Sales of Receivables and Servicing Rights (Tables)

3 Months Ended

Mar. 31, 2014

Sales of Receivables and Servicing Rights

Activity Related to Mortgage Banking Net Revenue

Information related to residential mortgage loan sales and the Bancorp’s mortgage banking activity, which is included in mortgage banking net revenue in the Condensed Consolidated Statements of Income, is as follows:
		For the three months
		ended March 31,
($ in millions)		2014	2013
Residential mortgage loan sales	$	1,672	6,888
Origination fees and gains on loan sales		41	169
Gross mortgage servicing fees		62	61

Changes in the Servicing Assets

Servicing Rights
The following table presents changes in the servicing rights related to residential mortgage and automobile loans for the three months ended March 31:
($ in millions)		2014	2013
Carrying amount before valuation allowance as of the beginning of the period	$	1,440	1,358
Servicing rights that result from the transfer of residential mortgage loans		23	73
Servicing rights that result from the transfer of automobile loans		-	6
Amortization		(23)	(53)
Carrying amount before valuation allowance		1,440	1,384
Valuation allowance for servicing rights:
Beginning balance		(469)	(661)
Recovery of MSR impairment		4	49
Ending balance		(465)	(612)
Carrying amount as of the end of the period	$	975	772

Estimated Amortization Expense on Servicing Rights

The Bancorp's projections of amortization expense shown below are based on existing asset balances as of March 31, 2014. Future amortization expense may vary from these projections. Estimated amortization expense for the remainder of 2014 through 2018 is as follows:

($ in millions)		Total
Remainder of 2014	$	71
2015		89
2016		82
2017		77
2018		72

Fair Value of the Servicing Assets

The following table displays the beginning and ending fair value of the servicing assets for the three months ended March 31:
($ in millions)		2014	2013
Fixed rate residential mortgage loans:
Beginning balance	$	929	664
Ending balance		935	731
Adjustable rate residential mortgage loans:
Beginning balance		38	33
Ending balance		37	35
Fixed rate automobile loans:
Beginning balance		4	-
Ending balance		3	6

Activity Related to the MSR Portfolio

The following table presents activity related to valuations of the MSR portfolio and the impact of the non-qualifying hedging strategy, which is included in the Condensed Consolidated Statements of Income:
		For the three months
		ended March 31,
($ in millions)		2014	2013
Securities gains, net - non-qualifying hedges on MSRs	$	-	2
Changes in fair value and settlement of free-standing derivatives purchased
to economically hedge the MSR portfolio (Mortgage banking net revenue)		24	(6)
Recovery of MSR impairment (Mortgage banking net revenue)		4	49

Servicing Assets and Residual Interests Economic Assumptions

As of March 31, 2014 and 2013, the key economic assumptions used in measuring the interests in residential mortgage loans that continued to be held by the Bancorp at the date of sale or securitization resulting from transactions completed during the three months ended were as follows:
		March 31, 2014						March 31, 2013
	Rate	Weighted-Average Life (in years)	Prepayment Speed (annual)		Discount Rate (annual)		Weighted-Average Default rate	Weighted-Average Life (in years)	Prepayment Speed (annual)		Discount Rate (annual)		Weighted-Average Default rate
Residential mortgage loans:
Servicing assets	Fixed	6.7	10.8	%	10.0	%	N/A	7.3	8.8	%	10.0	%	N/A
Servicing assets	Adjustable	3.7	22.5		11.7		N/A	3.5	23.4		11.4		N/A

Sensitivity of the Current Fair Value of Residual Cash Flows to Immediate 10%, 20% and 50% Adverse Changes in Assumptions

At March 31, 2014, the sensitivity of the current fair value of residual cash flows to immediate 10%, 20% and 50% adverse changes in prepayment speed assumptions and immediate 10% and 20% adverse changes in other assumptions are as follows:
					Prepayment						Residual Servicing
					Speed Assumption						Cash Flows
			Fair	Weighted-Average Life (in				Impact of Adverse Change on Fair Value			Discount			Impact of Adverse Change on Fair Value
($ in millions)(a)	Rate		Value	years)	Rate			10%	20%	50%	Rate			10%	20%
Residential mortgage loans:
Servicing assets	Fixed	$	935	6.6	10.6	%	$	(37)	(72)	(163)	9.9	%	$	(36)	(69)
Servicing assets	Adjustable		37	3.1	26.1			(2)	(3)	(7)	11.8			(1)	(2)

• The impact of the weighted-average default rate on the current fair value of residual cash flows for all scenarios is immaterial.