SunTrust 2008 Annual Report Download - page 125

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SUNTRUST BANKS, INC.
Notes to Consolidated Financial Statements (Continued)
The following tables present key assumptions and inputs, along with the impacts on the fair values of two unfavorable
variations from the expected amounts, related to the fair values of the Company’s retained and residual interests, excluding
MSRs, which are separately addressed herein. Retained interests in residential mortgage securitization transactions include
senior and subordinated securities. To estimate the market value of these securities, consideration was given to dealer
indications of market value as well as the results of discounted cash flow models using market assumptions for prepayment
rates, credit losses and discount rates due to illiquidity in the market for non-agency residential MBS. Fair value for senior
retained interest was based on modeled valuations. For subordinated retained interests, the Company valued the retained
interests using dealer indicated prices since these prices more accurately reflected the severe disruption in the market for
these securities. The fair value of subordinated interest totaled $4.4 million as of December 31, 2008 based on a weighted
average price of 12.3% of par.
Year Ended December 31, 2008
(Dollars in millions)
Residential
Mortgage
Senior
Interests
Commercial and
Corporate
Loans
Student
Loans CDO Securities
Fair Value $135.2 $23.0 $13.4 $45.0
Prepayment Rate 14% 10% 7% 0%
Decline in fair value from 10%
adverse change 1.9 - 0.3 -
Decline in fair value from 20%
adverse change 4.0 0.1 0.6 -
Expected Credit Losses 1.51% - 2.78% 1.21% -5.0% N/A 22.81% -30.58%
Decline in fair value from 10%
adverse change - 12.3 N/A - 1
Decline in fair value from 20%
adverse change - 14.3 N/A - 1
Annual Discount Rate 11.5% - 16.0% 40% 25% L + 6% to 8%
Decline in fair value from 10%
adverse change 4.9 1.2 0.9 2.7
Decline in fair value from 20%
adverse change 9.9 2.3 1.8 8.6
Weighted Average Life (in years) 5.69 2.69 5.83 24.97
Expected Static Pool Losses 2.31 1.21% - 5.0% N/A 22.81% -30.58%
1Due to the seniority of these interests and the credit support in each transaction, the expected credit losses would need to
experience an adverse change greater than 20% before the expected credit loss assumption would result in additional fair
value changes.
As of December 31, 2007
(Dollars in millions) Fair Value
Weighted
Average Life
(in years)
Prepayment
Rate
Expected
Credit Losses
Annual
Discount Rate
Commercial and Corporate Loans 1
Residual $90.9 4.37 7% -20% 0.35% -2% 13% -22%
As of December 31, 2007
Decline in fair value from 10% adverse change $1.0 $1.0 $3.2
Decline in fair value from 20% adverse change 1.8 1.7 6.2
1Includes residual interests held in association with student loan securitization activity, which are separately presented in 2008.
113