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Business Segment Information
 9 Months Ended
Sep. 30, 2014
Segment Reporting [Abstract]  
Business Segment Information
BUSINESS SEGMENT INFORMATION
The Corporation has strategically aligned its operations into three major business segments: the Business Bank, the Retail Bank and Wealth Management. These business segments are differentiated based on the type of customer and the related products and services provided. In addition to the three major business segments, the Finance Division is also reported as a segment. Business segment results are produced by the Corporation’s internal management accounting system. This system measures financial results based on the internal business unit structure of the Corporation. The performance of the business segments is not comparable with the Corporation's consolidated results and is not necessarily comparable with similar information for any other financial institution. Additionally, because of the interrelationships of the various segments, the information presented is not indicative of how the segments would perform if they operated as independent entities. The management accounting system assigns balance sheet and income statement items to each business segment using certain methodologies, which are regularly reviewed and refined. These methodologies may be modified as the management accounting system is enhanced and changes occur in the organizational structure and/or product lines. For comparability purposes, amounts in all periods are based on business segments and methodologies in effect at September 30, 2014.
In the second quarter 2014, the Corporation enhanced the approach used to determine the standard reserve factors used in estimating the allowance for credit losses, which had the effect of capturing certain elements in the standard reserve component that had formerly been included in the qualitative assessment. The impact of the change was largely neutral to the total allowance for loan losses at June 30, 2014. However, because standard reserves are allocated to the segments at the loan level, while qualitative reserves are allocated at the portfolio level, the impact of the methodology change on the allowance of each segment reflected the characteristics of the individual loans within each segment's portfolio, causing segment reserves to increase or decrease accordingly. As a result, the current year provision for credit losses within each segment is not comparable to prior period amounts.
The following discussion provides information about the activities of each business segment. A discussion of the financial results and the factors impacting performance can be found in the section entitled "Business Segments" in the financial review.
The Business Bank meets the needs of middle market businesses, multinational corporations and governmental entities by offering various products and services, including commercial loans and lines of credit, deposits, cash management, capital market products, international trade finance, letters of credit, foreign exchange management services and loan syndication services.
The Retail Bank includes small business banking and personal financial services, consisting of consumer lending, consumer deposit gathering and mortgage loan origination. In addition to a full range of financial services provided to small business customers, this business segment offers a variety of consumer products, including deposit accounts, installment loans, credit cards, student loans, home equity lines of credit and residential mortgage loans.
Wealth Management offers products and services consisting of fiduciary services, private banking, retirement services, investment management and advisory services, investment banking and brokerage services. This business segment also offers the sale of annuity products, as well as life, disability and long-term care insurance products.
The Finance segment includes the Corporation’s securities portfolio and asset and liability management activities. This segment is responsible for managing the Corporation’s funding, liquidity and capital needs, performing interest sensitivity analysis and executing various strategies to manage the Corporation’s exposure to liquidity, interest rate risk and foreign exchange risk.
The Other category includes discontinued operations, the income and expense impact of equity and cash, tax benefits not assigned to specific business segments, charges of an unusual or infrequent nature that are not reflective of the normal operations of the business segments and miscellaneous other expenses of a corporate nature.
For further information on the methodologies which form the basis for these results refer to Note 22 to the consolidated financial statements in the Corporation's 2013 Annual Report.
Business segment financial results are as follows:
(dollar amounts in millions)
Business
Bank
 
Retail
Bank
 
Wealth Management
 
Finance
 
Other
 
Total
Nine Months Ended September 30, 2014
Earnings summary:
 
 
 
 
 
 
 
 
 
 
 
Net interest income (expense) (FTE)
$
1,124

 
$
446

 
$
139

 
$
(485
)
 
$
19

 
$
1,243

Provision for credit losses
45

 
(2
)
 
(11
)
 
—

 
(7
)
 
25

Noninterest income
275

 
123

 
195

 
44

 
6

 
643

Noninterest expenses
441

 
524

 
239

 
(24
)
 
