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Acquisitions and Discontinued Operations (Tables)

3 Months Ended

Mar. 31, 2015

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 March 31,
in millions	2015		2014
Net interest income	$	10	$	23
Provision for credit losses		2		4

Net interest income after provision for credit losses		8		19
Noninterest income		4		(14	)
Noninterest expense		4		6

Income (loss) before income taxes		8		(1	)
Income taxes		3		—

Income (loss) from discontinued operations, net of taxes ^(a)	$	5	$	(1	)

(a)	Includes after-tax charges of $6 million and $9 million for the three-month periods ended March 31, 2015, and March 31, 2014, 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:


in millions	March 31, 2015		December 31, 2014		March 31, 2014
Held-to-maturity securities	$	1	$	1		—
Trust loans at fair value		—		—	$	1,893
Portfolio loans at fair value		187		191		143
Loans, net of unearned income^(a)		2,032		2,104		2,318
Less: Allowance for loan and lease losses		25		29		34

Net loans		2,194		2,266		4,320
Trust accrued income and other assets at fair value		—		—		19
Accrued income and other assets		36		38		41

Total assets	$	2,231	$	2,305	$	4,380

Trust accrued expense and other liabilities at fair value		—		—	$	20
Trust securities at fair value		—		—		1,796

Total liabilities		—		—	$	1,816

(a)	At March 31, 2015, December 31, 2014, and March 31, 2014, unearned income was less than $1 million.

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 March 31, 2015, December 31, 2014, and March 31, 2014:

March 31, 2015

dollars in millions

Fair Value of Level 3
Assets and Liabilities

Valuation
Technique

Significant
Unobservable Input

Range
(Weighted-Average)

Portfolio loans accounted for at fair value

187

Discounted cash flow

Prepayment speed

5.40 - 10.20% (7.04%)

Loss severity

2.00 - 77.00% (27.66%)

Discount rate

3.70 - 3.80% (3.71%)

Default rate

1.40 - 1.70% (1.60%)

December 31, 2014

dollars in millions

Fair Value of Level 3
Assets and Liabilities

Valuation
Technique

Significant
Unobservable Input

Range
(Weighted-Average)

Portfolio loans accounted for at fair value

191

Discounted cash flow

Prepayment speed

5.40 - 5.60% (5.50%)

Loss severity

2.00 - 77.00% (25.66%)

Discount rate

3.90 - 4.00% (3.92%)

Default rate

.86 - 1.70% (1.12%)

March 31, 2014

dollars in millions

Fair Value of Level 3
Assets and Liabilities

Valuation
Technique

Significant
Unobservable Input

Range
(Weighted-Average)

Trust loans and portfolio loans accounted for at fair value

2,036

Discounted cash flow

Prepayment speed

4.00 - 13.50% (6.62%)

Loss severity

2.00 - 79.50% (53.89%)

Discount rate

2.40 - 10.50% (3.51%)

Default rate

8.05 - 23.87% (18.65%)

Trust securities

1,796

Discounted cash flow

Discount rate

1.60 - 3.50% (2.55%)

Principal and Fair Value Amounts for Trust Loans at Fair Value, Portfolio Loans at Fair Value, and Portfolio Loans at Carrying Value

The following table shows the principal and fair value amounts for our trust loans at fair value, portfolio loans at fair value, and portfolio loans at carrying value at March 31, 2015, December 31, 2014, and March 31, 2014. Our policies for determining past due loans, placing loans on nonaccrual, applying payments on nonaccrual loans, and resuming accrual of interest are disclosed in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Nonperforming Loans” beginning on page 116 of our 2014 Form 10-K.


	March 31, 2015				December 31, 2014				March 31, 2014
in millions	Principal		Fair Value		Principal		Fair Value		Principal		Fair Value
Trust loans at fair value
Accruing loans past due 90 days or more		—		—		—		—	$	25	$	25
Loans placed on nonaccrual status		—		—		—		—		10		10
Portfolio loans at fair value
Accruing loans past due 90 days or more	$	5	$	5	$	5	$	5	$	7	$	7
Loans placed on nonaccrual status		—		—		—		—		—		—
Portfolio loans at carrying value
Accruing loans past due 90 days or more	$	27		N/A	$	29		N/A	$	32		N/A
Loans placed on nonaccrual status		8		N/A		11		N/A		8		N/A

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 March 31, 2015, December 31, 2014, and March 31, 2014.


	March 31, 2015				December 31, 2014				March 31, 2014
in millions	Contractual Amount		Fair Value		Contractual Amount		Fair Value		Contractual Amount		Fair Value
ASSETS
Portfolio loans	$	186	$	187	$	192	$	191	$	136	$	143
Trust loans		—		—		—		—		1,889		1,893
Trust other assets		—		—		—		—		19		19
LIABILITIES
Trust securities		—		—		—		—	$	1,904	$	1,796
Trust other liabilities		—		—		—		—		20		20

Consolidated Assets and Liabilities at Fair Value on Recurring Basis

The following tables present the assets and liabilities of the consolidated education loan securitization trusts measured at fair value as well as the portfolio loans that are measured at fair value on a recurring basis at March 31, 2015, December 31, 2014, and March 31, 2014.


