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Business Segment Information
 9 Months Ended
Sep. 30, 2018
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. 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. During the third quarter 2018, the Small Business component was reclassified from Retail Bank to Business Bank. For comparability purposes, amounts in all periods are based on business unit structure and methodologies in effect at September 30, 2018.
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 small and 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 a full range of personal financial services, consisting of consumer lending, consumer deposit gathering and mortgage loan origination. 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 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 23 to the consolidated financial statements in the Corporation's 2017 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, 2018
 
 
 
 
 
Earnings summary:
 
 
 
 
 
 
 
 
 
 
 
Net interest income (expense)
$
413

 
$
141

 
$
46

 
$
(16
)
 
$
15

 
$
599

Provision for credit losses
(1
)
 
1

 
2

 
—

 
(2
)
 
—

Noninterest income
137

 
35

 
66

 
(7
)
 
3

 
234

Noninterest expenses
210

 
153

 
72

 
(1
)
 
18

 
452

Provision (benefit) for income taxes
77

 
5

 
9

 
(8
)
 
(20
)
(a)
63

Net income (loss)
$
264

 
$
17

 
$
29

 
$
(14
)
 
$
22

 
$
318

Net credit-related charge-offs
$
14

 
$
—

 
$
1

 
$
—

 
$
—

 
$
15

 
 
 
 
 
 
 
 
 
 
 
 
Selected average balances:
 
 
 
 
 
 
 
 
 
 
 
Assets
$
43,165

 
$
2,621

 
$
5,068

 
$
13,696

 
$
6,660

 
$
71,210

Loans
41,591

 
2,057

 
4,936

 
—

 
—

 
48,584

Deposits
30,286

 
20,765

 
3,988

 
929

 
125

 
56,093

 
 
 
 
 
 
 
 
 
 
 
 
Statistical data:
 
 
 
 
 
 
 
 
 
 
 
Return on average assets (b)
2.43
%
 
0.31
%
 
2.28
%
 
N/M

 
N/M

 
1.77
%
Efficiency ratio (c)
38.24

 
86.81

 
63.93

 
N/M

 
N/M

 
52.93

(dollar amounts in millions)
Business
Bank
 
Retail
Bank
 
Wealth Management
 
Finance
 
Other
 
Total
Three Months Ended September 30, 2017
 
 
 
 
 
Earnings summary:
 
 
 
 
 
 
 
 
 
 
 
Net interest income (expense)
$
397

 
$
118

 
$
45

 
$
(24
)
 
$
10

 
$
546

Provision for credit losses
12

 
4

 
9

 
—

 
(1
)
 
24

Noninterest income
158

 
39

 
62

 
13

 
3

 
275

Noninterest expenses
227

 
156

 
70

 
(1
)
 
11

 
463

Provision (benefit) for income taxes
109

 
(1
)
 
10

 
(8
)
 
(2
)
(a)
108

Net income (loss)
$
207

 
$
(2
)
 
$
18

 
$
(2
)
 
$
5

 
$
226

Net credit-related charge-offs (recoveries)
$
27

 
$
—

 
$
(2
)
 
$
—

 
$
—

 
$
25

 
 
 
 
 
 
 
 
 
 
 
 
Selected average balances:
 
 
 
 
 
 
 
 
 
 
 
Assets
$
42,749

 
$
2,623

 
$
5,416

 
$
13,996

 
$
6,467

 
$
71,251

Loans
41,334

 
2,059

 
5,270

 
—

 
—

 
48,663

Deposits
31,251

 
20,782

 
4,054

 
270

 
136

 
56,493

 
 
 
 
 
 
 
 
 
 
 
 
Statistical data:
 
 
 
 
 
 
 
 
 
 
 
