SunTrust 2014 Annual Report Download - page 182

Notes to Consolidated Financial Statements, continued
159
• Treasury & Payment Solutions provides all SunTrust
business clients with services required to manage their
payments and receipts, combined with the ability to manage
and optimize their deposits across all aspects of their
business. Treasury & Payment Solutions operates all
electronic and paper payment types, including card, wire
transfer, ACH, check, and cash. It also provides clients the
means to manage their accounts electronically online, both
domestically and internationally.
Mortgage Banking offers residential mortgage products
nationally through its retail and correspondent channels, as well
as via the internet (www.suntrust.com) and by telephone (1-800-
SUNTRUST). These products are either sold in the secondary
market, primarily with servicing rights retained, or held in the
Company’s loan portfolio. Mortgage Banking services loans for
itself and for other investors, and includes ValuTree Real Estate
Services, LLC, a tax service subsidiary.
Corporate Other includes management of the Company’s
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. Additionally, it includes Enterprise Information Services,
which is the primary information technology and operations
group; Corporate Real Estate, Marketing, SunTrust Online,
Human Resources, Finance, Corporate Risk Management, Legal
and Compliance, Communications, Procurement, and Executive
Management. The financial results of RidgeWorth, including the
gain on sale, are reflected in the Corporate Other segment. Prior
to the sale of RidgeWorth, RidgeWorth's financial performance
was reported in the Wholesale Banking segment. See Note 2,
"Acquisitions/Dispositions," for additional information related
to the sale of RidgeWorth.
Because the business segment results are presented based on
management accounting practices, the transition to the
consolidated results, which are prepared under U.S. GAAP,
creates certain differences which are reflected in Reconciling
Items. Business segment reporting conventions are described
below.
• Net interest income – Net interest income is presented on
a FTE basis to make income from tax-exempt assets
comparable to other taxable products. The segment results
reflect maturity funds transfer pricing, which ascribes
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
this mismatch is generally attributable to corporate balance
sheet management strategies.
• Provision for credit losses – Represents net charge-offs by
segment combined with an allocation to the segments of the
provision attributable to each segment's quarterly change in
the ALLL and unfunded commitment reserve balances.
• Provision/(benefit) for income taxes – Calculated using a
blended income tax rate for each segment. This calculation
includes the impact of various adjustments, such as the
reversal of the FTE gross up on tax-exempt assets, tax
adjustments, and credits that are unique to each segment.
The difference between the calculated provision/(benefit)
for income taxes at the segment level and the consolidated
provision/(benefit) for income taxes is reported in
Reconciling Items.
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
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, residual expenses are also allocated to the
segments. The recoveries for the majority of these costs are
reported in Corporate Other.
• Support and Overhead Costs – Expenses not directly
attributable to a specific segment are allocated based on
various drivers (e.g., number of equivalent employees,
number of PC’s/Laptops and net revenue). The recoveries
for these allocations are reported in Corporate Other.
• 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 results 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. Prior year results have been
restated to reflect a refinement in the provision for credit losses
methodology.