UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14C of the
Securities Exchange Act of 1934
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Check the appropriate box:
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Preliminary Information Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14c-5(d)(2))
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Definitive Information Statement
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HUNTINGTON PREFERRED CAPITAL, INC.
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(Name of Registrant as Specified in Its Charter)
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Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11:
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify
the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Date Filed:
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Huntington Preferred Capital, Inc.
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Notice of Annual Meeting
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Information Statement
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Annual Report on Form 10-K
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Huntington
Preferred Capital, Inc.
Huntington Center
41 South High Street
Columbus, Ohio 43287
Notice of Annual Meeting of Shareholders
To Our Common, Class C Preferred, and Class E Preferred Shareholders:
The 2012
Annual Meeting of Shareholders of Huntington Preferred Capital, Inc. will be held in the Huntington Center, Sixth Floor
,
41 South High Street, Columbus, Ohio, on Thursday, May 10, 2012, at 8:30 a.m. local Columbus, Ohio, time, for the
following purposes:
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(1)
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To elect ten directors to serve until the Annual Meeting of Shareholders to be held in 2013 and until their successors are elected.
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(2)
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To ratify the appointment of Deloitte & Touche LLP to serve as the independent registered public accounting firm for Huntington Preferred Capital, Inc. for the
year 2012.
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(3)
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To transact any other business which may properly come before the meeting.
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Directors and officers of Huntington Preferred Capital, Inc. and representatives of its independent registered public accounting firm will be present at the meeting.
Attached are Huntington Preferred Capital, Inc.s Information Statement and Annual Report on Form 10-K for the year 2011.
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By Order of the Board of Directors,
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/s/ Elizabeth B. Moore
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Elizabeth B. Moore
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Secretary
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March 29, 2012
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Important Notice Regarding the Availability of Meeting Materials for the
Shareholder Meeting to be Held on May 10, 2012
The Information Statement and Annual Report on Form 10-K are available at www.edocumentview.com/HPCI2012
Information Statement
This Information
Statement is provided to holders of voting stock of Huntington Preferred Capital, Inc. (Huntington Preferred or the Company) in connection with Huntington Preferreds Annual Meeting of Shareholders to be held on
May 10, 2012, and at any adjournment. This Information Statement will be first sent or given to Huntington Preferreds voting shareholders on approximately April 5, 2012. Huntington Preferreds Annual Report on Form 10-K for 2011
is attached and follows this Information Statement.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
Holders of record of common stock, Class C Preferred securities, and Class E Preferred
securities of Huntington Preferred at the close of business on March 19, 2012, will be entitled to vote at the Annual Meeting. At that date, Huntington Preferred had 14,000,000 shares of common stock outstanding and entitled to vote. Each share
of common stock outstanding on the record date entitles the holder to one vote on each matter submitted at the Annual Meeting. Also on the record date, Huntington Preferred had outstanding and entitled to vote 2,000,000 Class C Preferred securities
and 1,400,000 Class E Preferred securities. The holders of the Class C and Class E Preferred securities are entitled to
1/10
th
of one vote per share on all matters submitted at
the Annual Meeting.
The presence in person or by proxy of the holders of a majority in amount of the voting shares of
Huntington Preferred outstanding and entitled to vote will constitute a quorum at the Annual Meeting. Under the law of Ohio, Huntington Preferreds state of incorporation, abstentions and broker non-votes are counted for purposes of determining
the presence or absence of a quorum. Broker non-votes occur when brokers who hold their customers shares in street name submit proxies for such shares on some matters, but not others. Generally, this would occur when brokers have not received
any instructions from their customers. In these cases, the brokers, as the holders of record, are permitted to vote on routine matters, which typically include the ratification of the independent registered public accounting firm, but
not on non-routine matters. Brokers are no longer permitted to vote on the election of directors without instructions from their customers.
For the election of directors, the nominees receiving the greatest number of favorable votes cast at a meeting at which a quorum is present shall be elected. Only shares that are voted in favor of a
particular nominee will be counted toward such nominees achievement of a plurality, and thus broker non-votes and abstentions will have no effect. The ratification of the appointment of the independent registered public accounting firm
requires the affirmative vote of a majority of all the votes cast at a meeting at which a quorum is present. Abstentions will be counted as votes against the matter. Broker non-votes will not be counted as votes cast and thus will have no effect on
this matter. As of the date of this Information Statement, management knows of no other business that will come before the Annual Meeting.
Election of Directors
Directors are elected annually and serve until the next annual meeting of shareholders and until their successors are elected and qualify.
