Huntington National Bank 2007 Annual Report Download - page 27

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Table 4 reflects the earnings impact of the above-mentioned significant items for periods affected by this Discussion of Results of
Operations:
Table 4 — Significant Items Influencing Earnings Performance Comparison
(1)
(in thousands of dollars) After-tax EPS After-tax EPS After-tax EPS
2007 2006 2005
Net income — GAAP $ 75,169 $461,221 $412,091
Earnings per share, after tax $ 0.25 $ 1.92 $ 1.77
Change from prior year — $ (1.67) 0.15 0.06
Change from prior year — % (87.0)% 8.5% 3.5%
Significant items — favorable (unfavorable) impact: Earnings
(2)
EPS
(3)
Earnings
(2)
EPS
(3)
Earnings
(2)
EPS
(3)
Franklin Credit relationship restructuring $(423,645) $(0.91) $— $— $— $—
Net market-related (losses) gains (95,427) (0.20) 5,860 0.02 (6,603) (0.02)
Merger costs (85,084) (0.18) (3,749) (0.01)
Visa»anti-trust indemnification (24,870) (0.05) —— ——
Litigation losses (10,767) (0.02) —— ——
Reduction to federal income tax expense
(4)
—— 84,541 0.35 — —
MSR FAS 156 accounting change —— 5,143 0.01 — —
Gain on sale of MasterCard»stock —— 3,341 0.01 — —
Balance sheet restructuring ——(77,525) (0.21) (8,770) (0.02)
Huntington Foundation contribution ——(10,000) (0.03) — —
Automobile lease residual value losses —— (5,549) (0.01) — —
Severance and consolidation expenses —— (4,750) (0.01) (5,064) (0.01)
Accounting adjustment for certain equity investments —— (3,240) (0.01) — —
Adjustment to defer home equity annual fees —— (2,254) (0.01) — —
Net impact of federal tax loss carry back
(4)
—— — — 26,936 0.12
Net impact of repatriating foreign earnings
(4)
—— — — (5,040) (0.02)
SEC and regulatory related expenses —— — — (3,715) (0.01)
Write-off of equity investments —— — — (2,598) (0.01)
(1) See Significant Factors Influencing Financial Performance discussion.
(2) Pre-tax unless otherwise noted.
(3) Based upon the annual average outstanding diluted common shares.
(4) After-tax.
Net Interest Income / Average Balance Sheet
(This section should be read in conjunction with Significant Items 1, 2, 3, 4, and 5.)
Our primary source of revenue is net interest income, which is the difference between interest income from earning assets
(primarily loans, direct financing leases, and securities), and interest expense of funding sources (primarily interest bearing deposits
and borrowings). Earning asset balances and related funding, as well as changes in the levels of interest rates, impact net interest
income. The difference between the average yield on earning assets and the average rate paid for interest-bearing liabilities is the
net interest spread. Non-interest bearing sources of funds, such as demand deposits and shareholders’ equity, also support earning
assets. The impact of the non-interest bearing sources of funds, often referred to as “free” funds, is captured in the net interest
margin, which is calculated as net interest income divided by average earning assets. Given the “free” nature of non-interest bearing
sources of funds, the net interest margin is generally higher than the net interest spread. Both the net interest spread and net
interest margin are presented on a fully-taxable equivalent basis, which means that tax-free interest income has been adjusted to a
pre-tax equivalent income, assuming a 35% tax rate.
25
MANAGEMENT’S DISCUSSION AND ANALYSIS HUNTINGTON BANCSHARES INCORPORATED