STI 2018 Annual Report

64 We also maintain access to diversified sources for both secured and unsecured wholesale funding. These uncommitted sources include Fed Funds purchased from other financial institutions, securities sold under agreements to repurchase, FHLB advances, and Global Bank Notes. Aggregate borrowings increased to $23.8 billion at December 31, 2018, from $14.6 billion at December 31, 2017. These additional borrowings include a mix of both secured and unsecured funding and have primarily been used to support loan growth. The Bank and Parent Companymaintain programs to access the debt capital markets. The Parent Company maintains an SEC shelf registration fromwhich it may issue senior or subordinated notes and various capital securities, such as common or preferred stock. In August 2018, our Board approved a new SEC shelf registration, which authorized the issuance of up to $6.0 billion of such securities, of which $5.9 billion of issuance capacity remained available at December 31, 2018. Under our previous SEC shelf registration, the Board authorized the issuance of up to $5.0 billion of such securities, of which $1.7 billion of issuance capacity remained available at December 31, 2017. The Bank maintains a Global Bank Note program under which it may issue senior or subordinated debt with various terms. At December 31, 2018, the Bank retained $31.5 billion of remaining capacity to issue notes under the Global Bank Note program. Refer to Table 18 in the “Borrowings” section for details regarding Bank and Parent Company debt issuances completed during 2018. Our issuance capacity under these Bank and Parent Company programs refers to authorization granted by our Board, which is a formal program capacity and not a commitment to purchase by any investor. Debt and equity securities issued under these programs are designed to appeal primarily to domestic and international institutional investors. Institutional investor demand for these securities depends upon numerous factors, including, but not limited to, our credit ratings, investor perception of financial market conditions, and the health of the banking sector. Therefore, our ability to access these markets in the future could be impaired for either idiosyncratic or systemic reasons. We assess liquidity needs that may occur in both the normal course of business and during times of unusual, adverse events, considering both on and off-balance sheet arrangements and commitments that may impact liquidity in certain business environments.We have contingency funding scenarios and plans that assess liquidity needs that may arise from certain stress events such as severe economic recessions, financial market disruptions, and credit rating downgrades. In particular, a ratings downgrade could adversely impact the cost and availability of some of our liquid funding sources. Factors that affect our credit ratings include, but are not limited to, the credit risk profile of our assets, the adequacy of our ALLL, the level and stability of our earnings, the liquidity profile of both the Bank and the Parent Company, the economic environment, and the adequacy of our capital base. As illustrated in Table 24, S&P assigned a “Credit Watch Positive” outlook on our credit rating, while both Moody’s and Fitch assigned “Positive” outlooks. Future credit rating downgrades are possible, although not currently anticipated given these “Credit Watch Positive” and “Positive” credit rating outlooks. Credit Ratings and Outlook Table 24 December 31, 2018 1 Moody’s S&P Fitch SunTrust Banks, Inc.: Senior debt Baa1 BBB+ A- Preferred stock Baa3 BB+ BB SunTrust Bank: Long-term deposits A1 A- A Short-term deposits P-1 A-2 F1 Senior debt Baal A- A- Outlook 1 Positive Credit Watch Positive Positive 1 In February 2019, following our announced intention to merge with BB&T (as discussed in Note 25, “Subsequent Event,” to the Consolidated Financial Statements in this Form 10-K), S&P revised our credit rating outlook from “Positive” to “Credit Watch Positive,” and both Moody’s and Fitch revised our credit rating outlook from “Stable” to “Positive.” The credit ratings and outlook presented in the above table reflect these updates. Our investment securities portfolio is a store of liquidity that is managed as part of our overall liquidity management and ALM process to optimize income and portfolio value, maintaining the majority of securities in liquid and high-grade asset classes, such as agency MBS, agency debt, and U.S. Treasury securities; nearly all of these securities qualify as high-quality liquid assets under the U.S. LCR Final Rule. At December 31, 2018, our securities AFS portfolio contained $28.0 billion of unencumbered, high-quality liquid securities at market value. As mentioned above, we evaluate contingency funding scenarios to anticipate and manage the likely impact of impaired capital markets access and other adverse liquidity circumstances. Our contingency plans also provide for continuous monitoring of net borrowed funds dependence and available sources of contingency liquidity. These contingency liquidity sources include available cash reserves, the ability to sell, pledge, or borrow against unencumbered securities in our investment portfolio, the capacity to borrow from the FHLB system or the Federal Reserve discount window, and the ability to sell or securitize certain loan portfolios. Table 25 presents period end and average balances of our contingency liquidity sources for 2018 and 2017. These sources exceed our contingency liquidity needs as measured in our contingency funding scenarios.