SunTrust 2008 Annual Report Download - page 131

SUNTRUST BANKS, INC.
Notes to Consolidated Financial Statements (Continued)
which protect the Company from losses attributable to operating deficits, construction deficits, and tax credit allocation
deficits. The Company accounts for its limited partner interests in accordance with the provisions of EITF No. 94-1,
“Accounting for Tax Benefits Resulting from Investments in Affordable Housing Projects”. Partnership assets of
approximately $1,045.3 million and $819.5 million in these partnerships were not included in the Consolidated Balance
Sheets at December 31, 2008 and 2007, respectively. These limited partner interests had carrying values of $188.9
million and $148.4 million at December 31, 2008 and 2007, respectively, and are recorded in other assets on the
Company’s Consolidated Balance Sheets. The Company’s maximum exposure to loss for these limited partner
investments totaled $473.2 million and $333.8 million at December 31, 2008 and 2007, respectively. The Company’s
maximum exposure to loss at December 31, 2008 would be borne by the loss of the limited partnership equity
investments along with $202.7 million of loans issued by the Company to the limited partnerships. The difference
between the maximum exposure to loss and the investment and loan balances is primarily attributable to the unfunded
equity commitments. Unfunded equity commitments are amounts that SunTrust has committed to the partnerships upon
the partnerships meeting certain conditions. When these conditions are met, the Company will invest these additional
amounts in the partnerships.
When SunTrust owns both the limited partner and general partner or indemnifying party, SunTrust consolidates the
partnerships and does not consider these partnerships VIEs because as owner of the partnerships the Company has the
ability to directly and indirectly make decisions that have a significant impact on the business. As of December 31, 2008
and 2007, total assets, which consists primarily of fixed assets and cash, attributable to the consolidated, non-VIE
partnerships was $493.5 million and $531.1 million, respectively, and total liabilities, excluding intercompany
liabilities, primarily representing third-party borrowings, were $327.2 million and $333.8 million, respectively.
RidgeWorth Family of Mutual Funds
RidgeWorth Capital Management, Inc., (“RidgeWorth”), formerly known as Trusco Capital Management, Inc., a
registered investment advisor and wholly-owned subsidiary of the Company, serves as the investment advisor for
various private placement and publicly registered investment funds (collectively the “Funds”). The Company evaluates
these Funds to determine if the Funds are voting interest entities or VIEs, as well as monitors the nature of its interests
in each Fund to determine if the Company is required to consolidate any of the Funds.
The Company has concluded that some of the Funds are VIEs because the equity investors lack decision making rights.
However, the Company has concluded that it is not the primary beneficiary of these funds as the Company does not
absorb a majority of the expected losses or expected returns of the funds. As the Company does not invest in these
funds, its exposure to loss is limited to the investment advisor and other administrative fees it earns. Payment on these
fees is received from the individual investor accounts. The total unconsolidated assets of these funds as of December 31,
2008 and 2007 were $3.6 billion and $4.3 billion, respectively.
While the Company does not have any contractual obligation to provide monetary support to any of the Funds, the
Company did elect to provide support for specific securities on one occasion in 2008 and two occasions in 2007.
In September 2008, the Company purchased, at amortized cost plus accrued interest, a Lehman Brothers Holdings, Inc.
(“Lehman Brothers”) security from the RidgeWorth Prime Quality Money Market Fund. This fund received a cash
payment for the accrued interest and a $70 million SunTrust-issued note which will mature on September 30, 2009. The
Lehman Brothers security went into default when Lehman Brothers filed for bankruptcy in September. The Company
took this action in response to the unprecedented market events during the third quarter in order to protect investors in
the fund from losses associated with this specific security. When purchased by the fund, the Lehman Brothers security
was rated A-1/P-1 and was a Tier 1 eligible security. Lehman Brothers is currently in liquidation and the ultimate timing
and form of repayment on the security is not known at this time. During the third quarter, the Company recorded a
pre-tax market valuation loss of $63.8 million as a result of the purchase. Prior to the purchase of the Lehman Brothers
security, the Company had concluded that this fund was a voting interest entity as the equity investors in the fund have
the ability to control the fund. In connection with the purchase, the Company re-evaluated its involvement with this
fund, including consideration of whether or not the Company had an implicit variable interest in the fund as a result of
the action it took currently as well as the action it took in December 2007. As SunTrust has no contractual obligation to
provide any current or future support to the fund, the size of the financial support provided, and the unique
circumstances that caused the Company to intervene both in September 2008 and December 2007, SunTrust concluded
that the fund was still a voting interest entity and that, even if the fund were deemed a VIE, the Company would not be
the primary beneficiary. As of December 31, 2008, the security had a carrying value of $6.7 million.
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