US Bank 2012 Annual Report Download - page 27

TABLE 2 Analysis of Net Interest Income (a)
Year Ended December 31 (Dollars in Millions) 2012 2011 2010
2012
v 2011
2011
v 2010
Components of Net Interest Income
Income on earning assets (taxable-equivalent basis) .......... $ 13,112 $ 12,870 $ 12,375 $ 242 $ 495
Expense on interest-bearing liabilities (taxable-equivalent
basis) ....................................................... 2,143 2,522 2,587 (379) (65)
Net interest income (taxable-equivalent basis) ................... $ 10,969 $ 10,348 $ 9,788 $ 621 $ 560
Net interest income, as reported ................................. $ 10,745 $ 10,123 $ 9,579 $ 622 $ 544
Average Yields and Rates Paid
Earning assets yield (taxable-equivalent basis) ................ 4.28% 4.54% 4.91% (.26)% (.37)%
Rate paid on interest-bearing liabilities (taxable-equivalent
basis) ....................................................... .95 1.14 1.24 (.19) (.10)
Gross interest margin (taxable-equivalent basis) ................. 3.33% 3.40% 3.67% (.07)% (.27)%
Net interest margin (taxable-equivalent basis) ................... 3.58% 3.65% 3.88% (.07)% (.23)%
Average Balances
Investment securities (b) ...................................... $ 72,501 $ 63,645 $ 47,763 $ 8,856 $15,882
Loans.......................................................... 215,374 201,427 193,022 13,947 8,405
Earning assets................................................. 306,270 283,290 252,042 22,980 31,248
Interest-bearing liabilities ...................................... 225,466 221,690 209,113 3,776 12,577
(a) Interest and rates are presented on a fully taxable-equivalent basis utilizing a federal tax rate of 35 percent.
(b) Excludes unrealized gains and losses on available-for-sale investment securities and any premiums or discounts recorded related to the transfer of investment securities at fair value from
available-for-sale to held-to-maturity.
Average investment securities in 2012 were $8.9 billion
(13.9 percent) higher than 2011, primarily due to purchases of
government agency mortgage-backed securities, net of
prepayments and maturities, as the Company continued to
increase its on-balance sheet liquidity in response to
anticipated regulatory requirements.
Average total deposits for 2012 were $22.6 billion (10.6
percent) higher than 2011. Average noninterest-bearing
deposits in 2012 were $13.4 billion (24.9 percent) higher than
2011 due to growth in average balances in a majority of the
lines of business, including Wholesale Banking and
Commercial Real Estate, Wealth Management and Securities
Services, and Consumer and Small Business Banking. Average
total savings deposits were $7.3 billion (6.4 percent) higher in
2012, compared with 2011, primarily due to growth in
Consumer and Small Business Banking balances resulting
from continued strong participation in a product offering that
includes multiple bank products in a package, and higher
corporate trust balances. These increases were partially offset
by lower government banking and broker-dealer balances.
Average time certificates of deposit less than $100,000 were
lower in 2012 by $728 million (4.8 percent), compared with
2011, a result of maturities and lower renewals. Average time
deposits greater than $100,000 were $2.6 billion
(8.8 percent) higher in 2012, compared with 2011. Time
deposits greater than $100,000 are managed as an alternative
to other funding sources such as wholesale borrowing, based
largely on relative pricing.
The $560 million (5.7 percent) increase in net interest
income in 2011, compared with 2010, was primarily the
result of growth in average earning assets and lower cost core
deposit funding. Average earning assets were $31.2 billion
(12.4 percent) higher in 2011 compared with 2010, driven by
increases in investment securities, loans and cash balances at
the Federal Reserve reflected in other earning assets. Average
deposits increased $28.4 billion (15.4 percent) in 2011,
compared with 2010.
Average total loans increased $8.4 billion (4.4 percent) in
2011, compared with 2010, driven by growth in residential
mortgages, commercial loans, commercial real estate loans
and other retail loans, partially offset by lower covered loans
and credit card loans. Average residential mortgages increased
$6.0 billion (21.7 percent) resulting from the net effect of
origination and prepayment activity in the portfolio during
2011 due to the low interest rate environment. Average
commercial loans increased $4.6 billion (9.8 percent) in 2011,
compared with 2010, primarily driven by higher demand from
new and existing customers, including small business. Growth
in average commercial real estate balances of $1.2 billion (3.6
percent) was primarily due to the FCB acquisition. The $513
million (1.1 percent) increase in average other retail loans in
2011, compared with 2010, was primarily due to higher
automobile and installment loans, and retail leasing balances,
partially offset by lower home equity and second mortgage
balances. Average credit card balances decreased $319 million
(1.9 percent), as a result of consumers spending less and
paying down their balances. Average covered loans decreased
$3.6 billion (18.2 percent) in 2011, compared with 2010.
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