SunTrust 2008 Annual Report Download - page 69

Hedging Activity
Table 15 – 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 increased net interest income in 2008 by $180.7 million and decreased net interest income in
2007 by $25.6 million. The following tables summarize the derivative instruments into which we entered as hedges under
SFAS No. 133. See Note 17, “Derivative Financial Instruments,” to the Consolidated Financial Statements for a complete
description of our derivative instruments and activities during 2008, 2007, and 2006.
As of December 31, 20081
(Dollars in millions)
Notional
Amount
Gross
Unrealized
Gains 4
Gross
Unrealized
Losses 4Equity 7
Average
Maturity
in Yrs
Asset Hedges
Cash flow hedges
Interest rate swaps 2$11,100 $1,102 $- $689 3.98
Equity forward contracts 51,547 250 - 162 6.37
Total asset hedges $12,647 $1,352 $- $851 4.27
Liability Hedges
Cash flow hedges
Interest rate swaps 3$2,250 $- ($47) ($29) 0.47
Total liability hedges $2,250 $- ($47) ($29) 0.47
Terminated/Dedesignated Liability Hedges
Cash flow hedges
Interest rate swaps 6$6,087 $- $- $26 1.20
Total terminated/dedesignated hedges $6,087 $- $- $26 1.20
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, 2008 less any accrued interest receivable or payable from
interest rate derivatives.
5Represents equity forward contracts designated as cash flow hedges of the probable forecasted sale of common shares of Coke.
6Represents 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 $25.9 million of net gains, net of tax,
recorded in accumulated other comprehensive income will be reclassified into earnings as interest income or expense over the life of the respective hedged items.
7At December 31, 2008, the net unrealized gain on derivatives included in accumulated other comprehensive income, which is a component of stockholders’ equity,
was $847.1 million, net of tax. Of this net of tax amount, a $821.2 million gain represents the effective portion of the net gains on derivatives that currently qualify
as cash flow hedges, and a $25.9 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, 2008, $225.0 million of net gains, net of tax, recorded in accumulated other comprehensive income are expected
to be reclassified as interest income or interest expense during the next twelve months. Gains or losses on hedges of the risk of changes in overall cash flows on the
probable forecasted sales of equity securities will be reclassified from accumulated other comprehensive income as an adjustment to the sales price of the equity
shares when such shares are sold; no amounts are expected to be reclassified from accumulated other comprehensive income in the next twelve months.
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