Business Segments

6 Months Ended

Jun. 30, 2011

Business Segments

20. Business Segments

The Bancorp reports on four business segments: Commercial Banking, Branch Banking, Consumer Lending and Investment Advisors. Results of the Bancorp’s business segments are presented based on its management structure and management accounting practices. The structure and accounting practices are specific to the Bancorp; therefore, the financial results of the Bancorp’s business segments are not necessarily comparable with similar information for other financial institutions. The Bancorp refines its methodologies from time to time as management accounting practices are improved and businesses change.

The Bancorp manages interest rate risk centrally at the corporate level by employing a FTP methodology. This methodology insulates the business segments from interest rate volatility, enabling them to focus on serving customers through loan originations and deposit taking. The FTP system assigns charge rates and credit rates to classes of assets and liabilities, respectively, based on expected duration and the LIBOR swap curve. Matching duration allocates interest income and interest expense to each segment so its resulting net interest income is insulated from interest rate risk. In a rising rate environment, the Bancorp benefits from the widening spread between deposit costs and wholesale funding costs. However, the Bancorp’s FTP system credits this benefit to deposit-providing businesses, such as Branch Banking and Investment Advisors, on a duration-adjusted basis. The net impact of the FTP methodology is captured in General Corporate and Other.

The business segments are charged provision expense based on the actual net charge-offs experienced by the loans owned by each segment. Provision expense attributable to loan growth and changes in factors in the ALLL are captured in General Corporate and Other. The financial results of the business segments include allocations for shared services and headquarters expenses. Even with these allocations, the financial results are not necessarily indicative of the business segments’ financial condition and results of operations as if they existed as independent entities. Additionally, the business segments form synergies by taking advantage of cross-sell opportunities and when funding operations, by accessing the capital markets as a collective unit.

	Commercial			Branch		Consumer		Investment		General
($ in millions, except per share data)	Banking			Banking		Lending		Advisors		Corporate			Eliminations			Total
Three months ended June 30, 2011
Net interest income (a)	$	339			359		81		28		62			—			869
Provision for loan and lease losses		147			98		55		4		(191	)		—			113
Net interest income after provision for loan and lease losses		192			261		26		24		253			—			756
Noninterest income:
Mortgage banking net revenue		—			2		160		—		—			—			162
Service charges on deposits		52			73		—		1		—			—			126
Investment advisory revenue		3			29		—		92		—			(29	)(b)		95
Corporate banking revenue		90			4		—		1		—						95
Card and processing revenue		10			86		—		1		(8	)		—			89
Other noninterest income		8			19		7		—		49			—			83
Securities gains, net		—			—		—		—		6			—			6
Total noninterest income		163			213		167		95		47			(29	)		656
Noninterest expense:
Salaries, wages and incentives		58			116		31		36		124			—			365
Employee benefits		10			33		8		6		22			—			79
Net occupancy expense		5			46		2		3		19			—			75
Technology and communications		3			1		1		—		43			—			48
Card and processing expense		1			28		—		—		—			—			29
Equipment expense		1			13		—		—		14			—			28
Other noninterest expense		202			156		105		59		(216	)		(29	)		277
Total noninterest expense		280			393		147		104		6			(29	)		901
Income before income taxes		75			81		46		15		294			—			511
Applicable income tax (benefit) expense(a)		(11	)		29		16		5		135			—			174
Net income		86			52		30		10		159			—			337
Less: Net income attributable to noncontrolling interest		—			—		—		—		—			—			—
Net income attributable to Bancorp		86			52		30		10		159			—			337
Dividends on preferred stock		—			—		—		—		9			—			9
Net income available to common shareholders	$	86			52		30		10		150			—			328
Total goodwill	$	613			1,656		—		148		—			—			2,417
Total assets	$	43,567			46,976		22,044		6,833		(8,615	)		—			110,805

(a) Includes FTE adjustments of $5.

(b) Revenue sharing agreements between Investment Advisors and Branch Banking are eliminated in the Condensed Consolidated Statements of Income.

	Commercial		Branch		Consumer			Investment		General
($ in millions, except per share data)	Banking		Banking		Lending			Advisors		Corporate			Eliminations			Total
Three months ended June 30, 2010
Net interest income (a)	$	390		385		93			36		(17	)		—			887
Provision for loan and lease losses		188		125		114			8		(110	)		—			325
Net interest income (loss) after provision for loan and lease losses		202		260		(21	)		28		93			—			562
Noninterest income:
Mortgage banking net revenue		—		3		111			—		—			—			114
Service charges on deposits		47		101		—			2		(1	)		—			149
Investment advisory revenue		3		25		—			84		—			(25	)(b)		87
Corporate banking revenue		89		4		—			1		(1	)		—			93
Card and processing revenue		8		79		—			—		(3	)		—			84
Other noninterest income		17		17		11			—		40			—			85
Securities gains, net		—		—		—			—		8			—			8
Total noninterest income		164		229		122			87		43			(25	)		620
Noninterest expense:
Salaries, wages and incentives		53		112		40			33		118			—			356
Employee benefits		9		31		8			6		19			—			73
Net occupancy expense		4		43		2			2		22			—			73
Technology and communications		3		4		—			1		37			—			45
Card and processing expense		—		30		—			—		1			—			31
Equipment expense		1		12		—			—		18			—			31
Other noninterest expense		171		165		82			58		(125	)		(25	)		326
Total noninterest expense		241		397		132			100		90			(25	)		935
Income (loss) before income taxes		125		92		(31	)		15		46			—			247
Applicable income tax (benefit) expense (a)		9		34		(13	)		5		20			—			55
Net income (loss)		116		58		(18	)		10		26			—			192
Less: Net income attributable to noncontrolling interest		—		—		—			—		—			—			—
Net income (loss) attributable to Bancorp		116		58		(18	)		10		26			—			192
Dividends on preferred stock		—		—		—			—		62			—			62
Net income (loss) available to common shareholders	$	116		58		(18	)		10		(36	)		—			130
Total goodwill	$	613		1,656		—			148		—			—			2,417
Total assets	$	43,008		47,861		21,738			6,451		(7,033	)		—			112,025

(a) Includes FTE adjustments of $5.

