SunTrust 2006 Annual Report Download - page 56

Download and view the complete annual report

Please find page 56 of the 2006 SunTrust annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 159

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159

to lend to a customer who has complied with predetermined contractual obligations. The Company also
had $13.0 billion in letters of credit as of December 31, 2006, most of which are standby letters of credit
that provide that SunTrust Bank fund if certain future events occur. Of this, approximately $6.3 billion
support variable-rate demand obligations (“VRDOs”) remarketed by SunTrust and other agents. VRDOs
are municipal securities which are remarketed by the agent on a regular basis, usually weekly. In the
event that the securities are unable to be remarketed, SunTrust Bank would fund under the letters of
credit.
Certain provisions of long-term debt agreements and the lines of credit prevent the Company from
creating liens on, disposing of, or issuing (except to related parties) voting stock of subsidiaries. Further,
there are restrictions on mergers, consolidations, certain leases, sales or transfers of assets, and
minimum shareholders’ equity ratios. As of December 31, 2006, the Company was in compliance with
all covenants and provisions of these debt agreements.
Table 13 - Risk Management Derivative Financial Instruments
The Company monitors its sensitivity to changes in interest rates and may use derivative instruments to
limit the volatility of net interest income. Derivative instruments decreased net interest income in 2006
$105.6 million and increased net interest income in 2005 $104.4 million. The following tables
summarize the derivative instruments entered into by the Company as an end-user. See Note 17,
“Variable Interest Entities, Derivatives and Off-Balance Sheet Arrangements,” to the Consolidated
Financial Statements for a complete description of the derivative instruments and activities for 2006 and
2005.
As of December 31, 2006 1
(Dollars in millions)
Notional
Amount
Gross
Unrealized
Gains 6
Gross
Unrealized
Losses 6
Accumulated
Other
Comprehensive
Income 9
Average
Maturity in
Years
Asset Hedges
Cash flow hedges
Interest rate swaps 2$7,000 $- ($15) ($10) 1.34
Fair value hedges
Forward contracts 36,787 9 (6) - 0.07
Total asset hedges $13,787 $9 ($21) ($10) 0.72
Liability Hedges
Cash flow hedges
Interest rate swaps and options 4$2,265 $42 $- $26 1.95
Fair value hedges
Interest rate swaps 53,823 - (166) - 4.41
Total liability hedges $6,088 $42 ($166) $26 3.50
Terminated/Dedesignated Liability Hedges
Cash flow hedges
Interest rate swaps and options 7$8,615 $- $- $3 0.86
Fair value hedges
Interest rate swaps 83,694 15 (91) - 7.19
Total terminated/dedesignated hedges $12,309 $15 ($91) $3 2.76
1Includes only derivative financial instruments which are currently, or previously designated as, qualifying hedges under SFAS No. 133. Certain other
derivatives which are effective for risk management purposes, but which are not in designated hedging relationships under SFAS No. 133, are not
incorporated in this table. All interest rate swaps have resets of six months or less and are the pay and receive rates in effect as of December 31, 2006.
2Represents interest rate swaps designated as cash flow hedges of commercial loans.
3Forward contracts are designated as fair value hedges of closed mortgage loans which are held for sale.
4Represents interest rate swaps and options designated as cash flow hedges of floating rate certificates of deposit, Global Bank Notes, FHLB Advances and
other variable rate debt.
43