Segment Reporting

12 Months Ended

Dec. 31, 2019

Note 21 Segment Reporting

The Corporation utilizes a risk-based internal profitability measurement system to provide strategic business unit reporting. The profitability measurement system is based on internal management methodologies designed to produce consistent results and reflect the underlying economics of the units. 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 three reportable segments are Corporate and Commercial Specialty; Community, Consumer, and Business; and Risk Management and Shared Services. The financial information of the Corporation’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 reportable segment results are presented based on the Corporation's internal management accounting process. 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 U.S. GAAP. As a result, reported segments and the financial information of the reported segments 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 previously reported segment financial data. Additionally, the information presented is not indicative of how the segments would perform if they operated as independent entities.

To determine financial performance of each segment, the Corporation allocates FTP assignments, the provision for credit losses, certain noninterest expenses, income tax, and equity to each segment. Allocation methodologies are subject to periodic

adjustment as the internal management accounting system is revised, the interest rate environment evolves, and business or product lines within the segments change. Also, because the development and application of these methodologies is a dynamic process, the financial results presented may be periodically reviewed.

The Corporation allocates net interest income using an internal FTP methodology that charges users of funds (assets) and credits providers of funds (liabilities, primarily deposits) based on the maturity, prepayment, and / or re-pricing characteristics of the assets and liabilities. The net effect of this allocation is offset in the Risk Management and Shared Services segment to ensure the consolidated total reflects the Corporation's net interest income. The net FTP allocation is reflected as net intersegment interest income (expense) in the accompanying tables.

A credit provision is allocated to segments based on the expected long-term annual net charge off rates attributable to the credit risk of loans managed by the segment during the period. In contrast, the level of the consolidated provision for credit losses is determined based on an incurred loss model using the methodologies described in Note 1 to assess the overall appropriateness of the allowance for loan losses and the allowance for unfunded commitments. The net effect of the credit provision is recorded in Risk Management and Shared Services. Indirect 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 bank-wide expense accruals (including amortization of core deposit and other intangible assets associated with acquisitions) are generally not allocated to segments. Income taxes are allocated to segments based on the Corporation’s estimated effective tax rate, with certain segments adjusted for any tax-exempt income or non-deductible expenses, the net tax residual is recorded in Risk Management and Shared Services. 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).

A description of each business segment is presented below.

Corporate and Commercial Specialty: The Corporate and Commercial Specialty segment serves a wide range of customers including larger businesses, developers, not-for-profits, municipalities, and financial institutions. In serving this segment we compete based on an in-depth understanding of our customers’ financial needs, the ability to match market competitive solutions to those needs, and the highest standards of relationship and service excellence in the delivery of these services. Delivery of services is provided through our corporate and commercial units, our commercial real estate unit, as well as our specialized industries and commercial financial services units. Within this segment we provide the following products and services: (1) lending solutions, such as commercial loans and lines of credit, commercial real estate financing, construction loans, letters of credit, leasing, asset based lending, and, for our larger clients, loan syndications; (2) deposit and cash management solutions such as commercial checking and interest-bearing deposit products, cash vault and night depository services, liquidity solutions, payables and receivables solutions, and information services, and (3) specialized financial services such as interest rate risk management, foreign exchange solutions, and commodity hedging.

Community, Consumer, and Business: The Community, Consumer, and Business segment serves individuals, as well as small and mid-sized businesses. In serving this segment we compete based on providing a broad range of solutions to meet the needs of our customers in their entire financial lifecycle, convenient access to our services through multiple channels such as branches, phone based services, online and mobile banking, and a relationship based business model which assists our customers in navigating any changes and challenges in their financial circumstances. Delivery of services is provided through our various consumer banking, community banking, and private client units. Within this segment we provide the following products and services: (1) lending solutions such as residential mortgages, home equity loans and lines of credit, personal and installment loans, real estate financing, business loans, and business lines of credit; (2) deposit and transactional solutions such as checking, credit, debit and pre-paid cards, online banking and bill pay, and money transfer services; (3) investable funds solutions such as savings, money market deposit accounts, IRA accounts, certificates of deposit, fixed and variable annuities, full-service, discount and on-line investment brokerage; investment advisory services; trust and investment management accounts; (4) insurance and benefits related products and services; and (5) fiduciary services such as administration of pension, profit-sharing and other employee benefit plans, fiduciary and corporate agency services, and institutional asset management.

