22. Segment information

Reportable segments have been determined based upon the Company’s internal profitability reporting system, which is organized by strategic business unit. Certain strategic business units have been combined for segment information reporting purposes where the nature of the products and services, the type of customer and the distribution of those products and services are similar. The reportable segments are Business Banking, Commercial Banking, Commercial Real Estate, Discretionary Portfolio, Residential Mortgage Banking and Retail Banking.

The financial information of the Company’s segments has been compiled utilizing the accounting policies described in note 1 with certain exceptions. The more significant of these exceptions are described herein. The Company allocates interest income or interest expense using a methodology that charges users of funds (assets) interest expense and credits providers of funds (liabilities) with income based on the maturity, prepayment and/or repricing characteristics of the assets and liabilities. The net effect of this allocation is recorded in the “All Other” category. A provision for credit losses is allocated to segments in an amount based largely on actual net charge-offs incurred by the segment during the period plus or minus an amount necessary to adjust the segment’s allowance for credit losses due to changes in loan balances. In contrast, the level of the consolidated provision for credit losses is determined using the methodologies described in notes 1 and 5. Indirect fixed and variable expenses incurred by certain centralized support areas are allocated to segments based on actual usage (for example, volume measurements) and other criteria. Certain types of administrative expenses and bankwide expense accruals (including amortization of core deposit and other intangible assets associated with acquisitions of financial institutions) are generally not allocated to segments. Income taxes are allocated to segments based on the Company’s marginal statutory tax rate adjusted for any tax-exempt income or non-deductible expenses. Equity is allocated to the segments based on regulatory capital requirements and in proportion to an assessment of the inherent risks associated with the business of the segment (including interest, credit and operating risk).

The management accounting policies and processes utilized in compiling segment financial information are highly subjective and, unlike financial accounting, are not based on authoritative guidance similar to GAAP. As a result, reported segment results are not necessarily comparable with similar information reported by other financial institutions. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data. Information about the Company’s segments is presented in the accompanying table. Income statement amounts are in thousands of dollars. Balance sheet amounts are in millions of dollars.


							For the Years Ended December 31, 2014, 2013 and 2012
	Business Banking						Commercial Banking						Commercial Real Estate							Discretionary Portfolio
	2014		2013		2012		2014		2013		2012		2014			2013		2012		2014		2013			2012
Net interest income(a)	$	317,356	$	325,521	$	347,067	$	745,218	$	758,231	$	753,678	$	539,600		$	570,786	$	531,398	$	74,204	$	66,157		$	66,303
Noninterest income		105,370		102,945		103,283		259,832		263,766		253,808		127,445			130,895		133,120		27,464		(2,126	)		(76,113	)

		422,726		428,466		450,350		1,005,050		1,021,997		1,007,486		667,045			701,681		664,518		101,668		64,031			(9,810	)
Provision for credit losses		18,885		26,450		22,245		33,197		76,818		15,781		(6,476	)		7,365		4,238		16,547		16,670			44,305
Amortization of core deposit and other intangible assets		—		—		—		—		—		—		—			—		—		—		—			—
Depreciation and other amortization		405		198		122		588		564		567		16,278			14,296		11,004		891		1,330			2,065
Other noninterest expense		200,802		214,043		179,428		274,697		288,842		262,820		207,757			214,246		190,879		33,934		30,431			31,006

Income (loss) before taxes		202,634		187,775		248,555		696,568		655,773		728,318		449,486			465,774		458,397		50,296		15,600			(87,186	)
Income tax expense (benefit)		82,825		76,735		101,484		285,429		264,433		296,894		133,357			143,981		149,321		2,198		(14,368	)		(54,071	)

Net income (loss)	$	119,809	$	111,040	$	147,071	$	411,139	$	391,340	$	431,424	$	316,129		$	321,793	$	309,076	$	48,098	$	29,968		$	(33,115	)

Average total assets (in millions)	$	5,281	$	5,080	$	4,909	$	22,892	$	21,655	$	19,946	$	17,113		$	17,150	$	16,437	$	20,798	$	16,480		$	16,583

Capital expenditures (in millions)	$	2	$	1	$	—	$	—	$	—	$	—	$	—		$	—	$	—	$	—	$	—		$	—


									For the Years Ended December 31, 2014, 2013 and 2012
	Residential Mortgage Banking								Retail Banking						All Other									Total
	2014			2013			2012		2014		2013		2012		2014			2013			2012			2014		2013		2012
Net interest income(a)	$	90,123		$	98,496		$	78,058	$	741,109	$	810,134	$	902,906	$	168,836		$	43,904		$	(80,894	)	$	2,676,446	$	2,673,229	$	2,598,516
Noninterest income		331,391			325,474			402,211		335,501		373,362		349,571		592,270			670,889			501,390			1,779,273		1,865,205		1,667,270

