SunTrust 2007 Annual Report Download - page 74

Corporate agency services targets corporations, governmental entities and attorneys requiring escrow, sub-accounting, and
custodial services.
Corporate Other and Treasury
Corporate Other and Treasury includes the investment securities portfolio, long-term debt, end user derivative instruments,
short-term liquidity and funding activities, balance sheet risk management, and office premises. The majority of the support,
operational, and overhead costs associated with the major components of Corporate Other and Treasury have been allocated
to the functional lines of business with the cost recovery recognized in Corporate Other and Treasury. These components
include Enterprise Information Services, which is the primary data processing and operations group; the Corporate Real
Estate group, which manages the Company’s facilities; Marketing, which handles advertising, product management,
customer information functions, and internet banking; BankCard, which handles credit card issuance and merchant discount
relationships; SunTrust Online, which handles customer phone inquiries and phone sales and manages the Internet banking
functions; Human Resources, which includes the recruiting, training and employee benefit administration functions; Finance,
which includes accounting, planning, tax and treasury. Other functions included in Corporate Other and Treasury are
operational risk management, credit risk management, credit review, internal audit, legal and compliance, branch operations,
corporate strategies, procurement, and the executive management group.
For business segment reporting purposes, the basis of presentation in the accompanying discussion includes the following:
•Net interest income – All net interest income is presented on a fully taxable-equivalent 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 the consolidated provision for loan losses is reported in Reconciling Items.
•Provision for income taxes – Calculated using a nominal income tax rate for each segment. This 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.
The application and development of management reporting methodologies is a dynamic process and is subject to periodic
enhancements. The implementation of these enhancements to the internal management reporting methodology may
materially affect the net income disclosed for each segment with no impact on consolidated results. Whenever significant
changes to management reporting methodologies take place, the impact of these changes is quantified and prior period
information is reclassified wherever practicable. The Company will reflect these changes in the current period and will
update historical results.
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