SunTrust 2003 Annual Report Download - page 40

38 SunTrust Banks, Inc. Annual Report 2003
MANAGEMENT’S DISCUSSION continued
Prior to year-end, the Regulatory Agencies issued an interim
rule allowing sponsoring banking organizations to remove Asset
Backed Commercial Paper (ABCP) program assets consolidated
under FIN 46, “Consolidation of Variable Interest Entities” from
their risk-weighted asset bases for purposes of calculating risk-
based capital ratios. This interim rule does not affect the average
assets used in the calculation of Tier 1 Leverage. This provision,
unless otherwise amended or modified, expires after March 31,
2004. Without the interim rule, Tier 1 Risk-Based Capital and
Total Risk-Based Capital would be negatively impacted by 17
and 25 basis points, respectively.
The Regulatory Agencies concurrently issued for comment
proposals on the risk-based treatment of ABCP conduits by spon-
soring organizations, regardless of their consolidation under FIN
46. The proposal provides for a 20% credit conversion factor on the
liquidity facilities supporting the underlying assets of the program.
The new proposal would negatively impact the Tier 1 Risk-Based
Capital and Total Risk-Based Capital ratios by five and seven basis
points, respectively, compared to its current treatment.
In December 2003, the Financial Accounting Standards
Board issued a revised interpretation of FIN 46, which required
deconsolidation of subordinated beneficial interests. As a result,
the Company deconsolidated its Trust Preferred Securities in the
fourth quarter of 2003. There was no impact to the results of
operations and a less than .04% impact to the statement of con-
dition as a result of the deconsolidation. These notes payable to
trusts established to issue the preferred securities are included in
long-term debt and totaled $1.65 billion at December 31, 2003
and 2002.
As a result of FASB’s Interpretation, questions have been
raised whether Trust Preferred Securities would still qualify for
treatment as Tier 1 Capital given the new accounting treatment. In
July of 2003, the Federal Reserve instructed bank holding compa-
nies to continue to include Trust Preferred Securities in Tier 1
Capital for regulatory capital purposes, until notice is given to the
contrary. Management does not expect the final rules will result in
the immediate elimination of existing Trust Preferred Securities as
Tier 1 Capital. These securities comprised 18.5% of Tier 1 Capital
as of December 31, 2003. If it were determined that the existing
Trust Preferred Securities do not qualify as Tier 1 Capital, SunTrust
would still meet the requirements for well-capitalized institutions
at December 31, 2003.
SunTrust manages capital through dividends and share
repurchases authorized by the Company’s Board of Directors.
Management assesses capital needs based on expected growth
and the current economic climate. In 2003, the Company repur-
chased 3.3 million shares for $182 million compared to 5.7
million shares for $341 million repurchased in 2002. Shares
issued under various compensation programs of 1.4 million and
1.0 million in 2003 and 2002, respectively, partially offset
these repurchases. As of December 31, 2003, the Company
was authorized to purchase up to an additional 6.2 million
shares under current Board resolutions.
TABLE 21 SHARE REPURCHASES
Number of shares Maximum number of
Total number Average purchased as part of shares that may yet be
of shares price paid Broker-dealer used publicly announced purchased under the
purchased per share to effect purchases plans or programs plans or programs1
January 300,000 $55.92 SunTrust Robinson Humphrey 300,000 9,202,796
February 1,243,000 56.02 SunTrust Robinson Humphrey 1,243,000 7,959,796
March 1,460,000 54.45 SunTrust Robinson Humphrey 1,460,000 6,499,796
April — — — — 6,499,796
May — — — — 6,499,796
June — — — — 6,499,796
July — — — — 6,499,796
August 257,000 59.36 SunTrust Robinson Humphrey 257,000 6,242,796
September 15,000 60.00 SunTrust Robinson Humphrey 15,000 6,227,796
October — — — — 6,227,796
November — — — — 6,227,796
December — — — — 6,227,796
Total 3,275,000 $55.59 3,275,000
1On November 12, 2002, the Board of Directors authorized to purchase 10 million shares of SunTrust common stock in addition to 2,796 shares which were remaining from a June 13, 2001
authorization. There is no expiration date for this authorization.