Huntington National Bank 2008 Annual Report Download - page 38

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– $14.3 million, or 36%, increase in professional services, reflecting increased legal and collection costs. We expect that
collection costs will remain at higher levels throughout 2009.
Partially offset by:
– $22.1 million, or 3%, decline in personnel expense reflecting the benefit of merger and restructuring efficiencies.
– $8.7 million, or 21%, decline in marketing expense.
– $7.6 million, or 6%, decline in outside data processing and other services reflecting merger efficiencies.
– $7.3 million, or 6%, decline in net occupancy expense, reflecting merger efficiencies.
As a participating FDIC insured bank, we were assessed quarterly deposit insurance premiums totaling $24.1 million during 2008.
However, we received a one-time assessment credit from the FDIC which substantially offset our 2008 deposit insurance premium
and, therefore, only $7.9 million of deposit insurance premium expense was recognized during 2008. In late 2008, the FDIC raised
assessment rates for the first quarter of 2009 by a uniform 7 basis points, resulting in a range between 12 and 50 basis points,
depending upon the risk category of the institution. At the same time, the FDIC proposed further changes in the assessment
system beginning in the 2009 second quarter. The final rule, expected to be issued in early 2009, could result in adjustments to the
proposed changes. Based on these proposed changes, as well as the full consumption of the one-time assessment credit prior to
2009 (discussed above), our full-year 2009 deposit insurance premium expense will increase compared with our full-year 2008
deposit insurance premium expense. We anticipate this increase will negatively impact our earnings per common share by $0.07-
$0.09. See “Risk Factors” included in Item 1A of our 2008 Form 10-K for the year ended December 31, 2008 for additional discussion.
In the 2009 first quarter, details of an expense reduction initiative were announced. We anticipate this initiative will reduce
expenses approximately $100 million, net of one-time expenses in 2009, compared with 2008 levels.
2007 VERSUS 2006
Noninterest expense increased $310.9 million, or 31%, from 2006.
Table 15 — Noninterest Expense — Estimated Merger-Related Impact-2007 vs. 2006
(in thousands) 2007 2006 Amount Percent
Merger-
Related
Restructuring/
Merger Costs
Significant
Items Amount Percent
(1)
Change Other
Twelve Months Ended
December 31,
Change Attributable to:
Personnel costs $ 686,828 $ 541,228 $145,600 26.9% $136,500 $30,487 $(4,750)
(2)
$(16,637) (2.3)%
Outside data processing and
other services 127,245 78,779 48,466 61.5 24,524 16,996 — 6,946 5.8
Net occupancy 99,373 71,281 28,092 39.4 20,368 8,495 — (771) (0.8)
Equipment 81,482 69,912 11,570 16.5 9,598 1,936 — 36 0.0
Amortization of intangibles 45,151 9,962 35,189 N.M. 34,862 — — 327 0.7
Marketing 46,043 31,728 14,315 45.1 8,722 12,789 — (7,196) (13.5)
Professional services 40,320 27,053 13,267 49.0 5,414 6,046 — 1,807 4.7
Telecommunications 24,502 19,252 5,250 27.3 4,448 1,002 — (200) (0.8)
Printing and supplies 18,251 13,864 4,387 31.6 2,748 1,332 — 307 1.7
Other expense 137,488 106,649 30,839 28.9 26,096 2,252 14,797
(3)
(12,306) (9.1)
Sub-total 1,306,683 969,708 336,975 34.8 273,280 81,335 10,047 (27,687) (2.1)
Automobile operating lease
expense 5,161 31,286 (26,125) (83.5) — — — (26,125) (83.5)
Total noninterest expense $1,311,844 $1,000,994 $310,850 31.1% $273,280 $81,335 $10,047 $(53,812) (4.0)%
N.M., not a meaningful value.
(1) Calculated as other / (prior period + merger-related + restructuring/merger costs).
(2) Refer to Significant Item 6 of the “Significant Items” discussion.
(3) Refer to Significant Items 3, 5, and 6 of the “Significant Items” discussion.
Of the $310.9 million increase, $273.3 million reflected merger-related expenses, $81.3 million reflected merger costs related to
merger/integration activities, and $10.0 million reflected the net change related to Significant Items (see “Significant Items”
discussion). Considering the impact of these items, noninterest expense declined $53.8 million, or 4%, reflecting:
– $26.1 million, or 84%, decline in automobile operating lease expense.
– $16.6 million, or 2%, decline in personnel costs reflecting merger efficiencies including the impact of the reductions to full-
time equivalent staff during 2007.
36
Management’s Discussion and Analysis Huntington Bancshares Incorporated