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

Annual report pursuant to Section 13 and 15(d)

SEGMENT REPORTING

SEGMENT REPORTING

12 Months Ended

Dec. 31, 2017

Huntington's business segments are based on the internally-aligned segment leadership structure, which is how management monitors results and assesses performance. The Company has four major business segments: Consumer and Business Banking, Commercial Banking, Vehicle Finance, Regional Banking and The Huntington Private Client Group (RBHPCG). The Treasury / Other function includes technology and operations, other unallocated assets, liabilities, revenue, and expense.

Business segment results are determined based upon Huntington's management reporting system, which assigns balance sheet and income statement items to each of the business segments. The process is designed around the 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 four business segments from Treasury / Other. Huntington utilizes 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 four business segments.

The management accounting policies and processes utilized in compiling segment financial information are highly subjective and, unlike financial accounting, are not based on authoritative guidance similar to GAAP. As a result, reported segment results are not necessarily comparable with similar information reported by other financial institutions. Furthermore, changes in management structure or allocation methodologies and procedures result in changes in reported segment financial data. Accordingly, certain amounts have been reclassified to conform to the current period presentation.

Huntington uses an active and centralized FTP methodology to attribute appropriate net interest 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). A new methodology for establishing FTP rates was adopted in 2017, therefore, prior period amounts have been restated to reflect the new methodology.

Huntington announced a change in the 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 in the Consumer and Business Banking segment. Additionally, the Insurance operating unit previously included in Commercial Banking was realigned to RBHPCG during the second quarter. Prior period results have been reclassified to conform to the current period presentation.

Consumer and Business Banking - The Consumer and Business Banking segment, including Home Lending, 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, mortgage loans, consumer loans, credit cards, and small business loans and investment products. Other financial services available to consumer and small business customers include insurance, interest rate risk protection, foreign exchange, and treasury management. Business Banking is defined as serving companies with revenues up to $20 million. Home Lending supports origination and servicing of consumer loans and mortgages for customers who are generally located in our primary banking markets across all segments.

Commercial Banking - Through a relationship banking model, this segment provides a wide array of products and services to the middle market, large corporate, real estate and government public sector customers located primarily within our geographic footprint. The segment is divided into six business units: Middle Market, Specialty Banking, Asset Finance, Capital Markets/ Institutional Corporate Banking, Commercial Real Estate and Treasury Management.

Vehicle Finance - Our products and services include providing financing to consumers for the purchase of automobiles, light-duty trucks, recreational vehicles and marine craft at franchised and other select dealerships, and providing financing to franchised dealerships for the acquisition of new and used inventory. Products and services are delivered through highly specialized relationship-focused bankers and product partners.

Regional Banking and The Huntington Private Client Group - The core business of The Huntington Private Client Group is The Huntington Private Bank, which consists of Private Banking, Wealth & Investment Management, and Retirement Plan Services. The Huntington Private Bank provides high net-worth customers with deposit, lending (including specialized lending options), and banking services. The Huntington Private Bank also delivers wealth management and legacy planning through investment and portfolio management, fiduciary administration, and trust services. This group also provides retirement plan services to corporate businesses. The Huntington Private Client Group provides corporate trust services and institutional and mutual fund custody services.

Listed below is certain financial information reconciled to Huntington’s December 31, 2017, December 31, 2016, and December 31, 2015, reported results by business segment:



Income Statements (dollar amounts in millions)	Consumer & Business Banking		Commercial Banking		Vehicle Finance		RBHPCG			Treasury / Other			Huntington Consolidated
2017
Net interest income	$	1,555	$	899	$	424	$	184		$	(60	)	$	3,002
Provision (benefit) for credit losses	110		28		63		—			—			201
Noninterest income	735		278		14		188			92			1,307
Noninterest expense	1,647		474		150		243			200			2,714
Provision (benefit) for income taxes	187		236		79		45			(339		)	208
Net income (loss)	$	346	$	439	$	146	$	84		$	171		$	1,186
2016
Net interest income	$	1,224	$	725	$	345	$	152		$	(77	)	$	2,369
Provision (benefit) for credit losses	68		79		47		(3		)	—			191
Noninterest income	650		244		14		177			65			1,150
Noninterest expense	1,338		398		118		229			325			2,408
Provision (benefit) for income taxes	164		172		68		36			(232		)	208
Net income (loss)	$	304	$	320	$	126	$	67		$	(105	)	$	712
2015
Net interest income	$	995	$	560	$	262	$	125		$	9		$	1,951
Provision (benefit) for credit losses	45		16		39		—			—			100
Noninterest income	566		214		13		174			72			1,039
Noninterest expense	1,192		343		93		241			107			1,976
Provision (benefit) for income taxes	113		145		50		21			(108		)	221
Net income (loss)	$	211	$	270	$	93	$	37		$	82		$	693



	Assets at December 31,				Deposits at December 31,
(dollar amounts in millions)	2017		2016		2017		2016
Consumer & Business Banking	$	26,220	$	25,333	$	45,643	$	45,356
Commercial Banking	32,118		31,566		21,235		19,597
Vehicle Finance	17,865		16,132		358		349
RBHPCG	5,821		5,328		6,057		6,214
Treasury / Other	22,161		21,355		3,748		4,092
Total	$	104,185	$	99,714	$	77,041	$	75,608