Business Segments

3 Months Ended

Mar. 31, 2020

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 served, and the related products and services provided. The segments 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, 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 and land loans, 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 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, namely 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 a matched cost of funds, which is tied to the pricing and term characteristic of the loans. FTP credits for deposits are based on matched funding credit rates, which are tied to the implied or stated maturity of the deposits. FTP credits for deposits reflect the long-term value 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 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 for the three months ended March 31, 2019.

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, 2020 and 2019:




($ in thousands)	Consumer and Business Banking		Commercial Banking		Other		Total
Three months ended March 31, 2020
Net interest income before provision for credit losses	$	152,591	$	183,501	$	26,615	$	362,707
Provision for credit losses	7,788		66,082		—		73,870
Noninterest income	16,402		32,456		5,191		54,049
Noninterest expense	86,964		70,126		21,786		178,876
Segment income before income taxes	74,241		79,749		10,020		164,010
Segment net income	$	53,195	$	57,131	$	34,498	$	144,824
As of March 31, 2020
Segment assets	$	11,894,691	$	26,412,726	$	7,641,128	$	45,948,545




($ in thousands)	Consumer and Business Banking		Commercial Banking		Other		Total
Three months ended March 31, 2019
Net interest income before provision for credit losses	$	185,059	$	152,708	$	24,694	$	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	107,912		87,142		37		195,091
Segment net income	$	77,146	$	62,334	$	24,544	$	164,024
As of March 31, 2019
Segment assets	$	10,902,961	$	23,964,592	$	7,223,880	$	42,091,433