NOTE 7 – GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The Company evaluates goodwill for impairment each year as of September 30, or as events occur or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount.

The fair value of a reporting unit is determined by using discounted cash flow analyses and, when applicable, guideline company information. The carrying value of a reporting unit is determined using an equity allocation methodology that allocates the total equity of the Company to each of its reporting units considering both regulatory risk-based capital and tangible equity relative to tangible assets. See Note 1, "Significant Accounting Policies" in the 2014 Annual Report on Form 10-K for additional information regarding the Company's goodwill accounting policy.

The Company performed a qualitative goodwill assessment in the first and second quarters of 2015, considering changes in key assumptions and monitoring other events or changes in circumstances occurring since the most recent goodwill impairment analysis performed as of December 31, 2014. The Company concluded, based on the totality of factors observed, that the fair values of its reporting units more-likely-than-not exceed their respective carrying values and accordingly, goodwill was not quantitatively tested for impairment during the six months ended June 30, 2015.

There were no changes in the carrying amount of goodwill by reportable segment for the six months ended June 30, 2015. Changes in the carrying amount of goodwill by reportable segment for the six months ended June 30, 2014 are as follows:



(Dollars in millions)	Consumer Banking and Private Wealth Management		Wholesale Banking			Total
Balance, January 1, 2014		$4,262		$2,107			$6,369
Acquisition of Lantana Oil and Gas Partners, Inc.	—		8			8
Sale of RidgeWorth	—		(40		)	(40		)
Balance, June 30, 2014		$4,262		$2,075			$6,337

Other Intangible Assets

Changes in the carrying amounts of other intangible assets for the six months ended June 30 are as follows:



(Dollars in millions)	MSRs - Fair Value			Other			Total
Balance, January 1, 2015		$1,206			$13			$1,219
Amortization ¹	—			(3		)	(3		)
Servicing rights originated	117			13			130
Servicing rights purchased	109			—			109
Changes in fair value:
Due to changes in inputs and assumptions ²	72			—			72
Other changes in fair value ³	(109		)	—			(109		)
Sale of servicing rights	(2		)	—			(2		)
Balance, June 30, 2015		$1,393			$23			$1,416

Balance, January 1, 2014		$1,300			$34			$1,334
Amortization ¹	—			(7		)	(7		)
Servicing rights originated	68			—			68
Servicing rights purchased	76			—			76
Changes in fair value:
Due to changes in inputs and assumptions ²	(107		)	—			(107		)
Other changes in fair value ³	(78		)	—			(78		)
Sale of RidgeWorth	—			(9		)	(9		)
Balance, June 30, 2014		$1,259			$18			$1,277

¹ Does not include amortization of tax credits for non-qualified community development investments, which totaled $10 million reflected in amortization on the Company's Consolidated Statements of Income and $5 million reflected in other noninterest expense on the Company's Consolidated Statements of Income for the six months ended June 30, 2015 and 2014, respectively. See Note 8, "Certain Transfers of Financial Assets and Variable Interest Entities," for additional information.

² Primarily reflects changes in option adjusted spreads and prepayment speed assumptions, due to changes in interest rates.

³ Represents changes due to the collection of expected cash flows, net of accretion, due to the passage of time.

The Company's estimated future amortization of intangible assets subject to amortization was immaterial at June 30, 2015.

Servicing Rights

The Company retains servicing rights for certain of its sales or securitizations of residential mortgage and consumer indirect loans. MSRs on residential mortgage loans and servicing rights on consumer indirect loans are the only servicing assets capitalized by the Company and are classified within other intangible assets on the Company's Consolidated Balance Sheets.

Mortgage Servicing Rights

Income earned by the Company on its MSRs is derived primarily from contractually specified mortgage servicing fees and late fees, net of curtailment costs. Such income earned for the three and six months ended June 30, 2015 was $83 million and $166 million, respectively, and $81 million and $160 million for the three and six months ended June 30, 2014, respectively. These amounts are reported in mortgage servicing related income in the Consolidated Statements of Income.

