49196--2/24/2009--HUNTINGTON_BANCSHARES

related topics

{condition, economic, financial}

{tax, income, asset}

{loss, insurance, financial}

{stock, price, share}

{loan, real, estate}

{debt, indebtedness, cash}

{financial, litigation, operation}

{control, financial, internal}

{cost, contract, operation}

{cost, operation, labor}

The allowance for loan losses may prove inadequate or be negatively affected by credit risk exposures. The largest single contributor to our net loss in the fourth quarter of 2008, and our reduced net income in 2008, was $438.0 million of provision expense relating to our credit relationship with Franklin Credit Management Corporation (Franklin). This charge represents our best estimate of the inherent loss within this credit relationship. However, there can be no assurance that we will not incur further losses relating to the Franklin relationship. A sustained weakness or weakening in business and economic conditions generally or specifically in the markets in which we do business could adversely affect our business and operating results. Our commercial real estate loan portfolio has and will continue to be affected by the on-going correction in residential real estate prices and reduced levels of home sales. Declines in home values and reduced levels of home sales in our markets could continue to adversely affect us. Adverse economic conditions in the automobile manufacturing and related service industries may impact our banking business. We could experience losses on residual values related to our automobile lease portfolio. If our stock price declines from levels at December 31, 2008, we will evaluate our goodwill balances for impairment, and if the values of our businesses have declined, we could recognize an impairment charge for our goodwill. The value of certain investment securities is volatile and future declines or other-than-temporary impairments could materially adversely affect our future earnings and regulatory capital. Changes in interest rates could negatively impact our financial condition and results of operations. If the Bank or holding company were unable to borrow funds through access to capital markets, we may not be able to meet the cash flow requirements of our depositors, creditors, and borrowers, or the operating cash needed to fund corporate expansion and other corporate activities. The OCC may impose dividend payment and other restrictions on the Bank, which could impact our ability to pay dividends to shareholders or repurchase stock. Due to the significant loss that the Bank incurred in the fourth quarter of 2008, at December 31, 2008, the Bank could not declare and pay dividends to the holding company without regulatory approval. If our regulators deem it appropriate, they can take regulatory actions that could impact our ability to compete for new business, constrain our ability to fund our liquidity needs, and increase the cost of our services. The resolution of significant pending litigation, if unfavorable, could have a material adverse affect on our results of operations for a particular period. Huntington faces significant operational risk. Failure to maintain effective internal controls over financial reporting in the future could impair our ability to accurately and timely report its financial results or prevent fraud, resulting in loss of investor confidence and adversely affecting our business and stock price.

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49196--2/24/2009--HUNTINGTON_BANCSHARES_INC/MD