| NON-INTEREST INCOME |
NONINTEREST INCOME
Huntington earns a variety of revenue including interest and fees from customers as well as revenues from non-customers. Certain sources of revenue are recognized within interest or fee income and are outside of the scope of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Other sources of revenue fall within the scope of ASC 606 and are generally recognized within ‘noninterest income’. These revenues are included within various sections of the consolidated financial statements. The following table shows Huntington’s total noninterest income segregated between contracts with customers within the scope of ASC 606 and those within the scope of other GAAP Topics.
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(dollar amounts in millions) |
Three Months Ended June 30, 2018 |
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Six Months Ended June 30, 2018 |
Noninterest income |
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Noninterest income from contracts with customers |
$ |
217 |
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$ |
431 |
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Noninterest income within the scope of other GAAP topics |
119 |
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219 |
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Total noninterest income |
$ |
336 |
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$ |
650 |
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Huntington recognizes revenue when the performance obligations related to the transfer of goods or services under the terms of a contract are satisfied. Some obligations are satisfied at a point in time while others are satisfied over a period of time. Revenue is recognized as the amount of consideration to which Huntington expects to be entitled to in exchange for transferring goods or services to a customer. When consideration includes a variable component, the amount of consideration attributable to variability is included in the transaction price only to the extent it is probable that significant revenue recognized will not be reversed when uncertainty associated with the variable consideration is subsequently resolved. Generally, the variability relating to the consideration is explicitly stated in the contracts, but may also arise from Huntington's customer business practice, for example, waiving certain fees related to customer’s deposit accounts such as NSF fees. Huntington's contracts generally do not contain terms that require significant judgement to determine the variability impacting the transaction price.
Revenue is measured as the amount of consideration Huntington expects to be entitled to in exchange for transferring goods or services. Revenue is segregated based on the nature of product and services offered as part of contractual arrangements. Revenue from contracts with customers is broadly segregated as follows:
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Service charges on deposit accounts include fees and other charges Huntington receives to provide various services, including but not limited to, maintaining an account with a customer, providing overdraft services, wire transfer, transferring funds, and accepting and executing stop-payment orders. The consideration includes both fixed (e.g., account maintenance fee) and transaction fees (e.g., wire-transfer fee). The fixed fee is recognized over a period of time while the transaction fee is recognized when a specific service (e.g., execution of wire-transfer) is rendered to the customer. Huntington may, from time to time, waive certain fees (e.g., NSF fee) for customers but generally does not reduce the transaction price to reflect variability for future reversals due to the insignificance of the amounts. Waiver of fees reduces the revenue in the period the waiver is granted to the customer.
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Cards and payment processing income includes interchange fees earned on debit cards and credit cards. All other fees (e.g. annual fees), and interest income are recognized in accordance with ASC 310. Huntington recognizes interchange fees for services performed related to authorization and settlement of a cardholder’s transaction with a merchant. Revenue is recognized when a cardholder’s transaction is approved and settled. The revenue may be constrained due to inherent uncertainty related to cardholder’s right to return goods and services but the uncertainty is resolved within a short period of time (generally within 30 days) and the amount of returns was not material for the reporting period ended June 30, 2018. Revenue is not adjusted for such variability, rather returns reduce the amount of interchange revenue in the period the return is made by the customer.
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Certain volume or transaction based interchange expenses (net of rebates) paid to the payment network reduce the interchange revenue and are presented net on the income statement. Similarly, rewards payable under a reward program to cardholders are recognized as a reduction of the transaction price and are presented net against the interchange revenue.
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Trust and investment management services includes fee income generated from personal, corporate and institutional customers. Huntington also provides investment management services, cash management services and tax reporting to customers. Services are rendered over a period of time, over which revenue is recognized. Huntington may also recognize revenue from referring a customer to outside third-parties including mutual fund companies that pay distribution (12b-1) fees and other expenses. 12b-1 fees are received upon initially placing account holder’s funds with a mutual fund company as well as in the future periods as long as the account holder (i.e., the fund investor), remains invested in the fund. The transaction price includes variable consideration which is considered constrained as it is not probable that a significant revenue reversal in the amount of cumulative revenue recognized will not occur. Accordingly, those fees are recognized as revenue when the uncertainty associated with the variable consideration is subsequently resolved, that is, initial fees are recognized in the initial period while the future fees are recognized in future periods.
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Insurance income includes agency commissions that are recognized when Huntington sells insurance policies to customers. Huntington is also entitled to renewal commissions and, in some cases, profit sharing which are recognized in subsequent periods. The initial commission is recognized when the insurance policy is sold to a customer. Renewal commission is variable consideration and is recognized in subsequent periods when the uncertainty around variable consideration is subsequently resolved (i.e., when customer renews the policy). Profit sharing is also a variable consideration that is not recognized until the variability surrounding realization of revenue is resolved (i.e., Huntington have reached a minimum volume of sales). Another source of variability is the ability of the policy holder to cancel the policy anytime and in such cases, Huntington may be required, under the terms of the contract, to return part of the commission received. The variability related to cancellation of the policy is not deemed significant and thus, does not impact the amount of revenue recognized. In the event the policyholder chooses to cancel the policy at any time, the revenue for amounts which qualify for claw-back are reversed in the period the cancellation occurs.
