companies from making capital distributions, including payment of preferred and common dividends, as part of the annual capital plan approval process.

We are subject to the current capital requirements mandated by the Federal Reserve and final Basel III capital and liquidity frameworks.

The Federal Reserve sets risk-based capital ratio and leverage ratio guidelines for bank holding companies. Under the guidelines and related policies, bank holding companies must maintain capital sufficient to meet both a risk-based asset ratio test and a leverage ratio test on a consolidated basis. The risk-based ratio is determined by allocating assets and specified off-balance sheet commitments into risk-weighted categories, with higher weighting assigned to categories perceived as representing greater risk. The risk-based ratio represents total capital divided by total risk-weighted assets. The leverage ratio is core capital divided by total assets adjusted as specified in the guidelines. The Bank is subject to substantially similar capital requirements.

On July 2, 2013, the Federal Reserve voted to adopt final capital rules implementing Basel III requirements for U.S. Banking organizations. The final rules establish an integrated regulatory capital framework and will implement in the United States the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Act. Under the final rule, minimum requirements will increase for both the quantity and quality of capital held by banking organizations. Consistent with the international Basel framework, the final rule includes a new minimum ratio of common equity tier 1 capital (Tier 1 Common) to risk-weighted assets and a Tier 1 Common capital conservation buffer of 2.5% of risk-weighted assets that will apply to all supervised financial institutions. The rule also raises the minimum ratio of tier 1 capital to risk-weighted assets and includes a minimum leverage ratio of 4% for all banking organizations. These new minimum capital ratios were effective for us on January 1, 2015, and will be fully phased-in on January 1, 2019.

The following are the Basel III regulatory capital levels that we must satisfy to avoid limitations on capital distributions and discretionary bonus payments during the applicable transition period, from January 1, 2015, until January 1, 2019:

Basel III Regulatory Capital Levels
January 1,
2015
January 1,
2016
January 1,
2017
January 1,
2018
January 1,
2019

Tier 1 Common

4.5 5.125 5.75 6.375 7.0

Tier 1 risk-based capital ratio

6.0 6.625 7.25 7.875 8.5

Total risk-based capital ratio

8.0 8.625 9.25 9.875 10.5

The final rule emphasizes Tier 1 Common capital, the most loss-absorbing form of capital, and implements strict eligibility criteria for regulatory capital instruments. The final rule also improves the methodology for calculating risk-weighted assets to enhance risk sensitivity. Banks and regulators use risk weighting to assign different levels of risk to different classes of assets.

We have evaluated the impact of the Basel III final rule on our regulatory capital ratios and estimate, on a fully phased-in basis, a reduction of approximately 40 basis points to our Basel I tier I common risk-based capital ratio. The estimate is based on management's current interpretation, expectations, and understanding of the final U.S. Basel III rules. We anticipate that our capital ratios, on a Basel III basis, will continue to exceed the well-capitalized minimum capital requirements. We are evaluating options to mitigate the capital impact of the final rule prior to its effective implementation date.

Based on the final Basel III rule, banking organizations with more than $15 billion in total consolidated assets are required to phase-out of additional tier 1 capital any non-qualifying capital instruments (such as trust preferred securities and cumulative preferred shares) issued before September 12, 2010. We will begin the additional tier I capital phase-out of our trust preferred securities in 2015, but will be able to include these instruments in Tier II capital as a non-advanced approaches institution.

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Generally, under the currently applicable guidelines, a financial institution's capital is divided into two tiers. Institutions that must incorporate market risk exposure into their risk-based capital requirements may also have a third tier of capital in the form of restricted short-term subordinated debt. These tiers are:

Tier 1 risk-based capital, or core capital, which includes total equity plus qualifying capital securities and minority interests subject to phase-out, excluding unrealized gains and losses accumulated in other comprehensive income, and nonqualifying intangible and servicing assets.

Tier 2 risk-based capital, or supplementary capital, which includes, among other things, cumulative and limited-life preferred stock, mandatory convertible securities, qualifying subordinated debt, and the ACL, up to 1.25% of risk-weighted assets.

Total risk-based capital is the sum of Tier 1 and Tier 2 risk-based capital.

The Federal Reserve and the other federal banking regulators require that all intangible assets (net of deferred tax), except originated or purchased MSRs, nonmortgage servicing assets, and purchased credit card relationships intangible assets, be deducted from Tier 1 capital. However, the total amount of these items included in capital cannot exceed 100% of its Tier 1 capital.

Under the general risk-based guidelines to remain adequately-capitalized, financial institutions are required to maintain a total risk-based capital ratio of 8%, with 4% being Tier 1 risk-based capital. The appropriate regulatory authority may set higher capital requirements when they believe an institution's circumstances warrant an increase.

Under the leverage guidelines, financial institutions are required to maintain a Tier 1 leverage ratio of at least 3%. The minimum ratio is applicable only to financial institutions that meet certain specified criteria, including excellent asset quality, high liquidity, low interest rate risk exposure, and the highest regulatory rating. Financial institutions not meeting these criteria are required to maintain a minimum Tier 1 leverage ratio of 4%.

Failure to meet applicable capital guidelines could subject the financial institution to a variety of enforcement remedies available to the federal regulatory authorities. These include limitations on the ability to pay dividends, the issuance by the regulatory authority of a directive to increase capital, and the termination of deposit insurance by the FDIC. In addition, the financial institution could be subject to the measures described below under Prompt Corrective Action as applicable to under-capitalized institutions.

The risk-based capital standards of the Federal Reserve, the OCC, and the FDIC specify that evaluations by the banking agencies of a bank's capital adequacy will include an assessment of the exposure to declines in the economic value of a bank's capital due to changes in interest rates. These banking agencies issued a joint policy statement on interest rate risk describing prudent methods for monitoring such risk that rely principally on internal measures of exposure and active oversight of risk management activities by senior management.

FDICIA requires federal banking regulatory authorities to take Prompt Corrective Action with respect to depository institutions that do not meet minimum capital requirements. For these purposes, FDICIA establishes five capital tiers: well-capitalized, adequately-capitalized, under-capitalized, significantly under-capitalized, and critically under-capitalized.

Throughout 2014, our regulatory capital ratios and those of the Bank were in excess of the levels established for well-capitalized institutions. An institution is deemed to be well-capitalized if it has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 6% or greater, and a Tier 1 leverage ratio of 5% or greater and is not subject to a regulatory order, agreement, or directive to meet and maintain a specific capital level for any capital measure.

At December 31, 2014

(dollar amounts in billions)

Well-capitalized minimums Actual Excess
Capital (1)

Ratios:

Tier 1 leverage ratio

Consolidated 5.00 9.74 $ 3.0
Bank 5.00 9.56 2.9

Tier 1 risk-based capital ratio

Consolidated 6.00 11.50 3.0
Bank 6.00 11.28 2.9

Total risk-based capital ratio

Consolidated 10.00 13.56 1.9
Bank 10.00 12.79 1.5

(1) Amount greater than the well-capitalized minimum percentage.

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FDICIA generally prohibits a depository institution from making any capital distribution, including payment of a cash dividend or paying any management fee to its holding company, if the depository institution would become under-capitalized after such payment. Under-capitalized institutions are also subject to growth limitations and are required by the appropriate federal banking agency to submit a capital restoration plan. If any depository institution subsidiary of a holding company is required to submit a capital restoration plan, the holding company would be required to provide a limited guarantee regarding compliance with the plan as a condition of approval of such plan.

Depending upon the severity of the under capitalization, the under-capitalized institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately-capitalized, requirements to reduce total assets, cessation of receipt of deposits from correspondent banks, and restrictions on making any payment of principal or interest on their subordinated debt. Critically under-capitalized institutions are subject to appointment of a receiver or conservator within 90 days of becoming so classified.

Under FDICIA, a depository institution that is not well-capitalized is generally prohibited from accepting brokered deposits and offering interest rates on deposits higher than the prevailing rate in its market. Since the Bank is well-capitalized, the FDICIA brokered deposit rule did not adversely affect its ability to accept brokered deposits. The Bank had $2.2 billion of such brokered deposits at December 31, 2014.

On September 3, 2014, the U.S. banking regulators approved a final rule to implement a minimum liquidity coverage ratio (LCR) requirement for banking organizations with total consolidated assets of $250 billion or more, and a less stringent modified LCR requirement to depository institution holding companies below the threshold but with total consolidated assets of $50 billion or more. The LCR requires covered banking organizations to maintain HQLA equal to projected stressed cash outflows over a 30 calendar-day stress scenario. We are covered by the modified LCR requirement and therefore subject to the phase-in of the rule beginning January 2016 at 90% and January 2017 at 100%. We will also be required to calculate the LCR monthly.

As a bank holding company, we must act as a source of financial and managerial strength to the Bank.

Under the Dodd-Frank Act, a bank holding company must act as a source of financial and managerial strength to each of its subsidiary banks and must commit resources to support each such subsidiary bank. The Federal Reserve may require a bank holding company to make capital injections into a troubled subsidiary bank. It may charge the bank holding company with engaging in unsafe and unsound practices if the bank holding company fails to commit resources to such a subsidiary bank or if it undertakes actions that the Federal Reserve believes might jeopardize the bank holding company's ability to commit resources to such subsidiary bank.

Any loans by a holding company to a subsidiary bank are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank. In the event of a bank holding company's bankruptcy, an appointed bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank. Moreover, the bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the institution's general unsecured creditors, including the holders of its note obligations.

Federal law permits the OCC to order the pro-rata assessment of shareholders of a national bank whose capital stock has become impaired, by losses or otherwise, to relieve a deficiency in such national bank's capital stock. This statute also provides for the enforcement of any such pro-rata assessment of shareholders of such national bank to cover such impairment of capital stock by sale, to the extent necessary, of the capital stock owned by any assessed shareholder failing to pay the assessment. As the sole shareholder of the Bank, we are subject to such provisions.

Moreover, the claims of a receiver of an insured depository institution for administrative expenses and the claims of holders of deposit liabilities of such an institution are accorded priority over the claims of general unsecured creditors of such an institution, including the holders of the institution's note obligations, in the event of liquidation or other resolution of such institution. Claims of a receiver for administrative expenses and claims of holders of deposit liabilities of the Bank, including the FDIC as the insurer of such holders, would receive priority over the holders of notes and other senior debt of the Bank in the event of liquidation or other resolution and over our interests as sole shareholder of the Bank.

Bank transactions with affiliates.

Federal banking law and regulation imposes qualitative standards and quantitative limitations upon certain transactions by a bank with its affiliates, including the bank's bank holding company and certain companies the bank holding company may be deemed to control for these purposes. Transactions covered by these provisions must be on arm's-length terms, and cannot exceed certain

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amounts which are determined with reference to the bank's regulatory capital. Moreover, if the transaction is a loan or other extension of credit, it must be secured by collateral in an amount and quality expressly prescribed by statute, and if the affiliate is unable to pledge sufficient collateral, the bank holding company may be required to provide it.

Provisions added by the Dodd-Frank Act expanded the scope of (i) the definition of affiliate to include any investment fund having any bank or BHC-affiliated company as an investment advisor, (ii) credit exposures subject to the prohibition on the acceptance of low-quality assets or securities issued by an affiliate as collateral, the quantitative limits, and the collateralization requirements to now include credit exposures arising out of derivative, repurchase agreement, and securities lending/borrowing transactions, and (iii) transactions subject to quantitative limits to now also include credit collateralized by affiliate-issued debt obligations that are not securities. In addition, these provisions require that a credit extension to an affiliate remain secured in accordance with the collateral requirements at all times that it is outstanding, rather than the previous requirement of only at the inception or upon material modification of the transaction. They also raise significantly the procedural and substantive hurdles required to obtain a regulatory exemption from the affiliate transaction requirements. While these provisions became effective on July 21, 2012, the Federal Reserve has not yet issued a proposed rule to implement them.

As a financial holding company, we are subject to additional laws and regulations.

In order to maintain its status as a financial holding company, a bank holding company's depository subsidiaries must all be both well-capitalized and well-managed, and must meet their Community Reinvestment Act obligations.

Financial holding company powers relate to financial activities that are specified in the Bank Holding Company Act or determined by the Federal Reserve, in coordination with the Secretary of the Treasury, to be financial in nature, incidental to an activity that is financial in nature, or complementary to a financial activity, provided that the complementary activity does not pose a safety and soundness risk. In addition, we are required by the Bank Holding Company Act to obtain Federal Reserve approval prior to acquiring, directly or indirectly, ownership or control of voting shares of any bank, if, after such acquisition, we would own or control more than 5% of its voting stock. Furthermore, the Dodd-Frank Act added a new provision to the Bank Holding Company Act, which requires bank holding companies with total consolidated assets equal to or greater than $50 billion to obtain prior approval from the Federal Reserve to acquire a nondepository company having total consolidated assets of $10 billion or more.

We also must comply with anti-money laundering and customer privacy regulations, as well as corporate governance, accounting, and reporting requirements.

The USA Patriot Act of 2001 and its related regulations require insured depository institutions, broker-dealers, and certain other financial institutions to have policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing. Federal banking regulators are required, when reviewing bank holding company acquisition and bank merger applications, to take into account the effectiveness of the anti-money laundering activities of the applicants. The Financial Crimes Enforcement Network has proposed a rule for those same entities, and, if adopted, the proposal will prescribe customer due diligence requirements, including a new regulatory mandate to identify the beneficial owners of legal entities which are customers.

Pursuant to Title V of the Gramm-Leach-Bliley Act, we, like all other financial institutions, are required to:

provide notice to our customers regarding privacy policies and practices,

inform our customers regarding the conditions under which their nonpublic personal information may be disclosed to nonaffiliated third parties, and

give our customers an option to prevent certain disclosure of such information to nonaffiliated third parties.

The Sarbanes-Oxley Act of 2002 imposed new or revised corporate governance, accounting, and reporting requirements on us. In addition to a requirement that chief executive officers and chief financial officers certify financial statements in writing, the statute imposed requirements affecting, among other matters, the composition and activities of audit committees, disclosures relating to corporate insiders and insider transactions, code of ethics, and the effectiveness of internal controls over financial reporting.

Available Information

This information may be read and copied at the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549. You can obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet web site that contains reports, proxy statements, and other information about issuers, like us, who file electronically with the SEC. The address of the site is http://www.sec.gov . The reports and other information filed by us with the SEC are also available at our Internet web site. The address of the site is http://www.huntington.com . Except as specifically incorporated by reference into this Annual Report on Form 10-K, information on those web sites is not part of this report. You also should be able to inspect reports, proxy statements, and other information about us at the offices of the NASDAQ National Market at 33 Whitehall Street, New York, New York.

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Item 1A: Risk Factors

Risk Governance

We use a multi-faceted approach to risk governance. It begins with the board of directors defining our risk appetite as aggregate moderate-to-low. This does not preclude engagement in select higher risk activities. Rather, the definition is intended to represent an average of where we want our overall risk to be managed.

Three board committees primarily oversee implementation of this desired risk appetite and monitoring of our risk profile: The Audit Committee, Risk Oversight Committee, and the Technology Committee:

The Audit Committee is principally involved with overseeing the integrity of financial statements, providing oversight of the internal audit department, and selecting our external auditors. Our chief auditor reports directly to the Audit Committee Chair.

The Risk Oversight Committee supervises our risk management processes which primarily cover credit, market, liquidity, operational, compliance, legal, strategic, and reputational risks. It also approves the charters of executive risk management committees, sets risk limits on certain risk measures (e.g., economic value of equity), receives results of the risk self-assessment process, and routinely engages management in review of key risks. Our credit review executive reports directly to the Risk Oversight Committee.

The Technology Committee provides oversight of technology to meet defined standards for risk, security, and Company-defined targets; and ensure that exposure to security and redundancy risks are defined and transparent and provides oversight of the Bank's overall third party relationship risk management process.

The Audit and Risk Oversight committees routinely hold executive sessions with our key officers engaged in accounting and risk management. On a periodic basis, the two committees meet in joint session to cover matters relevant to both such as the construct and appropriateness of the ACL, which is reviewed quarterly. All directors have access to information provided to each committee and all scheduled meetings are open to all directors.

Further, through its Compensation Committee, the board of directors seeks to ensure its system of rewards is risk-sensitive and aligns the interests of management, creditors, and shareholders. We utilize a variety of compensation-related tools to induce appropriate behavior, including common stock ownership thresholds for the chief executive officer and certain members of senior management, a requirement to hold until retirement, or exit from the company, a portion of net shares received upon exercise of stock options or release of restricted stock awards (50% for executive officers and 25% for other award recipients), equity deferrals, recoupment provisions, and the right to terminate compensation plans at any time.

Management has implemented an Enterprise Risk Management and Risk Appetite Framework. Critically important is our self-assessment process, in which each business segment produces an analysis of its risks and the strength of its risk controls. The segment analyses are combined with assessments by our risk management organization of major risk sectors (e.g., credit, market, liquidity, operational, reputational, compliance, etc.) to produce an overall enterprise risk assessment. Outcomes of the process include a determination of the quality of the overall control process, the direction of risk, and our position compared to the defined risk appetite.

Management also utilizes a wide series of metrics (key risk indicators) to monitor risk positions throughout the Company. In general, a range for each metric is established which allows the company, in aggregate, to operate within a moderate-to-low risk profile. Deviations from the range will indicate if the risk being measured is moving, which may then necessitate corrective action.

We also have four other executive level committees to manage risk: ALCO, Credit Policy and Strategy, Risk Management, and Capital Management. Each committee focuses on specific categories of risk and is supported by a series of subcommittees that are tactical in nature. We believe this structure helps ensure appropriate escalation of issues and overall communication of strategies.

Huntington utilizes three lines of defense with regard to risk management: (1) business segments, (2) corporate risk management, and (3) internal audit and credit review. To induce greater ownership of risk within its business segments, segment risk officers have been embedded to identify and monitor risk, elevate and remediate issues, establish controls, perform self-testing, and oversee the self-assessment process. Corporate Risk Management establishes policies, sets operating limits, reviews new or modified products/processes, ensures consistency and quality assurance within the segments, and produces the enterprise risk assessment. The Chief Risk Officer has significant input into the design and outcome of incentive compensation plans as they apply to risk. Internal Audit and Credit Review provide additional assurance that risk-related functions are operating as intended.

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Risk Overview

We, like other financial companies, are subject to a number of risks that may adversely affect our financial condition or results of operations, many of which are outside of our direct control, though efforts are made to manage those risks while optimizing returns. Among the risks assumed are: (1)  credit risk , which is the risk of loss due to loan and lease customers or other counterparties not being able to meet their financial obligations under agreed upon terms, (2)  market risk , which is the risk of loss due to changes in the market value of assets and liabilities due to changes in market interest rates, foreign exchange rates, equity prices, and credit spreads, (3)  liquidity risk , which is (a) the risk of loss due to the possibility that funds may not be available to satisfy current or future commitments based on external macro market issues, investor and customer perception of financial strength, and events unrelated to us such as war, terrorism, or financial institution market specific issues, and (b) the risk of loss based on our ability to satisfy current or future funding commitments due to the mix and maturity structure of our balance sheet, amount of on-hand cash and unencumbered securities and the availability of contingent sources of funding, (4)  operational and legal risk , which is the risk of loss due to human error, inadequate or failed internal systems and controls, including the use of financial or other quantitative methodologies that may not adequately predict future results, violations of, or noncompliance with, laws, rules, regulations, prescribed practices, or ethical standards, and external influences such as market conditions, fraudulent activities, disasters, and security risks, and (5)  compliance risk , which exposes us to money penalties, enforcement actions or other sanctions as a result of nonconformance with laws, rules, and regulations that apply to the financial services industry.

We also expend considerable effort to contain risk which emanates from execution of our business strategies and work relentlessly to protect the Company's reputation. Strategic risk and reputational risk do not easily lend themselves to traditional methods of measurement. Rather, we closely monitor them through processes such as new product / initiative reviews, frequent financial performance reviews, employee and client surveys, monitoring market intelligence, periodic discussions between management and our board, and other such efforts.

In addition to the other information included or incorporated by reference into this report, readers should carefully consider that the following important factors, among others, could negatively impact our business, future results of operations, and future cash flows materially.

Credit Risks:

1. Our ACL level may prove to be inappropriate or be negatively affected by credit risk exposures which could materially adversely affect our net income and capital.

Our business depends on the creditworthiness of our customers. Our ACL of $666.0 million at December 31, 2014, represented Management's estimate of probable losses inherent in our loan and lease portfolio as well as our unfunded loan commitments and letters of credit. We periodically review our ACL for appropriateness. In doing so, we consider economic conditions and trends, collateral values, and credit quality indicators, such as past charge-off experience, levels of past due loans, and NPAs. There is no certainty that our ACL will be appropriate over time to cover losses in the portfolio because of unanticipated adverse changes in the economy, market conditions, or events adversely affecting specific customers, industries, or markets. If the credit quality of our customer base materially decreases, if the risk profile of a market, industry, or group of customers changes materially, or if the ACL is not appropriate, our net income and capital could be materially adversely affected which, in turn, could have a material adverse effect on our financial condition and results of operations.

In addition, bank regulators periodically review our ACL and may require us to increase our provision for loan and lease losses or loan charge-offs. Any increase in our ACL or loan charge-offs as required by these regulatory authorities could have a material adverse effect on our financial condition and results of operations.

2. Weakness in economic conditions could materially adversely affect our business.

Our performance could be negatively affected to the extent there is deterioration in business and economic conditions which have direct or indirect material adverse impacts on us, our customers, and our counterparties. These conditions could result in one or more of the following:

A decrease in the demand for loans and other products and services offered by us;

A decrease in customer savings generally and in the demand for savings and investment products offered by us; and

An increase in the number of customers and counterparties who become delinquent, file for protection under bankruptcy laws, or default on their loans or other obligations to us.

An increase in the number of delinquencies, bankruptcies, or defaults could result in a higher level of NPAs, NCOs, provision for credit losses, and valuation adjustments on loans held for sale. The markets we serve are dependent on industrial and manufacturing businesses and thus are particularly vulnerable to adverse changes in economic conditions affecting these sectors.

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Market Risks:

1. Changes in interest rates could reduce our net interest income, reduce transactional income, and negatively impact the value of our loans, securities, and other assets. This could have a material adverse impact on our cash flows, financial condition, results of operations, and capital.

Our results of operations depend substantially on net interest income, which is the difference between interest earned on interest earning assets (such as investments and loans) and interest paid on interest bearing liabilities (such as deposits and borrowings). Interest rates are highly sensitive to many factors, including governmental monetary policies and domestic and international economic and political conditions. Conditions such as inflation, deflation, recession, unemployment, money supply, and other factors beyond our control may also affect interest rates. If our interest earning assets mature or reprice faster than interest bearing liabilities in a declining interest rate environment, net interest income could be materially adversely impacted. Likewise, if interest bearing liabilities mature or reprice more quickly than interest earning assets in a rising interest rate environment, net interest income could be adversely impacted. The continuation of the current low interest rate environment could affect consumer and business behavior in ways that are adverse to us and could also constrict our net interest income margin which may restrict our ability to increase net interest income.

Changes in interest rates can affect the value of loans, securities, assets under management, and other assets, including mortgage and nonmortgage servicing rights. An increase in interest rates that adversely affects the ability of borrowers to pay the principal or interest on loans and leases may lead to an increase in NPAs and a reduction of income recognized, which could have a material adverse effect on our results of operations and cash flows. When we place a loan on nonaccrual status, we reverse any accrued but unpaid interest receivable, which decreases interest income. However, we continue to incur interest expense as a cost of funding NALs without any corresponding interest income. In addition, transactional income, including trust income, brokerage income, and gain on sales of loans can vary significantly from period-to-period based on a number of factors, including the interest rate environment.

Rising interest rates reduce the value of our fixed-rate debt securities and cash flow hedging derivatives portfolio. Any unrealized loss from these portfolios impacts OCI, shareholders' equity, and the Tangible Common Equity ratio. Any realized loss from these portfolios impacts regulatory capital ratios, notably Tier I and Total risk-based capital ratios. In a rising interest rate environment, pension and other post-retirement obligations somewhat mitigate negative OCI impacts from securities and financial instruments. For more information, refer to "Market Risk" of the MD&A.

Certain investment securities, notably mortgage-backed securities, are very sensitive to rising and falling rates. Generally, when rates rise, prepayments of principal and interest will decrease and the duration of mortgage-backed securities will increase. Conversely, when rates fall, prepayments of principal and interest will increase and the duration of mortgage-backed securities will decrease. In either case, interest rates have a significant impact on the value of mortgage-backed securities investments.

Liquidity Risks:

1. Changes in either Huntington's financial condition or in the general banking industry could result in a loss of depositor confidence.

Liquidity is the ability to meet cash flow needs on a timely basis at a reasonable cost. The Bank uses its liquidity to extend credit and to repay liabilities as they become due or as demanded by customers. The board of directors establishes liquidity policies and limits and management establishes operating guidelines for liquidity.

