Acquisitions and Discontinued Operations (Tables)

9 Months Ended

Sep. 30, 2013

Components of Income (Loss) from Discontinued Operations, Net of Taxes for Education Lending Business

The components of “income (loss) from discontinued operations, net of taxes” for the education lending business are as follows:

	Three months ended September 30,						Nine months ended September 30,
in millions	2013			2012			2013			2012
Net interest income	$	26		$	28		$	80		$	89
Provision (credit) for loan and lease losses		6			(2	)		10			4
Net interest income (expense) after provision for loan and lease losses		20			30			70			85
Noninterest income		(94	)		(21	)		(128	)		(41	)
Noninterest expense		6		$	9			20			27
Income (loss) before income taxes		(80	)		—			(78	)		17
Income taxes		(30	)		—			(29	)		6
Income (loss) from discontinued operations, net of taxes (a)	$	(50	)		—		$	(49	)	$	11

(a) Includes after-tax charges of $9 million and $13 million for the three-month periods ended September 30, 2013 and 2012, and $30 and $39 million for the nine-month periods ended September 30, 2013 and 2012, respectively, determined by applying a matched funds transfer pricing methodology to the liabilities assumed necessary to support the discontinued operations.

Components of Assets and Liabilities of Education Lending Business

The discontinued assets and liabilities of our education lending business included on the balance sheet are as follows:

	September 30,		December 31,		September 30,
in millions	2013		2012		2012
Trust loans at fair value	$	2,135	$	2,369	$	2,513
Portfolio loans at fair value		148		157		71
Loans, net of unearned income of ($6), ($5) and ($2)		2,455		2,675		2,744
Less: Allowance for loan and lease losses		38		55		65
Net loans		4,700		5,146		5,263
Trust accrued income and other assets at fair value		23		26		29
Accrued income and other assets		64		60		68
Total assets	$	4,787	$	5,232	$	5,360
Trust accrued expense and other liabilities at fair value	$	21	$	22	$	25
Trust securities at fair value		2,016		2,159		2,310
Total liabilities	$	2,037	$	2,181	$	2,335

Quantitative Information about Level 3 Fair Value Measurements

The following table shows the significant unobservable inputs used to measure the fair value of the education loan securitization trust loans and securities and the portfolio loans accounted for at fair value as of September 30, 2013, December 31, 2012, and September 30, 2012:

September 30, 2013	Fair Value of Level 3		Valuation	Significant	Range
dollars in millions	Assets and Liabilities		Technique	Unobservable Input	(Weighted-Average)
Trust loans and portfolio loans accounted for at fair value	$	2,283	Discounted cash flow	Prepayment speed	4.00 - 13.50% (6.04%)
				Loss severity	2.00 - 79.50% (37.67%)
				Discount rate	2.00 - 10.50% (7.09%)
				Default rate	8.02 - 23.78% (15.97%)
Trust securities		2,016	Discounted cash flow	Discount rate	1.10 - 3.80% (2.64%)

December 31, 2012	Fair Value of Level 3		Valuation	Significant	Range
dollars in millions	Assets and Liabilities		Technique	Unobservable Input	(Weighted-Average)
Trust loans and portfolio loans accounted for at fair value	$	2,526	Discounted cash flow	Prepayment speed	4.00 - 26.00% (9.74%)
				Loss severity	2.00 - 80.00% (49.61%)
				Discount rate	2.40 - 10.50% (5.12%)
				Default rate	8.13 - 21.50% (13.44%)
Trust securities		2,159	Discounted cash flow	Discount rate	1.50 - 6.10% (4.14%)

September 30, 2012	Fair Value of Level 3		Valuation	Significant	Range
dollars in millions	Assets and Liabilities		Technique	Unobservable Input	(Weighted-Average)
Trust loans and portfolio loans accounted for at fair value	$	2,584	Discounted cash flow	Prepayment speed	4.00 - 26.00% (10.08%)
				Loss severity	2.00 - 80.00% (51.05%)
				Discount rate	2.60 - 10.50% (5.04%)
				Default rate	8.00 - 21.50% (12.60%)
Trust securities		2,310	Discounted cash flow	Discount rate	1.80 - 6.50% (4.30%)

Consolidated Trusts' Assets and Liabilities at Fair Value and Contractual Values

The following table shows the consolidated trusts’ assets and liabilities at fair value and the portfolio loans at fair value and their related contractual values as of September 30, 2013.  

September 30, 2013	Contractual		Fair
in millions	Amount		Value
ASSETS
Portfolio loans	$	142	$	148
Trust loans		2,190		2,135
Trust other assets		23		23
LIABILITIES
Trust securities	$	2,200	$	2,016
Trust other liabilities		21		21

Consolidated Assets and Liabilities at Fair Value on Recurring Basis

The following table presents the assets and liabilities of the trusts that were consolidated and are measured at fair value, as well as the portfolio loans that are measured at fair value on a recurring basis.

September 30, 2013
in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Portfolio loans		—		—	$	148	$	148
Trust loans		—		—		2,135		2,135
Trust other assets		—		—		23		23
Total assets on a recurring basis at fair value		—		—	$	2,306	$	2,306
LIABILITIES MEASURED ON A RECURRING BASIS
Trust securities		—		—	$	2,016	$	2,016
Trust other liabilities		—		—		21		21
Total liabilities on a recurring basis at fair value		—		—	$	2,037	$	2,037

Change in Fair Values of Level 3 Consolidated Education Loan Securitization Trusts and Portfolio Loans

The following table shows the change in the fair values of the Level 3 consolidated education loan securitization trusts and portfolio loans for the three and nine-month periods ended September 30, 2013.

