Acquisitions and Discontinued Operations (Tables)

3 Months Ended

Mar. 31, 2014

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	2014			2013
Net interest income	$	23		$	28
Provision (credit) for loan and lease losses		4			6
Net interest income (expense) after provision for loan and lease losses		19			22
Noninterest income		(14	)		(16	)
Noninterest expense		6			7
Income (loss) before income taxes		(1	)		(1	)
Income taxes		—			(1	)
Income (loss) from discontinued operations, net of taxes (a)	$	(1	)		—

(a) Includes after-tax charges of $9 million and $10 million for the three-month periods ended March 31, 2014, and 2013, 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, 2014		December 31, 2013		March 31, 2013
Trust loans at fair value	$	1,893	$	1,960	$	2,333
Portfolio loans at fair value		143		147		154
Loans, net of unearned income of ($6), ($6), and ($5)		2,318		2,390		2,599
Less: Allowance for loan and lease losses		34		39		49
Net loans		4,320		4,458		5,037
Trust accrued income and other assets at fair value		19		20		25
Accrued income and other assets		41		45		54
Total assets	$	4,380	$	4,523	$	5,116
Trust accrued expense and other liabilities at fair value	$	20	$	20	$	25
Trust securities at fair value		1,796		1,834		2,126
Total liabilities	$	1,816	$	1,854	$	2,151

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, 2014, December 31, 2013, and March 31, 2013:

March 31, 2014	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	$	2,036	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%)

December 31, 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	$	2,107	Discounted cash flow	Prepayment speed	4.00 - 13.50% (6.47%)
				Loss severity	2.00 - 79.50% (54.21%)
				Discount rate	2.40 - 10.50% (3.50%)
				Default rate	8.01 - 23.71% (18.43%)
Trust securities		1,834	Discounted cash flow	Discount rate	1.60 - 3.50% (2.55%)

March 31, 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	$	2,487	Discounted cash flow	Prepayment speed	4.00 - 13.50% (6.16%)
				Loss severity	2.00 - 80.00% (52.29%)
				Discount rate	1.80 - 5.50% (3.89%)
				Default rate	8.13 - 22.00% (13.84%)
Trust securities		2,126	Discounted cash flow	Discount rate	1.10 - 5.00% (3.29%)

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, 2014, December 31, 2013, and March 31, 2013.  

	March 31, 2014				December 31, 2013				March 31, 2013
dollars 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	$	25	$	25	$	33	$	32
Loans placed on nonaccrual status		10		10		12		12		13		12
Portfolio loans at fair value
Accruing loans past due 90 days or more	$	7	$	7	$	8	$	8	$	5	$	5
Loans placed on nonaccrual status		—		—		—		—		—		—
Portfolio loans at carrying value
Accruing loans past due 90 days or more	$	32		N/A	$	35		N/A	$	41		N/A
Loans placed on nonaccrual status		8		N/A		10		N/A		3		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, 2014, December 31, 2013, and March 31, 2013.

	March 31, 2014				December 31, 2013				March 31, 2013
dollars in millions	Contractual Amount		Fair Value		Contractual Amount		Fair Value		Contractual Amount		Fair Value
ASSETS
Portfolio loans	$	136	$	143	$	140	$	147	$	148	$	154
Trust loans		1,889		1,893		1,964		1,960		2,357		2,333
Trust other assets		19		19		20		20		25		25
LIABILITIES
Trust securities	$	1,904	$	1,796	$	1,958	$	1,834	$	2,382	$	2,126
Trust other liabilities		20		20		20		20		25		25

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, 2014, December 31, 2013, and March 31, 2013.

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

December 31, 2013
in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Portfolio loans		—		—	$	147	$	147
Trust loans		—		—		1,960		1,960
Trust other assets		—		—		20		20
Total assets on a recurring basis at fair value		—		—	$	2,127	$	2,127
LIABILITIES MEASURED ON A RECURRING BASIS
Trust securities		—		—	$	1,834	$	1,834
Trust other liabilities		—		—		20		20
Total liabilities on a recurring basis at fair value		—		—	$	1,854	$	1,854

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 periods ended March 31, 2014, and 2013.

in millions	Portfolio Student Loans			Trust Student Loans			Trust Other Assets			Trust Securities			Trust Other Liabilities
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
Balance at December 31, 2012	$	157		$	2,369		$	26		$	2,159		$	22
Gains (losses) recognized in earnings (a)		—			43			—			59			—
Purchases		—			—			—			—			—
Sales		—			—			—			—			—
Settlements		(3	)		(79	)		(1	)		(92	)		3
Balance at March 31, 2013 (b)	$	154		$	2,333		$	25		$	2,126		$	25

(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, 2014, and 2013.

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	2014		2013
Net interest income	$	1		—
Noninterest income		10	$	29
Noninterest expense		—		21
Income (loss) before income taxes		11		8
Income taxes		4		3
Income (loss) from discontinued operations, net of taxes	$	7	$	5

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

	Three months ended March 31,
in millions	2014			2013
Noninterest expense	$	4			—
Income (loss) before income taxes		(4	)		—
Income taxes		(2	)	$	2
Income (loss) from discontinued operations, net of taxes	$	(2	)	$	(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, 2014		December 31, 2013		March 31, 2013
Cash and due from banks		—		—	$	1
Seller note	$	28	$	29		—
Accrued income and other assets		—		—		43
Total assets	$	28	$	29	$	44
Accrued expense and other liabilities		—		—	$	24
Total liabilities		—		—	$	24

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

in millions	March 31, 2014		December 31, 2013		March 31, 2013
Cash and due from banks	$	19	$	20	$	22
Total assets	$	19	$	20	$	22
Accrued expense and other liabilities	$	3		—	$	1
Total liabilities	$	3		—	$	1

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	2014			2013
Net interest income	$	24		$	28
Provision (credit) for loan and lease losses		4			6
Net interest income (expense) after provision for loan and lease losses		20			22
Noninterest income		(4	)		13
Noninterest expense		10			28
Income (loss) before income taxes		6			7
Income taxes		2			4
Income (loss) from discontinued operations, net of taxes (a)	$	4		$	3

(a) Includes after-tax charges of $9 million and $10 million for the three months ended March 31, 2014, and 2013, 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, 2014		December 31, 2013		March 31, 2013
Cash and due from banks	$	19	$	20	$	23
Seller note		28		29		—
Trust loans at fair value		1,893		1,960		2,333
Portfolio loans at fair value		143		147		154
Loans, net of unearned income of ($6), ($6), and ($5)		2,318		2,390		2,599
Less: Allowance for loan and lease losses		34		39		49
Net loans		4,320		4,458		5,037
Trust accrued income and other assets at fair value		19		20		25
Accrued income and other assets		41		45		97
Total assets	$	4,427	$	4,572	$	5,182
Trust accrued expense and other liabilities at fair value	$	20	$	20	$	25
Accrued expense and other liabilities		3		—		25
Trust securities at fair value		1,796		1,834		2,126
Total liabilities	$	1,819	$	1,854	$	2,176

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 March 31, 2014.

in millions	Seller note
Balance at December 31, 2013	$	29
Gains (losses) recognized in earnings (a)		(1	)
Settlements		(28	)
Balance at March 31, 2014 (b)		—

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

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