Huntington National Bank 2008 Annual Report Download - page 22

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IMPACT METHODOLOGY
For both the Sky Financial and Unizan acquisitions, comparisons of the reported results are impacted as follows:
– Increased the absolute level of reported average balance sheet, revenue, expense, and the absolute level of certain credit
quality results.
– Increased the absolute level of reported noninterest expense items because of costs incurred as part of merger integration
activities, most notably employee retention bonuses, outside programming services related to systems conversions,
occupancy expenses, and marketing expenses related to customer retention initiatives.
Given the significant impact of the mergers on reported results, we believe that an understanding of the impacts of each merger is
necessary to understand better underlying performance trends. When comparing post-merger period results to premerger periods,
we use the following terms when discussing financial performance:
– “Merger-related” refers to amounts and percentage changes representing the impact attributable to the merger.
– “Merger costs” represent noninterest expenses primarily associated with merger integration activities, including severance
expense for key executive personnel.
– “Non-merger-related” refers to performance not attributable to the merger, and includes “merger efficiencies”, which
represent noninterest expense reductions realized as a result of the merger.
After completion of our mergers, we combine the acquired companies’ operations with ours, and do not monitor the subsequent
individual results of the acquired companies. As a result, the following methodologies were implemented to estimate the
approximate effect of the mergers used to determine “merger-related” impacts.
Balance Sheet Items
Sky Financial
For average loans and leases, as well as total average deposits, Sky Financial’s balances as of June 30, 2007, adjusted for purchase
accounting adjustments, and transfers of loans to loans held-for-sale, were used in the comparison. To estimate the impact on 2007
average balances, it was assumed that the June 30, 2007 balances, as adjusted, remained constant over time.
Unizan
For average loans and leases, as well as core average deposits, balances as of the acquisition date were pro-rated to the post-merger
period being used in the comparison. For example, to estimate the impact on 2006 first quarter average balances, one-third of the
closing date balance was used as those balances were in reported results for only one month of the quarter. Quarterly estimated
impacts for the 2006 second, third, and fourth quarter results were developed using this same pro-rata methodology. Full-year
2006 estimated results represent the annual average of each quarter’s estimate. This methodology assumed acquired balances
remained constant over time.
Income Statement Items
Sky Financial
Sky Financial’s actual results for the first six months of 2007, adjusted for the impact of unusual items and purchase accounting
adjustments, were determined. This six-month adjusted amount was multiplied by two to estimate an annual impact. This
methodology does not adjust for any market-related changes, or seasonal factors in Sky Financial’s 2007 six-month results. Nor does it
consider any revenue or expense synergies realized since the merger date. The one exception to this methodology of holding the
estimated annual impact constant relates to the amortization of intangibles expense where the amount is known and is therefore used.
Unizan
Unizan’s actual full-year 2005 results were used for pro-rating the impact on post-merger periods. For example, to estimate the
2006 first quarter impact of the merger on personnel costs, one-twelfth of Unizan’s full-year 2005 personnel costs was used. Full
quarter and year-to-date estimated impacts for subsequent periods were developed using this same pro-rata methodology. This
results in an approximate impact since the methodology does not adjust for any unusual items or seasonal factors in Unizan’s 2005
reported results, or synergies realized since the merger date. The one exception to this methodology relates to the amortization of
intangibles expense where the amount is known and is therefore used.
Certain tables and comments contained within our discussion and analysis provide detail of changes to reported results to quantify
the estimated impact of the Sky Financial merger using this methodology.
20
Management’s Discussion and Analysis Huntington Bancshares Incorporated