Fifth Third Bank 2014 Annual Report Download - page 56

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
54 Fifth Third Bancorp
$45 million partially offset by the purchase of $297 million of asset-
backed securities during the year ended December 31, 2014.
On an amortized cost basis, available-for-sale and other
securities were 18% and 16% of total interest-earning assets at
December 31, 2014 and 2013, respectively. The estimated weighted-
average life of the debt securities in the available-for-sale and other
portfolio was 5.8 years at December 31, 2014, compared to 6.7 years
at December 31, 2013. In addition, at December 31, 2014, the
available-for-sale and other securities portfolio had a weighted-
average yield of 3.31%, compared to 3.39% at December 31, 2013.
Information presented in Table 25 is on a weighted-average life
basis, anticipating future prepayments. Yield information is
presented on a FTE basis and is computed using historical cost
balances. Maturity and yield calculations for the total available-for-
sale portfolio exclude equity securities that have no stated yield or
maturity. Total net unrealized gains on the available-for-sale and
other securities portfolio were $731 million at December 31, 2014,
compared to $188 million at December 31, 2013. The increase from
December 31, 2013 was primarily due to a decrease in interest rates
during the year ended December 31, 2014. The fair value of
investment securities is impacted by interest rates, credit spreads,
market volatility and liquidity conditions. The fair value of
investment securities generally increases when interest rates decrease
or when credit spreads contract.
TABLE 25: CHARACTERISTICS OF AVAILABLE-FOR-SALE AND OTHER SECURITIES
Weighted-Average Weighted-Average
A
s of December 31, 2014 ($ in millions) Amortized Cost Fair Value Life (in years) Yield
U.S. Treasury and federal agencies:
A
verage life 1 – 5 years $1,545 1,632 2.0 3.62 %
Total 1,545 1,632 2.0 3.62
Obligations of states and political subdivisions:(a)
A
verage life of one year or less 39 39 0.4 0.03
A
verage life 1 – 5 years 111 115 2.9 3.72
A
verage life 5 – 10 years 30 32 7.9 3.67
A
verage life greater than 10 years 5 6 10.3 3.78
Total 185 192 3.4 2.93
A
gency residential mortgage-backed securities:
A
verage life of one year or less 42 43 0.4 5.61
A
verage life 1 – 5 years 3,224 3,361 4.1 3.80
A
verage life 5 – 10 years 8,386 8,665 5.9 3.33
A
verage life greater than 10 years 316 335 12.9 3.83
Total 11,968 12,404 5.6 3.47
A
gency commercial mortgage-backed securities:
A
verage life of one year or less 15 15 0.3 -
A
verage life 1 – 5 years 865 874 4.4 2.83
A
verage life 5 – 10 years 3,350 3,427 7.7 3.13
A
verage life greater than 10 years 235 249 13.6 3.90
Total 4,465 4,565 7.3 3.10
Non-agency commercial mortgage-backed securities:
A
verage life of one year or less 54 54 0.5 2.19
A
verage life 1 – 5 years 561 576 2.3 2.69
A
verage life 5 – 10 years 874 920 7.9 3.67
Total 1,489 1,550 5.5 3.25
A
sset-backed securities and other debt securities:
A
verage life of one year or less 97 102 0.2 2.05
A
verage life 1 – 5 years 514 524 3.1 2.76
A
verage life 5 – 10 years 244 253 6.9 1.90
A
verage life greater than 10 years 469 483 14.5 1.91
Total 1,324 1,362 7.6 2.25
Equity securities 701 703
Total available-for-sale and other securities $21,677 22,408 5.8 3.31 %
(a) Taxable-equivalent yield adjustments included in the above table are 0.01%, 0.00%, 1.94%, 2.01% and 0.37 for securities with an average life of one year or less, 1-5 years, 5-10 years, greater
than 10 years and in total, respectively.
Deposits
The Bancorp’s deposit balances represent an important source of
funding and revenue growth opportunity. The Bancorp continues to
focus on core deposit growth in its retail and commercial franchises
by improving customer satisfaction, building full relationships and
offering competitive rates. Core deposits represented 71% of the
Bancorp’s asset funding base for both of the years ended December
31, 2014 and 2013.