SunTrust 2008 Annual Report Download - page 132

SUNTRUST BANKS, INC.
Notes to Consolidated Financial Statements (Continued)
In December 2007, the Company purchased, through a combination of cash and SunTrust-issued notes, approximately
$1.4 billion in SIV securities from the RidgeWorth Prime Quality Money Market Fund and the RidgeWorth Institutional
Cash Management Money Market Fund at amortized cost plus accrued interest. The SunTrust-issued notes matured on
June 30, 2008. RidgeWorth is the investment adviser to these funds. The Company took this action to protect investors
in these funds from possible losses associated with these securities. The SIV assets were originally rated A-1/P-1 and
were Tier 1 eligible securities when purchased and were collateralized by various domestic and foreign assets,
residential MBS, including Alt-A and subprime collateral, CDO securities, and commercial loans. Prior to the purchase
of the SIV securities, the Company had concluded that these funds were voting interest entities as the equity investors in
the funds have the ability to control the funds. In connection with the purchase, the Company re-evaluated its
involvement with these funds, including consideration of whether or not the Company had an implicit variable interest
in the funds as a result of the action it took. As SunTrust has no contractual obligation to provide any current or future
support to the funds, the size of the financial support provided, and the unique circumstances that caused the Company
to intervene, SunTrust concluded that the funds were still voting interest entities and that, even if the funds were deemed
VIEs, the Company would not be the primary beneficiary of the funds. The Company recorded a pre-tax mark to market
valuation loss of $250.5 million in the fourth quarter of 2007 as a result of purchasing these securities. During 2008, the
Company recorded $40.4 million of net market valuation losses, sold approximately $359.0 million in securities, and
received over $613.8 million in payments from paydowns, settlements, and maturities from these securities.
During the third quarter of 2007, the Company provided support for specific securities within an institutional private
placement fund (the “Private Fund”). This action led the Company to conclude that it was the primary beneficiary of the
Private Fund as it was likely to absorb a majority of the expected losses of the Private Fund. Accordingly, as of
September 30, 2007, SunTrust consolidated the Private Fund, recorded approximately $967 million in trading securities
and a similar amount of other liabilities that represented the minority interest obligations of the Private Fund. After a
thorough evaluation of the Private Fund within the current market conditions, the Company further elected to close the
Private Fund in November 2007, which resulted in the termination of the VIE. As a result, the Company purchased the
securities of the Private Fund at the securities’ amortized cost plus accrued interest and Private Fund shareholders
received their full principal and interest due in cash. The Company has been managing the trading securities that were
received from the Private Fund as part of its actively managed trading portfolio. Due to increased losses within the
collateral underlying these securities, market valuation write-downs of $132.4 million were recorded during 2007.
During 2008, the Company recorded $40.0 million of net market valuation losses, sold over $409.1 million in securities,
and received over $242.9 million in payments related to these securities. At December 31, 2008, the Company still
owned securities with a fair value of $51.3 million in trading assets.
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