(Address of principal executive offices) (Zip Code)
(404) 588-7711
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
ý Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No ý
At October 31, 2012, 538,828,728 shares of the Registrant’s Common Stock, $1.00 par value, were outstanding.
Coke Counterparty — a large, unaffiliated financial institution with whom the Company entered into the Agreements.
Coke Stock Split — the two-for-one stock split of shares of The Coca-Cola Company effective August 10, 2012.
Company — SunTrust Banks, Inc.
CP — Commercial paper.
CPP — Capital Purchase Program.
CSA — Credit support annex.
DBRS — Dun and Bradstreet, Inc.
DDA — Demand deposit account.
Dodd-Frank Act — The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
EPS — Earnings per share.
ERISA — Employee Retirement Income Security Act of 1974.
Exchange Act — Securities Exchange Act of 1934.
FASB — Financial Accounting Standards Board.
FDIC — The Federal Deposit Insurance Corporation.
Federal Reserve — The Board of Governors of the Federal Reserve System.
i
Fed funds — Federal funds.
FFELP — Federal Family Education Loan Program.
FHA — Federal Housing Administration.
FHLB — Federal Home Loan Bank.
FICO — Fair Isaac Corporation.
FINRA — Financial Industry Regulatory Authority.
Fitch — Fitch Ratings Ltd.
FRB — Federal Reserve Board.
FTE — Fully taxable-equivalent.
FVO — Fair value option.
GenSpring — GenSpring Family Offices, LLC.
GSE — Government-sponsored enterprise.
HUD — U.S. Department of Housing and Urban Development.
IFRS — International Financial Reporting Standards.
IIS — Institutional Investment Solutions.
IPO — Initial public offering.
IRLC — Interest rate lock commitment.
ISDA — International Swaps and Derivatives Association.
LGD — Loss given default.
LHFI — Loans held for investment.
LHFI-FV — Loans held for investment carried at fair value.
LHFS — Loans held for sale.
LIBOR —London InterBank Offered Rate.
LOCOM – Lower of cost or market.
LTI — Long-term incentive.
LTV— Loan to value.
MBS — Mortgage-backed securities.
MD&A — Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Moody’s — Moody’s Investors Service.
MSR — Mortgage servicing right.
MVE — Market value of equity.
NEO — Named executive officers.
NII — Net interest income.
NOW — Negotiable order of withdrawal account.
NPL — Nonperforming loan.
NPR — Notice of Proposed Rulemaking.
OCC — Office of the Comptroller of the Currency.
OCI — Other comprehensive income.
OREO — Other real estate owned.
OTC — Over-the-counter.
OTTI — Other-than-temporary impairment.
ii
Parent Company — SunTrust Banks, Inc., the parent Company of SunTrust Bank and other subsidiaries of
SunTrust Banks, Inc.
PD — Probability of default.
PPG — Playbook for profitable growth.
QSPE — Qualifying special-purpose entity.
RidgeWorth — RidgeWorth Capital Management, Inc.
ROA — Return on average total assets.
ROE — Return on average common shareholders’ equity.
RSU — Restricted stock unit.
RWA — Risk-weighted assets.
S&P — Standard and Poor’s.
SBA — Small Business Administration.
SEC — U.S. Securities and Exchange Commission.
SERP — Supplemental Executive Retirement Plan.
SPE — Special purpose entity.
STIS — SunTrust Investment Services, Inc.
STM — SunTrust Mortgage, Inc.
STRH — SunTrust Robinson Humphrey, Inc.
SunTrust — SunTrust Banks, Inc.
TARP — Troubled Asset Relief Program.
TDR — Troubled debt restructuring.
Three Pillars —Three Pillars Funding, LLC.
TRS — Total return swaps.
U.S. — United States.
U.S. GAAP — Generally Accepted Accounting Principles in the United States.
U.S. Treasury — The United States Department of the Treasury.
VA —Veterans Administration.
VAR —Value at risk.
VI — Variable interest.
VIE — Variable interest entity.
Visa —The Visa, U.S.A. Inc. card association or its affiliates, collectively.
Visa Counterparty — a financial institution which purchased the Company's Visa Class B shares.
W&IM — Wealth and Investment Management.
PART I – FINANCIAL INFORMATION
The following unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and accordingly do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. However, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary to comply with Regulation S-X have been included. Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2012.
iii
Item 1.
FINANCIAL STATEMENTS (UNAUDITED)
SunTrust Banks, Inc.
