SunTrust 2006 Annual Report Download - page 102

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SUNTRUST BANKS, INC.
Notes to Consolidated Financial Statements (Continued)
investment strategies for clients. The transaction resulted in $39.8 million of goodwill and $11.1 million
of other intangibles related to client relationships and noncompete agreements which were both
deductible for tax purposes.
On October 1, 2004, SunTrust acquired National Commerce Financial Corporation and subsidiaries, a
Memphis-based financial services organization. NCF’s parent company merged into SunTrust in a
transaction that qualified as a tax-free reorganization. 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 an aggregate purchase price of approximately
$7.4 billion. The total consideration consisted of approximately $1.8 billion in cash and approximately
76.4 million shares of SunTrust common stock. Based on a valuation of their estimated useful lives, the
core deposit intangibles are being amortized over a 10 year period using the sum of the years digit
method and the other intangibles will be amortized over a weighted average of 7.3 years using the
straight line method. No goodwill related to NCF was deductible for tax purposes. The Company
incurred $98.6 million and $28.4 million in merger expenses in 2005 and 2004, respectively, which
represent incremental costs to integrate NCF’s operations. More specifically, these represent costs
related to consulting fees for systems and other integration initiatives, employee-related charges and
marketing expenditures.
On May 28, 2004, SunTrust acquired substantially all of the assets of Seix Investment Advisors, Inc
(“Seix”). The Company acquired approximately $17 billion in assets under management. The Company
paid $190 million in cash, resulting in $84.0 million of goodwill and $99.2 million of other intangible
assets, all of which are deductible for tax purposes. Additional payments may be made in 2007 and
2009, contingent on performance. The additional payments are currently estimated to total
approximately $58.0 million.
Note 3 - Funds Sold and Securities Purchased Under Agreements to Resell
Funds sold and securities purchased under agreements to resell at December 31 were as follow:
(Dollars in thousands) 2006 2005
Federal funds $209,225 $384,575
Resell agreements 840,821 928,923
Total funds sold and securities purchased under agreements to resell $1,050,046 $1,313,498
Securities purchased under agreements to resell are collateralized by U.S. government or agency
securities and are carried at the amounts at which securities will be subsequently resold. The Company
takes possession of all securities under agreements to resell and performs the appropriate margin
evaluation on the acquisition date based on market volatility, as necessary. The Company requires
collateral between 100% and 105% of the underlying securities. The total market value of the collateral
held was $849.9 million and $958.1 million at December 31, 2006 and 2005, of which $561.8 million
and $572.5 million was repledged, respectively.
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