Huntington National Bank 2003 Annual Report Download - page 54

MANAGEMENT’S DISCUSSION AND ANALYSIS
N ON -I NTEREST E XPENSE
Non-interest expense for the recent three years ended December 31, 2003 was as follows:
Table 9—Non-Interest Expense
Change from 2002 Change from 2001
(in thousands of dollars) 2003 Amount % 2002 Amount % 2001
Personnel costs $ 447,263 $ 29,226 7.0% $ 418,037 $ (36,173) (8.0)% $ 454,210
Outside data processing and other services 66,118 (1,250) (1.9) 67,368 (2,324) (3.3) 69,692
Equipment 65,921 (2,402) (3.5) 68,323 (12,237) (15.2) 80,560
Net occupancy 62,481 2,942 4.9 59,539 (16,910) (22.1) 76,449
Professional services 42,448 9,363 28.3 33,085 223 0.7 32,862
Marketing 27,490 (421) (1.5) 27,911 (3,146) (10.1) 31,057
Telecommunications 21,979 (682) (3.0) 22,661 (5,323) (19.0) 27,984
Printing and supplies 13,009 (2,189) (14.4) 15,198 (3,169) (17.3) 18,367
Amortization of intangible assets 816 (1,203) (59.6) 2,019 (39,206) (95.1) 41,225
Other 80,780 (11,283) (12.3) 92,063 625 0.7 91,438
Sub-total excluding operating
lease expense 828,305 22,101 2.7 806,204 (117,640) (12.7) 923,844
Operating lease expense 393,270 (125,700) (24.2) 518,970 (39,656) (7.1) 558,626
Sub-total including operating
lease expense 1,221,575 (103,599) (7.8) 1,325,174 (157,296) (10.6) 1,482,470
Loss on early extinguishment of debt 15,250 15,250 NM — — NM —
Restructuring (releases) charges (6,666) (55,639) NM 48,973 (30,984) NM 79,957
Total Non-Interest Expense $1,230,159 $(143,988) (10.5)% $1,374,147 $(188,280) (12.1)% $1,562,427
NM, not a meaningful value.
2003 versus 2002 Performance
Non-interest expense for 2003 was down $144.0 million, or 10%, from 2002. As shown in Table 9, the impact of the 2003 loss on early
extinguishment of debt and restructuring charges in both years, as well as the impact of the decline in operating lease expense (as this
portfolio continued to run-off), accounted for $166.1 million of the decline, with the remaining components of non-interest expense
up $22.1 million from 2002 (see Significant Factors item 1, 6, and 8).
Contributing to this $22.1 million increase were:
• $29.2 million increase in personnel costs consisting of higher incentive and sales commission expense, especially related to mortgage
banking activity, as well as higher benefit and pension costs, including an $11.5 million decline associated with the sold Florida
banking and insurance operations.
• $9.4 million, or 28%, increase in professional services including $6.9 million of costs related to the ongoing formal SEC
investigation.
Partially offset by:
• $11.3 million decline in other expense including $1.1 million associated with the sold Florida banking and insurance operations,
with the remaining $10.2 million decline reflecting lower operational losses, travel costs, and franchise taxes.
2002 versus 2001 Performance
Non-interest expense for 2002 was down $188.3 million, or 12%, from 2001. As shown in Table 9, the impact of restructuring charges
in both years, as well as the impact of the decline in operating lease expense accounted for $70.5 million of the decline, with the
remaining components of non-interest expense down $117.6 million from 2001 (see Significant Factors item 1 and 8).
Contributing to the $117.6 million decline between years were:
• $39.2 million decline in the amortization of intangible assets, of which $29.0 million related to goodwill eliminated with the sale of
the Florida banking operations, with the remainder reflecting the adoption in 2002 of Statement No. 142, Goodwill and Other
Intangible Assets, under which goodwill was no longer amortized to expense (see Significant Factor item 9).
52 HUNTINGTON BANCSHARES INCORPORATED