Return on average assets (b)
1.92
%
 
(0.03
)%
 
1.30
%
 
N/M

 
N/M

 
1.25
%
Efficiency ratio (c)
40.88

 
99.05

 
64.96

 
N/M

 
N/M

 
56.33

(a)
Included discrete tax benefits of $23 million and $2 million for the three months ended September 30, 2018 and 2017, respectively.
(b)
Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity.
(c)
Noninterest expenses as a percentage of the sum of net interest income and noninterest income excluding gains (losses) from securities and a derivative contract tied to the conversion rate of Visa Class B shares.
N/M – not meaningful


(dollar amounts in millions)
Business
Bank
 
Retail
Bank
 
Wealth Management
 
Finance
 
Other
 
Total
Nine Months Ended September 30, 2018
 
 
 
 
 
Earnings summary:
 
 
 
 
 
 
 
 
 
 
 
Net interest income (expense)
$
1,200

 
$
402

 
$
133

 
$
(37
)
 
$
40

 
$
1,738

Provision for credit losses
(9
)
 
(2
)
 
(1
)
 
—

 
(5
)
 
(17
)
Noninterest income
403

 
100

 
201

 
16

 
6

 
726

Noninterest expenses
635

 
450

 
218

 
(3
)
 
46

 
1,346

Provision (benefit) for income taxes
222

 
12

 
29

 
(13
)
 
(40
)
(a)
210

Net income (loss)
$
755

 
$
42

 
$
88

 
$
(5
)
 
$
45

 
$
925

Net credit-related charge-offs
$
40

 
$
—

 
$
—

 
$
—

 
$
—

 
$
40

 
 
 
 
 
 
 
 
 
 
 
 
Selected average balances:
 
 
 
 
 
 
 
 
 
 
 
Assets
$
43,205

 
$
2,629

 
$
5,233

 
$
13,736

 
$
5,886

 
$
70,689

Loans
41,580

 
2,062

 
5,102

 
—

 
—

 
48,744

Deposits
30,168

 
20,888

 
3,879

 
949

 
120

 
56,004

 
 
 
 
 
 
 
 
 
 
 
 
Statistical data:
 
 
 
 
 
 
 
 
 
 
 
Return on average assets (b)
2.34
%
 
0.26
%
 
2.26
%
 
N/M

 
N/M

 
1.75
%
Efficiency ratio (c)
39.59

 
88.81

 
65.51

 
N/M

 
N/M

 
54.12

(dollar amounts in millions)
Business
Bank
 
Retail
Bank
 
Wealth Management
 
Finance
 
Other
 
Total
Nine Months Ended September 30, 2017
 
 
 
 
 
Earnings summary:
 
 
 
 
 
 
 
 
 
 
 
Net interest income (expense)
$
1,119

 
$
330

 
$
125

 
$
(85
)
 
$
27

 
$
1,516

Provision for credit losses
52

 
3

 
6

 
—

 
(4
)
 
57

Noninterest income
473

 
116

 
191

 
34

 
8

 
822

Noninterest expenses
679

 
456

 
211

 
(3
)
 
34

 
1,377

Provision (benefit) for income taxes
300

 
(5
)
 
36

 
(27
)
 
(31
)
(a)
273

Net income (loss)
$
561

 
$
(8
)
 
$
63

 
$
(21
)
 
$
36

 
$
631

Net credit-related charge-offs (recoveries)
$
79

 
$
1

 
$
(4
)
 
$
—

 
$
—

 
$
76

 
 
 
 
 
 
 
 
 
 
 
 
Selected average balances:
 
 
 
 
 
 
 
 
 
 
 
Assets
$
42,496

 
$
2,625

 
$
5,418

 
$
13,959

 
$
6,972

 
$
71,470

Loans
41,109

 
2,056

 
5,266

 
—

 
—

 
48,431

Deposits
31,995

 
20,720

 
4,046

 
189

 
178

 
57,128

 
 
 
 
 
 
 
 
 
 
 
 
Statistical data:
 
 
 
 
 
 
 
 
 
 
 
