SunTrust 2008 Annual Report Download - page 83

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 most real estate assets. The majority of the
support, operational, and overhead costs associated with the Corporate Other and Treasury have been allocated to the
functional segments 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 our facilities; Marketing, which handles advertising, product management, customer information functions,
and internet banking; 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 corporate risk management, legal and compliance, branch operations, corporate strategies, procurement, and the
executive management group. Finally, Corporate Other and Treasury also includes Trustee Management, which provides
treasury management and deposit services to bankruptcy trustees.
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 an 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 charge-offs by segment. The difference between the total 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 FTE 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 total segment level and the consolidated provision for income taxes is reported in
Reconciling Items.
We continue to augment our internal management reporting methodologies. Currently, the segment’s 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 segment’s financial performance. The internal allocations include the following:
•Operational Costs – Expenses are charged to the segments 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 segments. The recoveries for the majority of these costs are in the Corporate Other and Treasury
segment.
•Support and Overhead Costs – Expenses not directly attributable to a specific segment 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 Corporate Other and Treasury.
•Sales and Referral Credits – Segments may compensate another segment for referring or selling certain products.
The majority of the revenue resides in the segment 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. We will reflect these changes in the current period and will update historical
results. At the end of 2008, we announced certain management and organizational changes related to the lines of business.
This reorganization will strengthen the alignment between strategy development and execution. Our reporting segments
could change after the organizational transitions are completed in the first quarter of 2009.
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