STI 2018 Annual Report

Notes to Consolidated Financial Statements, continued 120 Commercial Mortgage Servicing Rights Income earned by the Company on its commercial mortgage servicing rights is derived primarily from contractually specified servicing fees and other ancillary fees. The Company also earns income from subservicing certain third party commercial mortgages for which the Company does not record servicing rights. The following table presents the Company’s income earned from servicing commercial mortgages. Year Ended December 31 (Dollars in millions) 2018 2017 2016 Income from commercial mortgage servicing rights 1 $26 $22 $1 Income from subservicing third party commercial mortgages 1 13 14 1 1 Recognized in Commercial real estate related income in the Consolidated Statements of Income. TheUPBof commercial mortgage loans serviced for third parties is presented in the following table: (Dollars in millions) December 31, 2018 December 31, 2017 UPB of commercial mortgages subserviced for third parties $28,140 $24,294 UPB of loans underlying commercial mortgage servicing rights 6,399 5,760 Total UPB of commercial mortgages serviced for third parties $34,539 $30,054 No commercialmortgage servicing rightswere purchased or sold during the years ended December 31, 2018 and 2017. Commercial mortgage servicing rights are accounted for at amortized cost and are monitored for impairment on an ongoing basis. The Company calculates the fair value of commercial servicing rights based on the present value of estimated future net servicing income, considering prepayment projections and other assumptions. Impairment, if any, is recognized when the carrying value of the servicing asset exceeds the fair value at the measurement date. The amortized cost of the Company’s commercial mortgage servicing rights was $66 million and $65 million at December 31, 2018 and December 31, 2017, respectively. A summary of the significant unobservable inputs used to estimate the fair value of the Company’s commercial mortgage servicing rights and the uncertainty of the fair values in response to 10% and 20% adverse changes in those inputs at the reporting date, are presented in the following table. (Dollars in millions) December 31, 2018 December 31, 2017 Fair value of commercial mortgage servicing rights $77 $75 Discount rate (annual) 12% 12% Decline in fair value from 10% adverse change $3 $3 Decline in fair value from 20% adverse change 6 6 Prepayment rate assumption (annual) 5% 7% Decline in fair value from 10% adverse change $1 $1 Decline in fair value from 20% adverse change 2 2 Weighted-average life (in years) 8.1 7.0 Float earnings rate (annual) 1.1% 1.1% Commercial mortgage servicing right uncertainties are hypothetical and should be used with caution.