US Bank 2014 Annual Report Download - page 38

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Investment Securities The Company uses its investment
securities portfolio to manage enterprise interest rate risk,
provide liquidity (including the ability to meet 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 $101.0 billion at
December 31, 2014, compared with $79.9 billion at
December 31, 2013. The $21.2 billion (26.5 percent) increase
reflected $20.2 billion of net investment purchases in
preparation for final liquidity coverage ratio regulatory
requirements, and a $762 million favorable change in net
unrealized gains (losses) on available-for-sale investment
securities.
Average investment securities were $90.3 billion in
2014, compared with $75.0 billion in 2013. The weighted-
average yield of the available-for-sale portfolio was
2.32 percent at December 31, 2014, compared with
2.64 percent at December 31, 2013. The average maturity of
the available-for-sale portfolio was 4.3 years at
December 31, 2014, compared with 6.0 years at
December 31, 2013. The weighted-average yield of the held-
to-maturity portfolio was 1.92 percent at December 31, 2014,
compared with 2.00 percent at December 31, 2013. The
average maturity of the held-to-maturity portfolio was 4.0
years at December 31, 2014, compared with 4.5 years at
December 31, 2013. 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, 2014,
the Company’s net unrealized gains on available-for-sale
securities were $637 million, compared with unrealized
losses of $125 million at December 31, 2013. The favorable
change in net unrealized gains (losses) was primarily due to
increases in the fair value of agency mortgage-backed and
state and political securities as a result of decreases in
interest rates and changes in credit spreads. Gross
unrealized losses on available-for-sale securities totaled
$343 million at December 31, 2014, compared with $775
million at December 31, 2013. 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,
2014, 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.
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