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Other noninterest income includes a variety of other revenue streams including capital markets revenue, consumer fees and marketing allowance revenue. Revenue is recognized when, or as, a performance obligation is satisfied. Inherent variability in the transaction price is not recognized until the uncertainty affecting the variability is resolved.
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Control is transferred to a customer either at a point in time or over time. A performance obligation is deemed satisfied when the control over goods or services is transferred to the customer. To determine when control is transferred at a point in time, Huntington considers indicators, including but not limited to the right to payment for the asset, transfer of significant risk and rewards of ownership of the asset and acceptance of asset by the customer. When control is transferred over a period of time, for different performance obligations, either the input or output method is used to determine the progress. The measure of progress used to assess completion of the performance obligation varies between performance obligations and may be based on time throughout the period of service or on the value of goods and services transferred to the customer. As each distinct service or activity is performed, Huntington transfers control to the customer based on the services performed as the customer simultaneously receives the benefits of those services. This timing of revenue recognition aligns with the resolution of any uncertainty related to variable consideration. Costs incurred to obtain a revenue producing contract is expensed when incurred as a practical expedient as the contractual period for majority of contracts is one year or less.
Revenue is recorded in the business segment responsible for the related product or service. Fee sharing arrangements exist to allocate portions of such revenue to other business segments involved in selling to, or providing service to, customers. Business segment results are determined based upon management's reporting system, which assigns balance sheet and income statement items to each of the business segments. The process is designed around Huntington's organizational and management structure and, accordingly, the results derived are not necessarily comparable with similar information published by other financial institutions.
The following table illustrates the disaggregation by operating segment and major revenue stream and reconciles disaggregated revenue to segment revenue presented in Note 18.
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Three Months Ended June 30, 2018 |
(dollar amounts in millions) |
Consumer & Business Banking |
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Commercial Banking |
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Vehicle Finance |
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RBHPCG |
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Treasury / Other |
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Huntington Consolidated |
Major Revenue Streams |
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Service charges on deposit accounts |
$ |
72 |
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$ |
16 |
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$ |
2 |
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$ |
1 |
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$ |
— |
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$ |
91 |
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Cards and payment processing income |
49 |
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3 |
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— |
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— |
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— |
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52 |
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Trust and investment management services |
5 |
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2 |
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— |
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35 |
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— |
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42 |
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Insurance income |
10 |
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1 |
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— |
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10 |
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— |
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21 |
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Other income |
10 |
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1 |
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— |
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— |
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— |
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11 |
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Net revenue from contracts with customers |
$ |
146 |
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$ |
23 |
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$ |
2 |
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$ |
46 |
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$ |
— |
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$ |
217 |
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Noninterest income within the scope of other GAAP topics |
41 |
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57 |
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— |
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2 |
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19 |
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119 |
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Total noninterest income |
$ |
187 |
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$ |
80 |
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$ |
2 |
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$ |
48 |
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$ |
19 |
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$ |
336 |
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Six Months Ended June 30, 2018 |
(dollar amounts in millions) |
Consumer & Business Banking |
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Commercial Banking |
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Vehicle Finance |
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RBHPCG |
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Treasury / Other |
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Huntington Consolidated |
Major Revenue Streams |
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Service charges on deposit accounts |
$ |
140 |
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$ |
32 |
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$ |
3 |
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$ |
2 |
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$ |
— |
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$ |
177 |
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Cards and payment processing income |
96 |
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5 |
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— |
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— |
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— |
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101 |
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Trust and investment management services |
12 |
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2 |
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— |
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72 |
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— |
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86 |
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Insurance income |
18 |
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2 |
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— |
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21 |
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1 |
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42 |
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Other Income |
20 |
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1 |
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1 |
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2 |
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1 |
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25 |
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Net revenue from contracts with customers |
$ |
286 |
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$ |
42 |
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$ |
4 |
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$ |
97 |
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$ |
2 |
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$ |
431 |
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Noninterest income within the scope of other GAAP topics |
75 |
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107 |
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2 |
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1 |
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34 |
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219 |
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Total noninterest income |
$ |
361 |
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$ |
149 |
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$ |
6 |
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$ |
98 |
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$ |
36 |
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$ |
650 |
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Huntington generally provides services for customers in which it acts as principal. Payment terms and conditions vary amongst services and customers, and thus impact the timing and amount of revenue recognition. Some fees may be paid before any service is rendered and accordingly, such fees are deferred until the obligations pertaining to those fees are satisfied. Most Huntington contracts with customers are cancelable by either party without penalty or they are short-term in nature, with a contract duration of less than one year. Accordingly, most revenue deferred for the reporting period ended June 30, 2018 is expected to be earned within one year. Huntington does not have significant balances of contract assets or contract liabilities and any change in those balances during the reporting period ended June 30, 2018 was determined to be immaterial.
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