Huntington National Bank 2008 Annual Report Download - page 26

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To this end, we have adopted a practice of listing as “Significant Items”, individual and/or particularly volatile items that impact
the current period results by $0.01 per share or more. Such “Significant Items” generally fall within the categories discussed below:
TIMING DIFFERENCES
Parts of our regular business activities are naturally volatile, including capital markets income and sales of loans. While such items
may generally be expected to occur within a full-year reporting period, they may vary significantly from period to period. Such
items are also typically a component of an income statement line item and not, therefore, readily discernable. By specifically
disclosing such items, analysts/investors can better assess how, if at all, to adjust their estimates of future performance.
OTHER ITEMS
From time to time, an event or transaction might significantly impact revenues or expenses in a particular reporting period that is
judged to be infrequent, short-term in nature, and/or materially outside typically expected performance. Examples would be
(1) merger costs as they typically impact expenses for only a few quarters during the period of transition; including related
restructuring charges and asset valuation adjustments; (2) changes in an accounting principle; (3) large and infrequent tax
assessments/refunds; (4) a large gain/loss on the sale of an asset; and (5) outsized commercial loan net charge-offs related to fraud.
In addition, for the periods covered by this report, the impact of the Franklin relationship is deemed to be a significant item due
to its unusually large size and because it was acquired in the Sky Financial merger and thus it is not representative of our typical
underwriting criteria. By disclosing such items, analysts/investors can better assess how, if at all, to adjust their estimates of future
performance.
PROVISION FOR CREDIT LOSSES
While the provision for credit losses may vary significantly among periods, and often exceeds $0.01 per share, we typically exclude
it from the list of “Significant Items” unless, in our view, there is a significant, specific credit (or multiple significant, specific
credits) affecting comparability among periods. In determining whether any portion of the provision for credit losses should be
included as a significant item, we consider, among other things, that the provision is a major income statement caption rather
than a component of another caption and, therefore, the period-to-period variance can be readily determined. We also consider
the additional historical volatility of the provision for credit losses.
OTHER EXCLUSIONS
“Significant Items” for any particular period are not intended to be a complete list of items that may significantly impact future
periods. A number of factors, including those described in Huntington’s 2008 Annual Report on Form 10-K and other factors
described from time to time in Huntington’s other filings with the SEC, could also significantly impact future periods.
Significant Items Influencing Financial Performance Comparisons
Earnings comparisons among the three years ended December 31, 2008, 2007, and 2006 were impacted by a number of significant
items summarized below.
1. SKY FINANCIAL ACQUISITION.The merger with Sky Financial was completed on July 1, 2007. The impacts of Sky Financial
on the 2008 reported results compared with the 2007 reported results are as follows:
– Increased the absolute level of reported average balance sheet, revenue, expense, and credit quality results (e.g.,
NCOs).
– Increased reported noninterest expense items as a result of costs incurred as part of merger integration and post-
merger restructuring activities, most notably employee retention bonuses, outside programming services related to
systems conversions, and marketing expenses related to customer retention initiatives. These net merger costs were
$21.8 million ($0.04 per common share) in 2008 and $85.1 million ($0.18 per common share) in 2007.
2. FRANKLIN RELATIONSHIP.Our relationship with Franklin was acquired in the Sky Financial acquisition. The impacts of the
Franklin relationship on the 2008 reported results compared with the 2007 reported results are as follows:
– Performance for 2008 included a $454.3 million ($0.81 per common share) negative impact. In the 2008 fourth
quarter, the cash flow from Franklin’s mortgages, which represent the collateral for our loans, deteriorated
significantly. This deterioration resulted in a $438.0 million provision for credit losses, $9.0 million reduction of net
interest income as the loans were placed on nonaccrual status, and $7.3 million of interest-rate swap losses recorded
to noninterest income.
24
Management’s Discussion and Analysis Huntington Bancshares Incorporated