At June 30, 2015 and December 31, 2014, the total UPB of mortgage loans serviced was $145.5 billion and $142.1 billion, respectively. Included in these amounts were $118.4 billion and $115.5 billion at June 30, 2015 and December 31, 2014, respectively, of loans serviced for third parties. The Company purchased MSRs on residential loans with a UPB of $10.3 billion during the six months ended June 30, 2015; however, only $6.1 billion of these loans are reflected in the UPB amounts above as the transfer of servicing for the remainder is scheduled for the third quarter of 2015. The Company purchased MSRs on residential loans with a UPB of $5.9 billion during the six months ended June 30, 2014. During the six months ended June 30, 2015 and 2014, the Company sold MSRs, at a price approximating their fair value, on residential loans with a UPB of $407 million and $439 million, respectively.

The Company calculates the fair value of MSRs using a valuation model that calculates the present value of estimated future net servicing income using prepayment projections, spreads, and other assumptions. Senior management and the STM Valuation Committee review all significant assumptions at least quarterly, comparing these inputs to various sources of market data. Changes to valuation model inputs are reflected in the periods' results. See Note 14, “Fair Value Election and Measurement,” for further information regarding the Company's MSR valuation methodology.

A summary of the key inputs used to estimate the fair value of the Company’s MSRs at June 30, 2015 and December 31, 2014, and the sensitivity of the fair values to immediate 10% and 20% adverse changes in those inputs, are presented in the following table.



(Dollars in millions)	June 30, 2015			December 31, 2014
Fair value of MSRs		$1,393			$1,206
Prepayment rate assumption (annual)	9		%	11		%
Decline in fair value from 10% adverse change		$50			$46
Decline in fair value from 20% adverse change	96			88
Option adjusted spread (annual)	9		%	10		%
Decline in fair value from 10% adverse change		$64			$55
Decline in fair value from 20% adverse change	123			105
Weighted-average life (in years)	7.1			6.4
Weighted-average coupon	4.1		%	4.2		%

These MSR sensitivities are hypothetical and should be used with caution. Changes in fair value based on variations in assumptions generally cannot be extrapolated because (i) the relationship of the change in an assumption to the change in fair value may not be linear and (ii) changes in one assumption may result in changes in another, which might magnify or counteract the sensitivities. The sensitivities do not reflect the effect of hedging activity undertaken by the Company to offset changes in the fair value of MSRs. See Note 13, “Derivative Financial Instruments,” for further information regarding these hedging activities.

Consumer Loan Servicing Rights

In June 2015, the Company completed the securitization of $1.0 billion of indirect auto loans, with servicing rights retained, and recognized a $13 million servicing asset at the time of sale. See Note 8, “Certain Transfers of Financial Assets and Variable Interest Entities," for additional information on the Company's securitization transactions.

Income earned by the Company on its consumer loan servicing rights is derived primarily from contractually specified servicing fees and other ancillary fees. Such income earned for both the three and six months ended June 30, 2015 was $1 million and is reported in other noninterest income in the Consolidated Statements of Income. There was no income earned on consumer loan servicing rights for the three and six months ended June 30, 2014.

At June 30, 2015, the total UPB of consumer indirect loans serviced was $976 million, all of which were serviced for third parties. No consumer loan servicing rights were purchased or sold during the six months ended June 30, 2015 and 2014.

Consumer loan servicing rights are accounted for at amortized cost and are monitored for impairment on an ongoing basis. The Company calculates the fair value of consumer servicing rights using a valuation model that calculates the present value of estimated future net servicing income using prepayment projections and other assumptions. Impairment, if any, is recognized when changes in valuation model inputs reflect a fair value for the servicing asset that is below its respective carrying value. At June 30, 2015 the fair value of the Company's consumer loan servicing rights was $13 million.