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Segment Reporting
 9 Months Ended
Sep. 30, 2020
Segment Reporting [Abstract]  
Segment Reporting Segment Reporting
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 2019 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 allowance model using the methodologies described in Note 3 in this Quarterly Report on Form 10-Q. 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 CDIs and other intangible assets associated with acquisitions, acquisition-related costs, asset gains on disposed business units, loss on prepayment of FHLB advances, and income tax benefits as a result of tax planning strategies) 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 2019 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 by providing lending and deposit solutions as well as the support to deliver, fund, and manage such banking solutions. In addition, this segment provides a variety of investment, fiduciary, and retirement planning products and services to individuals and small to mid-sized businesses. The Community, Consumer, and Business segment serves individuals, as well as small and mid-sized businesses, by providing lending and deposit solutions. In addition, the Corporation offered insurance and risk consulting services. During the second quarter of 2020, the Corporation sold ABRC. 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 First Staunton and Huntington branch acquisition related costs, the gain on sale of ABRC, the loss on the prepayment of FHLB advances, and the income tax benefit from tax planning strategies are included within the Risk Management and Shared Services segment.
During the first quarter of 2020, the Corporation reassigned goodwill of approximately $4 million to the Corporate and Commercial Specialty segment from the Community, Consumer and Business segment as a result of a reorganization of the investment and fiduciary businesses. The goodwill reassigned was attributable to the Corporation's acquisition of Whitnell & Co. in 2017. Also effective in the first quarter of 2020, the marketing business unit, formerly part of the Risk Management and Shared Services segment, was reorganized under the Community, Consumer and Business segment.
During the third quarter of 2020, the retirement plan services business unit, formerly part of the Community, Consumer, and Business segment, was reorganized under the Corporate and Commercial Specialty segment. In addition, the oil and gas business unit, formerly part of the Corporate and Commercial Specialty segment, was reorganized under the Risk Management and Shared Services segment as the Corporation's Credit team manages our exposure to the Corporation's higher-leveraged borrowers.
Information about the Corporation’s segments is presented below:
Corporate and Commercial Specialty
Three Months Ended September 30,Nine Months Ended September 30,
($ in Thousands)2020201920202019
Net interest income$92,033 $111,060 $298,611 $339,222 
Net intersegment interest income (expense)6,937 (12,041)3,123 (40,863)
Segment net interest income98,970 99,020 301,734 298,359 
Noninterest income37,405 33,671 111,254 101,135 
Total revenue136,376 132,691 412,987 399,495 
Credit provision15,572 12,248 41,456 37,417 
Noninterest expense52,144 57,946 159,471 174,570 
Income (loss) before income taxes68,660 62,497 212,060 187,508 
Income tax expense (benefit)12,600 11,249 39,461 35,472 
Net income$56,060 $51,248 $172,599 $152,036 
Allocated goodwill$530,144 $530,144 

Community, Consumer, and Business
Three Months Ended September 30,Nine Months Ended September 30,
($ in Thousands)2020201920202019
Net interest income$73,644 $73,777 $221,691 $230,476 
Net intersegment interest income (expense)9,231 25,437 42,213 68,930 
Segment net interest income82,875 99,214 263,904 299,406 
Noninterest income32,958 59,934 140,442 171,283 
Total revenue115,833 159,148 404,345 470,688 
Credit provision5,758 4,631 16,296 13,942 
Noninterest expense102,100 118,241 335,591 345,611 
Income (loss) before income taxes7,975 36,277 52,458 111,135 
Income tax expense (benefit)1,675 7,618 11,016 23,338 
Net income$6,300 $28,658 $41,442 $87,797 
Allocated goodwill$577,758 $646,086 

 Risk Management and Shared Services
Three Months Ended September 30,Nine Months Ended September 30,
($ in Thousands)2020201920202019
Net interest income$16,472 $21,528 $54,662 $65,834 
Net intersegment interest income (expense)(16,167)(13,396)(45,336)(28,067)
Segment net interest income305 8,131 9,326 37,767 
Noninterest income(a)
5,182 7,245 176,646 15,472 
Total revenue5,487 15,376 185,973 53,239 
Credit provision21,679 (14,879)99,257 (35,359)
Noninterest expense(b)
73,343 24,743 108,122 70,198 
Income (loss) before income taxes(89,535)5,512 (21,407)18,400 
Income tax expense (benefit)(c)
(72,389)2,080 (47,135)3,546 
Net income$(17,146)$3,432 $25,728 $14,854 
Allocated goodwill$— $— 
Consolidated Total
Three Months Ended September 30,Nine Months Ended September 30,
($ in Thousands)2020201920202019
Net interest income$182,150 $206,365 $574,964 $635,532 
Net intersegment interest income (expense)— — — — 
Segment net interest income182,150 206,365 574,964 635,532 
Noninterest income(a)
75,545 100,850 428,342 287,890 
Total revenue257,695 307,216 1,003,305 923,422 
Credit provision43,009 2,000 157,009 16,000 
Noninterest expense(b)
227,587 200,930 603,184 590,380 
Income (loss) before income taxes(12,900)104,286 243,112 317,042 
Income tax expense (benefit)c)
(58,114)20,947 3,342 62,356 
Net income$45,214 $83,339 $239,769 $254,686 
Allocated goodwill$1,107,902 $1,176,230 
(a) For the nine months ended September 30, 2020, the Corporation recognized a $163 million asset gain related to the sale of ABRC.
(b) For the three months ended September 30, 2020 and 2019, the Risk Management and Shared Services segment included approximately $218 thousand and $2 million respectively, of acquisition related noninterest expense. For the nine months ended September 30, 2020 and 2019, the Risk Management and Shared Services segment included approximately $2 million and $6 million respectively, of acquisition related noninterest expense. For the three and nine months ended September 30, 2020, the Risk Management and Shared Services segment also incurred a $45 million loss on the prepayment of FHLB advances.
(c) The Corporation has recognized $63 million in tax benefits for the nine months ended September 30, 2020, and $49 million for the three months ended September 30, 2020, primarily driven by tax planning strategies which allowed for the recognition of built in capital losses and tax basis step-up yielding this tax benefit