Huntington Preferreds articles of incorporation provide that while any Class C Preferred securities or Class E Preferred securities are outstanding, the Board of Directors shall consist of at least nine persons, three of whom must be
Independent Directors. The articles of incorporation define Independent Directors as those directors who are not current officers or employees of Huntington Preferred, or directors, officers, or employees of any direct or
indirect subsidiary of Huntington Bancshares Incorporated. See Corporate Governance and Report of the Audit Committee below for additional information regarding the independence of Huntington Preferreds directors.
The Board of Directors has increased the authorized number of directors to ten, effective upon the 2012 Annual Meeting of
Shareholders, and has nominated ten persons for election as directors at the meeting. The nominees include the nine current directors: David S. Anderson, Timothy R. Barber, Richard A. Cheap, Reginald D. Dickson, Harry V. Farver, Edward J. Kane,
Roger E. Kephart, Donald R. Kimble, and James D. Robbins. If reelected, Reginald D. Dickson, Roger E. Kephart, and James D. Robbins, currently serving as Independent Directors will satisfy the Independent Director requirement in Huntington
Preferreds articles of incorporation. The Board has also nominated Gerard P. Mastroianni for election to the Board for the first time. As of the date of the annual meeting, Mr. Mastroianni will also qualify as an Independent
Director. The other six nominees for reelection to the Board of Directors are officers of The Huntington National Bank or Huntington Bancshares Incorporated. The Huntington National Bank is a wholly owned subsidiary of Huntington Bancshares
Incorporated. The following table sets forth certain information concerning each nominee for director.
1
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Name and Principal Occupation
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Age
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Position Held with Huntington
Preferred
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David S. Anderson
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57
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Vice President, Treasurer and Director
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Executive Vice President & Controller,
Huntington Bancshares Incorporated
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Timothy R. Barber
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49
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Vice President and Director
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Executive Vice President,
The Huntington National Bank
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Richard A. Cheap
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60
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Vice President and Director
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General Counsel and Secretary,
Huntington Bancshares Incorporated
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Reginald D. Dickson
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65
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Director
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Chairman/CEO and Majority Owner,
Buford, Dickson, Harper & Sparrow, Inc.
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Harry V. Farver
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42
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Vice President and Director
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Senior Vice President and Director of Accounting
Operations, Huntington Bancshares Incorporated
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Edward J. Kane
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61
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Vice President and Director
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Executive Vice President and Director of Tax and Corporate
Planning and Analysis,
Huntington Bancshares Incorporated
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Roger E. Kephart
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67
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Director
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Retired Partner,
Kephart & Fisher, L.L.C.
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Donald R. Kimble
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52
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President and Director
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Senior Executive Vice President & Chief Financial
Officer, Huntington Bancshares Incorporated
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Gerard P. Mastroianni
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56
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Nominee for Director
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President
Alliance Ventures, Inc.
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James D. Robbins
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65
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Director
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Retired Managing Partner,
PricewaterhouseCoopers LLP, Columbus, Ohio office
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The business experience for at least the last five years of each nominee for director is further
described below.
David S. Anderson.
Mr. Anderson has served as Vice President and as a director of Huntington
Preferred since May 13, 2010, and as Treasurer of Huntington Preferred since December 13, 2010. Mr. Anderson has served as Executive Vice President and Controller for Huntington Bancshares Incorporated since November 30, 2009.
Prior to joining Huntington, Mr. Anderson served as corporate controller with Citizens Financial Group in Providence, Rhode Island, beginning in 1995. Mr. Anderson was chosen as a nominee for director of Huntington Preferred due to his
accounting experience and his role as corporate controller for Huntington Bancshares Incorporated.
Timothy R. Barber.
Mr. Barber has served as a Vice President and as a director of Huntington Preferred since May 2009. Mr. Barber has served as the Credit Risk Manager for The Huntington National Bank since February 1998 and as Executive Vice President
since January 2012. He also served as Senior Vice President for The Huntington National Bank from February 2000 to January 2012, and as Vice President of The Huntington National Bank from February 1998 to February 2000. Because Huntington
Preferreds assets consist primarily of loan participation interests, Mr. Barber was chosen to serve as a director due to his experience with credit risk management and his role as Credit Risk Manager for The Huntington National Bank.
Richard A. Cheap.
