US Bank 2012 Annual Report Download - page 30

The $400 million (4.8 percent) increase in noninterest
income in 2011 over 2010 was due to higher payments-related
revenues of 3.5 percent due to growth in transaction volumes
and new business initiatives, partially offset by a decline in credit
and debit card revenue due to the impact of legislative changes
to debit card interchange fees beginning in the fourth quarter of
2011; higher ATM processing services income of 6.9 percent
largely due to increased transaction volumes; an increase in
commercial products revenue of 9.1 percent due to higher
commercial leasing revenue, syndication fees and other
commercial loan fees; a 16.2 percent increase in investment
products fees and commissions due to business initiatives; and
lower net securities losses of 60.3 percent, primarily due to
lower impairments and an increase in other income. The
increase in other income of 38.3 percent reflected the 2011
merchant settlement gain, the gain on the FCB acquisition and
gains related to the Company’s investment in Visa Inc., in
addition to higher retail lease residual revenue, partially offset by
a gain recognized on the exchange of the Company’s proprietary
long-term mutual fund business for an equity interest in Nuveen
Investments in 2010. Offsetting these positive variances was a
decrease in deposit service charges of 7.2 percent as a result of
2010 legislative and pricing changes. Trust and investment
management fees declined 7.4 percent as a result of the sale of
the Company’s proprietary long-term mutual fund business and
lower money market investment management fees, due to the
low interest rate environment, partially offset by the positive
impact of a securitization trust administration acquisition and
improved equity market conditions. Mortgage banking revenue
decreased 1.7 percent, principally due to lower origination and
sales revenue, partially offset by higher loan servicing revenue
and a favorable net change in the valuation of mortgage
servicing rights (“MSRs”) and related economic hedging
activities.
Noninterest Expense Noninterest expense in 2012 was
$10.5 billion, compared with $9.9 billion in 2011 and
$9.4 billion in 2010. The Company’s efficiency ratio was
51.5 percent in 2012, compared with 51.8 percent in 2011.
The $545 million (5.5 percent) increase in noninterest expense
in 2012 over 2011 was principally due to higher
compensation expense, employee benefits expense and
professional services expense. Compensation expense
increased 6.9 percent, primarily as a result of growth in
staffing for business initiatives and mortgage servicing-related
activities, in addition to higher commissions and merit
increases. Employee benefits expense increased 11.8 percent
principally due to higher pension and medical insurance costs
and staffing levels. Professional services expense increased
38.4 percent principally due to mortgage servicing review-
related projects. Technology and communications expense
was 8.3 percent higher due to business expansion and
technology projects. Other expense increased 2.2 percent in
2012, from 2011, reflecting the $80 million expense accrual
for a mortgage foreclosure-related regulatory settlement,
higher regulatory and insurance-related costs and an accrual
recorded by the Company related to its portion of obligations
associated with Visa Inc., partially offset by a $130 million
expense accrual related to mortgage servicing matters
recorded in 2011, lower FDIC assessments and lower costs
related to other real estate owned. These increases were
partially offset by a decrease of 8.2 percent in net occupancy
and equipment expense, principally reflecting the change in
presentation of ATM surcharge revenue passed through to
others, and a 8.4 percent decrease in other intangibles expense
due to the reduction or completion of amortization of certain
intangibles.
The $528 million (5.6 percent) increase in noninterest
expense in 2011 over 2010 was principally due to increased
compensation, employee benefits, net occupancy and
equipment, and professional services expenses, partially offset
by a decrease in other intangibles expense. Compensation
expense increased 6.9 percent, primarily due to an increase in
TABLE 5 Noninterest Expense
Year Ended December 31 (Dollars in Millions) 2012 2011 2010
2012
v 2011
2011
v 2010
Compensation ............................................................... $ 4,320 $4,041 $3,779 6.9% 6.9%
Employee benefits ........................................................... 945 845 694 11.8 21.8
Net occupancy and equipment .............................................. 917 999 919 (8.2) 8.7
Professional services ........................................................ 530 383 306 38.4 25.2
Marketing and business development ....................................... 388 369 360 5.1 2.5
Technology and communications ............................................ 821 758 744 8.3 1.9
Postage, printing and supplies ............................................... 304 303 301 .3 .7
Other intangibles ............................................................. 274 299 367 (8.4) (18.5)
Other ......................................................................... 1,957 1,914 1,913 2.2 .1
Total noninterest expense ................................................. $10,456 $9,911 $9,383 5.5% 5.6%
Efficiency ratio (a) ............................................................ 51.5% 51.8% 51.5%
(a) Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding securities gains (losses), net.
26 U.S. BANCORP