US Bank 2014 Annual Report Download - page 27

TABLE 2 ANALYSIS OF NET INTEREST INCOME (a)
Year Ended December 31 (Dollars in Millions) 2014 2013 2012
2014
v 2013
2013
v 2012
Components of Net Interest Income
Income on earning assets (taxable-equivalent basis) ............... $ 12,454 $ 12,513 $ 13,112 $ (59) $ (599)
Expense on interest-bearing liabilities (taxable-equivalent basis) ... 1,457 1,685 2,143 (228) (458)
Net interest income (taxable-equivalent basis) ........................ $ 10,997 $ 10,828 $ 10,969 $ 169 $ (141)
Net interest income, as reported ...................................... $ 10,775 $ 10,604 $ 10,745 $ 171 $ (141)
AverageYieldsandRatesPaid
Earning assets yield (taxable-equivalent basis) ..................... 3.65% 3.97% 4.28% (.32)% (.31)%
Rate paid on interest-bearing liabilities (taxable-equivalent
basis) ............................................................ .58 .73 .95 (.15) (.22)
Gross interest margin (taxable-equivalent basis) ...................... 3.07% 3.24% 3.33% (.17)% (.09)%
Net interest margin (taxable-equivalent basis) ........................ 3.23% 3.44% 3.58% (.21)% (.14)%
Average Balances
Investment securities(b) ............................................. $ 90,327 $ 75,046 $ 72,501 $15,281 $ 2,545
Loans ............................................................... 241,692 227,474 215,374 14,218 12,100
Earning assets ...................................................... 340,994 315,139 306,270 25,855 8,869
Interest-bearing liabilities .......................................... 249,972 230,400 225,466 19,572 4,934
(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 2014 were $15.3 billion
(20.4 percent) higher than 2013, due to purchases of U.S.
government and agency-backed securities, net of
prepayments and maturities, in preparation for final liquidity
coverage ratio regulatory requirements.
Average total deposits for 2014 were $16.2 billion
(6.5 percent) higher than 2013. Average noninterest-bearing
deposits for 2014 were $4.4 billion (6.4 percent) higher than
theprioryear,reflectinggrowthinConsumerandSmall
Business Banking, Wholesale Banking and Commercial Real
Estate, and Wealth Management and Securities Services, as
well as the impact of the Charter One acquisition. Average
total savings deposits for 2014 were $15.2 billion
(11.2 percent) higher than 2013, reflecting growth in
Consumer and Small Business Banking, Wholesale Banking
and Commercial Real Estate and corporate trust balances,
as well as the impact of the Charter One acquisition. Average
time deposits less than $100,000 for 2014 were $1.7 billion
(13.7 percent) lower than 2013 due to maturities. Average
time deposits greater than $100,000 for 2014 were $1.7
billion (5.3 percent) lower than the prior year, primarily due
to declines in Consumer and Small Business Banking
balances. Time deposits greater than $100,000 are managed
as an alternative to other funding sources, such as wholesale
borrowing, based largely on relative pricing and liquidity
characteristics.
The $141 million (1.3 percent) decrease in net interest
income in 2013, compared with 2012, was primarily the result
of lower net interest margin, partially offset by higher
average earning assets. The decrease in the net interest
margin in 2013, compared with 2012, primarily reflected
lower reinvestment rates on investment securities, as well as
growth in the investment portfolio, and lower rates on loans,
partially offset by lower rates on deposits and a reduction in
higher cost long-term debt. Average earning assets
increased $8.9 billion (2.9 percent) in 2013, compared with
2012, driven by increases in loans and investment securities,
partially offset by decreases in loans held for sale and in
other earning assets, primarily due to the deconsolidation of
certain consolidated variable interest entities (“VIEs”) during
2013.
Average total loans increased $12.1 billion (5.6 percent)
in 2013, compared with 2012, driven by growth in residential
mortgages, commercial loans, commercial real estate loans
and credit card loans, partially offset by decreases in other
retail loans and covered loans. Average residential
mortgages increased $7.7 billion (19.1 percent), reflecting
origination and refinancing activity due to the low interest
rate environment during the period. Average commercial and
commercial real estate loans increased $6.4 billion (10.6
percent) and $1.7 billion (4.7 percent), respectively, driven by
higher demand for loans from new and existing customers.
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