Huntington National Bank 2011 Annual Report Download - page 101

The following table presents commercial relationship OCR metrics:
Table 39 — Commercial Relationship OCR Cross-sell Report
2011 2010
Fourth Third Second First Fourth
Commercial Relationships ...................... 138,357 135,826 133,165 130,240 127,596
Product Penetration by Number of Services
1 Service .................................... 28.4% 29.7% 30.7% 32.1% 32.9%
2-3 Services ................................. 40.2 41.1 42.6 42.5 42.9
4+ Services .................................. 31.4 29.2 26.7 25.4 24.2
Total revenue (in millions) ...................... $ 175.4 $ 175.5 $ 166.6 $ 157.7 $ 160.8
By focusing on targeted relationships we are able to achieve higher product service distribution among our
commercial relationships. Our expanded product offerings allow us to focus not only on the credit driven
relationship, but leverage these relationships to generate a deeper share of wallet. The percent of commercial
relationships utilizing over four products at the end of the 2011 fourth quarter was 31.4%, up from 24.2% at the
end of 2010. In 2011, commercial relationships grew at 8%. Total commercial relationship revenue in the 2011
fourth quarter was $175.4 million, down $0.1 million, or less than 1%, from the 2011 third quarter, and was up
$14.6 million, or 9%, higher than the year-ago quarter. This was primarily driven by capital markets activities.
Revenue Sharing
Revenue is recorded in the business segment responsible for the related product or service. Fee sharing is
recorded to allocate portions of such revenue to other business segments involved in selling to, or providing
service to, customers. Results of operations for the business segments reflect these fee sharing allocations.
Expense Allocation
The management accounting process that develops the business segment reporting utilizes various estimates
and allocation methodologies to measure the performance of the business segments. Expenses are allocated to
business segments using a two-phase approach. The first phase consists of measuring and assigning unit costs
(activity-based costs) to activities related to product origination and servicing. These activity-based costs are then
extended, based on volumes, with the resulting amount allocated to business segments that own the related
products. The second phase consists of the allocation of overhead costs to all four business segments from
Treasury / Other. We utilize a full-allocation methodology, where all Treasury / Other expenses, except those
related to our insurance business, reported Significant Items (except for the goodwill impairment), and a small
amount of other residual unallocated expenses, are allocated to the four business segments.
Funds Transfer Pricing (FTP)
We use an active and centralized FTP methodology to attribute appropriate net interest income to the
business segments. The intent of the FTP methodology is to eliminate all interest rate risk from the business
segments by providing matched duration funding of assets and liabilities. The result is to centralize the financial
impact, management, and reporting of interest rate and liquidity risk in the Treasury / Other function where it can
be centrally monitored and managed. The Treasury / Other function charges (credits) an internal cost of funds for
assets held in (or pays for funding provided by) each business segment. The FTP rate is based on prevailing
market interest rates for comparable duration assets (or liabilities), and includes an estimate for the cost of
liquidity (liquidity premium). Deposits of an indeterminate maturity receive an FTP credit based on a
combination of vintage-based average lives and replicating portfolio pool rates. Other assets, liabilities, and
capital are charged (credited) with a four-year moving average FTP rate. The denominator in the net interest
margin calculation has been modified to add the amount of net funds provided by each business segment for all
periods presented.
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