Consolidated Statements of Income
For the Three Months Ended September 30
For the Nine Months Ended September 30
(Dollars in millions and shares in thousands, except per share data) (Unaudited)
2012
2011
2012
2011
Interest Income
Interest and fees on loans
$1,257
$1,296
$3,820
$3,910
Interest and fees on loans held for sale
29
21
84
71
Interest and dividends on securities available for sale:
Taxable interest
132
175
454
517
Tax-exempt interest
4
5
12
16
Dividends1
8
20
53
61
Trading account interest and other
15
21
48
63
Total interest income
1,445
1,538
4,471
4,638
Interest Expense
Interest on deposits
98
154
342
485
Interest on long-term debt
66
110
244
347
Interest on other borrowings
10
11
29
35
Total interest expense
174
275
615
867
Net interest income
1,271
1,263
3,856
3,771
Provision for credit losses
450
347
1,067
1,186
Net interest income after provision for credit losses
821
916
2,789
2,585
Noninterest Income
Service charges on deposit accounts
172
176
504
509
Other charges and fees
116
130
361
386
Card fees
55
104
183
309
Trust and investment management income
127
134
387
404
Retail investment services
60
58
180
175
Investment banking income
83
68
230
231
Trading income
19
66
145
171
Mortgage production related (loss)/income
(64
)
54
102
56
Mortgage servicing related income
64
58
215
202
Net securities gains2
1,941
2
1,973
98
Other noninterest (loss)/income
(31
)
53
78
157
Total noninterest income
2,542
903
4,358
2,698
Noninterest Expense
Employee compensation
670
642
1,977
1,898
Employee benefits
110
108
363
354
Outside processing and software
171
164
527
484
Net occupancy expense
92
90
267
268
Marketing and customer development
75
41
134
125
Operating losses
71
72
200
161
Regulatory assessments
67
80
179
232
Credit and collection services
65
71
181
182
Equipment expense
49
44
140
132
Other staff expense
41
18
75
53
Consulting and legal fees
40
34
116
77
Other real estate expense
30
62
133
195
Amortization/impairment of goodwill/intangible assets
17
11
39
34
Net loss/(gain) on debt extinguishment
2
(1
)
15
(3
)
Other noninterest expense
226
124
467
375
Total noninterest expense
1,726
1,560
4,813
4,567
Income before provision for income taxes
1,637
259
2,334
716
Provision for income taxes
551
45
710
136
Net income including income/(loss) attributable to noncontrolling interest
1,086
214
1,624
580
Net income/(loss) attributable to noncontrolling interest
9
(1
)
22
7
Net income
$1,077
$215
$1,602
$573
Net income available to common shareholders
$1,066
$211
$1,581
$424
Net income per average common share:
Diluted
$1.98
$0.39
$2.94
$0.81
Basic
1.99
0.40
2.96
0.81
Dividends declared per common share
0.05
0.05
0.15
0.07
Average common shares - diluted
538,699
535,395
537,538
524,888
Average common shares - basic
534,506
531,928
533,859
521,248
1 Includes dividends on common stock of The Coca-Cola Company of $14 million during the three months ended September 30, 2011, $31 million during the nine months ended September 30, 2012, and $42 million during the nine months ended September 30, 2011.
2 Includes credit-related OTTI losses of $3 million and $7 million for the three and nine months ended September 30, 2012, respectively, and $0 and $2 million for the three and nine months ended September 30, 2011, respectively. There were no non-credit related unrealized OTTI losses recorded in OCI, before taxes, for the three and nine months ended September 30, 2012 and 2011.
See Notes to Consolidated Financial Statements (unaudited).
1
SunTrust Banks, Inc.
Consolidated Statements of Comprehensive (Loss)/Income
For the Three Months Ended September 30
For the Nine Months Ended September 30
(Dollars in millions) (Unaudited)
2012
2011
2012
2011
Net income
$1,077
$215
$1,602
$573
Components of other comprehensive (loss)/income:
Change in net unrealized gains on securities, net of tax of ($795), $100, ($688), and $170, respectively
(1,448
)
173
(1,256
)
294
Change in net unrealized gains on derivatives, net of tax of $111, $105, $15, and $74, respectively
204
182
34
129
Change related to employee benefit plans, net of tax of $3, $2, ($13), and ($7), respectively
5
4
(23
)
(13
)
Total other comprehensive (loss)/income
(1,239
)
359
(1,245
)
410
Total comprehensive (loss)/income
($162
)
$574
$357
$983
See Notes to Consolidated Financial Statements (unaudited).