27

 
1,207

Provision (benefit) for income taxes (FTE)
311

 
16

 
38

 
(160
)
 
5

 
210

Net income (loss)
$
602

 
$
31

 
$
68

 
$
(257
)
 
$
—

 
$
444

Net credit-related charge-offs
$
16

 
$
7

 
$
1

 
$
—

 
$
—

 
$
24

 
 
 
 
 
 
 
 
 
 
 
 
Selected average balances:
 
 
 
 
 
 
 
 
 
 
 
Assets
$
37,094

 
$
6,074

 
$
4,981

 
$
11,070

 
$
6,117

 
$
65,336

Loans
36,124

 
5,406

 
4,797

 
—

 
—

 
46,327

Deposits
27,755

 
21,600

 
3,934

 
246

 
246

 
53,781

 
 
 
 
 
 
 
 
 
 
 
 
Statistical data:
 
 
 
 
 
 
 
 
 
 
 
Return on average assets (a)
2.17
%
 
0.19
%
 
1.81
%
 
N/M

 
N/M

 
0.91
%
Efficiency ratio (b)
31.56

 
91.81

 
71.95

 
N/M

 
N/M

 
63.99

(dollar amounts in millions)
Business
Bank
 
Retail
Bank
 
Wealth Management
 
Finance
 
Other
 
Total
Nine Months Ended September 30, 2013
Earnings summary:
 
 
 
 
 
 
 
 
 
 
 
Net interest income (expense) (FTE)
$
1,115

 
$
460

 
$
138

 
$
(492
)
 
$
23

 
$
1,244

Provision for credit losses
29

 
21

 
(8
)
 
—

 
(5
)
 
37

Noninterest income
287

 
132

 
191

 
47

 
6

 
663

Noninterest expenses
446

 
530

 
238

 
7

 
28

 
1,249

Provision (benefit) for income taxes (FTE)
312

 
14

 
35

 
(168
)
 
4

 
197

Net income (loss)
$
615

 
$
27

 
$
64

 
$
(284
)
 
$
2

 
$
424

Net credit-related charge-offs
$
37

 
$
18

 
$
5

 
$
—

 
$
—

 
$
60

 
 
 
 
 
 
 
 
 
 
 
 
Selected average balances:
 
 
 
 
 
 
 
 
 
 
 
Assets
$
35,694

 
$
5,967

 
$
4,785

 
$
11,553

 
$
5,708

 
$
63,707

Loans
34,626

 
5,278

 
4,629

 
—

 
—

 
44,533

Deposits
25,931

 
21,183

 
3,722

 
309

 
210

 
51,355

 
 
 
 
 
 
 
 
 
 
 
 
Statistical data:
 
 
 
 
 
 
 
 
 
 
 
Return on average assets (a)
2.30
%
 
0.17
%
 
1.78
%
 
N/M

 
N/M

 
0.89
%
Efficiency ratio (b)
31.78

 
89.19

 
72.64

 
N/M

 
N/M

 
65.45

(a)
Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity.
(b)    Noninterest expenses as a percentage of the sum of net interest income (FTE) and noninterest income excluding net securities gains.
FTE – Fully Taxable Equivalent
N/M – not meaningful
The Corporation operates in three primary markets - Texas, California, and Michigan, as well as in Arizona and Florida, with select businesses operating in several other states, and in Canada and Mexico. The Corporation produces market segment results for the Corporation’s three primary geographic markets as well as Other Markets. Other Markets includes Florida, Arizona, the International Finance division and businesses with a national perspective. The Finance & Other category includes the Finance segment and the Other category as previously described. Market segment results are provided as supplemental information to the business segment results and may not meet all operating segment criteria as set forth in GAAP. For comparability purposes, amounts in all periods are based on market segments and methodologies in effect at September 30, 2014.
A discussion of the financial results and the factors impacting performance can be found in the section entitled "Market Segments" in the financial review.
Market segment financial results are as follows:
(dollar amounts in millions)
Michigan
 