Our primary source of liquidity is our large supply of deposits from consumer and commercial customers. The continued availability of this supply depends on customer willingness to maintain deposit balances with banks in general and us in particular. The availability of deposits can also be impacted by regulatory changes (e.g. changes in FDIC insurance, the Liquidity Coverage Ratio, etc.), and other events which can impact the perceived safety or economic benefits of bank deposits. While we make significant efforts to consider and plan for hypothetical disruptions in our deposit funding, market related, geopolitical or other events could impact the liquidity derived from deposits.

2. If we lose access to capital markets, we may not be able to meet the cash flow requirements of our depositors, creditors, and borrowers, or have the operating cash needed to fund corporate expansion and other corporate activities.

Wholesale funding sources include securitization, federal funds purchased, securities sold under repurchase agreements, non-core deposits, and long-term debt. The Bank is also a member of the Federal Home Loan Bank of Cincinnati, which provides members access to funding through advances collateralized with mortgage-related assets. We maintain a portfolio of highly-rated, marketable securities that is available as a source of liquidity.

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Capital markets disruptions can directly impact the liquidity of the Bank and Corporation. The inability to access capital markets funding sources as needed could adversely impact our financial condition, results of operations, cash flows, and level of regulatory-qualifying capital. We may, from time-to-time, consider using our existing liquidity position to opportunistically retire outstanding securities in privately negotiated or open market transactions.

Operational and Legal Risks:

1. We face security risks, including denial of service attacks, hacking and identity theft that could result in the disclosure of confidential information, adversely affect our business or reputation and create significant legal and financial exposure.

Our computer systems and network infrastructure are subject to security risks and could be susceptible to cyber-attacks, such as denial of service attacks, hacking, terrorist activities or identity theft. Financial services institutions and companies engaged in data processing have reported breaches in the security of their websites or other systems, some of which have involved sophisticated and targeted attacks intended to obtain unauthorized access to confidential information, destroy data, disable or degrade service, or sabotage systems, often through the introduction of computer viruses or malware, cyber-attacks and other means. Denial of service attacks have been launched against a number of large financial services institutions, including us. None of these events resulted in a breach of our client data or account information; however, the performance of our website, www.huntington.com, was adversely affected, and in some instances customers were prevented from accessing our website. We expect to be subject to similar attacks in the future. While events to date primarily resulted in inconvenience, future cyber-attacks could be more disruptive and damaging. Hacking and identity theft risks, in particular, could cause serious reputational harm. Cyber threats are rapidly evolving and we may not be able to anticipate or prevent all such attacks and could be held liable for any security breach or loss.

Despite efforts to ensure the integrity of our systems, we will not be able to anticipate all security breaches of these types, nor will we be able to implement guaranteed preventive measures against such security breaches. Persistent attackers may succeed in penetrating defenses given enough resources, time and motive. The techniques used by cyber criminals change frequently, may not be recognized until launched and can originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations or hostile foreign governments. These risks may increase in the future as we continue to increase our mobile-payment and other internet-based product offerings and expand our internal usage of web-based products and applications.

Even the most advanced internal control environment may be vulnerable to compromise. Targeted social engineering attacks are becoming more sophisticated and are extremely difficult to prevent. The successful social engineer will attempt to fraudulently induce employees, customers or other users of our systems to disclose sensitive information in order to gain access to its data or that of its clients.

A successful penetration or circumvention of system security could cause us serious negative consequences, including significant disruption of operations, misappropriation of confidential information, or damage to our computers or systems or those of our customers and counterparties. A successful security breach could result in violations of applicable privacy and other laws, financial loss to us or to our customers, loss of confidence in our security measures, significant litigation exposure, and harm to our reputation, all of which could have a material adverse effect on the Company.

2. The resolution of significant pending litigation, if unfavorable, could have a material adverse effect on our results of operations for a particular period.

We face legal risks in our businesses, and the volume of claims and amount of damages and penalties claimed in litigation and regulatory proceedings against financial institutions remain high. Substantial legal liability against us could have material adverse financial effects or cause significant reputational harm to us, which in turn could seriously harm our business prospects. It is possible that the ultimate resolution of these matters, if unfavorable, may be material to the results of operations for a particular reporting period.

Note 20 of the Notes to Consolidated Financial Statements updates the status of litigation concerning Cyberco Holdings, Inc. Although the bank maintains litigation reserves related to this case, the ultimate resolution of the matter, if unfavorable, may be material to our results of operations for a particular reporting period.

3. We face significant operational risks which could lead to financial loss, expensive litigation, and loss of confidence by our customers, regulators, and capital markets.

We are exposed to many types of operational risks, including the risk of fraud or theft by employees or outsiders, unauthorized transactions by employees or outsiders, or operational errors by employees. Huntington executes against a significant number of controls, a large percent of which are manual and dependent on adequate execution by colleagues and third party service providers. There is inherent risk that unknown single points of failure through the execution chain could give rise to material loss through inadvertent errors or malicious attack. These operational risks could lead to financial loss, expensive litigation, and loss of confidence by our customers, regulators, and the capital markets.

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Moreover, negative public opinion can result from our actual or alleged conduct in any number of activities, including lending practices, corporate governance, and acquisitions and from actions taken by government regulators and community organizations in response to those activities. Negative public opinion can adversely affect our ability to attract and retain customers and can also expose us to litigation and regulatory action.

Relative to acquisitions, we cannot predict if, or when, we will be able to identify and attract acquisition candidates or make acquisitions on favorable terms. We incur risks and challenges associated with the integration of acquired institutions in a timely and efficient manner, and we cannot guarantee that we will be successful in retaining existing customer relationships or achieving anticipated operating efficiencies.

4. Failure to maintain effective internal controls over financial reporting in the future could impair our ability to accurately and timely report our financial results or prevent fraud, resulting in loss of investor confidence and adversely affecting our business and stock price.

Effective internal controls over financial reporting are necessary to provide reliable financial reports and prevent fraud. As a financial holding company, we are subject to regulation that focuses on effective internal controls and procedures. Such controls and procedures are modified, supplemented, and changed from time-to-time as necessitated by our growth and in reaction to external events and developments. Any failure to maintain, in the future, an effective internal control environment could impact our ability to report our financial results on an accurate and timely basis, which could result in regulatory actions, loss of investor confidence, and adversely impact our business and stock price.

5. We rely on quantitative models to measure risks and to estimate certain financial values.

Quantitative models may be used to help manage certain aspects of our business and to assist with certain business decisions, including estimating probable loan losses, measuring the fair value of financial instruments when reliable market prices are unavailable, estimating the effects of changing interest rates and other market measures on our financial condition and results of operations, managing risk, and for capital planning purposes (including during the CCAR capital planning and capital adequacy process). Our measurement methodologies rely on many assumptions, historical analyses and correlations. These assumptions may not capture or fully incorporate conditions leading to losses, particularly in times of market distress, and the historical correlations on which we rely may no longer be relevant. Additionally, as businesses and markets evolve, our measurements may not accurately reflect this evolution. Even if the underlying assumptions and historical correlations used in our models are adequate, our models may be deficient due to errors in computer code, bad data, misuse of data, or the use of a model for a purpose outside the scope of the model's design.

All models have certain limitations. Reliance on models presents the risk that our business decisions based on information incorporated from models will be adversely affected due to incorrect, missing, or misleading information. In addition, our models may not capture or fully express the risks we face, may suggest that we have sufficient capitalization when we do not, or may lead us to misjudge the business and economic environment in which we will operate. If our models fail to produce reliable results on an ongoing basis, we may not make appropriate risk management, capital planning, or other business or financial decisions. Strategies that we employ to manage and govern the risks associated with our use of models may not be effective or fully reliable. Also, information that we provide to the public or regulators based on poorly designed models could be inaccurate or misleading.

Banking regulators continue to focus on the models used by banks and bank holding companies in their businesses. Some of our decisions that the regulators evaluate, including distributions to our shareholders, could be affected adversely due to their perception that the quality of the models used to generate the relevant information is insufficient.

Compliance Risks:

1. Bank regulations regarding capital and liquidity, including the annual CCAR assessment process and the Basel III capital and liquidity standards, could require higher levels of capital and liquidity. Among other things, these regulations could impact our ability to pay common stock dividends, repurchase common stock, attract cost-effective sources of deposits, or require the retention of higher amounts of low yielding securities.

The Federal Reserve administers the annual CCAR, an assessment of the capital adequacy of bank holding companies with consolidated assets of $50 billion or more and of the practices used by covered banks to assess capital needs. Under CCAR, the Federal Reserve makes a qualitative assessment of capital adequacy on a forward-looking basis and reviews the strength of a bank holding company's capital adequacy process. The Federal Reserve also makes a quantitative assessment of capital based on supervisory-run stress tests that assess the ability to maintain capital levels above each minimum regulatory capital ratio and above a

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tier 1 common ratio of 5% and common equity tier 1 ratio of 4.5%, after making all capital actions included in a bank holding company's capital plan, under baseline and stressful conditions throughout a nine-quarter planning horizon. Capital plans for 2015 were required to be submitted by January 5, 2015, and the Federal Reserve will either object to the capital plan and/or planned capital actions, or provide a notice of non-objection, no later than March 31, 2015. We submitted our capital plan to the Federal Reserve on January 5, 2015. There can be no assurance that the Federal Reserve will respond favorably to our capital plan, capital actions or stress test and the Federal Reserve, OCC, or other regulatory capital requirements may limit or otherwise restrict how we utilize our capital, including common stock dividends and stock repurchases.

On July 2, 2013, the Federal Reserve voted to adopt final Basel III capital rules for U.S. Banking organizations. The final rules establish an integrated regulatory capital framework and will implement in the United States the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Act. Under the final rule, minimum requirements will increase for both the quantity and quality of capital held by banking organizations. As a Standardized Approach institution, the Basel III minimum capital requirements became effective for us on January 1, 2015, and will be fully phased-in on January 1, 2019.

On September 3, 2014, the U.S. banking regulators approved a final rule to implement a minimum liquidity coverage ratio (LCR) requirement for banking organizations with total consolidated assets of $250 billion or more, and a less stringent modified LCR requirement to depository institution holding companies below the threshold but with total consolidated assets of $50 billion or more. The LCR requires covered banking organizations to maintain HQLA equal to projected stressed cash outflows over a 30 calendar-day stress scenario. We are covered by the modified LCR requirement and therefore subject to the phase-in of the rule beginning January 2016 at 90% and January 2017 at 100%. We will also be required to calculate the LCR monthly. The LCR assigns less severe outflow assumptions to certain types of customer deposits, which should increase the demand, and perhaps the cost, among banks for these deposits. Additionally, the HQLA requirements will increase the demand for direct US government and US government- guaranteed debt that, while high quality, generally carry lower yields than other securities that banks hold in their investment portfolios.

2. If our regulators deem it appropriate, they can take regulatory actions that could result in a material adverse impact on our financial results, ability to compete for new business, constrain our ability to fund our liquidity needs or pay dividends, and increase the cost of our services.

We are subject to the supervision and regulation of various state and federal regulators, including the OCC, Federal Reserve, FDIC, SEC, CFPB, Financial Industry Regulatory Authority, and various state regulatory agencies. As such, we are subject to a wide variety of laws and regulations, many of which are discussed in the Regulatory Matters section. As part of their supervisory process, which includes periodic examinations and continuous monitoring, the regulators have the authority to impose restrictions or conditions on our activities and the manner in which we manage the organization. Such actions could negatively impact us in a variety of ways, including monetary fines, impacting our ability to pay dividends, precluding mergers or acquisitions, limiting our ability to offer certain products or services, or imposing additional capital requirements.

With the development of the CFPB, our consumer products and services are subject to increasing regulatory oversight and scrutiny with respect to compliance under consumer laws and regulations. We may face a greater number or wider scope of investigations, enforcement actions and litigation in the future related to consumer practices, thereby increasing costs associated with responding to or defending such actions. In addition, increased regulatory inquiries and investigations, as well as any additional legislative or regulatory developments affecting our consumer businesses, and any required changes to our business operations resulting from these developments, could result in significant loss of revenue, require remuneration to our customers, trigger fines or penalties, limit the products or services we offer, require us to increase our prices and therefore reduce demand for our products, impose additional compliance costs on us, cause harm to our reputation or otherwise adversely affect our consumer businesses.

3. Legislative and regulatory actions taken now or in the future that impact the financial industry may materially adversely affect us by increasing our costs, adding complexity in doing business, impeding the efficiency of our internal business processes, negatively impacting the recoverability of certain of our recorded assets, requiring us to increase our regulatory capital, limiting our ability to pursue business opportunities, and otherwise result in a material adverse impact on our financial condition, results of operation, liquidity, or stock price.

The Dodd-Frank Act represents a comprehensive overhaul of the financial services industry within the United States, establishes the CFPB, and requires the bureau and other federal agencies to implement many new and significant rules and regulations. It is not possible to predict the full extent to which the Dodd-Frank Act, or the resulting rules and regulations in their entirety, will impact our business. Compliance with these new laws and regulations have and will continue to result in additional costs, which could be significant, and may have a material and adverse effect on our results of operations. In addition, if we do not appropriately comply with current or future legislation and regulations that apply to our consumer operations, we may be subject to fines, penalties or judgments, or material regulatory restrictions on our businesses, which could adversely affect operations and, in turn, financial results.

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Item 1B: Unresolved Staff Comments

None.

Item 2: Properties

Our headquarters, as well as the Bank's, is located in the Huntington Center, a thirty seven story office building located in Columbus, Ohio. Of the building's total office space available, we lease approximately 28%. The lease term expires in 2030, with six five-year renewal options for up to 30 years but with no purchase option. The Bank has an indirect minority equity interest of 18.4% in the building.

Our other major properties consist of the following:

Description

Location

Own Lease
13 story office building, located adjacent to the Huntington Center Columbus, Ohio ü
12 story office building, located adjacent to the Huntington Center Columbus, Ohio ü
3 story office building - the Crosswoods building Columbus, Ohio ü
A portion of 200 Public Square Building Cleveland, Ohio ü
12 story office building Youngstown, Ohio ü
10 story office building Warren, Ohio ü
10 story office building Toledo, Ohio ü
A portion of the Grant Building Pittsburgh, PA ü
18 story office building Charleston, West Virginia ü
3 story office building Holland, Michigan ü
2 building office complex Troy, Michigan ü
Data processing and operations center (Easton) Columbus, Ohio ü
Data processing and operations center (Northland) Columbus, Ohio ü
Data processing and operations center (Parma) Cleveland, Ohio ü
8 story office building Indianapolis, Indiana ü

Item 3: Legal Proceedings

Information required by this item is set forth in Note 20 of the Notes to Consolidated Financial Statements and incorporated into this Item by reference.

Item 4: Mine Safety Disclosures

Not applicable.

PART II

Item 5: Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

The common stock of Huntington Bancshares Incorporated is traded on the NASDAQ Stock Market under the symbol "HBAN". The stock is listed as "HuntgBcshr" or "HuntBanc" in most newspapers. As of January 31, 2015, we had 28,369 shareholders of record.

Information regarding the high and low sale prices of our common stock and cash dividends declared on such shares, as required by this Item, is set forth in Table 46 entitled Selected Quarterly Income Statement Data and incorporated into this Item by reference. Information regarding restrictions on dividends, as required by this Item, is set forth in Item 1 Business-Regulatory Matters and in Note 21 of the Notes to Consolidated Financial Statements and incorporated into this Item by reference.

The following graph shows the changes, over the five-year period, in the value of $100 invested in (i) shares of Huntington's Common Stock; (ii) the Standard & Poor's 500 Stock Index (the "S&P 500 Index") and (iii) Keefe, Bruyette & Woods Bank Index (the "KBW Bank Index"), for the period December 31, 2009, through December 31, 2014. The KBW Bank Index is a market capitalization-weighted bank stock index published by Keefe, Bruyette & Woods. The index is composed of the largest banking companies and includes all money center banks and regional banks, including Huntington. An investment of $100 on December 31, 2009, and the reinvestment of all dividends, are assumed. The plotted points represent the closing price on the last trading day of the fiscal year indicated.

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The following table provides information regarding Huntington's purchases of its Common Stock during the three-month period ended December 31, 2014:

Period

Total Number
of Shares
Purchased
Average
Price Paid
Per Share
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs (1)
Maximum Number of Shares (or
Approximate Dollar Value) that
May Yet Be Purchased Under

the Plans or Programs (2)

October 1, 2014 to October 31, 2014

2,647,087 $ 9.46 20,179,890 $ 61,369,532

November 1, 2014 to November 30, 2014

958,144 10.08 21,138,034 51,711,440

December 1, 2014 to December 31, 2014

-   -   21,138,034 51,711,440

Total

3,605,231 $ 9.63 21,138,034 $ 51,711,440

(1) The reported shares were repurchased pursuant to Huntington's publicly announced stock repurchase authorization, which became effective April 1, 2014.
(2) The number shown represents, as of the end of each period, the maximum number of shares (approximate dollar value) of Common Stock that may yet be purchased under publicly announced stock repurchase authorizations. The shares may be purchased, from time-to-time, depending on market conditions.

On March 26, 2014, Huntington announced that the Federal Reserve did not object to Huntington's proposed capital actions included in Huntington's capital plan submitted to the Federal Reserve in January 2014. These actions included a potential repurchase of up to $250 million of common stock through the first quarter of 2015. This repurchase authorization represented a $23 million, or 10%, increase from the prior common stock repurchase authorization. Purchases of common stock may include open market purchases, privately negotiated transactions, and accelerated repurchase programs. Huntington's board of directors authorized a share repurchase program consistent with Huntington's capital plan. During the 2014 fourth quarter, Huntington repurchased a total of 3.6 million shares at a weighted average share price of $9.63. For the year ended December 31, 2014, Huntington purchased 35.7 million common shares at a weighted average price of $9.37 per share. For the year ended December 31, 2013, Huntington purchased 16.7 million common shares at a weighted average price of $7.46 per share.

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Item 6: Selected Financial Data

Table 1-Selected Financial Data (1)

Year Ended December 31,

(dollar amounts in thousands, except per share amounts)

2014 2013 2012 2011 2010

Interest income

$ 1,976,462 $ 1,860,637 $ 1,930,263 $ 1,970,226 $ 2,145,392

Interest expense

139,321 156,029 219,739 341,056 526,587

Net interest income

1,837,141 1,704,608 1,710,524 1,629,170 1,618,805

Provision for credit losses

80,989 90,045 147,388 174,059 634,547

Net interest income after provision for credit losses

1,756,152 1,614,563 1,563,136 1,455,111 984,258

Noninterest income

979,179 1,012,196 1,106,321 992,317 1,053,660

Noninterest expense

1,882,346 1,758,003 1,835,876 1,728,500 1,673,805

Income before income taxes

852,985 868,756 833,581 718,928 364,113

Provision for income taxes

220,593 227,474 202,291 172,555 57,465

Net income

$ 632,392 $ 641,282 $ 631,290 $ 546,373 $ 306,648

Dividends on preferred shares

31,854 31,869 31,989 30,813 172,032

Net income applicable to common shares

$ 600,538 $ 609,413 $ 599,301 $ 515,560 $ 134,616

Net income per common share-basic

$ 0.73 $ 0.73 $ 0.70 $ 0.60 $ 0.19

Net income per common share-diluted

0.72 0.72 0.69 0.59 0.18

Cash dividends declared per common share

0.21 0.19 0.16 0.10 0.04

Balance sheet highlights

Total assets (period end)

$ 66,298,010 $ 59,467,174 $ 56,141,474 $ 54,448,673 $ 53,813,903

Total long-term debt (period end)

4,335,962 2,458,272 1,364,834 2,747,857 3,663,826

Total shareholders' equity (period end)

6,328,170 6,090,153 5,778,500 5,416,121 4,974,803

Average long-term debt

3,494,987 1,670,502 1,986,612 3,182,900 3,893,246

Average shareholders' equity

6,269,884 5,914,914 5,671,455 5,237,541 5,482,502

Average total assets

62,498,880 56,299,313 55,673,599 53,750,054 52,574,231

Key ratios and statistics

Margin analysis-as a % of average earnings assets

Interest income (2)

3.47 3.66 3.85 4.09 4.55

Interest expense

0.24 0.30 0.44 0.71 1.11

Net interest margin (2)

3.23 3.36 3.41 3.38 3.44

Return on average total assets

1.01 1.14 1.13 1.02 0.58

Return on average common shareholders' equity

10.2 11.0 11.3 10.6 3.5

Return on average tangible common shareholders' equity (3), (7)

11.8 12.7 13.3 12.8 5.4

Efficiency ratio (4)

65.1 62.6 63.2 63.5 60.1

Dividend payout ratio

28.8 26.0 22.9 16.7 21.1

Average shareholders' equity to average assets

10.03 10.51 10.19 9.74 10.43

Effective tax rate

25.9 26.2 24.3 24.0 15.8

Tier 1 common risk-based capital ratio
(period end) (7), (8)

10.23 10.90 10.48 10.00 9.29

Tangible common equity to tangible assets (period end)  (5), (7)

8.17 8.82 8.74 8.30 7.55

Tangible equity to tangible assets (period end) (6), (7)

8.76 9.47 9.44 9.01 8.23

Tier 1 leverage ratio (period end) (9)

9.74 10.67 10.36 10.28 9.41

Tier 1 risk-based capital ratio (period end) (9)

11.50 12.28 12.02 12.11 11.55

Total risk-based capital ratio (period end) (9)

13.56 14.57 14.50 14.77 14.46

Other data

Full-time equivalent employees (average)

11,873 11,964 11,494 11,398 11,038

Domestic banking offices (period end)

729 711 705 668 620

(1)

Comparisons for presented periods are impacted by a number of factors. Refer to the Significant Items for additional discussion regarding these key factors.

(2)

On an FTE basis assuming a 35% tax rate.

(3)

Net income (loss) excluding expense for amortization of intangibles for the period divided by average tangible shareholders' equity. Average tangible shareholders' equity equals average total shareholders' equity less average intangible assets and goodwill. Expense for amortization of intangibles and average intangible assets are net of deferred tax liability, and calculated assuming a 35% tax rate.

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(4)

Noninterest expense less amortization of intangibles divided by the sum of FTE net interest income and noninterest income excluding securities gains.

(5)

Tangible common equity (total common equity less goodwill and other intangible assets) divided by tangible assets (total assets less goodwill and other intangible assets). Other intangible assets are net of deferred tax and calculated assuming a 35% tax rate.

(6)

Tangible equity (total equity less goodwill and other intangible assets) divided by tangible assets (total assets less goodwill and other intangible assets). Other intangible assets are net of deferred tax and calculated assuming a 35% tax rate.

(7)

Tier 1 common equity, tangible equity, tangible common equity, and tangible assets are non-GAAP financial measures. Additionally, any ratios utilizing these financial measures are also non-GAAP. These financial measures have been included as they are considered to be critical metrics with which to analyze and evaluate financial condition and capital strength. Other companies may calculate these financial measures differently.

(8)

In accordance with applicable regulatory reporting guidance, we are not required to retrospectively update historical filings for newly adopted accounting principles. Therefore, Tier 1 capital, Tier 1 common equity, and risk-weighted assets have not been updated for the adoption of ASU 2014-01.

(9)

In accordance with applicable regulatory reporting guidance, we are not required to retrospectively update historical filings for newly adopted accounting principles. Therefore, regulatory capital data has not been updated for the adoption of ASU 2014-01.

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Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION

We are a multi-state diversified regional bank holding company organized under Maryland law in 1966 and headquartered in Columbus, Ohio. Through the Bank, we have 149 years of servicing the financial needs of our customers. Through our subsidiaries, we provide full-service commercial and consumer banking services, mortgage banking services, automobile financing, equipment leasing, investment management, trust services, brokerage services, insurance service programs, and other financial products and services. Our 715 branches are located in Ohio, Michigan, Pennsylvania, Indiana, West Virginia, and Kentucky. Selected financial services and other activities are also conducted in various other states. International banking services are available through the headquarters office in Columbus, Ohio and a limited purpose office located in the Cayman Islands and another limited purpose office located in Hong Kong. Our foreign banking activities, in total or with any individual country, are not significant.

This MD&A provides information we believe necessary for understanding our financial condition, changes in financial condition, results of operations, and cash flows. The MD&A should be read in conjunction with the Consolidated Financial Statements, Notes to Consolidated Financial Statements, and other information contained in this report.

Our discussion is divided into key segments:

Executive Overview – Provides a summary of our current financial performance and business overview, including our thoughts on the impact of the economy, legislative and regulatory initiatives, and recent industry developments. This section also provides our outlook regarding our expectations for the next several quarters.

Discussion of Results of Operations -Reviews financial performance from a consolidated Company perspective. It also includes a Significant Items section that summarizes key issues helpful for understanding performance trends. Key consolidated average balance sheet and income statement trends are also discussed in this section.

Risk Management and Capital - Discusses credit, market, liquidity, operational, and compliance risks, including how these are managed, as well as performance trends. It also includes a discussion of liquidity policies, how we obtain funding, and related performance. In addition, there is a discussion of guarantees and / or commitments made for items such as standby letters of credit and commitments to sell loans, and a discussion that reviews the adequacy of capital, including regulatory capital requirements.

