SunTrust 2003 Annual Report Download - page 66

64 SunTrust Banks, Inc. Annual Report 2003
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 2003, the American Institute of Certified Public
Accountants (AICPA) issued Statement of Position (SOP) 03-3,
“Accounting for Loans or Certain Debt Securities Acquired in a
Transfer.” The SOP addresses accounting for differences between
contractual cash flows and cash flows expected to be collected
from an investor’s initial investment in loans or debt securities
acquired in a transfer if those differences relate to a deterioration of
credit quality. The SOP also prohibits companies from “carrying
over” or creating a valuation allowance in the initial accounting
for loans acquired that meet the scope criteria of the SOP. The
SOP is effective for loans acquired in fiscal years beginning after
December 15, 2004.
In December 2003, the Securities Exchange Commission
(SEC) Staff announced that it will issue a Staff Accounting
Bulletin (SAB) addressing the accounting treatment for mortgage
loan interest rate lock commitments. The SAB will require inter-
est rate lock commitments that relate to mortgage loans held for
sale to be accounted for, by the issuer of the interest rate lock
commitment, under SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities,” as written options that
would be reported as liabilities until either they are exercised or
they expire unexercised. SunTrust hedges its interest rate lock
commitments with fair value hedging instruments and the SAB,
if issued, would restrict the Company’s ability to apply fair value
accounting to the interest rate lock commitments that could be
reported as an asset on the Company’s balance sheet, while the
hedges in place would be subject to unrestricted fair value
accounting. The SAB is expected to be effective for interest rate
lock commitments entered into in the period beginning after
March 15, 2004. The Company is in the process of assessing
the impact this SAB will have on its results of operations.
In December 2003, the Medicare Prescription Drugs,
Improvement and Modernization Act of 2003 (the Medicare Act)
was signed into law. The Medicare Act calls for sponsors of retiree
health care benefit plans to be reimbursed for a certain percentage
of the prescription cost for retirees. SFAS No. 106, “Employers’
Accounting for Postretirement Benefits Other Than Pensions,”
requires enacted changes in relevant laws to be considered in cur-
rent period measurements of postretirement benefit costs and
Accumulated Postretirement Benefit Obligations (APBO).
Therefore, under SFAS No. 106, measures of APBO and net peri-
odic post retirement benefit costs on or after the date of enactment
should reflect the effects of the Medicare Act. However, certain
accounting issues raised in the Medicare Act have resulted in the
FASB allowing plan sponsors to elect to defer accounting for the
effects of the Medicare Act until further guidance is issued.
SunTrust elected to defer until the FASB issues additional guid-
ance, which is expected to be later in 2004. Nonetheless, certain
disclosures are required as of December 31, 2003, and are
included in Note 16 to the Consolidated Financial Statements.
SunTrust is in the process of analyzing the impact the Medicare
Act will have on the Company’s financial position and results of
operations when adopted.
NOTE 2 ACQUISITIONS
SunTrust completed the acquisition of the Florida banking franchise
of Huntington Bancshares, Inc. (Huntington-Florida) on February 15,
2002. The Company acquired approximately $4.7 billion in assets
and liabilities. The transaction resulted in $528 million of goodwill,
$255 million of core deposit intangibles and $13 million of other
intangibles, all of which were deductible for tax purposes.
On June 2, 2003, SunTrust completed the acquisition of
Lighthouse Financial Services, Inc. (Lighthouse) based in Hilton
Head Island, South Carolina. The Company acquired approximately
$637 million in assets, $567 million in loans, and $421 million in
deposits. In addition, SunTrust paid $131 million in a combi-
nation of cash and SunTrust stock. The transaction resulted in
$99 million of goodwill and $23 million of other intangible
assets, which were not deductible for tax purposes. The acqui-
sition did not have a material impact on SunTrust’s financial
position or results of operations.
SunTrust completed the acquisition of Sun America
Mortgage (Sun America), one of the top mortgage lenders in
Metro Atlanta, on July 31, 2003. The transaction resulted in
$10 million of goodwill and $9 million of other intangibles, all
of which were deductible for tax purposes. The acquisition did
not have a material impact on SunTrust’s financial position or
results of operations.