US Bank 2015 Annual Report Download - page 74

Wholesale Banking and Commercial Real Estate
Wholesale Banking and Commercial Real Estate offers
lending, equipment finance and small-ticket leasing,
depository services, treasury management, capital markets,
international trade services and other financial services to
middle market, large corporate, commercial real estate,
financial institution, non-profit and public sector clients.
Wholesale Banking and Commercial Real Estate contributed
$884 million of the Company’s net income in 2015, or a
decrease of $208 million (19.0 percent) compared with 2014.
The decrease was primarily driven by a higher provision for
credit losses, higher noninterest expense and lower net
revenue.
Net revenue decreased $71 million (2.4 percent) in 2015,
compared with 2014. Noninterest income decreased $75
million (7.8 percent) in 2015, compared with 2014, driven by
higher loan-related charges, partially offset by higher loan
syndication and bond underwriting fees, as well as higher
commercial leasing revenue. Net interest income, on a
taxable-equivalent basis, increased $4 million (0.2 percent) in
2015, compared with 2014, driven by increases in average
loans and deposits, partially offset by lower rates and fees on
loans.
Noninterest expense increased $71 million (5.8 percent) in
2015, compared with 2014, primarily resulting from higher
compensation expense due to higher variable compensation
and merit increases, higher benefits expense due to increased
pension costs, an increase in the FDIC insurance assessment
allocation based on increased loan volumes, and higher net
shared services expense. The provision for credit losses
increased $184 million in 2015, compared with 2014, due to
an unfavorable change in the reserve allocation driven by a
decline in energy prices and an increase in net charge-offs.
Nonperforming assets were $168 million at December 31,
2015, compared with $170 million at December 31, 2014.
Nonperforming assets as a percentage of period-end loans
were 0.19 percent at December 31, 2015, compared with
0.21 percent at December 31, 2014. Refer to the “Corporate
Risk Profile” section for further information on factors
impacting the credit quality of the loan portfolios.
Consumer and Small Business Banking Consumer and
Small Business Banking delivers products and services
through banking offices, telephone servicing and sales, on-
line services, direct mail, ATM processing and mobile devices,
such as mobile phones and tablet computers. It
encompasses community banking, metropolitan banking and
indirect lending, as well as mortgage banking. Consumer and
Small Business Banking contributed $1.4 billion of the
Company’s net income in 2015, or a decrease of $129 million
(8.7 percent), compared with 2014. The decrease was due to
lower net revenue and higher noninterest expense, partially
offset by a decrease in the provision for credit losses.
Net revenue decreased $204 million (2.8 percent) in 2015,
compared with 2014. Net interest income, on a taxable-
equivalent basis, decreased $100 million (2.1 percent) in
2015, compared with 2014, primarily due to lower rates on
loans and lower loan fees due to the wind down of the CAA
product, partially offset by higher average loan, deposit and
loans held for sale balances. Noninterest income decreased
$104 million (4.0 percent) in 2015, compared with 2014,
primarily the result of lower mortgage banking revenue due to
an unfavorable change in the valuation of MSRs, net of
hedging activities, partially offset by higher mortgage
production revenue. Noninterest expense increased
$266 million (5.8 percent) in 2015, compared with 2014, the
result of higher compensation, employee benefits and
mortgage servicing-related expenses.
The provision for credit losses decreased $266 million
(67.7 percent) in 2015, compared with 2014, due to lower net
charge-offs and a favorable change in the reserve allocation
driven by improvements in the mortgage portfolio. As a
percentage of average loans outstanding, net charge-offs
decreased to 0.25 percent in 2015, compared with 0.38
percent in 2014. Nonperforming assets were $1.3 billion at
December 31, 2015, compared with $1.4 billion at
December 31, 2014. Nonperforming assets as a percentage
of period-end loans were 0.95 percent at December 31,
2015, compared with 1.10 percent at December 31, 2014.
Refer to the “Corporate Risk Profile” section for further
information on factors impacting the credit quality of the loan
portfolios.
Wealth Management and Securities Services Wealth
Management and Securities Services provides private
banking, financial advisory services, investment management,
retail brokerage services, insurance, trust, custody and fund
servicing through five businesses: Wealth Management,
Corporate Trust Services, U.S. Bancorp Asset Management,
Institutional Trust & Custody and Fund Services. Wealth
Management and Securities Services contributed $257 million
of the Company’s net income in 2015, an increase of $6
million (2.4 percent), compared with 2014. The increase from
the prior year was primarily due to higher net revenue, partially
offset by higher noninterest expense.
Net revenue increased $73 million (4.1 percent) in 2015,
compared with 2014, driven by a $70 million (5.0 percent)
increase in noninterest income, reflecting the impact of
account growth, improved market conditions and lower fee
waivers. Net interest income, on a taxable-equivalent basis,
increased $3 million (0.8 percent) in 2015, compared with
2014, principally due to higher average loan and deposit
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