March 31, 2015 in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Portfolio loans		—		—	$	187	$	187

Total assets on a recurring basis at fair value		—		—	$	187	$	187


December 31, 2014 in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Portfolio loans		—		—	$	191	$	191

Total assets on a recurring basis at fair value		—		—	$	191	$	191


March 31, 2014 in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Portfolio loans		—		—	$	143	$	143
Trust loans		—		—		1,893		1,893
Trust other assets		—		—		19		19

Total assets on a recurring basis at fair value		—		—	$	2,055	$	2,055

LIABILITIES MEASURED ON A RECURRING BASIS
Trust securities		—		—	$	1,796	$	1,796
Trust other liabilities		—		—		20		20

Total liabilities on a recurring basis at fair value		—		—	$	1,816	$	1,816

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-month periods ended March 31, 2015, and March 31, 2014.


in millions	Portfolio Student Loans			Trust Student Loans			Trust Other Assets			Trust Securities			Trust Other Liabilities
Balance at December 31, 2014	$	191			—			—			—			—
Gains (losses) recognized in earnings ^(a)		3			—			—			—			—
Purchases		—			—			—			—			—
Sales		—			—			—			—			—
Settlements		(7	)		—			—			—			—

Balance at March 31, 2015 ^(b)	$	187			—			—			—			—

Balance at December 31, 2013	$	147		$	1,960		$	20		$	1,834		$	20
Gains (losses) recognized in earnings ^(a)		—			2			—			16			—
Purchases		—			—			—			—			—
Sales		—			—			—			—			—
Settlements		(4	)		(69	)		(1	)		(54	)		—

Balance at March 31, 2014 ^(b)	$	143		$	1,893		$	19		$	1,796		$	20

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

(b)	There were no issuances, transfers into Level 3, or transfers out of Level 3 for the three-month periods ended March 31, 2015, and March 31, 2014.

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 additional gain recorded as of March 31, 2014, on the sale of this business, are as follows:


	Three months ended March 31,
in millions	2015		2014
Net interest income		—	$	1
Noninterest income		—		10
Noninterest expense		—		—

Income (loss) before income taxes		—		11
Income taxes		—		4

Income (loss) from discontinued operations, net of taxes		—	$	7

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


	Three months ended March 31,
in millions	2015		2014
Noninterest expense		—	$	4

Income (loss) before income taxes		—		(4	)
Income taxes		—		(2	)

Income (loss) from discontinued operations, net of taxes		—	$	(2	)

Components of Assets and Liabilities from Discontinued Operations

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


in millions	March 31, 2015		December 31, 2014		March 31, 2014
Seller note ^(a)		—		—	$	28

Total assets		—		—	$	28

Accrued expense and other liabilities		—		—		—

Total liabilities		—		—		—

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


in millions	March 31, 2015		December 31, 2014		March 31, 2014
Cash and due from banks	$	15	$	19	$	19

Total assets	$	15	$	19	$	19

Accrued expense and other liabilities		—	$	3	$	3

Total liabilities		—	$	3	$	3

Combined Results of Discontinued Operations

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


	Three months ended March 31,
in millions	2015		2014
Net interest income	$	10	$	24
Provision for credit losses		2		4

Net interest income after provision for credit losses		8		20
Noninterest income		4		(4	)
Noninterest expense		4		10

Income (loss) before income taxes		8		6
Income taxes		3		2

Income (loss) from discontinued operations, net of taxes ^(a)	$	5	$	4

(a)	Includes after-tax charges of $6 million and $9 million for the three-month periods ended March 31, 2015, and March 31, 2014, 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:


in millions	March 31, 2015		December 31, 2014		March 31, 2014
Cash and due from banks	$	15	$	19	$	19
Held-to-maturity securities		1		1		—
Seller note		—		—		28
Trust loans at fair value		—		—		1,893
Portfolio loans at fair value		187		191		143
Loans, net of unearned income ^(a)		2,032		2,104		2,318
Less: Allowance for loan and lease losses		25		29		34

Net loans		2,194		2,266		4,320
Trust accrued income and other assets at fair value		—		—		19
Accrued income and other assets		36		38		41

Total assets	$	2,246	$	2,324	$	4,427

Trust accrued expense and other liabilities at fair value		—		—	$	20
Accrued expense and other liabilities		—	$	3		3
Trust securities at fair value		—		—		1,796

Total liabilities		—	$	3	$	1,819

(a)	At March 31, 2015, December 31, 2014, and March 31, 2014, unearned income was less than $1 million.