	Portfolio			Trust			Trust						Trust
	Student			Student			Other			Trust			Other
in millions	Loans			Loans			Assets			Securities			Liabilities
Balance at December 31, 2012	$	157		$	2,369		$	26		$	2,159		$	22
Gains (losses) recognized in earnings (a)		—			6			—			130			—
Purchases		—			—			—			—			—
Sales		—			—			—			—			—
Issuances		—			—			—			—			—
Settlements		(9	)		(240	)		(3	)		(273	)		(1	)
Balance at September 30, 2013	$	148		$	2,135		$	23		$	2,016		$	21
Balance at June 30, 2013	$	151		$	2,317		$	24		$	2,118		$	21
Gains (losses) recognized in earnings (a)		—			(105	)		—			(14	)		—
Purchases		—			—			—			—			—
Sales		—			—			—			—			—
Issuances		—			—			—			—			—
Settlements		(3	)		(77	)		(1	)		(88	)		—
Balance at September 30, 2013	$	148		$	2,135		$	23		$	2,016		$	21

(a) Gains (losses) were driven primarily by fair value adjustments.

Components of Income (Loss) from Discontinued Operations, Net of Taxes

The components of “income (loss) from discontinued operations, net of taxes” for Victory which includes the gain on the sale of this business on July 31, 2013 are as follows:

	Three months ended September 30,				Nine months ended September 30,
in millions	2013		2012		2013		2012
Noninterest income	$	155	$	26	$	212	$	84
Noninterest expense		16		22		59		67
Income (loss) before income taxes		139		4		153		17
Income taxes		52		1		57		6
Income (loss) from discontinued operations, net of taxes	$	87	$	3	$	96	$	11

 The components of “income (loss) from discontinued operations, net of taxes” for Austin are as follows:

	Three months ended September 30,					Nine months ended September 30,
in millions	2013			2012		2013			2012
Noninterest expense	$	1			—	$	1		$	9
Income (loss) before income taxes		(1	)		—		(1	)		(9	)
Income taxes	$	(1	)		—		1			(3	)
Income (loss) from discontinued operations, net of taxes		—			—	$	(2	)	$	(6	)

Components of Assets and Liabilities from Discontinued Operations

The discontinued assets and liabilities of Victory included on the balance sheet are as follows:

	September 30,		December 31,		September 30,
in millions	2013		2012		2012
Cash and due from banks		—	$	1	$	1
Accrued income and other assets	$	31		27		18
Total assets	$	31	$	28	$	19
Accrued expense and other liabilities		—	$	38	$	33
Total liabilities		—	$	38	$	33

The discontinued assets and liabilities of Austin included on the balance sheet are as follows:

	September 30,		December 31,		September 30,
in millions	2013		2012		2012
Cash and due from banks	$	20	$	22	$	21
Total assets	$	20	$	22	$	21
Accrued expense and other liabilities		—	$	1		—
Total liabilities		—	$	1		—

Victory Seller Note Measured at Fair Value on Recurring Basis

The following table presents the Victory Seller note that is measured at fair value on a recurring basis through December 31, 2013.

September 30, 2013
in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Seller note		—		—	$	31	$	31
Total assets on a recurring basis at fair value		—		—	$	31	$	31

Combined Results of Discontinued Operations

Combined discontinued operations. The combined results of the discontinued operations are as follows:

	Three months ended September 30,					Nine months ended September 30,
in millions	2013		2012			2013		2012
Net interest income	$	26	$	28		$	80	$	89
Provision (credit) for loan and lease losses		6		(2	)		10		4
Net interest income (expense) after provision for loan and lease losses		20		30			70		85
Noninterest income		61		5			84		43
Noninterest expense		23		31			80		103
Income (loss) before income taxes		58		4			74		25
Income taxes		21		1			29		9
Income (loss) from discontinued operations, net of taxes (a)	$	37	$	3		$	45	$	16

(a) Includes after-tax charges of $9 million and $13 million for the three-month periods ended September 30, 2013 and 2012, respectively, and $30 million and $39 million for the nine-month periods ended September 30, 2013 and 2012, respectively, determined by applying a matched funds transfer pricing methodology to the liabilities assumed necessary to support the discontinued operations.

Combined Assets and Liabilities of Discontinued Operations

The combined assets and liabilities of the discontinued operations are as follows:

	September 30,		December 31,		September 30,
in millions	2013		2012		2012
Cash and due from banks	$	20	$	23	$	22
Trust loans at fair value		2,135		2,369		2,513
Portfolio loans at fair value		148		157		71
Loans, net of unearned income of ($6), ($5), and ($2)		2,455		2,675		2,744
Less: Allowance for loan and lease losses		38		55		65
Net loans		4,700		5,146		5,263
Trust accrued income and other assets at fair value		23		26		29
Accrued income and other assets		95		87		86
Total assets	$	4,838	$	5,282	$	5,400
Trust accrued expense and other liabilities at fair value	$	21	$	22	$	25
Accrued expense and other liabilities		—		39		33
Trust securities at fair value		2,016		2,159		2,310
Total liabilities	$	2,037	$	2,220	$	2,368

Seller Note [Member]

Change in Fair Values of Level 3 Consolidated Education Loan Securitization Trusts and Portfolio Loans

The following table shows the change in the fair value of the Level 3 Victory Seller note for the three-month period ended September 30, 2013.

in millions	Seller note
Balance at June 30, 2013		—
Gains (losses) recognized in earnings (a)	$	(1	)
Purchases		—
Sales		—
Issuances		32
Settlements		—
Balance at September 30, 2013	$	31

(a) Gains (losses) were driven primarily by fair value adjustments.