Return on average assets (b)
1.77
%
 
(0.05
)%
 
1.55
%
 
N/M

 
N/M

 
1.18
%
Efficiency ratio (c)
42.65

 
N/M
 
66.76

 
N/M

 
N/M

 
58.82

(a)
Included discrete tax benefits of $48 million and $31 million for the nine months ended September 30, 2018 and 2017, respectively.
(b)
Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity.
(c)
Noninterest expenses as a percentage of the sum of net interest income and noninterest income excluding gains (losses) from securities and a derivative contract tied to the conversion rate of Visa Class B shares.
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, 2018.
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, 2018
Earnings summary:
 
 
 
 
 
 
 
 
 
 
 
Net interest income (expense)
$
185

 
$
199

 
$
121

 
$
95

 
$
(1
)
 
$
599

Provision for credit losses
4

 
3

 
(9
)
 
4

 
(2
)
 
—

Noninterest income
75

 
43

 
33

 
86

 
(3
)
 
234

Noninterest expenses
143

 
104

 
90

 
98

 
17

 
452

Provision (benefit) for income taxes
25

 
34

 
16

 
15

 
(27
)
(a)
63

Net income
$
88

 
$
101

 
$
57

 
$
64

 
$
8

 
$
318

Net credit-related charge-offs (recoveries)
$
8

 
$
5

 
$
4

 
$
(2
)
 
$
—

 
$
15

 
 
 
 
 
 
 
 
 
 
 
 
Selected average balances:
 
 
 
 
 
 
 
 
 
 
 
Assets
$
13,055

 
$
18,336

 
$
10,271

 
$
9,193

 
$
20,355

 
$
71,210

Loans
12,424

 
18,074

 
9,702

 
8,384

 
—

 
48,584

Deposits
20,721

 
16,894

 
8,904

 
8,520

 
1,054

 
56,093

 
 
 
 
 
 
 
 
 
 
 
 
Statistical data:
 
 
 
 
 
 
 
 
 
 
 
Return on average assets (b)
1.63
%
 
2.18
%
 
2.18
%
 
2.75
%
 
N/M

 
1.77
%
Efficiency ratio (c)
54.90

 
43.12

 
58.05

 
53.97

 
N/M

 
52.93

(dollar amounts in millions)
Michigan
 
California
 
Texas
 
Other
Markets
 
Finance
& Other
 
Total
Three Months Ended September 30, 2017
Earnings summary:
 
 
 
 
 
 
 
 
 
 
 
Net interest income (expense)
$
170

 
$
184

 
$
122

 
$
84

 
$
(14
)
 
$
546

Provision for credit losses
8

 
25

 
(22
)
 
14

 
(1
)
 
24

Noninterest income
79

 
41

 
33

 
107

 
15

 
275

Noninterest expenses
144

 
103

 
92

 
114

 
10

 
463

Provision (benefit) for income taxes
34

 
37

 
31

 
17

 
(11
)
(a)
108

Net income
$
63

 
$
60

 
$
54

 
$
46

 
$
3

 
$
226

Net credit-related charge-offs
$
2

 
$
10

 
$
9

 
$
4

 
$
—

 
$
25

 

 
 
 
 
 
 
 
 
 
 
Selected average balances:

 
 
 
 
 
 
 
 
 
 
Assets
$
13,367

 
$
18,161

 
$
10,435

 
$
8,825

 
$
20,463

 
$
71,251

Loans
12,612

 
17,916

 
9,959

 
8,176

 
—

 
48,663

Deposits
21,641

 
17,316

 
9,400

 
7,730

 
406

 
56,493

 

 
 
 
 
 
 
 
 
 
 
Statistical data:

 
 
 
 
 
 
 
 
 
 
Return on average assets (b)
1.11
%
 
1.31
%
 
2.00
%
 
2.07
%
 
N/M

 
1.25
%
Efficiency ratio (c)
57.78

 
45.62

 
59.46

 
59.82

 
N/M

 
56.33

(a)
Included discrete tax benefits of $23 million and $2 million for the three months ended September 30, 2018 and 2017, respectively.
(b)
Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity.
(c)
Noninterest expenses as a percentage of the sum of net interest income and noninterest income excluding gains (losses) from securities and a derivative contract tied to the conversion rate of Visa Class B shares.
N/M – not meaningful
(dollar amounts in millions)
Michigan
 
