SunTrust 2007 Annual Report Download - page 62

Table 14 – Risk Management Derivative Financial Instruments
We monitor our 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 2007 by $25.6 million and decreased net interest income in
2006 by $105.6 million. The following tables summarize the derivative instruments into which we entered 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 during 2007 and 2006.
As of December 31, 20071
(Dollars in millions)
Notional
Amount
Gross
Unrealized
Gains4
Gross
Unrealized
Losses4
Accumulated Other
Comprehensive
Income6
Average
Maturity
in Years
Asset Hedges
Cash flow hedges
Interest rate swaps2$10,200 $246 ($1) $152 3.07
Total asset hedges $10,200 $246 ($1) $152 3.07
Liability Hedges
Cash flow hedges
Interest rate swaps3$3,865 $3 ($47) ($27) 1.45
Total liability hedges $3,865 $3 ($47) ($27) 1.45
Terminated/Dedesignated Liability Hedges
Cash flow hedges
Interest rate swaps and options5$5,737 $- $- $34 1.88
Total terminated/dedesignated hedges $5,737 $- $- $34 1.88
1Includes only derivative financial instruments which are currently, or were previously designated as, and for which the Company continues to recognize
the impacts of, 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.
2Represents interest rate swaps designated as cash flow hedges of commercial loans.
3Represents interest rate swaps designated as cash flow hedges of floating rate certificates of deposit and FHLB Advances.
4Represents the change in fair value of derivative financial instruments from inception to December 31, 2007 less accrued interest receivable or payable.
5Represents interest rate swaps and options that have been terminated and/or dedesignated as derivatives that qualify for hedge accounting. The derivatives
were designated as cash flow hedges of floating rate debt, certificates of deposit, commercial loans, and tax exempt bonds. The $33.7 million of net gains,
net of taxes, recorded in accumulated other comprehensive income will be reclassified into earnings as interest income or expense over the life of the
respective hedged items.
6At December 31, 2007, the net unrealized gain on derivatives included in accumulated other comprehensive income, which is a component of
stockholders’ equity, was $158.6 million, net of income taxes. Of this net-of-tax amount, a $124.9 million gain represents the effective portion of the net
gains on derivatives that currently qualify as cash flow hedges, and a $33.7 million gain relates to previous qualifying cash flow hedging relationships that
have been terminated or dedesignated. Gains or losses on hedges of interest rate risk will be classified into interest income or expense as a yield
adjustment of the hedged item in the same period that the hedged cash flows impact earnings. As of December 31, 2007, $45.3 million of net gains, net of
taxes, recorded in accumulated other comprehensive income are expected to be reclassified into interest income or interest expense during the next twelve
months.
50