Business Segments

3 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Business Segments

Note 15—Business Segments

The Company utilizes an internal reporting system to measure the performance of various operating segments within the Bank and the Company. The Company has identified three operating segments for purposes of management reporting: (1) Retail Banking; (2) Commercial Banking; and (3) Other. These three business divisions meet the criteria of an operating segment: the segment engages in business activities from which it earns revenues and incurs expenses; its operating results are regularly reviewed by the Company’s chief operating decision-maker to render decisions about resources to be allocated to the segment and assess its performance; and discrete financial information is available.

The Retail Banking segment focuses primarily on retail operations through the Bank’s branch network. The Commercial Banking segment, which includes C&I and CRE operations, primarily generates commercial loans and deposits through the commercial lending offices located in the Bank’s production offices. Furthermore, the Company’s Commercial Banking segment offers a wide variety of international finance, trade, and cash management services and products. The remaining centralized functions, including treasury activities and eliminations of inter-segment amounts, have been aggregated and included in the “Other” segment, which provides broad administrative support to the two core segments.

Operating segment results are based on the Company’s internal management reporting process, which reflects assignments and allocations of certain operating and administrative costs and the provision for credit losses. Net interest income is based on the Company’s internal funds transfer pricing system which assigns a cost of funds or a credit for funds to assets or liabilities based on their type, maturity or repricing characteristics. Noninterest income and noninterest expense, including depreciation and amortization, directly attributable to a segment are assigned to that business segment. Indirect costs, including overhead expense, are allocated to the segments based on several factors, including, but not limited to, full-time equivalent employees, loan volume and deposit volume. The provision for credit losses is allocated based on actual charge-offs for the period as well as average loan balances for each segment during the period. The Company evaluates overall performance based on profit or loss from operations before income taxes excluding nonrecurring gains and losses.

The Company’s internal funds transfer pricing assumptions are intended to promote core deposit growth and to reflect the current risk profiles of various loan categories within the credit portfolio. Internal transfer pricing assumptions and methodologies are reviewed at least annually to ensure that the Company’s process is reflective of current market conditions. The internal transfer pricing process is formulated with the goal of incentivizing loan and deposit growth that is consistent with the Company’s overall growth objectives, as well as to provide a reasonable and consistent basis for the measurement of the Company’s business segments and product net interest margins.

The accounting policies of the segments are the same as those described in Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements of the Company’s 2016 Form 10-K. Changes in the Company’s management structure or reporting methodologies may result in changes in the measurement of operating segment results. Results for prior periods are generally restated for comparability for changes in management structure or reporting methodologies unless it is deemed not practicable to do so.

The following tables present the operating results and other key financial measures for the individual operating segments as of and for the three months ended March 31, 2017 and 2016:

($ in thousands)	Three Months Ended March 31, 2017
	Retail Banking			Commercial Banking			Other			Total
Interest income	$	81,648		$	191,796		$	29,225		$	302,669
Charge for funds used	(27,860		)	(64,387		)	(28,167		)	(120,414		)
Interest spread on funds used	53,788			127,409			1,058			182,255
Interest expense	(16,173		)	(5,108		)	(9,266		)	(30,547		)
Credit on funds provided	102,528			12,061			5,825			120,414
Interest spread on funds provided	86,355			6,953			(3,441		)	89,867
Net interest income (loss) before provision for credit losses	$	140,143		$	134,362		$	(2,383	)	$	272,122
Provision for credit losses	$	381		$	6,687		$	—		$	7,068
Depreciation, amortization and (accretion), net	$	2,344		$	(3,474	)	$	29,260		$	28,130
Segment income before income taxes	$	73,361		$	91,798		$	62,845		$	228,004
As of March 31, 2017:
Goodwill	$	357,207		$	112,226		$	—		$	469,433
Segment assets	$	8,213,268		$	19,624,237		$	7,504,621		$	35,342,126

($ in thousands)	Three Months Ended March 31, 2016
	Retail Banking			Commercial Banking			Other			Total
Interest income	$	77,371		$	177,082		$	21,719		$	276,172
Charge for funds used	(22,652		)	(53,791		)	(11,837		)	(88,280		)
Interest spread on funds used	54,719			123,291			9,882			187,892
Interest expense	(14,606		)	(4,026		)	(5,336		)	(23,968		)
Credit on funds provided	72,431			9,977			5,872			88,280
Interest spread on funds provided	57,825			5,951			536			64,312
Net interest income before provision for credit losses	$	112,544		$	129,242		$	10,418		$	252,204
(Reversal of) provision for credit losses	$	(1,582	)	$	3,022		$	—		$	1,440
Depreciation, amortization and (accretion), net	$	43		$	(10,773	)	$	23,488		$	12,758
Segment income before income taxes	$	45,945		$	92,829		$	5,897		$	144,671
As of March 31, 2016:
Goodwill	$	357,207		$	112,226		$	—		$	469,433
Segment assets	$	7,203,470		$	17,939,537		$	7,966,162		$	33,109,169