US Bank 2013 Annual Report Download - page 34

TABLE 12 Selected Loan Maturity Distribution
At December 31, 2013 (Dollars in Millions)
One Year
or Less
Over One
Through
Five Years
Over
Five Years Total
Commercial .......................................................................... $23,380 $ 42,810 $ 3,843 $ 70,033
Commercial real estate .............................................................. 8,338 24,915 6,632 39,885
Residential mortgages ............................................................... 2,563 8,100 40,493 51,156
Credit card ........................................................................... 18,021 – – 18,021
Other retail ........................................................................... 9,296 25,491 12,891 47,678
Covered loans ....................................................................... 1,629 2,027 4,806 8,462
Total loans ......................................................................... $63,227 $103,343 $68,665 $235,235
Total of loans due after one year with
Predetermined interest rates ...................................................... $ 79,952
Floating interest rates ............................................................. $ 92,056
Investment Securities The Company uses its investment
securities portfolio to manage enterprise interest rate risk,
provide liquidity (including the ability to meet proposed
regulatory requirements), generate interest and dividend
income, and as collateral for public deposits and wholesale
funding sources. While the Company intends to hold its
investment securities indefinitely, it may sell available-for-
sale securities in response to structural changes in the
balance sheet and related interest rate risk and to meet
liquidity requirements, among other factors.
Investment securities totaled $79.9 billion at
December 31, 2013, compared with $74.5 billion at
December 31, 2012. The $5.4 billion (7.1 percent) increase
reflected $6.7 billion of net investment purchases, partially
offset by a $1.2 billion unfavorable change in net unrealized
gains (losses) on available-for-sale investment securities.
Held-to-maturity securities were $38.9 billion at
December 31, 2013, compared with $34.4 billion at
December 31, 2012, primarily reflecting net purchases of
U.S. government agency-backed securities made in
anticipation of final liquidity coverage ratio regulatory
requirements.
Average investment securities were $75.0 billion in 2013,
compared with $72.5 billion in 2012. The weighted-average
yield of the available-for-sale portfolio was 2.64 percent at
December 31, 2013, compared with 2.93 percent at
December 31, 2012. The average maturity of the available-for-
sale portfolio was 6.0 years at December 31, 2013, compared
with 4.1 years at December 31, 2012. The weighted-average
yield of the held-to-maturity portfolio was 2.00 percent at
December 31, 2013, compared with 1.94 percent at
December 31, 2012. The average maturity of the held-to-
maturity portfolio was 4.5 years at December 31, 2013,
compared with 3.3 years at December 31, 2012. The increases
in the weighted-average maturities from December 31, 2012 to
December 31, 2013, related to the impact of higher interest
rates on anticipated prepayments on mortgage-backed
securities. Investment securities by type are shown in Table 13.
The Company’s available-for-sale securities are carried
at fair value with changes in fair value reflected in other
comprehensive income (loss) unless a security is deemed to
be other-than-temporarily impaired. At December 31, 2013,
the Company’s net unrealized losses on available-for-sale
securities were $125 million, compared with unrealized gains
of $1.1 billion at December 31, 2012. The unfavorable
change in net unrealized gains (losses) was primarily due to
decreases in the fair value of agency mortgage-backed and
state and political securities as a result of increases in
interest rates. Gross unrealized losses on available-for-sale
securities totaled $775 million at December 31, 2013,
compared with $147 million at December 31, 2012.
The Company conducts a regular assessment of its
investment portfolio to determine whether any securities are
other-than-temporarily impaired. When assessing unrealized
losses for other-than-temporary impairment, the Company
considers the nature of the investment, the financial
condition of the issuer, the extent and duration of unrealized
loss, expected cash flows of underlying assets and market
conditions. At December 31, 2013, the Company had no
plans to sell securities with unrealized losses, and believes it
is more likely than not that it would not be required to sell
such securities before recovery of their amortized cost.
There is limited market activity for non-agency mortgage-
backed securities held by the Company. As a result, the
Company estimates the fair value of these securities using
estimates of expected cash flows, discount rates and
management’s assessment of various other market factors,
which are judgmental in nature. The Company recorded
$14 million of impairment charges in earnings during 2013 on
non-agency mortgage-backed securities. These impairment
charges were due to changes in expected cash flows,
primarily resulting from changes in voluntary prepayment and
default assumptions in the underlying mortgage pools. Further
adverse changes in market conditions may result in additional
impairment charges in future periods.
During 2012, the Company recorded $46 million of
impairment charges in earnings on non-agency mortgage-
backed securities. These impairment charges were due to
changes in expected cash flows primarily resulting from
increases in defaults in the underlying mortgage pools. During
2012, the Company also recognized impairment charges of
$27 million in earnings related to certain perpetual preferred
securities issued by financial institutions, following the
downgrades of money center banks by a rating agency.
32 U.S. BANCORP