Segment Information

12 Months Ended

Dec. 31, 2019

Our operations are conducted through three operating segments: Community Banking, Mortgage Originations, and

Mortgage Servicing. The Other segment includes the remaining reported activities. Operating segments are defined as components of an enterprise that engage in business activity from which revenues are earned and expenses incurred for which discrete financial information is available that is evaluated regularly by executive management in deciding how to allocate resources and in assessing performance. The operating segments have been determined based on the products and services offered and reflect the manner in which financial information is currently evaluated by management. Each segment operates under the same banking charter, but is reported on a segmented basis for this report. Each of the operating segments is complementary to each other and because of the interrelationships of the segments, the information presented is not indicative of how the segments would perform if they operated as independent entities.

The Community Banking segment originates loans, provides deposits and fee based services to consumer, business, and mortgage lending customers through its Branch Banking, Business Banking and Commercial Banking, Government Banking, Warehouse Lending and LHFI Portfolio groups. Products offered through these groups include checking accounts, savings accounts, money market accounts, certificates of deposit, consumer loans, commercial loans, commercial real estate loans, equipment finance and leasing, home builder finance loans and warehouse lines of credit. Other financial services available include consumer and corporate card services, customized treasury management solutions, merchant services and capital markets services such as loan syndications, and investment and insurance products and services.

The Mortgage Originations segment originates and acquires one-to-four family residential mortgage loans to sell or hold on our balance sheet. Loans originated-to-sell, comprise the majority of the lending activity. These loans are originated through mortgage branches, call centers, the Internet and third party counterparties. The Mortgage Origination segment recognizes interest income on loans that are held for sale and the gains from sales associated with these loans, whereas the interest income on LHFI and a loss on sales for the purchase of these loans is recognized in the Community Banking segment.

The Mortgage Servicing segment services and subservices mortgage loans for others on a fee for service basis and may also collect ancillary fees and earn income through the use of noninterest-bearing escrows. Revenue for those serviced and subserviced loans is earned on a contractual fee basis, with the fees varying based on our responsibilities and the status of the underlying loans. The Mortgage Servicing segment also provides servicing of residential mortgages for our own LHFI portfolio

in the Community Banking segment and our own LHFS portfolio in the Mortgage Originations segment, for which it earns revenue via an intercompany service fee allocation.

The Other segment includes the treasury functions, which include, the impact of interest rate risk management, balance sheet funding activities and the administration of the investment securities portfolios, as well as miscellaneous other expenses of a corporate nature. In addition, the Other segment includes revenue and expenses related to treasury and corporate assets and liabilities and equity not directly assigned or allocated to the Community Banking, Mortgage Originations or Mortgage Servicing operating segments.

Revenues are comprised of net interest income (before the provision (benefit) for loan losses) and noninterest income. Noninterest expenses and provision (benefit) for income taxes, are fully allocated to each operating segment. Allocation methodologies may be subject to periodic adjustment as the internal management accounting system is revised and the business or product lines within the segments change.

The following tables present financial information by business segment for the periods indicated:



	Year Ended December 31, 2019
	Community Banking			Mortgage Originations			Mortgage Servicing			Other (1)			Total
	(Dollars in millions)
Summary of Operations
Net interest income	$	449		$	106		$	16		$	(9	)	$	562
Provision (benefit) for loan losses	20			2			—			(4		)	18
Net interest income after provision (benefit) for loan losses	429			104			16			(5		)	544
Net gain on loan sales	(29		)	364			—			—			335
Loan fees and charges	(1		)	69			32			—			100
Loan administration income	(5		)	(22		)	124			(67		)	30
Net return on mortgage servicing rights	—			6			—			—			6
Other noninterest income	64			10			—			65			139
Total noninterest income	29			427			156			(2		)	610
Compensation and benefits	100			114			28			135			377
Commissions	2			109			—			—			111
Loan processing expense	7			35			36			2			80
Other noninterest expense	167			88			59			6			320
Total noninterest expense	276			346			123			143			888
Income before indirect overhead allocations and income taxes	182			185			49			(150		)	266
Indirect overhead allocation Income (expense)	(41		)	(42		)	(18		)	101			—
Provision (benefit) for income taxes	30			29			6			(17		)	48
Net income (loss)	$	111		$	114		$	25		$	(32	)	$	218

Intersegment (expense) revenue	$	(19	)	$	29		$	26		$	(36	)	$	—

Average balances
Loans held-for-sale	$	32		$	3,920		$	—		$	—		$	3,952
Loans with government guarantees	—			553			—			—			553
Loans held-for-investment (2)	10,910			24			—			(2		)	10,932
Total assets	11,378			5,408			47			3,840			20,673
Deposits	10,301			—			3,850			556			14,707


(1)	Includes offsetting adjustments made to reclassify income and expenses relating to operating leases and custodial deposits for subservicing clients.


