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Business Segments
 9 Months Ended
Sep. 30, 2013
Business Segments  
Business Segments

22. 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 nine months ended September 30, 2013 and 2012 are:
         
      General  
  CommercialBranch ConsumerInvestment Corporate  
($ in millions) BankingBankingLendingAdvisorsand OtherEliminationsTotal
Three months ended September 30, 2013        
Net interest income $ 374 374 76 38 31 - 893
Provision for loan and lease losses  37 52 20 - (58) - 51
Net interest income after provision for loan         
and lease losses  337 322 56 38 89 - 842
Noninterest income:        
Mortgage banking net revenue  - 3 118 - - - 121
Service charges on deposits  61 78 - 1 - - 140
Corporate banking revenue  98 4 - 1 (1) - 102
Investment advisory revenue  1 36 - 95 - (35)(a) 97
Card and processing revenue  13 74 - 1 (19) - 69
Other noninterest income  32 22 11 1 119 - 185
Securities gains, net  - - 2 - - - 2
Securities gains, net - non-qualifying hedges on         
mortgage servicing rights  - - 5 - - - 5
Total noninterest income  205 217 136 99 99 (35) 721
Noninterest expense:        
Salaries, wages and incentives  55 114 40 33 147 - 389
Employee benefits  8 32 9 6 28 - 83
Net occupancy expense  6 46 2 2 19 - 75
Technology and communications  3 1 - - 48 - 52
Card and processing expense  2 31 - - - - 33
Equipment expense  1 15 - - 13 - 29
Other noninterest expense 21219111766 (253) (35) 298
Total noninterest expense  287 430 168 107 2 (35) 959
Income before income taxes   255 109 24 30 186 - 604
Applicable income tax expense  49 38 9 10 77 - 183
Net income  206 71 15 20 109 - 421
Less: Net income attributable to noncontrolling interests  - - - - - - -
Net income attributable to Bancorp  206 71 15 20 109 - 421
Dividends on preferred stock   - - - - - - -
Net income available to common shareholders $ 206 71 15 20 109 - 421
Total goodwill$ 613 1,655 - 148 - - 2,416
Total assets$ 50,438 49,282 23,015 9,182 (6,244) - 125,673

  • 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 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 20117210767 (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

  • 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
Nine months ended September 30, 2013        
Net interest income$ 1,095 1,079 246 109 132 - 2,661
Provision for loan and lease losses  116 162 71 1 (174) - 176
Net interest income after provision for loan         
and lease losses  979 917 175 108 306 - 2,485
Noninterest income:        
Mortgage banking net revenue  - 10 563 1 - - 574
Service charges on deposits  179 226 - 2 - - 407
Corporate banking revenue  295 10 - 2 - - 307
Investment advisory revenue  4 110 - 289 - (108)(a) 295
Card and processing revenue  39 215 - 3 (56) - 201
Other noninterest income  72 65 37 8 526 - 708
Securities gains, net  - - 2 - 17 - 19
Securities gains, net - non-qualifying hedges on         
mortgage servicing rights  - - 13 - - - 13
Total noninterest income  589 636 615 305 487 (108) 2,524
Noninterest expense:        
Salaries, wages and incentives  174 342 148 100 429 - 1,193
Employee benefits  33 100 34 20 93 - 280
Net occupancy expense  17 139 6 7 61 - 230
Technology and communications  8 3 1 - 139 - 151
Card and processing expense  6 91 - - - - 97
Equipment expense  3 43 1 - 38 - 85
Other noninterest expense  603 557 366 217 (699) (108) 936
Total noninterest expense  844 1,275 556 344 61 (108) 2,972
Income before income taxes   724 278 234 69 732 - 2,037
Applicable income tax expense  133 98 83 24 275 - 613
Net income  591 180 151 45 457 - 1,424
Less: Net income attributable to noncontrolling interests  - - - - (9) - (9)
Net income attributable to Bancorp  591 180 151 45 466 - 1,433
Dividends on preferred stock   - - - - 18 - 18
Net income available to common shareholders $ 591 180 151 45 448 - 1,415
Total goodwill$ 613 1,655 - 148 - - 2,416
Total assets$ 50,438 49,282 23,015 9,182 (6,244) - 125,673

  • 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
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

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