Huntington National Bank 2005 Annual Report Download - page 138

NOTES TOCONSOLIDATED FINANCIAL STATEMENTS HUNTINGTON BANCSHARES INCORPORATED
information published by other financial institutions. During the second quarter of 2005, the Capital Markets Group was
removed from the Treasury/Other segment and combined with the Private Financial Group to form the Private Financial and
Capital Markets Group segment. Since the Capital Markets Group is now managed through the Private Financial Group,
combining these two segments better reflects the management accountability and decision making structure. Prior periods reflect
this change. An overview of this system is provided below, along with a description of each segment and discussion of financial
results.
The following provides a brief description of the four operating segments of Huntington:
Regional Banking: This segment provides traditional banking products and services to consumer, small business, and commercial
customers located in its seven operating regions within the five states of Ohio, Michigan, West Virginia, Indiana, and Kentucky. It
provides these services through a banking network of 344 branches, over 900 ATMs, plus on-line and telephone banking
channels. Each region is further divided into Retail and Commercial Banking units. Retail products and services include home
equity loans and lines of credit, first mortgage loans, direct installment loans, small business loans, personal and business deposit
products, as well as sales of investment and insurance services. Retail Banking accounts for 60% and 79% of total Regional
Banking loans and deposits, respectively. Commercial Banking serves middle market commercial banking relationships, which use
a variety of banking products and services including, but not limited to, commercial loans, international trade, cash management,
leasing, interest rate protection products, capital market alternatives, 401(k) plans, and mezzanine investment capabilities.
Dealer Sales: This segment provides a variety of banking products and services to more than 3,500 automotive dealerships within
our primary banking markets, as well as in Arizona, Florida, Georgia, North Carolina, Pennsylvania, South Carolina and
Tennessee. We have been in this business for more than 50 years. Dealer Sales finances the purchase of automobiles by customers
of the automotive dealerships, purchases automobiles from dealers and simultaneously leases the automobiles to consumers under
long-term leases, finances the dealerships’ floor plan inventories, real estate, or working capital needs, and provides other banking
services to the automotive dealerships and their owners. Dealer Sales is directly impacted by general automotive sales, including
programs initiated by manufacturers to enhance and increase sales directly. Competition from the financing divisions of
automobile manufacturers and from other financial institutions is intense.
Private Financial and Capital Markets Group (PFCMG): This segment provides products and services designed to meet the
needs of our higher net worth customers. Revenue is derived through the sale of trust, asset management, investment advisory,
brokerage, insurance, and private banking products and services. It also focuses on financial solutions for corporate and
institutional customers that include investment banking, sales and trading of securities, mezzanine capital financing, and risk
management products. To serve our customers, a unique distribution model is used that employs a single, unified sales force to
deliver products and services mainly through Regional Banking distribution channels. PFCMG provides investment management
and custodial services to our 29 proprietary mutual funds, including ten variable annuity funds. The Huntington Investment
Company offers brokerage and investment advisory services to both Regional Banking and PFCMG customers through more than
100 licensed investment sales representatives and nearly 700 licensed personal bankers. PFCMG’s insurance entities provide a
complete array of insurance products including individual life insurance products ranging from basic term life insurance, to estate
planning, group life and health insurance, property and casualty insurance, mortgage title insurance, and reinsurance for payment
protection products. Income and related expenses from the sale of brokerage and insurance products is shared with the line of
business that generated the sale or provided the customer referral, most notably Regional Banking.
Treasury/Other: This segment includes revenue and expense related to assets, liabilities, and equity not directly assigned or
allocated to one of the other three business segments. Assets included in this segment include investment securities and bank
owned life insurance.
U SE OF O PERATING E ARNINGS TO M EASURE S EGMENT P ERFORMANCE
Management uses earnings on an operating basis, rather than on a GAAP basis, to measure underlying performance trends for
each business segment. Operating earnings represent GAAP earnings adjusted to exclude the impact of certain items listed in the
reconciliation table below. Analyzing earnings on an operating basis is very helpful in assessing underlying performance trends, a
critical factor used to determine the success of strategies and future earnings capabilities. For the year ending December 31, 2005,
operating earnings were the same as reported GAAP earnings.
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