California
 
Texas
 
Other
Markets
 
Finance
& Other
 
Total
Nine Months Ended September 30, 2014
Earnings summary:
 
 
 
 
 
 
 
 
 
 
 
Net interest income (expense) (FTE)
$
544

 
$
531

 
$
403

 
$
231

 
$
(466
)
 
$
1,243

Provision for credit losses
(13
)
 
39

 
32

 
(26
)
 
(7
)
 
25

Noninterest income
268

 
109

 
95

 
121

 
50

 
643

Noninterest expenses
487

 
299

 
274

 
144

 
3

 
1,207

Provision (benefit) for income taxes (FTE)
122

 
113

 
70

 
60

 
(155
)
 
210

Net income (loss)
$
216

 
$
189

 
$
122

 
$
174

 
$
(257
)
 
$
444

Net credit-related charge-offs (recoveries)
$
13

 
$
21

 
$
8

 
$
(18
)
 
$
—

 
$
24

 
 
 
 
 
 
 
 
 
 
 
 
Selected average balances:
 
 
 
 
 
 
 
 
 
 
 
Assets
$
13,797

 
$
15,543

 
$
11,525

 
$
7,284

 
$
17,187

 
$
65,336

Loans
13,400

 
15,259

 
10,829

 
6,839

 
—

 
46,327

Deposits
20,853

 
15,506

 
10,743

 
6,187

 
492

 
53,781

 
 
 
 
 
 
 
 
 
 
 
 
Statistical data:
 
 
 
 
 
 
 
 
 
 
 
Return on average assets (a)
1.32
%
 
1.52
%
 
1.36
%
 
3.19
%
 
N/M

 
0.91
%
Efficiency ratio (b)
59.87

 
46.74

 
55.02

 
41.12

 
N/M

 
63.99

(dollar amounts in millions)
Michigan
 
California
 
Texas
 
Other
Markets
 
Finance
& Other
 
Total
Nine Months Ended September 30, 2013
Earnings summary:
 
 
 
 
 
 
 
 
 
 
 
Net interest income (expense) (FTE)
$
564

 
$
516

 
$
394

 
$
239

 
$
(469
)
 
$
1,244

Provision for credit losses
(16
)
 
22

 
31

 
5

 
(5
)
 
37

Noninterest income
268

 
113

 
100

 
129

 
53

 
663

Noninterest expenses
496

 
298

 
272

 
148

 
35

 
1,249

Provision (benefit) for income taxes (FTE)
125

 
115

 
67

 
54

 
(164
)
 
197

Net income (loss)
$
227

 
$
194

 
$
124

 
$
161

 
$
(282
)
 
$
424

Net credit-related charge-offs
$
10

 
$
30

 
$
7

 
$
13

 
$
—

 
$
60

 
 
 
 
 
 
 
 
 
 
 
 
Selected average balances:
 
 
 
 
 
 
 
 
 
 
 
Assets
$
13,936

 
$
14,072

 
$
10,774

 
$
7,664

 
$
17,261

 
$
63,707

Loans
13,508

 
13,826

 
10,064

 
7,135

 
—

 
44,533

Deposits
20,294

 
14,532

 
10,149

 
5,861

 
519

 
51,355

 
 
 
 
 
 
 
 
 
 
 
 
Statistical data:
 
 
 
 
 
 
 
 
 
 
 
Return on average assets (a)
1.42
%
 
1.66
%
 
1.46
%
 
2.80
%
 
N/M

 
0.89
%
Efficiency ratio (b)
59.52

 
47.39

 
54.96

 
40.22

 
N/M

 
65.45

(a)
Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity.
(b)    Noninterest expenses as a percentage of the sum of net interest income (FTE) and noninterest income excluding net securities gains.
FTE – Fully Taxable Equivalent
N/M – not meaningful