(2)	Includes adjustment made to reclassify operating lease assets to loans held-for-investment.



	Year Ended December 31, 2018
	Community Banking			Mortgage Originations			Mortgage Servicing			Other (1)			Total
	(Dollars in millions)
Summary of Operations
Net interest income	$	314		$	128		$	7		$	48		$	497
Provision (benefit) for loan losses	2			2			—			(12		)	(8		)
Net interest income after provision (benefit) for loan losses	312			126			7			60			505
Net gain on loan sales	(12		)	212			—			—			200
Loan fees and charges	(1		)	63			25			—			87
Loan administration income	(3		)	(14		)	69			(29		)	23
Net return on mortgage servicing rights	—			36			—			—			36
Other noninterest income	44			16			—			33			93
Total noninterest income	28			313			94			4			439
Compensation and benefits	70			105			19			124			318
Commissions	2			78			—			—			80
Loan processing expense	5			25			26			3			59
Other noninterest expense	103			58			44			50			255
Total noninterest expense	180			266			89			177			712
Income before indirect overhead allocations and income taxes	160			173			12			(113		)	232
Indirect overhead allocation	(39		)	(68		)	(20		)	127			—
Provision (benefit) for income taxes	25			22			(2		)	—			45
Net income (loss)	$	96		$	83		$	(6	)	$	14		$	187

Intersegment (expense) revenue	$	1		$	10		$	19		$	(30	)	$	—

Average balances
Loans held-for-sale	$	24		$	4,172		$	—		$	—		$	4,196
Loans with government guarantees	—			303			—			—			303
Loans held-for-investment (2)	8,417			9			—			29			8,455
Total assets	8,615			5,406			34			3,925			17,980
Deposits	8,892			—			1,883			—			10,775


(1)	Includes offsetting adjustments made to reclassify income and expenses relating to operating leases and custodial deposits for subservicing clients.


(2)	Includes adjustment made to reclassify operating lease assets to loans held-for-investment.



	Year Ended December 31, 2017
	Community Banking			Mortgage Originations			Mortgage Servicing			Other (1)			Total
	(Dollars in millions)
Summary of Operations
Net interest income	$	238		$	129		$	11		$	12		$	390
Provision (benefit) for loan losses	4			4			—			(2		)	6
Net interest income after provision (benefit) for loan losses	234			125			11			14			384
Net gain on loan sales	(10		)	278			—			—			268
Loan fees and charges	—			67			15			—			82
Loan administration income	—			(18		)	39			—			21
Net return on mortgage servicing rights	—			22			—			—			22
Other noninterest income	31			21			12			13			77
Total noninterest income	21			370			66			13			470
Compensation and benefits	62			100			16			121			299
Commissions	—			72			—			—			72
Loan processing expense	5			26			22			4			57
Other noninterest expense	87			65			39			24			215
Total noninterest expense	154			263			77			149			643
Income before indirect overhead allocations and income taxes	101			232			—			(122		)	211
Indirect overhead allocation	(41		)	(63		)	(23		)	127			—
Provision (benefit) for income taxes	21			59			(8		)	76			148
Net income (loss)	$	39		$	110		$	(15	)	$	(71	)	$	63

Intersegment (expense) revenue	$	(6	)	$	4		$	19		$	(17	)	$	—

Average balances
Loans held-for-sale	$	16		$	4,130		$	—		$	—		$	4,146
Loans with government guarantees	—			290			—			—			290
Loans held-for-investment (2)	6,475			7			—			29			6,511
Total assets	6,544			5,414			36			3,852			15,846
Deposits	7,454			—			1,453			—			8,907


(1)	Includes offsetting adjustments made to reclassify income and expenses relating to operating leases and custodial deposits for subservicing clients.

(2)

Includes adjustment made to reclassify operating lease assets to loans held-for-investment.