2
SunTrust Banks, Inc.
Consolidated Balance Sheets
As of
(Dollars in millions and shares in thousands) (Unaudited)
September 30, 2012
December 31, 2011
Assets
Cash and due from banks
$4,655
$3,696
Securities purchased under agreements to resell
930
792
Interest-bearing deposits in other banks
22
21
Cash and cash equivalents
5,607
4,509
Trading assets (including encumbered securities of $614 as of September 30, 2012 and $574 as of December 31, 2011)
6,381
6,279
Securities available for sale
21,467
28,117
Loans held for sale1 (loans at fair value: $3,222 as of September 30, 2012 and $2,141 as of December 31, 2011)
5,205
2,353
Loans2 (loans at fair value: $390 as of September 30, 2012 and $433 as of December 31, 2011)
121,817
122,495
Allowance for loan and lease losses
(2,239
)
(2,457
)
Net loans
119,578
120,038
Premises and equipment
1,578
1,564
Goodwill
6,369
6,344
Other intangible assets (MSRs at fair value: $831 as of September 30, 2012 and $921 as of December 31, 2011)
896
1,017
Other real estate owned
304
479
Other assets
5,796
6,159
Total assets
$173,181
$176,859
Liabilities and Shareholders’ Equity
Noninterest-bearing consumer and commercial deposits
$37,592
$34,359
Interest-bearing consumer and commercial deposits
87,306
91,252
Total consumer and commercial deposits
124,898
125,611
Brokered time deposits (CDs at fair value: $900 as of September 30, 2012 and $1,018 as of December 31, 2011)
2,198
2,281
Foreign deposits
130
30
Total deposits
127,226
127,922
Funds purchased
680
839
Securities sold under agreements to repurchase
1,630
1,644
Other short-term borrowings
6,511
8,983
Long-term debt 3 (debt at fair value: $2,050 as of September 30, 2012 and $1,997 as of December 31, 2011)
10,765
10,908
Trading liabilities
1,458
1,806
Other liabilities
4,512
4,691
Total liabilities
152,782
156,793
Preferred stock, no par value
275
275
Common stock, $1.00 par value
550
550
Additional paid in capital
9,195
9,306
Retained earnings
10,491
8,978
Treasury stock, at cost, and other4
(616
)
(792
)
Accumulated other comprehensive income, net of tax
504
1,749
Total shareholders’ equity
20,399
20,066
Total liabilities and shareholders’ equity
$173,181
$176,859
Common shares outstanding
538,821
536,967
Common shares authorized
750,000
750,000
Preferred shares outstanding
3
3
Preferred shares authorized
50,000
50,000
Treasury shares of common stock
11,100
12,954
1 Includes loans held for sale, at fair value, of consolidated VIEs
$328
$315
2 Includes loans of consolidated VIEs
374
3,322
3 Includes debt of consolidated VIEs ($287 at fair value as of September 30, 2012 and $289 as of December 31, 2011)
683
722
4 Includes noncontrolling interest held
114
107
See Notes to Consolidated Financial Statements (unaudited).
3
SunTrust Banks, Inc.
