US Bank 2014 Annual Report Download - page 99

The following table provides information about the amount of interest income from taxable and non-taxable investment securities:
Year Ended December 31 (Dollars in Millions) 2014 2013 2012
Taxable ........................................................................................................... $1,634 $1,375 $1,515
Non-taxable ...................................................................................................... 232 256 277
Total interest income from investment securities .............................................................. $1,866 $1,631 $1,792
The following table provides information about the amount of gross gains and losses realized through the sales of available-
for-sale investment securities:
Year Ended December 31 (Dollars in Millions) 2014 2013 2012
Realized gains ....................................................................................................... $11 $23 $158
Realized losses ...................................................................................................... – – (99)
Net realized gains (losses) ........................................................................................ $11 $23 $ 59
Income tax (benefit) on net realized gains (losses) ................................................................... $4 $9 $23
The Company conducts a regular assessment of its
investment securities with unrealized losses to determine
whether investment securities are other-than-temporarily
impaired considering, among other factors, the nature of the
investment securities, credit ratings or financial condition of the
issuer, the extent and duration of the unrealized loss, expected
cash flows of underlying collateral, the existence of any
government or agency guarantees, market conditions and
whether the Company intends to sell or it is more likely than not
the Company will be required to sell the investment securities.
The following table summarizes other-than-temporary impairment by investment category:
2014 2013 2012
Year Ended December 31 (Dollars in Millions)
Losses
Recorded in
Earnings
Other Gains
(Losses)(c) Total
Losses
Recorded in
Earnings
Other Gains
(Losses)(c) Total
Losses
Recorded in
Earnings
Other Gains
(Losses)(c) Total
Available-for-sale
Mortgage-backed securities
Non-agency residential
Prime(a) ................................ $(1) $1 $ – $ (6) $2 $(4) $(12) $ (9) $(21)
Non-prime(b) ........................... (2) – (2) (8) 6 (2) (33) 21 (12)
Commercial non-agency ................. – – – – – – (1) (1) (2)
Other asset-backed securities .............. – – – – – – (1) 1 –
Perpetual preferred securities.............. (5) – (5) – – – (27) – (27)
Total available-for-sale ............... $(8) $1 $(7) $(14) $8 $(6) $(74) $12 $(62)
(a) Prime securities are those designated as such by the issuer at origination. When an issuer designation is unavailable, the Company determines at acquisition date the categorization based on
asset pool characteristics (such as weighted-average credit score, loan-to-value, loan type, prevalence of low documentation loans) and deal performance (such as pool delinquencies and
security market spreads).
(b) Includes all securities not meeting the conditions to be designated as prime.
(c) Losses represent the non-credit portion of other-than-temporary impairment recorded in other comprehensive income (loss) for investment securities determined to be other-than-temporarily
impaired during the period. Gains represent recoveries in the fair value of securities that had non-credit other-than-temporary impairment during the period.
The Company determined the other-than-temporary
impairment recorded in earnings for debt securities not intended
to be sold by estimating the future cash flows of each individual
investment security, using market information where available,
and discounting the cash flows at the original effective rate of the
investment security. Other-than-temporary impairment recorded
in other comprehensive income (loss) was measured as the
difference between that discounted amount and the fair value of
each investment security. For perpetual preferred securities
determined to be other-than-temporarily impaired, the Company
recorded a loss in earnings for the entire difference between the
securities’ fair value and their amortized cost.
The following table includes the ranges for significant assumptions used for those available-for-sale non-agency mortgage-
backed securities determined to be other-than-temporarily impaired during 2014:
Prime(a) Non-Prime(b)
Minimum Maximum Average Minimum Maximum Average
Estimated lifetime prepayment rates ...................................... 7% 20% 16% 1% 10% 5%
Lifetime probability of default rates ....................................... 3 7 4 6 14 9
Lifetime loss severity rates ................................................ 15 60 47 40 75 56
(a) Prime securities are those designated as such by the issuer at origination. When an issuer designation is unavailable, the Company determines at acquisition date the categorization based on
asset pool characteristics (such as weighted-average credit score, loan-to-value, loan type, prevalence of low documentation loans) and deal performance (such as pool delinquencies and
security market spreads).
(b) Includes all securities not meeting the conditions to be designated as prime.
U.S. BANCORP The power of potential
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