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Goodwill and Other Intangible Assets
 9 Months Ended
Sep. 30, 2015
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets
NOTE 7 – GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
The Company conducts a goodwill impairment test at the reporting unit level at least annually, or more frequently as events occur or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount. In the third quarter of 2015, the Company performed a quantitative assessment of its goodwill and concluded that the fair values of its reporting units exceeded their respective carrying values. Additionally, in the third quarter of 2015, the Company elected to prospectively change the date of its annual goodwill impairment test from September 30 to October 1 to better align the timing of the test with the availability of key inputs. See Note 1, "Significant Accounting Policies" to the Company's 2014 Annual Report on Form 10-K for additional information regarding the Company's goodwill accounting policy.
There were no changes in the carrying amount of goodwill by reportable segment for the nine months ended September 30, 2015. Changes in the carrying amount of goodwill by reportable segment for the nine months ended September 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, September 30, 2014

$4,262

 

$2,075

 

$6,337



Other Intangible Assets
Changes in the carrying amounts of other intangible assets for the nine months ended September 30 are as follows:
(Dollars in millions)
 MSRs -
Fair Value
 
Other
 
Total
Balance, January 1, 2015

$1,206

 

$13

 

$1,219

Amortization 1
—

 
(6
)
 
(6
)
Servicing rights originated
185

 
13

 
198

Servicing rights purchased
109

 
—

 
109

Changes in fair value:
 
 
 
 

Due to changes in inputs and assumptions 2
(74
)
 
—

 
(74
)
Other changes in fair value 3
(161
)
 
—

 
(161
)
Servicing rights sold
(3
)
 
—

 
(3
)
Balance, September 30, 2015

$1,262

 

$20

 

$1,282

 
 
 
 
 
 
Balance, January 1, 2014

$1,300

 

$34

 

$1,334

Amortization 1
—

 
(10
)
 
(10
)
Servicing rights originated
137

 
—

 
137

Servicing rights purchased
109

 
—

 
109

Changes in fair value:
 
 
 
 


Due to changes in inputs and assumptions 2
(117
)
 
—

 
(117
)
Other changes in fair value 3
(123
)
 
—

 
(123
)
Servicing rights sold
(1
)
 
—

 
(1
)
Sale of RidgeWorth
—

 
(9
)
 
(9
)
Balance, September 30, 2014

$1,305

 

$15

 

$1,320

1 Does not include amortization of tax credits for non-qualified community development investments. 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 September 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 nine months ended September 30, 2015 was $89 million and $254 million, respectively, and $81 million and $241 million for the three and nine months ended September 30, 2014, respectively. These amounts are reported in mortgage servicing related income in the Consolidated Statements of Income.
At September 30, 2015 and December 31, 2014, the total UPB of mortgage loans serviced was $149.2 billion and $142.1 billion, respectively. Included in these amounts were $122.0 billion and $115.5 billion at September 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 nine months ended September 30, 2015, all of which are reflected in the UPB amounts above. The Company purchased MSRs on residential loans with a UPB of $9.0 billion during the nine months ended September 30, 2014. During the nine months ended September 30, 2015 and 2014, the Company sold MSRs on residential loans, at a price approximating their fair value, with a UPB of $590 million and $612 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 September 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)
September 30, 2015
 
December 31, 2014
Fair value of MSRs

$1,262

 

$1,206

Prepayment rate assumption (annual)
11
%
 
11
%
Decline in fair value from 10% adverse change

$51

 

$46

Decline in fair value from 20% adverse change
98

 
88

Option adjusted spread (annual)
8
%
 
10
%
Decline in fair value from 10% adverse change

$55

 

$55

Decline in fair value from 20% adverse change
105

 
105

Weighted-average life (in years)
6.4

 
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 the three and nine months ended September 30, 2015 was $2 million and $3 million, respectively, 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 nine months ended September 30, 2014.
At September 30, 2015, the total UPB of consumer indirect loans serviced was $889 million, all of which were serviced for third parties. No consumer loan servicing rights were purchased or sold during the nine months ended September 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 September 30, 2015, both the amortized cost and the fair value of the Company's consumer loan servicing rights were $11 million.