STI 2018 Annual Report

Notes to Consolidated Financial Statements, continued 160 Non-recurring Fair Value Measurements The following tables present gains and losses recognized on assets still held at period end, and measured at fair value on a non-recurring basis, for the year ended December 31, 2018 and the year ended December 31, 2017. Adjustments to fair value generally result from the application of LOCOM, or the measurement alternative, or through write-downs of individual assets. The tables do not reflect changes in fair value attributable to economic hedges the Company may have used to mitigate interest rate risk associated with LHFS. Fair Value Measurements (Losses)/Gains for the Year Ended December 31, 2018 (Dollars in millions) December 31, 2018 Level 1 Level 2 Level 3 LHFS $47 $— $47 $— ($1) LHFI 63 — — 63 — OREO 19 — — 19 (4) Other assets 67 — 47 20 24 Fair Value Measurements Losses for the Year Ended December 31, 2017 (Dollars in millions) December 31, 2017 Level 1 Level 2 Level 3 LHFS $13 $— $13 $— $— LHFI 49 — — 49 — OREO 24 — 1 23 (4) Other assets 53 — 4 49 (43) Discussed below are the valuation techniques and inputs used in estimating fair values for assets measured at fair value on a non- recurring basis and classified as level 2 and/or 3. Loans Held for Sale At December 31, 2018 and 2017, LHFS classified as level 2 consisted of commercial loans that were valued using market prices and measured at LOCOM. During the year ended December 31, 2018, the Company recognized an immaterial amount of impairment charges attributable to changes in the fair value of these loans. There were no gains/(losses) recognized in earnings during the year endedDecember 31, 2017 as the charge- offs related to these loans are a component of the ALLL. Loans Held for Investment At December 31, 2018 and 2017, LHFI classified as level 3 consisted primarily of consumer loans discharged in Chapter 7 bankruptcy that had not been reaffirmed by the borrower, as well as nonperforming CRE loans for which specific reserves had been recognized. Cash proceeds from the sale of the underlying collateral is the expected source of repayment for a majority of these loans. Accordingly, the fair value of these loans is derived from the estimated fair value of the underlying collateral, incorporating market data if available. Due to the lack of market data for similar assets, all of these loans are classified as level 3. There were no gains/(losses) recognized during the year ended December 31, 2018 or during the year endedDecember 31, 2017, as the charge-offs related to these loans are a component of the ALLL. OREO OREO is measured at the lower of cost or fair value less costs to sell. Level 2 OREO consists primarily of residential homes, commercial properties, and vacant lots and land for which binding purchase agreements exist. Level 3 OREO consists primarily of residential homes, commercial properties, and vacant lots and land for which initial valuations are based on property-specific appraisals, broker pricing opinions, or other limited, highly subjective market information. Updated value estimates are received regularly for level 3 OREO. Other Assets Other assets consist of equity investments, other repossessed assets, assets under operating leases where the Company is the lessor, branch properties, land held for sale, and software. Pursuant to the adoption of ASU 2016-01 on January 1, 2018, the Company elected the measurement alternative for measuring certain equity securities without readily determinable fair values, which are adjusted based on any observable price changes in orderly transactions. These equity securities are classified as level 2 based on the valuation methodology and associated inputs. During the year ended December 31, 2018, the Company recognized remeasurement gains of $30 million on these equity securities. Prior to the adoption of ASU 2016-01, equity investments were evaluated for potential impairment based on the expected remaining cash flows to be received from these assets discounted at a market rate that is commensurate with the expected risk, considering relevant company-specific valuation multiples, where applicable. Based on the valuation methodology and associated unobservable inputs, these investments are classified as level 3. During the year ended December 31, 2017, the Company recognized an immaterial amount of impairment charges on its equity investments. Other repossessed assets include repossessed personal property that is measured at fair value less cost to sell. These assets are classified as level 3 as their fair value is determined based on a variety of subjective, unobservable factors. There were no losses recognized in earnings by the Company on other repossessed assets during the year ended December 31, 2018 or during the year ended December 31, 2017, as the impairment