SunTrust 2003 Annual Report Download - page 87

Annual Report 2003 SunTrust Banks, Inc. 85
NOTE 20 FAIR VALUES OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and fair values of the Company’s financial instruments at December 31, 2003 and 2002:
2003 2002
Carrying Fair Carrying Fair
(Dollars in thousands) Amount Value Amount Value
Financial assets
Cash and short-term investments $5,321,374 $ 5,321,374 $5,558,295 $ 5,558,295
Trading assets 1,853,137 1,853,137 1,717,774 1,717,774
Securities available for sale 25,606,884 25,606,884 23,445,182 23,445,182
Loans held for sale 5,552,060 5,556,142 7,747,793 7,752,689
Loans 79,790,399 80,474,925 72,237,821 73,858,294
Mortgage servicing rights 449,293 560,628 383,918 442,701
Financial liabilities
Consumer and commercial deposits 72,924,646 73,058,073 70,226,810 70,491,118
Brokered deposits 3,184,084 3,195,497 3,169,826 3,170,267
Foreign deposits 5,080,789 5,080,789 6,309,992 6,309,992
Short-term borrowings 13,680,661 13,680,661 11,770,961 11,770,961
Long-term debt 15,313,922 16,018,678 11,879,820 12,795,905
Trading liabilities 1,048,543 1,048,543 930,645 930,645
Other financial instruments
Commitments to extend credit 56,835 58,184
Standby letters of credit 93,788 93,788 4,674 86,497
The following methods and assumptions were used by the
Company in estimating the fair value of financial instruments:
•Short-term financial instruments are valued at their carrying
amounts reported in the balance sheet, which are reason-
able estimates of fair value due to the relatively short period
to maturity of the instruments. This approach applies to
cash and cash equivalents, short-term investments, short-
term borrowings and certain other assets and liabilities.
•Trading assets and liabilities are substantially valued at
quoted market prices. If quoted market prices are not avail-
able, fair values are based on quoted market prices of
comparable instruments. Fair values for derivatives are
based on quoted market prices, current settlement values,
pricing models or other formulas.
•Securities available for sale are substantially valued at
quoted market prices.
•Loans held for sale are valued based on quoted market
prices in the secondary market.
•Loans are valued on the basis of estimated future receipts of
principal and interest, discounted at rates currently being
offered for loans with similar terms and credit quality. Loan
prepayments are used to adjust future cash flows based on
historical patterns. The carrying amount of accrued interest
approximates its fair value.
•Mortgage servicing rights are valued through a review of
valuation assumptions that are supported by market and
economic data collected from various sources.
•Deposit liabilities with no defined maturity such as demand
deposits, NOW/money market accounts and savings
accounts have a fair value equal to the amount payable on
demand at the reporting date, i.e., their carrying amounts.
Fair values for certificates of deposit are estimated using a
discounted cash flow calculation that applies current inter-
est rates to a schedule of aggregated expected maturities.
The intangible value of long-term relationships with deposi-
tors is not taken into account in estimating fair values.
•Fair values for long-term debt are based on quoted market
prices for similar instruments or estimated using discounted
cash flow analysis and the Company’s current incremental
borrowing rates for similar types of instruments.
NOTE 21 CONTINGENCIES
The Company and its subsidiaries are parties to numerous
claims and lawsuits arising in the course of their normal busi-
ness activities, some of which involve claims for substantial
amounts. Although the ultimate outcome of these claims and
lawsuits cannot be ascertained at this time, it is the opinion of
management that none of these matters, when resolved, will
have a material effect on the Company’s consolidated results of
operations or financial position.