NOTE 18—BUSINESS SEGMENTS

Our principal operations are currently organized into three major business segments, which are defined based on the products and services provided or the type of customer served: Credit Card, Consumer Banking and Commercial Banking. The operations of acquired businesses have been integrated into our existing business segments. Certain activities that are not part of a segment,

such as management of our corporate investment portfolio and asset/liability management by our centralized Corporate Treasury group, are included in the Other category.


•	Credit Card: Consists of our domestic consumer and small business card lending, and international card businesses in Canada and the United Kingdom.


•	Consumer Banking: Consists of our branch-based lending and deposit gathering activities for consumers and small businesses, national deposit gathering, national auto lending and our consumer home loan portfolio and associated servicing activities.


•	Commercial Banking: Consists of our lending, deposit gathering, capital markets and treasury management services to commercial real estate and commercial and industrial customers. Our commercial and industrial customers typically include companies with annual revenues between $20 million and $2 billion.

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Other category: Includes the residual impact of the allocation of our centralized Corporate Treasury group activities, such as management of our corporate investment portfolio and asset/liability management, to our business segments. Accordingly, net gains and losses on our investment securities portfolio and certain trading activities are included in the Other category. Other category also includes foreign exchange-rate fluctuations on foreign currency-denominated transactions; unallocated corporate expenses that do not directly support the operations of the business segments or for which the business segments are not considered financially accountable in evaluating their performance, such as certain restructuring charges; certain material items that are non-recurring in nature; offsets related to certain line-item reclassifications; and residual tax expense or benefit to arrive at the consolidated effective tax rate that is not assessed to our primary business segments.

Basis of Presentation

We report the results of each of our business segments on a continuing operations basis. See “Note 2—Business Developments and Discontinued Operations” for a discussion of our discontinued operations. The results of our individual businesses reflect the manner in which management evaluates performance and makes decisions about funding our operations and allocating resources.

Business Segment Reporting Methodology

The results of our business segments are intended to present each segment as if it were a stand-alone business. Our internal management and reporting process used to derive our segment results employs various allocation methodologies, including funds transfer pricing, to assign certain balance sheet assets, deposits and other liabilities and their related revenue and expenses directly or indirectly attributable to each business segment. Our funds transfer pricing process provides a funds credit for sources of funds, such as deposits generated by our Consumer Banking and Commercial Banking businesses, and a funds charge for the use of funds by each segment. Due to the integrated nature of our business segments, estimates and judgments have been made in allocating certain revenue and expense items. Transactions between segments are based on specific criteria or approximate third-party rates. We regularly assess the assumptions, methodologies and reporting classifications used for segment reporting, which may result in the implementation of refinements or changes in future periods.

The following is additional information on the principles and methodologies used in preparing our business segment results.

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Net interest income: Interest income from loans held for investment and interest expense from deposits and other interest-bearing liabilities are reflected within each applicable business segment. Because funding and asset/liability management are managed centrally by our Corporate Treasury group, net interest income for our business segments also includes the results of a funds transfer pricing process that is intended to allocate a cost of funds used or credit for funds provided to all business segment assets and liabilities, respectively, using a matched funding concept. The taxable-equivalent benefit of tax-exempt products is also allocated to each business unit with a corresponding increase in income tax expense.


•	Non-interest income: Non-interest fees and other revenue associated with loans or customers managed by each business segment and other direct revenues are accounted for within each business segment.


•	Provision for credit losses: The provision for credit losses is directly attributable to the business segment in accordance with the loans each business segment manages.

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Non-interest expense: Non-interest expenses directly managed and incurred by a business segment are accounted for within each business segment. We allocate certain non-interest expenses indirectly incurred by business segments, such as corporate support functions, to each business segment based on various factors, including the actual cost of the services from the service providers, the utilization of the services, the number of employees or other relevant factors.


