SunTrust 2008 Annual Report Download - page 156

SUNTRUST BANKS, INC.
Notes to Consolidated Financial Statements (Continued)
2007, STIS and STRH experienced minimal net losses as a result of the indemnity. The clearing agreements expire in
May 2010 for both STIS and STRH. See Note 21, “Contingencies,” to the Consolidated Financial Statements for a
discussion regarding the offer to purchase ARS.
SunTrust Community Capital, LLC (“SunTrust Community Capital”), a SunTrust subsidiary, previously obtained state
and federal tax credits through the construction and development of affordable housing properties and continues to
obtain state and federal tax credits through investments as a limited partner in affordable housing developments.
SunTrust Community Capital or its subsidiaries are limited and/or general partners in various partnerships established
for the properties. If the partnerships generate tax credits, those credits may be sold to outside investors. As of
December 31, 2008, SunTrust Community Capital has completed six tax credit sales containing guarantee provisions
stating that SunTrust Community Capital will make payment to the outside investors if the tax credits become ineligible.
SunTrust Community Capital also guarantees that the general partner under the transaction will perform on the delivery
of the credits. The guarantees are expected to expire within a ten year period. As of December 31, 2008, the maximum
potential amount that SunTrust Community Capital could be obligated to pay under these guarantees is $38.6 million;
however, SunTrust Community Capital can seek recourse against the general partner. Additionally, SunTrust
Community Capital can seek reimbursement from cash flow and residual values of the underlying affordable housing
properties provided that the properties retain value. As of December 31, 2008 and December 31, 2007, $11.5 million
and $14.4 million, respectively, were accrued representing the remainder of tax credits to be delivered, and were
recorded in other liabilities on the Consolidated Balance Sheets.
Note 19 - Concentrations of Credit Risk
Credit risk represents the maximum accounting loss that would be recognized at the reporting date if borrowers failed to
perform as contracted and any collateral or security proved to be of no value. Concentrations of credit risk (whether on- or
off-balance sheet) arising from financial instruments can exist in relation to individual borrowers or groups of borrowers,
certain types of collateral, certain types of industries, certain loan products, or certain regions of the country.
Credit risk associated with these concentrations could arise when a significant amount of loans, related by similar
characteristics, are simultaneously impacted by changes in economic or other conditions that cause their probability of
repayment to be adversely affected. The Company does not have a significant concentration of risk to any individual client
except for the U.S. government and its agencies. The major concentrations of credit risk for the Company arise by collateral
type in relation to loans and credit commitments. The only significant concentration that exists is in loans secured by
residential real estate. At December 31, 2008, the Company owned $48.5 billion in residential mortgage loans and home
equity lines, representing 38.2% of total loans, and an additional $18.3 billion in commitments to extend credit on home
equity loans and $17.0 billion in mortgage loan commitments. At December 31, 2007, the Company had $47.7 billion in
residential mortgage loans and home equity lines, representing 39.0% of total loans, and an additional $20.4 billion in
commitments to extend credit on home equity loans and $12.9 billion in mortgage loan commitments. The Company
originates and retains certain residential mortgage loan products that include features such as interest only loans, high loan to
value loans, and low initial interest rate loans. As of December 31, 2008, the Company owned $16.8 billion of interest only
loans, primarily with a 10 year interest only period. Approximately $1.9 billion of those loans had combined original loan to
value ratios in excess of 80% with no mortgage insurance. Additionally, the Company owned approximately $2.4 billion of
amortizing loans with combined loan to value ratios in excess of 80% with no mortgage insurance. The Company attempts to
mitigate and control the risk in each loan type through private mortgage insurance and underwriting guidelines and practices.
A geographic concentration arises because the Company operates primarily in the Southeastern and Mid-Atlantic regions of
the United States.
SunTrust engages in limited international banking activities. The Company’s total cross-border outstanding loans were
$945.8 million and $591.6 million as of December 31, 2008 and December 31, 2007, respectively.
Note 20 – Fair Value Election and Measurement
As discussed in Note 1, “Significant Accounting Policies,” to the Consolidated Financial Statements, SunTrust early adopted
the fair value financial accounting standards SFAS Nos. 157 and 159 as of January 1, 2007. In certain circumstances, fair
value enables a company to more accurately align its financial performance with the economic value of actively traded or
hedged assets or liabilities. Fair value enables a company to mitigate the non-economic earnings volatility caused from
financial assets and financial liabilities being carried at different bases of accounting, as well as to more accurately portray
the active and dynamic management of a company’s balance sheet.
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