Huntington National Bank 2005 Annual Report Download - page 51

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MANAGEMENT’S DISCUSSION AND ANALYSIS HUNTINGTON BANCSHARES INCORPORATED
2004. In addition to impacting the data processing and other services expense category, a portion of these expenses was also
spread across various other expense categories.
2004 versus 2003 Performance
Non-interest expense declined $107.9 million, or 9%, from 2003. Comparisons with prior-period results were significantly
influenced by the decline in operating lease expense as previously noted. Operating lease expense declined $156.8 million, or
40%, from 2003. All other components of non-interest expense increased a net $48.9 million from 2003 reflecting:
– $38.5 million increase in personnel costs primarily related to higher retirement and insurance benefit expenses, and to a
lesser degree, higher salaries.
– $13.5 million increase in net occupancy expense, reflecting a $7.8 million property lease impairment, as well as higher
depreciation and lower rental income.
– $12.5 million increase in other expense impacted by SEC-related expenses and accruals. (See discussion below.)
– $6.0 million increase in outside data processing expenses, including Unizan-related expenses. (See discussion below.)
– $5.5 million decline in restructuring reserve releases, as such releases totaled $1.2 million in 2004, down from $6.7 million
in 2003.
Partially offset by:
– $15.3 million related to the loss on the early extinguishment of debt in 2003.
– $5.6 million decline in professional services, primarily reflecting lower consulting expenses.
SEC-related expenses and accruals, as well as expenses related to Unizan integration planning and systems conversions,
contributed to the change in expense from 2003. Specifically, SEC-related expenses and accruals totaled $13.6 million in 2004
compared with $6.9 million in 2003. These expenses and accruals impacted the professional services and other expense categories.
Unizan integration planning and systems conversion expenses totaled $3.6 million in 2004. In addition to impacting the data
processing and other services expense category, a portion of these expenses was also spread across various other expense
categories.
Operating Lease Assets
(This section should be read in conjunction with Significant Factor 1 and the Market Risk section.)
Operating lease assets represent automobile leases originated before May 2002. This operating lease portfolio is running-off over
time since all automobile lease originations after April 2002 have been recorded as direct financing leases and are reported in the
automobile loan and lease category in earning assets. As a result, the non-interest income and non-interest expenses associated
with the operating lease portfolio has declined.
49