NOTE 17 - BUSINESS SEGMENT REPORTING

The Company measures business activity across three segments: Consumer Banking and Private Wealth Management, Wholesale Banking, and Mortgage Banking, with functional activities included in Corporate Other. Business segments are determined based on the products and services provided or the type of client served, and they reflect the manner in which financial information is evaluated by management.

Beginning in the second quarter of 2017, the Company will realign its business segment structure from three segments to two segments based on, among other things, the manner in which financial information is evaluated by management and in conjunction with organizational changes made throughout the Company that were announced during the first quarter of 2017. Specifically, the Company plans to retain the current composition of its Wholesale Banking segment and change the basis of presentation of the Consumer Banking and Private Wealth Management segment and Mortgage Banking segment such that those segments will be combined into a single Consumer segment.

The following is a description of the segments and their primary businesses at March 31, 2017.

The Consumer Banking and Private Wealth Management segment is made up of three primary businesses:

•

Consumer Banking provides services to consumers and branch-managed small business clients through an extensive network of traditional and in-store branches, ATMs, the internet (www.suntrust.com), mobile banking, and by telephone (1-800-SUNTRUST). Financial products and services offered to consumers and small business clients include deposits and payments, loans, brokerage, and various fee-based services. Discount/online and full-service brokerage products are offered to individual clients through STIS. Consumer Banking also serves as an entry point for clients and provides services for other lines of business.

•

Consumer Lending offers an array of lending products to consumers and small business clients via the Company's Consumer Banking and Private Wealth Management businesses, through the internet (www.suntrust.com and www.lightstream.com), as well as through various national offices and partnerships. Products offered include home equity lines, personal credit lines and loans, direct auto, indirect auto, student lending, credit cards, and other lending products.

•

PWM provides a full array of wealth management products and professional services to both individual and institutional clients including loans, deposits, brokerage, professional investment management, and trust services to clients seeking active management of their financial resources. Institutional clients are served by the Institutional Investment Solutions business. Discount/online and full-service brokerage products are offered to individual clients through STIS. PWM also includes GenSpring, which provides family office solutions to ultra-high net worth individuals and their families. Utilizing teams of multi-disciplinary specialists with expertise in investments, tax, accounting, estate planning, and other wealth management disciplines, GenSpring helps families manage and sustain wealth across multiple generations.

The Wholesale Banking segment is made up of three primary lines of business and the Treasury & Payment Solutions product group:

•

CIB delivers comprehensive capital markets solutions, including advisory, capital raising, and financial risk management, with the goal of serving the needs of both public and private companies in the Wholesale Banking segment and PWM business. Investment Banking and Corporate Banking teams within CIB serve clients across the nation, offering a full suite of traditional banking and investment banking products and services to companies with annual revenues typically greater than $150 million. Investment Banking serves select industry segments including consumer and retail, energy, financial services, healthcare, industrials, and technology, media and communications. Corporate Banking serves clients across diversified industry sectors based on size, complexity, and frequency of capital markets issuance. Also managed within CIB is the Equipment Finance Group, which provides lease financing solutions (through SunTrust Equipment Finance & Leasing).

•

Commercial & Business Banking offers an array of traditional banking products, including lending, cash management and investment banking solutions via STRH to commercial clients (generally clients with revenues between $1 million and $150 million), not-for-profit organizations, and governmental entities, as well as auto dealer financing (floor plan inventory financing). Also managed within Commercial & Business Banking is the Premium Assignment Corporation, which provides corporate insurance premium financing solutions.

•

Commercial Real Estate provides a full range of financial solutions for commercial real estate developers, owners, and operators, including construction, mini-perm, and permanent real estate financing, as well as tailored financing and equity investment solutions via STRH. With the acquisition of the assets of Pillar in December of 2016, commercial real estate also provides multi-family agency lending and servicing, as well as loan administration, advisory, and commercial mortgage brokerage services. The Institutional Property Group business targets relationships with REITs, pension fund advisors, private funds, homebuilders, and insurance companies and the Regional business focuses on private real estate owners and developers through a regional delivery structure. Commercial Real Estate also offers tailored financing and equity investment solutions for community development and affordable housing projects through STCC, with particular expertise in Low Income Housing Tax Credits and New Market Tax Credits.

•

Treasury & Payment Solutions provides SunTrust Wholesale Banking 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, 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 also services loans for other investors, in addition to loans held in the Company’s loan portfolio.

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, Corporate Other includes the Company's functional activities such as marketing, SunTrust online, human resources, finance, ER, legal and compliance, communications, procurement, enterprise information services, corporate real estate, and executive management.

Because business segment results are presented based on management accounting practices, the transition to the consolidated results prepared under U.S. GAAP creates certain differences, which are reflected in Reconciling Items. Business segment reporting conventions are described below:

•

Net interest income-FTE – is reconciled from net interest income and is grossed-up on an FTE basis to make income from tax-exempt assets comparable to other taxable products. Segment results reflect matched maturity funds transfer pricing, which ascribes credits or charges based on the economic value or cost created by assets and liabilities of each segment. Differences between these credits and charges are captured as reconciling items. The change in this variance is generally attributable to corporate balance sheet management strategies.


