Huntington National Bank 2007 Annual Report Download - page 66

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RESULTS FOR THE FOURTH QUARTER
Earnings Discussion
2007 fourth quarter results were a net loss of $239.3 million, or $0.65 per common share, compared with earnings of $87.7 million,
or $0.37 per common share, in the year-ago quarter. Significant items impacting 2007 fourth quarter performance included (see
table below):
– $423.6 million pretax ($0.75 per common share based upon the quarterly average outstanding diluted common shares)
negative impact related to the Franklin relationship consisting of a $405.8 million provision for credit losses related to the
credit deterioration of the Franklin loans and a $17.9 million reduction of net interest income. The net interest income
reduction reflected the placement of the Franklin loans on nonaccrual status from November 16, 2007 until December 28,
2007. During this period, the loan payments from Franklin remained current, with the interest received used to reduce the
exposure.
– $63.5 million pre-tax ($0.11 per common share) negative impact of market-related losses consisting of:
– $34.0 million loss on loans held-for-sale,
– $11.6 million of securities losses,
– $9.4 million of equity investment losses, and
– $8.6 million net negative impact of MSRs hedging consisting of a net impairment loss of $11.8 million included in non-
interest income, partially offset by related net interest income of $3.2 million.
– $44.4 million pretax ($0.08 per common share) of merger-costs consisting of:
– $31.0 million related to Sky Financial integration expenses, and
– $13.4 million related to the previously announced retirement of Sky Financial’s former chairman, president, and chief
executive officer, who was appointed Huntington’s president and chief operating officer at the time of the acquisition, but
subsequently retired on December 31, 2007. This consisted of a cash payment, the accelerated vesting of stock awards,
and retirement benefits.
– $24.9 million pretax ($0.04 per common share) Visa»indemnification charge associated with its announced anti-trust
settlement with American Express»and pending Visa»litigation.
– $8.9 million pretax ($0.02 per common share) of increases to litigation reserves on existing cases.
(in millions, except per share) Pre-tax EPS
(3)
Impact
(1)(2)
Three Months Ended
December 31, 2007 — GAAP earnings ($239.3) ($0.65)
Franklin relationship restructuring (423.6) (0.75)
Net market-related losses (63.5) (0.11)
Merger costs (44.4) (0.08)
Visa»indemnification charge (24.9) (0.04)
Increases to litigation reserves (8.9) (0.02)
December 31, 2006 — GAAP earnings $ 87.7
(4)
$ 0.37
Gain on sale of MasterCard»stock 2.6 0.01
Completion of balance sheet restructuring (20.2) (0.05)
Huntington Foundation contribution (10.0) (0.03)
Automobile lease residual value losses (5.2) (0.01)
Severance and consolidation expenses (4.5) (0.01)
(1) Includes significant items with $0.01 EPS impact or greater
(2) Favorable (unfavorable) impact on GAAP earnings; pre-tax unless otherwise noted
(3) Based upon the quarterly average outstanding diluted common shares
(4) After-tax
NET INTEREST INCOME,NET INTEREST MARGIN,LOANS AND AVERAGE BALANCE SHEET
(This section should be read in conjunction with Significant Items 1, 2, 4, and 5.)
64
MANAGEMENT’S DISCUSSION AND ANALYSIS HUNTINGTON BANCSHARES INCORPORATED