SunTrust 2015 Annual Report Download - page 142

Notes to Consolidated Financial Statements, continued
114
The following table provides a rollforward of the Company's
gross federal and state UTBs, excluding interest and penalties,
during the years ended December 31.
(Dollars in millions) 2015 2014
Balance at January 1 $210 $291
Increases in UTBs related to prior years 41
Decreases in UTBs related to prior years (4) (36)
Increases in UTBs related to the current year 10 87
Decreases in UTBs related to settlements (119) (130)
Decreases in UTBs related to lapse of the
applicable statutes of limitations (1) (3)
Balance at December 31 $100 $210
The amount of UTBs that would favorably affect the Company's
effective tax rate, if recognized, was $67 million at December 31,
2015.
Interest related to UTBs is recorded in the provision for
income taxes. The Company had a gross liability of $8 million
and $20 million for interest related to its UTBs at December 31,
2015 and 2014, respectively. During the years ended December
31, 2015 and 2014, the Company recognized a gross benefit of
$4 million and expense of $3 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 $17 million during the next 12
months due to completion of tax authority examinations and the
expiration of statutes of limitations. It is uncertain how much, if
any, of this potential decrease will impact the Company’s
effective tax rate.
NOTE 15 - EMPLOYEE BENEFIT PLANS
The Company sponsors various short-term incentive and LTI
plans for eligible employees, which may be delivered through
various programs, such as RSUs, restricted stock, performance
stock units, and AIP and LTI cash. All incentive awards are
subject to clawback provisions. Awards for performance stock
units vest over a period of three years and are paid in 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 after three years from
the date of the award and are paid in cash. Compensation expense
for incentive plans with cash payouts was $245 million, $203
million, and $150 million for the years ended December 31,
2015, 2014, and 2013, respectively.
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, performance stock units,
and RSUs to key employees of the Company. Award vesting may
be conditional based upon individual, business unit, Company,
and/or performance relative to peer group metrics.
As amended and restated effective January 1, 2014,
following approval by the Compensation Committee of the
Board, shareholders approved an amendment to the 2009 Stock
Plan to remove the sub-limit on shares available for grant that
may be issued as restricted stock or RSUs. Accordingly, all 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 amendment, only
a portion of such shares were available to be granted as either
restricted stock or RSUs. At December 31, 2015, approximately
16 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 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, unvested restricted stock.
The Company accrues and reinvests dividends in equivalent
shares of SunTrust common stock for unvested RSU awards,
which are paid out 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. These awards were granted with a fair value
of $21.67 per unit on the grant date. The balance of RSUs
classified as a liability at December 31, 2015 and 2014 was $23
million and $21 million, respectively.
Consistent with the Company's 2014 decision to discontinue
the issuance of stock options, no stock options were granted
during the years ended December 31, 2015 and 2014. For options
issued in 2013 the fair value of option grants was estimated on
the date of grant using the Black-Scholes option pricing model
based on the assumptions presented in the following table.
Year Ended December 31
2015 1 2014 12013
Dividend yield N/A N/A 1.28%
Expected stock price volatility N/A N/A 30.98
Risk-free interest rate (weighted average) N/A N/A 1.02
Expected life of options N/A N/A 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 years ended December 31,
2015 and 2014.