SunTrust 2010 Annual Report Download - page 196

SUNTRUST BANKS, INC.
Notes to Consolidated Financial Statements (Continued)
forecasts. The value of related accrued interest on loans approximates fair value; however, it is not included in the
carrying amount or fair value of loans. The value of long-term customer relationships is not permitted under current
U.S. GAAP to be included in the estimated fair value.
(e) Deposit liabilities with no defined maturity such as demand deposits, NOW/money market accounts, and savings
accounts have a fair value equal to the amount payable on demand at the reporting date (i.e., their carrying
amounts). Fair values for CDs are estimated using a discounted cash flow calculation that applies current interest
rates to a schedule of aggregated expected maturities. The assumptions used in the discounted cash flow analysis are
expected to approximate those that market participants would use in valuing deposits. The value of long-term
relationships with depositors is not taken into account in estimating fair values.
(f) Fair values for foreign deposits, certain brokered deposits, short-term borrowings, and certain long-term debt are
based on quoted market prices for similar instruments or estimated using discounted cash flow analysis and the
Company’s current incremental borrowing rates for similar types of instruments. For brokered deposits and long-
term debt that the Company carries at fair value, refer to the respective valuation sections within this footnote.
Note 21 - Contingencies
Litigation and Regulatory Matters
The Company and its subsidiaries are parties to numerous claims and lawsuits arising in the course of their normal business
activities, some of which involve claims for substantial amounts. The Company’s experience has shown that the damages
alleged by plaintiffs or claimants are often overstated, unsubstantiated by legal theory, unsupported by the facts, and/or bear
no relation to the ultimate award that a court might grant. In addition, the outcome of litigation and regulatory matters and
timing of ultimate resolution are inherently difficult to predict. Because of these factors, the Company typically cannot
provide a meaningful estimate of the range of reasonably possible outcomes of claims in the aggregate or by individual
claim. On a case-by-case basis, however, reserves are established for those legal claims in which it is probable that a loss will
be incurred and the amount of such loss can be reasonably estimated. In no cases are those accrual amounts material to the
financial condition of the Company. The actual costs of resolving these claims may be substantially higher or lower than the
amounts reserved.
For a limited number of legal matters in which the Company is involved, the Company is able to estimate a range of
reasonably possible losses. For other matters for which a loss is probable or reasonably possible, such an estimate is not
possible. For those matters where an estimate is reasonably possible, management currently estimates the aggregate range of
reasonably possible losses as $100 million to $150 million in excess of the accrued liability, if any, related to those matters.
This estimated range of reasonably possible losses represents the estimated possible losses over the life of such legal matters,
which may span a currently indeterminable number of years, and is based on information currently available as of
December 31, 2010. The matters underlying the estimated range will change from time to time, and actual results may vary
significantly from this estimate. Those matters for which an estimate is not possible are not included within this estimated
range and, therefore, this estimated range does not represent the Company’s maximum loss exposure. Based on current
knowledge, it is the opinion of management that liabilities arising from legal claims in excess of the amounts currently
accrued, if any, will not have a material impact to the Company’s financial condition, results of operations, or cash flows.
However, in light of the significant uncertainties involved in these matters, and the very large or indeterminate damages
sought in some of these matters, an adverse outcome in one or more of these matters could be material to the Company’s
results or cash flows for any given reporting period.
The following is a description of the nature of certain litigation and regulatory matters.
Auction Rate Securities Investigations and Claims
FINRA Auction Rate Securities Investigation
In September 2008, STRH and STIS entered into an “agreement in principle” with FINRA related to the sales and
brokering of ARS by STRH and STIS. This agreement was non-binding and subject to the negotiation of a final
settlement. The parties were unable to finalize this agreement and FINRA continued its investigation. At this time the
180