NOTE 18 - BUSINESS SEGMENT REPORTING

The Company operates and measures business activity across two segments: Consumer and Wholesale, with functional activities included in Corporate Other. The Company's business segment structure is based on the manner in which financial information is evaluated by management as well as the products and services provided or the type of client served. The following is a description of the segments and their primary businesses at March 31, 2018.

The Consumer segment is made up of four primary businesses:

•

Consumer Banking provides services to individual 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, and various fee-based services. Consumer Banking also serves as an entry point for clients and provides services for other businesses.

•

Consumer Lending offers an array of lending products to individual consumers and small business clients via the Company's Consumer Banking and PWM 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 individual consumers and institutional clients, including loans, deposits, brokerage, professional investment advisory, 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. Investment advisory products and services are offered to clients by STAS, an SEC registered investment advisor. PWM also includes GFO, which provides family office solutions to clients and their families to help them manage and sustain wealth across multiple generations, including family meeting facilitation, consolidated reporting, expense management, specialty asset management, and business transition advice, as well as other wealth management disciplines.

•

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.

◦

The Company plans to merge its STM and Bank entities in the third quarter of 2018. The Company has received conditional regulatory approval for the merger, which is subject to final approval from the appropriate regulatory authorities once certain merger transaction documents have been executed. These entities are both part of the Company's Consumer business segment, and the merged entity would remain within Consumer. Subsequent to the merger, it is anticipated that STM will conduct operations under the Bank’s name and charter. The planned merger resulted in an increase in the Company’s valuation allowance recorded for STM's state carryforwards in the first quarter of 2018, as described in Note 12, “Income Taxes.” The Company is continuing to evaluate the anticipated impacts of the merger; however, no additional material impacts are currently expected.

The Wholesale segment is made up of three primary businesses 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 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, technology, financial services, healthcare, industrials, and 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 $250 million), not-for-profit organizations, and governmental entities, as well as auto dealer financing (floor plan inventory financing).

•

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. Commercial Real Estate also provides multi-family agency lending and servicing, as well as loan administration, advisory, and commercial mortgage brokerage services via Pillar. 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 Wholesale 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.

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. Corporate Other also 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. Additionally, the results of PAC were reported previously in the Wholesale segment and were reclassified to Corporate Other for enhanced comparability of the Wholesale segment results excluding PAC. See Note 2, "Acquisitions/Dispositions," to the Company's 2017 Annual Report on Form 10-K for additional information related to the sale of PAC in December 2017.

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 for credit losses – represents net charge-offs by segment combined with an allocation to the segments for the provision 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 an 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 revised, when practicable.



	Three Months Ended March 31, 2018
(Dollars in millions)	Consumer		Wholesale			Corporate Other			Reconciling Items			Consolidated
Balance Sheets:
Average LHFI		$74,093		$68,741			$90			($4	)		$142,920
Average consumer and commercial deposits	103,099		56,050			204			(184		)	159,169
Average total assets	83,716		82,472			35,489			2,455			204,132
Average total liabilities	103,925		61,902			13,877			(177		)	179,527
Average total equity	—		—			—			24,605			24,605
Statements of Income:
Net interest income		$961		$563			($28	)		($55	)		$1,441
FTE adjustment	—		20			1			(1		)	20
Net interest income-FTE ¹	961		583			(27		)	(56		)	1,461
Provision/(benefit) for credit losses ²	60		(32		)	—			—			28
Net interest income after provision/(benefit) for credit losses-FTE	901		615			(27		)	(56		)	1,433
Total noninterest income	443		371			14			(32		)	796
Total noninterest expense	966		477			(21		)	(5		)	1,417
Income before provision for income taxes-FTE	378		509			8			(83		)	812
Provision for income taxes-FTE ³	83		119			9			(44		)	167
Net income including income attributable to noncontrolling interest	295		390			(1		)	(39		)	645
Less: Net income attributable to noncontrolling interest	—		—			2			—			2
Net income		$295		$390			($3	)		($39	)		$643

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.



	Three Months Ended March 31, 2017^{1, 2}
(Dollars in millions)	Consumer		Wholesale		Corporate Other			Reconciling Items			Consolidated
Balance Sheets:
Average LHFI		$71,147		$71,237		$1,286			$—			$143,670
Average consumer and commercial deposits	101,941		56,866		117			(50		)	158,874
Average total assets	81,265		84,632		35,241			3,114			204,252
Average total liabilities	102,896		62,512		15,196			(23		)	180,581
Average total equity	—		—		—			23,671			23,671
Statements of Income:
Net interest income		$894		$527		$26			($81	)		$1,366
FTE adjustment	—		34		1			(1		)	34
Net interest income-FTE ³	894		561		27			(82		)	1,400
Provision for credit losses ⁴	88		32		—			(1		)	119
Net interest income after provision for credit losses-FTE	806		529		27			(81		)	1,281
Total noninterest income	464		401		24			(42		)	847
Total noninterest expense	992		479		(2		)	(4		)	1,465
Income before provision for income taxes-FTE	278		451		53			(119		)	663
Provision for income taxes-FTE ⁵	100		168		(6		)	(69		)	193
Net income including income attributable to noncontrolling interest	178		283		59			(50		)	470
Less: Net income attributable to noncontrolling interest	—		—		2			—			2
Net income		$178		$283		$57			($50	)		$468

¹Beginning in the second quarter of 2017, the Company realigned its business segment structure from three segments to two segments. Specifically, the Company retained the previous composition of the Wholesale Banking segment and changed the basis of presentation of the Consumer Banking and Private Wealth Management segment and Mortgage Banking segment such that those segments were combined into a single Consumer segment. Accordingly, business segment information presented for the three months ended March 31, 2017 has been revised to conform to the new business segment structure and updated internal funds transfer pricing methodology for consistent presentation.

² During the fourth quarter of 2017, the Company sold PAC, the results of which were previously reported within the Wholesale business segment. For all periods prior to January 1, 2018, PAC's financial results, including the gain on sale, have been transferred to Corporate Other for enhanced comparability of the Wholesale business segment excluding PAC.

³ Presented on a matched maturity funds transfer price basis for the segments.

⁴ Provision 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.

⁵ Includes regular provision for income taxes as well as FTE income and tax credit adjustment reversals.