SunTrust 2011 Annual Report Download - page 191
Download and view the complete annual report
Please find page 191 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)
175
(Dollars in millions)
Assets
Trading loans
LHFS
LHFI
MSRs
Liabilities
Brokered time deposits
Long-term debt
Fair Value Gain/(Loss) for the Year Ended
December 31, 2009, for Items Measured at Fair Value Pursuant
to Election of the FVO
Trading
income/(loss)
$3
2
3
—
11
(65)
Mortgage
Production
Related
(Loss)/
Income 1
$—
625
(1)
17
—
—
Mortgage
Servicing
Related
Income
$—
—
—
66
—
—
Total
Changes in
Fair Values
Included in
Current
Period
Earnings 2
$3
627
2
83
11
(65)
1For the year ended December 31, 2009, income related to LHFS, includes $664 million related to MSRs recognized upon the sale of loans reported at fair value.
For the year ended December 31, 2009, income related to MSRs includes $18 million of MSRs recognized upon the sale of loans reported at LOCOM. These
MSRs are included in the table since the Company elected to report MSRs recognized in 2009 and beyond using the fair value method. Previously, MSRs were
reported under the amortized cost method.
2Changes in fair value for the year ended December 31, 2009, exclude accrued interest for the periods then ended. Interest income or interest expense on trading
loans, LHFS, LHFI, brokered time deposits and long-term debt that have been elected to be carried at fair value are recorded in interest income or interest expense
in the Consolidated Statements of Income/(Loss) based on their contractual coupons.
The following is a discussion of the valuation techniques and inputs used in developing fair value measurements for assets and
liabilities classified as level 2 or 3 that are measured at fair value on a recurring basis, based on the class as determined by the
nature and risks of the instrument.
Trading Assets and Securities Available for Sale
Unless otherwise indicated, trading assets are priced by the trading desk and independently validated against pricing received from
two or three third party pricing sources; securities AFS are valued by an independent third party pricing service and independently
validated against pricing received from two other third party pricing sources, all of which are sources that are widely used by
market participants. The Company classifies instruments as level 2 in the fair value hierarchy when it is able to determine that
external pricing sources are using similar instruments trading in the markets as the basis for estimating fair value. One way the
Company determines this is by the number of pricing services that will provide a quote on the instrument along with the range of
values provided by those pricing services. A wide range of quoted values may indicate that significant adjustments to the trades
in the market are being made by the pricing services.
Federal agency securities
The Company includes in this classification securities issued by federal agencies and GSEs. Agency securities consist
of debt obligations issued by HUD, FHLB and other agencies, or collateralized by loans that are guaranteed by the SBA
and are, therefore, backed by the full faith and credit of the U.S. government. In the case of securities issued by GSEs
such as Fannie Mae and Freddie Mac, the obligations are not explicitly guaranteed by the U.S. government; however,
the GSEs carry an implied rating commensurate with that of U.S. government obligations and may be required to maintain
such rating through its agency agreement. In certain instances, the U.S. Treasury owns the senior preferred stock of these
enterprises and has made a commitment, under that stock purchase agreement, to provide these GSEs with funds to
maintain a positive net worth. For SBA instruments, the Company estimated fair value based on pricing from observable
trading activity for similar securities or obtained fair values from a third party pricing service; accordingly, the Company
has classified these instruments as level 2.
U.S. states and political subdivisions
The Company’s investments in U.S. states and political subdivisions (collectively “municipals”) include obligations of
county and municipal authorities and agency bonds, which are general obligations of the municipality or are supported
by a specified revenue source. Holdings were geographically dispersed, with no significant concentrations in any one
state or municipality. Additionally, all but an immaterial amount of AFS municipal obligations classified as level 2 are
highly rated or are otherwise collateralized by securities backed by the full faith and credit of the federal government.