Business Segment Information

6 Months Ended

Jun. 30, 2019

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. For comparability purposes, amounts in all periods are based on business unit structure and methodologies in effect at June 30, 2019.

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 2018 Annual Report.

Business segment financial results are as follows:

	Business Bank			Retail Bank			Wealth Management			Finance			Other				Total
(dollar amounts in millions)
Three Months Ended June 30, 2019
Earnings summary:
Net interest income (expense)	$	420		$	146		$	46		$	(24	)	$	15			$	603
Provision for credit losses	52			1			(5		)	—			(4		)		44
Noninterest income	136			33			68			14			(1		)		250
Noninterest expenses	195			147			67			—			15				424
Provision (benefit) for income taxes	71			7			13			(4		)	—				87
Net income (loss)	$	238		$	24		$	39		$	(6	)	$	3			$	298
Net credit-related charge-offs (recoveries)	$	35		$	—		$	(2	)	$	—		$	—			$	33
Selected average balances:
Assets	$	45,321		$	2,839		$	5,071		$	14,242		$	3,779			$	71,252
Loans	43,926			2,107			4,930			—			—				50,963
Deposits	28,251			20,649			3,740			2,174			181				54,995
Statistical data:
Return on average assets (a)	2.11		%	0.44		%	3.10		%	n/m			n/m				1.68		%
Efficiency ratio (b)	34.98			82.26			58.99			n/m			n/m				49.65
Three Months Ended June 30, 2018
Earnings summary:
Net interest income (expense)	$	405		$	135		$	44		$	(7	)	$	13			$	590
Provision for credit losses	(25		)	(1		)	1			—			(4		)		(29		)
Noninterest income	135			32			67			12			2				248
Noninterest expenses	211			149			75			(1		)	14				448
Provision (benefit) for income taxes	81			4			8			(2		)	2			(c)	93
Net income	$	273		$	15		$	27		$	8		$	3			$	326
Net credit-related (recoveries) charge-offs	$	(4	)	$	—		$	1		$	—		$	—			$	(3	)
Selected average balances:
Assets	$	43,740		$	2,633		$	5,260		$	13,735		$	5,152			$	70,520
Loans	42,041			2,057			5,127			—			—				49,225
Deposits	29,735			21,008			3,852			1,093			142				55,830
Statistical data:
Return on average assets (a)	2.50		%	0.28		%	2.10		%	n/m			n/m				1.85		%
Efficiency ratio (b)	39.12			87.84			66.81			n/m			n/m				53.24

(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 and noninterest income excluding net gains (losses) from securities and a derivative contract tied to the conversion rate of Visa Class B shares.

(c) Included discrete tax benefits of $3 million for second quarter 2018.

n/m – not meaningful

(dollar amounts in millions)	Business Bank			Retail Bank			Wealth Management			Finance			Other				Total
Six Months Ended June 30, 2019
Earnings summary:
Net interest income (expense)	$	832		$	292		$	93		$	(39	)	$	31			$	1,209
Provision for credit losses	46			(3		)	(10		)	—			(2		)		31
Noninterest income	272			64			132			18			2				488
Noninterest expenses	393			292			139			—			33				857
Provision (benefit) for income taxes	153			16			23			(8		)	(12		)	(a)	172
Net income (loss)	$	512		$	51		$	73		$	(13	)	$	14			$	637
Net credit-related charge-offs (recoveries)	$	47		$	—		$	(3	)	$	—		$	—			$	44
Selected average balances:
Assets	$	44,619		$	2,826		$	5,122		$	14,077		$	3,871			$	70,515
Loans	43,236			2,105			4,982			—			—				50,323
Deposits	28,356			20,560			3,770			1,655			157				54,498
Statistical data:
Return on average assets (b)	2.31		%	0.49		%	2.88		%	n/m			n/m				1.82		%
Efficiency ratio (c)	35.61			81.80			61.67			n/m			n/m				50.23
Six Months Ended June 30, 2018
Earnings summary:
Net interest income (expense)	$	786		$	262		$	87		$	(21	)	$	25			$	1,139
Provision for credit losses	(9		)	(3		)	(3		)	—			(2		)		(17		)
Noninterest income	266			65			135			23			3				492
Noninterest expenses	424			297			146			(2		)	29				894
Provision (benefit) for income taxes	146			7			19			(5		)	(20		)	(a)	147
Net income	$	491		$	26		$	60		$	9		$	21			$	607
Net credit-related charge-offs (recoveries)	$	26		$	—		$	(1	)	$	—		$	—			$	25
Selected average balances:
Assets	$	43,226		$	2,632		$	5,316		$	13,757		$	5,492			$	70,423
Loans	41,574			2,065			5,186			—			—				48,825
Deposits	30,107			20,951			3,824			959			118				55,959
Statistical data:
Return on average assets (b)	2.29		%	0.24		%	2.26		%	n/m			n/m				1.74		%
Efficiency ratio (c)	40.30			90.14			66.31			n/m			n/m				54.74

(a) Included discrete tax benefits of $11 million and $25 million for the six months ended June 30, 2019 and 2018, 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 June 30, 2019.