•	Goodwill and intangible assets: Goodwill and intangible assets that are not directly attributable to business segments are assigned to business segments based on the relative fair value of each segment. Intangible amortization is included in the results of the applicable segment.


•	Income taxes: Income taxes are assessed for each business segment based on a standard tax rate with the residual tax expense or benefit to arrive at the consolidated effective tax rate included in the Other category.


•	Loans held for investment: Loans are reported within each business segment based on product or customer type served by that business segment.


•	Deposits: Deposits are reported within each business segment based on product or customer type served by that business segment.

Segment Results and Reconciliation

We may periodically change our business segments or reclassify business segment results based on modifications to our management reporting methodologies or changes in organizational alignment. The following tables present our business segment results for the years ended December 31, 2017, 2016 and 2015, selected balance sheet data as of December 31, 2017, 2016 and 2015, and a reconciliation of our total business segment results to our reported consolidated income from continuing operations, loans held for investment and deposits.

Table 18.1: Segment Results and Reconciliation



	Year Ended December 31, 2017
(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking⁽¹⁾		Other⁽¹⁾			Consolidated Total
Net interest income	$	13,648	$	6,380	$	2,261	$	171		$	22,460
Non-interest income	3,325		749		708		(5		)	4,777
Total net revenue	16,973		7,129		2,969		166			27,237
Provision for credit losses	6,066		1,180		301		4			7,551
Non-interest expense	7,916		4,233		1,603		442			14,194
Income (loss) from continuing operations before income taxes	2,991		1,716		1,065		(280		)	5,492
Income tax provision	1,071		626		389		1,289			3,375
Income (loss) from continuing operations, net of tax	$	1,920	$	1,090	$	676	$	(1,569	)	$	2,117
Loans held for investment	$	114,762	$	75,078	$	64,575	$	58		$	254,473
Deposits	0		185,842		33,938		23,922			243,702

	Year Ended December 31, 2016
(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking⁽¹⁾		Other⁽¹⁾			Consolidated Total
Net interest income	$	12,635	$	5,829	$	2,216	$	193		$	20,873
Non-interest income	3,380		733		578		(63		)	4,628
Total net revenue	16,015		6,562		2,794		130			25,501
Provision (benefit) for credit losses	4,926		1,055		483		(5		)	6,459
Non-interest expense	7,703		4,139		1,407		309			13,558
Income (loss) from continuing operations before income taxes	3,386		1,368		904		(174		)	5,484
Income tax provision (benefit)	1,226		498		329		(339		)	1,714
Income from continuing operations, net of tax	$	2,160	$	870	$	575	$	165		$	3,770
Loans held for investment	$	105,552	$	73,054	$	66,916	$	64		$	245,586
Deposits	0		181,917		33,866		20,985			236,768



	Year Ended December 31, 2015
(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking⁽¹⁾		Other⁽¹⁾			Consolidated Total
Net interest income	$	11,161	$	5,755	$	1,865	$	53		$	18,834
Non-interest income	3,421		710		487		(39		)	4,579
Total net revenue	14,582		6,465		2,352		14			23,413
Provision (benefit) for credit losses	3,417		819		302		(2		)	4,536
Non-interest expense	7,502		4,026		1,156		312			12,996
Income (loss) from continuing operations before income taxes	3,663		1,620		894		(296		)	5,881
Income tax provision (benefit)	1,309		586		324		(350		)	1,869
Income from continuing operations, net of tax	$	2,354	$	1,034	$	570	$	54		$	4,012
Loans held for investment	$	96,125	$	70,372	$	63,266	$	88		$	229,851
Deposits	0		172,702		34,257		10,762			217,721

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⁽¹⁾

Some of our commercial investments generate tax-exempt income or tax credits. Accordingly, we make certain reclassifications within our Commercial Banking business results to present revenues and yields on a taxable-equivalent basis, calculated assuming an effective tax rate approximately equal to our federal statutory tax rate (35% for all periods presented), with offsetting reductions to the Other category.