•	Provision/(benefit) for credit losses – represents net charge-offs by segment combined with an allocation to the segments for the provision/(benefit) attributable to each segment's quarterly change in the ALLL and unfunded commitments reserve balances.


•	Noninterest income – includes federal and state tax credits that are grossed-up on a pre-tax equivalent basis, related primarily to certain community development investments.


•	Provision for income taxes-FTE – is calculated using a blended income tax rate for each segment and includes reversals of the tax adjustments and credits described above. The difference between the calculated provision for income taxes at the segment level and the consolidated provision for income taxes is reported as reconciling items.

The segment’s financial performance is comprised of direct financial results and allocations for various corporate functions that provide management an enhanced view of the segment’s financial performance. Internal allocations include the following:


•	Operational costs – expenses are charged to segments based on a methodical activity-based costing process, which also allocates residual expenses to the segments. Generally, recoveries 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 (number of equivalent employees, number of PCs/laptops, net revenue, etc.). Recoveries for these allocations are reported in Corporate Other.

The application and development of management reporting methodologies is an active process and undergoes 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. If significant changes to management reporting methodologies take place, the impact of these changes is quantified and prior period information is reclassified, when practicable.

Beginning in the second quarter of 2017, the Company will make certain adjustments to its internal funds transfer pricing methodology, and prior period results will be reclassified to conform to the new business segment structure.



	Three Months Ended March 31, 2017
(Dollars in millions)	Consumer Banking and Private Wealth Management		Wholesale Banking		Mortgage Banking		Corporate Other			Reconciling Items			Consolidated
Balance Sheets:
Average loans		$44,074		$72,451		$27,078		$67			$—			$143,670
Average consumer and commercial deposits	98,871		57,393		2,543		117			(50		)	158,874
Average total assets	49,794		85,864		31,475		34,005			3,114			204,252
Average total liabilities	99,478		63,108		2,861		15,158			(24		)	180,581
Average total equity	—		—		—		—			23,671			23,671
Statements of Income:
Net interest income		$766		$543		$113		$11			($67	)		$1,366
FTE adjustment	—		34		—		1			(1		)	34
Net interest income-FTE ¹	766		577		113		12			(68		)	1,400
Provision for credit losses ²	88		31		—		—			—			119
Net interest income after provision for credit losses-FTE	678		546		113		12			(68		)	1,281
Total noninterest income	350		403		115		23			(44		)	847
Total noninterest expense	797		482		184		6			(4		)	1,465
Income before provision for income taxes-FTE	231		467		44		29			(108		)	663
Provision for income taxes-FTE ³	85		174		15		(16		)	(65		)	193
Net income including income attributable to noncontrolling interest	146		293		29		45			(43		)	470
Net income attributable to noncontrolling interest	—		—		—		2			—			2
Net income		$146		$293		$29		$43			($43	)		$468

¹Presented on a matched maturity funds transfer price basis for the segments.

²Provision for credit losses represents net charge-offs by segment combined with an allocation to the segments for the provision attributable to quarterly changes in the ALLL and unfunded commitment reserve balances.

³Includes regular provision for income taxes as well as FTE income and tax credit adjustment reversals.



	Three Months Ended March 31, 2016
(Dollars in millions)	Consumer Banking and Private Wealth Management		Wholesale Banking		Mortgage Banking			Corporate Other			Reconciling Items			Consolidated
Balance Sheets:
Average loans		$41,589		$70,773		$25,946			$64			$—			$138,372
Average consumer and commercial deposits	93,238		53,620		2,311			107			(47		)	149,229
Average total assets	47,285		84,363		29,203			30,560			1,603			193,014
Average total liabilities	93,853		59,496		2,686			13,201			(19		)	169,217
Average total equity	—		—		—			—			23,797			23,797
Statements of Income:
Net interest income		$719		$495		$120			$31			($83	)		$1,282
FTE adjustment	—		35		—			1			—			36
Net interest income-FTE ¹	719		530		120			32			(83		)	1,318
Provision/(benefit) for credit losses ²	29		82		(10		)	—			—			101
Net interest income after provision/(benefit) for credit losses-FTE	690		448		130			32			(83		)	1,217
Total noninterest income	356		313		126			20			(34		)	781
Total noninterest expense	741		411		174			(4		)	(4		)	1,318
Income before provision for income taxes-FTE	305		350		82			56			(113		)	680
Provision for income taxes-FTE ³	113		131		32			16			(61		)	231
Net income including income attributable to noncontrolling interest	192		219		50			40			(52		)	449
Net income attributable to noncontrolling interest	—		—		—			2			—			2
Net income		$192		$219		$50			$38			($52	)		$447

¹Presented on a matched maturity funds transfer price basis for the segments.

²Provision/(benefit) for credit losses represents net charge-offs by segment combined with an allocation to the segments for the provision/(benefit) attributable to quarterly changes in the ALLL and unfunded commitment reserve balances.

³Includes regular provision for income taxes as well as FTE income and tax credit adjustment reversals.