US Bank 2015 Annual Report Download - page 112

Download and view the complete annual report

Please find page 112 of the 2015 US Bank annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 173

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172
  • 173

NOTE 9 PREMISES AND EQUIPMENT
Premises and equipment at December 31 consisted of the following:
(Dollars in Millions) 2015 2014
Land ............................................................................................... $ 522 $ 534
Buildings and improvements ............................................................................ 3,348 3,323
Furniture, fixtures and equipment ........................................................................ 2,721 2,719
Capitalized building and equipment leases ................................................................ 113 126
Construction in progress ............................................................................... 19 26
6,723 6,728
Less accumulated depreciation and amortization ........................................................... (4,210) (4,110)
Total ............................................................................................. $2,513 $ 2,618
NOTE 10 MORTGAGE SERVICING RIGHTS
The Company serviced $231.8 billion of residential mortgage
loans for others at December 31, 2015, and $225.0 billion at
December 31, 2014, which include subserviced mortgages
with no corresponding MSRs asset. The net impact included
in mortgage banking revenue of fair value changes of MSRs
due to changes in valuation assumptions and derivatives used
to economically hedge MSRs were net gains of $23 million,
$241 million (of which $44 million related to excess servicing
rights sold during 2014) and $192 million for the years ended
December 31, 2015, 2014 and 2013, respectively. Loan
servicing fees, not including valuation changes, included in
mortgage banking revenue, were $728 million, $732 million
and $754 million for the years ended December 31, 2015,
2014 and 2013, respectively.
Changes in fair value of capitalized MSRs for the years ended December 31, are summarized as follows:
(Dollars in Millions) 2015 2014 2013
Balance at beginning of period ............................................................... $2,338 $2,680 $1,700
Rights purchased ........................................................................ 29 5 8
Rights capitalized ........................................................................ 632 382 769
Rights sold ............................................................................. – (141) –
Changes in fair value of MSRs
Due to fluctuations in market interest rates(a) ................................................. (58) (276) 617
Due to revised assumptions or models(b) .................................................... 10 86 33
Other changes in fair value(c) ............................................................. (439) (398) (447)
Balance at end of period .................................................................... $2,512 $2,338 $2,680
(a) Includes changes in MSR value associated with changes in market interest rates, including estimated prepayment rates and anticipated earnings on escrow deposits.
(b) Includes changes in MSR value not caused by changes in market interest rates, such as changes in cost to service, ancillary income, and discount rate, as well as the impact of any model
changes. 2014 includes a $44 million revaluation gain related to excess servicing rights sold.
(c) Primarily represents changes due to realization of expected cash flows over time (decay).
The estimated sensitivity to changes in interest rates of the fair value of the MSRs portfolio and the related derivative instruments
as of December 31 follows:
2015 2014
(Dollars in Millions)
Down
100 bps
Down
50 bps
Down
25 bps
Up
25 bps
Up
50 bps
Up
100 bps
Down
100 bps
Down
50 bps
Down
25 bps
Up
25 bps
Up
50 bps
Up
100 bps
MSR portfolio .................. $(598) $(250) $(114) $ 96 $ 176 $ 344 $(540) $(242) $(114) $ 100 $ 185 $ 346
Derivative instrument hedges ..... 475 226 107 (98) (192) (377) 441 223 109 (102) (197) (375)
Net sensitivity ................ $(123) $ (24) $ (7) $ (2) $ (16) $ (33) $ (99) $ (19) $ (5) $ (2) $ (12) $ (29)
The fair value of MSRs and their sensitivity to changes in
interest rates is influenced by the mix of the servicing portfolio
and characteristics of each segment of the portfolio. The
Company’s servicing portfolio consists of the distinct
portfolios of government-insured mortgages, conventional
mortgages and Housing Finance Agency (“HFA”) mortgages.
The servicing portfolios are predominantly comprised of fixed-
rate agency loans with limited adjustable-rate or jumbo
mortgage loans. The HFA division specializes in servicing
loans made under state and local housing authority programs.
These programs provide mortgages to low-income and
moderate-income borrowers and are generally government-
insured programs with a favorable rate subsidy, down
payment and/or closing cost assistance.
—110 —