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Business Segments and Revenue from Contracts with Customers
 6 Months Ended
Jun. 30, 2020
Segment Reporting [Abstract]  
Segment Reporting Disclosure
NOTE 12—BUSINESS SEGMENTS AND REVENUE FROM CONTRACTS WITH CUSTOMERS
Our principal operations are organized into three major business segments, which are defined primarily based on the products and services provided or the types of customers 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, asset/liability management by our centralized Corporate Treasury group and residual tax expense or benefit to arrive at the consolidated effective tax rate that is not assessed to our primary business segments, are included in the Other category.
Basis of Presentation
We report the results of each of our business segments on a continuing operations basis. 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. We provide additional information on the allocation methodologies used to derive our business segment results in “Note 17—Business Segments and Revenue from Contracts with Customers” in our 2019 Form 10-K.
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 table presents our business segment results for the three and six months ended June 30, 2020 and 2019, selected balance sheet data as of June 30, 2020 and 2019, and a reconciliation of our total business segment results to our reported consolidated income from continuing operations, loans held for investment and deposits.
Table 12.1: Segment Results and Reconciliation
 
 
Three Months Ended June 30, 2020
(Dollars in millions)
 
Credit Card
 
Consumer Banking
 
Commercial Banking(1)
 
Other(1)
 
Consolidated Total
Net interest income (loss)
 
$
3,369

 
$
1,665

 
$
518

 
$
(92
)
 
$
5,460

Non-interest income (loss)
 
845

 
97

 
180

 
(26
)
 
1,096

Total net revenue (loss)(2)
 
4,214

 
1,762

 
698

 
(118
)
 
6,556

Provision (benefit) for credit losses
 
2,944

 
876

 
427

 
(1
)
 
4,246

Non-interest expense
 
1,969

 
1,036

 
425

 
340

 
3,770

Loss from continuing operations before income taxes
 
(699
)
 
(150
)
 
(154
)
 
(457
)
 
(1,460
)
Income tax benefit
 
(166
)
 
(36
)
 
(36
)
 
(305
)
 
(543
)
Loss from continuing operations, net of tax
 
$
(533
)
 
$
(114
)
 
$
(118
)
 
$
(152
)
 
$
(917
)
Loans held for investment
 
$
107,310

 
$
66,712

 
$
77,490

 
$
0

 
$
251,512

Deposits
 
0

 
246,804

 
35,669

 
21,765

 
304,238

 
 
Six Months Ended June 30, 2020
(Dollars in millions)
 
Credit Card
 
Consumer Banking
 
Commercial Banking(1)
 
Other(1)
 
Consolidated Total
Net interest income
 
$
7,071

 
$
3,322

 
$
1,009

 
$
83

 
$
11,485

Non-interest income (loss)
 
1,756

 
223

 
418

 
(77
)
 
2,320

Total net revenue(2)
 
8,827

 
3,545

 
1,427

 
6

 
13,805

Provision for credit losses
 
6,646

 
1,736

 
1,283

 
4

 
9,669

Non-interest expense
 
4,177

 
2,027

 
837

 
458

 
7,499

Loss from continuing operations before income taxes
 
(1,996
)
 
(218
)
 
(693
)
 
(456
)
 
(3,363
)
Income tax benefit
 
(472
)
 
(52
)
 
(164
)
 
(418
)
 
(1,106
)
Loss from continuing operations, net of tax
 
$
(1,524
)
 
$
(166
)
 
$
(529
)
 
$
(38
)
 
$
(2,257
)
Loans held for investment
 
$
107,310

 
$
66,712

 
$
77,490

 
$
0

 
$
251,512

Deposits
 
0

 
246,804

 
35,669

 
21,765

 
304,238

 
 
Three Months Ended June 30, 2019
(Dollars in millions)
 
Credit Card
 
Consumer Banking
 
Commercial Banking(1)
 
Other(1)
 
Consolidated Total
Net interest income (loss)
 
$
3,531

 
$
1,709

 
$
514

 
$
(8
)
 
$
5,746

Non-interest income (loss)
 
1,038

 
166

 
200

 
(26
)
 
1,378

Total net revenue (loss)
 
4,569

 
1,875

 
714

 
(34
)
 
7,124

Provision for credit losses
 
1,095

 
165

 
82

 
0

 
1,342

Non-interest expense
 
2,253

 
1,002

 
427

 
97

 
3,779

Income (loss) from continuing operations before income taxes
 
1,221

 
708

 
205

 
(131
)
 
2,003

Income tax provision (benefit)
 
283

 
165

 
48

 
(109
)
 
387

Income (loss) from continuing operations, net of tax
 
$
938

 
$
543

 
$
157

 
$
(22
)
 
$
1,616

Loans held for investment
 
$
112,141

 
$
60,327

 
$
71,992

 
$
0

 
$
244,460

Deposits
 
0

 
205,220

 
30,761

 
18,554

 
254,535

 
 
Six Months Ended June 30, 2019
(Dollars in millions)
 
Credit Card
 
Consumer Banking
 
Commercial Banking(1)
 
Other(1)
 
Consolidated Total
Net interest income
 
$
7,121

 
$
3,388

 
$
1,003

 
$
25

 
$
11,537

Non-interest income (loss)
 
1,988

 
326

 
387

 
(31
)
 
2,670

Total net revenue (loss)
 
