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Segment Reporting
3 Months Ended
Mar. 31, 2016
Segment Reporting [Abstract]  
Segment Reporting
Segment Reporting
The Corporation utilizes a risk-based internal profitability measurement system to provide strategic business unit reporting. The profitability measurement system is based on internal management methodologies designed to produce consistent results and reflect the underlying economics of the units. Certain strategic business units have been combined for segment information reporting purposes where the nature of the products and services, the type of customer and the distribution of those products and services are similar. The three reportable segments are Corporate and Commercial Specialty; Community, Consumer, and Business; and Risk Management and Shared Services. The financial information of the Corporation’s segments has been compiled utilizing the accounting policies described in the Corporation’s 2015 Annual Report on Form 10-K, with certain exceptions. The more significant of these exceptions are described herein.
The Corporation allocates net interest income using an internal funds transfer pricing ("FTP") methodology that charges users of funds (assets) and credits providers of funds (liabilities, primarily deposits) based on the maturity, prepayment and / or repricing characteristics of the assets and liabilities. The net effect of this allocation is recorded in the Risk Management and Shared Services segment.
During 2015, the Corporation adopted enhanced FTP methodology utilizing, new, more granular deposit information which incorporated the additional dimension of vintage (based on time from when the deposit account was opened) for determining the funds credit for non-maturity deposits. The new deposit information demonstrated that deposit accounts with the Corporation for a longer period of time had a lower attrition rate, warranting a higher crediting rate (based on a longer-term segment of the yield curve) to reflect the long-term value such deposits provide to the Corporation.
A credit provision is allocated to segments based on the expected long-term annual net charge off rates attributable to the credit risk of loans managed by the segment during the period. In contrast, the level of the consolidated provision for credit losses is determined based on an incurred loss model using the methodologies described in the Corporation’s 2015 Annual Report on Form 10-K to assess the overall appropriateness of the allowance for loan losses. The net effect of the credit provision is recorded in Risk Management and Shared Services. Indirect expenses incurred by certain centralized support areas are allocated to segments based on actual usage (for example, volume measurements) and other criteria. Certain types of administrative expense and bank-wide expense accruals (including amortization of core deposit and other intangible assets associated with acquisitions) are generally not allocated to segments. Income taxes are allocated to segments based on the Corporation’s estimated effective tax rate, with certain segments adjusted for any tax-exempt income or non-deductible expenses. Equity is allocated to the segments based on regulatory capital requirements and in proportion to an assessment of the inherent risks associated with the business of the segment (including interest, credit and operating risk).
The management accounting policies and processes utilized in compiling segment financial information are highly subjective and, unlike financial accounting, are not based on authoritative guidance similar to U.S. generally accepted accounting principles. As a result, reported segments and the financial information of the reported segments are not necessarily comparable with similar information reported by other financial institutions. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in previously reported segment financial data.
A brief description of each business segment is presented below. A more in-depth discussion of these segments can be found in the Segment Reporting footnote in the Corporation’s 2015 Annual Report on Form 10-K. There have been no changes in the Corporation's segments since December 31, 2015.
The Corporate and Commercial Specialty segment serves a wide range of customers including larger businesses, developers, not-for-profits, municipalities, and financial institutions. The Community, Consumer, and Business segment serves individuals, as well as small and mid-sized businesses. The Risk Management and Shared Services segment includes key shared operational functions and also includes residual revenue and expenses, representing the difference between actual amounts incurred and the amounts allocated to operating segments, including interest rate risk residuals (FTP mismatches) and credit risk and provision residuals (long-term credit charge mismatches).
Information about the Corporation’s segments is presented below.
Segment Income Statement Data
 
 
 
 
 
 
 
($ in Thousands)
Corporate and
Commercial
Specialty
 
Community,
Consumer, and
Business
 
Risk Management
and Shared Services
 
Consolidated
Total
Three Months Ended March 31, 2016
 
 
 
 
 
 
 
Net interest income
$
79,164

 
$
85,605

 
$
7,218

 
$
171,987

Noninterest income
11,613

 
63,748

 
7,831

 
83,192

Total revenue
90,777

 
149,353

 
15,049

 
255,179

Credit provision*
12,739

 
6,142

 
1,119

 
20,000

Noninterest expense
34,403

 
121,295

 
18,273

 
173,971

Income (loss) before income taxes
43,635

 
21,916

 
(4,343
)
 
61,208

Income tax expense (benefit)
14,579

 
7,670

 
(3,575
)
 
18,674

Net income (loss)
$
29,056

 
$
14,246

 
$
(768
)
 
$
42,534

Return on average allocated capital (ROCET1)**
11.3
%
 
9.1
%
 
(5.0
)%
 
8.6
%
Three Months Ended March 31, 2015
 
 
 
 
 
 
 
Net interest income
$
75,691

 
$
86,357

 
$
5,765

 
$
167,813

Noninterest income
12,613

 
65,344

 
1,856

 
79,813

Total revenue
88,304

 
151,701

 
7,621

 
247,626

Credit provision*
9,526

 
7,071

 
(12,097
)
 
4,500

Noninterest expense
34,460

 
118,373

 
21,159

 
173,992

Income (loss) before income taxes
44,318

 
26,257

 
(1,441
)
 
69,134

Income tax expense (benefit)
15,368

 
9,190

 
(2,096
)
 
22,462

Net income
$
28,950

 
$
17,067

 
$
655

 
$
46,672

Return on average allocated capital (ROCET1)**
12.5
%
 
10.7
%
 
(1.1
)%
 
10.2
%
Segment Balance Sheet Data
 
 
 
 
 
 
 
($ in Thousands)
Corporate and
Commercial
Specialty
 
Community,
Consumer, and
Business
 
Risk Management
and Shared Services
 
Consolidated
Total
Three Months Ended March 31, 2016
 
 
 
 
 
 
 
Average earning assets
$
9,720,028

 
$
9,120,319

 
$
6,432,026

 
$
25,272,373

Average loans
9,711,221

 
9,119,020

 
92,589

 
18,922,830

Average deposits
5,918,341

 
11,100,195

 
3,556,638

 
20,575,174

Average allocated capital (CET1)**
$
1,031,659

 
$
627,211

 
$
237,611

 
$
1,896,481

Three Months Ended March 31, 2015
 
 
 
 
 
 
 
Average earning assets
$
9,218,844

 
$
8,525,399

 
$
6,403,783

 
$
24,148,026

Average loans
9,210,992

 
8,525,399

 
78,724

 
17,815,115

Average deposits
5,421,541

 
10,522,618

 
3,111,037

 
19,055,196

Average allocated capital (CET1)**
$
942,764

 
$
647,375

 
$
214,078

 
$
1,804,217

* The consolidated credit provision is equal to the actual reported provision for credit losses.
** The Federal Reserve establishes capital adequacy requirements for the Corporation, including Tier 1 capital. Tier 1 capital is comprised of common capital and certain redeemable, non-cumulative preferred stock. Average allocated capital represents average common equity Tier 1 which is defined as average Tier 1 capital excluding qualifying perpetual preferred stock and qualifying trust preferred securities. This is a non-GAAP financial measure. For segment reporting purposes, the ROCET1 reflects return on average allocated common equity Tier 1 (“CET1”). The ROCET1 for the Risk Management and Shared Services segment and the Consolidated Total is inclusive of the annualized effect of the preferred stock dividends.