SunTrust 2011 Annual Report Download - page 36
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We depend on the accuracy and completeness of information about clients and counterparties.
In deciding whether to extend credit or enter into other transactions with clients and counterparties, we may rely on information
furnished by or on behalf of clients and counterparties, including financial statements and other financial information. We also
may rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect
to financial statements, on reports of independent auditors.
Regulation by federal and state agencies could adversely affect the business, revenue, and profit margins.
We are heavily regulated by federal and state agencies. This regulation is to protect depositors, the federal DIF and the banking
system as a whole. The U.S. Congress and state legislatures and federal and state regulatory agencies continually review banking
laws, regulations, and policies for possible changes. Changes to statutes, regulations, or regulatory policies, including interpretation
or implementation of statutes, regulations, or policies, could affect us adversely, including limiting the types of financial services
and products we may offer and/or increasing the ability of nonbanks to offer competing financial services and products. Also, if
we do not comply with laws, regulations, or policies, we could receive regulatory sanctions and damage to our reputation.
Competition in the financial services industry is intense and could result in losing business or margin declines.
We operate in a highly competitive industry that could become even more competitive as a result of reform of the financial services
industry resulting from the Dodd-Frank Act and other legislative, regulatory and technological changes, and continued
consolidation. We face aggressive competition from other domestic and foreign lending institutions and from numerous other
providers of financial services. The ability of non-banking financial institutions to provide services previously limited to commercial
banks has intensified competition. Because non-banking financial institutions are not subject to the same regulatory restrictions
as banks and bank holding companies, they can often operate with greater flexibility and lower cost structures. Securities firms
and insurance companies that elect to become financial holding companies, can offer virtually any type of financial service,
including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking, and may acquire
banks and other financial institutions. This may significantly change the competitive environment in which we conduct business.
Some of our competitors have greater financial resources and/or face fewer regulatory constraints. As a result of these various
sources of competition, we could lose business to competitors or be forced to price products and services on less advantageous
terms to retain or attract clients, either of which would adversely affect our profitability.
Maintaining or increasing market share depends on market acceptance and regulatory approval of new products and
services.
Our success depends, in part, on our ability to adapt products and services to evolving industry standards. There is increasing
pressure to provide products and services at lower prices. This can reduce net interest income and noninterest income from fee-
based products and services. In addition, the widespread adoption of new technologies could require us to make substantial capital
expenditures to modify or adapt existing products and services or develop new products and services. We may not be successful
in introducing new products and services in response to industry trends or developments in technology, or those new products
may not achieve market acceptance. As a result, we could lose business, be forced to price products and services on less advantageous
terms to retain or attract clients, or be subject to cost increases, any of which would adversely affect our profitability.
We might not pay dividends on your common stock.
Holders of our common stock are only entitled to receive such dividends as our Board may declare out of funds legally available
for such payments. Although we have historically declared cash dividends on our common stock, we are not required to do so.
Further, in February 2009, the Federal Reserve required bank holding companies to substantially reduce or eliminate dividends.
Since that time, the Federal Reserve has indicated that increased capital distributions would generally not be considered prudent
in the absence of a well-developed capital plan and a capital position that would remain strong even under adverse conditions. As
a result, we expect that any substantial increase in our dividend will require the approval of the Federal Reserve.
Additionally, our obligations under the warrant agreements (that we entered into with the U.S. Treasury as part of the CPP) will
increase to the extent that we pay dividends prior to December 31, 2018 exceeding $0.54 per share per quarter, which was the
amount of dividends we paid when we first participated in the CPP. Specifically, the exercise price and the number of shares to
be issued upon exercise of the warrants will be adjusted proportionately (that is, adversely to us) as specified in a formula contained
in the warrant agreements.
Our ability to receive dividends from our subsidiaries could affect our liquidity and ability to pay dividends.
We are a separate and distinct legal entity from our subsidiaries, including the Bank. We receive substantially all of our revenue
from dividends from our subsidiaries. These dividends are the principal source of funds to pay dividends on our common stock
and interest and principal on our debt. Various federal and/or state laws and regulations limit the amount of dividends that our
Bank and certain of our nonbank subsidiaries may pay us. Also, our right to participate in a distribution of assets upon a subsidiary's
liquidation or reorganization is subject to the prior claims of the subsidiary's creditors. Limitations on our ability to receive dividends