Segment Reporting

9 Months Ended

Sep. 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 and Note 3 in this Quarterly Report on Form 10-Q, 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). 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 September 30,						Nine Months Ended September 30,
($ in Thousands)	2019			2018			2019			2018
Net interest income	$	110,929		$	113,298		$	342,486		$	339,718
Net intersegment interest income (expense)	(17,318		)	(13,018		)	(60,000		)	(36,151		)
Segment net interest income	93,612			100,280			282,485			303,567
Noninterest income	13,452			12,280			39,215			39,156
Total revenue	107,063			112,560			321,700			342,723
Credit provision	12,912			11,232			39,713			32,955
Noninterest expense	39,172			41,828			117,982			122,853
Income (loss) before income taxes	54,979			59,500			164,005			186,914
Income tax expense (benefit)	9,670			12,098			30,536			36,978
Net income	$	45,309		$	47,402		$	133,469		$	149,937
Allocated goodwill							$	525,836		$	524,525



	Community, Consumer, and Business
	Three Months Ended September 30,				Nine Months Ended September 30,
($ in Thousands)	2019		2018		2019		2018
Net interest income	$	81,517	$	91,323	$	254,463	$	268,137
Net intersegment interest income (expense)	27,651		21,951		76,679		63,301
Segment net interest income	109,167		113,275		331,142		331,438
Noninterest income	81,133		73,838		233,692		224,124
Total revenue	190,300		187,113		564,834		555,562
Credit provision	5,008		5,280		15,007		15,125
Noninterest expense	137,761		139,627		406,984		405,129
Income (loss) before income taxes	47,532		42,206		142,843		135,307
Income tax expense (benefit)	9,982		8,863		30,003		28,415
Net income	$	37,550	$	33,343	$	112,839	$	106,893
Allocated goodwill					$	650,394	$	644,397



	Risk Management and Shared Services
	Three Months Ended September 30,						Nine Months Ended September 30,
($ in Thousands)	2019			2018			2019			2018
Net interest income	$	13,919		$	14,770		$	38,583		$	47,770
Net intersegment interest income (expense)	(10,333		)	(8,933		)	(16,679		)	(27,150		)
Segment net interest income	3,586			5,837			21,905			20,620
Noninterest income	6,265			2,183			14,983			8,242
Total revenue	9,852			8,019			36,888			28,861
Credit provision	(15,919		)	(21,512		)	(38,721		)	(49,081		)
Noninterest expense^(a)	23,981			22,959			65,399			100,654
Income (loss) before income taxes	1,790			6,572			10,209			(22,712		)
Income tax expense (benefit)	1,295			1,388			1,816			(10,460		)
Net income	$	495		$	5,185		$	8,393		$	(12,252	)
Allocated goodwill							$	—		$	—



	Consolidated Total
	Three Months Ended September 30,					Nine Months Ended September 30,
($ in Thousands)	2019		2018			2019		2018
Net interest income	$	206,365	$	219,392		$	635,532	$	655,625
Net intersegment interest income (expense)	—		—			—		—
Segment net interest income	206,365		219,392			635,532		655,625
Noninterest income	100,850		88,300			287,890		271,522
Total revenue	307,216		307,692			923,422		927,146
Credit provision	2,000		(5,000		)	16,000		(1,000		)
Noninterest expense	200,930		204,413			590,380		628,636
Income (loss) before income taxes	104,286		108,279			317,042		299,510
Income tax expense (benefit)	20,947		22,349			62,356		54,932
Net income	$	83,339	$	85,929		$	254,686	$	244,578
Allocated goodwill						$	1,176,230	$	1,168,922

(a) For the three months ended both September 30, 2019 and 2018, the Risk Management and Shared Services segment included approximately $2 million of acquisition related noninterest expense. For the nine months ended September 30, 2019 and 2018, the Risk Management and Shared Services segment included approximately $6 million and $30 million, respectively, of acquisition related noninterest expense.