Huntington National Bank 2007 Annual Report Download - page 26

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Total net market-related losses also include the net impact of MSRs and related hedging (see item 5 above). Net income
included the following impact from other net market-related losses:
(amounts in thousands except per common share)
Securities
gains/
(losses)
Public equity
investments
Loss on
loans
held-for-sale
Debt
extinguishment
Pretax
income
Net
income
Per
common
share
2007 $(30,486) $(20,009) $(34,003) $8,058 $(76,440) $(49,686) $(0.16)
2006 (55) 7,436 — — 7,381 4,798 0.02
2005 715 — — — 715 465 —
7. Visa»INDEMNIFICATION.— Performance for 2007 included an accrual of $24.9 million ($16.2 million after-tax, or $0.05 per
common share) for estimated indemnification losses arising from third-party litigation against Visa». Management expects
that the value of our future ownership in Visa», currently not reflected in the financial statements, will ultimately more
than offset this accrual. However, no assurance can be given that the proceeds received, if any, resulting from this future
ownership would be sufficient to cover the accrued indemnity liabilities.
8. EFFECTIVE TAX RAT E.— Various items impacted the effective tax rates for 2007, 2006, and 2005. For 2007, our effective tax
rate was favorably impacted by lower net income and the impact of tax exempt income, bank owned life insurance, asset
securitization activities, and general business credits from investments in low income housing and historic property
partnerships. For 2006, impacts included the effects of an $84.5 million ($0.35 per common share) reduction of provision
for income taxes from the release of tax reserves as a result of the resolution of the federal income tax audit for 2002 and
2003, and the recognition of a federal tax loss carry back. For 2005, the effective tax rate benefited $26.9 million ($0.12 per
common share) from the positive impact of a federal tax loss carry back, partially offset by a net $5.0 million after tax
($0.02 per common share) increase from the repatriation of foreign earnings.
9. OTHER SIGNIFICANT ITEMS INFLUENCING EARNINGS PERFORMANCE COMPARISONS.— In addition to the items discussed separately
in this section, a number of other items impacted financial results. These included:
2007
– $10.8 million pretax negative impact primarily due to increases to litigation reserves on existing cases.
2006
– $10.0 million pretax contribution to the Huntington Foundation.
– $5.5 million pretax increase in automobile lease residual value losses. This increase reflected higher relative losses on
certain vehicles sold at auction, most notably high-line imports and larger sport utility vehicles.
– $4.8 million in severance and consolidation pretax expenses. This reflected fourth quarter severance-related expenses
associated with a reduction of 75 Regional Banking staff positions, as well as costs associated with the retirements of a
vice chairman and an executive vice president.
– $3.7 million of Unizan pretax merger costs, primarily associated with systems conversion expenses.
– $3.3 million pretax gain on the sale of MasterCard»stock.
– $3.2 million pretax negative impact associated with the write-down of equity method investments.
– $2.3 million pretax unfavorable impact due to a cumulative adjustment to defer home equity annual fees.
2005
– $8.8 million pretax investment securities losses, resulting from the decision to reduce exposure to certain unsecured
federal agency securities.
– $5.1 million of pretax severance and consolidation expenses associated with the consolidation of certain operations
functions, including the closing of an item-processing center in Michigan.
– $3.7 million pretax expense associated with the closed SEC investigation and regulatory-related written agreements.
– $2.6 million pretax write-offs of equity investments.
24
MANAGEMENT’S DISCUSSION AND ANALYSIS HUNTINGTON BANCSHARES INCORPORATED