SunTrust 2007 Annual Report Download - page 147

SUNTRUST BANKS, INC.
Notes to Consolidated Financial Statements (Continued)
• Securities available for sale and trading assets and liabilities are predominantly valued at quoted market prices. If
quoted market prices are not available, fair values are based on quoted market prices of similar instruments. In
instances when significant valuation assumptions are not readily observable in the market, instruments are valued
based on the best available data in order to approximate fair value. This data may be internally-developed and
considers risk premiums that a market participant would require.
• Loans held for sale are valued based on observable current market prices. If quoted market prices are not available,
fair values are based on quoted market prices of similar instruments. In instances when significant valuation
assumptions are not readily observable in the market, instruments are valued based on the best available data in
order to approximate fair value. This data may be internally-developed and considers risk premiums that a market
participant would require.
• 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 assumptions used are expected to approximate those that market participants
would use in valuing loans. The carrying amount of accrued interest approximates its fair value.
• 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 interest rates to a schedule of aggregated expected maturities. The assumptions used in the discounted cash
flow analysis are expected to approximate those that market participants would use in valuing deposits. The
intangible value of long-term relationships with depositors is not taken into account in estimating fair values.
• Fair values for foreign deposits, brokered deposits, short-term borrowings and 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 business
activities, some of which involve claims for substantial amounts. The Company’s experience has shown that the damages
often alleged by plaintiffs or claimants are grossly overstated, unsubstantiated by legal theory, and bear no relation to the
ultimate award that a court might grant. In addition, valid legal defenses, such as statutes of limitations, frequently result in
judicial findings of no liability by the Company. Because of these factors, the Company cannot provide a meaningful
estimate of the range of reasonably possible outcomes of claims in the aggregate or by individual claim. However, it is the
opinion of management that liabilities arising from these claims in excess of the amounts currently accrued, if any, will not
have a material impact to the Company’s financial condition or results of operations.
Note 22–Business Segment Reporting
The Company uses a line of business management structure to measure business activities. During 2007, the Company had
five primary lines of business (“LOBs”): Retail, Commercial, Corporate and Investment Banking, Wealth and Investment
Management, and Mortgage.
The Retail line of business includes loans, deposits, and other fee-based services for consumers and business clients with less
than $5 million in sales (up to $10 million in sales in larger metropolitan markets). Clients are serviced through an extensive
network of traditional and in-store branches, ATMs, the Internet and the telephone.
The Commercial line of business provides enterprises with a full array of financial products and services including
commercial lending, financial risk management, and treasury and payment solutions including commercial card services.
This line of business primarily serves business clients between $5 million and $250 million in annual revenues and clients
specializing in commercial real estate activities.
Corporate and Investment Banking provides advisory services, debt and equity capital raising solutions, financial risk
management capabilities, and debt and equity sales and trading for the Company’s clients as well as traditional lending,
leasing, treasury management services and institutional investment management to middle and large corporate clients.
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