Huntington National Bank 2006 Annual Report Download - page 30

Download and view the complete annual report

Please find page 30 of the 2006 Huntington National Bank annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 130

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130

MANAGEMENT’S DISCUSSION AND ANALYSIS HUNTINGTON BANCSHARES INCORPORATED
– $59.6 million, or 12%, increase in personnel expense, with Unizan contributing $25.8 million, or 43%, of the increase.
The remaining $33.8 million increase included $17.0 million increase in share-based compensation primarily related to the
expensing of stock options, which began in 2006, and $9.0 million in higher performance and sales-related compensation.
– $24.1 million, or 29% ($10.0 million merger-related), increase in other expense, including a $10.0 million donation to the
Huntington Foundation in the fourth quarter, which will result in reduced contributions in future periods, $5.5 million of
higher residual value losses on automobile leases, $3.7 million of Unizan merger-related costs, and $3.5 million related to
the fourth quarter restructuring of certain FHLB advances.
– $9.1 million increase in the amortization of intangibles, substantially all merger-related.
– $6.8 million, or 11%, increase in equipment expense ($1.7 million merger-related), reflecting higher depreciation
associated with recent technology investments.
– $5.4 million, or 21% ($0.9 million merger-related), increase in marketing expense, reflecting increased campaign and
market research expenses.
– $4.1 million, or 6%, increase in outside data processing and other services ($1.7 million merger-related), with $2.0 million
related to Unizan system conversion merger-related costs and a $1.7 million increase in debit card processing costs due to
higher activity levels.
Partially offset by:
– $7.5 million, or 22%, decline in professional services expenses, despite Unizan adding $4.9 million, including a reduction
in SEC/regulatory related expenses, as well as declines in collections and other consulting expenses.
2005 versus 2004
Non-interest expense decreased $152.4 million, or 14%, from 2004 with $131.2 million of the decline reflecting the decrease in
operating lease expense. Of the remaining $21.2 million decline, the primary drivers were:
– $14.0 million, or 15%, decrease in other expense, reflecting decreased SEC and regulatory-related expenses in 2005,
$5.8 million of costs related to investments in partnerships generating tax benefits in the year-ago period, and lower
litigation related expense accruals and lower insurance costs in 2005.
– $4.8 million, or 6%, decline in net occupancy expense, as 2004 included a $7.8 million loss caused by property lease
impairments, partially offset by lower rental income and higher depreciation expense in 2005.
– $4.1 million, or 1%, decline in personnel costs, mainly due to lower commission and benefit expense, partially offset by
higher salaries and severance.
SEC-related expenses and accruals, as well as expenses related to Unizan integration planning and systems conversions,
contributed to the change in expense from 2005. Specifically, SEC/regulatory-related expenses and accruals while not meaningful
in 2006, totaled $3.7 million in 2005, and $13.6 million in 2004. These expenses and accruals impacted the professional services
and other expense categories. Unizan merger-related costs, primarily related to integration planning and systems conversion
expenses, totaled $3.7 million in 2006, $0.7 million in 2005, and $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 the Significant Factor 3.)
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
28