SunTrust 2015 Annual Report Download - page 139

Notes to Consolidated Financial Statements, continued
111
price and number of shares to be issued upon exercise to be
proportionately adjusted. The amount of such adjustment is
determined by a formula and depends in part on the extent to
which the Company raises its dividend. The formulas are
contained in the warrant agreements which were filed as exhibits
to Form 8-K filed on September 23, 2011.
Substantially all of the Company’s retained earnings are
undistributed earnings of the Bank, which are restricted by
various regulations administered by federal and state bank
regulatory authorities. At December 31, 2015 and 2014, retained
earnings of the Bank available for payment of cash dividends to
the Parent Company under these regulations totaled
approximately $2.7 billion and $2.9 billion, respectively.
Additionally, the Federal Reserve requires the Company to
maintain cash reserves. At December 31, 2015 and 2014, these
reserve requirements totaled $1.0 billion and $1.5 billion,
respectively, and were fulfilled with a combination of cash on
hand and deposits at the Federal Reserve.
Regulatory Capital
The Company is subject to various regulatory capital
requirements that involve quantitative measures of the
Company’s assets. The following table presents regulatory
capital metrics for SunTrust and the Bank at December 31:
Under Basel III 1 Under Basel I 1
2015 2014
(Dollars in millions) Amount Ratio Amount Ratio
SunTrust Banks, Inc.
CET1 $16,421 9.96% N/A N/A
Tier 1 common equity N/A N/A $15,594 9.60%
Tier 1 capital $17,804 10.80% 17,554 10.80
Total capital 20,668 12.54 20,338 12.51
Leverage 9.69 9.64
SunTrust Bank
CET1 $17,859 11.02% N/A N/A
Tier 1 capital 17,908 11.05 $17,036 10.67%
Total capital 20,101 12.40 19,619 12.29
Leverage 9.96 9.57
1 Basel III Final Rules became effective on January 1, 2015; thus, CET1 is not
applicable ("N/A") in periods ending prior to January 1, 2015 and Basel I Tier 1
common equity is N/A in periods ending after January 1, 2015. Tier 1 capital, Total
capital, and Leverage ratio for periods ended prior to January 1, 2015 were calculated
under Basel I.
On October 11, 2013, the Federal Reserve published final rules
in the Federal Register implementing Basel III. These rules,
which became effective for the Company and the Bank on
January 1, 2015, include the following minimum capital
requirements: CET1 ratio of 4.5%; Tier 1 capital ratio of 6%;
Total capital ratio of 8%; Leverage ratio of 4%; and a capital
conservation buffer of 2.5% of RWA. The capital conservation
buffer is applicable beginning on January 1, 2016 and will be
phased-in through December 31, 2018.
At December 31, 2015, the Company had $627 million in
principal amount of trust preferred securities outstanding. The
Basel III rules require the phase-out of non-qualifying Tier 1
capital instruments such as trust preferred securities.
Accordingly, on January 1, 2015, the Company began phasing-
out of Tier 1 capital its trust preferred and other hybrid capital
securities, and instead began treating them as qualifying Tier 2
capital. Beginning January 1, 2016, these securities will be
completely phased-out of Tier 1 capital and will be classified as
Tier 2 capital, using the methodology specified under Basel III.
Preferred Stock
Preferred stock at December 31 consisted of the following:
(Dollars in millions) 2015 2014 2013
Series A (1,725 shares outstanding) $172 $172 $172
Series B (1,025 shares outstanding) 103 103 103
Series E (4,500 shares outstanding) 450 450 450
Series F (5,000 shares outstanding) 500 500 —
Total preferred stock $1,225 $1,225 $725
In September 2006, the Company authorized and issued
depositary shares representing ownership interests in 5,000
shares of Perpetual Preferred Stock, Series A, no par value and
$100,000 liquidation preference per share (the Series A Preferred
Stock). The Series A Preferred Stock has no stated maturity and
will not be subject to any sinking fund or other obligation of the
Company. Dividends on the Series A Preferred Stock, if declared,
will accrue and be payable quarterly at a rate per annum equal
to the greater of three-month LIBOR plus 0.53%, or 4.00%.
Dividends on the shares are noncumulative. Shares of the Series
A Preferred Stock have priority over the Company’s common
stock with regard to the payment of dividends and, as such, the
Company may not pay dividends on or repurchase, redeem, or
otherwise acquire for consideration shares of its common stock
unless dividends for the Series A Preferred Stock have been
declared for that period and sufficient funds have been set aside
to make payment. During 2009, the Company repurchased 3,275
shares of the Series A Preferred Stock. In September 2011, the
Series A Preferred Stock became redeemable at the Company’s
option at a redemption price equal to $100,000 per share, plus
any declared and unpaid dividends. Except in certain limited
circumstances, the Series A Preferred Stock does not have any
voting rights.
In December 2011, the Company authorized 5,010 shares
and issued 1,025 shares of Perpetual Preferred Stock, Series B,
no par value and $100,000 liquidation preference per share (the
Series B Preferred Stock). The Series B Preferred Stock has no
stated maturity and will not be subject to any sinking fund or
other obligation of the Company. Dividends on the shares are
noncumulative and, if declared, will accrue and be payable
quarterly at a rate per annum equal to the greater of three-month
LIBOR plus 0.65%, or 4.00%. Shares of the Series B Preferred
Stock have priority over the Company's common stock with
regard to the payment of dividends and, as such, the Company
may not pay dividends on or repurchase, redeem, or otherwise
acquire for consideration shares of its common stock unless
dividends for the Series B Preferred Stock have been declared
for that period and sufficient funds have been set aside to make
payment. The Series B Preferred Stock was immediately
redeemable upon issuance at the Company's option at a
redemption price equal to $100,000 per share, plus any declared
and unpaid dividends. Except in certain limited circumstances,
the Series B Preferred Stock does not have any voting rights.