Intangible Assets

Intangible assets consisted of the following:



	March 31, 2013		December 31, 2012
	(in millions)
Mortgage servicing rights	$	202	$	179
Purchased credit card relationships	58		60
Other	7		8
Total other intangible assets	$	267	$	247

Mortgage Servicing Rights (“MSRs”) A servicing asset is a contract under which estimated future revenues from contractually specified cash flows, such as servicing fees and other ancillary revenues, are expected to exceed the obligation to service the financial assets. We recognize the right to service mortgage loans as a separate and distinct asset at the time they are acquired or when originated loans are sold.

MSRs are subject to credit, prepayment and interest rate risk, in that their value will fluctuate as a result of changes in these economic variables. Interest rate risk is mitigated through an economic hedging program that uses securities and derivatives to offset changes in the fair value of MSRs. Since the hedging program involves trading activity, risk is quantified and managed using a number of risk assessment techniques.

Residential mortgage servicing rights Residential MSRs are initially measured at fair value at the time that the related loans are sold and are remeasured at fair value at each reporting date. Changes in fair value of MSRs are reflected in residential mortgage banking revenue in the period in which the changes occur. Fair value is determined based upon the application of valuation models and other inputs. The valuation models incorporate assumptions market participants would use in estimating future cash flows. The reasonableness of these valuation models is periodically validated by reference to external independent broker valuations and industry surveys.

Fair value of residential MSRs is calculated using the following critical assumptions:



	March 31, 2013		December 31, 2012
Annualized constant prepayment rate (“CPR”)	18.2	%	22.4	%
Constant discount rate	12.5	%	11.3	%
Weighted average life	3.8		3.4

Residential MSRs activity is summarized in the following table:



Three Months Ended March 31,	2013			2012
	(in millions)
Fair value of MSRs:
Beginning balance	$	168		$	220
Additions related to loan sales	6			8
Changes in fair value due to:
Change in valuation inputs or assumptions used in the valuation models	26			16
Realization of cash flows	(10		)	(16		)
Ending balance	$	190		$	228

Information regarding residential mortgage loans serviced for others, which are not included in the consolidated balance sheet, is summarized in the following table:



	March 31, 2013		December 31, 2012
	(in millions)
Outstanding principal balances at period end	$	31,039	$	32,041
Custodial balances maintained and included in noninterest bearing deposits at period end	$	722	$	810

Servicing fees collected are included in residential mortgage banking revenue and totaled $21 million and $25 million during the three months ended March 31, 2013 and 2012, respectively.

Commercial mortgage servicing rights Commercial MSRs, which are accounted for using the lower of amortized cost or fair value method, totaled $12 million and $11 million at March 31, 2013 and December 31, 2012, respectively.

Purchased credit card relationships In March 2012, we purchased from HSBC Finance the account relationships associated with $746 million of credit card receivables which were not included in the sale to Capital One at a fair value of $108 million. Approximately $43 million of this value was associated with the credit card receivables sold to First Niagara. The remaining $65 million was included in intangible assets and is being amortized over its estimated useful life of ten years

Other Intangible Assets Other intangible assets, which result from purchase business combinations, are comprised of favorable lease arrangements of $7 million and $8 million at March 31, 2013 and December 31, 2012, respectively.