Huntington National Bank 2014 Annual Report Download - page 179
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173
Asset-backed securities 82,738 Discounted cash flo
w
Discount rate 4.3% - 13.3% (7.3%)
Cumulative prepayment rate 0.0% - 100% (10.1%)
Cumulative defaul
t
1.9% - 100% (15.9%)
Loss given default 20% - 100% (94.4%)
Cure given deferral 0.0% - 75% (32.6%)
Automobile loans 10,590 Discounted cash flo
w
Constant prepayment rate (CPR) 154.2%
Discount rate 0.2% - 5.0% (2.3%)
Life of pool cumulative losses 2.1%
Impaired loans 52,911 Appraisal value NA NA
Other real estate owned 35,039 Appraisal value NA NA
The following provides a general description of the impact of a change in an unobservable input on the fair value measurement
and the interrelationship between unobservable inputs, where relevant/significant. Interrelationships may also exist between
observable and unobservable inputs. Such relationships have not been included in the discussion below.
A significant change in the unobservable inputs may result in a significant change in the ending fair value measurement of Level
3 instruments. In general, prepayment rates increase when market interest rates decline and decrease when market interest rates rise
and higher prepayment rates generally result in lower fair values for MSR assets, Private-label CMO securities, Asset-backed
securities, and Automobile loans.
Credit loss estimates, such as probability of default, constant default, cumulative default, loss given default, cure given deferral,
and loss severity, are driven by the ability of the borrowers to pay their loans and the value of the underlying collateral and are
impacted by changes in macroeconomic conditions, typically increasing when economic conditions worsen and decreasing when
conditions improve. An increase in the estimated prepayment rate typically results in a decrease in estimated credit losses and vice
versa. Higher credit loss estimates generally result in lower fair values. Credit spreads generally increase when liquidity risks and
market volatility increase and decrease when liquidity conditions and market volatility improve.
Discount rates and spread over forward interest rate swap rates typically increase when market interest rates increase and/or credit
and liquidity risks increase and decrease when market interest rates decline and/or credit and liquidity conditions improve. Higher
discount rates and credit spreads generally result in lower fair market values.
Net market price and pull through percentages generally increase when market interest rates increase and decline when market
interest rates decline. Higher net market price and pull through percentages generally result in higher fair values.