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Business Segments
 6 Months Ended
Jun. 30, 2013
Business Segments  
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 an 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 demand deposit accounts 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, 2013 to reflect the current market rates and updated market assumptions. These rates were generally higher than those in place during 2012, thus net interest income for deposit providing businesses was positively impacted during 2013.

 

The business segments are charged provision expense based on the actual net charge-offs experienced by 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.

Results of operations and assets by segment for the three and six months ended June 30, 2013 and 2012 are:
         
      General  
  CommercialBranch ConsumerInvestment Corporate  
($ in millions) BankingBankingLendingAdvisorsand OtherEliminationsTotal
Three months ended June 30, 2013        
Net interest income $ 361 358 85 35 41 - 880
Provision for loan and lease losses  37 51 22 1 (47) - 64
Net interest income after provision for loan         
and lease losses  324 307 63 34 88 - 816
Noninterest income:        
Mortgage banking net revenue  - 3 230 - - - 233
Service charges on deposits  59 76 - 1 - - 136
Corporate banking revenue  102 3 - 1 - - 106
Investment advisory revenue  1 37 - 96 1 (37)(a) 98
Card and processing revenue  13 74 - 1 (21) - 67
Other noninterest income  23 23 14 - 354 - 414
Securities gains, net  - - - - - - -
Securities gains, net - non-qualifying hedges on         
mortgage servicing rights  - - 6 - - - 6
Total noninterest income  198 216 250 99 334 (37) 1,060
Noninterest expense:        
Salaries, wages and incentives  56 113 57 34 144 - 404
Employee benefits  8 30 11 6 28 - 83
Net occupancy expense  6 46 2 2 20 - 76
Technology and communications  2 2 - - 46 - 50
Card and processing expense  2 32 - - (1) - 33
Equipment expense  1 14 - - 13 - 28
Other noninterest expense 20418913881 (214) (37) 361
Total noninterest expense  279 426 208 123 36 (37) 1,035
Income before income taxes   243 97 105 10 386 - 841
Applicable income tax expense  45 35 38 3 129 - 250
Net income  198 62 67 7 257 - 591
Less: Net income attributable to noncontrolling interests  - - - - - - -
Net income attributable to Bancorp  198 62 67 7 257 - 591
Dividends on preferred stock   - - - - 9 - 9
Net income available to common shareholders $ 198 62 67 7 248 - 582
Total goodwill$ 613 1,655 - 148 - - 2,416
Total assets$ 50,441 49,843 23,973 8,480 (9,377) - 123,360

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

 

         
      General  
  CommercialBranch ConsumerInvestment Corporate  
($ in millions) BankingBankingLendingAdvisorsand OtherEliminationsTotal
Three months ended June 30, 2012        
Net interest income $ 348 342 77 29 99 - 895
Provision for loan and lease losses  61 69 49 2 (110) - 71
Net interest income after provision for loan         
and lease losses  287 273 28 27 209 - 824
Noninterest income:        
Mortgage banking net revenue  - 4 179 - - - 183
Service charges on deposits  54 75 - 1 - - 130
Corporate banking revenue  97 4 - 1 - - 102
Investment advisory revenue  2 32 - 91 - (32)(a) 93
Card and processing revenue  12 70 - 1 (19) - 64
Other noninterest income  12 20 10 4 57 - 103
Securities gains, net  - - - - 3 - 3
Securities gains, net - non-qualifying hedges on        
mortgage servicing rights  - - - - - - -
Total noninterest income  177 205 189 98 41 (32) 678
Noninterest expense:        
Salaries, wages and incentives  56 113 47 35 142 - 393
Employee benefits  9 30 9 6 30 - 84
Net occupancy expense  5 47 2 3 17 - 74
Technology and communications  2 1 - - 45 - 48
Card and processing expense  1 29 - - - - 30
Equipment expense  - 13 - - 14 - 27
Other noninterest expense 19616810868 (227) (32) 281
Total noninterest expense  269 401 166 112 21 (32) 937
Income before income taxes   195 77 51 13 229 - 565
Applicable income tax expense   32 27 18 5 98 - 180
Net income  163 50 33 8 131 - 385
Less: Net income attributable to noncontrolling interest  - - - - - - -
Net income attributable to Bancorp  163 50 33 8 131 - 385
Dividends on preferred stock   - - - - 9 - 9
Net income available to common shareholders $ 163 50 33 8 122 - 376
Total goodwill$ 613 1,656 - 148 - - 2,417
Total assets$ 46,691 48,156 23,538 7,721 (8,563) - 117,543