Mr. Cheap has served as a Vice President and as a director of Huntington Preferred since April
2001. He also served as Secretary of Huntington Preferred from April 2001 to December 2001. Mr. Cheap has served as General Counsel and Secretary for Huntington Bancshares Incorporated and as Executive Vice President, General Counsel,
Secretary, and Cashier of The Huntington National Bank since May 1998. Prior to joining Huntington Bancshares Incorporated and the Bank, Mr. Cheap practiced law with the law firm of Porter, Wright, Morris & Arthur LLP, Columbus, Ohio,
from 1981, and as a partner from 1987 to May 1998. Mr. Cheap was chosen to serve as a director of Huntington Preferred because of his experience as corporate counsel and his role as General Counsel and Secretary for Huntington Bancshares
Incorporated and The Huntington National Bank.
2
Reginald D. Dickson
. Mr. Dickson has served as a director of Huntington
Preferred since May 2008. Mr. Dickson has served as Chairman, Chief Executive Officer and majority owner of Buford, Dickson, Harper & Sparrow, Inc., an investment research and portfolio management firm, since 2002. He has served as
Chairman since the firms inception in 1995. Buford, Dickson, Harper & Sparrow, Inc. has $100 million under active management and is based in St. Louis, Missouri. Previously, Mr. Dickson served as President and Chief Executive
Officer of INROADS, Inc., a national minority career development organization, from 1982 to 1992. Mr. Dickson has previously served on the boards of First American National Bank, from 1979 to 1999, and Dollar General, from 1993 to July 2007.
Mr. Dickson was selected to serve as a director of Huntington Preferred because of his experience serving as a public company director and audit committee member.
Harry V. Farver.
Mr. Farver has served as a Vice President and as a director of Huntington Preferred since April 2011. Mr. Farver joined Huntington Bancshares Incorporated in June 2010 as
Senior Vice President and Director of Accounting Operations. Prior to joining Huntington, Mr. Farver was with PricewaterhouseCoopers LLP from 1995 to 2000 and from 2003 to 2010, and served as Senior Manager there from 2005 to June 2010.
Mr. Farver was with JPMorgan Chase from 2000 to 2003 where he worked as a Senior Accounting Manager in the Retail line of business. Mr. Farver was chosen as a nominee for director of Huntington Preferred due to his accounting experience
and his role as Director of Accounting Operations for Huntington Bancshares Incorporated.
Edward J. Kane.
Mr. Kane has served as a Vice President and a director of Huntington Preferred since December 2001. Mr. Kane has served as Corporate Tax Director for Huntington Bancshares Incorporated since joining Huntington in November 2001. He has
also served as Huntingtons Director of Corporate Planning and Analysis since August 2011. Mr. Kane was named Executive Vice President of Huntington since October 2007, and served as Senior Vice President of Huntington from November 2001
to October 2007. Prior to joining Huntington Bancshares Incorporated, Mr. Kane served as Vice President, Tax Planning, and Tax Compliance for The CIT Group Inc., Livingston, New Jersey, from 1992 to September 2001, and in various other
capacities from May 1973 to 1992. Because Huntington Preferred qualifies as a REIT for tax purposes, Mr. Kane was chosen as a director of the company due to his knowledge of tax matters and his role as the Corporate Tax Director for Huntington
Bancshares Incorporated.
Roger E. Kephart.
Mr. Kephart has served as a director of Huntington Preferred since
November 2001. Mr. Kephart co-founded the law firm of Kephart & Fisher in 1991, based in Columbus, Ohio. In addition to practicing law, Mr. Kephart served as his firms administrative partner until retiring as of January
2003. Mr. Kephart was chosen to serve on the board of Huntington Preferred due to his skills as a lawyer, including as administrative partner of his law firm, and considering that Huntington Preferreds primary assets and sources of income
are loan participation interests, his experience with commercial lending transactions.
Donald R. Kimble.
Mr. Kimble has served as President and a director of Huntington Preferred since August 2004. Mr. Kimble has served as Chief Financial Officer for Huntington Bancshares Incorporated since August 2004 and as Senior Executive Vice President
since May 2009. Mr. Kimble also served as Controller for Huntington Bancshares Incorporated from August 2004 to July 2006. Mr. Kimble joined Huntington Bancshares Incorporated in June 2004 as Executive Vice President of Finance
Administration. Prior to joining Huntington Bancshares Incorporated, Mr. Kimble served as Executive Vice President and Controller for AmSouth Bancorporation from December 2000 to June 2004, and previously held various accounting and subsidiary
chief financial officer positions with Bank One Corporation from July 1987 to December 2000. Mr. Kimble was chosen to serve as a director of Huntington Preferred due to his financial administration experience and his role as Chief Financial
Officer for Huntington Bancshares Incorporated.
Gerard P. Mastroianni.
