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. From time to time, the Corporation may make reclassifications among the segments to more appropriately reflect management's current view of the segments, and 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 unit structure and methodologies in effect at September 30, 2016.

Effective January 1, 2016, in conjunction with the effective date for regulatory Liquidity Coverage Ratio (LCR) requirements, the Corporation prospectively implemented an additional funds transfer pricing (FTP) charge, primarily for the cost of maintaining liquid assets to support potential draws on unfunded loan commitments and for the long-term economic cost of holding collateral for secured deposits. For further information about the Corporation's FTP methodology, refer to Note 22 to the consolidated financial statements in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2015.

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 2015 Annual Report.

Business segment financial results are as follows:



(dollar amounts in millions)	Business Bank			Retail Bank			Wealth Management			Finance			Other			Total
Three Months Ended September 30, 2016	Business Bank			Retail Bank			Wealth Management			Finance			Other			Total
Earnings summary:
Net interest income (expense)	$	361		$	156		$	41		$	(114	)	$	6		$	450
Provision for credit losses	2			10			(1		)	—			5			16
Noninterest income	145			50			61			13			3			272
Noninterest expenses	215			195			75			(1		)	9			493
Provision (benefit) for income taxes	97			—			10			(39		)	(4		)	64
Net income (loss)	$	192		$	1		$	18		$	(61	)	$	(1	)	$	149
Net credit-related charge-offs	$	14		$	3		$	(1	)	$	—		$	—		$	16

Selected average balances:
Assets	$	39,618		$	6,544		$	5,283		$	14,144		$	7,320		$	72,909
Loans	38,243			5,871			5,092			—			—			49,206
Deposits	30,019			23,654			4,030			98			264			58,065

Statistical data:
Return on average assets (a)	1.94		%	0.01		%	1.39		%	N/M			N/M			0.82		%
Efficiency ratio (b)	42.38			94.57			73.07			N/M			N/M			68.15



(dollar amounts in millions)	Business Bank			Retail Bank			Wealth Management			Finance			Other			Total
Three Months Ended September 30, 2015	Business Bank			Retail Bank			Wealth Management			Finance			Other			Total
Earnings summary:
Net interest income (expense)	$	378		$	158		$	45		$	(163	)	$	4		$	422
Provision for credit losses	30			2			(3		)	—			(3		)	26
Noninterest income	144			49			59			12			(4		)	260
Noninterest expenses	198			185			75			—			(1		)	457
Provision (benefit) for income taxes	99			7			11			(57		)	3			63
Net income (loss)	$	195		$	13		$	21		$	(94	)	$	1		$	136
Net credit-related charge-offs (recoveries)	$	23		$	1		$	(1	)	$	—		$	—		$	23

Selected average balances:
Assets	$	39,768		$	6,518		$	5,228		$	11,761		$	8,058		$	71,333
Loans	38,113			5,835			5,024			—			—			48,972
Deposits	31,405			23,079			4,188			203			265			59,140

Statistical data:
Return on average assets (a)	1.96		%	0.23		%	1.62		%	N/M			N/M			0.76		%
Efficiency ratio (b)	37.98			89.33			71.12			N/M			N/M			66.87


(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 (fully taxable equivalent basis) and noninterest income excluding net securities gains.

N/M – not meaningful



(dollar amounts in millions)	Business Bank			Retail Bank			Wealth Management			Finance			Other			Total
Nine Months Ended September 30, 2016	Business Bank			Retail Bank			Wealth Management			Finance			Other			Total
Earnings summary:
Net interest income (expense)	$	1,077		$	466		$	128		$	(346	)	$	17		$	1,342
Provision for credit losses	200			13			(3		)	—			3			213
Noninterest income	426			141			181			33			3			784
Noninterest expenses	644			579			229			(3		)	20			1,469
Provision (benefit) for income taxes	217			5			30			(119		)	(2		)	131
Net income (loss)	$	442		$	10		$	53		$	(191	)	$	(1	)	$	313
Net credit-related charge-offs	$	113		$	6		$	2		$	—		$	—		$	121

Selected average balances:
Assets	$	39,589		$	6,548		$	5,220		$	13,955		$	5,630		$	70,942
Loans	38,126			5,872			5,025			—			—			49,023
Deposits	29,195			23,438			4,137			81			251			57,102

Statistical data:
Return on average assets (a)	1.49		%	0.06		%	1.37		%	N/M			N/M			0.59		%
Efficiency ratio (b)	42.70			94.87			74.09			N/M			N/M			68.88



(dollar amounts in millions)	Business Bank			Retail Bank			Wealth Management			Finance			Other			Total
Nine Months Ended September 30, 2015	Business Bank			Retail Bank			Wealth Management			Finance			Other			Total
Earnings summary:
Net interest income (expense)	$	1,117		$	466		$	133		$	(471	)	$	11		$	1,256
Provision for credit losses	116			(14		)	(13		)	—			(2		)	87
Noninterest income	426			136			177			32			(2		)	769
Noninterest expenses	572			542			225			(2		)	8			1,345
Provision (benefit) for income taxes	289			26			35			(163		)	1			188
Net income (loss)	$	566		$	48		$	63		$	(274	)	$	2		$	405
Net credit-related charge-offs (recoveries)	$	55		$	3		$	(8	)	$	—		$	—		$	50

Selected average balances:
Assets	$	39,567		$	6,449		$	5,137		$	11,593		$	6,942		$	69,688
Loans	37,950			5,767			4,938			—			—			48,655
Deposits	30,607			22,746			4,082			146			270			57,851

Statistical data:
Return on average assets (a)	1.91		%	0.28		%	1.64		%	N/M			N/M			0.78		%
Efficiency ratio (b)	37.00			89.91			71.98			N/M			N/M			66.25


(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 (fully taxable equivalent basis) and noninterest income excluding net securities gains.

