Business Segments

9 Months Ended

Sep. 30, 2011

21. 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 September 30, 2011
Net interest income ^(a)	$	345	359	85	29	84	-	902
Provision for loan and lease losses		104	87	55	16	(175)	-	87
Net interest income after provision for loan
and lease losses		241	272	30	13	259	-	815
Noninterest income:
Mortgage banking net revenue		-	3	175	-	-	-	178
Service charges on deposits		53	81	-	1	(1)	-	134
Investment advisory revenue		3	30	-	89	-	(30)^(b)	92
Corporate banking revenue		82	4	-	1	-		87
Card and processing revenue		10	78	-	1	(11)	-	78
Other noninterest income		11	19	10	-	24	-	64
Securities gains, net		-	-	-	-	26	-	26
Securities gains, net - non-qualifying hedges on
mortgage servicing rights		-	-	6	-	-	-	6
Total noninterest income		159	215	191	92	38	(30)	665
Noninterest expense:
Salaries, wages and incentives		60	115	37	34	123	-	369
Employee benefits		9	31	8	6	16	-	70
Net occupancy expense		5	46	2	3	19	-	75
Technology and communications		2	1	-	-	45		48
Card and processing expense		1	33	-	-	-	-	34
Equipment expense		1	13	-	-	14		28
Other noninterest expense		184	160	111	62	(165)	(30)	322
Total noninterest expense		262	399	158	105	52	(30)	946
Income before income taxes		138	88	63	-	245	-	534
Applicable income tax expense^(a)		10	31	22	-	90	-	153
Net income		128	57	41	-	155	-	381
Less: Net income attributable to noncontrolling interest		-	-	-	-	-	-	-
Net income attributable to Bancorp		128	57	41	-	155	-	381
Dividends on preferred stock		-	-	-	-	8	-	8
Net income available to common shareholders	$	128	57	41	-	147	-	373
Total goodwill	$	613	1,656	-	148	-	-	2,417
Total assets	$	44,622	46,727	23,213	7,358	(7,015)	-	114,905

(a) Includes FTE adjustments of $4.

(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 September 30, 2010
Net interest income ^(a)	$	389	384	102	35	6	-	916
Provision for loan and lease losses		559	153	232	12	(499)	-	457
Net interest income (loss) after provision for loan
and lease losses		(170)	231	(130)	23	505	-	459
Noninterest income:
Mortgage banking net revenue		-	8	224	-	-	-	232
Service charges on deposits		50	92	-	1	-	-	143
Investment advisory revenue		5	27	-	85	-	(27)^(b)	90
Corporate banking revenue		81	4	-	2	(1)	-	86
Card and processing revenue		9	73	-	-	(5)	-	77
Other noninterest income		(6)	18	6	-	177	-	195
Securities gains, net		-	-	-	-	4	-	4
Total noninterest income		139	222	230	88	175	(27)	827
Noninterest expense:
Salaries, wages and incentives		52	110	44	33	121	-	360
Employee benefits		7	27	7	5	36	-	82
Net occupancy expense		4	43	2	2	21	-	72
Technology and communications		4	4	1	-	39	-	48
Card and processing expense		-	26	-	-	-	-	26
Equipment expense		1	12	-	-	17	-	30
Other noninterest expense		178	167	91	60	(108)	(27)	361
Total noninterest expense		246	389	145	100	126	(27)	979
Income (loss) before income taxes		(277)	64	(45)	11	554	-	307
Applicable income tax (benefit) expense ^(a)		(132)	25	(18)	4	190	-	69
Net income (loss)		(145)	39	(27)	7	364	-	238
Less: Net income attributable to noncontrolling interest		-	-	-	-	-	-	-
Net income (loss) attributable to Bancorp		(145)	39	(27)	7	364	-	238
Dividends on preferred stock		-	-	-	-	63	-	63
Net income (loss) available to common shareholders	$	(145)	39	(27)	7	301	-	175
Total goodwill	$	613	1,656	-	148	-	-	2,417
Total assets	$	43,403	46,479	22,227	6,296	(6,083)	-	112,322

(a) Includes FTE adjustments of $4.