9,109

 
3,714

 
1,390

 
(6
)
 
14,207

Provision for credit losses
 
2,484

 
400

 
151

 
0

 
3,035

Non-interest expense
 
4,424

 
1,996

 
844

 
186

 
7,450

Income (loss) from continuing operations before income taxes
 
2,201

 
1,318

 
395

 
(192
)
 
3,722

Income tax provision (benefit)
 
512

 
307

 
92

 
(215
)
 
696

Income from continuing operations, net of tax
 
$
1,689

 
$
1,011

 
$
303

 
$
23

 
$
3,026

Loans held for investment
 
$
112,141

 
$
60,327

 
$
71,992

 
$
0

 
$
244,460

Deposits
 
0

 
205,220

 
30,761

 
18,554

 
254,535

__________
(1) 
Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting reductions to the Other category.
(2) 
Total net revenue was reduced by $318 million and $707 million in the three and six months ended June 30, 2020, respectively, for credit card finance charges and fees charged off as uncollectible.    
Revenue from Contracts with Customers
The majority of our revenue from contracts with customers consists of interchange fees, service charges and other customer-related fees, and other contract revenue. Interchange fees are primarily from our Credit Card business and are recognized upon settlement with the interchange networks, net of rewards earned by customers. Service charges and other customer-related fees within our Consumer Banking business are primarily related to fees earned on consumer deposit accounts for account maintenance and various transaction-based services such as overdrafts and ATM usage. Service charges and other customer-related fees within our Commercial Banking business are mostly related to fees earned on treasury management and capital markets services. Other contract revenue in our Credit Card business consists primarily of revenue from our partnership arrangements. Other contract revenue in our Consumer Banking business consists primarily of revenue earned on certain marketing and promotional events from our auto dealers. Revenue from contracts with customers is included in non-interest income in our consolidated statements of income.
The following table presents revenue from contracts with customers and a reconciliation to non-interest income by business segment for the three and six months ended June 30, 2020 and 2019.
Table 12.2: Revenue from Contracts with Customers and Reconciliation to Segments Result
 
 
Three Months Ended June 30, 2020
(Dollars in millions)
 
Credit Card
 
Consumer Banking
 
Commercial Banking(1)
 
Other(1)
 
Consolidated Total
Contract revenue:
 
 
 
 
 
 
 
 
 
 
Interchange fees, net(2)
 
$
612

 
$
48

 
$
13

 
$
(1
)
 
$
672

Service charges and other customer-related fees
 
0

 
31

 
43

 
(1
)
 
73

Other
 
57

 
3

 
0

 
0

 
60

Total contract revenue
 
669

 
82

 
56

 
(2
)
 
805

Revenue from other sources
 
176

 
15

 
124

 
(24
)
 
291

Total non-interest income
 
$
845

 
$
97

 
$
180

 
$
(26
)
 
$
1,096

 
 
Six Months Ended June 30, 2020
(Dollars in millions)
 
Credit Card
 
Consumer Banking
 
Commercial Banking(1)
 
Other(1)
 
Consolidated Total
Contract revenue:
 
 
 
 
 
 
 
 
 
 
Interchange fees, net(2)
 
$
1,300

 
$
98

 
$
28

 
$
(2
)
 
$
1,424

Service charges and other customer-related fees
 
0

 
95

 
74

 
(1
)
 
168

Other
 
127

 
22

 
1

 
0

 
150

Total contract revenue
 
1,427

 
215

 
103

 
(3
)
 
1,742

Revenue from other sources
 
329

 
8

 
315

 
(74
)
 
578

Total non-interest income
 
$
1,756

 
$
223

 
$
418

 
$
(77
)
 
$
2,320

 
 
Three Months Ended June 30, 2019
(Dollars in millions)
 
Credit Card
 
Consumer Banking
 
Commercial Banking(1)
 
Other(1)
 
Consolidated Total
Contract revenue:
 
 
 
 
 
 
 
 
 
 
Interchange fees, net(2)
 
$
757

 
$
52

 
$
13

 
$
(2
)
 
$
820

Service charges and other customer-related fees
 
0

 
74

 
28

 
0

 
102

Other
 
20

 
26

 
1

 
0

 
47

Total contract revenue
 
777

 
152

 
42

 
(2
)
 
969

Revenue from other sources
 
261

 
14

 
158

 
(24
)
 
409

Total non-interest income
 
$
1,038

 
$
166

 
$
200

 
$
(26
)
 
$
1,378

 
 
Six Months Ended June 30, 2019
(Dollars in millions)
 
Credit Card
 
Consumer Banking
 
Commercial Banking(1)
 
Other(1)
 
Consolidated Total
Contract revenue:
 
 
 
 
 
 
 
 
 
 
Interchange fees, net(2)
 
$
1,459

 
$
98

 
$
24

 
$
(3
)
 
$
1,578

Service charges and other customer-related fees
 
0

 
149

 
53

 
0

 
202

Other
 
32

 
50

 
1

 
0

 
83

Total contract revenue
 
1,491

 
297

 
78

 
(3
)
 
1,863

Revenue from other sources
 
497

 
29

 
309

 
(28
)
 
807

Total non-interest income
 
$
1,988

 
$
326

 
$
387

 
$
(31
)
 
$
2,670

__________
(1) 
Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting reductions to the Other category.
(2) 
Interchange fees are presented net of customer reward expenses.