SunTrust 2015 Annual Report Download - page 78

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The securities AFS portfolio had an effective duration of
4.5 years at December 31, 2015 compared to 3.6 years at
December 31, 2014. Effective duration is a measure of price
sensitivity of a bond portfolio to an immediate change in market
interest rates, taking into consideration embedded options. An
effective duration of 4.5 years suggests an expected price change
of approximately 4.5% for a 100 basis point instantaneous and
parallel change in market interest rates.
The credit quality and liquidity profile of the securities AFS
portfolio remained strong at December 31, 2015 and
consequently, we believe that we have the flexibility to respond
to changes in the economic environment and take actions as
opportunities arise to manage our interest rate risk profile and
balance liquidity risk against investment returns. Over the longer
term, the size and composition of the securities AFS portfolio
will reflect balance sheet trends, our overall liquidity position,
and interest rate risk management objectives. Accordingly, the
size and composition of the securities AFS portfolio could
change over time.
Federal Home Loan Bank and Federal Reserve Bank Stock
We previously acquired capital stock in the FHLB of Atlanta as
a precondition for becoming a member of that institution. As a
member, we are able to take advantage of competitively priced
advances as a wholesale funding source and to access grants and
low-cost loans for affordable housing and community
development projects, among other benefits. At December 31,
2015, we held a total of $32 million of capital stock in the FHLB,
a decrease of $344 million compared to December 31, 2014. This
decrease in our holdings of FHLB capital stock was due to our
redemption of stock related to a decline in FHLB borrowings
over the same period. For the years ended December 31, 2015,
2014, and 2013, we recognized dividends related to FHLB
capital stock of $11 million, $13 million, and $8 million,
respectively.
Similarly, to remain a member of the Federal Reserve
System, we are required to hold a certain amount of capital stock,
determined as either a percentage of the Bank’s capital or as a
percentage of total deposit liabilities. At December 31, 2015, we
held $402 million of Federal Reserve Bank of Atlanta stock,
unchanged from December 31, 2014. For each of the years ended
December 31, 2015, 2014, and 2013, we recognized dividends
related to Federal Reserve Bank of Atlanta stock of $24 million.
In December 2015, the U.S. Congress passed legislation that
changes the dividend rate on our statutory investment in Federal
Reserve Bank of Atlanta stock from 6% to the lower of 6% or
the 10-year Treasury note rate, beginning in 2016.
DEPOSITS
Composition of Average Deposits Table 16
Year Ended December 31 % of Total Deposits
(Dollars in millions) 2015 2014 2013 2015 2014 2013
Noninterest-bearing deposits $42,102 $40,411 $38,643 29% 30% 30%
Interest-bearing deposits:
NOW accounts 35,161 28,879 26,083 24 22 20
Money market accounts 50,518 44,813 42,655 35 33 33
Savings 6,165 6,076 5,740 45 4
Consumer time 6,443 7,539 9,018 46 7
Other time 3,813 4,294 4,937 33 4
Total consumer and commercial deposits 144,202 132,012 127,076 99 99 98
Brokered time deposits 888 1,584 2,030 11 2
Foreign deposits 218 146 35 —— —
Total deposits $145,308 $133,742 $129,141 100% 100% 100%
During 2015, we experienced solid deposit growth and improved
deposit mix as the proportion of lower-cost deposit account
balances increased, while higher-cost time deposit account
balances decreased due to maturities. These favorable trends
contributed to our decline in interest expense on deposits during
the year. See Table 2 and the "Net Interest Income/Margin"
section in this MD&A for additional information regarding
average deposit balances and related rates paid. See Note 5,
"Securities Available for Sale," to the Consolidated Financial
Statements in this Form 10-K for information regarding
collateral pledged to secure public deposits.
Average consumer and commercial deposits increased
$12.2 billion, or 9%, compared to 2014, driven by broad-based
growth across all of our business segments. While a portion of
the low-cost deposit growth has been attributable to clients’
desires related to increased liquidity, a majority of the growth
reflects investments we have made in client-facing platforms, as
well as our overall increased focus on meeting more of our
clients' deposit needs through exceptional service and relevant
deposit products.
Consumer and commercial deposit growth remains one of
our key areas of focus. During 2015, we continued to focus on
deepening our relationships with existing clients, growing our
client base, and increasing deposits, while managing the rates
we pay for deposits. We maintained pricing discipline through a
judicious use of competitive rates in select products and markets
as we allowed higher rate time deposits to run-off, while growing
balances in other deposit categories. Other initiatives to attract