Segment Reporting

6 Months Ended

Jun. 30, 2019

The Corporation utilizes a risk-based internal profitability measurement system to provide strategic business unit reporting. The profitability measurement system is based on internal management methodologies designed to produce consistent results and reflect the underlying economics of the units. Certain strategic business units have been combined for segment information reporting purposes where the nature of the products and services, the type of customer and the distribution of those products and services are similar. The three reportable segments are Corporate and Commercial Specialty; Community, Consumer, and

Business; and Risk Management and Shared Services. The financial information of the Corporation’s segments has been compiled utilizing the accounting policies described in the Corporation’s 2018 Annual Report on Form 10-K, with certain exceptions. The more significant of these exceptions are described herein.

The reportable segment results are presented based on the Corporation's internal management accounting process. 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 U.S. GAAP. As a result, reported segments and the financial information of the reported segments are not necessarily comparable with similar information reported by other financial institutions. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in previously reported segment financial data. Additionally, the information presented is not indicative of how the segments would perform if they operated as independent entities.

To determine financial performance of each segment, the Corporation allocates FTP assignments, the provision for credit losses, certain noninterest expenses, income taxes, and equity to each segment. Allocation methodologies are subject to periodic adjustment as the internal management accounting system is revised, the interest rate environment evolves, and business or product lines within the segments change. Also, because the development and application of these methodologies is a dynamic process, the financial results presented may be periodically reviewed.

The Corporation allocates net interest income using an internal FTP methodology that charges users of funds (assets) and credits providers of funds (liabilities, primarily deposits) based on the maturity, prepayment and / or repricing characteristics of the assets and liabilities. The net effect of this allocation is offset in the Risk Management and Shared Services segment to ensure consolidated totals reflect the Corporation's net interest income. The net FTP allocation is reflected as net intersegment income (expense) in the accompanying tables.

A credit provision is allocated to segments based on the expected long-term annual net charge off rates attributable to the credit risk of loans managed by the segment during the period. In contrast, the level of the consolidated provision for credit losses is determined based on an incurred loss model using the methodologies described in the Corporation’s 2018 Annual Report on Form 10-K to assess the overall appropriateness of the allowance for loan losses. The net effect of the credit provision is recorded in Risk Management and Shared Services. Indirect expenses incurred by certain centralized support areas are allocated to segments based on actual usage (for example, volume measurements) and other criteria. Certain types of administrative expense and bank-wide expense accruals (including amortization of CDI and other intangible assets associated with acquisitions) are generally not allocated to segments. Income taxes are allocated to segments based on the Corporation’s estimated effective tax rate, with certain segments adjusted for any tax-exempt income or non-deductible expenses. Equity is allocated to the segments based on regulatory capital requirements and in proportion to an assessment of the inherent risks associated with the business of the segment (including interest, credit and operating risk).

A brief description of each business segment is presented below. A more in-depth discussion of these segments can be found in the Segment Reporting footnote in the Corporation’s 2018 Annual Report on Form 10-K.

The Corporate and Commercial Specialty segment serves a wide range of customers including larger businesses, developers, not-for-profits, municipalities, and financial institutions. The Community, Consumer, and Business segment serves individuals, as well as small and mid-sized businesses. The Risk Management and Shared Services segment includes key shared operational functions and also includes residual revenue and expenses, representing the difference between actual amounts incurred and the amounts allocated to operating segments, including interest rate risk residuals (FTP mismatches) and credit risk and provision residuals (long-term credit charge mismatches). In addition, the Risk Management and Shared Services segment includes certain unallocated expenses related to Bank Mutual's shared services and operations prior to system conversion in late June 2018. All Bank Mutual and Huntington branch acquisition related costs are included in the Risk Management and Shared Services segment.

Information about the Corporation’s segments is presented below:



	Corporate and Commercial Specialty
	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	($ in Thousands)
Net interest income	$	115,648		$	121,985		$	231,557		$	226,420
Net intersegment interest income (expense)	(20,061		)	(14,656		)	(42,683		)	(23,133		)
Segment net interest income	95,587			107,330			188,874			203,287
Noninterest income	14,318			14,194			25,763			26,876
Total revenue	109,904			121,524			214,637			230,163
Credit provision	13,317			11,126			26,802			21,723
Noninterest expense	40,022			41,775			78,810			81,025
Income (loss) before income taxes	56,566			68,623			109,026			127,415
Income tax expense (benefit)	10,864			13,454			20,866			24,880
Net income	$	45,702		$	55,169		$	88,159		$	102,535
Allocated goodwill							$	525,798		$	523,284



	Community, Consumer, and Business
	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	($ in Thousands)
Net interest income	$	84,874	$	90,418	$	172,946	$	176,813
Net intersegment interest income (expense)	25,586		24,202		49,028		41,350
Segment net interest income	110,461		114,620		221,974		218,163
Noninterest income	78,335		76,250		152,559		150,286
Total revenue	188,796		190,870		374,533		368,449
Credit provision	4,966		4,880		10,000		9,846
Noninterest expense	138,415		138,553		269,405		265,700
Income (loss) before income taxes	45,415		47,437		95,128		92,904
Income tax expense (benefit)	9,540		9,962		19,983		19,510
Net income	$	35,874	$	37,475	$	75,145	$	73,394
Allocated goodwill					$	650,221	$	643,382

Information about the Corporation’s segments is presented below: (continued)



	Risk Management and Shared Services
	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	($ in Thousands)
Net interest income	$	13,097		$	13,959		$	24,664		$	33,000
Net intersegment interest income (expense)	(5,525		)	(9,546		)	(6,345		)	(18,217		)
Segment net interest income	7,572			4,413			18,318			14,783
Noninterest income	3,185			2,399			8,718			6,059
Total revenue	10,757			6,812			27,036			20,842
Credit provision	(10,283		)	(12,006		)	(22,801		)	(27,569		)
Noninterest expense^(a)	19,343			30,929			41,236			77,498
Income (loss) before income taxes	1,697			(12,111		)	8,602			(29,087		)
Income tax expense (benefit)	(1,387		)	(8,661		)	560			(11,806		)
Net income	$	3,084		$	(3,450	)	$	8,042		$	(17,280	)
Allocated goodwill							$	—		$	—



	Consolidated Total
	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	($ in Thousands)
Net interest income	$	213,619	$	226,362	$	429,167	$	436,233
Net intersegment interest income (expense)	—		—		—		—
Segment net interest income	213,619		226,362		429,167		436,233
Noninterest income	95,837		92,842		187,040		183,222
Total revenue	309,457		319,204		616,206		619,455
Credit provision	8,000		4,000		14,000		4,000
Noninterest expense	197,779		211,258		389,450		424,223
Income (loss) before income taxes	103,678		103,947		212,756		191,232
Income tax expense (benefit)	19,017		14,754		41,409		32,583
Net income	$	84,661	$	89,192	$	171,347	$	158,648
Allocated goodwill					$	1,176,019	$	1,166,665

(a) For the three months ended June 30, 2019 and 2018, the Risk Management and Shared Services segment includes approximately $4 million and $7 million, respectively, of acquisition related noninterest expense. For the six months ended June 30, 2019 and 2018, the Risk Management and Shared Services segment includes approximately $4 million and $28 million, respectively, of acquisition related noninterest expense.