Huntington National Bank 2015 Annual Report Download - page 198

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24. SEGMENT REPORTING
Our business segments are based on our internally-aligned segment leadership structure, which is how we monitor results and
assess performance. We have five major business segments: Retail and Business Banking, Commercial Banking, Automobile Finance
and Commercial Real Estate (AFCRE), Regional Banking and The Huntington Private Client Group (RBHPCG), and Home Lending.
The Treasury / Other function includes our technology and operations, other unallocated assets, liabilities, revenue, and expense.
Business segment results are determined based upon our management reporting system, which assigns balance sheet and income
statement items to each of the business segments. The process is designed around our organizational and management structure and,
accordingly, the results derived are not necessarily comparable with similar information published by other financial institutions.
Additionally, because of the interrelationships of the various segments, the information presented is not indicative of how the
segments would perform if they operated as independent entities
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.
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 five business
segments from Treasury / Other. We utilize a full-allocation methodology, where all Treasury / Other expenses, except reported
Significant Items, and a small amount of other residual unallocated expenses, are allocated to the five business segments.
We use an active and centralized Funds Transfer Pricing (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).
Retail and Business Banking - The Retail and Business Banking segment provides a wide array of financial products and
services to consumer and small business customers including but not limited to checking accounts, savings accounts, money market
accounts, certificates of deposit, consumer loans, and small business loans. Other financial services available to consumer and small
business customers include investments, insurance, interest rate risk protection, foreign exchange, and treasury management. Business
Banking is defined as serving companies with revenues up to $20 million and consists of approximately 165,000 businesses
Commercial Banking - Through a relationship banking model, this segment provides a wide array of products and services to
the middle market, large corporate, and government public sector customers located primarily within our geographic footprint. The
segment is divided into seven business units: middle market, large corporate, specialty banking, asset finance, capital markets, treasury
management, and insurance.
Automobile Finance and Commercial Real Estate - : This segment provides lending and other banking products and services
to customers outside of our traditional retail and commercial banking segments. Our products and services include providing financing
for the purchase of vehicles by customers at franchised automotive dealerships, financing the acquisition of new and used vehicle
inventory of franchised automotive dealerships, and financing for land, buildings, and other commercial real estate owned or
constructed by real estate developers, automobile dealerships, or other customers with real estate project financing needs. Products and
services are delivered through highly specialized relationship-focused bankers and product partners.
Regional Banking and The Huntington Private Client Group - Regional Banking and The Huntington Private Client Group
is closely aligned with our eleven regional banking markets. The Huntington Private Client Group is organized into units consisting of
The Huntington Private Bank, The Huntington Trust, and The Huntington Investment Company. Our private banking, trust, and
investment functions focus their efforts in our Midwest footprint and Florida.
Huntington sold Huntington Asset Advisors, Huntington Asset Services and Unified Financial Securities in the 2015 fourth
quarter.
Home Lending - Home Lending originates and services consumer loans and mortgages for customers who are generally
located in our primary banking markets. Consumer and mortgage lending products are primarily distributed through the Retail and
Business Banking segment, as well as through commissioned loan originators. Home lending earns interest on loans held in the
warehouse and portfolio, earns fee income from the origination and servicing of mortgage loans, and recognizes gains or losses from
the sale of mortgage loans. Home Lending supports the origination and servicing of mortgage loans across all segments.
Listed below is certain financial information reconciled to Huntington’s December 31, 2015, December 31, 2014, and
December 31, 2013, reported results by business segment: