Business Segments

9 Months Ended

Sep. 30, 2012

Business Segments

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'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 U.S. 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 interest-bearing 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, U.S. swap curve 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 on the loans and leases owned by each segment. Provision expense attributable to loan and leases growth and changes in ALLL factors 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.

						General
		Commercial	Branch	Consumer	Investment	Corporate
($ in millions)		Banking	Banking	Lending	Advisors	and Other	Eliminations	Total
Three months ended September 30, 2012
Net interest income	$	354	344	77	30	98	-	903
Provision for loan and lease losses		45	71	38	3	(92)	-	65
Net interest income after provision for loan
and lease losses		309	273	39	27	190	-	838
Noninterest income:
Mortgage banking net revenue		-	3	197	-	-	-	200
Service charges on deposits		57	70	-	1	-	-	128
Corporate banking revenue		96	4	-	1	-	-	101
Investment advisory revenue		1	33	-	90	-	(32)(a)	92
Card and processing revenue		11	72	-	1	(19)	-	65
Other noninterest income		18	21	10	14	15	-	78
Securities gains, net		-	-	-	-	2	-	2
Securities gains, net - non-qualifying hedges on
mortgage servicing rights		-	-	5	-	-	-	5
Total noninterest income		183	203	212	107	(2)	(32)	671
Noninterest expense:
Salaries, wages and incentives		53	111	49	33	153	-	399
Employee benefits		7	31	9	6	26	-	79
Net occupancy expense		5	47	2	3	19	-	76
Technology and communications		3	1	-	-	45	-	49
Card and processing expense		1	29	-	-	-	-	30
Equipment expense		1	14	-	-	13	-	28
Other noninterest expense		201	172	107	67	(170)	(32)	345
Total noninterest expense		271	405	167	109	86	(32)	1,006
Income before income taxes		221	71	84	25	102	-	503
Applicable income tax expense		39	25	30	9	36	-	139
Net income		182	46	54	16	66	-	364
Less: Net income attributable to noncontrolling interests		-	-	-	-	1	-	1
Net income attributable to Bancorp		182	46	54	16	65	-	363
Dividends on preferred stock		-	-	-	-	9	-	9
Net income available to common shareholders	$	182	46	54	16	56	-	354
Total goodwill	$	613	1,656	-	148	-	-	2,417
Total assets	$	47,495	48,003	23,640	8,024	(9,679)	-	117,483

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

						General
		Commercial	Branch	Consumer	Investment	Corporate
($ in millions)		Banking	Banking	Lending	Advisors	and Other	Eliminations	Total
Three months ended September 30, 2011
Net interest income	$	341	359	85	29	84	-	898
Provision for loan and lease losses		104	87	55	16	(175)	-	87
Net interest income after provision for loan
and lease losses		237	272	30	13	259	-	811
Noninterest income:
Mortgage banking net revenue		-	3	175	-	-	-	178
Service charges on deposits		53	81	-	1	(1)	-	134
Corporate banking revenue		82	4	-	1	-	-	87
Investment advisory revenue		3	30	-	89	-	(30)(a)	92
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		51	114	37	34	133	-	369
Employee benefits		9	31	8	6	16	-	70
Net occupancy expense		5	47	2	3	18	-	75
Technology and communications		2	1	-	-	45	-	48
Card and processing expense		1	33	-	-	-	-	34
Equipment expense		1	13	-	-	14		28
Other noninterest expense		189	160	111	62	(170)	(30)	322
Total noninterest expense		258	399	158	105	56	(30)	946
Income before income taxes		138	88	63	-	241	-	530
Applicable income tax expense		8	31	22	-	88	-	149
Net income		130	57	41	-	153	-	381
Less: Net income attributable to noncontrolling interest		-	-	-	-	-	-	-
Net income attributable to Bancorp		130	57	41	-	153	-	381
Dividends on preferred stock		-	-	-	-	8	-	8
Net income available to common shareholders	$	130	57	41	-	145	-	373
Total goodwill	$	613	1,656	-	148	-	-	2,417
Total assets	$	44,615	46,727	23,213	7,358	(7,008)	-	114,905

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

						General
		Commercial	Branch	Consumer	Investment	Corporate
($ in millions)		Banking	Banking	Lending	Advisors	and Other	Eliminations	Total
Nine months ended September 30, 2012
Net interest income	$	1,049	1,021	234	87	305	-	2,696
Provision for loan and lease losses		181	226	140	9	(329)	-	227
Net interest income after provision for loan
and lease losses		868	795	94	78	634	-	2,469
Noninterest income:
Mortgage banking net revenue		-	10	577	1	-	-	588
Service charges on deposits		166	219	-	2	-	-	387
Corporate banking revenue		286	11	-	2	-	-	299
Investment advisory revenue		5	96	-	275	-	(95)(a)	281
Card and processing revenue		35	202	-	3	(53)	-	187
Other noninterest income		45	60	30	19	205	-	359
Securities gains, net		-	-	-	-	13	-	13
Securities gains, net - non-qualifying hedges on
mortgage servicing rights		-	-	5	-	-	-	5
Total noninterest income		537	598	612	302	165	(95)	2,119
Noninterest expense:
Salaries, wages and incentives		166	337	139	103	446	-	1,191
Employee benefits		32	98	30	20	94	-	274
Net occupancy expense		16	140	6	8	57	-	227
Technology and communications		7	3	1	-	133	-	144
Card and processing expense		3	86	-	-	1	-	90
Equipment expense		2	40	1	1	38	-	82
Other noninterest expense		603	496	319	199	(612)	(95)	910
Total noninterest expense		829	1,200	496	331	157	(95)	2,918
Income before income taxes		576	193	210	49	642	-	1,670
Applicable income tax expense		90	68	74	17	242	-	491
Net income		486	125	136	32	400	-	1,179
Less: Net income attributable to noncontrolling interests		-	-	-	-	1	-	1
Net income attributable to Bancorp		486	125	136	32	399	-	1,178
Dividends on preferred stock		-	-	-	-	26	-	26
Net income available to common shareholders	$	486	125	136	32	373	-	1,152
Total goodwill	$	613	1,656	-	148	-	-	2,417
Total assets	$	47,495	48,003	23,640	8,024	(9,679)	-	117,483

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

						General
		Commercial	Branch	Consumer	Investment	Corporate
($ in millions)		Banking	Banking	Lending	Advisors	and Other	Eliminations	Total
Nine months ended September 30, 2011
Net interest income	$	1,003	1,057	256	85	240	-	2,641
Provision for loan and lease losses		402	300	205	25	(564)	-	368
Net interest income after provision for loan
and lease losses		601	757	51	60	804	-	2,273
Noninterest income:
Mortgage banking net revenue		-	6	435	1	-	-	442
Service charges on deposits		154	228	-	3	(1)	-	384
Corporate banking revenue		254	11	-	2	1	-	268
Investment advisory revenue		9	89	-	275	-	(88)(a)	285
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		147	343	102	103	390	-	1,085
Employee benefits		30	100	26	21	69	-	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		597	478	318	182	(596)	(88)	891
Total noninterest expense		803	1,189	454	316	91	(88)	2,765
Income before income taxes		295	200	70	28	820	-	1,413
Applicable income tax (benefit) expense		(2)	69	24	10	328	-	429
Net income		297	131	46	18	492	-	984
Less: Net income attributable to noncontrolling interest		-	-	-	-	1	-	1
Net income attributable to Bancorp		297	131	46	18	491	-	983
Dividends on preferred stock		-	-	-	-	194	-	194
Net income available to common shareholders	$	297	131	46	18	297	-	789
Total goodwill	$	613	1,656	-	148	-	-	2,417
Total assets	$	44,615	46,727	23,213	7,358	(7,008)	-	114,905

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