Segment Reporting

12 Months Ended

Dec. 31, 2020

Segment Reporting [Abstract]

Segment Reporting

Note 21 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 Note 1, 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 tax, 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 NII 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 re-pricing characteristics of the assets and liabilities. The net effect of this allocation is offset in the Risk Management and Shared Services segment to ensure the consolidated totals reflect the Corporation's NII. The net FTP allocation is reflected as net intersegment interest 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 ACLL model using methodologies described in Note 1. 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 acquisition-related costs, asset gains on disposed business units, loss on the prepayment of FHLB advances, and income tax benefits as a result of corporate restructuring) 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 with the net tax residual recorded in Risk Management and Shared Services. 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 description of each business segment is presented below.

Corporate and Commercial Specialty: The Corporate and Commercial Specialty segment serves a wide range of customers including private clients, 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, private clients, and small to mid-sized businesses. In serving this segment, we compete based on an in-depth understanding of our customers’ financial needs, the ability to match market competitive solutions to those needs, and the highest standards of relationship and service excellence in the delivery of these services. Delivery of services is provided through our corporate and commercial units, our CRE unit, as well as our specialized industries and commercial financial services units. Within this segment we provide the following products and services: (1) lending solutions, such as commercial loans and lines of credit, CRE financing, construction loans, letters of credit, leasing, asset based lending, and, for our larger clients, loan syndications; (2) deposit and cash management solutions such as commercial checking and interest-bearing deposit products, cash vault and night depository services, liquidity solutions, payables and receivables solutions, and information services; (3) specialized financial services such as interest rate risk management, foreign exchange solutions, and commodity hedging; (4) fiduciary services such as administration of pension, profit-sharing and other employee benefit plans, fiduciary and corporate agency services, and institutional asset management; and (5) investable funds solutions such as savings, money market deposit

accounts, IRA accounts, certificates of deposit, fixed and variable annuities, full-service, discount and online investment brokerage; investment advisory services; trust and investment management accounts.

Community, Consumer, and Business: 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, until the sale of the business in June of 2020. In serving this segment, we compete based on providing a broad range of solutions to meet the needs of our customers in their entire financial lifecycle, convenient access to our services through multiple channels such as branches, phone based services, online and mobile banking, and a relationship based business model which assists our customers in navigating any changes and challenges in their financial circumstances. Delivery of services is provided through our various consumer banking and community banking units. Within this segment we provide the following products and services: (1) lending solutions such as residential mortgages, home equity loans and lines of credit, personal and installment loans, business loans, and business lines of credit, and (2) deposit and transactional solutions such as checking, credit, debit and pre-paid cards, online banking and bill pay, and money transfer services.

Risk Management and Shared Services: 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, Huntington branch, and Bank Mutual acquisition related costs, the asset gain on sale of ABRC, loss on the prepayment of FHLB advances, and the tax benefit from corporate restructuring are included within the Risk Management and Shared Services segment.

During 2020, the following restructurings occurred which resulted in the prior period segment results being revised for comparability:

•The Corporation reorganized their investment and fiduciary businesses from the Community, Consumer and Business segment to the Corporate and Commercial Specialty segment. As a result of the reorganization, the Corporation reassigned goodwill of approximately $4 million attributable to the Corporation's acquisition of Whitnell & Co. in 2017.

•The Corporation reorganized their marketing business unit from the Risk Management and Shared Services segment to the Community, Consumer and Business segment.

•The Corporation reorganized their retirement plan services business unit from the Community, Consumer, and Business segment to the Corporate and Commercial Specialty segment.

•The Corporation reorganized their oil and gas business unit from the Corporate and Commercial Specialty segment to the Risk Management and Shared Services segment.

•The Corporation reorganized their trust investment support services team from the Risk Management and Shared Services segment to the Corporate and Commercial Specialty segment. This transition occurred to better align the wealth support teams with the business units that were already a part of the Corporate and Commercial Specialty segment.

Information about the Corporation’s segments is presented below:

	Corporate and Commercial Specialty
	For the Years Ended December 31,
($ in Thousands)	2020		2019		2018
Net interest income	$	395,135	$	447,979	$	458,240
Net intersegment interest income (expense)	10,400		(52,200)		(33,519)
Segment net interest income	405,535		395,779		424,721
Noninterest income	149,456		136,097		132,071
Total revenue	554,991		531,876		556,793
Provision for credit losses	59,780		49,341		42,234
Noninterest expense	209,507		233,655		233,202
Income (loss) before income taxes	285,705		248,879		281,356
Income tax expense (benefit)	53,193		47,480		54,732
Net income	$	232,512	$	201,399	$	226,625
Allocated goodwill	$	530,144	$	530,144	$	528,832

	Community, Consumer, and Business
	For the Years Ended December 31,
($ in Thousands)	2020		2019		2018
Net interest income	$	295,297	$	301,563	$	322,020
Net intersegment interest income (expense)	54,203		93,331		76,876
Segment net interest income	349,500		394,894		398,896
Noninterest income	185,737		223,712		212,711
Total revenue	535,237		618,606		611,607
Provision for credit losses	21,862		18,594		18,500
Noninterest expense	429,447		467,086		463,187
Income (loss) before income taxes	83,928		132,925		129,920
Income tax expense (benefit)	17,625		27,914		27,283
Net income	$	66,303	$	105,011	$	102,637
Allocated goodwill	$	579,156	$	646,086	$	640,191

	Risk Management and Shared Services
	For the Years Ended December 31,
($ in Thousands)	2020		2019		2018
Net interest income	$	72,525	$	86,132	$	99,320
Net intersegment interest income (expense)	(64,603)		(41,130)		(43,357)
Segment net interest income	7,922		45,001		55,963
Noninterest income(a)	178,862		21,015		10,785
Total revenue	186,784		66,017		66,748
Provision for credit losses	92,365		(51,935)		(60,734)
Noninterest expense(b)	137,080		93,247		125,410
Income (loss) before income taxes	(42,661)		24,705		2,073
Income tax expense (benefit)(c)	(50,618)		4,325		(2,228)
Net income	$	7,957	$	20,379	$	4,301
Allocated goodwill	$	—	$	—	$	—

	Consolidated Total
	For the Years Ended December 31,
($ in Thousands)	2020		2019		2018
Net interest income	$	762,957	$	835,674	$	879,580
Net intersegment interest income (expense)	—		—		—
Segment net interest income	762,957		835,674		879,580
Noninterest income(a)	514,056		380,824		355,568
Total revenue	1,277,012		1,216,498		1,235,148
Provision for credit losses	174,006		16,000		—
Noninterest expense(b)	776,034		793,988		821,799
Income (loss) before income taxes	326,972		406,509		413,349
Income tax expense (benefit)(c)	20,200		79,720		79,786
Net income	$	306,771	$	326,790	$	333,562
Allocated goodwill	$	1,109,300	$	1,176,230	$	1,169,023

(a) For the year ended December 31, 2020, the Corporation recognized a $163 million asset gain related to the sale of ABRC. 2019 includes less than $1 million of Huntington related asset losses and 2018 includes approximately $2 million of Bank Mutual acquisition related asset losses net of asset gains.

(b) For the year ended December 31, 2020, 2019, 2018 and the Risk Management and Shared Services segment includes approximately $2 million, $7 million, and $29 million of acquisition related costs, respectively.

(c) The Corporation has recognized $63 million in tax benefits for the year ended December 31, 2020.