Business Segment Discussion -Provides an overview of financial performance for each of our major business segments and provides additional discussion of trends underlying consolidated financial performance.

Results for the Fourth Quarter - Provides a discussion of results for the 2014 fourth quarter compared with the 2013 fourth quarter.

Additional Disclosures - Provides comments on important matters including forward-looking statements, critical accounting policies and use of significant estimates, and recent accounting pronouncements and developments.

A reading of each section is important to understand fully the nature of our financial performance and prospects.

EXECUTIVE OVERVIEW

2014 Financial Performance Review

In 2014, we reported net income of $632.4 million, or $0.72 per common share, relatively unchanged from the prior year. This resulted in a 1.01% return on average assets and a 11.8% return on average tangible common equity. In addition, we grew our base of consumer and business customers as we increased 2014 average earning assets by $6.1 billion, or 12%, over the prior year. Our strategic business investments and OCR sales approach continued to generate positive results in 2014. (Also, see Significant Items Influencing Financial Performance Comparisons within the Discussion of Results of Operations.)

Fully-taxable equivalent net interest income was $1.9 billion in 2014, an increase of $132.7 million, or 8%, compared with 2013. This reflected the impact of 12% earning asset growth, partially offset by 13% interest-bearing liability growth and a 13 basis point decrease in the NIM to 3.23%. The earning asset growth reflected a $3.6 billion, or 9%, increase in average loans and leases and a $2.7 billion, or 29%, increase in average securities. The loan growth reflected an increase in average automobile loans, as the growth in originations remained strong. Also, average C&I loans increased which primarily reflected growth in trade finance in support of our middle market and corporate customers. The securities growth primarily reflected an increase in LCR level 1 qualified securities and direct purchase municipal instruments. This earnings asset growth was partially offset by a $4.7 billion, or 13%, increase in interest-bearing liabilities. The interest-bearing liability growth reflected a $3.2 billion, or 104%, increase in short- and long-term borrowings

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and a $2.2 billion, or 14%, increase in money market deposits, partially offset by a $1.2 billion, or 27%, decrease in average core certificates of deposit. Borrowings have been a cost effective method to fund our incremental securities growth and the change in deposit mix reflects our strategic focus on changing funding sources. The NIM contraction reflected a 19 basis point decrease related to the mix and yield of earning assets and 3 basis point reduction in the benefit to the margin from the impact of noninterest-bearing funds, partially offset by the 9 basis point reduction in funding costs.

Noninterest income was $979.2 million in 2014, a decrease of $33.0 million, or 3%, compared with 2013. Mortgage banking income was down due to a reduction in origination and secondary marketing revenue as originations decreased and gain-on-sale margins compressed, and a negative impact from net MSR hedging activity. In addition, other income declined primarily due to a decrease in LIHTC gains and lower fees associated with commercial loan activity and trust services primarily due to a reduction in fees. These declines were partially offset by an increase in securities gains as we adjusted the mix of our securities portfolio to prepare for the LCR requirements and an increase in electronic banking income due to higher card related income and underlying customer growth.

Noninterest expense was $1.9 billion in 2014, an increase of $124.3 million, or 7%, compared with 2013. This reflected an increase in personnel costs, other expense, professional services, outside data processing and other services, and equipment. The increase included $65.5 million of significant items related to franchise repositioning, merger and acquisition costs, and additions to the litigation reserves ( This section should be read in conjunction with Table 8 – Noninterest Expense ). Excluding the impact of the significant items, other noninterest expense increased due to state franchise taxes, protective advances, and litigation expense. Professional services increased due to outside consultant expenses related to strategic planning and legal services. Outside data processing and other services increased, primarily reflecting higher debit and credit card processing costs and increased other technology investment expense, as we continue to invest in technology supporting our products, services, and our Continuous Improvement initiatives.

Credit quality continued to improve in 2014. NALs declined $21.8 million, or 7%, from 2013 to $300.2 million, or 0.63% of total loans and leases. NPAs declined $14.4 million, or 4%, compared to a year-ago to $337.7 million, or 0.71% of total loans and leases, OREO, and other NPAs. The decreases primarily reflected meaningful improvement in both CRE and residential mortgage NALs. The provision for credit losses decreased $9.1 million, or 10%, from 2013 due to the continued decline in NCOs and nonaccrual loans. NCOs decreased $64.0 million, or 34%, from the prior year to $124.6 million. NCOs were an annualized 0.27% of average loans and leases in the current year compared to 0.45% in 2013. The ACL as a percentage of total loans and leases decreased to 1.40% from 1.65% a year ago, while the ACL as a percentage of period-end total NALs increased slightly to 222% from 221%. However, criticized and classified loans did increase $95.1 million, or 7%, from prior year.

The tangible common equity to tangible assets ratio at December 31, 2014, was 8.17%, down 65 basis points from a year ago. Our Tier 1 common risk-based capital ratio at year end was 10.23%, down from 10.90% at the end of 2013. The regulatory Tier 1 risk-based capital ratio at December 31, 2014, was 11.50%, down from 12.28% at December 31, 2013. The decreases in the capital ratios were due to balance sheet growth and share repurchases that were partially offset by increased retained earnings and the stock issued in the Camco Financial acquisition. Specifically, all capital ratios were impacted by the repurchase of 35.7 million common shares over the last four quarters, 3.6 million of which were repurchased during the 2014 fourth quarter. This decrease was offset partially by the increase in retained earnings, as well as the issuance of 8.7 million common shares in the Camco acquisition. Huntington estimates the negative impact to Tier 1 common risk-based capital from the 2015 first quarter implementation of the Federal Reserve's revised Basel III capital rules will be approximately 40 basis points on a fully phased-in basis.

Business Overview

General

Our general business objectives are: (1) grow net interest income and fee income, (2) deliver positive operating leverage, (3) increase primary relationships across all business segments, (4) continue to strengthen risk management and reduce volatility, and (5) maintain strong capital and liquidity positions.

Huntington enjoys a unique and advantaged position in the industry and our future is bright. We are focused on executing our strategic plan, and we are very pleased with the results we are achieving. For the past several years we have invested in the company at a time when most of the industry has been pulling back. We have expanded and optimized our retail distribution, both physical and digital. We have invested in small business and commercial specialty lending verticals. We have added new products, such as our consumer and commercial credit cards and our new business and consumer checking accounts. These represent just a handful of the investments we have made. Our 2014 earnings reflected results from these investments. Yet significant opportunity remains as none of these investments are mature. We have a strong outlook for the future.

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Economy

We remain optimistic on the economy in our footprint as fundamentals look positive. Home prices are improving, and the recent reduction in interest rates provides another refinance window. Automobile sales were very strong in 2014 and appear poised for another great, if not even better, year in 2015. The state governments in our footprint are operating with surpluses, and most of the municipalities are on solid footing. We have good momentum on the consumer side. Our loan pipeline remains stable, and customer activity among our core small and middle market business customer base continues to trend favorably.

Legislative and Regulatory

A comprehensive discussion of legislative and regulatory matters affecting us can be found in the Regulatory Matters section included in Item 1 of this Form 10-K.

2015 Expectations

As we move into 2015, customer activity is strong, pipelines are stable, and our balance sheet is well positioned. We built our plan with an assumption of no change in interest rates and with the flexibility to quickly adjust to the evolving operating environment. We remain committed to investing in the business, disciplined expense control, and delivering full-year positive operating leverage.

Excluding Significant Items and net MSR hedging activity, we expect to deliver positive operating leverage in 2015 with revenue growth exceeding noninterest expense growth of 2-4%.

Overall, asset quality metrics are expected to remain near current levels, although moderate quarterly volatility also is expected, given the absolute low level of problem assets and credit costs. We anticipate NCOs will remain within or below our long-term normalized range of 35 to 55 basis points.

The effective tax rate for 2015 is expected to be in the range of 25% to 28%.

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Table 2-Selected Annual Income Statements (1)

Year Ended December 31,
Change from 2013 Change from 2012

(dollar amounts in thousands, except per share amounts)

2014 Amount Percent 2013 Amount Percent 2012

Interest income

$ 1,976,462 $ 115,825 6 $ 1,860,637 $ (69,626 (4 )%  $ 1,930,263

Interest expense

139,321 (16,708 (11 156,029 (63,710 (29 219,739

Net interest income

1,837,141 132,533 8 1,704,608 (5,916 -   1,710,524

Provision for credit losses

80,989 (9,056 (10 90,045 (57,343 (39 147,388

Net interest income after provision for credit losses

1,756,152 141,589 9 1,614,563 51,427 3 1,563,136

Service charges on deposit accounts

273,741 1,939 1 271,802 9,623 4 262,179

Trust services

115,972 (7,035 (6 123,007 1,110 1 121,897

Electronic banking

105,401 12,810 14 92,591 10,301 13 82,290

Mortgage banking income

84,887 (41,968 (33 126,855 (64,237 (34 191,092

Brokerage income

68,277 (1,347 (2 69,624 (3,060 (4 72,684

Insurance income

65,473 (3,791 (5 69,264 (2,055 (3 71,319

Bank owned life insurance income

57,048 629 1 56,419 377 1 56,042

Capital markets fees

43,731 (1,489 (3 45,220 (2,126 (4 48,160

Gain on sale of loans

21,091 2,920 16 18,171 (40,011 (69 58,182

Securities gains (losses)

17,554 17,136 4,100 418 (4,351 (91 4,769

Other income

126,004 (12,821 (9 138,825 304 -   137,707

Total noninterest income

979,179 (33,017 (3 1,012,196 (94,125 (9 1,106,321

Personnel costs

1,048,775 47,138 5 1,001,637 13,444 1 988,193

Outside data processing and other services

212,586 13,039 7 199,547 9,292 5 190,255

Net occupancy

128,076 2,732 2 125,344 14,184 13 111,160

Equipment

119,663 12,870 12 106,793 3,846 4 102,947

Professional services

59,555 18,968 47 40,587 (25,171 (38 65,758

Marketing

50,560 (625 (1 51,185 (13,078 (20 64,263

Deposit and other insurance expense

49,044 (1,117 (2 50,161 (18,169 (27 68,330

Amortization of intangibles

39,277 (2,087 (5 41,364 (5,185 (11 46,549

Gain on early extinguishment of debt

-   -   -   -   798 (100 (798

Other expense

174,810 33,425 24 141,385 (57,834 (29 199,219

Total noninterest expense

1,882,346 124,343 7 1,758,003 (77,873 (4 1,835,876

Income before income taxes

852,985 (15,771 (2 868,756 35,175 4 833,581

Provision for income taxes

220,593 (6,881 (3 227,474 25,183 12 202,291

Net income

$ 632,392 $ (8,890 (1 )%  $ 641,282 $ 9,992 2 $ 631,290

Dividends on preferred shares

31,854 (15 -   31,869 (120 -   31,989

Net income applicable to common shares

$ 600,538 $ (8,875 (1 )%  $ 609,413 $ 10,112 2 $ 599,301

Average common shares-basic

819,917 (14,288 (2 )%  834,205 (23,757 (3 )%  857,962

Average common shares-diluted

833,081 (10,893 (1 843,974 (19,428 (2 863,402

Per common share:

Net income-basic

$ 0.73 $ -   - $ 0.73 $ 0.03 4 $ 0.70

Net income-diluted

0.72 -   -   0.72 0.03 4 0.69

Cash dividends declared

0.21 0.02 11 0.19 0.03 19 0.16

Revenue-FTE

Net interest income

$ 1,837,141 $ 132,533 8 $ 1,704,608 $ (5,916 - $ 1,710,524

FTE adjustment

27,550 210 1 27,340 6,934 34 20,406

Net interest income (2)

1,864,691 132,743 8 1,731,948 1,018 -   1,730,930

Noninterest income

979,179 (33,017 (3 1,012,196 (94,125 (9 1,106,321

Total revenue (2)

$ 2,843,870 $ 99,726 4 $ 2,744,144 $ (93,107 (3 )%  $ 2,837,251

(1)

Comparisons for presented periods are impacted by a number of factors. Refer to "Significant Items".

(2)

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

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DISCUSSION OF RESULTS OF OPERATIONS

This section provides a review of financial performance from a consolidated perspective. It also includes a "Significant Items" section that summarizes key issues important for a complete understanding of performance trends. Key consolidated balance sheet and income statement trends are discussed. All earnings per share data are reported on a diluted basis. For additional insight on financial performance, please read this section in conjunction with the "Business Segment Discussion."

Significant Items

Definition of Significant Items

From time-to-time, revenue, expenses, or taxes are impacted by items judged by us to be outside of ordinary banking activities and / or by items that, while they may be associated with ordinary banking activities, are so unusually large that their outsized impact is believed by us at that time to be infrequent or short-term in nature. We refer to such items as Significant Items. Most often, these Significant Items result from factors originating outside the company; e.g., regulatory actions / assessments, windfall gains, changes in accounting principles, one-time tax assessments / refunds, litigation actions, etc. In other cases, they may result from our decisions associated with significant corporate actions outside of the ordinary course of business; e.g., merger / restructuring charges, recapitalization actions, goodwill impairment, etc.

Even though certain revenue and expense items are naturally subject to more volatility than others due to changes in market and economic environment conditions, as a general rule volatility alone does not define a Significant Item. For example, changes in the provision for credit losses, gains / losses from investment activities, asset valuation writedowns, etc., reflect ordinary banking activities and are, therefore, typically excluded from consideration as a Significant Item.

We believe the disclosure of Significant Items provides a better understanding of our performance and trends to ascertain which of such items, if any, to include or exclude from an analysis of our performance; i.e., within the context of determining how that performance differed from expectations, as well as how, if at all, to adjust estimates of future performance accordingly. To this end, we adopted a practice of listing Significant Items in our external disclosure documents; e.g., earnings press releases, investor presentations, Forms 10-Q and 10-K.

Significant Items for any particular period are not intended to be a complete list of items that may materially impact current or future period performance.

Significant Items Influencing Financial Performance Comparisons

Earnings comparisons among the three years ended December 31, 2014, 2013, and 2012 were impacted by a number of Significant Items summarized below.

1. Franchise Repositioning Related Expense. Significant events relating to franchise repositioning related expense, and the impacts of those events on our reported results, were as follows:

During 2014, $28.0 million of franchise repositioning related expense was recorded for the consolidation of 26 branches and organizational actions. This resulted in a negative impact of $0.02 per common share in 2014.

During 2013, $23.5 million of franchise repositioning related expense was recorded. This resulted in a negative impact of $0.02 per common share in 2013.

2. Litigation Reserve. $20.9 million and $23.5 million of net additions to litigation reserves were recorded as other noninterest expense in 2014 and 2012, respectively. This resulted in a negative impact of $0.02 per common share in 2014 and 2012.

3. Mergers and Acquisitions. During 2014, $15.8 million of net noninterest expense was recorded related to the acquisition of 24 Bank of America branches and Camco Financial. This resulted in a negative impact of $0.01 per common share in 2014.

4. Pension Curtailment Gain. During 2013, a $33.9 million pension curtailment gain was recorded in personnel costs. This resulted in a positive impact of $0.03 per common share in 2013.

5. State deferred tax asset valuation allowance adjustment. During 2012, a valuation allowance of $21.3 million (net of tax) was released for the portion of the deferred tax asset and state net operating loss carryforwards expected to be realized. This resulted in a positive impact of $0.02 per common share in 2012. Additional information can be found in the Provision for Income Taxes section within this MD&A.

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6. Bargain Purchase Gain. During 2012, an $11.2 million bargain purchase gain associated with the FDIC-assisted Fidelity Bank acquisition was recorded in noninterest income. This resulted in a positive impact of $0.01 per common share in 2012.

The following table reflects the earnings impact of the above-mentioned Significant Items for periods affected by this Results of Operations discussion:

Table 3-Significant Items Influencing Earnings Performance Comparison

2014 2013 2012

(dollar amounts in thousands, except per share amounts)

After-tax EPS After-tax EPS After-tax EPS

Net income-GAAP

$ 632,392 $ 641,282 $ 631,290

Earnings per share, after-tax

$ 0.72 $ 0.72 $ 0.69

Significant items-favorable (unfavorable) impact:

Earnings (1) EPS (2)(3) Earnings (1) EPS (2)(3) Earnings (1) EPS (2)(3)

Franchise repositioning related expense

$ (27,976 $ (0.02 $ (23,461 $ (0.02 $ -   $ -  

Net additions to litigation reserve

(20,909 (0.02 -   -   (23,500 (0.02

Mergers and acquisitions, net

(15,818 (0.01 -   -   -   -  

Pension curtailment gain

-   -   33,926 0.03 -   -  

State deferred tax asset valuation allowance adjustment (3)

-   -   -   -   21,251 0.02

Bargain purchase gain

-   -   -   -   11,217 0.01

(1) Pretax unless otherwise noted.

(2) Based upon the annual average outstanding diluted common shares.

(3) After-tax.

Net Interest Income / Average Balance Sheet

Our primary source of revenue is net interest income, which is the difference between interest income from earning assets (primarily loans, securities, and direct financing leases), and interest expense of funding sources (primarily interest-bearing deposits and borrowings). Earning asset balances and related funding sources, as well as changes in the levels of interest rates, impact net interest income. The difference between the average yield on earning assets and the average rate paid for interest-bearing liabilities is the net interest spread. Noninterest-bearing sources of funds, such as demand deposits and shareholders' equity, also support earning assets. The impact of the noninterest-bearing sources of funds, often referred to as "free" funds, is captured in the net interest margin, which is calculated as net interest income divided by average earning assets. Both the net interest margin and net interest spread are presented on a fully-taxable equivalent basis, which means that tax-free interest income has been adjusted to a pretax equivalent income, assuming a 35% tax rate.

The following table shows changes in fully-taxable equivalent interest income, interest expense, and net interest income due to volume and rate variances for major categories of earning assets and interest-bearing liabilities:

Table 4-Change in Net Interest Income Due to Changes in Average Volume and Interest Rates (1)

2014 2013
Increase (Decrease) From
Previous Year Due To
Increase (Decrease) From
Previous Year Due To

Fully-taxable equivalent basis (2)

(dollar amounts in millions)

Volume Yield/
Rate
Total Volume Yield/
Rate
Total

Loans and leases

$ 136.7 $ (94.5 $ 42.2 $ 66.1 $ (108.7 $ (42.6

Investment securities

69.7 10.2 79.9 (3.7 2.0 (1.7

Other earning assets

(6.3 0.2 (6.1 (16.8 (1.7 (18.5

Total interest income from earning assets

200.1 (84.1 116.0 45.6 (108.4 (62.8

Deposits

5.2 (35.0 (29.8 1.0 (46.9 (45.9

Short-term borrowings

1.5 -   1.5 (0.3 (0.7 (1.0

Long-term debt

30.1 (18.5 11.6 (7.9 (9.0 (16.9

Total interest expense of interest-bearing liabilities

36.8 (53.5 (16.7 (7.2 (56.6 (63.8

Net interest income

$ 163.3 $ (30.6 $ 132.7 $ 52.8 $ (51.8 $ 1.0

(1)

The change in interest rates due to both rate and volume has been allocated between the factors in proportion to the relationship of the absolute dollar amounts of the change in each.

(2)

Calculated assuming a 35% tax rate.

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Table 5-Consolidated Average Balance Sheet and Net Interest Margin Analysis

Average Balances
Fully-taxable equivalent basis (1) Change from 2013 Change from 2012

(dollar amounts in millions)

2014 Amount Percent 2013 Amount Percent 2012

Assets

Interest-bearing deposits in banks

$ 85 $ 15 21 $ 70 $ (25 (26 )%  $ 95

Loans held for sale

323 (198 (38 521 (566 (52 1,087

Available-for-sale and other securities:

Taxable

6,785 402 6 6,383 (1,515 (19 7,898

Tax-exempt

1,429 866 154 563 136 32 427

Total available-for-sale and other securities

8,214 1,268 18 6,946 (1,379 (17 8,325

Trading account securities

46 (34 (43 80 13 19 67

Held-to-maturity securities-taxable

3,612 1,457 68 2,155 1,230 133 925

Total securities

11,872 2,691 29 9,181 (136 (1 9,317

Loans and leases: (2)

Commercial:

Commercial and industrial

18,342 1,168 7 17,174 1,230 8 15,944

Commercial real estate:

Construction

728 148 26 580 (2 -   582

Commercial

4,271 (178 (4 4,449 (749 (14 5,198

Commercial real estate

4,999 (30 (1 5,029 (751 (13 5,780

Total commercial

23,341 1,138 5 22,203 479 2 21,724

Consumer:

Automobile loans and leases

7,670 1,991 35 5,679 1,153 25 4,526

Home equity

8,395 85 1 8,310 (5 -   8,315

Residential mortgage

5,623 425 8 5,198 8 -   5,190

Other consumer

396 (40 (9 436 (19 (4 455

Total consumer

22,084 2,461 13 19,623 1,137 6 18,486

Total loans and leases

45,425 3,599 9 41,826 1,616 4 40,210

Allowance for loan and lease losses

(638 87 (12 (725 151 (17 (876

Net loans and leases

44,787 3,686 9 41,101 1,767 4 39,334

Total earning assets

57,705 6,107 12 51,598 889 2 50,709

Cash and due from banks

898 (10 (1 908 (182 (17 1,090

Intangible assets

578 21 4 557 (43 (7 600

All other assets

3,956 (5 -   3,961 (190 (5 4,151

Total assets

$ 62,499 $ 6,200 11 $ 56,299 $ 625 1 $ 55,674

Liabilities and Shareholders' Equity

Deposits:

Demand deposits-noninterest-bearing

$ 13,988 $ 1,117 9 $ 12,871 $ 671 6 $ 12,200

Demand deposits-interest-bearing

5,896 41 1 5,855 44 1 5,811

Total demand deposits

19,884 1,158 6 18,726 715 4 18,011

Money market deposits

17,917 2,242 14 15,675 1,774 13 13,901

Savings and other domestic deposits

5,031 2 -   5,029 96 2 4,933

Core certificates of deposit

3,315 (1,234 (27 4,549 (1,672 (27 6,221

Total core deposits

46,147 2,168 5 43,979 913 2 43,066

Other domestic time deposits of $250,000 or more

242 (64 (21 306 (20 (6 326

Brokered time deposits and negotiable CDs

2,139 533 33 1,606 16 1 1,590

Deposits in foreign offices

375 29 8 346 (26 (7 372

Total deposits

48,903 2,666 6 46,237 883 2 45,354

Short-term borrowings

2,761 1,358 97 1,403 (194 (12 1,597

Long-term debt

3,495 1,825 109 1,670 (317 (16 1,987

Total interest-bearing liabilities

41,171 4,732 13 36,439 (299 (1 36,738

All other liabilities

1,070 (4 -   1,074 9 1 1,065

Shareholders' equity

6,270 355 6 5,915 244 4 5,671

Total liabilities and shareholders' equity

$ 62,499 $ 6,200 11 $ 56,299 $ 625 1 $ 55,674

Continued

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Table 6-Consolidated Average Balance Sheet and Net Interest Margin Analysis (Continued)

Fully-taxable equivalent basis (1) Interest Income / Expense Average Rate (2)

(dollar amounts in thousands)

2014 2013 2012 2014 2013 2012

Assets

Interest-bearing deposits in banks

$ 103 $ 102 $ 202 0.12 0.15 0.21

Loans held for sale

12,728 18,905 36,769 3.94 3.63 3.38

Securities:

Available-for-sale and other securities:

Taxable

171,080 148,557 184,340 2.52 2.33 2.33

Tax-exempt

44,562 25,663 17,659 3.12 4.56 4.14

Total available-for-sale and other securities

215,642 174,220 201,999 2.63 2.51 2.43

Trading account securities

421 355 853 0.92 0.44 1.27

Held-to-maturity securities-taxable

88,724 50,214 24,088 2.46 2.33 2.60

Total securities

304,787 224,789 226,940 2.57 2.45 2.43

Loans and leases: (2)

Commercial:

Commercial and industrial

643,484 643,731 639,458 3.51 3.75 4.01

Commercial real estate:

Construction

31,414 23,440 22,886 4.31 4.04 3.93

Commercial

163,192 182,622 208,552 3.82 4.11 4.01

Commercial real estate

194,606 206,062 231,438 3.89 4.10 4.00

Total commercial

838,090 849,793 870,896 3.59 3.83 4.01

Consumer:

Automobile loans and leases

262,931 221,469 214,053 3.43 3.90 4.73

Home equity

343,281 345,379 355,869 4.09 4.16 4.28

Residential mortgage

213,268 199,601 212,661 3.79 3.84 4.10

Other consumer

28,824 27,939 33,279 7.30 6.41 7.31

Total consumer

848,304 794,388 815,862 3.84 4.05 4.41

Total loans and leases

1,686,394 1,644,181 1,686,758 3.71 3.93 4.19

Total earning assets

$ 2,004,012 $ 1,887,977 $ 1,950,669 3.47 3.66 3.85

Liabilities and Shareholders' Equity

Deposits:

Demand deposits-noninterest-bearing

$ -   $ -   $ -   - - -

Demand deposits-interest-bearing

2,272 2,525 3,579 0.04 0.04 0.06

Total demand deposits

2,272 2,525 3,579 0.01 0.01 0.02

Money market deposits

42,156 38,830 40,164 0.24 0.25 0.29

Savings and other domestic deposits

8,779 13,292 18,928 0.17 0.26 0.38

Core certificates of deposit

26,998 50,544 84,983 0.81 1.11 1.37

Total core deposits

80,205 105,191 147,654 0.25 0.34 0.48

Other domestic time deposits of $250,000 or more

1,036 1,442 2,140 0.43 0.47 0.66

Brokered time deposits and negotiable CDs

4,728 9,100 11,694 0.22 0.57 0.74

Deposits in foreign offices

483 508 679 0.13 0.15 0.18

Total deposits

86,452 116,241 162,167 0.25 0.35 0.49

Short-term borrowings

2,940 1,475 2,391 0.11 0.11 0.15

Long-term debt

49,929 38,313 55,181 1.43 2.29 2.78

Total interest-bearing liabilities

139,321 156,029 219,739 0.34 0.43 0.60

Net interest income

$ 1,864,691 $ 1,731,948 $ 1,730,930

Net interest rate spread

3.13 3.23 3.25

Impact of noninterest-bearing funds on margin

0.10 0.13 0.16

Net interest margin

3.23 3.36 3.41

(1)

FTE yields are calculated assuming a 35% tax rate.

