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Segment Reporting
 6 Months Ended
Jun. 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, and asset gains on disposed business units) 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 and fiduciary 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 as well as the gain on sale of ABRC are included in the Risk Management and Shared Services segment.
During the first quarter of 2020, the Corporation reassigned goodwill of approximately $4 million to the Corporate and Commercial Specialty segment from the Community, Consumer and Business segment as a result of a reorganization of the investment and fiduciary businesses. The goodwill reassigned was attributable to the Corporation's acquisition of Whitnell & Co. in 2017. Also effective in the first quarter of 2020, the marketing business unit, formerly part of the Risk Management and Shared Services segment, was reorganized under the Community, Consumer and Business segment.
Information about the Corporation’s segments is presented below:
Corporate and Commercial Specialty
Three Months Ended June 30,Six Months Ended June 30,
($ in Thousands)2020201920202019
Net interest income$98,824  $114,232  $206,577  $228,162  
Net intersegment interest income (expense)6,889  (13,326) (3,856) (28,881) 
Segment net interest income105,713  100,906  202,721  199,281  
Noninterest income30,691  31,267  65,124  58,414  
Total revenue136,405  132,174  267,845  257,695  
Credit provision13,713  12,585  25,885  25,169  
Noninterest expense50,837  56,450  102,098  111,383  
Income (loss) before income taxes71,855  63,139  139,862  121,144  
Income tax expense (benefit)13,446  12,244  26,117  23,411  
Net income$58,410  $50,895  $113,745  $97,732  
Allocated goodwill$530,144  $530,106  

Community, Consumer, and Business
Three Months Ended June 30,Six Months Ended June 30,
($ in Thousands)2020201920202019
Net interest income$73,120  $77,013  $148,047  $156,699  
Net intersegment interest income (expense)14,340  22,804  33,025  43,551  
Segment net interest income87,459  99,817  181,072  200,250  
Noninterest income58,557  62,123  116,207  120,398  
Total revenue146,017  161,940  297,279  320,648  
Credit provision5,429  4,626  10,537  9,311  
Noninterest expense122,290  119,694  238,721  232,612  
Income (loss) before income taxes18,298  37,620  48,021  78,725  
Income tax expense (benefit)3,843  7,900  10,084  16,532  
Net income$14,455  $29,720  $37,936  $62,193  
Allocated goodwill$577,758  $645,913  

 Risk Management and Shared Services
Three Months Ended June 30,Six Months Ended June 30,
($ in Thousands)2020201920202019
Net interest income$17,929  $22,375  $38,190  $44,306  
Net intersegment interest income (expense)(21,229) (9,478) (29,169) (14,671) 
Segment net interest income(3,301) 12,896  9,021  29,635  
Noninterest income(a)
165,242  2,447  171,465  8,228  
Total revenue161,941  15,343  180,486  37,863  
Credit provision41,858  (9,211) 77,579  (20,480) 
Noninterest expense(b)
10,280  21,634  34,779  45,456  
Income (loss) before income taxes109,802  2,919  68,129  12,887  
Income tax expense (benefit)33,950  (1,127) 25,255  1,466  
Net income$75,853  $4,047  $42,874  $11,422  
Allocated goodwill$—  $—  
Consolidated Total
Three Months Ended June 30,Six Months Ended June 30,
($ in Thousands)2020201920202019
Net interest income$189,872  $213,619  $392,814  $429,167  
Net intersegment interest income (expense)—  —  —  —  
Segment net interest income189,872  213,619  392,814  429,167  
Noninterest income(a)
254,490  95,837  352,796  187,040  
Total revenue444,362  309,457  745,610  616,206  
Credit provision61,000  8,000  114,001  14,000  
Noninterest expense(b)
183,407  197,779  375,598  389,450  
Income (loss) before income taxes199,955  103,678  256,012  212,756  
Income tax expense (benefit)51,238  19,017  61,457  41,409  
Net income$148,718  $84,661  $194,555  $171,347  
Allocated goodwill$1,107,902  $1,176,019  
(a) For the three and six months ended June 30, 2020, the Corporation recognized a $163 million asset gain related to the sale of ABRC.
(b) For the three months ended both June 30, 2020 and 2019, the Risk Management and Shared Services segment included less than $1 million and approximately $4 million respectively, of acquisition related noninterest expense. For the six months ended June 30, 2020 and 2019, the Risk Management and Shared Services segment included approximately $2 million and $4 million respectively, of acquisition related noninterest expense.