Business Segments

12 Months Ended

Dec. 31, 2013

Business Segments

Business Segments

30. 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 each of the three years ended December 31 are:
						General
		Commercial	Branch	Consumer	Investment	Corporate
2013 ($ in millions)		Banking	Banking	Lending	Advisors	and Other	Eliminations	Total
Net interest income	$	1,487	1,461	312	154	147	-	3,561
Provision for loan and lease losses		187	217	92	2	(269)	-	229
Net interest income after provision for loan
and lease losses		1,300	1,244	220	152	416	-	3,332
Noninterest income:
Mortgage banking net revenue		-	12	687	1	-	-	700
Service charges on deposits		242	304	-	3	-	-	549
Corporate banking revenue		386	13	-	3	(2)	-	400
Investment advisory revenue		5	148	-	384	-	(144)(a)	393
Card and processing revenue		52	291	-	5	(76)	-	272
Other noninterest income		95	86	45	10	643	-	879
Securities gains, net		-	-	3	-	18	-	21
Securities gains, net - non-qualifying hedges on
mortgage servicing rights		-	-	13	-	-	-	13
Total noninterest income		780	854	748	406	583	(144)	3,227
Noninterest expense:
Salaries, wages and incentives		233	457	175	134	582	-	1,581
Employee benefits		40	127	40	25	125	-	357
Net occupancy expense		23	185	8	10	81	-	307
Technology and communications		11	4	1	-	188	-	204
Card and processing expense		7	126	-	-	1	-	134
Equipment expense		4	58	1	-	51	-	114
Other noninterest expense		825	748	460	284	(909)	(144)	1,264
Total noninterest expense		1,143	1,705	685	453	119	(144)	3,961
Income before income taxes		937	393	283	105	880	-	2,598
Applicable income tax expense		171	138	100	37	326	-	772
Net income		766	255	183	68	554	-	1,826
Less: Net income attributable to noncontrolling interests		-	-	-	-	(10)	-	(10)
Net income attributable to Bancorp		766	255	183	68	564	-	1,836
Dividends on preferred stock		-	-	-	-	37	-	37
Net income available to common shareholders	$	766	255	183	68	527	-	1,799
Total goodwill	$	613	1,655	-	148	-	-	2,416
Total assets	$	52,287	50,038	22,610	10,711	(5,203)	-	130,443

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

						General
		Commercial	Branch	Consumer	Investment	Corporate
2012 ($ in millions)		Banking	Banking	Lending	Advisors	and Other	Eliminations	Total
Net interest income	$	1,432	1,362	314	117	370	-	3,595
Provision for loan and lease losses		223	294	176	10	(400)	-	303
Net interest income after provision for loan
and lease losses		1,209	1,068	138	107	770	-	3,292
Noninterest income:
Mortgage banking net revenue		-	14	830	1	-	-	845
Service charges on deposits		225	294	-	3	-	-	522
Corporate banking revenue		395	15	-	3	-	-	413
Investment advisory revenue		6	129	-	366	-	(127)(a)	374
Card and processing revenue		46	279	-	4	(76)	-	253
Other noninterest income		65	81	42	19	367	-	574
Securities gains, net		-	-	1	-	14	-	15
Securities gains, net - non-qualifying hedges on
mortgage servicing rights		-	-	3	-	-	-	3
Total noninterest income		737	812	876	396	305	(127)	2,999
Noninterest expense:
Salaries, wages and incentives		229	448	192	136	602	-	1,607
Employee benefits		39	125	39	25	143	-	371
Net occupancy expense		21	187	8	11	75	-	302
Technology and communications		10	3	1	-	182	-	196
Card and processing expense		5	115	-	-	1	-	121
Equipment expense		2	54	1	1	52	-	110
Other noninterest expense		800	660	429	264	(652)	(127)	1,374
Total noninterest expense		1,106	1,592	670	437	403	(127)	4,081
Income before income taxes		840	288	344	66	672	-	2,210
Applicable income tax expense		146	102	121	23	244	-	636
Net income		694	186	223	43	428	-	1,574
Less: Net income attributable to noncontrolling interests		-	-	-	-	(2)	-	(2)
Net income attributable to Bancorp		694	186	223	43	430	-	1,576
Dividends on preferred stock		-	-	-	-	35	-	35
Net income available to common shareholders	$	694	186	223	43	395	-	1,541
Total goodwill	$	613	1,655	-	148	-	-	2,416
Total assets	$	48,693	48,856	24,657	9,212	(9,524)	-	121,894

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

						General
		Commercial	Branch	Consumer	Investment	Corporate
2011 ($ in millions)		Banking	Banking	Lending	Advisors	and Other	Eliminations	Total
Net interest income	$	1,357	1,423	343	113	321	-	3,557
Provision for loan and lease losses		490	393	261	27	(748)	-	423
Net interest income after provision for loan
and lease losses		867	1,030	82	86	1,069	-	3,134
Noninterest income:
Mortgage banking net revenue		-	11	585	1	-	-	597
Service charges on deposits		207	309	-	4	-	-	520
Corporate banking revenue		332	14	-	3	1	-	350
Investment advisory revenue		12	117	-	364	(1)	(117)(a)	375
Card and processing revenue		38	305	-	4	(39)	-	308
Other noninterest income		52	81	36	(3)	84	-	250
Securities gains, net		-	-	-	-	46	-	46
Securities gains, net - non-qualifying hedges on
mortgage servicing rights		-	-	9	-	-	-	9
Total noninterest income		641	837	630	373	91	(117)	2,455
Noninterest expense:
Salaries, wages and incentives		203	454	149	138	534	-	1,478
Employee benefits		37	127	34	26	106	-	330
Net occupancy expense		20	184	8	11	82	-	305
Technology and communications		11	5	1	1	170	-	188
Card and processing expense		5	114	-	-	1	-	120
Equipment expense		2	51	1	1	58	-	113
Other noninterest expense		795	640	433	244	(771)	(117)	1,224
Total noninterest expense		1,073	1,575	626	421	180	(117)	3,758
Income before income taxes		435	292	86	38	980	-	1,831
Applicable income tax expense (benefit)		(6)	102	30	14	393	-	533
Net income		441	190	56	24	587	-	1,298
Less: Net income attributable to noncontrolling interests		-	-	-	-	1	-	1
Net income attributable to Bancorp		441	190	56	24	586	-	1,297
Dividends on preferred stock		-	-	-	-	203	-	203
Net income available to common shareholders	$	441	190	56	24	383	-	1,094
Total goodwill	$	613	1,656	-	148	-	-	2,417
Total assets	$	45,864	46,703	24,325	7,670	(7,595)	-	116,967

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