Mr. Mastroianni is president of Alliance
Ventures, Inc., Crestview Ventures LLC., and Louisville Ventures, LLC., all real estate and property management firms located in Alliance, Ohio which he has managed since 1989. Mr. Mastroinanni has served as a director of Huntington Bancshares
Incorporated from 2007. His term as a director of Huntington will end as of Huntingtons 2012 annual meeting to be held on April 19, 2012. Mr. Mastroianni previously served on the board of Citizens Bankshares, and on the board of Sky
Financial Group, Inc. for nine years prior to its merger with Huntington in 2007. In addition to his business acumen and experience as a bank director, Mr. Mastroianni also has substantial non-profit board experience, including current service
as a trustee for the Stark Development Board, The University of Mount Union, Alliance for Children and Family, and the Sisters of Charity Foundation. Mr. Mastroianni was chosen as a nominee for director because of his broad business and
community leadership, and his real estate and property management experience.
James D. Robbins.
Mr. Robbins has
served as a director of Huntington Preferred since November 2001. Mr. Robbins has served as President of James D. Robbins and Co., a financial advisory and investment company, since July 2001. Prior to that time, Mr. Robbins served as
managing partner of PricewaterhouseCoopers LLP, Columbus market (and its predecessor firm, Coopers & Lybrand), from November 1993 until his retirement in June 2001. Mr. Robbins is a certified public
3
accountant (inactive) in the State of Ohio and the Commonwealth of Kentucky. Mr. Robbins has also served as a director of the public company, DSW Inc. since July 2009. Mr. Robbins
previously served as a director of Dollar General, from April 2002 to July 2007. Mr. Robbins was chosen to serve as a director of Huntington Preferred because of his accounting and auditing experience and his experience as a public company
director and audit committee member.
The executive officers of Huntington Preferred are Messrs. Anderson, Barber, Cheap,
Farver, Kane and Kimble.
Corporate Governance
Six of Huntington Preferreds nine directors are also officers or directors of The Huntington National Bank or its affiliates. The Board of Directors has one standing committee, the Audit Committee,
which is comprised of Huntington Preferreds three Independent Directors, Messrs. Dickson, Kephart, and Robbins, Chairman. James D. Robbins qualifies as an audit committee financial expert as the term is defined in the rules of the
Securities and Exchange Commission. Designation of Mr. Robbins as an audit committee financial expert by the Board of Directors does not impose any duties, obligations or liabilities on him that are greater than the duties, obligations, and
liabilities imposed on the other members of the Audit Committee. The Securities and Exchange Commission has determined that a person who is identified as an audit committee financial expert will not be deemed an expert for any purpose as
a result of such designation.
The Board of Directors has ratified a Code of Business Conduct and Ethics previously adopted by
the Board of Directors of Huntington Bancshares Incorporated, which applies to all employees and, where applicable, to directors of Huntington Bancshares Incorporated and its affiliates, including Huntington Preferred. Huntington Preferreds
President (principal executive officer) and Vice President and Treasurer (principal financial officer) are also bound by a Financial Code of Ethics for Chief Executive Officer and Senior Financial Officers. The Code of Business Conduct and Ethics
and the Financial Code of Ethics for Chief Executive Officer and Senior Financial Officers are posted on the Investor Relations pages of Huntington Bancshares Incorporateds website at www.huntington.com.
The Audit Committee, which met four times in 2011, operates pursuant to a written Charter that is posted on the Investor Relations pages
of Huntington Bancshares Incorporateds website at www.huntington.com. Click on the link to Investor Information under Huntington Preferred Capital, Inc. to view the Charter. The Audit Committee provides assistance to the Board of
Directors in fulfilling its oversight responsibility for the integrity of Huntington Preferreds financial statements; the financial reporting process; the systems of internal accounting and financial controls; the performance of Huntington
Preferreds internal audit function and independent auditor; and the independent auditors qualifications and independence. The Audit Committee also provides oversight and review of compliance by Huntington Preferreds officers and
directors with the Code of Business Conduct and Ethics and compliance by Huntington Preferreds President (principal executive officer) and Vice President and Treasurer (principal financial officer) with the Financial Code of Ethics for Chief
Executive Officer and Senior Financial Officers.
In exercising its primary responsibilities described above, the Audit
Committee provides a risk oversight function for the company. The Audit Committee also fulfills certain additional risk-oversight related tasks that include annual review of fraud risk and annual review of risks and risk factors with the chief risk
officer for Huntington Bancshares Incorporated.