California
 
Texas
 
Other
Markets
 
Finance
& Other
 
Total
Nine Months Ended September 30, 2018
Earnings summary:
 
 
 
 
 
 
 
 
 
 
 
Net interest income
$
540

 
$
582

 
$
353

 
$
260

 
$
3

 
$
1,738

Provision for credit losses
38

 
(5
)
 
(37
)
 
(9
)
 
(4
)
 
(17
)
Noninterest income
221

 
124

 
94

 
264

 
23

 
726

Noninterest expenses
431

 
317

 
273

 
282

 
43

 
1,346

Provision (benefit) for income taxes
67

 
101

 
48

 
47

 
(53
)
(a)
210

Net income
$
225

 
$
293

 
$
163

 
$
204

 
$
40

 
$
925

Net credit-related charge-offs
$
7

 
$
18

 
$
11

 
$
4

 
$
—

 
$
40

 
 
 
 
 
 
 
 
 
 
 
 
Selected average balances:
 
 
 
 
 
 
 
 
 
 
 
Assets
$
13,292

 
$
18,530

 
$
10,361

 
$
8,884

 
$
19,622

 
$
70,689

Loans
12,557

 
18,284

 
9,797

 
8,106

 
—

 
48,744

Deposits
20,949

 
16,875

 
9,018

 
8,093

 
1,069

 
56,004

 
 
 
 
 
 
 
 
 
 
 
 
Statistical data:
 
 
 
 
 
 
 
 
 
 
 
Return on average assets (b)
1.39
%
 
2.12
%
 
2.10
%
 
3.06
%
 
N/M

 
1.75
%
Efficiency ratio (c)
56.42

 
44.76

 
60.90

 
53.91
%
 
N/M

 
54.12

(dollar amounts in millions)
Michigan
 
California
 
Texas
 
Other
Markets
 
Finance
& Other
 
Total
Nine Months Ended September 30, 2017
Earnings summary:
 
 
 
 
 
 
 
 
 
 
 
Net interest income (expense)
$
483

 
$
521

 
$
337

 
$
234

 
$
(59
)
 
$
1,516

Provision for credit losses
3

 
71

 
(45
)
 
32

 
(4
)
 
57

Noninterest income
242

 
128

 
98

 
312

 
42

 
822

Noninterest expenses
438

 
297

 
281

 
330

 
31

 
1,377

Provision (benefit) for income taxes
101

 
108

 
73

 
50

 
(59
)
(a)
273

Net income
$
183

 
$
173

 
$
126

 
$
134

 
$
15

 
$
631

Net credit-related charge-offs (recoveries)
$
(2
)
 
$
28

 
$
36

 
$
14

 
$
—

 
$
76

 
 
 
 
 
 
 
 
 
 
 
 
Selected average balances:
 
 
 
 
 
 
 
 
 
 
 
Assets
$
13,331

 
$
18,198

 
$
10,490

 
$
8,520

 
$
20,931

 
$
71,470

Loans
12,637

 
17,930

 
10,028

 
7,836

 
—

 
48,431

Deposits
21,827

 
17,301

 
9,712

 
7,920

 
368

 
57,128

 
 
 
 
 
 
 
 
 
 
 
 
Statistical data:
 
 
 
 
 
 
 
 
 
 
 
Return on average assets (b)
1.08
%
 
1.26
%
 
1.53
%
 
2.07
%
 
N/M

 
1.18
%
Efficiency ratio (c)
60.29

 
45.78

 
64.44

 
60.49
%
 
N/M

 
58.82

(a)
Included discrete tax benefits of $48 million and $31 million for the nine months ended September 30, 2018 and 2017, respectively.
(b)
Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity.
(c)
Noninterest expenses as a percentage of the sum of net interest income and noninterest income excluding gains (losses) from securities and a derivative contract tied to the conversion rate of Visa Class B shares.
N/M – not meaningful