Huntington Bancshares Incorporated Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL AND OTHER INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Business segments are based on segment leadership structure, which reflects how segment performance is monitored and assessed. We have four major business segments: Consumer and Business Banking, Commercial Banking, Vehicle Finance, and Regional Banking and The Huntington Private Client Group (RBHPCG). The Treasury / Other function includes technology and operations, other unallocated assets, liabilities, revenue, and expense.

A rollforward of goodwill by business segment for the years ended December 31, 2017 and 2016, is presented in the table below:



	Consumer &
	Business		Commercial			Vehicle				Treasury/			Huntington
(dollar amounts in millions)	Banking		Banking			Finance		RBHPCG		Other			Consolidated
Balance, January 1, 2016	$	368	$	215		$	—	$	89	$	5		$	677
Goodwill acquired during the period	1,030		238			—		53		—			1,321
Adjustments	—		—			—		—		(5		)	(5		)
Balance, December 31, 2016	1,398		453			—		142		—			1,993
Adjustments	—		(28		)	—		28		—			—
Balance, December 31, 2017	$	1,398	$	425		$	—	$	170	$	—		$	1,993

Huntington announced a change in its executive leadership team, which became effective at the end of 2017. As a result, Commercial Real Estate is now included as an operating unit in the Commercial Banking segment. During the 2017 second quarter, the previously reported Home Lending segment was included as an operating unit within the Consumer and Business Banking segment. Additionally, the Insurance operating unit previously included in Commercial Banking was realigned to RBHPCG during second quarter. As a result, Huntington reclassified a net $28 million of goodwill from the Commercial Banking segment to the RBHPCG segment.

On August 16, 2016, Huntington completed its acquisition of FirstMerit in a stock and cash transaction valued at approximately $3.7 billion. In connection with the acquisition, the Company recorded $1.3 billion of goodwill, $310 million core deposit intangible asset and $95 million of other intangible assets. Huntington allocated goodwill recognized in the acquisition of FirstMerit to its existing operating segments. The allocation was performed using the ‘with and without’ approach, where an entity calculates the fair value of each segment before and after the acquisition, with the difference attributable to the fair value acquired via the acquisition. This method is most appropriate when multiple segments are expected to benefit from synergies realized in an acquisition. The results of the allocation are presented in the table above. For additional information on the acquisition, see Note 3 Acquisition of FirstMerit Corporation.

During the 2016 third quarter, Huntington reclassified $5 million of goodwill in the Treasury / Other segment related to a held for sale disposal group.

Goodwill is not amortized but is evaluated for impairment on an annual basis at October 1 of each year or whenever events or changes in circumstances indicate the carrying value may not be recoverable. No impairment was recorded in 2017 or 2016.

At December 31, 2017 and 2016, Huntington’s other intangible assets consisted of the following:



(dollar amounts in millions)	Gross Carrying Amount			Accumulated Amortization			Net Carrying Value
December 31, 2017
Core deposit intangible	$	325		$	(61	)	$	264
Customer relationship	190			(108		)	82
Total other intangible assets	$	515		$	(169	)	$	346
December 31, 2016
Core deposit intangible	$	325		$	(27	)	$	298
Customer relationship	195		(1)	(91		)	104
Total other intangible assets	$	520		$	(118	)	$	402


(1)	During the 2016 third quarter, certain commercial merchant relationships, which resulted in an intangible of $14 million, were contributed to a joint venture in which Huntington holds a minority interest.

The estimated amortization expense of other intangible assets for the next five years is as follows:



(dollar amounts in millions)	Amortization Expense
2018	$	53
2019	50
2020	42
2021	40
2022	38

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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