SunTrust 2010 Annual Report Download - page 153

SUNTRUST BANKS, INC.
Notes to Consolidated Financial Statements (Continued)
The following table provides a rollforward of the Company’s UTBs from January 1 to December 31:
Federal and State UTBs
2010 2009
(Dollars in millions)
Balance at January 1 $161 $301
Increases in UTBs related to prior years 26 8
Decreases in UTBs related to prior years (16) -
Increases in UTBs related to the current year 6-
Decreases in UTBs related to settlements (57) (146)
Decreases in UTBs related to lapse of the applicable statutes of limitations (18) (3)
Increases in UTBs related to acquired entities in prior years, offset to goodwill -1
Balance at December 31 $102 $161
Note 16 - Employee Benefit Plans
The Company sponsors various short-term incentive and LTI plans for eligible employees. The Company delivers LTIs
through various incentive programs, including stock options, restricted stock, LTI cash, and salary shares. Prior to 2008,
some LTIs were delivered through the PUP, a cash basis LTI 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 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. 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. Compensation expense related to programs that have cash payouts for
the years ended December 31, 2010, 2009 and 2008 totaled $77 million, $28 million and $48 million, respectively.
An important new compensation development that had the characteristics of both base salary and equity emerged as part of
the U.S. Treasury’s Interim Final Rule on TARP Standards for Compensation and Corporate Governance. This compensation
development became known as salary shares. Specifically, the Interim Rule prohibits the payment of short-term incentives
(annual bonus) and stock options to the SEO and to the next 20 most highly compensated employees. Effective January 1,
2010, the Company chose to use the salary share concept because it is specifically authorized by EESA to address the
constraints on the annual cash bonus and equity awards; and the Company believes it is necessary that it use this approach to
remain competitive and to minimize the risk of talent flight to other companies with which it competes. Specifically, the
Company will pay additional base salary amounts in the form of stock (salary shares) to the SEO and other employees who
are among the next 20 most highly-compensated employees. The Company will do this each pay period in the form of stock
units under the SunTrust Banks, Inc. 2009 Stock Plan. The stock units will not include any rights to receive dividends or
dividend equivalents. As required by EESA, each salary share will be non-forfeitable upon grant but may not be sold or
transferred until the expiration of a holding period (except as necessary to satisfy applicable withholding taxes). As a result,
these individuals are at risk for the value of our stock price until the stock unit is settled. The stock units will be settled in
cash; one half on March 31, 2011 and one half on March 31, 2012, unless settled earlier due to the executive’s death. The
amount to be paid on settlement of the stock units will be equal to the value of a share of SunTrust common stock on the
settlement date. Benefit plan determinations and limits were established to ensure that the salary shares were accounted for
equitably within relevant benefit plans. As of December 31, 2010, the accrual related to salary shares was $10 million.
Stock Based Compensation
The Company provides stock-based awards through the SunTrust Banks Inc. 2009 Stock Plan under which the Compensation
Committee of the Board of Directors (the “Committee”) has the authority to grant stock options and restricted stock, of
which some may have performance features, to key employees of the Company. Under the 2009 Stock Plan, approximately
9 million shares of common stock is authorized and reserved for issuance, of which no more than 5 million shares may be
issued as restricted stock or stock units. See the summary of stock option and restricted stock activity table for the shares
available for additional grants. 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.
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