Huntington National Bank 2014 Annual Report Download - page 76

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Funds Transfer Pricing (FTP)
We use an active and centralized FTP methodology to attribute appropriate income to the business segments. The intent of the
FTP methodology is to transfer 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 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).
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 33 - Net Income by Business Segment
Year ended December 31,
(dollar amounts in thousands) 2014 2013 2012
Retail and Business Banking $ 172,199 $ 128,973 $ 139,016
Commercial Banking 152,653 129,962 155,197
AFCRE 196,377 220,433 205,928
RBHPCG 22,010 39,502 16,922
Home Lending (19,727) 2,670 45,285
Treasury / Other 108,880 119,742 68,942
N
et income $ 632,392 $ 641,282 $ 631,290
Treasury / Other
The Treasury / Other function includes revenue and expense related to assets, liabilities, and equity not directly assigned or
allocated to one of the five 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 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
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.
Optimal Customer Relationship (OCR)
Our OCR strategy is focused on building and deepening relationships with our customers through superior interactions, product
penetration, and quality of service. We will deliver high-quality customer and prospect interactions through a fully integrated sales
culture which will include all partners necessary to deliver a total Huntington solution The quality of our relationships will lead to our
ability to be the primary bank for our customers, yielding quality, annuitized revenue and profitable share of customers overall
financial services revenue. We believe our relationship oriented approach will drive a competitive advantage through our local market
delivery channels.
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.