STI 2018 Annual Report

53 Various regulations administered by federal and state bank regulatory authorities restrict the Bank’s ability to distribute its retained earnings. At December 31, 2018, 2017, and 2016, the Bank's capacity to pay cash dividends to the Parent Company under these regulations totaled approximately $2.2 billion, $2.5 billion, and $2.5 billion, respectively. During the first half of 2018, we repurchased $660 million of our outstanding common stock at market value, which completed our $1.32 billion of authorized common equity repurchases approved by the Board in conjunction with the 2017 capital plan. In June 2018, we announced capital plans in response to the Federal Reserve’s review of and non-objection to our 2018 capital plan submitted in conjunction with the 2018 CCAR. Our 2018 capital plan includes increases in our share repurchase program and quarterly common stock dividend, while maintaining our level of preferred stock dividends. Specifically, the 2018 capital plan authorized the repurchase of up to $2.0 billion of our outstanding common stock to be completed between the third quarter of 2018 and the second quarter of 2019, aswell as a 25%increase in our quarterly common stock dividend from $0.40 per share to $0.50 per share, beginning in the third quarter of 2018. During the second half of 2018, we repurchased $1.25 billion of our outstanding common stock at market value as part of this 2018 capital plan. In January 2019, we repurchased an additional $250 million of our outstanding common stock under the 2018 capital plan pursuant to an SECRule 10b5-1 repurchase plan entered into on November 6, 2018, and we do not intend to utilize our remaining share repurchase capacity of $500 million under the 2018 capital plan. See Item 5 of this Form 10-K for additional information regarding our share repurchase activity, and Note 15, “Capital,” to the Consolidated Financial Statements in this Form 10-K for additional information regarding our capital actions. CRITICALACCOUNTING POLICIES Our significant accounting policies are integral to understanding our financial performance and are described in detail in Note 1, “SignificantAccounting Policies,” to the Consolidated Financial Statements in this Form 10-K. We have identified certain accounting policies as being critical because (1) they require judgment about matters that are highly uncertain and (2) different estimates that could be reasonably applied would result in materially different outcomes with respect to the recognition and measurement of certain assets, liabilities, commitments, and contingencies, with corresponding impacts on earnings. Our accounting and reporting policies are in accordance with U.S. GAAP, and they conform to general practiceswithin the financial services industry. We have established detailed policies and control procedures that are intended to ensure that these critical accounting estimates arewell controlled and applied consistently from period to period, and that the process for changing methodologies occurs in an appropriate manner. The following is a description of our current critical accounting policies. Contingencies We face uncertainty with respect to the outcomes of various contingencies, including the allowance for credit losses and legal and regulatory matters. Allowance for Credit Losses The allowance for credit losses is composed of the ALLL and the reserve for unfunded commitments. The ALLL represents our estimate of probable losses inherent in the LHFI portfolio based on current economic conditions. The ALLL is increased by the provision for loan losses and reduced by loan charge-offs, net of recoveries. The ALLL is determined based on our review of certain LHFI that are individually evaluated for impairment and pools of LHFI with similar risk characteristics that are evaluated on a collective basis. Our loss estimate includes an assessment of internal and external influences on credit quality that may not be fully reflected in the historical loss, risk-rating, or other indicative data. Large commercial nonaccrual loans and certain commercial and consumer loans whose terms have been modified in a TDR, are reviewed to determine the amount of specific allowance required in accordance with applicable accounting guidance. For this purpose, we consider themost probable source of repayment, including the present value of the loan's expected future cash flows, the fair value of the underlying collateral less costs of disposition, or the loan's estimated market value. We use assumptions and methodologies that are relevant to assess the extent of impairment in the portfolio and employ judgment in assigning or estimating internal risk ratings, market and collateral values, discount rates, and loss rates. General allowances are established for loans and leases grouped into pools that have similar characteristics. The ALLL Committee estimates probable losses by evaluating quantitative and qualitative factors for each loan portfolio segment, including net charge-off trends, internal risk ratings, changes in internal risk ratings, loss forecasts, collateral values, geographic location, delinquency rates, nonperforming and restructured loan status, origination channel, product mix, underwriting practices, industry conditions, and economic trends. In addition to these factors, the consumer and residential portfolio segments consider borrower FICO scores, and the commercial portfolio segment considers single name borrower concentration. Estimated collateral values are based on appraisals, broker price opinions, automated valuation models, other collateral- specific information, and/or relevant market information, supplemented when applicable with valuations performed by internal valuation professionals. Their values reflect an orderly disposition, inclusive of marketing costs. In limited instances, we adjust externally provided appraisals for justifiable and well supported reasons, such as an appraiser not being aware of certain collateral-specific factors or recent sales information.Appraisals generally represent the “as is” value of the collateral but may be adjusted based on the intended disposition strategy.