SunTrust 2010 Annual Report Download - page 177

SUNTRUST BANKS, INC.
Notes to Consolidated Financial Statements (Continued)
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, 2010, 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 from
inception. As of December 31, 2010, the maximum potential amount that SunTrust Community Capital could be obligated to
pay under these guarantees is $37 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, 2010 and
December 31, 2009, $7 million and $9 million was 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, 2010, the Company owned $45.2 billion in residential mortgage loans and home
equity lines, representing 39% of total LHFI, $1.3 billion of residential construction loans, representing 1% of total LHFI,
and an additional $13.6 billion in commitments to extend credit on home equity lines and $9.2 billion in mortgage loan
commitments. Approximately 10% of the residential mortgages and home equity products were government guaranteed. At
December 31, 2009, the Company had $44.6 billion in residential mortgage loans and home equity lines, representing 39% of
total LHFI, $1.9 billion of residential construction loans, representing 2% of total LHFI and an additional $15.2 billion in
commitments to extend credit on home equity lines and $12.2 billion in mortgage loan commitments. Approximately, 2% of
the residential mortgages and home equity products were government guaranteed.
The Company originates and retains certain residential mortgage loan products that include features such as interest only
loans and high LTV loans. The Company owned $13.2 billion and $15.4 billion of interest only loans, primarily with a 10
year interest only period, as of December 31, 2010 and December 31, 2009, respectively. Approximately $3.3 billion of those
loans as of December 31, 2010 and $2.4 billion as of December 31, 2009, had combined original LTV ratios in excess of
80% with no mortgage insurance. Additionally, the Company owned approximately $4.7 billion and $3.0 billion of
amortizing loans with combined original LTV ratios in excess of 80% with no mortgage insurance as of December 31, 2010
and December 31, 2009, respectively. Despite changes in underwriting guidelines that have curtailed the origination of high
LTV loans, the balances of such loans with no mortgage insurance increased during 2010 as the benefits of mortgage
insurance covering certain second lien mortgage loans were exhausted, resulting in the loans effectively no longer being
insured. A geographic concentration arises because the Company operates primarily in the Southeastern and Mid-Atlantic
regions of the U.S.
SunTrust engages in limited international banking activities. The Company’s total cross-border outstanding loans were $446
million and $572 million as of December 31, 2010 and December 31, 2009, respectively.
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