(2)

For purposes of this analysis, nonaccrual loans are reflected in the average balances of loans.

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2014 vs. 2013

Fully-taxable equivalent net interest income for 2014 increased $132.7 million, or 8%, from 2013. This reflected the impact of 12% earning asset growth, partially offset by 13% interest-bearing liability growth and a 13 basis point decrease in the NIM to 3.23%.

Average earning assets increased $6.1 billion, or 12%, from the prior year, driven by:

$2.7 billion, or 29%, increase in average securities, reflecting an increase of Liquidity Coverage Ratio (LCR) Level 1 qualified securities and direct purchase municipal instruments.

$2.0 billion, or 35%, increase in average Automobile loans, as originations remained strong.

$1.2 billion, or 7%, increase in average C&I loans and leases, primarily reflecting growth in trade finance in support of our middle market and corporate customers.

$0.4 billion, or 8%, increase in average Residential mortgage loans as a result of the Camco Financial acquisition and a decrease in the rate of payoffs due to lower levels of refinancing.

Average noninterest bearing deposits increased $1.1 billion, or 9%, while average interest-bearing liabilities increased $4.7 billion, or 13%, from 2013, primarily reflecting:

$3.2 billion, or 104%, increase in short- and long-term borrowings, which are a cost effective method of funding incremental securities growth.

$2.2 billion, or 14%, increase in money market deposits, reflecting the strategic focus on customer growth and increased share-of-wallet among both consumer and commercial customers.

$0.5 billion, or 33%, increase in brokered deposits and negotiated CDs, which were used to efficiently finance balance sheet growth while continuing to manage the overall cost of funds.

Partially offset by:

$1.2 billion, or 27%, decrease in average core certificates of deposit due to the strategic focus on changing the funding sources to no-cost demand deposits and lower-cost money market deposits.

The primary items impacting the decrease in the NIM were:

19 basis point negative impact from the mix and yield on earning assets, primarily reflecting lower rates on loans, and the impact of an increased total securities balance.

3 basis point decrease in the benefit to the margin of non-interest bearing funds, reflecting lower interest rates on total interest bearing liabilities from the prior year.

Partially offset by:

9 basis point positive impact from the mix and yield of total interest-bearing liabilities, reflecting the strategic focus on changing the funding sources from higher rate time deposits to no-cost demand deposits and low-cost money market deposits.

2013 vs. 2012

Fully-taxable equivalent net interest income for 2013 increased $1.0 million, or less than 1%, from 2012. This reflected the impact of 4% loan growth, a 5 basis point decrease in the NIM to 3.36%, as well as a 7% reduction in other earning assets, the majority of which were loans held for sale. The primary items impacting the decrease in the NIM were:

19 basis point negative impact from the mix and yield of earning assets primarily reflecting a decrease in consumer loan yields.

3 basis point decrease in the benefit to the margin of non-interest bearing funds, reflecting lower interest rates on total interest bearing liabilities from the prior year.

Partially offset by:

14 basis point positive impact from the mix and yield of deposits reflecting the strategic focus on changing the funding sources from higher rate time deposits to no-cost demand deposits and low-cost money market deposits.

3 basis point positive impact from noncore funding primarily reflecting lower debt costs.

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Average earning assets increased $0.9 billion, or 2%, from the prior year, driven by:

$1.2 billion, or 8%, increase in average C&I loans and leases. This reflected the continued growth within the middle market healthcare vertical, equipment finance, and dealer floorplan.

$1.2 billion, or 25%, increase in average on balance sheet automobile loans, as the growth in originations remained strong and our investments in the Northeast and upper Midwest continued to grow as planned.

Partially offset by:

$0.8 billion, or 13%, decrease in average CRE loans, as acceptable returns for new originations were balanced against internal concentration limits and increased competition for projects sponsored by high quality developers.

$0.6 billion, or 52%, decrease in loans held-for-sale reflecting the impact of automobile loan securitizations completed in 2012.

While there was minimal impact on the full-year average balance sheet, $1.9 billion of net investment securities were purchased during the 2013 fourth quarter. Our investment securities portfolio is evaluated under established asset/liability management objectives. Additionally, $0.6 billion of direct purchase municipal instruments were reclassified on December 31, 2013, from C&I loans to available-for-sale securities.

Average noninterest-bearing deposits increased $0.7 billion, or 6%, while average interest-bearing liabilities decreased $0.3 billion, or 1%, from 2012, primarily reflecting:

$1.7 billion, or 27%, decrease in average core certificates of deposit due to the strategic focus on changing the funding sources to no-cost demand deposits and low-cost money market deposits.

$0.6 billion, or 47%, decrease in short-term borrowings due to a focused effort to reduce collateralized deposits.

Partially offset by:

$1.8 billion, or 13%, increase in money market deposits reflecting the strategic focus on customer growth and increased share of wallet among both consumer and commercial customers.

While there was minimal impact on the full-year average balance sheet, average subordinated notes and other long-term debt reflect the issuance of $0.5 billion and $0.8 billion of long-term debt in the 2013 fourth quarter and the 2013 third quarter, respectively.

Provision for Credit Losses

(This section should be read in conjunction with the Credit Risk section.)

The provision for credit losses is the expense necessary to maintain the ALLL and the AULC at levels appropriate to absorb our estimate of credit losses in the loan and lease portfolio and the portfolio of unfunded loan commitments and letters-of-credit.

The provision for credit losses in 2014 was $81.0 million, down $9.1 million, or 10%, from 2013, reflecting a $64.0 million, or 34%, decrease in NCOs. The provision for credit losses in 2014 was $43.6 million less than total NCOs.

The provision for credit losses in 2013 was $90.0 million, down $57.3 million, or 39%, from 2012, reflecting a $153.8 million, or 45%, decrease in NCOs. The provision for credit losses in 2013 was $98.6 million less than total NCOs.

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Noninterest Income

(This section should be read in conjunction with Significant Item 6.)

The following table reflects noninterest income for the past three years:

Table 7-Noninterest Income

Twelve Months Ended December 31,
Change from 2013 Change from 2012

(dollar amounts in thousands)

2014 Amount Percent 2013 Amount Percent 2012

Service charges on deposit accounts

$ 273,741 $ 1,939 1 $ 271,802 $ 9,623 4 $ 262,179

Trust services

115,972 (7,035 (6 123,007 1,110 1 121,897

Electronic banking

105,401 12,810 14 92,591 10,301 13 82,290

Mortgage banking income

84,887 (41,968 (33 126,855 (64,237 (34 191,092

Brokerage income

68,277 (1,347 (2 69,624 (3,060 (4 72,684

Insurance income

65,473 (3,791 (5 69,264 (2,055 (3 71,319

Bank owned life insurance income

57,048 629 1 56,419 377 1 56,042

Capital markets fees

43,731 (1,489 (3 45,220 (2,940 (6 48,160

Gain on sale of loans

21,091 2,920 16 18,171 (40,011 (69 58,182

Securities gains (losses)

17,554 17,136 4,100 418 (4,351 (91 4,769

Other income

126,004 (12,821 (9 138,825 1,118 1 137,707

Total noninterest income

$ 979,179 $ (33,017 (3 )%  $ 1,012,196 $ (94,125 (9 )%  $ 1,106,321

2014 vs. 2013

Noninterest income decreased $33.0 million, or 3%, from the prior year, primarily reflecting:

$42.0 million, or 33%, decrease in mortgage banking income primarily driven by a $27.7 million, or 33%, reduction in origination and secondary marketing revenue as originations decreased and gain-on-sale margins compressed, and a $14.2 million negative impact from net MSR hedging activity.

$12.8 million, or 9%, decrease in other income primarily due to a decrease in LIHTC gains and lower fees associated with commercial loan activity.

$7.0 million, or 6%, decrease in trust services primarily due to a reduction in fees.

Partially offset by:

$17.1 million increase in securities gains as we adjusted the mix of our securities portfolio to prepare for the LCR requirements.

$12.8 million, or 14%, increase in electronic banking income due to higher card related income and underlying customer growth.

2013 vs. 2012

Noninterest income decreased $94.1 million, or 9%, from the prior year, primarily reflecting:

$64.2 million, or 34%, decrease in mortgage banking income primarily driven by 9% reduction in volume, lower gain on sale margin, and a higher percentage of originations held on the balance sheet.

$40.0 million, or 69%, decrease in gain on sale of loans as no auto loan securitizations occurred in 2013 compared to $2.3 billion of auto loan securitizations in 2012.

$4.4 million, or 91%, decrease in securities gains as the prior year had certain securities designated as available-for-sale that were sold and the proceeds from those sales were reinvested into the held-to-maturity portfolio.

Partially offset by:

$10.3 million, or 13%, increase in electronic banking income due to continued consumer household growth.

$9.6 million, or 4%, increase in service charges on deposit accounts reflecting 8% consumer household and 6% commercial relationship growth and changing customer usage patterns. This more than offset the approximately $28.0 million negative impact of the February 2013 implementation of a new posting order for consumer transaction accounts.

$1.1 million, or 1%, increase in other income. In accordance with ASC 323-740, the low income housing tax credit investment amortization expense is now presented as a component of provision for income taxes. Previously, the amortization expense was included in other income. This change resulted in higher other income. In addition, there was an increase in fees associated with commercial loan activity. These increases were partially offset by an $11.2 million bargain purchase gain associated with the FDIC-assisted Fidelity Bank acquisition in the prior year.

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Noninterest Expense

(This section should be read in conjunction with Significant Items 1, 2, 3 and 4.)

The following table reflects noninterest expense for the past three years:

Table 8-Noninterest Expense

Twelve Months Ended December 31,
Change from 2013 Change from 2012

(dollar amounts in thousands)

2014 Amount Percent 2013 Amount Percent 2012

Personnel costs

$ 1,048,775 $ 47,138 5 $ 1,001,637 $ 13,444 1 $ 988,193

Outside data processing and other services

212,586 13,039 7 199,547 9,292 5 190,255

Net occupancy

128,076 2,732 2 125,344 14,184 13 111,160

Equipment

119,663 12,870 12 106,793 3,846 4 102,947

Professional services

59,555 18,968 47 40,587 (25,171 (38 65,758

Marketing

50,560 (625 (1 51,185 (13,078 (20 64,263

Deposit and other insurance expense

49,044 (1,117 (2 50,161 (18,169 (27 68,330

Amortization of intangibles

39,277 (2,087 (5 41,364 (5,185 (11 46,549

Gain on early extinguishment of debt

-   -   -   -   798 (100 (798

Other expense

174,810 33,425 24 141,385 (57,834 (29 199,219

Total noninterest expense

$ 1,882,346 $ 124,343 7 $ 1,758,003 $ (77,873 (4 )%  $ 1,835,876

Number of employees (average full-time equivalent)

11,873 (91 (1 )%  11,964 470 4 11,494

Impacts of Significant Items:

Twelve Months Ended December 31,

(dollar amounts in thousands)

2014 2013 2012

Personnel costs

$ 19,850 $ (27,249 $ -  

Outside data processing and other services

5,507 1,350 -  

Net occupancy

11,153 12,117 -  

Equipment

2,248 2,364 -  

Professional services

2,228 -   -  

Marketing

1,357 -   -  

Other expense

23,140 953 23,500

Total noninterest expense adjustments

$ 65,483 $ (10,465 $ 23,500

Adjusted Noninterest Expense (Non-GAAP):

Twelve Months Ended December 31, Change from 2013 Change from 2012

(dollar amounts in thousands)

2014 2013 2012 Amount Percent Amount Percent

Personnel costs

$ 1,028,925 $ 1,028,886 $ 988,193 $ 39 - $ 40,693 4

Outside data processing and other services

207,079 198,197 190,255 8,882 4 7,942 4

Net occupancy

116,923 113,227 111,160 3,696 3 2,067 2

Equipment

117,415 104,429 102,947 12,986 12 1,482 1

Professional services

57,327 40,587 65,758 16,740 41 (25,171 (38

Marketing

49,203 51,185 64,263 (1,982 (4 (13,078 (20

Deposit and other insurance expense

49,044 50,161 68,330 (1,117 (2 (18,169 (27

Amortization of intangibles

39,277 41,364 46,549 (2,087 (5 (5,185 (11

Gain on early extinguishment of debt

-   -   (798 -   -   798 (100

Other expense

151,670 140,432 175,719 11,238 8 (35,287 (20

Total adjusted noninterest expense

$ 1,816,863 $ 1,768,468 $ 1,812,376 $ 48,395 3 $ (43,908 (2 )% 

2014 vs. 2013

Noninterest expense increased $124.3 million, or 7%, from 2013:

$47.1 million, or 5%, increase in personnel costs. Excluding the impact of significant items, personnel costs were relatively unchanged.

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$33.4 million, or 24%, increase in other noninterest expense. Excluding the impact of significant items, other noninterest expense increased $11.2 million, or 8%, due to an increase in state franchise taxes, protective advances, and litigation expense.

$19.0 million, or 47%, increase in professional services. Excluding the impact of significant items, professional services increased $16.7 million, or 41%, reflecting an increase in outside consultant expenses related to strategic planning and legal services.

$13.0 million, or 7%, increase in outside data processing and other services. Excluding the impact of significant items, outside data processing and other services increased $8.9 million, or 4%, primarily reflecting higher debit and credit card processing costs and increased other technology investment expense, as we continue to invest in technology supporting our products, services, and our Continuous Improvement initiatives.

$12.9 million, or 12%, increase in equipment. Excluding the impact of significant items, equipment increased $13.0 million, or 12%, primarily reflecting higher depreciation expense.

2013 vs. 2012

Noninterest expense decreased $77.9 million, or 4%, from 2012, and primarily reflected:

$57.8 million, or 29%, decline in other expense, reflecting a reduction in litigation expense, mortgage repurchases and warranty expense, OREO and foreclosure costs, and reduction in operating lease expense.

$25.2 million, or 38%, decrease in professional services, reflecting a decrease in outside consultant expenses and legal services, primarily collections.

$18.2 million, or 27%, decrease in deposit and other insurance expense due to lower insurance premiums.

$13.1 million, or 20%, decrease in marketing, primarily reflecting lower levels of advertising, and reduced promotional offers.

$5.2 million, or 11%, decrease due to the continued amortization of core deposit intangibles.

Partially offset by:

$14.2 million, or 13%, increase in net occupancy expense, reflecting $12.1 million of franchise repositioning expense related to branch consolidation and facilities optimization.

$13.4 million, or 1%, increase in personnel costs, primarily reflecting the $38.8 million increase in salaries due to a 4% increase in the number of average full-time equivalent employees as employee count increased mainly in technology and consumer areas and $6.7 million of franchise repositioning expense related to branch consolidation and severance expenses. This was partially offset by the $33.9 million one-time, non-cash gain related to the pension curtailment.

$9.3 million, or 5%, increase in outside data processing as we continue to invest in technology supporting our products, services, and our Continuous Improvement initiatives.

$3.9 million, or 4%, increase in equipment, including $2.4 million of branch consolidation and facilities optimization related expenses.

Provision for Income Taxes

(This section should be read in conjunction with Significant Item 5, and Note 15 of the Notes to Consolidated Financial Statements.)

2014 versus 2013

The provision for income taxes was $220.6 million for 2014 compared with a provision for income taxes of $227.5 million in 2013. Both years included the benefits from tax-exempt income, tax-advantaged investments, general business credits, and the change in accounting for investments in qualified affordable housing projects. In 2014, a $26.9 million reduction in the 2014 provision for federal income taxes was recorded for the portion of federal deferred tax assets related to capital loss carryforwards that are more likely than not

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to be realized compared to a $93.3 million increase in 2013. In 2014, a $7.4 million reduction in the 2014 provision for state income taxes, net of federal, was recorded for the portion of state deferred tax assets and state net operating loss carryforwards that are more likely than not to be realized, compared to a $6.0 million reduction in 2013. At December 31, 2014, we had a net federal deferred tax asset of $72.1 million and a net state deferred tax asset of $45.3 million. For regulatory capital purposes, there was no disallowed net deferred tax asset at December 31, 2014 and December 31, 2013.

We file income tax returns with the IRS and various state, city, and foreign jurisdictions. Federal income tax audits have been completed for tax years through 2009. In the first quarter of 2013, the IRS began an examination of our 2010 and 2011 consolidated federal income tax returns. Certain proposed adjustments resulting from the IRS examination of our 2005 through 2009 tax returns have been settled with the IRS Appeals Office, subject to final approval by the Joint Committee on Taxation of the U.S. Congress. Various state and other jurisdictions remain open to examination, including Ohio, Kentucky, Indiana, Michigan, Pennsylvania, West Virginia and Illinois.

2013 versus 2012

The provision for income taxes was $227.5 million for 2013 compared with a provision for income taxes of $202.3 million in 2012. Both years included the benefits from tax-exempt income, tax-advantaged investments, general business credits, and the change in accounting for investments in qualified affordable housing projects. In 2013, a $93.3 million increase in the 2013 provision for federal income taxes was recorded for the portion of federal capital loss carryforward deferred tax asset that are more likely than not to be realized compared to $3.0 million in 2012. In 2013, a $6.0 million reduction in the 2013 provision for state income taxes, net of federal, was recorded for the portion of state deferred tax assets and state net operating loss carryforwards that are more likely than not to be realized, compared to a $21.3 million reduction in 2012.

RISK MANAGEMENT AND CAPITAL

A comprehensive discussion of risk management and capital matters affecting us can be found in the Risk Governance section included in Item 1A and the Regulatory Matters section of Item 1 of this Form 10-K.

Some of the more significant processes used to manage and control credit, market, liquidity, operational, and compliance risks are described in the following paragraphs.

Credit Risk

Credit risk is the risk of financial loss if a counterparty is not able to meet the agreed upon terms of the financial obligation. The majority of our credit risk is associated with lending activities, as the acceptance and management of credit risk is central to profitable lending. We also have credit risk associated with our AFS and HTM securities portfolios (see Note 4 and Note 5 of the Notes to Consolidated Financial Statements) . We engage with other financial counterparties for a variety of purposes including investing, asset and liability management, mortgage banking, and trading activities. While there is credit risk associated with derivative activity, we believe this exposure is minimal.

We continue to focus on the identification, monitoring, and managing of our credit risk. In addition to the traditional credit risk mitigation strategies of credit policies and processes, market risk management activities, and portfolio diversification, we use additional quantitative measurement capabilities utilizing external data sources, enhanced use of modeling technology, and internal stress testing processes. Our portfolio management resources demonstrate our commitment to maintaining an aggregate moderate-to-low risk profile. In our efforts to continue to identify risk mitigation techniques, we have focused on product design features, origination policies, and treatment strategies for delinquent or stressed borrowers.

The maximum level of credit exposure to individual credit borrowers is limited by policy guidelines based on the perceived risk of each borrower or related group of borrowers. All authority to grant commitments is delegated through the independent credit administration function and is closely monitored and regularly updated. Concentration risk is managed through limits on loan type, geography, industry, and loan quality factors. We focus predominantly on extending credit to retail and commercial customers with existing or expandable relationships within our primary banking markets, although we will consider lending opportunities outside our primary markets if we believe the associated risks are acceptable and aligned with strategic initiatives. Although we offer a broad set of products, we continue to develop new lending products and opportunities. Each of these new products and opportunities goes through a rigorous development and approval process prior to implementation to ensure our overall objective of maintaining an aggregate moderate-to-low risk portfolio profile.

The checks and balances in the credit process and the separation of the credit administration and risk management functions are designed to appropriately assess and sanction the level of credit risk being accepted, facilitate the early recognition of credit problems when they occur, and to provide for effective problem asset management and resolution. For example, we do not extend additional credit to delinquent borrowers except in certain circumstances that substantially improve our overall repayment or collateral coverage position.

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Our asset quality indicators reflected continued overall improvement of our credit quality performance in 2014.

Loan and Lease Credit Exposure Mix

At December 31, 2014, our loans and leases totaled $47.7 billion, representing a $4.6 billion, or 11%, increase compared to $43.1 billion at December 31, 2013. The majority of the portfolio growth occurred in the Automobile and C&I portfolios. Huntington remained committed to a high quality origination strategy. The CRE portfolio remained relatively consistent, as a result of continued runoff offset by new production within the requirements associated with achieving an acceptable return, our internal concentration limits and increased competition for projects sponsored by high quality developers.

Total commercial loans and leases were $24.2 billion at December 31, 2014, and represented 51% of our total loan and lease credit exposure. Our commercial loan portfolio is diversified along product type, customer size, and geography within our footprint, and is comprised of the following ( see Commercial Credit discussion) :

C&I – C&I loans and leases are made to commercial customers for use in normal business operations to finance working capital needs, equipment purchases, or other projects. The majority of these borrowers are customers doing business within our geographic regions. C&I loans and leases are generally underwritten individually and secured with the assets of the company and/or the personal guarantee of the business owners. The financing of owner occupied facilities is considered a C&I loan even though there is improved real estate as collateral. This treatment is a result of the credit decision process, which focuses on cash flow from operations of the business to repay the debt. The operation, sale, rental, or refinancing of the real estate is not considered the primary repayment source for these types of loans. As we have expanded our C&I portfolio, we have developed a series of "vertical specialties" to ensure that new products or lending types are embedded within a structured, centralized Commercial Lending area with designated experienced credit officers. These specialties are comprised of either targeted industries (for example, Healthcare, Food & Agribusiness, Energy, etc) and/or lending disciplines (Equipment Finance, ABL, etc), all of which requires a high degree of expertise and oversight to effectively mitigate and monitor risk. As such, we have dedicated colleagues and teams focused on bringing value added expertise to these specialty clients.

CRE – CRE loans consist of loans to developers and REITs supporting income-producing or for-sale commercial real estate properties. We mitigate our risk on these loans by requiring collateral values that exceed the loan amount and underwriting the loan with projected cash flow in excess of the debt service requirement. These loans are made to finance properties such as apartment buildings, office and industrial buildings, and retail shopping centers, and are repaid through cash flows related to the operation, sale, or refinance of the property.

Construction CRE – Construction CRE loans are loans to developers, companies, or individuals used for the construction of a commercial or residential property for which repayment will be generated by the sale or permanent financing of the property. Our construction CRE portfolio primarily consists of retail, multi family, office, and warehouse project types. Generally, these loans are for construction projects that have been presold or preleased, or have secured permanent financing, as well as loans to real estate companies with significant equity invested in each project. These loans are underwritten and managed by a specialized real estate lending group that actively monitors the construction phase and manages the loan disbursements according to the predetermined construction schedule.

Total consumer loans and leases were $23.4 billion at December 31, 2014, and represented 49% of our total loan and lease credit exposure. The consumer portfolio is comprised primarily of automobile, home equity loans and lines-of-credit, and residential mortgages (see Consumer Credit discussion) . The increase from December 31, 2013 primarily relates to strong consumer demand for automobile originations and adjustable rate residential mortgages (ARMs).

Automobile – Automobile loans are comprised primarily of loans made through automotive dealerships and include exposure in selected states outside of our primary banking markets. The exposure outside of our primary banking markets represents 19% of the total exposure, with no individual state representing more than 6%. Applications are underwritten utilizing an automated underwriting system that applies consistent policies and processes across the portfolio.

Home equity – Home equity lending includes both home equity loans and lines-of-credit. This type of lending, which is secured by a first-lien or junior-lien on the borrower's residence, allows customers to borrow against the equity in their home or refinance existing mortgage debt. Products include closed-end loans which are generally fixed-rate with principal and interest payments, and variable-rate, interest-only lines-of-credit which do not require payment of principal during the 10-year revolving period. The home equity line of credit may convert to a 20-year amortizing structure at the end of the revolving period. Applications are underwritten centrally in conjunction with an automated underwriting system. The home equity underwriting criteria is based on minimum credit scores, debt-to-income ratios, and LTV ratios, with current collateral valuations.

