US Bank 2002 Annual Report Download - page 22

approximately $712 million in deposits and $570 million The Company intends to execute this plan as a tax-free
in assets. distribution of 100% of its ownership interests in the
On July 24, 2001, the Company acquired NOVA capital markets business and plans to retain $215 million of
Corporation, a merchant processor, in a stock and cash subordinated debt of the new company. The distribution is
transaction valued at approximately $2.1 billion. The subject to certain conditions including SEC registration,
transaction represented total assets acquired of $2.9 billion regulatory review and approval and a determination that
and total liabilities assumed of $773 million. Included in the distribution will be tax-free to the Company and its
total assets were merchant contracts and other intangibles shareholders. While expected to be completed in the third
of $650 million and goodwill of $1.6 billion. The goodwill quarter of 2003, the Company has no obligation to
reflected NOVA’s leadership position in the merchant consummate the distribution, whether or not these
processing market and its ability to provide a conditions are satisfied.
technologically superior product that is enhanced by a high This distribution does not include brokerage, financial
level of customer service. The Company believes that these advisory or asset management services offered to customers
factors, among others, will allow NOVA to generate through its other business units. The Company will
sufficient positive cash flows from new business in future continue to provide asset management services to its
periods to support the goodwill recorded in connection with customers through the Private Client, Trust and Asset
the acquisition. Management business units and access to investment
The following acquisitions were completed during the products and services through an extensive network of
year 2000. On October 13, 2000, the Company acquired licensed financial advisors within the retail brokerage
Scripps Financial Corporation of San Diego, which had platform of the Consumer Banking business unit.
10 branches in San Diego County and total assets of $650 These statements are forward-looking statements within
million. On September 28, 2000, the Company acquired the meaning of the Private Securities Litigation Reform Act.
Lyon Financial Services, Inc., a wholly owned subsidiary Refer to ‘‘Forward-Looking Statements’’ on page 3 of the
of the privately held Schwan’s Sales Enterprises, Inc. (now Annual Report on Form 10-K.
known as The Schwan Food Company) in Marshall, STATEMENT OF INCOME ANALYSIS
Minnesota. Lyon Financial specialized in small-ticket lease
Net Interest Income Net interest income, on a taxable-
transactions and had $1.3 billion in assets. On April 7, equivalent basis, was $6.9 billion in 2002, compared with
2000, the Company acquired Oliver-Allen Corporation, $6.4 billion in 2001 and $6.1 billion in 2000. The increase
Inc., a privately held information technology equipment in net interest income in 2002 was due to improvement in
leasing company with total assets of $280 million. On net interest margin and growth in average earning assets.
January 14, 2000, the Company acquired Peninsula Bank of The net interest margin in 2002 was 4.61 percent,
San Diego, which had 11 branches in San Diego County compared with 4.42 percent and 4.33 percent in 2001 and
and total assets of $491 million. In addition to these 2000, respectively. Average earning assets were
business combinations, the Company purchased 41 branches $149.1 billion for 2002, compared with $145.2 billion and
in Tennessee from First Union National Bank on $140.6 billion for 2001 and 2000, respectively.
December 8, 2000, representing approximately $450 million The 19 basis point improvement in 2002 net interest
in assets and $1.8 billion in deposits. margin, compared with 2001 reflected the funding benefits
Refer to Notes 4 and 5 of the Notes to Consolidated of the declining interest rate environment, a more favorable
Financial Statements for additional information regarding funding mix and improving spreads due to product
business combinations and merger and restructuring-related repricing dynamics, growth in net free funds and a shift in
items. mix toward retail loans, partially offset by lower yields on
the investment portfolio. The $3.9 billion (2.7 percent)
Planned Tax-Free Distribution On February 19, 2003, the increase in average earning assets for 2002, compared with
Company announced that its Board of Directors approved a 2001 was primarily driven by increases in the investment
plan to effect a spin-off of its capital markets business unit, portfolio and retail loan growth, partially offset by transfers
including investment banking and brokerage activities of high credit quality commercial loans to Stellar Funding
primarily conducted by its wholly owned subsidiary, Group, Inc. (the ‘‘loan conduit’’) and a decline in
U.S. Bancorp Piper Jaffray Inc. In 2002, the capital markets commercial and commercial real estate loans partially due
business unit had average assets of $3.0 billion, generated to current economic conditions.
revenues of $737.3 million (5.8 percent of total Total average loans of $114.5 billion in 2002 were
consolidated revenues) and contributed $1.1 million of net $3.7 billion (3.1 percent) lower, compared with 2001,
income representing less than 1 percent of the Company’s reflecting strong growth in average retail loans and
consolidated net income. residential mortgages of $3.1 billion (9.1 percent) and
20 U.S. Bancorp