Huntington National Bank 2006 Annual Report Download - page 126

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HUNTINGTON BANCSHARES INCORPORATED
South Carolina, and Tennessee. Dealer Sales finances the purchase of automobiles by customers at the automotive dealerships,
purchases automobiles from dealers and simultaneously leases the automobiles to consumers under long-term operating or direct
finance leases, finances the dealerships’ new and used vehicle inventories, dealership real estate, or dealer working capital needs,
and provides other banking services to the automotive dealerships and their owners. Competition from the financing divisions of
automobile manufacturers and from other financial institutions is intense. Dealer Sales’ production opportunities are directly
impacted by the general automotive sales business, including programs initiated by manufacturers to enhance and increase sales
directly. Huntington has been in this line of business for over 50 years.
Private Financial and Capital Markets Group (PFCMG): This segment provides products and services designed to meet the
needs of 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 high net worth 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.
Treasury/Other: This segment includes revenue and expense related to assets, liabilities, and equity that are not directly assigned
or allocated to one of the other three business segments. Assets in this segment include investment securities and bank owned life
insurance. The net interest income/(expense) of this segment includes the net impact of administering our investment securities
portfolios as part of overall liquidity management. A match-funded transfer pricing system is used to attribute appropriate
funding interest income and interest expense to other business segments. As such, net interest income includes the net impact of
any over or under allocations arising from centralized management of interest rate risk. Furthermore, net interest income includes
the net impact of derivatives used to hedge interest rate sensitivity. Non-interest income includes miscellaneous fee income not
allocated to other business segments, including bank owned life insurance income. Fee income also includes asset revaluations not
allocated to other business segments including the valuation adjustment of MSRs to fair value, as well as any investment securities
and trading assets gains or losses. The non-interest expense includes certain corporate administrative and other miscellaneous
expenses not allocated to other business segments. This segment also includes any difference between the actual effective tax rate
of Huntington and the statutory tax rate used to allocate income taxes to the other segments.
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 (reported) basis, to measure underlying performance
trends for each business segment. Operating earnings represent reported earnings adjusted to exclude the impact of the significant
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 years
ending December 31, 2006 and 2005, operating earnings were the same as reported GAAP earnings.
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