Huntington National Bank 2012 Annual Report Download - page 38

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(1) Comparisons for presented periods are impacted by a number of factors. Refer to Significant Items.
(2) For all periods presented, the impact of the convertible preferred stock issued in 2008 and the warrants issued to the U.S.
Department of the Treasury in 2008 related to Huntington's participation in the voluntary Capital Purchase Program was excluded
from the diluted share calculation because the result was more than basic earnings per common share (anti-dilutive) for the periods.
The convertible preferred stock and warrants were repurchased in December 2010 and January 2011, respectively.
(3) On a FTE basis assuming a 35% tax rate.
DISCUSSION OF RESULTS OF OPERATIONS
This section provides a review of financial performance from a consolidated perspective. It also includes a Significant Items
section that summarizes key issues important for a complete understanding of performance trends. Key consolidated balance sheet and
income statement trends are discussed. All earnings per share data is reported on a diluted basis. For additional insight on financial
performance, please read this section in conjunction with the Business Segment Discussion.
Significant Items
Definition of Significant Items
From time-to-time, revenue, expenses, or taxes, are impacted by items judged by us to be outside of ordinary banking activities
and / or by items that, while they may be associated with ordinary banking activities, are so unusually large that their outsized impact
is believed by us at that time to be infrequent or short-term in nature. We refer to such items as Significant Items. Most often, these
Significant Items result from factors originating outside the Company; e.g., regulatory actions / assessments, windfall gains, changes
in accounting principles, one-time tax assessments / refunds, litigation actions, etc. In other cases they may result from our decisions
associated with significant corporate actions out of the ordinary course of business; e.g., merger / restructuring charges,
recapitalization actions, goodwill impairment, etc.
Even though certain revenue and expense items are naturally subject to more volatility than others due to changes in market and
economic environment conditions, as a general rule volatility alone does not define a Significant Item. For example, changes in the
provision for credit losses, gains / losses from investment activities, asset valuation writedowns, etc., reflect ordinary banking
activities and are, therefore, typically excluded from consideration as a Significant Item.
Management believes the disclosure of Significant Items in current and prior period results aids analysts/investors in better
understanding corporate performance and trends so that they can ascertain which of such items, if any, they may wish to
include/exclude from their analysis of the company’s performance - i.e., within the context of determining how that performance
differed from their expectations, as well as how, if at all, to adjust their estimates of future performance accordingly. To this end,
Management has adopted a practice of listing Significant Items in its external disclosure documents (e.g., earnings press releases,
quarterly performance discussions, investor presentations, Forms 10-Q and 10-K).
Significant Items for any particular period are not intended to be a complete list of items that may materially impact current or
future period performance.
Significant Items Influencing Financial Performance Comparisons
Earnings comparisons among the three years ended December 31, 2012, 2011, and 2010 were impacted by a number of
Significant Items summarized below.
1. State deferred tax asset valuation allowance adjustment. During 2012, a valuation allowance of $21.3 million (net of tax)
was released for the portion of the deferred tax asset and state net operating loss carryforwards expected to be realized. This
resulted in a positive impact of $0.02 per common share for 2012. Additional information can be found in the Provision for
Income Taxes section within this MD&A.
2. Bargain Purchase Gain. During 2012, an $11.2 million bargain purchase gain associated with the FDIC-assisted Fidelity
Bank acquisition was recorded in noninterest income. This resulted in a positive impact of $0.01 per common share for 2012.
3. Litigation Reserve. $23.5 million and $17.0 million of additions to litigation reserves were recorded as other noninterest
expense in 2012 and 2011, respectively. This resulted in a negative impact of $0.02 per common share in 2012 and $0.01 per
common share in 2011.