Huntington National Bank 2010 Annual Report Download - page 49

The following table reflects pretax, pre-provision income for the three years ended December 31, 2010:
Table 5 — Pretax, Pre-provision Income (1)
2010 2009 2008
Twelve Months Ended December 31,
(Dollar amounts in thousands)
Income (Loss) Before Income Taxes ........................ $ 352,311 $(3,678,183) $ (296,008)
Add: Provision for credit losses ........................... 634,547 2,074,671 1,057,463
Less: Securities gains (losses) ............................ (274) (10,249) (197,370)
Add: Amortization of intangibles .......................... 60,478 68,307 76,894
Less: Significant Items
Gain on early extinguishment of debt ..................... —141,024 23,542
Goodwill impairment ................................. —(2,606,944) —
Gain related to Visa stock ............................. —31,362 25,087
Visa indemnification liability ........................... —— 16,995
FDIC special assessment .............................. —(23,555) —
Merger/restructuring costs ............................. —— (21,830)
Total pretax, pre-provision income ....................... $1,047,610 $ 933,157 $ 991,925
Change in total pretax, pre-provision income:
Amount ............................................ $ 114,453 $ (58,768)
Percent ............................................. 12% (6)%
(1) Pretax, pre-provision income is a non-GAAP financial measure. Any ratio utilizing this financial measure
is also non-GAAP. This financial measure has been included as it is considered to be an important metric
with which to analyze and evaluate our results of operations and financial strength. Other companies may
calculate this financial measure differently.
As discussed in more detail in the sections that follow, the increase from 2009 primarily reflected
improved revenue, including higher net interest income, partially offset by higher noninterest expense,
including personnel costs and marketing.
Net Interest Income / Average Balance Sheet
Our primary source of revenue is net interest income, which is the difference between interest income
from earning assets (primarily loans, securities, and direct financing leases), and interest expense of funding
sources (primarily interest-bearing deposits and borrowings). Earning asset balances and related funding
sources, 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. Noninterest-bearing sources of funds, such as demand deposits and shareholders’ equity, also support
earning assets. The impact of the noninterest-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. Both the net interest margin and net interest spread are presented on a fully-taxable equivalent basis,
which means that tax-free interest income has been adjusted to a pretax equivalent income, assuming a 35%
tax rate.
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