(b) Revenue sharing agreements between Investment Advisors and Branch Banking are eliminated in the Consolidated Statements of Income.

	Commercial			Branch		Consumer		Investment		General
($ in millions, except per share data)	Banking			Banking		Lending		Advisors		Corporate			Eliminations			Total
Six months ended June 30, 2011
Net interest income(a)	$	671			698		171		56		156			—			1,752
Provision for loan and lease losses		299			214		149		9		(390	)		—			281
Net interest income after provision for loan and lease losses		372			484		22		47		546			—			1,471
Noninterest income:
Mortgage banking net revenue		—			4		259		1		—			—			264
Service charges on deposits		101			147		—		2		—			—			250
Investment advisory revenue		6			58		—		187		—			(58	)(b)		193
Corporate banking revenue		172			7		—		1		1			—			181
Card and processing revenue		19			163		—		2		(15	)		—			169
Other noninterest income		40			38		17		—		69			—			164
Securities gains, net		—			—		—		—		14			—			14
Securities gains, net—non-qualifying hedges on mortgage servicing rights		—			—		5		—		—			—			5
Total noninterest income		338			417		281		193		69			(58	)		1,240
Noninterest expense:
Salaries, wages and incentives		111			230		64		70		241			—			716
Employee benefits		26			68		19		15		48			—			176
Net occupancy expense		10			92		4		5		41			—			152
Technology and communications		6			2		1		1		83			—			93
Card and processing expense		2			55		—		—		1			—			58
Equipment expense		1			25		—		—		31			—			57
Other noninterest expense		397			321		208		121		(422	)		(58	)		567
Total noninterest expense		553			793		296		212		23			(58	)		1,819
Income before income taxes		157			108		7		28		592			—			892
Applicable income tax expense (benefit) (a)		(17	)		38		2		10		257			—			290
Net income		174			70		5		18		335			—			602
Less: Net income attributable to noncontrolling interest		—			—		—		—		—			—			—
Net income attributable to Bancorp		174			70		5		18		335			—			602
Dividends on preferred stock		—			—		—		—		185			—			185
Net income available to common shareholders	$	174			70		5		18		150			—			417
Total goodwill	$	613			1,656		—		148		—			—			2,417
Total assets	$	43,567			46,976		22,044		6,833		(8,615	)		—			110,805

(a) Includes FTE adjustments of $9.

(b) Revenue sharing agreements between Investment Advisors and Branch Banking are eliminated in the Condensed Consolidated Statements of Income.

	Commercial			Branch		Consumer			Investment		General
($ in millions, except per share data)	Banking			Banking		Lending			Advisors		Corporate			Eliminations			Total
Six months ended June 30, 2010
Net interest income (a)	$	767			770		197			74		(20	)		—			1,788
Provision for loan and lease losses		466			282		246			21		(100	)		—			915
Net interest income (loss) after provision for loan and lease losses		301			488		(49	)		53		80			—			873
Noninterest income:
Mortgage banking net revenue		—			10		255			1		—			—			266
Service charges on deposits		95			193		—			3		—			—			291
Investment advisory revenue		5			51		—			171		—			(50	)(b)		177
Corporate banking revenue		165			7		—			2		—			—			174
Card and processing revenue		16			148		—			1		(7	)		—			158
Other noninterest income		45			34		20			—		61			—			160
Securities gains, net		—			—		—			—		21			—			21
Total noninterest income		326			443		275			178		75			(50	)		1,247
Noninterest expense:
Salaries, wages and incentives		104			218		69			63		232			—			686
Employee benefits		22			61		15			14		47			—			159
Net occupancy expense		8			87		3			5		47			—			150
Technology and communications		6			8		1			1		74			—			90
Card and processing expense		1			54		—			—		1			—			56
Equipment expense		1			24		—			—		35			—			60
Other noninterest expense		337			322		158			114		(191	)		(50	)		690
Total noninterest expense		479			774		246			197		245			(50	)		1,891
Income (loss) before income taxes		148			157		(20	)		34		(90	)		—			229
Applicable income tax expense (benefit) (a)		(19	)		58		(10	)		12		6			—			47
Net income (loss)		167			99		(10	)		22		(96	)		—			182
Less: Net income attributable to noncontrolling interest		—			—		—			—		—			—			—
Net income (loss) attributable to Bancorp		167			99		(10	)		22		(96	)		—			182
Dividends on preferred stock		—			—		—			—		125			—			125
Net income (loss) available to common shareholders	$	167			99		(10	)		22		(221	)		—			57
Total goodwill	$	613			1,656		—			148		—			—			2,417
Total assets	$	43,008			47,861		21,738			6,451		(7,033	)					112,025

(a) Includes FTE adjustments of $9.

(b) Revenue sharing agreements between Investment Advisors and Branch Banking are eliminated in the Condensed Consolidated Statements of Income.