US Bank 2014 Annual Report Download - page 30

TABLE 4 NONINTEREST INCOME
Year Ended December 31 (Dollars in Millions) 2014 2013 2012
2014
v 2013
2013
v 2012
Credit and debit card revenue ............................................... $1,021 $ 965 $ 892 5.8% 8.2%
Corporate payment products revenue ....................................... 724 706 744 2.5 (5.1)
Merchant processing services ............................................... 1,511 1,458 1,395 3.6 4.5
ATM processing services .................................................... 321 327 346 (1.8) (5.5)
Trust and investment management fees..................................... 1,252 1,139 1,055 9.9 8.0
Deposit service charges ..................................................... 693 670 653 3.4 2.6
Treasury management fees ................................................. 545 538 541 1.3 (.6)
Commercial products revenue .............................................. 854 859 878 (.6) (2.2)
Mortgage banking revenue .................................................. 1,009 1,356 1,937 (25.6) (30.0)
Investment products fees.................................................... 191 178 150 7.3 18.7
Securities gains (losses), net ................................................ 3 9 (15) (66.7) *
Other ........................................................................ 1,040 569 743 82.8 (23.4)
Total noninterest income ................................................. $9,164 $8,774 $9,319 4.4% (5.8)%
* Not meaningful.
The $545 million (5.8 percent) decrease in 2013
noninterest income from 2012 was principally due to lower
mortgage banking revenue of 30.0 percent, due to lower
origination and sales revenue, partially offset by higher loan
servicing income and favorable changes in the valuation of
MSRs, net of hedging activities. Growth in several fee
categories in 2013, compared with 2012, partially offset the
decline in mortgage banking revenue. Credit and debit card
revenue increased 8.2 percent due to higher transaction
volumes, including the impact of business expansion.
Merchant processing services revenue grew 4.5 percent as a
result of higher volumes and an increase in fee-based
product revenue. Trust and investment management fees
increased 8.0 percent, reflecting improved market conditions
and business expansion, while investment products fees and
commissions increased 18.7 percent due to higher sales
volumes and fees. In addition, net securities gains (losses)
were favorable in 2013, compared with 2012, as the Company
recognized impairment on certain money center bank
securities during 2012 following rating agency downgrades.
Offsetting these positive variances was a 5.1 percent
decrease in corporate payment products revenue due to
lower government–related transactions, a 2.2 percent
decrease in commercial products revenue due to lower
standby letters of credit fees and loan syndication fees, and a
5.5 percent decrease in ATM processing services revenue
due to lower volumes. In addition, other income decreased
23.4 percent in 2013, compared with 2012, primarily due to a
2012 gain on the sale of a credit card portfolio and lower
retail lease and equity investment revenue.
Noninterest Expense Noninterest expense in 2014 was
$10.7 billion, compared with $10.3 billion in 2013 and
$10.5 billion in 2012. The Company’s efficiency ratio was
53.2 percent in 2014, compared with 52.4 percent in 2013 and
51.5 percent in 2012. The $441 million (4.3 percent) increase
in noninterest expense in 2014 over 2013 was the result of
increases in most noninterest expense categories.
Compensation expense increased 3.5 percent, reflecting the
impact of merit increases, acquisitions and higher staffing
for risk, compliance and internal audit activities (partially
offset by lower employee benefits expense of 8.7 percent,
driven by lower pension costs). Net occupancy and
equipment expense was 4.0 percent higher due to business
initiatives and higher maintenance costs, and professional
services expense increased 8.7 percent due mainly to
mortgage servicing-related and other project costs.
Marketing and business development expense increased 7.0
percent primarily due to higher charitable contributions,
technology and communications expense increased 1.8
percent as result of business initiatives across most
business lines, and postage printing and supplies expense
increased 5.8 percent due to higher postage expense and
demand for credit and prepaid cards. In addition, other
expense increased 16.7 percent in 2014 over 2013, reflecting
the 2014 FHA DOJ settlement, accruals related to certain
legal matters, Charter One merger integration costs and
mortgage servicing-related expenses, partially offset by
lower tax-advantaged project costs in 2014 as a result of the
first quarter of 2014 adoption of new accounting guidance for
certain affordable housing tax credit investments. The legal
accruals related to several matters, some of which have
been settled, including a regulatory matter recently resolved
with the Commodity Futures Trading Commission.
Resolution of the remaining matters is not expected to be
material to the Company.
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