Business Segments

The Company organizes its operations into three reportable operating segments: (1) Consumer and Business Banking; (2) Commercial Banking; and (3) Other. These segments are defined by the type of customers and the related products and services provided, and reflect how financial information is currently evaluated by management. Operating segment results are based on the Company’s internal management reporting process, which reflects assignments and allocations of certain balance sheet and income statement items. Because of the interrelationships among the segments, the information presented is not indicative of how the segments would perform if they operated as independent entities.

The Consumer and Business Banking segment primarily provides financial products and services to consumer and commercial customers through the Company’s domestic branch network. This segment offers consumer and commercial deposits, mortgage and home equity loans, and other products and services. The Consumer and Business Banking segment also originates commercial loans for small and medium-sized enterprises through the Company’s branch network. Other products and services provided by the Consumer and Business Banking segment include wealth management, treasury management, and foreign exchange services.

The Commercial Banking segment primarily generates commercial loans and deposits. Commercial loan products include commercial business loans and lines of credit, trade finance loans and letters of credit, CRE loans, construction lending, affordable housing loans and letters of credit, asset-based lending, and equipment financing. Commercial deposit products and other financial services include treasury management, foreign exchange services, and interest rate and commodity hedging risk management.

The remaining centralized functions, including the treasury activities of the Company 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, the Consumer and Business Banking and the Commercial Banking segments.

The Company utilizes an internal reporting process to measure the performance of the three operating segments within the Company. The internal reporting process derives operating segment results by utilizing allocation methodologies for revenue and expenses. Net interest income of each segment represents the difference between actual interest earned on assets and interest incurred on liabilities of the segment, adjusted for funding charges or credits through the Company’s internal funds transfer pricing process. The process charges a cost to fund loans and allocates credits for funds provided from deposits using internal funds transfer pricing rates, which are based on market interest rates and other factors. When market interest rates increase, costs charged to the segments to fund the loans increase correspondingly, in addition to the credits allocated to the segments for deposit balances, and vice versa. The treasury function within the Other segment is responsible for liquidity and interest rate management of the Company. Therefore, the net spread between the total internal funds transfer pricing charges and credits is recorded as part of net interest income in the Other segment.

The Company’s internal funds transfer pricing process is managed by the treasury function within the Other segment. The process is formulated with the goal of encouraging loan and deposit growth that is consistent with the Company’s overall profitability objectives, as well as to provide a reasonable and consistent basis for the measurement of its business segments’ net interest margins and profitability. The Company’s internal funds transfer pricing assumptions and methodologies are reviewed at least annually to ensure that the process is reflective of current market conditions. Noninterest income and noninterest expense directly attributable to a segment are assigned to the related business segment. Indirect costs, including technology-related costs and corporate overhead, are allocated based on that segment’s estimated usage using factors, including but not limited to, full-time equivalent employees, net interest margin, and loan and deposit volume. Charge-offs are allocated to the respective segment directly associated with the loans that are charged off, and the remaining provision for credit losses is allocated to each segment based on loan volume. The Company’s internal reporting process utilizes a full-allocation methodology. Under this methodology, corporate expenses and indirect expenses incurred by the Other segment are allocated to the Consumer and Business Banking and the Commercial Banking segments, except certain treasury-related expenses and insignificant unallocated expenses.

During the three months ended March 31, 2019, the Company enhanced its segment cost allocation methodology related to stock compensation expense and bonus accrual. Effective the first quarter of 2019, stock compensation expense is allocated to the respective segments, while it was previously recorded in the Other segment as a corporate expense. In addition, bonus expense is now allocated at a more granular level at the segment level. For comparability, segment information for the three months ended March 31, 2018 have been restated to conform to the current period presentation.

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, 2019 and 2018:




($ in thousands)	Consumer and Business Banking			Commercial Banking			Other			Total
Three Months Ended March 31, 2019
Interest income	$	134,339		$	296,140		$	32,832		$	463,311
Charge for funds used	(77,446		)	(162,625		)	23,299			(216,772		)
Interest spread on funds used	56,893			133,515			56,131			246,539
Interest expense	(55,709		)	(23,650		)	(21,491		)	(100,850		)
Credit on funds provided	165,004			37,375			14,393			216,772
Interest spread on funds provided	109,295			13,725			(7,098		)	115,922
Net interest income before provision for credit losses	$	166,188		$	147,240		$	49,033		$	362,461
Provision for credit losses	$	3,013		$	19,566		$	—		$	22,579
Noninterest income	$	13,772		$	24,544		$	3,815		$	42,131
Noninterest expense	$	87,906		$	70,544		$	28,472		$	186,922
Segment income before income taxes	$	89,041		$	81,674		$	24,376		$	195,091
Segment net income	$	63,655		$	58,499		$	41,870		$	164,024
As of March 31, 2019
Segment assets	$	10,902,961		$	23,964,592		$	7,223,880		$	42,091,433




($ in thousands)	Consumer and Business Banking			Commercial Banking			Other			Total
Three Months Ended March 31, 2018
Interest income	$	104,710		$	239,577		$	27,586		$	371,873
Charge for funds used	(49,273		)	(111,366		)	(18,327		)	(178,966		)
Interest spread on funds used	55,437			128,211			9,259			192,907
Interest expense	(24,940		)	(9,179		)	(11,061		)	(45,180		)
Credit on funds provided	145,451			25,448			8,067			178,966
Interest spread on funds provided	120,511			16,269			(2,994		)	133,786
Net interest income before provision for credit losses	$	175,948		$	144,480		$	6,265		$	326,693
Provision for credit losses	$	3,093		$	17,125		$	—		$	20,218
Noninterest income	$	44,448		$	27,438		$	2,558		$	74,444
Noninterest expense	$	87,317		$	61,302		$	20,516		$	169,135
Segment income (loss) before income taxes	$	129,986		$	93,491		$	(11,693	)	$	211,784
Segment net income	$	93,134		$	67,029		$	26,869		$	187,032
As of March 31, 2018
Segment assets	$	9,327,355		$	22,002,393		$	6,342,190		$	37,671,938