SunTrust 2006 Annual Report Download - page 111

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SUNTRUST BANKS, INC.
Notes to Consolidated Financial Statements (Continued)
As of December 31, 2006, the Company had retained interest of $9.6 million classified as securities
available for sale and $47.0 million classified as trading assets. As of December 31, 2005, the Company
did not have retained interest in securities other than mortgage loan securitizations discussed earlier. For
subordinated and other residual interests for which there is no quoted market price, management reviews
the historical performance of each retained interest and the assumptions used to project future cash
flows on a quarterly basis. If past performance and future expectations dictate, assumptions are revised
and the present value of future cash flows is recalculated.
The key economic assumptions used to value subordinated and other residual interests retained at
December 31, 2006 and sensitivity of the fair values to immediate adverse changes in those assumptions
are as follows:
(Dollars in millions) Fair Value
Weighted
Average Life
(in years)
Prepayment
Rate
Expected
Credit Losses
Annual
Discount Rate
Commercial Loans
Preferenced Shares $22.9 11 20% 2% 14%
As of December 31, 2006
Decline in fair value from
first adverse change 1$0.3 $0.4 $0.5
Decline in fair value from
second adverse change 20.3 1.0 1.2
Student Loans
Residual Interest $24.4 6 7% 0% 9%
As of December 31, 2006
Decline in fair value from
10% adverse change $0.9 - $1.1
Decline in fair value from
20% adverse change 1.5 - 2.0
Debt Securities
Preferenced Shares $1.5 8 9% 0% 16%
As of December 31, 2006
Decline in fair value from
first adverse change 3$0.1 $0.2 $0.1
Decline in fair value from
second adverse change 40.2 0.7 0.1
1Decline in fair value from first adverse change is based on a 100 basis point (bp) increase in the Prepayment Rate, a 10% increase in Expected Credit
Losses, and a 100 bp increase in the Annual Discount Rate.
2Decline in fair value from second adverse change is based on a 200 bp increase in the Prepayment Rate, a 20% increase in Expected Credit Losses, and a
200 bp increase in the Annual Discount Rate.
3Decline in fair value from first adverse change is based on a 25% increase in Prepayment Rate, a 0.20% Expected Credit Losses, and a 100 bp increase in
the Annual Discount Rate.
4Decline in fair value from second adverse change is based on a 50% increase in Prepayment Rate, a 0.60% Expected Credit Losses, and a 200 bp increase
in the Annual Discount Rate.
98