Huntington National Bank 2013 Annual Report Download - page 75

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Net Income by Business Segment
The segregation of net income by business segment for the past three years is presented in the following table:
Table 34 - Net Income by Business Segment
Year ended December 31,
(dollar amounts in thousands) 2013 2012 2011
Retail and Business Banking $ 67,895 $ 89,183 $ 175,395
Regional and Commercial Banking 117,720 129,112 109,846
AFCRE 202,901 201,203 186,151
WGH 64,748 93,534 25,883
Treasury / Other 185,477 127,990 45,338
Net income $ 638,741 $ 641,022 $ 542,613
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Treasury / Other
The Treasury / Other function includes revenue and expense related to our insurance business, and assets, liabilities, and equity
not directly assigned or allocated to one of the four business segments. Other assets include investment securities and bank owned life
insurance. The financial impact associated with our FTP methodology, as described above, is also included.
Net interest income includes the impact of administering our investment securities portfolios and the net impact of derivatives
used to hedge interest rate sensitivity. Noninterest income includes insurance income, miscellaneous fee income not allocated to other
business segments, such as bank owned life insurance income and any investment security and trading asset gains or losses.
Noninterest expense includes any insurance-related expenses, as well as certain corporate administrative, merger, and other
miscellaneous expenses not allocated to other business segments. The provision for income taxes for the business segments is
calculated at a statutory 35% tax rate, though our overall effective tax rate is lower. As a result, Treasury / Other reflects a credit for
income taxes representing the difference between the lower actual effective tax rate and the statutory tax rate used to allocate income
taxes to the business segments.
The $57.5 million, or 45%, year over year increase in net income for Treasury/Other was primarily the result of the FTP process
described above. The FTP process produced increased net income for Treasury/Other as the sustained low market interest rate
environment, combined with a shift in funding mix to include additional wholesale sources, resulted in lower FTP credits paid to the
business segments.
Optimal Customer Relationship (OCR)
Our OCR initiative is a cross-business segment strategy designed to increase overall customer profitability and retention by
deepening product and service penetration to consumer and commercial customers. We believe this can be accomplished by taking
our broad array of services and products and delivering them through a rigorous and disciplined sales management process that is
consistent across all business segments and regions. It is also supported by robust sales and cross-referral technology.
OCR was introduced in late 2009. Through 2010, much of the effort was spent on defining processes, sales training, and systems
development to fully capture and measure OCR performance metrics. In 2011, we introduced OCR-related metrics for commercial
relationships, which complements the previously disclosed consumer OCR-related metrics. In 2013, we continue to experience strong
consumer household and commercial relationship growth.
CONSUMER OCR PERFORMANCE
For consumer OCR performance there are three key performance metrics: (1) the number of checking account households, (2) the
number of product penetration per consumer checking household, and (3) the revenue generated from the consumer households of all
business segments.
The growth in consumer checking account number of households is a result of both new sales of checking accounts and improved
retention of existing checking account households. The overall objective is to grow the number of households, along with an increase
in product penetration.