Huntington National Bank 2011 Annual Report Download - page 48

The following table reflects pretax, pre-provision income for the past three years:
Table 4 — Pretax, Pre-provision Income (1)
Twelve Months Ended December 31,
2011 2010 2009
(dollar amounts in thousands)
Income (Loss) Before Income Taxes ............................ $707,234 $ 352,311 $(3,678,183)
Add: Provision for credit losses ............................... 174,059 634,547 2,074,671
Less: Securities gains (losses) ................................. (3,681) (274) (10,249)
Add: Amortization of intangibles .............................. 53,318 60,478 68,307
Less: Significant Items
Litigation reserves addition ................................ (17,028) ——
Visa®-related derivative loss ............................... (6,385) ——
Gain related to Visa®stock ................................. —— 31,362
Goodwill impairment ..................................... —— (2,606,944)
FDIC special assessment ................................... —— (23,555)
Gain on early extinguishment of debt ......................... 9,697 — 141,024
Total pretax, pre-provision income ......................... $952,008 $1,047,610 $ 933,157
Change in total pretax, pre-provision income:
Amount ................................................ $ (95,602) $ 114,453 $ (58,768)
Percent ................................................. (9)% 12% (6)%
(1) See Additional Disclosures section.
Pretax, pre-provision income was $952.0 million in 2011, down $95.6 million, or 9%, from the prior year.
As discussed in the sections that follow, the decrease primarily reflected the negative impact from lower
noninterest income and higher noninterest expense as compared to the prior year.
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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