Huntington National Bank 2004 Annual Report Download - page 134

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HUNTINGTON BANCSHARES INCORPORATED
Management remains in active dialogue with the SEC and banking regulators concerning these and related matters and is working
diligently to resolve them in a full and comprehensive manner. No assurances, however, can be provided as to the ultimate timing or
outcome of these matters.
D IVESTITURES
During 2003, Huntington sold four banking offices located in eastern West Virginia. This sale included approximately $50 million of
loans and $130 million of deposits. Huntington’s pre-tax gain from this sale was $13.1 million in 2003 and is reflected as a separate
component of non-interest income.
During 2002, Huntington announced the restructuring of its investment in Huntington Merchant Services LLC, the Company’s
merchant services business. Huntington sold its Florida-related merchant business and decreased its equity investment in Huntington
Merchant Services. As a result of the transaction, Huntington recorded a pre-tax gain of $24.6 million in 2002 which is reflected as a
separate component of non-interest income.
During 2002, Huntington completed the sale of its Florida insurance operations to members of The J. Rolfe Davis Insurance Agency,
Inc. management. Though the sale affected selected non-interest income and non-interest expense categories, it had no material gain
or impact on net income.
During 2002, Huntington completed the sale of its Florida operations to SunTrust Banks, Inc. Included in the sale were $4.8 billion of
deposits and other liabilities and $2.8 billion of loans and other assets. Huntington received a deposit premium of 15%, or
$711.9 million. The total net pre-tax gain from the sale was $182.5 million and is reflected in non-interest income. The after-tax gain
was $61.4 million, or $0.25 per share. Income taxes related to this transaction were $121.0 million, an amount higher than the
tax impact at the statutory rate of 35%, because most of the goodwill relating to the Florida operations was non-deductible for
tax purposes.
28. SEGMENT REPORTING
Huntington has three distinct lines of business: Regional Banking, Dealer Sales, and the Private Financial Group (PFG). A fourth
segment includes Huntington’s Treasury function and other unallocated assets, liabilities, revenue, and expense. Line of business
results are determined based upon Huntington’s management reporting system, which assigns balance sheet and income statement
items to each of the business segments. The process is designed around Huntington’s organizational and management structure and,
accordingly, the results below are not necessarily comparable with similar information published by other financial institutions.
During 2002, the previously reported segments, Retail Banking and Corporate Banking, were combined and renamed Regional
Banking. Since this segment is managed through seven geographically defined regions where each region’s management has
responsibility for both retail and corporate banking business development, combining these two previously separate segments better
reflects the management accountability and decision making structure. In addition, changes were made to the methodologies utilized
for certain balance sheet and income statement allocations from Huntington’s management reporting system.
Management relies on operating earnings for review of performance trends and for critical decision making purposes. Operating
earnings exclude the impact of the significant items listed in the reconciliation table below. See Note 26 to the consolidated financial
statements for further discussions regarding restructuring reserves and Note 27 regarding the sale of Huntington’s Florida banking
and insurance operations. The financial information that follows is inclusive of the above adjustments on an after-tax basis to reflect
the reconciliation to reported net income.
The following provides a brief description of the four operating segments of Huntington:
Regional Banking: This segment provides products and services to consumer, small business, and commercial customers. These
products and services are offered in seven operating regions within the five states of Ohio, Michigan, West Virginia, Indiana, and
Kentucky through the Company’s banking network of 334 branches, over 700 ATMs, plus Internet 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, business loans, personal and business deposit products, as well as sales of
investment and insurance services. Retail products and services comprise 59% and 80%, of total regional banking loans and deposits,
respectively. Commercial Banking serves middle market and large 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 serves more than 3,500 automotive dealerships within Huntington’s primary banking markets, as well as
in Arizona, Florida, Georgia, Pennsylvania, and Tennessee. The segment 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
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