(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
Nine months ended September 30, 2011
Net interest income^(a)	$	1,015	1,057	256	85	242	-	2,655
Provision for loan and lease losses		402	300	205	25	(564)	-	368
Net interest income after provision for loan
and lease losses		613	757	51	60	806	-	2,287
Noninterest income:
Mortgage banking net revenue		-	6	435	1	-	-	442
Service charges on deposits		154	228	-	3	(1)	-	384
Investment advisory revenue		9	89	-	275	-	(88)^(b)	285
Corporate banking revenue		254	11	-	2	1	-	268
Card and processing revenue		29	241	-	3	(25)	-	248
Other noninterest income		51	57	26	-	92	-	226
Securities gains, net		-	-	-	-	40	-	40
Securities gains, net - non-qualifying hedges on
mortgage servicing rights		-	-	12	-	-	-	12
Total noninterest income		497	632	473	284	107	(88)	1,905
Noninterest expense:
Salaries, wages and incentives		170	344	101	104	366	-	1,085
Employee benefits		35	100	26	21	64	-	246
Net occupancy expense		15	138	6	8	59	-	226
Technology and communications		8	4	1	1	126	-	140
Card and processing expense		4	88	-	-	-	-	92
Equipment expense		2	38	1	1	43	-	85
Other noninterest expense		581	480	319	181	(582)	(88)	891
Total noninterest expense		815	1,192	454	316	76	(88)	2,765
Income before income taxes		295	197	70	28	837	-	1,427
Applicable income tax expense (benefit) ^(a)		(7)	69	24	10	347	-	443
Net income		302	128	46	18	490	-	984
Less: Net income attributable to noncontrolling interest		-	-	-	-	1	-	1
Net income attributable to Bancorp		302	128	46	18	489	-	983
Dividends on preferred stock		-	-	-	-	194	-	194
Net income available to common shareholders	$	302	128	46	18	295	-	789
Total goodwill	$	613	1,656	-	148	-	-	2,417
Total assets	$	44,622	46,727	23,213	7,358	(7,015)	-	114,905

(a) Includes FTE adjustments of $14.

(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
Nine months ended September 30, 2010
Net interest income ^(a)	$	1,156	1,155	299	109	(16)	-	2,703
Provision for loan and lease losses		1,025	436	478	33	(600)	-	1,372
Net interest income (loss) after provision for loan
and lease losses		131	719	(179)	76	584	-	1,331
Noninterest income:
Mortgage banking net revenue		-	18	479	1	-	-	498
Service charges on deposits		145	285	-	5	-	-	435
Investment advisory revenue		11	78	-	256	-	(78)^(b)	267
Corporate banking revenue		248	11	-	2	(1)	-	260
Card and processing revenue		25	220	-	2	(12)	-	235
Other noninterest income		36	54	26	-	238	-	354
Securities gains, net		-	-	-	-	25	-	25
Total noninterest income		465	666	505	266	250	(78)	2,074
Noninterest expense:
Salaries, wages and incentives		156	327	113	95	355	-	1,046
Employee benefits		29	88	22	19	83	-	241
Net occupancy expense		12	130	5	7	68	-	222
Technology and communications		10	12	1	2	113	-	138
Card and processing expense		1	80	-	-	1	-	82
Equipment expense		2	37	1	1	50	-	91
Other noninterest expense		515	489	249	173	(299)	(78)	1,049
Total noninterest expense		725	1,163	391	297	371	(78)	2,869
Income (loss) before income taxes		(129)	222	(65)	45	463	-	536
Applicable income tax expense (benefit) ^(a)		(152)	83	(28)	16	197	-	116
Net income (loss)		23	139	(37)	29	266	-	420
Less: Net income attributable to noncontrolling interest		-	-	-	-	-	-	-
Net income (loss) attributable to Bancorp		23	139	(37)	29	266	-	420
Dividends on preferred stock		-	-	-	-	187	-	187
Net income (loss) available to common shareholders	$	23	139	(37)	29	79	-	233
Total goodwill	$	613	1,656	-	148	-	-	2,417
Total assets	$	43,403	46,479	22,227	6,296	(6,083)	-	112,322

(a) Includes FTE adjustments of $13.

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

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

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