Huntington National Bank 2015 Annual Report Download - page 94

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Adjusted Noninterest Expense (Non-GAAP):
(dollar amounts in thousands) Fourth Quarter Change
2015 2014 Amount Percent
Personnel costs $ 286,529 $ 261,124 $ 25,405 10%
Outside data processing and other services 61,785 53,379 8,406 16
Equipment 31,601 29,978 1,623 5
Net occupancy 28,352 27,415 937 3
Marketing 12,035 12,452 (417)(3)
Professional services 11,857 15,665 (3,808) (24)
Deposit and other insurance expense 11,105 13,099 (1,994) (15)
Amortization of intangibles 3,788 10,653 (6,865) (64)
Other expense 41,224 39,224 2,000 5
Total adjusted noninterest expense $ 488,276 $ 462,989 $ 25,287 5%
Reported noninterest expense for the 2015 fourth quarter increased $15 million, or 3%, from the year-ago quarter. Changes in
reported noninterest expense primarily reflect:
• $26 million, or 10%, increase in personnel costs, reflecting a $26 million increase in salaries related to annual merit increases,
the addition of Huntington Technology Finance, and a 5% increase in the number of average full-time equivalent employees,
largely related to the build-out of the in-store strategy.
• $10 million, or 19%, increase in outside data processing and other services expense, primarily related to ongoing technology
investments.
Partially offset by:
• $9 million, or 18%, decrease in other expense, primarily reflecting the $12 million net increase to litigation reserves in the
2014 fourth quarter partially offset by $4 million of operating lease expense related to Huntington Technology Finance.
• $7 million, or 64%, decrease in amortization of intangibles reflecting the full amortization of the core deposit intangible from
the Sky Financial acquisition at the end of the 2015 second quarter.
Provision for Income Taxes
The provision for income taxes in the 2015 fourth quarter was $56 million and $57 million in the 2014 fourth quarter. The
effective tax rates for the 2015 fourth quarter and 2014 fourth quarter were 23.8% and 25.9%, respectively. At December 31, 2015, we
had a net federal deferred tax asset of $7 million and a net state deferred tax asset of $43 million.
Credit Quality
NCOs
NCOs decreased $1 million, or 5%, to $22 million. NCOs represented an annualized 0.18% of average loans and leases in the
current quarter compared to 0.20% in the year-ago quarter. The quarter's results were positively impacted by recovery activity in the
C&I and CRE portfolios as a result of continued successful workout strategies. We continue to be pleased with the net charge-off
performance across the entire portfolio, as we remain below our targeted range. Overall consumer credit metrics, led by the Home
Equity portfolio continue to show an improving trend, while the commercial portfolios continue to experience some quarter-to-quarter
volatility based on the absolute low level of problem loans.
NALs
Overall asset quality remains strong, with modest volatility based on the absolute low level of problem credits. NALs increased
$71 million, or 24%, from the year-ago quarter to $372 million, or 0.74% of total loans and leases. The increase was primarily
centered in the Commercial portfolio and was primarily comprised of several large energy-related relationships. NPAs increased $61
million, or 18%, from the year-ago quarter to $399 million, or 0.79% of total loans and leases and net OREO.
ACL
(This section should be read in conjunction with Note 3 of the Notes to Consolidated Financial Statements.)