Business Segments

12 Months Ended

Dec. 31, 2019

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. The information presented is not indicative of how the segments would perform if they operated as independent entities due to the interrelationships among the segments.

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. It also originates commercial loans for small and medium-sized enterprises through the Company’s branch network. Other products and services provided by this segment include wealth management, cash 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 financings. Commercial deposit products and other financial services include cash management, foreign exchange services, and interest rate and commodity risk hedging.

The remaining centralized functions, including the corporate 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 (“FTP”) process. Noninterest income and noninterest expense directly attributable to a business segment are assigned to that segment. Indirect costs, including technology-related costs and corporate overhead, are allocated based on a segment’s estimated usage using factors, including but not limited to, full-time equivalent employees, net interest income, and loan and deposit volume. Charge-offs are allocated to the segment directly associated with the loans 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 corporate treasury-related expenses and insignificant unallocated expenses.

The corporate treasury function within the Other segment is responsible for liquidity and interest rate management of the Company. The Company’s internal FTP process is also managed by the corporate 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 FTP process charges a cost to fund loans (“FTP charges for loans”) and allocates credits for funds provided from deposits (“FTP credits for deposits”) using internal FTP rates. FTP charges for loans are determined based on matched cost of funds that are tied to the pricing and term characteristic of the loans. FTP credits for deposits are based on matched funding credit rates that are tied to the implied or stated maturity of the deposits. These FTP credits reflect the long-term value to be generated by the deposits. The net spread between the total internal FTP charges and credits is recorded as part of net interest income in the Other segment. The FTP process transfers the corporate interest rate risk exposure to the treasury function within the Other segment, where such exposures are centrally managed.

The Company’s internal FTP assumptions and methodologies are reviewed at least annually to ensure that the process is reflective of current market conditions. During the first quarter of 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 all three segments, whereas 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 at the time of accrual. For comparability, segment information for the fiscal years ended December 31, 2018 and 2017 have been restated to conform to the current presentation. During the third quarter of 2019, the Company enhanced its FTP methodology related to deposits by setting a minimum floor rate for the FTP credits paid for deposits in consideration of the flattened and inverted yield curve. This methodology has been retrospectively applied to segment financial results throughout the year of 2019. This change in FTP methodology related to deposits had no impact on 2018 and 2017 segment results.

The following tables present the operating results and other key financial measures for the individual operating segments as of and for the years ended December 31, 2019, 2018 and 2017:




($ in thousands)	Consumer and Business Banking		Commercial Banking		Other		Total
Year Ended December 31, 2019
Net interest income before provision for credit losses	$	696,551	$	651,413	$	119,849	$	1,467,813
Provision for credit losses	14,178		84,507		—		98,685
Noninterest income	57,920		134,622		16,835		209,377
Noninterest expense	343,001		263,064		128,523		734,588
Segment income before income taxes	397,292		438,464		8,161		843,917
Segment net income	$	284,161	$	313,833	$	76,041	$	674,035
As of December 31, 2019
Segment assets	$	11,520,586	$	25,501,534	$	7,173,976	$	44,196,096




($ in thousands)	Consumer and Business Banking		Commercial Banking		Other			Total
Year Ended December 31, 2018
Net interest income before provision for credit losses	$	727,215	$	605,650	$	53,643		$	1,386,508
Provision for credit losses	9,364		54,891		—			64,255
Noninterest income	85,607		110,287		15,015			210,909
Noninterest expense	341,396		237,520		135,550			714,466
Segment income (loss) before income taxes	462,062		423,526		(66,892		)	818,696
Segment net income	$	330,683	$	303,553	$	69,465		$	703,701
As of December 31, 2018
Segment assets	$	10,587,621	$	23,761,469	$	6,693,266		$	41,042,356




($ in thousands)	Consumer and Business Banking		Commercial Banking		Other			Total
Year Ended December 31, 2017
Net interest income before provision for credit losses	$	590,821	$	553,817	$	40,431		$	1,185,069
Provision for credit losses	1,812		44,454		—			46,266
Noninterest income	54,451		110,089		93,208			257,748
Noninterest expense	323,318		200,153		137,980			661,451
Segment income (loss) before income taxes	320,142		419,299		(4,341		)	735,100
Segment net income	$	187,571	$	246,404	$	71,649		$	505,624
As of December 31, 2017
Segment assets	$	9,316,587	$	21,431,472	$	6,373,504		$	37,121,563