Consolidated Statements of Shareholders’ Equity
(Dollars and shares in millions, except per share data) (Unaudited)
Preferred
Stock
Common
Shares
Outstanding
Common
Stock
Additional
Paid in
Capital
Retained
Earnings
Treasury
Stock and
Other 1
Accumulated
Other
Comprehensive
Income 2
Total
Balance, January 1, 2011
$4,942
500
$515
$8,403
$8,542
($888
)
$1,616
$23,130
Net income
—
—
—
—
573
—
—
573
Other comprehensive income
—
—
—
—
—
—
410
410
Change in noncontrolling interest
—
—
—
—
—
(8
)
—
(8
)
Common stock dividends, $0.07 per share
—
—
—
—
(37
)
—
—
(37
)
Preferred stock dividends, $3,044 per share
—
—
—
—
(5
)
—
—
(5
)
U.S. Treasury preferred stock dividends, $1,236 per share
—
—
—
—
(60
)
—
—
(60
)
Accretion of discount for preferred stock issued to U.S. Treasury
6
—
—
—
(6
)
—
—
—
Repurchase of preferred stock issued to U.S. Treasury
(4,776
)
—
—
—
(74
)
—
—
(4,850
)
Purchase of outstanding warrants
(11
)
(11
)
Issuance of common stock
—
35
35
982
—
—
—
1,017
Stock compensation expense
—
—
—
9
—
—
—
9
Restricted stock activity
—
2
—
(57
)
—
49
—
(8
)
Amortization of restricted stock compensation
—
—
—
—
—
25
—
25
Issuance of stock for employee benefit plans and other
—
—
—
(12
)
—
27
—
15
Balance, September 30, 2011
$172
537
$550
$9,314
$8,933
($795
)
$2,026
$20,200
Balance, January 1, 2012
$275
537
$550
$9,306
$8,978
($792
)
$1,749
$20,066
Net income
—
—
—
—
1,602
—
—
1,602
Other comprehensive loss
—
—
—
—
—
—
(1,245
)
(1,245
)
Change in noncontrolling interest
—
—
—
—
—
7
—
7
Common stock dividends, $0.15 per share
—
—
—
—
(81
)
—
—
(81
)
Preferred stock dividends, $3,056 per share
—
—
—
—
(8
)
—
—
(8
)
Exercise of stock options and stock compensation expense
—
1
—
(35
)
—
51
—
16
Restricted stock activity
—
1
—
(64
)
—
69
—
5
Amortization of restricted stock compensation
—
—
—
—
—
22
—
22
Issuance of stock for employee benefit plans and other
—
—
—
(12
)
—
27
—
15
Balance, September 30, 2012
$275
539
$550
$9,195
$10,491
($616
)
$504
$20,399
1 At September 30, 2012, includes ($673) million for treasury stock, ($57) million for compensation element of restricted stock, and $114 million for noncontrolling interest.
At September 30, 2011, includes ($858) million for treasury stock, ($58) million for compensation element of restricted stock, and $121 million for noncontrolling interest.
2 Components of AOCI at September 30, 2012, included $607 million in unrealized net gains on AFS securities, $603 million in unrealized net gains on derivative financial instruments, and ($706) million related to employee benefit plans. At September 30, 2011, components included $1,820 million in unrealized net gains on AFS securities, $661 million in unrealized net gains on derivative financial instruments, and ($455) million related to employee benefit plans.
See Notes to Consolidated Financial Statements (unaudited).
4
SunTrust Banks, Inc.
Consolidated Statements of Cash Flows
Nine Months Ended September 30
(Dollars in millions) (Unaudited)
2012
2011
Cash Flows from Operating Activities
Net income including income attributable to noncontrolling interest
$1,624
$580
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and accretion
567
563
Origination of mortgage servicing rights
(244
)
(183
)
Provisions for credit losses and foreclosed property
1,191
1,309
Mortgage repurchase provision
701
287
Net securities gains
(1,973
)
(98
)
Net gain on sale of loans held for sale, loans, and other assets
(865
)
(309
)
Net (increase)/decrease in loans held for sale
(199
)
2,146
Net decrease/(increase) in other assets
457
(556
)
Net decrease in other liabilities
(313
)
—
Net cash provided by operating activities
946
3,739
Cash Flows from Investing Activities
Proceeds from maturities, calls, and paydowns of securities available for sale
5,431
3,903
Proceeds from sales of securities available for sale
4,195
11,585
Purchases of securities available for sale
(3,097
)
(15,664
)
Proceeds from maturities, calls, and paydowns of trading securities
—
132
Proceeds from sales of trading securities
—
102
Net increase in loans, including purchases of loans
(4,833
)
(5,018
)
Proceeds from sales of loans
2,041
499
Capital expenditures
(168
)
(78
)
Payments related to acquisitions, including contingent consideration
(13
)
(20
)
Proceeds from the sale of other real estate owned and other assets
363
481
Net cash provided by/(used in) investing activities
3,919
(4,078
)
Cash Flows from Financing Activities
Net (decrease)/increase in total deposits
(696
)
3,207
Net (decrease)/increase in funds purchased, securities sold under agreements
to repurchase, and other short-term borrowings
(2,645
)
1,416
Proceeds from the issuance of long-term debt
4,000
1,039
Repayment of long-term debt
(4,359
)
(1,255
)
Proceeds from the issuance of common stock
—
1,017
Repurchase of preferred stock
—
(4,850
)
Purchase of outstanding warrants
—
(11
)
Common and preferred dividends paid
(89
)
(102
)
Other financing activities
22
—
Net cash (used in)/provided by financing activities
(3,767
)
461
Net increase in cash and cash equivalents
1,098
122
Cash and cash equivalents at beginning of period
4,509
5,378
Cash and cash equivalents at end of period
$5,607
$5,500
Supplemental Disclosures:
Loans transferred from loans held for sale to loans
$34
$53
Loans transferred from loans to loans held for sale
3,112
657
Loans transferred from loans and loans held for sale to other real estate owned
304
570
Accretion of discount for preferred stock issued to the U.S. Treasury
—
80
See Notes to Consolidated Financial Statements (unaudited).