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

         
      General  
  CommercialBranch ConsumerInvestment Corporate  
($ in millions) BankingBankingLendingAdvisorsand OtherEliminationsTotal
Six months ended June 30, 2013        
Net interest income$ 722 705 170 70 101 - 1,768
Provision for loan and lease losses  80 109 51 2 (116) - 126
Net interest income after provision for loan         
and lease losses  642 596 119 68 217 - 1,642
Noninterest income:        
Mortgage banking net revenue  - 7 445 1 - - 453
Service charges on deposits  118 148 - 1 - - 267
Corporate banking revenue  197 7 - 1 - - 205
Investment advisory revenue  2 74 - 194 - (72)(a) 198
Card and processing revenue  26 142 - 2 (38) - 132
Other noninterest income  40 43 26 7 407 - 523
Securities gains, net  - - - - 17 - 17
Securities gains, net - non-qualifying hedges on         
mortgage servicing rights  - - 8 - - - 8
Total noninterest income  383 421 479 206 386 (72) 1,803
Noninterest expense:        
Salaries, wages and incentives  119 228 107 67 282 - 803
Employee benefits  25 69 24 15 64 - 197
Net occupancy expense  11 93 4 5 42 - 155
Technology and communications  5 2 - - 92 - 99
Card and processing expense  4 61 - - - - 65
Equipment expense  1 29 1 - 25 - 56
Other noninterest expense  390 367 249 151 (447) (72) 638
Total noninterest expense  555 849 385 238 58 (72) 2,013
Income before income taxes   470 168 213 36 545 - 1,432
Applicable income tax expense  84 59 75 13 198 - 429
Net income  386 109 138 23 347 - 1,003
Less: Net income attributable to noncontrolling interests  - - - - (10) - (10)
Net income attributable to Bancorp  386 109 138 23 357 - 1,013
Dividends on preferred stock   - - - - 18 - 18
Net income available to common shareholders $ 386 109 138 23 339 - 995
Total goodwill$ 613 1,655 - 148 - - 2,416
Total assets$ 50,441 49,843 23,973 8,480 (9,377) - 123,360

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

         
      General  
  CommercialBranch ConsumerInvestment Corporate  
($ in millions) BankingBankingLendingAdvisorsand OtherEliminationsTotal
Six months ended June 30, 2012        
Net interest income$ 696 677 157 57 206 - 1,793
Provision for loan and lease losses  137 155 103 6 (239) - 162
Net interest income after provision for loan         
and lease losses  559 522 54 51 445 - 1,631
Noninterest income:        
Mortgage banking net revenue  - 6 380 1 - - 387
Service charges on deposits  109 149 - 2 - - 260
Corporate banking revenue  190 7 - 2 - - 199
Investment advisory revenue  4 64 - 185 1 (64)(a) 190
Card and processing revenue  23 130 - 2 (33) - 122
Other noninterest income  28 39 20 4 188 - 279
Securities gains, net  - - - - 11 - 11
Securities gains, net - non-qualifying hedges on         
mortgage servicing rights  - - - - - - -
Total noninterest income  354 395 400 196 167 (64) 1,448
Noninterest expense:        
Salaries, wages and incentives  113 226 91 69 293 - 792
Employee benefits  24 67 21 15 68 - 195
Net occupancy expense  11 93 4 6 37 - 151
Technology and communications  4 2 - - 89 - 95
Card and processing expense  2 57 - - 1 - 60
Equipment expense  1 26 - - 28 - 55
Other noninterest expense  402 324 213 132 (444) (64) 563
Total noninterest expense  557 795 329 222 72 (64) 1,911
Income before income taxes   356 122 125 25 540 - 1,168
Applicable income tax expense   51 43 44 9 205 - 352
Net income  305 79 81 16 335 - 816
Less: Net income attributable to noncontrolling interest  - - - - 1 - 1
Net income attributable to Bancorp  305 79 81 16 334 - 815
Dividends on preferred stock   - - - - 18 - 18
Net income available to common shareholders $ 305 79 81 16 316 - 797
Total goodwill$ 613 1,656 - 148 - - 2,417
Total assets$ 46,691 48,156 23,538 7,721 (8,563) - 117,543

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