		421,514			423,970			480,269		1,076,610		1,183,496		1,252,477		761,106			714,793			420,496			4,455,719		4,538,434		4,265,786
Provision for credit losses		(2,357	)		(11,711	)		17,169		77,158		72,502		95,345		(12,954	)		(3,094	)		4,917			124,000		185,000		204,000
Amortization of core deposit and other intangible assets		—			—			—		—		—		—		33,824			46,912			60,631			33,824		46,912		60,631
Depreciation and other amortization		47,108			48,716			46,902		37,788		34,599		32,734		61,848			57,120			50,536			164,906		156,823		143,930
Other noninterest expense		222,396			225,794			195,604		759,569		768,644		751,916		844,972			690,150			693,046			2,544,127		2,432,150		2,304,699

Income (loss) before taxes		154,367			161,171			220,594		202,095		307,751		372,482		(166,584	)		(76,295	)		(388,634	)		1,588,862		1,717,549		1,552,526
Income tax expense (benefit)		59,361			61,779			85,671		82,179		125,350		151,616		(122,733	)		(78,841	)		(207,887	)		522,616		579,069		523,028

Net income (loss)	$	95,006		$	99,392		$	134,923	$	119,916	$	182,401	$	220,866	$	(43,851	)	$	2,546		$	(180,747	)	$	1,066,246	$	1,138,480	$	1,029,498

Average total assets (in millions)	$	3,333		$	2,858		$	2,451	$	10,449	$	10,997	$	11,705	$	12,277		$	9,442		$	7,952		$	92,143	$	83,662	$	79,983

Capital expenditures (in millions)	$	—		$	—		$	1	$	14	$	40	$	15	$	57		$	89		$	76		$	73	$	130	$	92

(a)

Net interest income is the difference between actual taxable-equivalent interest earned on assets and interest paid on liabilities by a segment and a funding charge (credit) based on the Company’s internal funds transfer pricing methodology. Segments are charged a cost to fund any assets (e.g. loans) and are paid a funding credit for any funds provided (e.g. deposits). The taxable-equivalent adjustment aggregated $23,642,000 in 2014, $24,971,000 in 2013 and $26,391,000 in 2012 and is eliminated in “All Other” net interest income and income tax expense (benefit).

The Business Banking segment provides deposit, lending, cash management and other financial services to small businesses and professionals through the Company’s banking office network and several other delivery channels, including business banking centers, telephone banking, Internet banking and automated teller machines. The Commercial Banking segment provides a wide range of credit products and banking services to middle-market and large commercial customers, mainly within the markets the Company serves. Among the services provided by this segment are commercial lending and leasing, letters of credit, deposit products and cash management services. The Commercial Real Estate segment provides credit services which are secured by various types of multifamily residential and commercial real estate and deposit services to its customers. Activities of this segment include the origination, sales and servicing of commercial real estate loans. The Discretionary Portfolio segment includes securities, residential mortgage loans and other assets; short-term and long-term borrowed funds; brokered deposits; and Cayman Islands branch deposits. This segment also provides foreign exchange services to customers. The Residential Mortgage Banking segment originates and services residential real estate loans for consumers and sells substantially all of those loans in the secondary market to investors or to the Discretionary Portfolio segment. The segment periodically purchases servicing rights to loans that have been originated by other entities. Residential real estate loans held for sale are included in the Residential Mortgage Banking segment. The Retail Banking segment offers a variety of services to consumers through several delivery channels that include banking offices, automated teller machines, telephone banking and Internet banking. The “All Other” category includes other operating activities of the Company that are not directly attributable to the reported segments; the difference between the provision for credit losses and the calculated provision allocated to the reportable segments; goodwill and core deposit and other intangible assets resulting from acquisitions of financial institutions; merger-related gains and expenses resulting from acquisitions; the net impact of the Company’s internal funds transfer pricing methodology; eliminations of transactions between reportable segments; certain nonrecurring transactions; the residual effects of unallocated support systems and general and administrative expenses; and the impact of interest rate risk management strategies. The amount of intersegment activity eliminated in arriving at consolidated totals was included in the “All Other” category as follows:


	Year Ended December 31
	2014			2013			2012
	(In thousands)
Revenues	$	(49,800	)	$	(50,128	)	$	(71,452	)
Expenses		(12,014	)		(16,235	)		(17,313	)
Income taxes (benefit)		(15,375	)		(13,791	)		(22,029	)
Net income (loss)		(22,411	)		(20,102	)		(32,110	)

The Company conducts substantially all of its operations in the United States. There are no transactions with a single customer that in the aggregate result in revenues that exceed ten percent of consolidated total revenues.