SunTrust 2011 Annual Report Download - page 134
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Please find page 134 of the 2011 SunTrust annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Notes to Consolidated Financial Statements (Continued)
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the extension of time for expected refinance and repayment. No credit loss is expected on these securities. The ABS is also highly-
rated, continues to receive timely principal and interest payments, and is evaluated quarterly for credit impairment. Cash flow
analysis shows that the underlying collateral can withstand highly stressed loss assumptions without incurring a credit loss.
The portion of unrealized losses on securities that have been other-than-temporarily impaired that relates to factors other than
credit are recorded in AOCI. Losses related to credit impairment on these securities is determined through estimated cash flow
analyses and have been recorded in earnings in current or prior periods. The unrealized OTTI loss relating to private MBS as of
December 31, 2011, includes purchased and retained interests from 2007 vintage securitizations. The unrealized OTTI loss relating
to ABS is related to four securities within the portfolio that are 2003 and 2004 vintage home equity issuances. The expectation of
cash flows for the previously impaired ABS securities has improved such that the amount of expected credit losses was reduced,
and the expected increase in cash flows will be accreted into earnings as a yield adjustment over the remaining life of the securities.
Realized Gains and Losses and Other-than-Temporarily Impaired Securities
(Dollars in millions)
Gross realized gains
Gross realized losses
OTTI
Net securities gains
Year Ended December 31
2011
$210
(87)
(6)
$117
2010
$210
(17)
(2)
$191
2009
$152
(34)
(20)
$98
The securities that gave rise to the $6 million credit impairment recognized during the year ended December 31, 2011 consisted
of private MBS with a fair value of $167 million at December 31, 2011. The securities impacted by credit impairment during the
year ended December 31, 2010, consisted of private MBS with a fair value of $1 million as of December 31, 2010, and $311
million as of December 31, 2009. Credit impairment that is determined through the use of cash flow models is estimated using
cash flows on security specific collateral and the transaction structure. Future expected credit losses are determined by using
various assumptions, the most significant of which include current default rates, prepayment rates, and loss severities. For the
majority of the securities that the Company has reviewed for credit-related OTTI, credit information is available and modeled at
the loan level underlying each security, and the Company also considers information such as loan to collateral values, FICO scores,
and geographic considerations such as home price appreciation/depreciation. These inputs are updated on a regular basis to ensure
the most current credit and other assumptions are utilized in the analysis. If, based on this analysis, the Company does not expect
to recover the entire amortized cost basis of the security, the expected cash flows are then discounted at the security’s initial
effective interest rate to arrive at a present value amount. OTTI credit losses reflect the difference between the present value of
cash flows expected to be collected and the amortized cost basis of these securities. During the years ended December 31, 2011,
2010, and 2009, all OTTI recognized in earnings on private MBS have underlying collateral of residential mortgage loans securitized
in 2007. The majority of the OTTI was taken on private MBS which were originated by the Company and, therefore, have geographic
concentrations in the Company’s primary footprint. Additionally, the Company has not purchased new private MBS during the
year ended December 31, 2011, and continues to reduce existing exposure primarily through paydowns.
(Dollars in millions)
OTTI1
Portion of losses recognized in AOCI (before taxes)
Net impairment (gains)/losses recognized in earnings
Year Ended December 31
2011
MBS - Private
$7
1
$6
2010
MBS - Private
$2
—
$2
Year Ended December 31
2009
MBS - Private
$112
93
$19
Corporate Bonds
$1
—
$1
1 The initial OTTI amount represents the excess of the amortized cost over the fair value of AFS debt securities. For subsequent impairments of the same security,
amount represents additional declines in the fair value subsequent to the previously recorded OTTI, if applicable, until such time the security is no longer in an
unrealized loss position.
The Company held stock in the FHLB of Atlanta totaling $342 million and $298 million at December 31, 2011 and December 31,
2010, respectively. The Company accounts for the stock based on relevant accounting guidance, which requires the investment
be carried at cost and be evaluated for impairment based on the ultimate recoverability of the par value. The Company evaluated
its holdings in FHLB stock at December 31, 2011 and believes its holdings in the stock are ultimately recoverable at par. Additionally,
the Company does not have operational or liquidity needs that would require a redemption of the stock in the foreseeable future
and therefore determined that the stock was not other-than-temporarily impaired.