Huntington Preferreds President serves as its principal executive
officer. The Board of Directors has not designated a chairman. Management believes that this leadership structure is appropriate in light of Huntington Preferreds relationship with The Huntington National Bank and the role of the independent
Audit Committee. The Huntington National Bank, which controls the voting power of Huntington Preferreds outstanding securities, is involved in virtually every aspect of Huntington Preferreds existence. The relationship with The
Huntington National Bank is counterbalanced by our Audit Committee, comprised solely of the Independent Directors, which reviews and approves material transactions among Huntington Preferred and The Huntington National Bank and/or its affiliated
companies.
Huntington Preferred is a controlled company as that term is defined in the rules of The NASDAQ Stock
Market, Inc. because more than 50% of the voting power of Huntington Preferred is held by consolidated subsidiaries of Huntington Bancshares Incorporated. As a controlled company, Huntington Preferred is exempt from the NASDAQ requirement to have a
majority of independent directors and certain other related rules. However, the members of Huntington Preferreds Audit Committee are required to meet the NASDAQ independence standards and the additional criteria for audit committee members.
The Board of Directors has determined that directors Reginald D. Dickson, Roger E. Kephart, and James D. Robbins meet the NASDAQ independence standards and the additional criteria for audit committee members. The Board of Directors has also
determined that Gerard P. Mastroianni is independent under the NASDAQ standards. In making its independence determinations, the Board is aware of the fact that the directors of Huntington Preferred, their immediate family members, and entities
affiliated with those directors, may from time to time be customers of Huntington Bancshares
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Incorporateds affiliated financial and lending institutions and have transactions and relationships with such affiliates in the ordinary course of business. Such transactions may include
loans on substantially the same terms, including interest rates and collateral on loans, as those prevailing at the time for comparable transactions with others and do not involve more than the normal risk of collectibility or present other
unfavorable features. Such transactions may also include transactions, relationships, or arrangements where Huntington Bancshares Incorporateds affiliated financial and lending institutions, in the ordinary course of business, act as
depository of funds or trustee, or provide similar services.
As a controlled company, Huntington Preferred is not subject to
the requirement under the NASDAQ rules to have a formalized process addressing the nominations of directors by independent board members. Since the majority of the directors are not independent, and likely will continue to be not independent, the
Board of Directors has determined that it would be unduly burdensome to have a standing nominating committee. Further, there is currently not a set policy, process, or list of specific criteria or minimum requirements for identifying and evaluating
director nominees, or for considering director candidates recommended by shareholders. In addition, no third parties are used to identify or evaluate potential nominees. Director nominees are considered by the President, who is also a director, and
other directors with whom the President confers. First-time nominee Gerard P. Mastroianni was recommended for consideration as a director nominee by the President.
Huntington Preferred does not maintain a standing compensation committee because Huntington Preferred does not compensate its executive officers or directors who are not Independent Directors. The Audit
Committee has the authority to set reasonable and appropriate compensation for the Independent Directors, subject to approval by the Board of Directors. The form and amount of compensation of directors will be guided by the following principles:
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What is customary for similar organizations;
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The amount of time required to fulfill the duties of a director; and
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The personal risks assumed by a director.
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Directors of Huntington Preferred are expected to attend the annual shareholders meeting and at least 75% of board and committee meetings. The Board of Directors held a total of four regular and special
meetings during 2011. Each director attended at least 75% of the meetings of the full board and, if applicable, the Audit Committee. Seven of the nine board members then serving were present for the 2011 Annual Shareholders Meeting.
Shareholders of Huntington Preferred may contact the directors by sending written communications to the attention of the President at
Huntington Preferreds principal executive offices. Such communications will be relayed to the director or directors addressed, except for communications which are inappropriate because they are vulgar, obscene, or otherwise socially offensive.
Report of the Audit Committee
A primary responsibility of the Audit Committee is to oversee the integrity of Huntington Preferreds financial statements and disclosures. In carrying out its duties, the Audit Committee has
reviewed and discussed the audited financial statements for the year ended December 31, 2011, with Huntington Preferreds management and Huntington Preferreds independent registered public accounting firm, Deloitte & Touche
LLP. This discussion included the selection, application, and disclosure of critical accounting policies. The Audit Committee has also reviewed with Deloitte & Touche LLP its judgment as to the quality, not just the acceptability, of
Huntington Preferreds accounting principles and such other matters required to be discussed under auditing standards generally accepted in the United States, including the Statement on Auditing Standards No. 61, as amended, Communication
with Audit Committees (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.
