Huntington National Bank 2012 Annual Report Download - page 82

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The following table presents commercial relationship OCR metrics:
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Table 38 - Commercial Relationship OCR Cross-sell Report
Year ended December 31,
2012 2011 2010
Commercial Relationships 151,083 138,357 127,596
Product Penetration by Number of Services
1 Service 24.6 % 28.4 % 32.9 %
2-3 Services 40.4 40.2 42.9
4+ Services 35.0 31.4 24.2
Total revenue (in millions) $ 724.4 $ 675.2 $ 584.5
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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
2012 was 35.0%, up from 31.4% from the prior year. For 2012, commercial relationships grew 9.2%. Total commercial relationship
revenue in 2012 was $724.4 million, up $49.2 million, or 7.3%, from 2011. This was primarily driven by increase in loan balances and
increased spreads.
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.