Fifth Third Bank 2014 Annual Report Download - page 41

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
39 Fifth Third Bancorp
Noninterest Income
Noninterest income decreased $754 million, or 23%, for the year ended December 31, 2014 compared to the year ended December 31, 2013. The
components of noninterest income are as follows:
TABLE 10: NONINTEREST INCOME
For the years ended December 31 ($ in millions) 2014 2013 2012 2011 2010
Service charges on deposits $ 560 549 522 520 574
Corporate banking revenue 430 400 413 350 364
Investment advisory revenue 407 393 374 375 361
Mortgage banking net revenue 310 700 845 597 647
Card and processing revenue 295 272 253 308 316
Other noninterest income 450 879 574 250 406
Securities gains, net 21 21 15 46 47
Securities gains, net, non-qualifying hedges on mortgage servicing rights - 13 3 9 14
Total noninterest income $ 2,473 3,227 2,999 2,455 2,729
Service charges on deposits
Service charges on deposits increased $11 million in 2014 compared
to 2013. Commercial deposit revenue increased $15 million in 2014
compared to 2013 primarily due to new customer acquisition and
product expansion. Consumer deposit revenue decreased $4 million
in 2014 compared to 2013 primarily due to a decrease in consumer
checking and savings fees from a decline in the percentage of
consumer customers being charged service fees, partially offset by
an increase in overdraft fees.
Corporate banking revenue
Corporate banking revenue increased $30 million in 2014 compared
to 2013. The increase from the prior year was primarily the result of
an increase in syndication and lease remarketing fees. Syndication
fees increased $22 million compared to 2013 due to the investment
in resources in the commercial business and a strengthening
economy in 2014. The increase in lease remarketing fees included
the impact of a $9 million write-down of equipment value on an
operating lease during the fourth quarter of 2013.
Investment advisory revenue
Investment advisory revenue increased $14 million in 2014
compared to 2013. The increase was primarily due to an increase of
$15 million in private client service fees due to growth in personal
asset management fees, partially offset by a decrease in securities
broker fees due to a decline in transactional brokerage revenue. The
Bancorp had approximately $308 billion and $302 billion in total
assets under care as of December 31, 2014 and 2013, respectively,
and managed $27 billion in assets for individuals, corporations and
not-for-profit organizations as of December 31, 2014 and 2013.
M
ortgage banking net revenu
e
Mortgage banking net revenue decreased $390 million, or 56%, in 2014 compared to 2013. The components of mortgage banking net revenue are
as follows:
TABLE 11: COMPONENTS OF MORTGAGE BANKING NET REVENUE
For the years ended December 31 ($ in millions) 2014 2013 2012
Origination fees and gains on loan sales $153 453 821
Net mortgage servicing revenue:
Gross mortgage servicing fees 246 251 250
Mortgage servicing rights amortization (119) (166) (186)
Net valuation adjustments on mortgage servicing rights and free-standing derivatives
entered into to economically hedge MSR 30 162 (40)
Net mortgage servicing revenue 157 247 24
Mortgage banking net revenue $310 700 845
Origination fees and gains on loan sales decreased $300 million in
2014 compared to 2013 primarily as the result of a 66% decrease in
residential mortgage loan originations. Residential mortgage loan
originations decreased to $7.5 billion in 2014 from $22.3 billion in
2013 due to strong refinancing activity that occurred during the year
ended December 31, 2013.
Net mortgage servicing revenue is comprised of gross servicing
fees and related servicing rights amortization as well as valuation
adjustments on MSRs and mark-to-market adjustments on both
settled and outstanding free-standing derivative financial
instruments used to economically hedge the MSR portfolio. Net
servicing revenue decreased $90 million in 2014 compared to 2013
driven primarily by a decrease of $132 million in net valuation
adjustments, partially offset by a decrease in mortgage servicing
rights amortization of $47 million.
The net valuation adjustment gain of $30 million during 2014
included $95 million in gains from derivatives economically hedging
the MSRs partially offset by temporary impairment of $65 million
on the MSRs. The net valuation adjustment gain of $162 million
during 2013 included a recovery of temporary impairment of $192
million on MSRs partially offset by $30 million in losses from
derivatives economically hedging the MSRs. Mortgage rates
decreased during 2014 which caused the modeled prepayments
speeds to increase, which led to temporary impairment on servicing
rights during the year. Mortgage rates increased in 2013 which
caused the modeled prepayment speeds to slow, and led to the
recovery of temporary impairment on servicing rights in 2013.
Servicing rights are deemed impaired when a borrower’s loan
rate is distinctly higher than prevailing rates. Impairment on
servicing rights is reversed when the prevailing rates return to a level
commensurate with the borrower’s loan rate. Further detail on the
valuation of MSRs can be found in Note 11 of the Notes to
Consolidated Financial Statements. The Bancorp maintains a non-
qualifying hedging strategy to manage a portion of the risk