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Residential mortgage – Residential mortgage loans represent loans to consumers for the purchase or refinance of a residence. These loans are generally financed over a 15-year to 30-year term, and in most cases, are extended to borrowers to finance their primary residence. Applications are underwritten centrally using consistent credit policies and processes. All residential mortgage loan decisions utilize a full appraisal for collateral valuation. Huntington has not originated or acquired residential mortgages that allow negative amortization or allow the borrower multiple payment options.

Other consumer – Primarily consists of consumer loans not secured by real estate, including personal unsecured loans, overdraft balances, and credit cards. We introduced a consumer credit card product during 2013, utilizing a centralized underwriting system and focusing on existing Huntington customers.

The table below provides the composition of our total loan and lease portfolio:

Table 9-Loan and Lease Portfolio Composition

At December 31,

(dollar amounts in millions)

2014 2013 2012 2011 2010

Commercial: (1)

Commercial and industrial

$ 19,033 40 $ 17,594 41 $ 16,971 42 $ 14,699 38 $ 13,063 34

Commercial real estate:

Construction

875 2 557 1 648 2 580 1 650 2

Commercial

4,322 9 4,293 10 4,751 12 5,246 13 6,001 16

Total commercial real estate

5,197 11 4,850 11 5,399 14 5,826 14 6,651 18

Total commercial

24,230 51 22,444 52 22,370 56 20,525 52 19,714 52

Consumer:

Automobile (2)

8,690 18 6,639 15 4,634 11 4,458 11 5,614 15

Home equity

8,491 18 8,336 19 8,335 20 8,215 21 7,713 20

Residential mortgage

5,831 12 5,321 12 4,970 12 5,228 13 4,500 12

Other consumer

414 1 380 2 419 1 498 3 566 1

Total consumer

23,426 49 20,676 48 18,358 44 18,399 48 18,393 48

Total loans and leases

$ 47,656 100 $ 43,120 100 $ 40,728 100 $ 38,924 100 $ 38,107 100

(1) As defined by regulatory guidance, there were no commercial loans outstanding that would be considered a concentration of lending to a particular industry or group of industries.
(2) 2011 included a decrease of $1.3 billion resulting from the transfer of automobile loans to loans held for a sale reflecting an automobile securitization transaction completed in 2012. 2010 included an increase of $0.5 billion resulting from the adoption of a new accounting standard to consolidate a previously off-balance sheet automobile loan securitization transaction.

As shown in the table above, our loan portfolio is diversified by consumer and commercial credit. At the corporate level, we manage the credit exposure in part via a credit concentration policy. The policy designates specific loan types, collateral types, and loan structures to be formally tracked and assigned limits as a percentage of capital. C&I lending by NAICS categories, specific limits for CRE primary project types, loans secured by residential real estate, shared national credit exposure, and designated high risk loan definitions represent examples of specifically tracked components of our concentration management process. Currently there are no identified concentrations that exceed the established limit. Our concentration management process is approved by our board level Risk Oversight Committee and is one of the strategies utilized to ensure a high quality, well diversified portfolio that is consistent with our overall objective of maintaining an aggregate moderate-to-low risk profile.

The table below provides our total loan and lease portfolio segregated by the type of collateral securing the loan or lease. The changes in the collateral composition are consistent with the portfolio growth metrics, with increases noted in the residential and vehicle categories. The increase in the unsecured exposure is centered in high quality commercial credit customers.

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Table 10-Loan and Lease Portfolio by Collateral Type

At December 31,

(dollar amounts in millions)

2014 2013 2012 2011 2010

Secured loans:

Real estate-commercial

$ 8,631 18 $ 8,622 20 $ 9,128 22 $ 9,557 25 $ 10,389 27

Real estate-consumer

14,322 30 13,657 32 13,305 33 13,444 35 12,214 32

Vehicles

10,932 23 8,989 21 6,659 16 6,021 15 7,134 19

Receivables/Inventory

5,968 13 5,534 13 5,178 13 4,450 11 3,763 10

Machinery/Equipment

3,863 8 2,738 6 2,749 7 1,994 5 1,766 5

Securities/Deposits

964 2 786 2 826 2 800 2 734 2

Other

919 2 1,016 2 1,090 3 1,018 3 990 2

Total secured loans and leases

45,599 96 41,342 96 38,935 96 37,284 96 36,990 97

Unsecured loans and leases

2,057 4 1,778 4 1,793 4 1,640 4 1,117 3

Total loans and leases

$ 47,656 100 $ 43,120 100 $ 40,728 100 $ 38,924 100 $ 38,107 100

Commercial Credit

The primary factors considered in commercial credit approvals are the financial strength of the borrower, assessment of the borrower's management capabilities, cash flows from operations, industry sector trends, type and sufficiency of collateral, type of exposure, transaction structure, and the general economic outlook. While these are the primary factors considered, there are a number of other factors that may be considered in the decision process. We utilize a centralized preview and senior loan approval committee, led by our chief credit officer. The risk rating (see next paragraph) and complexity of the credit determines the threshold for approval of the senior loan committee with a minimum credit exposure of $10.0 million. For loans not requiring senior loan committee approval, with the exception of small business loans, credit officers who understand each local region and are experienced in the industries and loan structures of the requested credit exposure are involved in all loan decisions and have the primary credit authority. For small business loans, we utilize a centralized loan approval process for standard products and structures. In this centralized decision environment, certain individuals who understand each local region may make credit-extension decisions to preserve our commitment to the communities we operate in. In addition to disciplined and consistent judgmental factors, a sophisticated credit scoring process is used as a primary evaluation tool in the determination of approving a loan within the centralized loan approval process.

In commercial lending, on-going credit management is dependent on the type and nature of the loan. We monitor all significant exposures on an on-going basis. All commercial credit extensions are assigned internal risk ratings reflecting the borrower's PD and LGD. This two-dimensional rating methodology provides granularity in the portfolio management process. The PD is rated and applied at the borrower level. The LGD is rated and applied based on the specific type of credit extension and the quality and lien position associated with the underlying collateral. The internal risk ratings are assessed at origination and updated at each periodic monitoring event. There is also extensive macro portfolio management analysis on an on-going basis. We continually review and adjust our risk-rating criteria based on actual experience, which provides us with the current risk level in the portfolio and is the basis for determining an appropriate allowance for credit losses (ACL) amount for the commercial portfolio. A centralized portfolio management team monitors and reports on the performance of the entire commercial portfolio, including small business loans, to provide consistent oversight.

In addition to the initial credit analysis conducted during the approval process, our Credit Review group performs testing to provide an independent review and assessment of the quality and risk of new loan originations. This group is part of our Risk Management area, and conducts portfolio reviews on a risk-based cycle to evaluate individual loans, validate risk ratings, as well as test the consistency of credit processes.

Our standardized loan grading system considers many components that directly correlate to loan quality and likelihood of repayment, one of which is guarantor support. On an annual basis, or more frequently if warranted, we consider, among other things, the guarantor's reputation and creditworthiness, along with various key financial metrics such as liquidity and net worth, assuming such information is available. Our assessment of the guarantor's credit strength, or lack thereof, is reflected in our risk ratings for such loans, which is directly tied to, and an integral component of, our ACL methodology. When a loan goes to impaired status, viable guarantor support is considered in the determination of a credit loss.

If our assessment of the guarantor's credit strength yields an inherent capacity to perform, we will seek repayment from the guarantor as part of the collection process and have done so successfully. However, we do not formally track the repayment success from guarantors.

Substantially all loans categorized as Classified (see Note 3 of Notes to Consolidated Financial Statements) are managed by our Special Assets Department (SAD). The SAD group is a specialized group of credit professionals that handle the day-to-day management of workouts, commercial recoveries, and problem loan sales. Its responsibilities include developing and implementing action plans, assessing risk ratings, and determining the appropriateness of the allowance, the accrual status, and the ultimate collectability of the Classified loan portfolio.

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C&I PORTFOLIO

The C&I portfolio is comprised of loans to businesses where the source of repayment is associated with the on-going operations of the business. Generally, the loans are secured by the borrower's assets, such as equipment, accounts receivable, and/or inventory. In many cases, the loans are secured by real estate, although the operation, sale, or refinancing of the real estate is not a primary source of repayment for the loan. For loans secured by real estate, appropriate appraisals are obtained at origination and updated on an as needed basis in compliance with regulatory requirements.

Currently, higher-risk segments of the C&I portfolio include loans to borrowers supporting the home building industry, contractors, and leveraged lending. We manage the risks inherent in this portfolio through origination policies, a defined loan concentration policy with established limits, on-going loan level reviews and portfolio level reviews, recourse requirements, and continuous portfolio risk management activities. Our origination policies for this portfolio include loan product-type specific policies such as LTV and debt service coverage ratios, as applicable.

The C&I portfolio continues to have strong origination activity as evidenced by the growth over the past 12 months. The credit quality of the portfolio remains strong as we maintain a focus on high quality originations. Problem loans have trended downward over the last several years, reflecting a combination of proactive risk identification and effective workout strategies implemented by the SAD. We continue to maintain a proactive approach to identifying borrowers that may be facing financial difficulty in order to maximize the potential solutions.

CRE PORTFOLIO

We manage the risks inherent in this portfolio specific to CRE lending, focusing on the quality of the developer and the specifics associated with each project. Generally, we: (1) limit our loans to 80% of the appraised value of the commercial real estate at origination, (2) require net operating cash flows to be 125% of required interest and principal payments, and (3) if the commercial real estate is nonowner occupied, require that at least 50% of the space of the project be preleased. We actively monitor both geographic and project-type concentrations and performance metrics of all CRE loan types, with a focus on loans identified as higher risk based on the risk rating methodology. Both macro-level and loan-level stress-test scenarios based on existing and forecast market conditions are part of the on-going portfolio management process for the CRE portfolio.

Dedicated real estate professionals originate and manage the majority of the portfolio, with the remainder obtained from prior bank acquisitions. The portfolio is diversified by project type and loan size, and this diversification represents a significant portion of the credit risk management strategies employed for this portfolio. Subsequent to the origination of the loan, the Credit Review group provides an independent review and assessment of the quality of the underwriting and risk of new loan originations.

Appraisal values are obtained in conjunction with all originations and renewals, and on an as needed basis, in compliance with regulatory requirements. Appraisals are obtained from approved vendors, and are reviewed by an internal appraisal review group comprised of certified appraisers to ensure the quality of the valuation used in the underwriting process. We continue to perform on-going portfolio level reviews within the CRE portfolio. These reviews generate action plans based on occupancy levels or sales volume associated with the projects being reviewed. Property values are updated using appraisals on a regular basis to ensure appropriate decisions regarding the on-going management of the portfolio reflect the changing market conditions. This highly individualized process requires working closely with all of our borrowers, as well as an in-depth knowledge of CRE project lending and the market environment.

Consumer Credit

Consumer credit approvals are based on, among other factors, the financial strength and payment history of the borrower, type of exposure, and the transaction structure. Consumer credit decisions are generally made in a centralized environment utilizing decision models. Importantly, certain individuals who understand each local region have the authority to make credit extension decisions to preserve our focus on the local communities we operate in. Each credit extension is assigned a specific PD and LGD. The PD is generally based on the borrower's most recent credit bureau score (FICO), which we update quarterly, while the LGD is related to the type of collateral and the LTV ratio associated with the credit extension.

In consumer lending, credit risk is managed from a segment (i.e., loan type, collateral position, geography, etc.) and vintage performance analysis. All portfolio segments are continuously monitored for changes in delinquency trends and other asset quality indicators. We make extensive use of portfolio assessment models to continuously monitor the quality of the portfolio, which may result in changes to future origination strategies. The on-going analysis and review process results in a determination of an appropriate ALLL amount for our consumer loan portfolio. The independent risk management group has a consumer process review component to ensure the effectiveness and efficiency of the consumer credit processes.

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Collection action is initiated as needed through a centrally managed collection and recovery function. The collection group employs a series of collection methodologies designed to maintain a high level of effectiveness while maximizing efficiency. In addition to the consumer loan portfolio, the collection group is responsible for collection activity on all sold and securitized consumer loans and leases. Collection practices include a single contact point for the majority of the residential real estate secured portfolios.

AUTOMOBILE PORTFOLIO

Our strategy in the automobile portfolio continues to focus on high quality borrowers as measured by both FICO and internal custom scores, combined with appropriate LTVs, terms, and profitability. Our strategy and operational capabilities allow us to appropriately manage the origination quality across the entire portfolio, including our newer markets. Although increased origination volume and entering new markets can be associated with increased risk levels, we believe our disciplined strategy and operational processes significantly mitigate these risks.

We have continued to consistently execute our value proposition and take advantage of available market opportunities. Importantly, we have maintained our high credit quality standards while expanding the portfolio.

RESIDENTIAL REAL ESTATE SECURED PORTFOLIOS

The properties securing our residential mortgage and home equity portfolios are primarily located within our geographic footprint. Huntington continues to support our local markets with consistent underwriting across all residential secured products. The residential-secured portfolio originations continue to be of high quality, with the majority of the negative credit impact coming from loans originated in 2006 and earlier. Our portfolio management strategies associated with our Home Savers group allow us to focus on effectively helping our customers with appropriate solutions for their specific circumstances.

Table 11-Selected Home Equity and Residential Mortgage Portfolio Data

Home Equity Residential Mortgage
Secured by first-lien Secured by junior-lien

December 31,
(dollar amounts in millions) 2014 2013 2014 2013 2014 2013

Ending balance

$ 5,129 $ 4,842 $ 3,362 $ 3,494 $ 5,831 $ 5,321

Portfolio weighted average LTV ratio (1)

71 71 81 81 74 74

Portfolio weighted average FICO score (2)

759 758 752 741 752 743
Home Equity Residential
Mortgage (3)
Secured by first-lien Secured by junior-lien

Year Ended December 31,
2014 2013 2014 2013 2014 2013

Originations

$ 1,566 $ 1,745 $ 872 $ 529 $ 1,192 $ 1,625

Origination weighted average LTV ratio (1)

74 69 83 81 83 79

Origination weighted average FICO score (2)

775 771 765 756 752 757

(1) The LTV ratios for home equity loans and home equity lines-of-credit are cumulative and reflect the balance of any senior loans. LTV ratios reflect collateral values at the time of loan origination.
(2) Portfolio weighted average FICO scores reflect currently updated customer credit scores whereas origination weighted average FICO scores reflect the customer credit scores at the time of loan origination.
(3) Represents only owned-portfolio originations.

Home Equity Portfolio

Our home equity portfolio (loans and lines-of-credit) consists of both first-lien and junior-lien mortgage loans with underwriting criteria based on minimum credit scores, debt-to-income ratios, and LTV ratios. We offer closed-end home equity loans which are generally fixed-rate with principal and interest payments, and variable-rate interest-only home equity lines-of-credit which do not require payment of principal during the 10-year revolving period of the line-of-credit. Applications are underwritten centrally in conjunction with an automated underwriting system.

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Given the low interest rate environment over the past several years, many borrowers have utilized the line-of-credit home equity product as the primary source of financing their home versus residential mortgages. The proportion of the home equity portfolio secured by a first-lien has increased significantly over the past three years, positively impacting the portfolio's risk profile. At December 31, 2014, $5.1 billion or 60% of our total home equity portfolio was secured by first-lien mortgages compared to 58% in the prior year. The first-lien position, combined with continued high average FICO scores and high LTV, significantly reduces the credit risk associated with these loans.

Within the home equity portfolio, the standard product is a 10-year interest-only draw period with a 20-year fully amortizing term at the end of the draw period. Prior to 2007, the standard product was a 10-year draw period with a balloon payment. In either case, after the 10-year draw period, the borrower must reapply, subject to full underwriting guidelines, to continue with the interest only revolving structure or begin repaying the debt in a term structure.

The principal and interest payment associated with the term structure will be higher than the interest-only payment, resulting in maturity risk. Our maturity risk can be segregated into two distinct segments: (1) home equity lines-of-credit underwritten with a balloon payment at maturity and (2) home equity lines-of-credit with an automatic conversion to a 20-year amortizing loan. We manage this risk based on both the actual maturity date of the line-of-credit structure and at the end of the 10-year draw period. This maturity risk is embedded in the portfolio which we address with proactive contact strategies beginning one year prior to maturity. In certain circumstances, our Home Saver group is able to provide payment and structure relief to borrowers experiencing significant financial hardship associated with the payment adjustment. Our existing HELOC maturity strategy is consistent with the recent regulatory guidance.

The table below summarizes our home equity line-of-credit portfolio by the actual maturity date as described above.

Table 12-Maturity Schedule of Home Equity Line-of-Credit Portfolio

December 31, 2014

(dollar amounts in millions)

1 Year or Less 1 to 2 years 2 to 3 years 3 to 4 years More than
4 years
Total

Secured by first-lien

$ 32 $ 3 $ 1 $ 2 $ 2,859 $ 2,897

Secured by junior-lien

197 120 104 17 2,532 2,970

Total home equity line-of-credit

$ 229 $ 123 $ 105 $ 19 $ 5,391 $ 5,867

December 31, 2013

Total home equity line-of-credit

$ 281 $ 245 $ 130 $ 112 $ 4,684 $ 5,452

The reduction in maturities presented in over 1-year categories is a result of our change to a product with a 20-year amortization period after 10-year draw period structure. Loans with a balloon payment structure risk is essentially eliminated after 2015.

The amounts in the above table maturing in four years or less primarily consist of balloon payment structures and represent the most significant maturity risk. The amounts maturing in more than four years primarily consist of exposure with a 20-year amortization period after the 10-year draw period.

Historically, less than 30% of our home equity lines-of-credit that are one year or less from maturity actually reach the maturity date.

Residential Mortgages Portfolio

Huntington underwrites all applications centrally, with a focus on higher quality borrowers. We do not originate residential mortgages that allow negative amortization or allow the borrower multiple payment options and have incorporated regulatory requirements and guidance into our underwriting process. All residential mortgages are originated based on a completed full appraisal during the credit underwriting process. We update values in compliance with applicable regulations to facilitate our portfolio management, as well as our workout and loss mitigation functions.

Several government programs continued to impact the residential mortgage portfolio, including various refinance programs such as HAMP and HARP, which positively affected the availability of credit for the industry. During the year ended December 31, 2014, we closed $248.0 million in HARP residential mortgages and $1.8 million in HAMP residential mortgages. The HARP and HAMP residential mortgage loans are part of our residential mortgage portfolio or serviced for others.

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We are subject to repurchase risk associated with residential mortgage loans sold in the secondary market. An appropriate level of reserve for representations and warranties related to residential mortgage loans sold has been established to address this repurchase risk inherent in the portfolio (see Operational Risk discussion).

Credit Quality

(This section should be read in conjunction with Note 3 of the Notes to Consolidated Financial Statements.)

We believe the most meaningful way to assess overall credit quality performance is through an analysis of credit quality performance ratios. This approach forms the basis of most of the discussion in the sections immediately following: NPAs and NALs, TDRs, ACL, and NCOs. In addition, we utilize delinquency rates, risk distribution and migration patterns, and product segmentation in the analysis of our credit quality performance.

Credit quality performance in 2014 reflected continued overall improvement. NPAs declined 4% to $337.7 million, compared to December 31, 2013, as the CRE, automobile and residential portfolio segments showed declines. This was partially offset by increases in C&I, primarily due to two credit relationships, and home equity as a result of lower partial charge-offs due the housing market recovery from the lows in 2010-2011. NCOs decreased 34% compared to the prior year, as a result of declines in the CRE, home equity and residential portfolios. Total criticized loans continued to decline, across both the commercial and consumer segments on a percentage basis. As a result of the continued credit quality improvement, the ACL to total loans ratio declined by 25 basis points to 1.40%.

NPAs, NALs, AND TDRs

(This section should be read in conjunction with Note 3 of the Notes to Consolidated Financial Statements.)

NPAs and NALs

NPAs consist of (1) NALs, which represent loans and leases no longer accruing interest, (2) OREO properties, and (3) other NPAs. Any loan in our portfolio may be placed on nonaccrual status prior to the policies described below when collection of principal or interest is in doubt. Also, when a borrower with discharged non-reaffirmed debt in a Chapter 7 bankruptcy is identified and the loan is determined to be collateral dependent, the loan is placed on nonaccrual status.

C&I and CRE loans (except for purchased credit impaired loans) are placed on nonaccrual status at 90-days past due, or earlier if repayment of principal and interest is in doubt. Of the $120.5 million of CRE and C&I-related NALs at December 31, 2014, $65.7 million, or 54%, represented loans that were less than 30-days past due, demonstrating our continued commitment to proactive credit risk management. With the exception of residential mortgage loans guaranteed by government organizations which continue to accrue interest, first lien loans secured by residential mortgage collateral are placed on nonaccrual status at 150-days past due. Junior-lien home equity loans are placed on nonaccrual status at the earlier of 120-days past due or when the related first-lien loan has been identified as nonaccrual. Automobile and other consumer loans are generally charged-off prior to the loan reaching 120-days past due.

When loans are placed on nonaccrual, accrued interest income is reversed with current year accruals charged to interest income and prior year amounts generally charged-off as a credit loss. When, in our judgment, the borrower's ability to make required interest and principal payments has resumed and collectability is no longer in doubt, the loan or lease could be returned to accrual status.

The table reflects period-end NALs and NPAs detail for each of the last five years:

Table 13-Nonaccrual Loans and Leases and Nonperforming Assets

At December 31,

(dollar amounts in thousands)

2014 2013 2012 2011 2010

Nonaccrual loans and leases:

Commercial and industrial

$ 71,974 $ 56,615 $ 90,705 $ 201,846 $ 346,720

Commercial real estate

48,523 73,417 127,128 229,889 363,692

Automobile

4,623 6,303 7,823 -   -  

Residential mortgages

96,564 119,532 122,452 68,658 45,010

Home equity

78,560 66,189 59,525 40,687 22,526

Total nonaccrual loans and leases

300,244 322,056 407,633 541,080 777,948

Other real estate owned, net

Residential

29,291 23,447 21,378 20,330 31,649

Commercial

5,748 4,217 6,719 18,094 35,155

Total other real estate, net

35,039 27,664 28,097 38,424 66,804

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Other nonperforming assets (1)

2,440 2,440 10,045 10,772 -  

Total nonperforming assets

$ 337,723 $ 352,160 $ 445,775 $ 590,276 $ 844,752

Nonaccrual loans as a % of total loans and leases

0.63 0.75 1.00 1.39 2.04

Nonperforming assets ratio (2)

0.71 0.82 1.09 1.51 2.21

Allowance for loan and lease losses as % of:

Nonaccrual loans and leases

202 201 189 178 161

Nonperforming assets

179 184 173 163 148

Allowance for credit losses as % of:

Nonaccrual loans and leases

222 221 199 187 166

Nonperforming assets

197 202 182 172 153

(1)

Other nonperforming assets includes certain impaired investment securities.

(2)

This ratio is calculated as nonperforming assets divided by the sum of loans and leases, impaired loans held for sale, net other real estate owned, and other nonperforming assets.

The $14.4 million, or 4%, decline in NPAs compared with December 31, 2013, primarily reflected:

$24.9 million, or 34%, decline in CRE NALs, reflecting both NCO activity and problem credit resolutions, including borrower payments and payoffs partially resulting from successful workout strategies implemented by our SAD group.

$23.0 million, or 19%, decline in residential mortgage NALs, reflecting resolution of foreclosure processes and improved delinquency trends.

Partially offset by:

$15.4 million, or 27%, increase in C&I NALs, primarily due to two credit relationships.

$12.4 million or 19% increase in home equity NALs primarily due to increasing TDR NALs.

$7.4 million, or 27%, increase in net OREO properties primarily related to consumer OREO, reflecting the impact from the acquisition of Camco Financial.

As discussed previously, residential mortgages are placed on nonaccrual status at 150-days past due, with the exception of residential mortgages guaranteed by government organizations which continue to accrue interest. First-lien home equity loans are placed on nonaccrual status at 150-days past due. Junior-lien home equity loans are placed on nonaccrual status at the earlier of 120-days past due or when the related first-lien loan has been identified as nonaccrual.