5
Notes to Consolidated Financial Statements (Unaudited)
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the results of operations in these financial statements, have been made.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could vary from these estimates. Certain reclassifications have been made to prior period amounts to conform to the current period presentation.
The Company evaluated subsequent events through the date its financial statements were issued.
These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. During the three months ended September 30, 2012, the Company elected to revise its credit policy related to the nonaccrual status and timing of charge-off recognition of second lien loans. The Company began classifying second lien loans as nonaccrual when the first lien loan is classified as nonaccrual, even if the second lien loan is performing, and as a result, the Company reclassified $81 million of performing second lien loans to nonaccrual. Additionally, the Company previously charged-off second lien loans at 180 days past due, but implemented a change in policy in the third quarter of 2012 to recognize the charge-off at 120 days past due as the analysis indicated that when a second lien loan becomes 120 days past due, the vast majority of these loans ultimately experience a charge-off. The change in credit policy resulted in $65 million of incremental charge-offs during the three and nine months ended September 30, 2012.
Except for accounting policies that have been recently adopted as described below, and the policy change related to second lien loans noted above, there have been no significant changes to the Company’s accounting policies as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.
Accounting Policies Recently Adopted and Pending Accounting Pronouncements
In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” The primary purpose of the ASU was to conform the language in the fair value measurements guidance in U.S. GAAP and IFRS. The ASU also clarified how to apply existing fair value measurement and disclosure requirements. Further, the ASU required additional disclosures about transfers between level 1 and 2 of the fair value hierarchy, quantitative information for level 3 inputs, and the level of the fair value measurement hierarchy for items that are not measured at fair value in the statement of financial position but for which the fair value is required to be disclosed. The ASU was effective for the interim reporting period ending March 31, 2012. The Company adopted the standard as of January 1, 2012, and the required disclosures are included in Note 12, “Fair Value Election and Measurement.” The adoption did not impact the Company’s financial position, results of operations, or EPS.
In June 2011, the FASB issued ASU 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income.” The ASU requires presentation of the components of comprehensive income in either a continuous statement of comprehensive income or two separate but consecutive statements. The update does not change the items presented in OCI and does not affect the calculation or reporting of EPS. In December 2011, the FASB issued ASU 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items out of Accumulated Other Comprehensive Income in ASU 2011-05,” which deferred the effective date for the amendments to the reclassification of items out of AOCI. In June 2012, the FASB decided that the presentation requirements deferred in ASU 2011-12 would not be reinstated. The guidance, with the exception of reclassification adjustments, was effective on January 1, 2012, and must be applied retrospectively for all periods presented. The Company adopted the standard as of January 1, 2012, and the required disclosures are included in the Consolidated Statements of Comprehensive (Loss)/Income. The adoption did not impact the Company’s financial position, results of operations, or EPS.
In September 2011, the FASB issued ASU 2011-08, “Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment.” The ASU amends interim and annual goodwill impairment testing requirements such that an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The guidance was effective for annual and interim goodwill impairment tests beginning on or after January 1, 2012. The Company adopted the standard as of January 1, 2012. The adoption did not have an impact on the Company's financial position, results of operations, or EPS.
6
Notes to Consolidated Financial Statements (Unaudited), continued
In July 2012, the FASB issued ASU 2012-02, “Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment." The ASU permits entities to perform an optional qualitative assessment for determining whether it is more likely than not that an indefinite-lived intangible asset is impaired. The guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The Company has evaluated this ASU and it is not expected to impact the Company's financial position, results of operations, or EPS when adopted.
In October 2012, the FASB issued ASU 2012-04, “Technical Corrections and Improvements." The ASU prescribes technical corrections and improvements to the Accounting Standards Codification for source literature amendments, guidance clarification and reference corrections, and relocated guidance within the Accounting Standards Codification. The ASU is effective for fiscal periods beginning after December 15, 2012. The Company is evaluating the impact of the ASU; however, it is not expected to have a significant impact on the Company's financial position, results of operations, or EPS.