Risk Management and Shared Services: The Risk Management and Shared Services segment includes Corporate Risk Management, Credit Administration, Finance, Treasury, Operations and Technology, which are key shared functions. The segment also includes Parent Company activity, intersegment eliminations and residual revenue and expenses, representing the difference between actual amounts incurred and the amounts allocated to operating segments, including interest rate risk residuals (FTP mismatches) and credit risk and provision residuals (long term credit charge mismatches). The earning assets within this segment include the Corporation’s investment portfolio, and capital includes both allocated and any remaining unallocated capital. All acquisition costs are included in this segment.

Information about the Corporation’s segments is presented below:


	Corporate and Commercial Specialty
	For the Years Ended December 31,
($ in Thousands)	2019		2018		2017
Net interest income	$	450,532	$	457,613	$	360,789
Net intersegment interest income (expense)	(76,064)		(56,356)		(3,737)
Segment net interest income	374,467		401,258		357,051
Noninterest income	53,282		52,321		52,297
Total revenue	427,749		453,578		409,348
Credit provision	52,382		44,592		42,298
Noninterest expense	156,348		160,399		156,890
Income (loss) before income taxes	219,019		248,587		210,160
Income tax expense (benefit)	41,209		47,850		71,655
Net income	$	177,809	$	200,737	$	138,505
Allocated goodwill	$	525,836	$	524,525	$	428,000


	Community, Consumer, and Business
	For the Years Ended December 31,
($ in Thousands)	2019		2018		2017
Net interest income	$	332,850	$	357,245	$	316,008
Net intersegment interest income (expense)	103,468		87,737		45,353
Segment net interest income	436,318		444,982		361,361
Noninterest income	307,750		295,647		266,250
Total revenue	744,067		740,629		627,611
Credit provision	20,043		20,083		20,400
Noninterest expense	547,423		541,771		490,567
Income (loss) before income taxes	176,601		178,775		116,645
Income tax expense (benefit)	37,105		37,543		40,826
Net income	$	139,496	$	141,232	$	75,819
Allocated goodwill	$	650,394	$	644,498	$	548,238


	Risk Management and Shared Services
	For the Years Ended December 31,
($ in Thousands)	2019		2018		2017
Net interest income	$	52,292	$	64,722	$	64,423
Net intersegment interest income (expense)	(27,403)		(31,382)		(41,615)
Segment net interest income	24,889		33,341		22,808
Noninterest income	19,793		7,600		14,133
Total revenue	44,682		40,941		36,941
Credit provision	(56,425)		(64,675)		(36,698)
Noninterest expense^(a)	90,217		119,629		61,677
Income (loss) before income taxes	10,890		(14,013)		11,962
Income tax expense (benefit)	1,405		(5,606)		(2,978)
Net income	$	9,484	$	(8,407)	$	14,941
Allocated goodwill	$	—	$	—	$	—


	Consolidated Total
	For the Years Ended December 31,
($ in Thousands)	2019		2018		2017
Net interest income	$	835,674	$	879,580	$	741,220
Net intersegment interest income (expense)	—		—		—
Segment net interest income	835,674		879,580		741,220
Noninterest income	380,824		355,568		332,680
Total revenue	1,216,498		1,235,148		1,073,900
Credit provision	16,000		—		26,000
Noninterest expense	793,988		821,799		709,133
Income (loss) before income taxes	406,509		413,349		338,767
Income tax expense (benefit)	79,720		79,786		109,503
Net income	$	326,790	$	333,562	$	229,264
Allocated goodwill	$	1,176,230	$	1,169,023	$	976,239

(a) For the year ended December 31, 2019, the Risk Management and Shared Services segment includes approximately $7 million of acquisition related costs. For the year ended December 31, 2018, the Risk Management and Shared Services segment includes approximately $29 million of acquisition related costs within noninterest expense and approximately $2 million of acquisition related asset losses, net of asset gains within noninterest income.