The following table reflects period-end accruing loans and leases 90 days or more past due for each of the last five years:

Table 14-Accruing Past Due Loans and Leases

At December 31,

(dollar amounts in thousands)

2014 2013 2012 2011 2010

Accruing loans and leases past due 90 days or more

Commercial and industrial (1)

$ 4,937 $ 14,562 $ 26,648 $ -   $ -  

Commercial real estate (1)

18,793 39,142 56,660 -   -  

Automobile

5,703 5,055 4,418 6,265 7,721

Residential mortgage (excluding loans guaranteed by the U.S. government) (1)

33,040 2,469 2,718 45,198 53,983

Home equity

12,159 13,983 18,200 20,198 23,497

Other loans and leases

837 998 1,672 1,988 2,456

Total, excl. loans guaranteed by the U.S. government

75,469 76,209 110,316 73,649 87,657

Add: loans guaranteed by the U.S. government

55,012 87,985 90,816 96,703 98,288

Total accruing loans and leases past due 90 days or more, including loans guaranteed by the U.S. government

$ 130,481 $ 164,194 $ 201,132 $ 170,352 $ 185,945

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Ratios:

Excluding loans guaranteed by the U.S. government, as a percent of total loans and leases

0.16 0.18 0.27 0.19 0.23

Guaranteed by the U.S. government, as a percent of total loans and leases

0.12 0.20 0.22 0.25 0.26

Including loans guaranteed by the U.S. government, as a percent of total loans and leases

0.27 0.38 0.49 0.44 0.49

(1)

Amounts represent accruing purchased impaired loans related to the FDIC-assisted Fidelity Bank and Camco Financial acquisition. Under the applicable accounting guidance (ASC 310-30), the loans were recorded at fair value upon acquisition and remain in accruing status.

TDR Loans

(This section should be read in conjunction with Note 3 of the Notes to Consolidated Financial Statements.)

TDRs are modified loans where a concession was provided to a borrower experiencing financial difficulties. TDRs can be classified as either accrual or nonaccrual loans. Nonaccrual TDRs are included in NALs whereas accruing TDRs are excluded from NALs, as it is probable that all contractual principal and interest due under the restructured terms will be collected. TDRs primarily reflect our loss mitigation efforts to proactively work with borrowers in financial difficulty.

The table below presents our accruing and nonaccruing TDRs at period-end for each of the past five years:

Table 15-Accruing and Nonaccruing Troubled Debt Restructured Loans

December 31,

(dollar amounts in thousands)

2014 2013 2012 2011 2010

Troubled debt restructured loans-accruing:

Commercial and industrial

$ 116,331 $ 83,857 $ 76,586 $ 54,007 $ 70,136

Commercial real estate

177,156 204,668 208,901 249,968 152,496

Automobile

26,060 30,781 35,784 36,573 29,764

Home equity

252,084 188,266 110,581 52,224 37,257

Residential mortgage

265,084 305,059 290,011 309,678 328,411

Other consumer

4,018 1,041 2,544 6,108 9,565

Total troubled debt restructured loans-accruing

840,733 813,672 724,407 708,558 627,629

Troubled debt restructured loans-nonaccruing:

Commercial and industrial

20,580 7,291 19,268 48,553 15,275

Commercial real estate

24,964 23,981 32,548 21,968 18,187

Automobile

4,552 6,303 7,823 -   -  

Home equity

27,224 20,715 6,951 369 -  

Residential mortgage

69,305 82,879 84,515 26,089 5,789

Other consumer

70 -   113 113 -  

Total troubled debt restructured loans-nonaccruing

146,695 141,169 151,218 97,092 39,251

Total troubled debt restructured loans

$ 987,428 $ 954,841 $ 875,625 $ 805,650 $ 666,880

Our strategy is to structure TDRs in a manner that avoids new concessions subsequent to the initial TDR terms. However, there are times when subsequent modifications are required, such as when the modified loan matures. Often the loans are performing in accordance with the TDR terms, and a new note is originated with similar modified terms. These loans are subjected to the normal underwriting standards and processes for other similar credit extensions, both new and existing. If the loan is not performing in accordance with the existing TDR terms, typically an individualized approach to repayment is established. In accordance with ASC 310-20-35, the refinanced note is evaluated to determine if it is considered a new loan or a continuation of the prior loan. A new loan is considered for removal of the TDR designation. A continuation of the prior note requires the continuation of the TDR designation, and because the refinanced note constitutes a new or amended debt instrument, it is included in our TDR activity table (below) as a new TDR and a restructured TDR removal during the period.

The types of concessions granted are consistent with those granted on new TDRs and include interest rate reductions, amortization or maturity date changes beyond what the collateral supports, and principal forgiveness based on the borrower's specific needs at a point in time. Our policy does not limit the number of times a loan may be modified. A loan may be modified multiple times if it is considered to be in the best interest of both the borrower and Huntington.

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Commercial loans are not automatically considered to be accruing TDRs upon the granting of a new concession. If the loan is in accruing status and no loss is expected based on the modified terms, the modified TDR remains in accruing status. For loans that are on nonaccrual status before the modification, collection of both principal and interest must not be in doubt, and the borrower must be able to exhibit sufficient cash flows for a six-month period of time to service the debt in order to return to accruing status. This six-month period could extend before or after the restructure date.

TDRs in the home equity and residential mortgage portfolio may continue to increase in the near term as we continue to appropriately manage the portfolio and work with our borrowers. Any granted change in terms or conditions that are not readily available in the market for that borrower, requires the designation as a TDR. There are no provisions for the removal of the TDR designation based on payment activity for consumer loans.

The following table reflects TDR activity for each of the past four years:

Table 16-Troubled Debt Restructured Loan Activity

(dollar amounts in thousands)

2014 2013 2012 2011

TDRs, beginning of period

$ 954,841 $ 875,625 $ 805,650 $ 666,880

New TDRs

667,315 611,556 597,425 583,439

Payments

(252,285 (191,367 (191,035 (138,467

Charge-offs

(35,150 (29,897 (81,115 (37,341

Sales

(23,424 (11,164 (13,787 (54,715

Refinanced to non-TDR

-   -   -   (40,091

Transfer to OREO

(12,668 (8,242 (21,709 (5,016

Restructured TDRs-accruing (1)

(243,225 (211,131 (153,583 (154,945

Restructured TDRs-nonaccruing (1)

(45,705 (26,772 (63,080 (47,659

Other

(22,271 (53,767 (3,141 33,565

TDRs, end of period

$ 987,428 $ 954,841 $ 875,625 $ 805,650

(1) Represents existing TDRs that were reunderwritten with new terms providing a concession. A corresponding amount is included in the New TDRs amount above.

ACL

(This section should be read in conjunction with Note 3 of the Notes to Consolidated Financial Statements.)

Our total credit reserve is comprised of two different components, both of which in our judgment are appropriate to absorb credit losses inherent in our loan and lease portfolio: the ALLL and the AULC. Combined, these reserves comprise the total ACL. Our Credit Administration group is responsible for developing the methodology assumptions and estimates used in the calculation, as well as determining the appropriateness of the ACL. The ALLL represents the estimate of losses inherent in the loan portfolio at the reported date. Additions to the ALLL result from recording provision expense for loan losses or increased risk levels resulting from loan risk-rating downgrades, while reductions reflect charge-offs (net of recoveries), decreased risk levels resulting from loan risk-rating upgrades, or the sale of loans. The AULC is determined by applying the transaction reserve process to the unfunded portion of the loan exposures adjusted by an applicable funding expectation.

The provision for credit losses in 2014 was $81.0 million, compared with $90.0 million in 2013.

We regularly evaluate the appropriateness of the ACL by performing on-going evaluations of the loan and lease portfolio, including such factors as the differing economic risks associated with each loan category, the financial condition of specific borrowers, the level of delinquent loans, the value of any collateral and, where applicable, the existence of any guarantees or other documented support. We evaluate the impact of changes in interest rates and overall economic conditions on the ability of borrowers to meet their financial obligations when quantifying our exposure to credit losses and assessing the appropriateness of our ACL at each reporting date. In addition to general economic conditions and the other factors described above, we also consider the impact of collateral value trends and portfolio diversification. A provision for credit losses is recorded to adjust the ACL to the level we have determined to be appropriate to absorb credit losses inherent in our loan and lease portfolio.

Our ACL evaluation process includes the on-going assessment of credit quality metrics, and a comparison of certain ACL benchmarks to current performance. While the total ACL balance has declined in recent quarters, all of the relevant benchmarks remain strong.

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The following table reflects activity in the ALLL and AULC for each of the last five years:

Table 17-Summary of Allowance for Credit Losses and Related Statistics

Year Ended December 31,

(dollar amounts in thousands)

2014 2013 2012 2011 2010

Allowance for loan and lease losses, beginning of year

$ 647,870 $ 769,075 $ 964,828 $ 1,249,008 $ 1,482,479

Loan and lease charge-offs

Commercial:

Commercial and industrial

(76,654 (45,904 (101,475 (134,385 (316,771

Commercial real estate:

Construction

(5,626 (9,585 (12,131 (42,012 (116,428

Commercial

(19,078 (59,927 (105,920 (140,747 (187,567

Commercial real estate

(24,704 (69,512 (118,051 (182,759 (303,995

Total commercial

(101,358 (115,416 (219,526 (317,144 (620,766

Consumer:

Automobile

(31,330 (23,912 (26,070 (33,593 (46,308

Home equity

(54,473 (98,184 (124,286 (109,427 (140,831

Residential mortgage

(25,946 (34,236 (52,228 (65,069 (163,427

Other consumer

(33,494 (34,568 (33,090 (32,520 (32,575

Total consumer

(145,243 (190,900 (235,674 (240,609 (383,141

Total charge-offs

(246,601 (306,316 (455,200 (557,753 (1,003,907

Recoveries of loan and lease charge-offs

Commercial:

Commercial and industrial

44,531 29,514 37,227 44,686 61,839

Commercial real estate:

Construction

4,455 3,227 4,090 10,488 7,420

Commercial

29,616 41,431 35,532 24,170 21,013

Total commercial real estate

34,071 44,658 39,622 34,658 28,433

Total commercial

78,602 74,172 76,849 79,344 90,272

Consumer:

Automobile

13,762 13,375 16,628 18,526 19,736

Home equity

17,526 15,921 7,907 7,630 1,458

Residential mortgage

6,194 7,074 4,305 8,388 10,532

Other consumer

5,890 7,108 7,049 6,776 7,435

Total consumer

43,372 43,478 35,889 41,320 39,161

Total recoveries

121,974 117,650 112,738 120,664 129,433

Net loan and lease charge-offs

(124,627 (188,666 (342,462 (437,089 (874,474

Provision for loan and lease losses

83,082 67,797 155,193 167,730 641,299

Allowance for assets sold and securitized or transferred to loans held for sale

(1,129 (336 (8,484 (14,821 (296

Allowance for loan and lease losses, end of year

605,196 647,870 769,075 964,828 1,249,008

Allowance for unfunded loan commitments, beginning of year

62,899 40,651 48,456 42,127 48,879

(Reduction in) Provision for unfunded loan commitments and letters of credit losses

(2,093 22,248 (7,805 6,329 (6,752

Allowance for unfunded loan commitments, end of year

60,806 62,899 40,651 48,456 42,127

Allowance for credit losses, end of year

$ 666,002 $ 710,769 $ 809,726 $ 1,013,284 $ 1,291,135

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The table below reflects the allocation of our ACL among our various loan categories during each of the past five years:

Table 18-Allocation of Allowance for Credit Losses (1)

At December 31,

(dollar amounts in thousands)

2014 2013 2012 2011 2010

Commercial:

Commercial and industrial

$ 286,995 40 $ 265,801 41 $ 241,051 42 $ 275,367 38 $ 340,614 34

Commercial real estate

102,839 11 162,557 11 285,369 14 388,706 14 588,251 18

Total commercial

389,834 51 428,358 52 526,420 56 664,073 52 928,865 52

Consumer:

Automobile

33,466 18 31,053 15 34,979 11 38,282 11 49,488 15

Home equity

96,413 18 111,131 19 118,764 20 143,873 21 150,630 20

Residential mortgage

47,211 12 39,577 12 61,658 12 87,194 13 93,289 12

Other loans

38,272 1 37,751 2 27,254 1 31,406 3 26,736 1

Total consumer

215,362 49 219,512 48 242,655 44 300,755 48 320,143 48

Total allowance for loan and lease losses

605,196 100 647,870 100 769,075 100 964,828 100 1,249,008 100

Allowance for unfunded loan commitments

60,806 62,899 40,651 48,456 42,127

Total allowance for credit losses

$ 666,002 $ 710,769 $ 809,726 $ 1,013,284 $ 1,291,135

Total allowance for loan and leases losses as % of:

Total loans and leases

1.27 1.50 1.89 2.48 3.28

Nonaccrual loans and leases

202 201 189 178 161

Nonperforming assets

179 184 173 163 148

Total allowance for credit losses as % of:

Total loans and leases

1.40 1.65 1.99 2.60 3.39

Nonaccrual loans and leases

222 221 199 187 166

Nonperforming assets

197 202 182 172 153

(1) Percentages represent the percentage of each loan and lease category to total loans and leases.

The C&I ACL increased $21.2 million, or 8%, compared with December 31, 2013, primarily due to the risk rating composition and overall growth in the portfolio. The CRE ACL decreased $59.7 million, or 37%, compared with December 31, 2013, due to the continued improving portfolio asset quality metrics and performance. The current portfolio management practices focus on increasing borrower equity in the projects, and recent underwriting includes meaningfully lower LTV. The December 31, 2014, CRE ACL covers NALs by more than two times. The home equity portfolio ALLL declined, consistent with the improving credit quality metrics. The ALLL for the other consumer portfolio is consistent with expectations given the increasing level of overdraft exposure. The reduction in the ACL, compared with December 31, 2013, is primarily a function of the decline in the CRE portfolio and improving economic conditions.

Compared with December 31, 2013, the AULC decreased $2.1 million, primarily reflecting the impact of an updated assessment of the unfunded commercial exposure.

The ACL to total loans declined to 1.40% at December 31, 2014, compared to 1.65% at December 31, 2013. Management believes the decline in the ratio is appropriate given the continued improvement in the risk profile of our loan portfolio. Further, the continued focus on early identification of loans with changes in credit metrics and proactive action plans for these loans, combined with originating high quality new loans will contribute to maintaining our strong key credit quality metrics.

Given the combination of these noted positive and negative factors, we believe that our ACL is appropriate and its coverage level is reflective of the quality of our portfolio and the current operating environment.

NCOs

Any loan in any portfolio may be charged-off prior to the policies described below if a loss confirming event has occurred. Loss confirming events include, but are not limited to, bankruptcy (unsecured), continued delinquency, foreclosure, or receipt of an asset valuation indicating a collateral deficiency and that asset is the sole source of repayment. Additionally, discharged, collateral dependent non-reaffirmed debt in Chapter 7 bankruptcy filings will result in a charge-off to estimated collateral value, less anticipated selling costs at the time of discharge.

C&I and CRE loans are either charged-off or written down to net realizable value at 90-days past due. Automobile loans and other consumer loans are charged-off at 120-days past due. First-lien and junior-lien home equity loans are charged-off to the estimated fair value of the collateral, less anticipated selling costs, at 150-days past due and 120-days past due, respectively. Residential mortgages are charged-off to the estimated fair value of the collateral, less anticipated selling costs, at 150-days past due.

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The following table reflects NCO detail for each of the last five years:

Table 19-Net Loan and Lease Charge-offs

Year Ended December 31,

(dollar amounts in thousands)

2014 2013 2012 2011 2010

Net charge-offs by loan and lease type

Commercial:

Commercial and industrial

$ 32,123 $ 16,390 $ 64,248 $ 89,699 $ 254,932

Commercial real estate:

Construction

1,171 6,358 8,041 31,524 109,008

Commercial

(10,538 18,496 70,388 116,577 166,554

Total commercial real estate

(9,367 24,854 78,429 148,101 275,562

Total commercial

22,756 41,244 142,677 237,800 530,494

Consumer:

Automobile

17,568 10,537 9,442 15,067 26,572

Home equity

36,947 82,263 116,379 101,797 139,373

Residential mortgage

19,752 27,162 47,923 56,681 152,895

Other consumer

27,604 27,460 26,041 25,744 25,140

Total consumer

101,871 147,422 199,785 199,289 343,980

Total net charge-offs

$ 124,627 $ 188,666 $ 342,462 $ 437,089 $ 874,474

Net charge-offs ratio: (1)

Commercial:

Commercial and industrial

0.18 0.10 0.40 0.66 2.05

Commercial real estate:

Construction

0.16 1.10 1.38 5.33 9.95

Commercial

(0.25 0.42 1.35 2.08 2.72

Commercial real estate

(0.19 0.49 1.36 2.39 3.81

Total commercial

0.10 0.19 0.66 1.20 2.70

Consumer:

Automobile

0.23 0.19 0.21 0.26 0.54

Home equity

0.44 0.99 1.40 1.28 1.84

Residential mortgage

0.35 0.52 0.92 1.20 3.42

Other consumer

6.99 6.30 5.72 4.85 3.80

Total consumer

0.46 0.75 1.08 1.05 1.95

Net charge-offs as a % of average loans

0.27 0.45 0.85 1.12 2.35

In assessing NCO trends, it is helpful to understand the process of how commercial loans are treated as they deteriorate over time. The ALLL established is consistent with the level of risk associated with the original underwriting. As a part of our normal portfolio management process for commercial loans, the loan is periodically reviewed and the ALLL is increased or decreased based on the updated risk rating. In certain cases, the standard ALLL is determined to not be appropriate, and a specific reserve is established based on the projected cash flow or collateral value of the specific loan. Charge-offs, if necessary, are generally recognized in a period after the specific ALLL was established. If the previously established ALLL exceeds that necessary to satisfactorily resolve the problem loan, a reduction in the overall level of the ALLL could be recognized. Consumer loans are treated in much the same manner as commercial loans, with increasing reserve factors applied based on the risk characteristics of the loan, although specific reserves are not identified for consumer loans. In summary, if loan quality deteriorates, the typical credit sequence would be periods of reserve building, followed by periods of higher NCOs as the previously established ALLL is utilized. Additionally, an increase in the ALLL either precedes or is in conjunction with increases in NALs. When a loan is classified as NAL, it is evaluated for specific ALLL or charge-off. As a result, an increase in NALs does not necessarily result in an increase in the ALLL or an expectation of higher future NCOs.

All residential mortgage loans greater than 150-days past due are charged-down to the estimated value of the collateral, less anticipated selling costs. The remaining balance is in delinquent status until a modification can be completed, or the loan goes through the foreclosure process. For the home equity portfolio, virtually all of the defaults represent full charge-offs, as there is no remaining equity, creating a lower delinquency rate but a higher NCO impact.

2014 versus 2013

NCOs decreased $64.0 million, or 34%, in 2014, primarily as a result of continued credit quality. This improvement was partially offset by an increase in C&I primarily relating to large losses associated with a small number of credit relationships.

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Market Risk

Market risk represents the risk of loss due to changes in market values of assets and liabilities. We incur market risk in the normal course of business through exposures to market interest rates, foreign exchange rates, equity prices, and credit spreads. We have identified two primary sources of market risk: interest rate risk and price risk.

Interest Rate Risk

OVERVIEW

Huntington actively manages interest rate risk, as changes in market interest rates can have a significant impact on reported earnings. The interest rate risk process is designed to compare income simulations in market scenarios designed to alter the direction, magnitude, and speed of interest rate changes, as well as the slope of the yield curve. These scenarios are designed to illustrate the embedded optionality in the balance sheet from, among other things, faster or slower mortgage prepayments and changes in deposit mix.

During the 2014 fourth quarter, we updated various assumptions associated with the modeling of non-maturity deposit behavior as interest rates change. The most significant change was the removal of a stress component that caused forecasted deposit balances to be lower than actual deposit balances. The new assumptions better align the behavior of our non-maturity deposits with our experience and expectations. The assumption changes primarily impacted EVE at Risk by making the +100 and +200 shock scenarios less liability sensitive. The assumption changes did not materially impact the NII at Risk. The results are further discussed below.

INCOME SIMULATION AND ECONOMIC VALUE ANALYSIS

Interest rate risk measurement is calculated and reported to the ALCO monthly and ROC at least quarterly. The information reported includes period-end results and identifies any policy limits exceeded, along with an assessment of the policy limit breach and the action plan and timeline for resolution, mitigation, or assumption of the risk.

Huntington uses two approaches to model interest rate risk: Net Interest Income at Risk (NII at Risk) and Economic Value of Equity (EVE). Under NII at Risk, net interest income is modeled utilizing various assumptions for assets, liabilities, and derivative positions under various interest rate scenarios over a one-year time horizon. EVE measures the period end market value of assets minus the market value of liabilities and the change in this value as rates change. EVE is a period end measurement.

Table 20-Net Interest Income at Risk

Net Interest Income at Risk (%)

Basis point change scenario

-25 +100 +200

Board policy limits

-   -2.0 -4.0

December 31, 2014

-0.2 0.5 0.2

Through December 31, 2013, we reported ISE at Risk. We now report NII at Risk to isolate the change in income related solely to interest earning assets and interest bearing liabilities. The difference between the results for ISE at Risk and NII at Risk are not significant for this or any previous fiscal year.

The NII at Risk results included in the table above reflect the analysis used monthly by management. It models gradual -25, +100 and +200 basis point parallel shifts in market interest rates, implied by the forward yield curve over the next one-year period. Due to the current low level of short-term interest rates, the analysis reflects a declining interest rate scenario of 25 basis points, the point at which many assets and liabilities reach zero percent.

Huntington is within Board policy limits for the +100 and +200 basis point scenarios. There is no policy limit for the -25 basis point scenario. The NII at Risk reported at December 31, 2014, shows that Huntington's earnings are not particularly sensitive to changes in interest rates over the next year. In recent periods, the amount of fixed rate assets, primarily indirect auto loans and securities, increased resulting in a reduction in asset sensitivity. This reduction is somewhat accentuated by our portfolio of mortgage-related loans and securities, whose expected maturities lengthen as rates rise. The reduced asset sensitivity for the +200 basis points scenario (relative to the +100 basis points scenario) relates to the modeled migration of money market accounts balances into CDs thereby shifting deposits from a variable rate to a fixed rate.

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Table 21-Economic Value of Equity at Risk

Economic Value of Equity at Risk (%)

Basis point change scenario

-25 +100 +200

Board policy limits

-   -5.0 -12.0

December 31, 2014

-0.6 0.4 -1.5

December 31, 2013

0.6 -3.9 -9.3

The EVE results included in the table above reflect the analysis used monthly by management. It models immediate -25, +100 and +200 basis point parallel shifts in market interest rates. Due to the current low level of short-term interest rates, the analysis reflects a declining interest rate scenario of 25 basis points, the point at which many assets and liabilities reach zero percent.

Huntington is within Board policy limits for the +100 and +200 basis point scenarios. There is no policy limit for the -25 basis point scenario. The EVE reported at December 31, 2014 shows that as interest rates increase (decrease) immediately, the economic value of equity position will decrease (increase). When interest rates rise, fixed rate assets generally lose economic value; the longer the duration, the greater the value lost. The opposite is true when interest rates fall. The EVE at risk reported as of December 31, 2014 for the +200 basis points scenario shows a change to a less liability sensitive position compared with December 31, 2013. The primary factor contributing to this change was the impact of substantially lower interest rates. In addition, the assumption changes mentioned above reduced liability sensitivity in the +200 basis point scenario by +3.4%.

MSR

(This section should be read in conjunction with Note 6 of the Notes to the Consolidated Financial Statements.)

At December 31, 2014 we had a total of $155.6 million of capitalized MSRs representing the right to service $15.6 billion in mortgage loans. Of this $155.6 million, $22.8 million was recorded using the fair value method and $132.8 million was recorded using the amortization method.

MSR fair values are very sensitive to movements in interest rates as expected future net servicing income depends on the projected outstanding principal balances of the underlying loans, which can be greatly reduced by prepayments. Prepayments usually increase when mortgage interest rates decline and decrease when mortgage interest rates rise. We have employed strategies to reduce the risk of MSR fair value changes or impairment. However, volatile changes in interest rates can diminish the effectiveness of these hedges. We typically report MSR fair value adjustments net of hedge-related trading activity in the mortgage banking income category of noninterest income. Changes in fair value between reporting dates are recorded as an increase or a decrease in mortgage banking income.

MSRs recorded using the amortization method generally relate to loans originated with historically low interest rates, resulting in a lower probability of prepayments and, ultimately, impairment. MSR assets are included in accrued income and other assets in the Consolidated Financial Statements.

Price Risk

Price risk represents the risk of loss arising from adverse movements in the prices of financial instruments that are carried at fair value and are subject to fair value accounting. We have price risk from trading securities, securities owned by our broker-dealer subsidiaries, foreign exchange positions, equity investments, investments in securities backed by mortgage loans, and marketable equity securities held by our insurance subsidiaries. We have established loss limits on the trading portfolio, on the amount of foreign exchange exposure that can be maintained, and on the amount of marketable equity securities that can be held by the insurance subsidiaries.

Liquidity Risk

Liquidity risk is the risk of loss due to the possibility that funds may not be available to satisfy current or future commitments resulting from external macro market issues, investor and customer perception of financial strength, and events unrelated to us, such as war, terrorism, or financial institution market specific issues. In addition, the mix and maturity structure of Huntington's balance sheet, the amount of on-hand cash and unencumbered securities, and the availability of contingent sources of funding can have an impact on Huntington's ability to satisfy current or future funding commitments. We manage liquidity risk at both the Bank and the parent company.

