SunTrust 2008 Annual Report Download - page 139

SUNTRUST BANKS, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2007, respectively. Interest expense related to UTBs was $22.4 million for the year ended December 31, 2008,
compared to $27.7 million, for the same period in 2007. The Company continually evaluates the UTBs associated with its
uncertain tax positions. It is reasonably possible that the total UTBs could significantly increase or decrease during the next
12 months due to completion of tax authority examinations and the expiration of statutes of limitations. However, an estimate
of the range of the reasonably possible change in the total amount of UTBs cannot currently be made.
The Company files consolidated and separate income tax returns in the United States federal jurisdiction and in various state
jurisdictions. The Company’s federal returns through 2004 have been examined by the Internal Revenue Service (“IRS”) and
issues for tax years 1997 through 2004 are still in dispute. The Company has paid the amounts assessed by the IRS in full for
tax years 1997 and 1998 and has filed refund claims with the IRS related to the disputed issues for those two years. An IRS
examination of the Company’s 2005 and 2006 federal income tax returns is currently in progress. Generally, the state
jurisdictions in which the Company files income tax returns are subject to examination for a period from three to seven years
after returns are filed.
The following table provides a rollforward of the Company’s UTBs from January 1 to December 31:
2008 2007
Federal and
State UTBs
Federal and
State UTBs
(Dollars in thousands)
Balance at January 1 $325,401 $288,146
Increases in UTBs related to prior years 12,295 9,197
Decreases in UTBs related to prior years (24,622) (17,577)
Increases in UTBs related to the current year 47,521 54,696
Decreases in UTBs related to settlements (17,258) -
Decreases in UTBs related to lapse of the applicable statutes of limitations (2,752) (1,635)
Decreases in UTBs related to acquired entities in prior years, offset to goodwill (10,565) (7,426)
Balance at December 31 $330,020 $325,401
Note 16 - Employee Benefit Plans
SunTrust sponsors various short and long-term incentive plans for eligible employees. The Management Incentive Plan
(“MIP”) is the Company’s short-term cash incentive plan for key employees that provides for potential annual cash awards
based on the attainment of the Company’s earnings and/or the achievement of business unit and individual performance
objectives. The Company delivers long-term incentives through various incentive programs, including stock options,
restricted stock, and long-term incentive cash. Prior to 2008, some long-term incentives were delivered through the
Performance Unit Plan (“PUP”), a cash long-term incentive plan with a three year time horizon. Effective January 1, 2008,
the PUP was terminated, and outstanding performance units under the PUP were replaced with a one-time grant of restricted
stock. The Long-Term Incentive (“LTI”) Cash Plan became effective in 2008, and awards under the LTI Cash Plan cliff vest
over a period of three years from the date of the award and are paid in cash. Compensation expense related to programs that
have cash payouts for the years ended December 31, 2008, 2007 and 2006 totaled $47.5 million, $48.5 million and $72.6
million, respectively.
Stock Based Compensation
The Company provides stock-based awards through the SunTrust Banks, Inc. 2004 Stock Plan (“Stock Plan”) under which
the Committee has the authority to grant stock options, restricted stock, and performance-based restricted stock
(“performance stock”) to key employees of the Company. Under the 2004 Stock Plan, a total of 19 million shares of common
stock is authorized and reserved for issuance, of which no more than 7.8 million shares may be issued as restricted stock.
Stock options are granted at a price which is no less than the fair market value of a share of SunTrust common stock on the
grant date and may be either tax-qualified incentive stock options or non-qualified stock options. Stock options typically vest
after three years and generally have a maximum contractual life of ten years and upon option exercise, shares are issued to
employees from treasury stock.
Shares of restricted stock may be granted to employees and directors and typically cliff vest after three years. Restricted
stock grants may be subject to one or more objective employment, performance or other grant conditions as established by
the Committee at the time of grant. Any shares of restricted stock that are forfeited will again become available for issuance
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