SunTrust 2014 Annual Report Download - page 142

Notes to Consolidated Financial Statements, continued
119
The following table provides a rollforward of the Company's
federal and state UTBs, excluding interest and penalties, during
the years ended December 31:
(Dollars in millions) 2014 2013
Balance at January 1 $291 $137
Increases in UTBs related to prior years 14
Decreases in UTBs related to prior years (36) (10)
Increases in UTBs related to the current year 87 171
Decreases in UTBs related to settlements (130) (2)
Decreases in UTBs related to lapse of the
applicable statutes of limitations (3) (9)
Balance at December 31 $210 $291
The amount of UTBs that, if recognized, would affect the
Company's effective tax rate was $148 million at December 31,
2014.
Interest related to UTBs is recorded as a component of the
income tax provision. The Company had a liability of $20 million
and $17 million for interest related to its UTBs at December 31,
2014 and 2013, respectively. During the years ended December
31, 2014 and 2013, the Company recognized an expense of
approximately $3 million and a benefit of approximately $1
million, respectively, for interest on the UTBs.
The Company files U.S. federal, state, and local income tax
returns. The Company's federal income tax returns are no longer
subject to examination by the IRS for taxable years prior to 2010.
With limited exceptions, the Company is no longer subject to
examination by state and local taxing authorities for taxable years
prior to 2006. It is reasonably possible that the liability for UTBs
could decrease by as much as $52 million during the next 12
months due to completion of tax authority examinations.
NOTE 15 - EMPLOYEE BENEFIT PLANS
The Company sponsors various short-term incentive plans and
LTI plans for eligible employees, which may be delivered
through various incentive programs, such as RSUs, restricted
stock, and LTI cash. AIP is the Company's short-term cash
incentive plan for key employees that provides for potential
annual cash awards based on the Company's performance and/
or the achievement of business unit and individual performance
objectives. Awards under the LTI cash plan generally cliff vest
over a period of three years from the date of the award and are
paid in cash. All incentive awards are subject to clawback
provisions. Compensation expense for these incentive plans with
cash payouts was $203 million, $150 million, and $155 million
for the years ended December 31, 2014, 2013, and 2012.
Stock-Based Compensation
The Company provides stock-based awards through the 2009
Stock Plan under which the Compensation Committee of the
Board of Directors has the authority to grant stock options, stock
appreciation rights, restricted stock, and RSUs to key employees
of the Company. Some awards may have performance or other
conditions, such as vesting tied to the Company's total
shareholder return relative to a peer group or vesting tied to the
achievement of an absolute financial performance target.
On January 9, 2014 the Compensation Committee of the
Board of Directors approved, subject to shareholder approval,
an amendment to the 2009 Stock Plan as amended and restated
effective January 1, 2014, to remove the sub-limit on shares
available for grant that may be issued as restricted stock or RSUs.
Following shareholder approval of the Plan amendment, which
occurred on April 22, 2014, all of the 17 million remaining
authorized shares previously under the Plan became available
for grant as stock options, stock appreciation rights, restricted
stock, or RSUs. Prior to the Plan amendment, only a portion of
such shares were available to be granted as either restricted stock
or RSUs. At December 31, 2014, approximately 18 million
shares were available for grant.
Shares or units of restricted stock may be granted to
employees and directors. Generally, grants to employees either
cliff vest after three years or vest pro rata annually over three
years. Restricted stock grants may be subject to one or more
criteria, including employment, performance, or other
conditions as established by the Compensation Committee at the
time of grant. Any shares of restricted stock that are forfeited
will again become available for issuance under the Stock Plan.
An employee or director has the right to vote the shares of
restricted stock after grant unless and until they are forfeited.
Compensation cost for restricted stock and RSUs is generally
equal to the fair market value of the shares on the grant date of
the award and is amortized to compensation expense over the
vesting period. Dividends are paid on awarded but unvested
restricted stock.
The Company accrues and reinvests dividends in equivalent
shares of SunTrust common stock for unvested RSU awards,
which are paid out only when the underlying RSU award vests.
Generally, RSU awards are classified as equity. However, during
2012 there were 574,257 RSUs granted that were classified as a
liability because the grant date had not been achieved as defined
under U.S. GAAP. The awards were granted with a fair value of
$21.67 per unit on the grant date. The balance of these RSUs
classified as a liability at December 31, 2014 and 2013 was $21
million and $17 million, respectively.
Consistent with the Company's decision to discontinue the
issuance of stock options in 2014, no stock options were granted
during the year ended December 31, 2014. The fair value of
option grants was estimated on the date of grant using the Black-
Scholes option pricing model based on the following
assumptions:
Year Ended December 31
2014 12013 2012
Dividend yield N/A 1.28% 0.91%
Expected stock price volatility N/A 30.98 39.88
Risk-free interest rate (weighted
average) N/A 1.02 1.07
Expected life of options N/A 6 years 6 years
1 Assumptions are not applicable ("N/A") as the Company discontinued the issuance of stock
options and no stock options were granted for the year ended December 31, 2014.