In addition, the Audit Committee has received and reviewed the written disclosures and the letter from Deloitte & Touche LLP required by the Public Company Accounting Oversight Board in Rule 3526
regarding Deloitte & Touche LLPs communications with the Audit Committee concerning independence and has discussed with Deloitte & Touche LLP its independence from Huntington Preferred. Based on this review and discussion,
and a review of the services provided by Deloitte & Touche LLP during 2011, the Audit Committee believes that the services provided by Deloitte & Touche LLP in 2011 are compatible with and do not impair Deloitte & Touche
LLPs independence.
5
Based on these reviews and discussions, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in Huntington Preferreds Annual Report on Form 10-K for the year 2011 for filing with the Securities and Exchange Commission.
Audit Committee
James D. Robbins, Chairman
Reginald D. Dickson
Roger E. Kephart
Compensation of Directors and Executive Officers
Huntington Preferred does not pay or award any compensation in any form to its executive officers. Huntington Preferred also does not pay or award any compensation to its directors who are not Independent
Directors. The table below reflects the compensation paid by Huntington Preferred to its Independent Directors for services as directors in 2011.
Director Compensation 2011
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Name
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Fees Earned or Paid in Cash ($)
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Total ($)
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Reginald D. Dickson
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$
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39,600
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$
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39,600
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Roger E. Kephart
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39,600
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39,600
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James D. Robbins
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45,100
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45,100
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The table above reflects the following compensation arrangements for the Independent Directors:
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Each Independent Director, as the term is defined in Huntington Preferreds articles of incorporation, receives retainer payments at an annual
rate of $33,000;
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The chairperson of the Audit Committee receives an additional retainer at an annual rate of $5,500; and
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Each Independent Director receives a meeting fee of $1,650 for each day on which he participates in a board and/or committee meeting, and a meeting fee
of $550 for each day on which he participates in a telephonic board and/or committee meeting.
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Ownership of Voting Stock
Common Stock
The following table sets forth, as of March 15, 2012, the number and percentage of outstanding common shares beneficially owned by all persons known by Huntington Preferred to own more than five
percent of such shares.
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Name and Address of Beneficial Owner
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Shares of Common
Stock
Beneficially Owned
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Percent of Class
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Huntington Preferred Capital Holdings, Inc.
3993Howard Hughes Parkway, Suite 250
Las Vegas, Nevada 89109
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2,870,000
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20.5
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%
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Huntington Preferred Capital II, Inc.
3993 Howard Hughes Parkway, Suite 250
Las Vegas, Nevada 89109
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11,130,000
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79.5
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%
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6
None of Huntington Preferreds directors or executive officers owns any Huntington
Preferred common stock. Huntington Preferred Capital Holdings, Inc., and Huntington Preferred Capital II, Inc. are both direct or indirect subsidiaries of The Huntington National Bank.
Preferred Stock
No person is known by Huntington Preferred to own more
than 5% of Huntington Preferreds Class C Preferred securities. The following table sets forth the beneficial ownership of Huntington Preferreds Class C Preferred securities by each of Huntington Preferreds directors, nominees for
director, and executive officers, and by the directors and executive officers as a group, as of March 15, 2012.
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Name of Beneficial Owner
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Shares of Class C Preferred Securities
Beneficially Owned(1)
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Percent of Class
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David S. Anderson
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0
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0
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Timothy R. Barber
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0
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0
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Richard A. Cheap
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100
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(2
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)
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Reginald D. Dickson
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1,100
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(2
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)
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Harry V. Farver
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0
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0
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Edward J. Kane
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800
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(2
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)
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Roger E. Kephart
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1,506
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(2
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)
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Donald R. Kimble
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0
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0
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Gerard P. Mastroianni
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0
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0
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James D. Robbins
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3,465
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(2
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)
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Directors and Executive Officers as a group (9 in group)
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6,971
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(2
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)
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(1)
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Except as otherwise noted, none of the named individuals shares with another person either voting or investment power as to the shares reported. The shares reported for
Mr. Kane are jointly owned with his spouse. Of the shares reported for Mr. Kephart, 1,000 shares are owned by his spouse. The figure reported for Mr. Robbins includes 500 shares owned by his spouse, 667 shares owned jointly with his
spouse, and 500 shares owned jointly by Mr. Robbins and his daughter.
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As indicated in the table below, as of March 15, 2012, all of Huntington Preferreds Class E Preferred securities were owned by
Tower Hill Securities, Inc.
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Name and Address
Of Beneficial Owner
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Shares of Class E Preferred Securities
Beneficially Owned
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Percent of Class
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Tower Hill Securities, Inc.
3993 Howard Hughes Parkway
Suite 250
Las Vegas, NV 89169
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1,400,000
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100
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%
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Huntington Preferreds Class A Preferred securities and Class B Preferred securities are
non-voting.