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The overall objective of liquidity risk management is to ensure that we can obtain cost-effective funding to meet current and future obligations, and can maintain sufficient levels of on-hand liquidity, under both normal business-as-usual and unanticipated stressed circumstances. The ALCO was appointed by the ROC to oversee liquidity risk management and the establishment of liquidity risk policies and limits. Contingency funding plans are in place, which measure forecasted sources and uses of funds under various scenarios in order to prepare for unexpected liquidity shortages. Liquidity risk is reviewed monthly for the Bank and the parent company, as well as its subsidiaries. In addition, liquidity working groups meet regularly to identify and monitor liquidity positions, provide policy guidance, review funding strategies, and oversee the adherence to, and maintenance of, the contingency funding plans.

Available-for-sale and other securities portfolio

(This section should be read in conjunction with Note 4 of the Notes to Consolidated Financial Statements.)

Our investment securities portfolio is evaluated under established asset/liability management objectives. Changing market conditions could affect the profitability of the portfolio, as well as the level of interest rate risk exposure.

Our available-for-sale and other securities portfolio is comprised of various financial instruments. At December 31, 2014, our available-for-sale and other securities portfolio totaled $9.4 billion, an increase of $2.1 billion from 2013. The duration of the portfolio decreased by 0.3 years to 3.9 years.

The composition and maturity of the portfolio is presented on the following two tables:

Table 22-Available-for-sale and other securities Portfolio Summary at Fair Value

At December 31,

(dollar amounts in thousands)

2014 2013 2012

U.S. Treasury, Federal agency, and other agency securities

$ 5,679,696 $ 3,937,713 $ 4,676,607

Other

3,704,974 3,371,040 2,889,568

Total available-for-sale and other securities

$ 9,384,670 $ 7,308,753 $ 7,566,175

Duration in years (1)

3.9 4.2 2.9

(1) The average duration assumes a market driven prepayment rate on securities subject to prepayment.

Table 23-Available-for-sale and other securities Portfolio Composition and Maturity

At December 31, 2014
Amortized

(dollar amounts in thousands)

Cost Fair Value Yield (1)

U.S. Treasury:

Under 1 year

$ -   $ -   -  

1-5 years

5,435 5,452 1.20

6-10 years

-   -   -  

Over 10 years

-   -   -  

Total U.S. Treasury

5,435 5,452 1.20

Federal agencies: mortgage-backed securities

Under 1 year

47,023 47,190 1.99

1-5 years

216,775 221,078 2.30

6-10 years

184,576 186,938 2.87

Over 10 years

4,825,525 4,867,495 2.42

Total Federal agencies: mortgage-backed securities

5,273,899 5,322,701 2.43

Other agencies:

Under 1 year

33,047 33,237 1.56

1-5 years

9,122 9,575 2.95

6-10 years

103,530 105,019 2.58

Over 10 years

204,016 203,712 2.60

Total other Federal agencies

349,715 351,543 2.51

Total U.S. Treasury, Federal agency, and other agency securities

5,629,049 5,679,696 2.43

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Municipal securities:

Under 1 year

256,399 255,835 2.42

1-5 years

269,385 274,003 3.45

6-10 years

938,780 945,954 2.86

Over 10 years

376,747 392,777 4.23

Total municipal securities

1,841,311 1,868,569 3.16

Private label CMO:

Under 1 year

-   -   -  

1-5 years

-   -   -  

6-10 years

1,314 1,371 5.60

Over 10 years

42,416 40,555 2.49

Total private label CMO

43,730 41,926 2.58

Asset-backed securities:

Under 1 year

-   -   -  

1-5 years

228,852 229,364 1.90

6-10 years

144,163 144,193 2.20

Over 10 years

641,984 582,441 2.15

Total asset-backed securities

1,014,999 955,998 2.10

Corporate debt securities:

Under 1 year

18,767 18,953 3.28

1-5 years

314,773 323,503 3.30

6-10 years

145,611 143,720 2.85

Over 10 years

-   -   -  

Total corporate debt securities

479,151 486,176 3.16

Other:

Under 1 year

250 250 1.48

1-5 years

3,150 3,066 2.50

6-10 years

-   -   NA

Over 10 years

-   -   NA

Nonmarketable equity securities (2)

331,559 331,559 5.05

Marketable equity securities (3)

16,687 17,430 NA

Total other

351,646 352,305 4.79

Total available-for-sale and other securities

$ 9,359,886 $ 9,384,670 2.67

(1) Weighted average yields were calculated using amortized cost on a fully-taxable equivalent basis, assuming a 35% tax rate.
(2) Consists of FHLB and FRB restricted stock holding carried at par.
(3) Consists of certain mutual fund and equity security holdings.

Investment securities portfolio

The expected weighted average maturities of our AFS and HTM portfolios are significantly shorter than their contractual maturities as reflected in Note 4 and Note 5 of the Notes to Consolidated Financial Statements. Particularly regarding the MBS and ABS, prepayments of principal and interest that historically occur in advance of scheduled maturities will shorten the expected life of these portfolios. The expected weighted average maturities, which take into account expected prepayments of principal and interest under existing interest rate conditions, are shown in the following table:

Table 24-Expected Life of Investment Securities

December 31, 2014
Available-for-Sale & Other
Securities
Held-to-Maturity
Securities

(dollar amounts in thousands)

Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value

Under 1 year

$ 569,054 $ 565,853 $ -   $ -  

1-5 years

4,882,061 4,938,893 2,200,359 2,201,471

6-10 years

3,039,362 3,031,093 1,171,565 1,173,650

Over 10 years

521,163 499,841 7,981 7,594

Other securities

348,246 348,990 -   -  

Total

$ 9,359,886 $ 9,384,670 $ 3,379,905 $ 3,382,715

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Bank Liquidity and Sources of Funding

Our primary sources of funding for the Bank are retail and commercial core deposits. As of December 31, 2014, these core deposits funded 73% of total assets (102% of total loans). At December 31, 2014, total core deposits represented 94% of total deposits, a slight decrease from December 31, 2013, when core deposits represented 95% of total deposits.

Core deposits may increase our need for liquidity as certificates of deposit mature or are withdrawn before maturity and as nonmaturity deposits, such as checking and savings account balances, are withdrawn. To the extent we are unable to obtain sufficient liquidity through core deposits, we may meet our liquidity needs through other sources, asset securitization, or sale. Other sources include non-core deposits, FHLB advances, and other wholesale debt instruments.

The following tables reflect contractual maturities of other domestic time deposits of $250,000 or more and brokered deposits and negotiable CDs as well as other domestic time deposits of $100,000 or more and brokered deposits and negotiable CDs at December 31, 2014.

Demand deposit overdrafts that have been reclassified as loan balances were $18.7 million and $19.3 million at December 31, 2014 and 2013, respectively.

Table 25-Maturity Schedule of time deposits, brokered deposits, and negotiable CDs

December 31, 2014

(dollar amounts in millions)

3 Months
or Less
3 Months
to 6 Months
6 Months
to 12 Months
12 Months
or More
Total

Other domestic time deposits of $250,000 or more and brokered deposits and negotiable CDs

$ 1,793 $ 169 $ 213 $ 545 $ 2,720

Other domestic time deposits of $100,000 or more and brokered deposits and negotiable CDs

$ 1,809 $ 179 $ 229 $ 568 $ 2,785

The following table reflects deposit composition detail for each of the last five years:

Table 26-Deposit Composition

At December 31,

(dollar amounts in millions)

2014 2013 2012 2011 2010

By Type

Demand deposits-noninterest-bearing

$ 15,393 30 $ 13,650 29 $ 12,600 27 $ 11,158 26 $ 7,217 17

Demand deposits-interest-bearing

6,248 12 5,880 12 6,218 13 5,722 13 5,469 13

Money market deposits

18,986 37 17,213 36 14,691 32 13,117 30 13,410 32

Savings and other domestic deposits

5,048 10 4,871 10 5,002 11 4,698 11 4,643 11

Core certificates of deposit

2,936 5 3,723 8 5,516 12 6,513 15 8,525 20

Total core deposits

48,611 94 45,337 95 44,027 95 41,208 95 39,264 93

Other domestic deposits of $250,000 or more

198 -   274 1 354 1 390 1 675 2

Brokered deposits and negotiable CDs

2,522 5 1,580 3 1,594 3 1,321 3 1,532 4

Deposits in foreign offices

401 1 316 1 278 1 361 1 383 1

Total deposits

$ 51,732 100 $ 47,507 100 $ 46,253 100 $ 43,280 100 $ 41,854 100

Core deposits:

Commercial

$ 22,725 47 $ 19,982 44 $ 18,358 42 $ 16,366 40 $ 12,476 32

Personal

25,886 53 25,355 56 25,669 58 24,842 60 26,788 68

Total core deposits

$ 48,611 100 $ 45,337 100 $ 44,027 100 $ 41,208 100 $ 39,264 100

Note 9 to Consolidated Financial Statements discusses short-term borrowings for each of the last five years.

The Bank maintains borrowing capacity at the FHLB and the Federal Reserve Bank Discount Window. The Bank does not consider borrowing capacity from the Federal Reserve Bank Discount Window as a primary source of liquidity. Total loans and securities pledged to the Federal Reserve Discount Window and the FHLB are $18.0 billion and $19.8 billion at December 31, 2014 and 2013, respectively.

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In February 2014, the Bank issued $500.0 million of senior notes at 99.842% of face value. The senior bank note issuances mature on April 1, 2019 and have a fixed coupon rate of 2.20%. In April 2014, the Bank issued $500.0 million of senior notes at 99.842% of face value. The senior note issuances mature on April 24, 2017 and have a fixed coupon rate of 1.375%. In April 2014, the Bank also issued $250.0 million of senior notes at 100% of face value. The senior bank note issuances mature on April 24, 2017 and have a variable coupon rate equal to the three-month LIBOR plus 0.425%. All senior note issuances may be redeemed one month prior to their maturity date at 100% of principal plus accrued and unpaid interest.

At December 31, 2014, total wholesale funding was $9.9 billion, an increase from $7.0 billion at December 31, 2013. The increase from prior year-end primarily relates to an increase in long-term debt, brokered deposits, and negotiable CDs.

Liquidity Coverage Ratio

On October 24, 2013, the U.S. banking regulators jointly issued a proposal that would implement a quantitative liquidity requirement consistent with the Liquidity Coverage Ratio (LCR) standard established by the Basel Committee on Banking Supervision. The LCR is designed to promote the short-term resilience of the liquidity risk profile of banks to which it applies.

On September 3, 2014, the U.S. banking regulators adopted a final LCR for internationally active banking organizations, generally those with $250 billion or more in total assets, and a Modified LCR rule for banking organizations, similar to Huntington, with $50 billion or more in total assets that are not internationally active banking organizations. The Modified LCR requires Huntington to maintain High Quality Liquid Assets (HQLA) to meet its net cash outflows over a prospective 30 calendar-day period, which takes into account the potential impact of idiosyncratic and market-wide shocks. The Modified LCR transition period begins on January 1, 2016, with Huntington required to maintain HQLA equal to 90 percent of the stated requirement. The ratio increases to 100 percent on January 1, 2017. Huntington expects to be compliant with the Modified LCR requirement within the transition periods established in the Modified LCR rule.

At December 31, 2014, we believe the Bank had sufficient liquidity to meet its cash flow obligations for the foreseeable future.

Table 27-Maturity Schedule of Commercial Loans

December 31, 2014

(dollar amounts in millions)

One Year
or Less
One to
Five Years
After
Five Years
Total Percent
of

total

Commercial and industrial

$ 4,988 $ 10,258 $  3,787 $ 19,033 78

Commercial real estate-construction

163 590 122 875 4

Commercial real estate-commercial

1,184 2,516 622 4,322 18

Total

$ 6,335 $ 13,364 $ 4,531 $ 24,230 100

Variable-interest rates

$ 5,748 $ 10,528 $ 2,589 $ 18,865 78

Fixed-interest rates

587 2,836 1,942 5,365 22

Total

$ 6,335 $ 13,364 $ 4,531 $ 24,230 100

Percent of total

26 55 19 100

At December 31, 2014, AFS securities, with a fair value of $3.6 billion, were pledged to secure public and trust deposits, interest rate swap agreements, U.S. Treasury demand notes, and securities sold under repurchase agreements.

Parent Company Liquidity

The parent company's funding requirements consist primarily of dividends to shareholders, debt service, income taxes, operating expenses, funding of nonbank subsidiaries, repurchases of our stock, and acquisitions. The parent company obtains funding to meet obligations from dividends and interest received from the Bank, interest and dividends received from direct subsidiaries, net taxes collected from subsidiaries included in the federal consolidated tax return, fees for services provided to subsidiaries, and the issuance of debt securities.

At December 31, 2014 and December 31, 2013, the parent company had $0.7 billion and $1.0 billion, respectively, in cash and cash equivalents.

On January 21, 2015, the board of directors declared a quarterly common stock cash dividend of $0.06 per common share. The dividend is payable on April 1, 2015, to shareholders of record on March 18, 2015. Based on the current quarterly dividend of $0.06

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per common share, cash demands required for common stock dividends are estimated to be approximately $48.7 million per quarter. On January 21, 2015, the board of directors declared a quarterly Series A and Series B Preferred Stock dividend payable on April 15, 2015 to shareholders of record on April 1, 2015. Based on the current dividend, cash demands required for Series A Preferred Stock are estimated to be approximately $7.7 million per quarter. Cash demands required for Series B Preferred Stock are expected to be approximately $0.3 million per quarter.

During 2014, the Bank paid dividends of $244.0 million to the holding company. We anticipate that the Bank will declare additional dividends to the holding company in the first quarter of 2015. To help meet any additional liquidity needs, we have an open-ended, automatic shelf registration statement filed and effective with the SEC, which permits us to issue an unspecified amount of debt or equity securities.

With the exception of the items discussed above, the parent company does not have any significant cash demands. It is our policy to keep operating cash on hand at the parent company to satisfy cash demands for at least the next 18 months. Considering the factors discussed above, and other analyses that we have performed, we believe the parent company has sufficient liquidity to meet its cash flow obligations for the foreseeable future.

Off-Balance Sheet Arrangements

In the normal course of business, we enter into various off-balance sheet arrangements. These arrangements include interest rate swaps, financial guarantees contained in standby letters-of-credit issued by the Bank, and commitments by the Bank to sell mortgage loans.

INTEREST RATE SWAPS

Balance sheet hedging activity is arranged to receive hedge accounting treatment and is classified as either fair value or cash flow hedges. Fair value hedges are purchased to convert deposits and subordinated and other long-term debt from fixed-rate obligations to floating rate. Cash flow hedges are also used to convert floating rate loans made to customers into fixed rate loans. See Note 18 for more information.

STANDBY LETTERS-OF-CREDIT

Standby letters-of-credit are conditional commitments issued to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. Most of these arrangements mature within two years and are expected to expire without being drawn upon. Standby letters-of-credit are included in the determination of the amount of risk-based capital that the parent company and the Bank are required to hold. Through our credit process, we monitor the credit risks of outstanding standby letters-of-credit. When it is probable that a standby letter-of-credit will be drawn and not repaid in full, a loss is recognized in the provision for credit losses. See Note 20 for more information.

COMMITMENTS TO SELL LOANS

Activity relating to our mortgage origination activity supports the hedging of the mortgage pricing commitments to customers and the secondary sale to third parties. At December 31, 2014 and December 31, 2013, we had commitments to sell residential real estate loans of $545.0 million and $452.6 million, respectively. These contracts mature in less than one year.

We do not believe that off-balance sheet arrangements will have a material impact on our liquidity or capital resources.

Table 28-Contractual Obligations (1)

December 31, 2014

(dollar amounts in millions)

One Year
or Less
1 to 3
Years
3 to 5
Years
More than
5 Years
Total

Deposits without a stated maturity

$ 45,069 $ -   $ -   $ -   $ 45,069

Certificates of deposit and other time deposits

4,630 1,803 98 132 6,663

Short-term borrowings

2,397 -   -   -   2,397

Long-term debt

-   2,453 1,126 757 4,336

Operating lease obligations

51 92 79 237 459

Purchase commitments

76 107 14 5 202

(1) Amounts do not include associated interest payments.

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Operational Risk

As with all companies, we are subject to operational risk. Operational risk is the risk of loss due to human error; inadequate or failed internal systems and controls, including the use of financial or other quantitative methodologies that may not adequately predict future results; violations of, or noncompliance with, laws, rules, regulations, prescribed practices, or ethical standards; and external influences such as market conditions, fraudulent activities, disasters, and security risks. We continuously strive to strengthen our system of internal controls to ensure compliance with laws, rules, and regulations, and to improve the oversight of our operational risk. For example, we actively and continuously monitor cyber-attacks such as attempts related to online deception and loss of sensitive customer data. We evaluate internal systems, processes and controls to mitigate loss from cyber-attacks and, to date, have not experienced any material losses. In addition, we are investing significantly in an effort to minimize these risks.

To mitigate operational risks, we have a senior management Operational Risk Committee and a senior management Legal, Regulatory, and Compliance Committee. The responsibilities of these committees, among other duties, include establishing and maintaining management information systems to monitor material risks and to identify potential concerns, risks, or trends that may have a significant impact and ensuring that recommendations are developed to address the identified issues. In addition, we have a senior management Model Risk Oversight Committee that is responsible for policies and procedures describing how model risk is evaluated and managed and the application of the governance process to implement these practices throughout the enterprise. These committees report any significant findings and recommendations to the Risk Management Committee. Potential concerns may be escalated to our ROC, as appropriate.

Our objective for cyber security is to recognize events and respond before the attacker has the opportunity to plan and execute on their goals. To this end we employ strategies to make Huntington less attractive as a target, while investing in threat analytic capabilities for rapid detection and response. Potential concerns related to cyber security may be escalated to our Technology Committee, as appropriate.

The goal of this framework is to implement effective operational risk techniques and strategies, minimize operational and fraud losses, minimize the impact of inadequately designed models and enhance our overall performance.

Representation and Warranty Reserve

We primarily conduct our mortgage loan sale and securitization activity with FNMA and FHLMC. In connection with these and other securitization transactions, we make certain representations and warranties that the loans meet certain criteria, such as collateral type and underwriting standards. We may be required to repurchase individual loans and / or indemnify these organizations against losses due to a loan not meeting the established criteria. We have a reserve for such losses and exposure, which is included in accrued expenses and other liabilities. The reserves are estimated based on historical and expected repurchase activity, average loss rates, and current economic trends. The level of mortgage loan repurchase losses depends upon economic factors, investor demand strategies and other external conditions containing a level of uncertainty and risk that may change over the life of the underlying loans. We currently do not have sufficient information to estimate the range of reasonably possible loss related to representation and warranty exposure.

The tables below reflect activity in the representations and warranties reserve:

Table 29-Summary of Reserve for Representations and Warranties on Mortgage Loans Serviced for Others

Year Ended December 31,

(dollar amounts in thousands)

2014 2013 2012 2011 2010

Reserve for representations and warranties, beginning of year

$ 22,027 $ 28,588 $ 23,218 $ 20,171 $ 5,916

Assumed reserve for representations and warranties

-   -   -   -   7,000

Reserve charges

(8,196 (12,513 (10,628 (8,711 (9,012

Provision for representations and warranties

(1,154 5,952 15,998 11,758 16,267

Reserve for representations and warranties, end of year

$ 12,677 $ 22,027 $ 28,588 $ 23,218 $ 20,171

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Table 30-Mortgage Loan Repurchase Statistics

Year Ended December 31,

(dollar amounts in thousands)

2014 2013 2012 2011

Number of loans sold

17,905 22,240 26,345 22,146

Amount of loans sold (UPB)

$ 2,354,653 $ 3,255,732 $ 4,105,243 $ 3,170,903

Number of loans repurchased (1)

159 159 219 128

Amount of loans repurchased (UPB) (1)

$ 18,482 $ 18,102 $ 29,123 $ 19,442

Number of claims received

149 780 666 445

Successful dispute rate (2)

34 46 46 50

Number of make whole payments (3)

122 167 167 72

Amount of make whole payments (3)

$ 6,853 $ 11,445 $ 9,432 $ 5,553

(1)

Loans repurchased are loans that fail to meet the purchaser's terms.

(2)

Successful disputes are a percent of close out requests.

(3)

Make whole payments are payments to reimburse for losses on foreclosed properties.

Compliance Risk

Financial institutions are subject to many laws, rules, and regulations at both the federal and state levels. In September, for example, the Office of the Comptroller of the Currency issued its final rule formalizing its "heightened expectations" supervisory regime for the largest federally chartered depository institutions, including Huntington, to improve risk management and ensure boards can challenge decisions made by management. These broad-based laws, rules and regulations include, but are not limited to, expectations relating to anti-money laundering, lending limits, client privacy, fair lending, prohibitions against unfair, deceptive or abusive acts or practices, protections for military members as they enter active duty, and community reinvestment. Additionally, the volume and complexity of recent regulatory changes have increased our overall compliance risk. As such, we utilize various resources to help ensure expectations are met, including a team of compliance experts dedicated to ensuring our conformance with all applicable laws, rules, and regulations. Our colleagues receive training for several broad-based laws and regulations including, but not limited to, anti-money laundering and customer privacy. Additionally, colleagues engaged in lending activities receive training for laws and regulations related to flood disaster protection, equal credit opportunity, fair lending, and / or other courses related to the extension of credit. We set a high standard of expectation for adherence to compliance management and seek to continuously enhance our performance.

Capital

(This section should be read in conjunction with the Regulatory Matters section included in Part 1, Item 1 and Note 12 of the Notes to Consolidated Financial Statements.)

Both regulatory capital and shareholders' equity are managed at the Bank and on a consolidated basis. We have an active program for managing capital and maintain a comprehensive process for assessing the Company's overall capital adequacy. We believe our current levels of both regulatory capital and shareholders' equity are adequate.

Regulatory Capital

The following table presents risk-weighted assets and other financial data necessary to calculate certain financial ratios, including the Tier 1 common equity ratio on a Basel I basis, which we use to measure capital adequacy. We estimate the negative impact to Tier I common risk-based capital from the 2015 first quarter implementation of the Federal Reserve's final Basel III capital rules will be approximately 40 bps on a fully phased-in basis.

Table 31-Capital Adequacy

December 31,

(dollar amounts in millions)

2014 2013 2012 2011 2010

Consolidated capital calculations:

Common shareholders' equity

$ 5,942 $ 5,704 $ 5,393 $ 5,030 $ 4,612

Preferred shareholders' equity

386 386 386 386 363

Total shareholders' equity

6,328 6,090 5,779 5,416 4,975

Goodwill

(523 (444 (444 (444 (444

Other intangible assets

(75 (93 (132 (175 (229

Other intangible asset deferred tax liability (1)

26 33 46 61 80

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Total tangible equity (2)

5,756 5,586 5,249 4,858 4,382

Preferred shareholders' equity

(386 (386 (386 (386 (363

Total tangible common equity (2)

$ 5,370 $ 5,200 $ 4,863 $ 4,472 $ 4,019

Total assets

$ 66,298 $ 59,467 $ 56,141 $ 54,449 $ 53,814

Goodwill

(523 (444 (444 (444 (444

Other intangible assets

(75 (93 (132 (175 (229

Other intangible asset deferred tax liability (1)

26 33 46 61 80

Total tangible assets (2)

$ 65,726 $ 58,963 $ 55,611 $ 53,891 $ 53,221

Tier 1 capital (3)

$ 6,266 $ 6,100 $ 5,741 $ 5,557 $ 5,022

Preferred shareholders' equity

(386 (386 (386 (386 (363

Trust-preferred securities

(304 (299 (299 (532 (570

REIT-preferred stock

-   -   (50 (50 (50

Tier 1 common equity (2) (3)

$ 5,576 $ 5,415 $ 5,006 $ 4,589 $ 4,039

Risk-weighted assets (RWA) (3)

$ 54,479 $ 49,690 $ 47,773 $ 45,891 $ 43,471

Tier 1 common equity / RWA ratio (2) (3)

10.23 10.90 10.48 10.00 9.29

Tangible equity / tangible asset ratio (2)

8.76 9.47 9.44 9.01 8.23

Tangible common equity / tangible asset ratio (2)

8.17 8.82 8.74 8.30 7.55

Tangible common equity / RWA ratio (2)

9.86 10.46 10.18 9.74 9.25

(1) Intangible assets are net of deferred tax liability and calculated assuming a 35% tax rate.
(2) Tangible equity, Tier 1 common equity, tangible common equity, and tangible assets are non-GAAP financial measures. Additionally, any ratios utilizing these financial measures are also non-GAAP. These financial measures have been included as they are considered to be critical metrics with which to analyze and evaluate financial condition and capital strength. Other companies may calculate these financial measures differently.
(3) In accordance with applicable regulatory reporting guidance, we are not required to retrospectively update historical filings for newly adopted accounting principles. Therefore, Tier 1 capital, Tier 1 common equity, and risk-weighted assets have not been updated for the adoption of ASU 2014-01.

