Acquisitions and Discontinued Operations (Tables)

3 Months Ended

Mar. 31, 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 March 31,
in millions	2013		2012

Net interest income	$	28	$	31
Provision for loan and lease losses		6		4

Net interest income (expense) after provision for loan and lease losses		22		27
Noninterest income		(16)		(18)
Noninterest expense		7	$	9

Income (loss) before income taxes		(1)		—
Income taxes	$	(1)		—

Income (loss) from discontinued operations, net of taxes ^(a)		—		—

(a)	Includes after-tax charges of $10 million and $14 million for the three-month periods ended March 31, 2013 and 2012, 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, 2013		December 31, 2012		March 31, 2012

Trust loans at fair value	$	2,333	$	2,369	$	2,714

Portfolio loans at fair value		154		157		74

Loans, net of unearned income of ($5), ($5) and ($2)		2,599		2,675		2,927

Less: Allowance for loan and lease losses		49		55		90

Net loans		5,037		5,146		5,625

Trust accrued income and other assets at fair value		25		26		112

Accrued income and other assets		54		60		—

Total assets	$	5,116	$	5,232	$	5,737


Trust accrued expense and other liabilities at fair value	$	25	$	22	$	30

Trust securities at fair value		2,126		2,159		2,512

Total liabilities	$	2,151	$	2,181	$	2,542

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, 2013:


March 31, 2013 dollars in millions	Fair Value of Level 3 Assets and Liabilities		Valuation Technique	Significant Unobservable Input	Range (Weighted-Average)

Trust loans and	$	2,487	Discounted cash flow	Prepayment speed	4.00 - 13.50% (6.16%)

portfolio loans				Loss severity	2.00 - 80.00% (52.29%)

accounted for at fair				Discount rate	1.80 - 5.50% (3.89%)

value				Default rate	8.13 - 22.00% (13.84%)

Trust securities		2,126	Discounted cash flow	Discount rate	1.10 - 5.00% (3.29%)


December 31, 2012 dollars in millions	Fair Value of Level 3 Assets and Liabilities		Valuation Technique	Significant Unobservable Input	Range (Weighted-Average)

Trust loans and	$	2,526	Discounted cash flow	Prepayment speed	4.00 -26.00% (10.02%)

portfolio loans				Loss severity	2.00 - 80.00% (52.30%)

accounted for at fair				Discount rate	2.40 - 6.60% (4.79%)

value				Default rate	8.13 - 21.50% (13.44%)

Trust securities		2,159	Discounted cash flow	Discount rate	1.50 - 6.10% (4.14%)


March 31, 2012 dollars in millions	Fair Value of Level 3 Assets and Liabilities		Valuation Technique	Significant Unobservable Input	Range (Weighted-Average)

Trust loans and	$	2,788	Discounted cash flow	Prepayment speed	4.00 - 26.00% (10.22%)

portfolio loans				Loss severity	2.00 - 80.00% (52.34%)

accounted for at fair				Discount rate	2.50 - 8.40% (4.70%)

value				Default rate	3.75 - 40.00% (18.58%)

Trust securities		2,512	Discounted cash flow	Discount rate	1.80 - 7.20% (4.10%)

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, 2013.


March 31, 2013 in millions	Contractual Amount		Fair Value

ASSETS

Portfolio loans	$	148	$	154

Trust loans		2,357		2,333

Trust other assets		25		25

LIABILITIES

Trust securities	$	2,382	$	2,126

Trust other liabilities		25		25

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.


March 31, 2013 in millions	Level 1		Level 2		Level 3		Total

ASSETS MEASURED ON A RECURRING BASIS

Portfolio loans		—		—	$	154	$	154

Trust loans		—		—		2,333		2,333

Trust other assets		—		—		25		25

Total assets on a recurring basis at fair value		—		—	$	2,512	$	2,512


LIABILITIES MEASURED ON A RECURRING BASIS

Trust securities		—		—	$	2,126	$	2,126

Trust other liabilities		—		—		25		25

Total liabilities on a recurring basis at fair value		—		—	$	2,151	$	2,151

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 period ended March 31, 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)		—		43		—		59		—
Purchases		—		—		—		—		—
Sales		—		—		—		—		—
Issuances		—		—		—		—		—
Settlements		(3)		(79)		(1)		(92)		3

Balance at March 31, 2013	$	154	$	2,333	$	25	$	2,126	$	25

(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 are as follows:


	Three months ended March 31,
in millions	2013		2012

Noninterest income	$	29	$	30

Noninterest expense		21		24

Income (loss) before income taxes		8		6

Income taxes		3		2

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

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


	Three months ended March 31,
in millions	2013		2012

Noninterest expense		—	$	8

Income (loss) before income taxes		—		(8)
Income taxes	$	2		(3)

Income (loss) from discontinued operations, net of taxes	$	(2)	$	(5)

Components of Assets and Liabilities from Discontinued Operations

The discontinued assets and liabilities of Victory that are classified as held for sale and measured at the lower of carrying value or fair value less cost to sell, included on the balance sheet and the related assets under management are as follows:


in millions	March 31, 2013		December 31, 2012		March 31, 2012

Cash and due from banks	$	1	$	1	$	1

Accrued income and other assets		43		27		21

Total assets	$	44	$	28	$	22


Accrued expense and other liabilities	$	24	$	38	$	26

Total liabilities	$	24	$	38	$	26

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


in millions	March 31, 2013		December 31, 2012		March 31, 2012

Cash and due from banks	$	22	$	22	$	30
Accrued income and other assets		—		—		1

Total assets	$	22	$	22	$	31


Accrued expense and other liabilities	$	1	$	1	$	7

Total liabilities	$	1	$	1	$	7

Combined Results of Discontinued Operations

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

in millions	2013		2012

Net interest income	$	28	$	31
Provision for loan and lease losses		6		4

Net interest income (expense) after provision for loan and lease losses		22		27
Noninterest income		13		12
Noninterest expense		28		41

Income (loss) before income taxes		7		(2)
Income taxes		4		(1)

Income (loss) from discontinued operations, net of taxes ^(a)	$	3	$	(1)

(a)	Includes after-tax charges of $10 million and $14 million for March 31, 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:


in millions	March 31, 2013		December 31, 2012		March 31, 2012

Cash and due from banks	$	23	$	23	$	31
Trust loans at fair value		2,333		2,369		2,714
Portfolio loans at fair value		154		157		74
Loans, net of unearned income of ($5), ($5), and ($2)		2,599		2,675		2,927
Less: Allowance for loan and lease losses		49		55		90

Net loans		5,037		5,146		5,625
Trust accrued income and other assets at fair value		25		26		112
Accrued income and other assets		97		87		22

Total assets	$	5,182	$	5,282	$	5,790


Trust accrued expense and other liabilities at fair value	$	25	$	22	$	30
Accrued expense and other liabilities		25		39		33
Trust securities at fair value		2,126		2,159		2,512

Total liabilities	$	2,176	$	2,220	$	2,575