As of December 31, 2011, many of the directors and executive officers of Huntington Preferred owned shares
of Huntington Bancshares Incorporated common stock. These directors and executive officers owned, individually and collectively, less than 1% of the Huntington Bancshares Incorporated common stock outstanding on December 31, 2011.
7
Transactions with Directors, Executive Officers, and Certain Beneficial Owners
The Audit Committee Charter provides that the Audit Committee reviews and approves all related party transactions as defined
by the rules of The NASDAQ Stock Market, Inc., which includes transactions required to be disclosed in this Information Statement and transactions between Huntington Preferred and Huntington Bancshares Incorporated, The Huntington National Bank, or
their affiliates. The Audit Committee may adopt policies governing the terms of transactions between Huntington Preferred and Huntington Bancshares Incorporated, The Huntington National Bank or their affiliates in the ordinary course of Huntington
Preferreds business. Related party transactions are brought to the attention of the Audit Committee by management or the directors.
Huntington Preferred holds participation interests directly, or subparticipation interests indirectly through Huntington Preferred Capital Holdings, Inc. (Holdings), in certain loans originated by The
Huntington National Bank (Bank) and its subsidiaries. The participation interests are in commercial real estate and consumer and residential real estate loans that were either directly underwritten by the Bank and its subsidiaries or acquired by the
Bank. Huntington Preferred expects to continue to purchase such interests, net of an allowance for loan losses, in the future from Holdings, the Bank, or their affiliates.
The loans underlying Huntington Preferreds participation interests are serviced by the Bank pursuant to the terms of (i) the participation agreement between the Bank and Huntington Preferred,
or (ii) the participation agreement between the Bank and Holdings and the subparticipation agreement between Holdings and Huntington Preferred. The Bank earned servicing fees from Huntington Preferred of $7.0 million during the year ended
December 31, 2011. Pursuant to the existing participation and subparticipation agreements, the amount and terms of the loan-servicing fee between the Bank and Huntington Preferred are determined by mutual agreement from time-to-time during the
terms of the agreements. In lieu of paying higher servicing costs to the Bank with respect to commercial real estate loans, Huntington Preferred waived its right to receive any origination fees associated with participation interests in commercial
real estate loans. The Bank and Huntington Preferred performed a review of loan-servicing fees in 2011, and have agreed to retain current servicing rates for all loan participation categories, including the continued waiver by Huntington Preferred
of its right to origination fees, until such time as servicing fees are reviewed in 2012. Currently, the annual servicing fee with respect to consumer loans is equal to the outstanding principal balance of each loan multiplied by a fee of 0.650%;
the annual servicing fee with respect to residential real estate loans is equal to the outstanding principal balance of each loan multiplied by a fee of 0.267%; and the annual servicing fee with respect to commercial and commercial real estate loans
is 0.125%.
Under the terms of the participation and subparticipation agreements, Huntington Preferred is obligated to make
funds or credit available to the Bank, either directly or indirectly through Holdings, so that the Bank may extend credit to any borrowers, or pay letters of credit issued for the account of any borrowers, to the extent provided in the loan
agreements underlying Huntington Preferreds participation interests. The unfunded commitments at December 31, 2011, totaled $233.4 million.
Personnel of Huntington Bancshares Incorporated and the Bank handle day-to-day operations of Huntington Preferred, such as accounting, financial reporting and analysis, tax reporting, and other
administrative functions. On a monthly basis, Huntington Preferred pays Huntington Bancshares Incorporated and the Bank for the costs related to the time spent by employees for performing these functions. The personnel costs were $0.4 million for
the year ended December 31, 2011.
Huntington Preferred maintains and transacts all of its cash activity through the
Bank. Typically, cash is invested with the Bank in an interest-bearing account. These interest-bearing balances are invested overnight or may be invested in Eurodollar deposits with the Bank for a term of not more than 30 days at market rates.
The Bank is eligible to obtain advances from various federal and government-sponsored agencies, such as the Federal Home Loan
Bank (FHLB). Huntington Preferred may from time to time be asked to act as guarantor of the Banks obligations under such advances and/or pledge all or a portion of its assets in connection with those advances. Any such guarantee or pledge
would rank senior to Huntington Preferreds common and preferred securities upon liquidation. Accordingly, any federal or government-sponsored agencies that make advances to the Bank where Huntington Preferred has acted as guarantor or has
pledged all or a portion of its assets as collateral will have a liquidation preference over the holders of Huntington Preferreds securities. Any such guarantee and/or pledge in connection with the Banks advances from the FHLB falls
within the definition of Permitted Indebtedness (as defined in Huntington Preferreds articles of incorporation) and, therefore, Huntington Preferred is not required to obtain the consent of the holders of its common or preferred securities for
any such guarantee and/or pledge.
