Business Segments

3 Months Ended

Mar. 31, 2012

Business Segments

19.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's 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 Bancorp adjusts the FTP charge and credit rates as dictated by changes in interest rates for various interest-earning assets and liabilities and by the review of the estimated durations for the indeterminate-lived deposits. The credit rate provided for DDAs is reviewed annually based upon the account type, its estimated duration and the corresponding fed funds, LIBOR or swap rate. The credit rates for several deposit products were reset January 1, 2012 to reflect the current market rates and updated market assumptions. These rates were lower than those in place during 2011, thus net interest income for deposit providing businesses was negatively impacted during 2012.

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 March 31, 2012
Net interest income	$	348	335	80	27	108	-	898
Provision for loan and lease losses		76	86	54	3	(128)	-	91
Net interest income after provision for loan
and lease losses		272	249	26	24	236	-	807
Noninterest income:
Mortgage banking net revenue		-	3	201	-	-	-	204
Service charges on deposits		54	74	-	1	-	-	129
Corporate banking revenue		93	3	-	1	-		97
Investment advisory revenue		2	31	-	94	-	(31)(a)	96
Card and processing revenue		12	60	-	1	(14)	-	59
Other noninterest income		16	19	10	-	130	-	175
Securities gains, net		-	-	-	-	9	-	9
Securities gains, net - non-qualifying hedges on
mortgage servicing rights		-	-	-	-	-	-	-
Total noninterest income		177	190	211	97	125	(31)	769
Noninterest expense:
Salaries, wages and incentives		58	112	44	35	150	-	399
Employee benefits		16	37	12	9	38	-	112
Net occupancy expense		5	47	2	3	20	-	77
Technology and communications		2	1	-	-	44	-	47
Card and processing expense		1	28	-	-	1	-	30
Equipment expense		1	13	-	-	13	-	27
Other noninterest expense		205	156	104	63	(216)	(31)	281
Total noninterest expense		288	394	162	110	50	(31)	973
Income before income taxes		161	45	75	11	311	-	603
Applicable income tax expense		19	16	27	4	107	-	173
Net income		142	29	48	7	204	-	430
Less: Net income attributable to noncontrolling interests		-	-	-	-	-	-	-
Net income attributable to Bancorp		142	29	48	7	204	-	430
Dividends on preferred stock		-	-	-	-	9	-	9
Net income available to common shareholders	$	142	29	48	7	195	-	421
Total goodwill	$	613	1,656	-	148	-	-	2,417
Total assets	$	46,388	48,544	23,155	7,684	(9,024)	-	116,747

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 March 31, 2011
Net interest income	$	329	339	90	28	93	-	879
Provision for loan and lease losses		152	116	94	5	(199)	-	168
Net interest income (loss) after provision for loan
and lease losses		177	223	(4)	23	292	-	711
Noninterest income:
Mortgage banking net revenue		-	3	99	-	-	-	102
Service charges on deposits		50	73	-	1	-	-	124
Corporate banking revenue		81	3	-	1	1	-	86
Investment advisory revenue		3	28	-	95	-	(28)(a)	98
Card and processing revenue		9	77	-	1	(7)	-	80
Other noninterest income		32	20	10	-	19	-	81
Securities gains, net		-	-	-	-	8	-	8
Securities gains, net - non-qualifying hedges on
mortgage servicing rights		-	-	5	-	-	-	5
Total noninterest income		175	204	114	98	21	(28)	584
Noninterest expense:
Salaries, wages and incentives		45	114	33	34	125	-	351
Employee benefits		13	34	11	9	30	-	97
Net occupancy expense		5	46	2	2	22	-	77
Technology and communications		3	1	-	-	41	-	45
Card and processing expense		1	28	-	-	-	-	29
Equipment expense		-	13	-	-	16		29
Other noninterest expense		201	164	104	62	(213)	(28)	290
Total noninterest expense		268	400	150	107	21	(28)	918
Income (loss) before income taxes		84	27	(40)	14	292	-	377
Applicable income tax (benefit) expense		(5)	9	(14)	5	117	-	112
Net income (loss)		89	18	(26)	9	175	-	265
Less: Net income attributable to noncontrolling interest		-	-	-	-	-	-	-
Net income (loss) attributable to Bancorp		89	18	(26)	9	175	-	265
Dividends on preferred stock		-	-	-	-	177	-	177
Net income (loss) available to common shareholders	$	89	18	(26)	9	(2)	-	88
Total goodwill	$	613	1,656	-	148	-	-	2,417
Total assets	$	43,461	47,205	21,982	6,794	(8,957)	-	110,485

Revenue sharing agreements between Investment Advisors and Branch Banking are eliminated in theCondensed Consolidated Statements of Income.