Huntington National Bank 2011 Annual Report Download - page 46

3. Litigation Reserve. During the 2011 first quarter, $17.0 million of additions to litigation reserves were
recorded as other noninterest expense. This resulted in a negative impact of $0.01 per common share.
4. TARP Capital Purchase Program Repurchase. During the 2010 fourth quarter, we issued $920.0
million of our common stock and $300.0 million of subordinated debt. The net proceeds, along with other
available funds, were used to repurchase all $1.4 billion of TARP Capital that we issued to the Treasury under its
TARP Capital Purchase Program in 2008. As part of this transaction, there was a deemed dividend that did not
impact net income, but resulted in a negative impact of $0.08 per common share for 2010.
5. Goodwill Impairment. The impacts of goodwill impairment on our reported results were as follows:
• During the 2009 first quarter, bank stock prices, including ours, experienced a steep decline. Our stock
price declined 78% from $7.66 per share at December 31, 2008, to $1.66 per share at March 31, 2009.
Given this significant decline, we conducted an interim test for goodwill impairment. As a result, we
recorded a noncash $2,602.7 million ($4.88 per common share) pretax charge. (See Goodwill discussion
located within the Critical Accounting Policies and Use of Significant Estimates section for additional
information.)
• During the 2009 second quarter, a pretax goodwill impairment of $4.2 million ($0.01 per common share)
was recorded relating to the sale of a small payments-related business in July 2009.
6. Franklin Relationship. Our relationship with Franklin was acquired in the 2007 Sky Financial
acquisition. Significant events relating to this relationship, and the impacts of those events on our reported
results, were as follows:
• On March 31, 2009, we restructured our relationship with Franklin. As a result of this restructuring, a
nonrecurring net tax benefit of $159.9 million ($0.30 per common share) was recorded in the 2009 first
quarter.Also, and although earnings were not significantly impacted, commercial NCOs increased $128.3
million as the previously established $130.0 million Franklin-specific ALLL was utilized to writedown
the acquired mortgages and OREO collateral to fair value.
• During the 2010 first quarter, a $38.2 million ($0.05 per common share) net tax benefit was recognized,
primarily reflecting the increase in the net deferred tax asset relating to the assets acquired from the
March 31, 2009 restructuring.
• During the 2010 second quarter, the portfolio of Franklin-related loans ($333.0 million of residential
mortgages and $64.7 million of home equity loans) was transferred to loans held for sale. At the time of
the transfer, the loans were marked to the lower of cost or fair value less costs to sell of $323.4 million,
resulting in $75.5 million of charge-offs, and the provision for credit losses commensurately increased
$75.5 million ($0.07 per common share).
• During the 2010 third quarter, the remaining Franklin-related residential mortgage and home equity loans
were sold at essentially book value.
7. Preferred Stock Conversion. During the 2009 first and second quarters, we converted 114,109 and
92,384 shares, respectively, of Series A 8.50% Non-cumulative Perpetual Preferred (Series A Preferred Stock)
stock into common stock. As part of these transactions, there was a deemed dividend that did not impact net
income, but resulted in a negative impact of $0.11 per common share for 2009. (See Capital discussion located
within the Risk Management and Capital section for additional information.)
8. Other Significant Items Influencing Earnings Performance Comparisons. In addition to the items
discussed separately in this section, a number of other items impacted 2009 financial results. These included:
• $23.6 million ($0.03 per common share) negative impact due to a special FDIC insurance premium
assessment. This amount was recorded to noninterest expense.
• $12.8 million ($0.02 per common share) benefit to provision for income taxes, representing a reduction to
the previously established capital loss carry-forward valuation allowance.
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