NOTE 2 – SECURITIES AVAILABLE FOR SALE
Securities Portfolio Composition
September 30, 2012
(Dollars in millions)
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
U.S. Treasury securities
$213
$11
$—
$224
Federal agency securities
1,713
89
—
1,802
U.S. states and political subdivisions
343
18
6
355
MBS - agency
16,705
881
—
17,586
MBS - private
213
4
—
217
ABS
260
5
4
261
Corporate and other debt securities
42
4
—
46
Other equity securities1
975
1
—
976
Total securities AFS
$20,464
$1,013
$10
$21,467
December 31, 2011
(Dollars in millions)
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
U.S. Treasury securities
$671
$23
$—
$694
Federal agency securities
1,843
89
—
1,932
U.S. states and political subdivisions
437
21
4
454
MBS - agency
20,480
743
—
21,223
MBS - private
252
—
31
221
CDO/CLO securities
50
—
—
50
ABS
460
11
7
464
Corporate and other debt securities
49
2
—
51
Coke common stock
—
2,099
—
2,099
Other equity securities1
928
1
—
929
Total securities AFS
$25,170
$2,989
$42
$28,117
1At September 30, 2012, other equity securities included the following securities at cost: $432 million in FHLB of Atlanta stock, $401 million in Federal Reserve Bank stock, and $141 million in mutual fund investments. At December 31, 2011, other equity securities included the following securities at cost: $342 million in FHLB of Atlanta stock, $398 million in Federal Reserve Bank stock, and $187 million in mutual fund investments.
Securities AFS that were pledged to secure public deposits, repurchase agreements, trusts, and other funds had a fair value of $8.1 billion and $9.1 billion as of September 30, 2012 and December 31, 2011, respectively. As of September 30, 2012 and December 31, 2011, there were no securities AFS pledged under which the transferee may repledge the collateral. The Company has also pledged $939 million and $770 million of certain other marketable securities and cash equivalents to secure $907 million and $747 million of repurchase agreements as of September 30, 2012 and December 31, 2011, respectively.
7
Notes to Consolidated Financial Statements (Unaudited), continued
During the three months ended September 30, 2012, the Company terminated the Agreements that hedged the Coke common stock, and the Company sold, in the market or to the Coke Counterparty, 59 million of its 60 million shares of Coke and contributed the remaining 1 million shares of Coke to the SunTrust Foundation for a net gain of $1.9 billion. The contribution to the SunTrust Foundation increased noninterest expense by $38 million during the three and nine months ended September 30, 2012. Details of the transactions are discussed in Note 10, "Derivative Financial Instruments."
The amortized cost and fair value of investments in debt securities at September 30, 2012, by estimated average life, are shown below. Actual cash flows may differ from estimated average lives and contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.
Distribution of Maturities
(Dollars in millions)
1 Year
or Less
1-5
Years
5-10
Years
After 10
Years
Total
Amortized Cost:
U.S. Treasury securities
$11
$202
$—
$—
$213
Federal agency securities
153
1,349
84
127
1,713
U.S. states and political subdivisions
103
172
19
49
343
MBS - agency
947
14,539
1,027
192
16,705
MBS - private
—
129
84
—
213
ABS
159
71
2
28
260
Corporate and other debt securities
4
21
17
—
42
Total debt securities
$1,377
$16,483
$1,233
$396
$19,489
Fair Value:
U.S. Treasury securities
$11
$213
$—
$—
$224
Federal agency securities
155
1,420
95
132
1,802
U.S. states and political subdivisions
105
184
19
47
355
MBS - agency
1,006
15,294
1,082
204
17,586
MBS - private
—
130
87
—
217
ABS
160
69
2
30
261
Corporate and other debt securities
4
22
20
—
46
Total debt securities
$1,441
$17,332
$1,305
$413
$20,491
Weighted average yield 1
3.47
%
2.95
%
3.68
%
3.38
%
3.03
%
1 Average yields are based on amortized cost and presented on a fully taxable-equivalent basis.
Securities in an Unrealized Loss Position
The Company held certain investment securities having unrealized loss positions. Market changes in interest rates and credit spreads may result in temporary unrealized losses as the market price of securities fluctuates. As of September 30, 2012, the Company did not intend to sell these securities nor was it more-likely-than-not that the Company would be required to sell these securities before their anticipated recovery or maturity. The Company has reviewed its portfolio for OTTI in accordance with the accounting policies outlined in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.
8
Notes to Consolidated Financial Statements (Unaudited), continued
