SunTrust 2006 Annual Report Download - page 133

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SUNTRUST BANKS, INC.
Notes to Consolidated Financial Statements (Continued)
Company’s Consolidated Balance Sheet were approximately $2.2 billion. At December 31, 2006, the
Company’s maximum exposure to loss related to these VIEs was approximately $32.2 million, which
represents the Company’s investment in preference shares. At December 31, 2005, the Company was
considered the primary beneficiary of one of these securitization vehicles and therefore, was required to
consolidate its assets and liabilities. As of December 31, 2005, the assets of the consolidated entity
totaled $317.0 million. The Company’s maximum exposure to loss for this VIE was $38.1 million as of
December 31, 2005. During 2006, the Company sold a majority of the equity in this securitization
vehicle and is no longer considered the primary beneficiary.
As part of its community reinvestment initiatives, the Company invests in multi-family affordable
housing properties throughout its footprint as a limited and/or general partner. The Company receives
affordable housing federal and state tax credits for these limited partner investments. Partnership assets
of approximately $756.9 million and $803.0 million in partnerships where SunTrust is only a limited
partner were not included in the Consolidated Balance Sheets at December 31, 2006 and 2005,
respectively. The Company’s maximum exposure to loss for these limited partner investments totaled
$330.6 million and $357.9 million at December 31, 2006 and 2005, respectively. The Company’s
maximum exposure to loss related to its affordable housing limited partner investments consists of the
limited partnership equity investments, unfunded equity commitments, and debt issued by the Company
to the limited partnerships.
SunTrust is the managing general partner of a number of non-registered investment limited partnerships
which have been established to provide alternative investment strategies for its clients. In reviewing the
partnerships for consolidation, SunTrust determined that these were voting interest entities and
accordingly considered the consolidation guidance contained in EITF Issue No. 04-5, “Determining
Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or
Similar Entity When the Limited Partners Have Certain Rights.” Under the terms of SunTrust’s
non-registered investment limited partnerships, the limited partners have certain rights, such as the right
to remove the general partner, or “kick-out rights”, as indicated in EITF Issue No. 04-5. Therefore,
SunTrust, as the general partner, is precluded from consolidating the limited partnerships.
Note 18 – Guarantees
The Company has undertaken certain guarantee obligations in the ordinary course of business. In
following the provisions of FIN 45, the Company must consider guarantees that have any of the
following four characteristics: (i) contracts that contingently require the guarantor to make payments to
a guaranteed party based on changes in an underlying factor that is related to an asset, a liability, or an
equity security of the guaranteed party; (ii) contracts that contingently require the guarantor to make
payments to a guaranteed party based on another entity’s failure to perform under an obligating
agreement; (iii) indemnification agreements that contingently require the indemnifying party to make
payments to an indemnified party based on changes in an underlying factor that is related to an asset, a
liability, or an equity security of the indemnified party; and (iv) indirect guarantees of the indebtedness
of others. The issuance of a guarantee imposes an obligation for the Company to stand ready to perform,
and should certain triggering events occur, it also imposes an obligation to make future payments.
Payments may be in the form of cash, financial instruments, other assets, shares of stock, or provisions
of the Company’s services. The following is a discussion of the guarantees that the Company has issued
as of December 31, 2006, which have characteristics as specified by FIN 45.
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