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, 2016.

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
Three Months Ended September 30, 2016	Michigan			California			Texas			Other Markets			Finance & Other			Total
Earnings summary:
Net interest income (expense)	$	169		$	181		$	118		$	90		$	(108	)	$	450
Provision for credit losses	13			(4		)	(3		)	5			5			16
Noninterest income	82			44			33			97			16			272
Noninterest expenses	161			110			102			112			8			493
Provision (benefit) for income taxes	26			44			19			18			(43		)	64
Net income (loss)	$	51		$	75		$	33		$	52		$	(62	)	$	149
Net credit-related charge-offs (recoveries)	$	1		$	—		$	10		$	5		$	—		$	16

Selected average balances:
Assets	$	13,174		$	17,933		$	11,014		$	9,324		$	21,464		$	72,909
Loans	12,488			17,637			10,566			8,515			—			49,206
Deposits	21,944			17,674			9,860			8,225			362			58,065

Statistical data:
Return on average assets (a)	0.90		%	1.61		%	1.18		%	2.23		%	N/M			0.82		%
Efficiency ratio (b)	64.10			48.56			67.29			59.87			N/M			68.15



(dollar amounts in millions)	Michigan			California			Texas			Other Markets			Finance & Other			Total
Three Months Ended September 30, 2015	Michigan			California			Texas			Other Markets			Finance & Other			Total
Earnings summary:
Net interest income (expense)	$	179		$	186		$	129		$	87		$	(159	)	$	422
Provision for credit losses	6			24			10			(11		)	(3		)	26
Noninterest income	84			38			34			96			8			260
Noninterest expenses	152			101			97			108			(1		)	457
Provision (benefit) for income taxes	35			37			20			25			(54		)	63
Net income (loss)	$	70		$	62		$	36		$	61		$	(93	)	$	136
Net credit-related charge-offs (recoveries)	$	9		$	10		$	4		$	—		$	—		$	23

Selected average balances:
Assets	$	13,856		$	17,060		$	11,578		$	9,020		$	19,819		$	71,333
Loans	13,223			16,789			10,997			7,963			—			48,972
Deposits	21,946			18,371			10,753			7,602			468			59,140

Statistical data:
Return on average assets (a)	1.23		%	1.27		%	1.16		%	2.70		%	N/M			0.76		%
Efficiency ratio (b)	57.42			45.19			59.48			59.00			N/M			66.87


(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 (fully taxable equivalent basis) and noninterest income excluding net securities gains.

N/M – not meaningful



(dollar amounts in millions)	Michigan			California			Texas			Other Markets			Finance & Other			Total
Nine Months Ended September 30, 2016	Michigan			California			Texas			Other Markets			Finance & Other			Total
Earnings summary:
Net interest income (expense)	$	509		$	537		$	360		$	265		$	(329	)	$	1,342
Provision for credit losses	10			8			199			(7		)	3			213
Noninterest income	240			120			95			293			36			784
Noninterest expenses	471			333			316			332			17			1,469
Provision (benefit) for income taxes	90			118			(20		)	64			(121		)	131
Net income (loss)	$	178		$	198		$	(40	)	$	169		$	(192	)	$	313
Net credit-related charge-offs (recoveries)	$	6		$	25		$	88		$	2		$	—		$	121

Selected average balances:
Assets	$	13,291		$	17,824		$	11,198		$	9,044		$	19,585		$	70,942
Loans	12,640			17,544			10,722			8,117			—			49,023
Deposits	21,731			17,089			10,095			7,855			332			57,102

Statistical data:
Return on average assets (a)	1.06		%	1.46		%	(0.45		)%	2.48		%	N/M			0.59		%
Efficiency ratio (b)	62.60			50.63			69.16			59.36			N/M			68.88



(dollar amounts in millions)	Michigan			California			Texas			Other Markets			Finance & Other			Total
Nine Months Ended September 30, 2015	Michigan			California			Texas			Other Markets			Finance & Other			Total
Earnings summary:
Net interest income (expense)	$	533		$	542		$	390		$	251		$	(460	)	$	1,256
Provision for credit losses	(15		)	24			74			6			(2		)	87
Noninterest income	249			109			99			282			30			769
Noninterest expenses	433			298			286			322			6			1,345
Provision (benefit) for income taxes	122			123			48			57			(162		)	188
Net income (loss)	$	242		$	206		$	81		$	148		$	(272	)	$	405
Net credit-related charge-offs (recoveries)	$	10		$	16		$	13		$	11		$	—		$	50

Selected average balances:
Assets	$	13,815		$	16,741		$	11,880		$	8,717		$	18,535		$	69,688
Loans	13,245			16,473			11,260			7,677			—			48,655
Deposits	21,788			17,500			10,907			7,240			416			57,851

Statistical data:
Return on average assets (a)	1.42		%	1.47		%	0.87		%	2.26		%	N/M			0.78		%
Efficiency ratio (b)	55.18			45.74			58.32			60.23			N/M			66.25


(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 (fully taxable equivalent basis) and noninterest income excluding net securities gains.

N/M – not meaningful