SunTrust 2007 Annual Report Download - page 148

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SUNTRUST BANKS, INC.
Notes to Consolidated Financial Statements (Continued)
Wealth and Investment Management provides a full array of wealth management products and professional services to both
individual and institutional clients. Wealth and Investment Management’s primary segments include Private Wealth
Management (brokerage and individual wealth management), GenSpring Family Offices (formerly known as AMA
Holdings), and Institutional Investment Management and Administration.
The Mortgage line of business offers residential mortgage products nationally through its retail, broker and correspondent
channels. These products are either sold in the secondary market primarily with MSRs retained or held as whole loans in the
Company’s residential loan portfolio. The line of business services loans for its own residential mortgage portfolio as well as
for others. Additionally, the line of business generates revenue through its tax service subsidiary (ValuTree Real Estate
Services, LLC) and the Company’s captive reinsurance subsidiary (Twin Rivers Insurance Company, formerly Cherokee
Insurance Company).
In addition, the Company reports a Corporate Other and Treasury segment which includes the investment and trading
securities portfolio, long-term debt, capital, short-term liquidity and funding activities, balance sheet risk management
including derivative hedging activities, and certain support activities not currently allocated to the aforementioned lines of
business. Because the business segment results are presented based on management accounting practices, the transition to
generally accepted accounting principles creates differences which are reflected in Reconciling Items.
For business segment reporting purposes, the basis of presentation in the accompanying financial tables includes the
following:
•Net interest income – All net interest income is presented on a fully taxable-equivalent (“FTE”) basis. The
revenue gross-up has been applied to tax-exempt loans and investments to make them comparable to other taxable
products. The segments have also been matched-maturity funds transfer priced, generating credits or charges based
on the economic value or cost created by the assets and liabilities of each segment . The mismatch between funds
credits and funds charges at the segment level resides in Reconciling Items. The change in the matched-maturity
funds mismatch is generally attributable to the corporate balance sheet management strategies.
•Provision for loan losses – Represents net loan charge-offs by segment. The difference between the segment net
charge-offs and consolidated provision for loan losses is reported in Reconciling Items.
•Provision for income taxes – Calculated using a nominal income tax rate for each segment. The calculation
includes the impact of various income adjustments, such as the reversal of the fully taxable-equivalent gross up on
tax-exempt assets, tax adjustments and credits that are unique to each business segment. The difference between
the calculated provision for income taxes at the segment level and the consolidated provision for income taxes is
reported in Reconciling Items.
The Company continues to augment its internal management reporting methodologies. Currently, the lines of business’
financial performance is comprised of direct financial results as well as various allocations that for internal management
reporting purposes provide an enhanced view of analyzing the line of business’ financial performance. The internal
allocations include the following:
•Operational Costs – Expenses are charged to the LOBs based on various statistical volumes multiplied by activity
based cost rates. As a result of the activity based costing process, planned residual expenses are also allocated to
the LOBs. The recoveries for the majority of these costs are in the Corporate Other and Treasury LOB.
•Support and Overhead Costs – Expenses not directly attributable to a specific LOB are allocated based on
various drivers (e.g., number of full-time equivalent employees and volume of loans and deposits). The recoveries
for these allocations are in the Corporate Other and Treasury LOB.
•Sales and Referral Credits – LOBs may compensate another LOB for referring or selling certain products. The
majority of the revenue resides in the LOB where the product is ultimately managed.
136