8
Currently, Huntington Preferreds assets have been used to secure only one such
facility. The Bank has obtained a line of credit from the FHLB, limited to $3.4 billion as of December 31, 2011, based on the Banks holdings of FHLB stock. As of this same date, the Bank had borrowings of $0.4 billion under this facility.
Huntington Preferred has entered into an Amended and Restated Agreement with the Bank with respect to the pledge of Huntington Preferreds assets to collateralize the Banks borrowings from the FHLB. The agreement provides that the Bank
will not place at risk Huntington Preferrreds assets in excess of an aggregate dollar amount or aggregate percentage of such assets established from time-to-time by Huntington Preferreds board of directors, including a majority of the
Independent Directors. The pledge limit established by Huntington Preferreds board is equal to 25% of Huntington Preferreds total assets, or approximately $0.9 billion as of December 31, 2011, as reflected in the Huntington
Preferreds month-end management report for the previous month. This pledge limit may be changed in the future by the board of directors, including a majority of the Independent Directors. The amount of Huntington Preferreds participation
interests pledged was $0.4 billion at December, 31, 2011. In 2011, the loans pledged consisted of 1-4 family residential mortgage loans. The agreement also provides that the Bank will pay Huntington Preferred a monthly fee based upon the total loans
pledged by Huntington Preferred. The Bank paid Huntington Preferred a total of $1.5 million in 2011 as compensation for making such assets available to the Bank. The fee represented thirty-five basis points per year on total pledged loans.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires Huntington Preferreds officers, directors, and persons who are beneficial owners of more than ten percent of Huntington Preferreds
Class C Preferred Shares to file reports of ownership and changes in ownership with the SEC. Reporting persons are required by SEC regulations to furnish Huntington Preferred with copies of all Section 16(a) forms filed by them. To the best of
its knowledge, and following a review of the copies of Section 16(a) forms received by it, Huntington Preferred believes that, during 2011, all filing requirements applicable for Huntington Preferreds reporting persons were timely met.
Proposal to Ratify the Appointment of Independent Registered Public Accounting Firm
The Audit Committee has selected Deloitte & Touche LLP as Huntington Preferreds independent registered public accounting
firm for 2012. Deloitte & Touche LLP has served as our independent registered public accounting firm since 2004. Although not required, we are asking shareholders to ratify the appointment of Deloitte & Touche LLP as the
independent accountant for 2012. The Audit Committee will reconsider the appointment of Deloitte & Touche LLP if its selection is not ratified by the shareholders. Representatives of Deloitte & Touche LLP regularly attend meetings
of the Audit Committee and will be present at the annual meeting. These representatives will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.
Audit Fees.
Audit fees are fees for professional services rendered for the audits of our annual financial statements and internal
control over financial reporting, review of the financial statements included in Form 10-Q filings, and services that are normally provided by Deloitte & Touche LLP in connection with statutory and regulatory filings or engagements
.
The aggregate audit fees billed by Deloitte & Touche LLP for the fiscal years ended December 31, 2011 and December 31, 2010 were $103,000 and $103,500, respectively.
Deloitte & Touche LLP did not bill Huntington Preferred for any other services in the fiscal years ended December 31, 2011
and December 31, 2010.
The Audit Committee has a policy that it will pre-approve all audit and non-audit services
provided by the independent accountant, and will not engage the independent accountant to perform any specific non-audit services prescribed by law or regulation. The Audit Committee may delegate pre-approval authority to a committee member. The
decisions of the member to whom pre-approval authority is delegated must be presented to the full committee at its next scheduled meeting. All of the services covered by the fees disclosed above were pre-approved by the Audit Committee.
9
Other Matters
Copies of the exhibits to Huntington Preferreds 2011 Annual Report on Form 10-K may be obtained, at a reasonable charge for copying and mailing, by writing to Investor Relations, Huntington
Bancshares Incorporated, Huntington Center, 41 South High Street, Columbus, Ohio 43287.
A number of brokerage firms have
instituted householding. The Securities and Exchange Commission has adopted householding rules which permit companies and intermediaries, such as brokers, to satisfy delivery requirements for proxy statements and annual reports with respect to two
or more shareholders sharing the same address by delivering one copy of these materials to these shareholders. If you hold your shares in street name, please contact your bank, broker, or other holder of record to request information
about householding.
10
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