SunTrust 2004 Annual Report Download - page 79

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
SUNTRUST 2004 ANNUAL REPORT 77
Note 2 / ACQUISITIONS
On October 1, 2004, SunTrust acquired 100 percent of the out-
standing common shares of NCF, a Memphis-based financial serv-
ices organization. NCF offered commercial and retail banking,
savings and trust services through its branches located in North
Carolina, South Carolina, Georgia,Tennessee, Mississippi, Arkansas,
Virginia, and West Virginia.The merger enhanced the Company’s
geographic position, as well as expanded the Company’s footprint
to include new areas, specifically Western Tennessee, North
Carolina, South Carolina, Mississippi,Arkansas, and West Virginia.
The acquisition was accounted for under the purchase method of
accounting with the results of operations for NCF included in
SunTrust’s results beginning October 1, 2004. Under the purchase
method of accounting the assets and liabilities of the former NCF
were recorded at their respective fair values as of October 1, 2004.
The consideration for the acquisition was a combination of cash and
stock with a purchase price of approximately $7.4 billion.The total
consideration consists of approximately $1.8 billion in cash and
approximately 76.4 million SunTrust shares.
The calculation of the purchase price is as follows:
(Dollars in thousands)
Total SunTrust common
stock issued 76,415,641
Purchase price per
SunTrust common share1$70.41
Value of SunTrust stock issued 5,380,425
Estimated fair value of
employee stock options 137,126
Investment banking fees 38,681
Cash paid 1,800,434
Total purchase price $7,356,666
1The value of the shares of common stock was based on the closing price of SunTrust common
stock on the day before the completion of the merger.
Securities,” are other-than-temporarily impaired and requires cer-
tain disclosures.The Issue was effective for other-than-temporary
impairment evaluations made in reporting periods beginning after
June 15, 2004. However, in September 2004, the evaluation and
accounting guidance contained in paragraphs 10 to 20 of this Issue
was delayed by FSP EITF Issue 03-1-1,“Effective Date of Paragraphs
10–20 of EITF Issue No. 03-1, ‘The Meaning of Other-Than-
Temporary Impairment and Its Application to Certain Investments.’”
The disclosures of the original consensus continued to be effective
in annual financial statements for fiscal years ending after
December 15, 2003 and for investments accounted for under SFAS
115. For all other investments within the scope of the original Issue,
the disclosures continue to be effective in annual financial state-
ments for fiscal years ending after June 15, 2004.
The delay of the effective date for paragraphs 10 through 20 will be
superseded concurrent with the final issuance of proposed FSP EITF
Issue 03-1-a, “Implementation Guidance for the Application of
Paragraph 16 of EITF Issue No. 03-1, ‘The Meaning of Other-Than-
Temporary Impairment and Its Application to Certain Investments.’”
FSP EITF Issue 03-1-a provides implementation guidance for debt
securities that are impaired solely because of interest rate and/or
sector spread increases and analyzed for other-than-temporary
impairment under paragraph 16 of Issue 03-1.The adoption of the
effective provisions of this EITF did not have a material impact on
the Company’s financial position or results of operations. The
required disclosures related to the Company’s other-than-tem-
porarily impaired securities are included in Note 5 to the
Consolidated Financial Statements. The Company is in the process
of assessing the impact the delayed provisions will have on its
financial position and results of operations, when adopted.
In December 2004, the FASB issued a revision of SFAS No. 123 (SFAS
No. 123(R)), “Accounting for Stock-Based Compensation.” The
revised Statement clarifies and expands SFAS No. 123’s guidance in
several areas, including measuring fair value, classifying an award as
equity or as a liability, and attributing compensation cost to report-
ing periods. The revised statement supercedes Accounting Practice
Bulletin (APB) Opinion No. 25, “Accounting for Stock Issued to
Employees,” and its related implementation guidance. Under the
provisions of SFAS 123(R), the alternative to use Opinion 25’s intrin-
sic value method of accounting that was provided in Statement No.
123, as originally issued, is eliminated, and entities are required to
measure liabilities incurred to employees in share-based payment
transactions at fair value. Effective January 1, 2002, the Company
adopted the fair-value recognition provision of SFAS No. 123,
prospectively, and began expensing the cost of stock options. Under
the provisions of SFAS No. 123(R) SunTrust is permitted to continue
the application of SFAS No. 123 until the reporting period ended
June 30, 2005, at which time the Company will adopt the provisions
of FAS No. 123(R) and expense the remaining unvested awards
issued prior to SunTrust’s adoption of SFAS No.123. The Company
has quantified the effect on net income and earnings per share if the
fair-value based method had been applied on a retrospective basis
in Note 16 to the Consolidated Financial Statements. The adoption
of this Statement is not expected to have a material impact on the
Company’s financial position or results of operations.
In December 2004, the FASB issued SFAS No. 153, “Exchanges of
Nonmonetary Assets – an amendment of APB Opinion No. 29.”
SFAS No. 153 addresses the measurement of nonmonetary
exchanges and eliminates the exception from fair value measure-
ment for nonmonetary exchanges of similar productive assets in
APB No. 29, “Accounting for Nonmonetary Transactions,” and
replaces it with an exception for exchanges that do not have com-
mercial substance. This Statement specifies that a nonmonetary
exchange has commercial substance if the future cash flows of the
entity are expected to change significantly as a result of the
exchange. The Company does not expect the adoption of SFAS No.
153 to have a material impact on the Company’s financial position
or results of operations.