The following table presents certain regulatory capital data at both the consolidated and Bank levels for the past five years:

Table 32-Regulatory Capital Data (1)

At December 31,

(dollar amounts in millions)

2014 2013 2012 2011 2010

Total risk-weighted assets

Consolidated $ 54,479 $ 49,690 $ 47,773 $ 45,891 $ 43,471
Bank 54,387 49,609 47,676 45,651 43,281

Tier 1 risk-based capital

Consolidated 6,266 6,100 5,741 5,557 5,022
Bank 6,136 5,682 5,003 4,245 3,683

Tier 2 risk-based capital

Consolidated 1,122 1,139 1,187 1,221 1,263
Bank 820 838 1,091 1,508 1,866

Total risk-based capital

Consolidated 7,388 7,239 6,928 6,778 6,285
Bank 6,956 6,520 6,094 5,753 5,549

Tier 1 leverage ratio

Consolidated 9.74 10.67 10.36 10.28 9.41
Bank 9.56 9.97 9.05 7.89 6.97

Tier 1 risk-based capital ratio

Consolidated 11.50 12.28 12.02 12.11 11.55
Bank 11.28 11.45 10.49 9.30 8.51

Total risk-based capital ratio

Consolidated 13.56 14.57 14.50 14.77 14.46
Bank 12.79 13.14 12.78 12.60 12.82

(1) In accordance with applicable regulatory reporting guidance, we are not required to retrospectively update historical filings for newly adopted accounting principles. Therefore, regulatory capital data has not been updated for the adoption of ASU 2014-01.

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The decreases in the capital ratios were due to balance sheet growth and share repurchases that were partially offset by retained earnings and the 8.7 million common shares issued in the Camco Financial acquisition. Specifically, all capital ratios were impacted by the repurchase of 35.7 million common shares in 2014.

Shareholders' Equity

We generate shareholders' equity primarily through the retention of earnings, net of dividends. Other potential sources of shareholders' equity include issuances of common and preferred stock. Our objective is to maintain capital at an amount commensurate with our risk profile and risk tolerance objectives, to meet both regulatory and market expectations, and to provide the flexibility needed for future growth and business opportunities. Shareholders' equity totaled $6.3 billion at December 31, 2014, representing a $0.2 billion, or 4%, increase compared with December 31, 2013, primarily due to an increase in retained earnings offset by share repurchases.

Dividends

We consider disciplined capital management as a key objective, with dividends representing one component. Our strong capital ratios and expectations for continued earnings growth positions us to continue to actively explore additional capital management opportunities.

On January 22, 2015, our board of directors declared a quarterly cash dividend of $0.06 per common share, payable on April 1, 2015. Also, cash dividends of $0.06 per common share were declared on October 15, 2014, and $0.05 per common share were declared on July 16, 2014, April 16, 2014 and January 16, 2014. Our 2014 capital plan to the FRB included the continuation of our current common dividend through the 2015 first quarter.

On January 22, 2015, our board of directors also declared a quarterly cash dividend on our 8.50% Series A Non-Cumulative Perpetual Convertible Preferred Stock of $21.25 per share. The dividend is payable on April 15, 2015. Cash dividends of $21.25 per share were also declared on October 15, 2014, July 16, 2014, April 16, 2014 and January 16, 2014.

On January 22, 2015, our board of directors also declared a quarterly cash dividend on our Floating Rate Series B Non-Cumulative Perpetual Preferred Stock of $7.38 per share. The dividend is payable on April 15, 2015. Also, cash dividends of $7.33, $7.33, $7.32 and $7.35 per share were declared on October 15, 2014, July 16, 2014, April 16, 2014 and January 16, 2014, respectively.

Share Repurchases

From time to time the board of directors authorizes the Company to repurchase shares of our common stock. Although we announce when the board of directors authorizes share repurchases, we typically do not give any public notice before we repurchase our shares. Future stock repurchases may be private or open-market repurchases, including block transactions, accelerated or delayed block transactions, forward transactions, and similar transactions. Various factors determine the amount and timing of our share repurchases, including our capital requirements, the number of shares we expect to issue for employee benefit plans and acquisitions, market conditions (including the trading price of our stock), and regulatory and legal considerations, including the FRB's response to our capital plan.

On March 26, 2014, Huntington announced that the Federal Reserve did not object to Huntington's proposed capital actions included in Huntington's capital plan submitted to the Federal Reserve in January 2014. These actions included a potential repurchase of up to $250 million of common stock from the second quarter of 2014 through the first quarter of 2015. Huntington's board of directors authorized a share repurchase program consistent with Huntington's capital plan. This repurchase authorization represents a $23 million, or 10%, increase from the prior common stock repurchase authorization. During 2014, we repurchased 35.7 million shares, with a weighted average price of $9.37. Purchases of common stock may include open market purchases, privately negotiated transactions, and accelerated repurchase programs. We have approximately $51.7 million remaining under the current authorization.

BUSINESS SEGMENT DISCUSSION

Overview

Our business segments are based on our internally-aligned segment leadership structure, which is how we monitor results and assess performance. During the 2014 first quarter, we reorganized our business segments to drive our ongoing growth and leverage the knowledge of our highly experienced team. We now have five major business segments: Retail and Business Banking,

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Commercial Banking, Automobile Finance and Commercial Real Estate (AFCRE), Regional Banking and The Huntington Private Client Group (RBHPCG), and Home Lending. A Treasury / Other function includes technology and operations, other unallocated assets, liabilities, revenue, and expense. All periods presented have been reclassified to conform to the current period classification.

Business segment results are determined based upon our management reporting system, which assigns balance sheet and income statement items to each of the business segments. The process is designed around our organizational and management structure and, accordingly, the results derived are not necessarily comparable with similar information published by other financial institutions.

Revenue Sharing

Revenue is recorded in the business segment responsible for the related product or service. Fee sharing is recorded to allocate portions of such revenue to other business segments involved in selling to, or providing service to customers. Results of operations for the business segments reflect these fee sharing allocations.

Expense Allocation

The management accounting process that develops the business segment reporting utilizes various estimates and allocation methodologies to measure the performance of the business segments. Expenses are allocated to business segments using a two-phase approach. The first phase consists of measuring and assigning unit costs (activity-based costs) to activities related to product origination and servicing. These activity-based costs are then extended, based on volumes, with the resulting amount allocated to business segments that own the related products. The second phase consists of the allocation of overhead costs to all five business segments from Treasury / Other. We utilize a full-allocation methodology, where all Treasury / Other expenses, except reported Significant Items, and a small amount of other residual unallocated expenses, are allocated to the five business segments.

Funds Transfer Pricing (FTP)

We use an active and centralized FTP methodology to attribute appropriate income to the business segments. The intent of the FTP methodology is to transfer interest rate risk from the business segments by providing matched duration funding of assets and liabilities. The result is to centralize the financial impact, management, and reporting of interest rate risk in the Treasury / Other function where it can be centrally monitored and managed. The Treasury / Other function charges (credits) an internal cost of funds for assets held in (or pays for funding provided by) each business segment. The FTP rate is based on prevailing market interest rates for comparable duration assets (or liabilities).

Net Income by Business Segment

The segregation of net income by business segment for the past three years is presented in the following table:

Table 33-Net Income by Business Segment

Year ended December 31,

(dollar amounts in thousands)

2014 2013 2012

Retail and Business Banking

$ 172,199 $ 128,973 $ 139,016

Commercial Banking

152,653 129,962 155,197

AFCRE

196,377 220,433 205,928

RBHPCG

22,010 39,502 16,922

Home Lending

(19,727 2,670 45,285

Treasury / Other

108,880 119,742 68,942

Net income

$ 632,392 $ 641,282 $ 631,290

Treasury / Other

The Treasury / Other function includes revenue and expense related to assets, liabilities, and equity not directly assigned or allocated to one of the five business segments. Other assets include investment securities and bank owned life insurance. The financial impact associated with our FTP methodology, as described above, is also included.

Net interest income includes the impact of administering our investment securities portfolios and the net impact of derivatives used to hedge interest rate sensitivity. Noninterest income includes miscellaneous fee income not allocated to other business segments, such as bank owned life insurance income and any investment security and trading asset gains or losses. Noninterest expense includes certain corporate administrative, merger, and other miscellaneous expenses not allocated to other business segments. The provision for

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income taxes for the business segments is calculated at a statutory 35% tax rate, though our overall effective tax rate is lower. As a result, Treasury / Other reflects a credit for income taxes representing the difference between the lower actual effective tax rate and the statutory tax rate used to allocate income taxes to the business segments.

Optimal Customer Relationship (OCR)

Our OCR strategy is focused on building and deepening relationships with our customers through superior interactions, product penetration, and quality of service. We will deliver high-quality customer and prospect interactions through a fully integrated sales culture which will include all partners necessary to deliver a total Huntington solution The quality of our relationships will lead to our ability to be the primary bank for our customers, yielding quality, annuitized revenue and profitable share of customers overall financial services revenue. We believe our relationship oriented approach will drive a competitive advantage through our local market delivery channels.

CONSUMER OCR PERFORMANCE

For consumer OCR performance there are three key performance metrics: (1) the number of checking account households, (2) the number of product penetration per consumer checking household, and (3) the revenue generated from the consumer households of all business segments.

The growth in consumer checking account number of households is a result of both new sales of checking accounts and improved retention of existing checking account households. The overall objective is to grow the number of households, along with an increase in product penetration.

We use the checking account since it typically represents the primary banking relationship product. We count additional services by type, not number of services. For example, a household that has one checking account and one mortgage, we count as having two services. A household with four checking accounts, we count as having one service. The household relationship utilizing four or more services is viewed to be more profitable and loyal. The overall objective, therefore, is to decrease the percentage of 1-3 services per consumer checking account household, while increasing the percentage of those with 4 or more services. Since we have made significant strides toward having the vast majority of our customers with 4+ services, during the 2013 second quarter, we changed our measurement to 6+ services. We are holding ourselves to a higher performance standard.

The following table presents consumer checking account household OCR metrics:

Table 34-Consumer Checking Household OCR Cross-sell Report

Year ended December 31
2014 2013 2012

Number of households (2) (3)

1,454,402 1,324,971 1,228,812

Product Penetration by Number of Services (1)

1 Service

2.8 3.0 3.1

2-3 Services

17.9 19.2 18.6

4-5 Services

29.9 30.2 31.1

6+ Services

49.4 47.6 47.2

Total revenue (in millions)

$ 1,017.0 $ 948.1 $ 983.4

(1) The definitions and measurements used in our OCR process are periodically reviewed and updated prospectively.
(2) On March 1, 2014, Huntington acquired 9,904 Camco Financial households.
(3) On September 12, 2014, Huntington acquired 37,939 Bank of America households.

Our emphasis on cross-sell, coupled with customers being attracted by the benefits offered through our "Fair Play" banking philosophy with programs such as 24-Hour Grace ® on overdrafts and Asterisk-Free Checking™, are having a positive effect. The percent of consumer households with 6 or more products services at the end of 2014 was 49.4%, up from 47.6% at the end of last year. For 2014, consumer checking account households grew 10%. Total consumer checking account household revenue in 2014 was $1,017.0 million, up $68.9 million, or 7%, from 2013.

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COMMERCIAL OCR PERFORMANCE

For commercial OCR performance, there are three key performance metrics: (1) the number of commercial relationships, (2) the number of services penetration per commercial relationship, and (3) the revenue generated. Commercial relationships include relationships from all business segments.

The growth in the number of commercial relationships is a result of both new sales of checking accounts and improved retention of existing commercial accounts. The overall objective is to grow the number of relationships, along with an increase in product service distribution.

The commercial relationship is defined as a business banking or commercial banking customer with a checking account relationship. We use this metric because we believe that the checking account anchors a business relationship and creates the opportunity to increase our cross-sell. Multiple sales of the same type of service are counted as one service, the same as consumer.

The following table presents commercial relationship OCR metrics:

Table 35-Commercial Relationship OCR Cross-sell Report

Year ended December 31,
2014 2013 2012

Commercial Relationships (1)

164,726 159,716 151,083

Product Penetration by Number of Services (2)

1 Service

15.7 21.1 24.6

2-3 Services

42.4 41.4 40.4

4+ Services

41.9 37.5 35.0

Total revenue (in millions)

$ 851.0 $ 738.5 $ 724.4

(1) Checking account required.
(2) The definitions and measurements used in our OCR process are periodically reviewed and updated prospectively.

By focusing on targeted relationships we are able to achieve higher product service penetration among our commercial relationships, and leverage these relationships to generate a deeper share of wallet. The percent of commercial relationships with 4 or more product services at the end of 2014 was 41.9%, up from 37.5% at the end of last year. Total commercial relationship revenue in 2014 was $851.0 million, up $112.5 million, or 15%, from 2013.

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Retail and Business Banking

Table 36-Key Performance Indicators for Retail and Business Banking

Change from 2013

(dollar amounts in thousands unless otherwise noted)

2014 2013 Amount Percent 2012

Net interest income

$ 912,992 $ 902,526 $ 10,466 1 $ 941,844

Provision for credit losses

75,529 137,978 (62,449 (45 135,102

Noninterest income

409,746 398,065 11,681 3 380,820

Noninterest expense

982,288 964,193 18,095 2 973,691

Provision for income taxes

92,722 69,447 23,275 34 74,855

Net income

$ 172,199 $ 128,973 $ 43,226 34 $ 139,016

Number of employees (average full-time equivalent)

5,239 5,212 27 1 5,075

Total average assets (in millions)

$ 14,861 $ 14,371 $ 490 3 $ 14,299

Total average loans/leases (in millions)

13,034 12,638 396 3 12,696

Total average deposits (in millions)

29,023 28,309 714 3 28,020

Net interest margin

3.19 3.22 (0.03 )%  (1 3.37

NCOs

$ 90,628 $ 131,377 $ (40,749 (31 $ 176,213

NCOs as a % of average loans and leases

0.70 1.04 (0.34 )%  (33 1.39

Return on average common equity

12.6 9.0 3.6 40 9.8

2014 vs. 2013

Retail and Business Banking reported net income of $172.2 million in 2014. This was an increase of $43.2 million, or 34%, compared to the year-ago period. The increase in net income reflected a combination of factors described below.

The increase in net interest income from the year-ago period reflected:

$0.7 billion, or 3%, increase in total average deposits.

$0.4 billion, or 3% increase in average total loans.

Partially offset by:

3 basis point decrease in the net interest margin, primarily due to assigned fund transfer price rates.

The decrease in the provision for credit losses from the year-ago period reflected:

A $40.7 million, or 31%, decrease in NCOs, combined with improved credit metrics on business banking and consumer loans.

The increase in total average loans and leases from the year-ago period reflected:

$275 million, or 3%, increase in consumer loans, primarily due to growth in home equity lines of credit, credit cards, and residential mortgages, as well as the impact of the Camco Financial acquisition.

$121 million, or 3%, increase in commercial loans, primarily due to C&I loan growth and the impact of the Camco Financial acquisition.

The increase in total average deposits from the year-ago period reflected:

$237 million deposit growth from our In-store branch network.

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A continued focus on product mix in reducing the overall cost of deposits as evidenced by an increase in money market and noninterest bearing deposits, partially offset by a decrease in core certificates of deposit. In addition, the acquisition of Camco Financial and 24 Bank of America branches contributed to the deposit increase.

The increase in noninterest income from the year-ago period reflected:

$12.8 million, or 14%, increase in electronic banking income, primarily due to strong consumer household growth combined with increased consumer card activity.

$3.6 million, or 15%, increase in other income, primarily due to various branch transaction based fees.

$2.9 million, or 19%, increase in gain on sale of loans, primarily due to the increased origination and sale of SBA loans.

Partially offset by:

$8.0 million, or 36%, decrease in mortgage banking fee share income.

The increase in noninterest expense from the year-ago period reflected:

$28.3 million, or 7%, increase in other noninterest expense, primarily due to increased allocated overhead expenses.

$5.2 million, or 14%, increase in outside data processing and other services expense, mainly the result of transaction costs associated with card activity.

$3.9 million, or 11%, increase in equipment expense, primarily due to technology investments.

Partially offset by:

$10.4 million, or 4%, decrease in personnel costs, primarily due to the pension plan curtailment in 2013, branch consolidations, and various efficiency improvement initiatives also contributed to the decrease in personnel costs.

$7.1 million, or 46%, reduction in deposit and other insurance.

$1.5 million, or 3%, reduction in marketing, primarily due to reduced direct mail advertising.

2013 vs. 2012

Retail and Business Banking reported net income of $129.0 million in 2013, compared with a net income of $139.0 million in 2012. The $10.0 million decrease included a $39.3 million, or 4%, decrease in net interest income, partially offset by a $17.2 million, or 5%, increase noninterest income, and a $9.5 million, or 1%, decrease in noninterest expense.

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Commercial Banking

Table 37-Key Performance Indicators for Commercial Banking

Change from 2013

(dollar amounts in thousands unless otherwise noted)

2014 2013 Amount Percent 2012

Net interest income

$ 306,434 $ 281,461 $ 24,973 9 $ 294,333

Provision for credit losses

31,521 27,464 4,057 15 4,602

Noninterest income

209,238 200,573 8,665 4 197,191

Noninterest expense

249,300 254,629 (5,329 (2 248,157

Provision for income taxes

82,198 69,979 12,219 17 83,568

Net income

$ 152,653 $ 129,962 $ 22,691 17 $ 155,197

Number of employees (average full-time equivalent)

1,026 1,072 (46 (4 )%  1,023

Total average assets (in millions)

$ 14,145 $ 11,821 $ 2,324 20 $ 10,986

Total average loans/leases (in millions)

11,901 10,804 1,097 10 9,913

Total average deposits (in millions)

10,207 9,429 778 8 9,033

Net interest margin

2.53 2.72 (0.19 )%  (7 2.88

NCOs

$ 7,852 $ (196 $ 8,048 N.R $ 30,497

NCOs as a % of average loans and leases

0.07 -   0.07 -   0.31

Return on average common equity

10.6 11.1 (0.5 (5 16.7

N.R.-Not relevant, as denominator of calculation is a net recovery in prior period compared with net loss in current period.

2014 vs. 2013

Commercial Banking reported net income of $152.7 million in 2014. This was an increase of $22.7 million, or 17%, compared to the year-ago period. The increase in net income reflected a combination of factors described below.

The increase in net interest income from the year-ago period reflected:

$1.1 billion, or 10%, increase in average loans/leases.

$0.9 billion, or 906%, increase in average available-for-sale securities, primarily related to direct purchase municipal securities.

$0.8 billion, or 8%, increase in average total deposits.

Partially offset by:

19 basis point decrease in the net interest margin, primarily due to a 9 basis point compression in commercial loan spreads, driven by a 6 basis point compression stemming from growth in the international portfolio with products such as bankers acceptances and foreign insured receivables, as well as compressed deposit margins resulting from declining rates and reduced FTP rates.

The increase in the provision for credit losses from the year-ago period reflected:

An increase related to loan growth and an $8.0 million increase in NCOs. The increase in NCOs primarily reflects a net recovery in the prior year and the return to net charge-offs in 2014.

The increase in total average assets from the year-ago period reflected:

$0.9 billion increase in available-for-sale securities driven from the addition of direct purchase municipal instruments. These instruments had been classified as C&I loans until December 31, 2013.

$0.6 billion, or 472%, increase in the international loan portfolio, primarily bankers acceptances and foreign insured receivables.

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$0.5 billion, or 100%, increase in the asset based lending portfolio average balance, which was transferred from the AFCRE segment retroactive to the beginning of 2014.

The increase in total average deposits from the year-ago period reflected:

$1.1 billion, or 13%, increase in core deposits. Middle market accounts, such as not-for-profit universities and healthcare, primarily contributed to the balance growth.

Partially offset by:

$0.3 billion, or 45%, decrease in brokered time deposits and negotiable CDs.

The increase in noninterest income from the year-ago period reflected:

$9.9 million, or 100%, increase in fee income associated with the asset based lending portfolio, which was transferred from the AFCRE segment retroactive to the beginning of 2014.

$4.2 million, or 9%, increase in service charges on deposit accounts and other treasury management related revenue, primarily due to a new commercial card product implemented in 2013, as well as strong core cash management growth.

Partially offset by:

$5.6 million, or 16%, decrease in commitment and other loan related fees primarily reflecting a significant syndication fee in 2013.

The decrease in noninterest expense from the year-ago period reflected:

$6.6 million, or 15%, decrease in allocated overhead expense.

$5.3 million, or 42%, decrease in deposit and other insurance expense.

Partially offset by:

$6.6 million, or 100%, increase in noninterest expense associated with the asset based lending portfolio, which was transferred from the AFCRE segment retroactive to the beginning of 2014.

2013 vs. 2012

Commercial Banking reported net income of $130.0 million in 2013, compared with net income of $155.2 million in 2012. The $25.2 million decrease included a $22.9 million, or 497%, increase in provision for credit losses, a $12.9 million, or 4%, decrease in net interest income, and a $6.5 million, or 3%, increase in noninterest expense partially offset by $13.6 million, or 16%, decrease in provision for income taxes, and a $3.4 million, or 2%, increase in noninterest income.

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Automobile Finance and Commercial Real Estate

Table 38-Key Performance Indicators for Automobile Finance and Commercial Real Estate

Change from 2013

(dollar amounts in thousands unless otherwise noted)

2014 2013 Amount Percent 2012

Net interest income

$ 379,363 $ 366,508 $ 12,855 4 $ 369,376

Provision (reduction in allowance) for credit losses

(52,843 (82,269 29,426 (36 (16,557

Noninterest income

26,628 46,819 (20,191 (43 91,314

Noninterest expense

156,715 156,469 246 -   160,434

Provision for income taxes

105,742 118,694 (12,952 (11 110,885

Net income

$ 196,377 $ 220,433 $ (24,056 (11 )%  $ 205,928

Number of employees (average full-time equivalent)

271 285 (14 (5 )%  287

Total average assets (in millions)

$ 14,591 $ 12,981 $ 1,610 12 $ 12,717

Total average loans/leases (in millions)

14,224 12,391 1,833 15 11,677

Total average deposits (in millions)

1,204 1,039 165 16 967

Net interest margin

2.61 2.82 (0.21 )%  (7 2.87

NCOs

$ 2,100 $ 29,137 $ (27,037 (93 $ 83,043

NCOs as a % of average loans and leases

0.01 0.24 (0.23 )%  (96 0.71

Return on average common equity

32.4 36.9 (4.5 (12 32.5

2014 vs. 2013

AFCRE reported net income of $196.4 million in 2014. This was a decrease of $24.1 million, or 11%, compared to the year-ago period. The decrease in net income reflected a combination of factors described below.

The increase in net interest income from the year-ago period reflected:

$2.0 billion, or 35%, increase in automobile loans and leases, primarily due to continued strong origination volume which totaled $5.2 billion for the year, up 24% from $4.2 billion a year ago.

Partially offset by:

21 basis point decrease in the net interest margin, primarily due to an 20 basis point reduction in loan spreads. This decline primarily reflects the impact of competitive pricing pressures in all of our portfolios, partially offset by a $5.1 million, or 4 basis points, recovery in 2014 from the unexpected pay-off of an acquired commercial real estate loan.

$0.3 billion, or 100%, decrease in asset based lending portfolio average balances which were transferred to the Commercial Banking segment retroactive to the beginning of 2014.

The decrease in the provision (reduction in allowance) for credit losses from the year-ago period reflected:

Less improvement in credit quality than what was experienced in the year-ago period, reflecting a 23 basis point decline in NPA/loans in the current period compared to a 51 basis point decline in the year-ago period, partially offset by lower NCOs.

The decrease in noninterest income from the year-ago period reflected:

$18.0 million, or 44%, decrease in other noninterest income, primarily due to a $8.6 million decrease in fee income associated with the asset based lending portfolio which was transferred to the Commercial Banking segment, as well as decreases in market related gains associated with certain loans and investments carried at fair value, operating lease related income and servicing income on securitized automobile loans.

The increase in noninterest expense from the year-ago period reflected:

$9.3 million, or 10%, increase in other noninterest expense, primarily due to a $12.5 million increase in allocated expenses, generally reflecting higher levels of business activity.

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Partially offset by:

$4.2 million, or 33%, decrease in deposit and other insurance expense.

$2.8 million, or 9%, decrease in personnel costs, primarily due to staffing associated with the asset based lending portfolio which was transferred to the Commercial Banking segment retroactive to the beginning of 2014.

$1.5 million, or 29%, decrease in professional services, primarily due to costs associated with the asset based lending portfolio in 2013.

2013 vs. 2012

AFCRE reported net income of $220.4 million in 2013, compared with a net income of $205.9 million in 2012. The $14.5 million increase included a $65.7 million, or 397%, increase in the reduction in allowance for credit losses, a $4.0 million, or 2%, decrease in noninterest expense partially offset by a $44.5 million, or 49%, decrease in noninterest income, and a $2.9 million, or less than 1%, decrease in net interest income.

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Regional Banking and The Huntington Private Client Group

Table 39-Key Performance Indicators for Regional Banking and The Huntington Private Client Group

Change from 2013

(dollar amounts in thousands unless otherwise noted)

2014 2013 Amount Percent 2012

Net interest income

$ 101,839 $ 105,862 $ (4,023 (4 )%