SunTrust 2012 Annual Report Download - page 177

Notes to Consolidated Financial Statements (Continued)
161
The impacts of derivatives on the Consolidated Statements of Income and the Consolidated Statements of Shareholders’ Equity
for the year ended December 31, 2010, are presented below:
Year Ended December 31, 2010
(Dollars in millions)
Amount of pre-
tax gain/(loss)
recognized in
OCI on Derivatives
(Effective Portion)
Classification of gain
reclassified from
AOCI into Income
(Effective Portion)
Amount of pre-
tax gain
reclassified from
AOCI into Income
(Effective Portion)
Derivatives in cash flow hedging relationships:
Equity contracts hedging Securities AFS ($101) $—
Interest rate contracts hedging Floating rate loans1903 Interest and fees on loans 487
Total $802 $487
1 During the year ended December 31, 2010, the Company also reclassified $130 million in pre-tax gains from AOCI into net interest income. These gains
related to hedging relationships that have been previously terminated or de-designated and are reclassified into earnings in the same period in which the
forecasted transaction occurs.
(Dollars in millions)
Classification of gain/(loss)
recognized in Income on Derivatives
Amount of gain/(loss)
recognized in Income
on Derivatives for the
Year Ended December 31, 2010
Derivatives not designated as hedging instruments:
Interest rate contracts covering:
Fixed rate debt Trading income ($64)
Corporate bonds and loans Trading income (1)
MSRs Mortgage servicing related income 444
LHFS, IRLCs, LHFI-FV Mortgage production related income/(loss) (176)
Trading activity Trading income 304
Foreign exchange rate contracts covering:
Foreign-denominated debt and commercial loans Trading income (94)
Trading activity Trading income 7
Credit contracts covering:
Loans Trading income (2)
Trading activity Trading income 10
Equity contracts - trading activity Trading income (53)
Other contracts:
IRLCs 1Mortgage production related income/(loss) 392
Total $767
1 Amount is included in the fair value gain/(loss) for LHFS measured at fair value pursuant to election of the FVO, as shown in Note 18, "Fair Value Election
and Measurement".
Credit Derivatives
As part of its trading businesses, the Company enters into contracts that are, in form or substance, written guarantees:
specifically, CDS, swap participations, and TRS. The Company accounts for these contracts as derivatives and, accordingly,
recognizes these contracts at fair value, with changes in fair value recognized in trading income in the Consolidated Statements
of Income.
The Company writes CDS, which are agreements under which the Company receives premium payments from its counterparty
for protection against an event of default of a reference asset. In the event of default under the CDS, the Company would
either net cash settle or make a cash payment to its counterparty and take delivery of the defaulted reference asset, from which
the Company may recover all, a portion, or none of the credit loss, depending on the performance of the reference asset. Events
of default, as defined in the CDS agreements, are generally triggered upon the failure to pay and similar events related to the
issuer(s) of the reference asset. As of December 31, 2012 and 2011, all written CDS contracts reference single name corporate
credits or corporate credit indices. When the Company has written CDS, it has generally entered into offsetting CDS for the
underlying reference asset, under which the Company paid a premium to its counterparty for protection against an event of
default on the reference asset. The counterparties to these purchased CDS are generally of high creditworthiness and typically
have ISDA master netting agreements in place that subject the CDS to master netting provisions, thereby mitigating the risk
of non-payment to the Company. As such, at December 31, 2012 and 2011, the Company did not have any significant risk of