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:

	Michigan			California			Texas			Other Markets			Finance & Other				Total
(dollar amounts in millions)
Three Months Ended June 30, 2019
Earnings summary:
Net interest income (expense)	$	186		$	208		$	124		$	94		$	(9	)		$	603
Provision for credit losses	(10		)	(4		)	49			13			(4		)		44
Noninterest income	72			40			34			91			13				250
Noninterest expenses	134			99			84			92			15				424
Provision (benefit) for income taxes	30			39			6			16			(4		)		87
Net income (loss)	$	104		$	114		$	19		$	64		$	(3	)		$	298
Net credit-related charge-offs	$	—		$	7		$	26		$	—		$	—			$	33
Selected average balances:
Assets	$	13,239		$	19,228		$	11,349		$	9,415		$	18,021			$	71,252
Loans	12,704			18,928			10,692			8,639			—				50,963
Deposits	19,816			16,325			8,670			7,829			2,355				54,995
Statistical data:
Return on average assets (a)	2.01		%	2.37		%	0.69		%	2.76		%	n/m				1.68		%
Efficiency ratio (b)	52.04			39.96			52.86			49.56			n/m				49.65
Three Months Ended June 30, 2018
Earnings summary:
Net interest income	$	181		$	194		$	122		$	87		$	6			$	590
Provision for credit losses	—			(9		)	(15		)	(1		)	(4		)		(29		)
Noninterest income	72			42			30			90			14				248
Noninterest expenses	144			105			92			94			13				448
Provision for income taxes	25			35			17			16			—			(c)	93
Net income	$	84		$	105		$	58		$	68		$	11			$	326
Net credit-related charge-offs (recoveries)	$	—		$	1		$	2		$	(6	)	$	—			$	(3	)
Selected average balances:
Assets	$	13,426		$	18,696		$	10,439		$	9,072		$	18,887			$	70,520
Loans	12,640			18,435			9,862			8,288			—				49,225
Deposits	20,902			16,642			8,967			8,084			1,235				55,830
Statistical data:
Return on average assets (a)	1.55		%	2.25		%	2.22		%	3.03		%	n/m				1.85		%
Efficiency ratio (b)	56.50			44.49			60.22			52.81			n/m				53.24

(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 and noninterest income excluding net gains (losses) from securities and a derivative contract tied to the conversion rate of Visa Class B shares.

(c) Included discrete tax benefits of $3 million for second quarter 2018.

n/m – not meaningful

(dollar amounts in millions)	Michigan			California			Texas			Other Markets			Finance & Other				Total
Six Months Ended June 30, 2019
Earnings summary:
Net interest income (expense)	$	372		$	413		$	247		$	185		$	(8	)		$	1,209
Provision for credit losses	(5		)	(5		)	38			5			(2		)		31
Noninterest income	144			80			66			178			20				488
Noninterest expenses	273			199			169			183			33				857
Provision (benefit) for income taxes	56			76			25			35			(20		)	(a)	172
Net income	$	192		$	223		$	81		$	140		$	1			$	637
Net credit-related charge-offs (recoveries)	$	4		$	4		$	39		$	(3	)	$	—			$	44
Selected average balances:
Assets	$	13,157		$	19,138		$	11,136		$	9,135		$	17,949			$	70,515
Loans	12,631			18,848			10,482			8,362			—				50,323
Deposits	19,854			16,285			8,684			7,863			1,812				54,498
Statistical data:
Return on average assets (b)	1.89		%	2.35		%	1.48		%	3.09		%	n/m				1.82		%
Efficiency ratio (c)	52.85			40.41			53.73			50.46			n/m				50.23
Six Months Ended June 30, 2018
Earnings summary:
Net interest income	$	355		$	382		$	233		$	165		$	4			$	1,139
Provision for credit losses	34			(11		)	(28		)	(10		)	(2		)		(17		)
Noninterest income	146			81			61			178			26				492
Noninterest expenses	288			210			184			185			27				894
Provision (benefit) for income taxes	42			67			32			31			(25		)	(a)	147
Net income	$	137		$	197		$	106		$	137		$	30			$	607
Net credit-related (recoveries) charge-offs	$	(1	)	$	13		$	8		$	5		$	—			$	25
Selected average balances:
Assets	$	13,411		$	18,639		$	10,406		$	8,718		$	19,249			$	70,423
Loans	12,622			18,391			9,846			7,966			—				48,825
Deposits	21,062			16,865			9,077			7,878			1,077				55,959
Statistical data:
Return on average assets (b)	1.26		%	2.12		%	2.06		%	3.17		%	n/m				1.74		%
Efficiency ratio (c)	57.31			45.63			62.41			53.86			n/m				54.74

(a) Included discrete tax benefits of $11 million and $25 million for the six months ended June 30, 2019 and 2018, 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