US Bank 2002 Annual Report Download - page 80

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The following table lists information related to nonperforming loans as of December 31:
(Dollars in Millions) 2002 2001
Loans on nonaccrual status ***************************************************************************** $1,188.7 $ 983.1
Restructured loans ************************************************************************************* 48.6 18.2
Total nonperforming loans ******************************************************************************* $1,237.3 $1,001.3
Interest income that would have been recognized at original contractual terms ******************************** $ 102.1 $ 109.2
Amount recognized as interest income******************************************************************** 36.7 46.2
Forgone revenue *************************************************************************************** $ 65.4 $ 63.0
Activity in the allowance for credit losses was as follows:
(Dollars in Millions) 2002 2001 2000
Balance at beginning of year ************************************************************ $2,457.3 $1,786.9 $1,710.3
Add
Provision charged to operating expense (a) ******************************************** 1,349.0 2,528.8 828.0
Deduct
Loans charged off******************************************************************* 1,590.7 1,771.4 1,017.6
Less recoveries of loans charged off ************************************************** 217.7 224.9 192.2
Net loans charged off *************************************************************** 1,373.0 1,546.5 825.4
Losses from loan sales/transfers ********************************************************* — (329.3) —
Acquisitions and other changes ********************************************************** (11.3) 17.4 74.0
Balance at end of year****************************************************************** $2,422.0 $2,457.3 $1,786.9
(a) In 2001, $382.2 million of the provision for credit losses was incurred in connection with the Firstar/USBM merger.
A portion of the allowance for credit losses is allocated to loans deemed impaired. All impaired loans are included in
non-performing assets. A summary of these loans and their related allowance for loan losses is as follows:
2002 2001 2000
Recorded Valuation Recorded Valuation Recorded Valuation
(Dollars in Millions) Investment Allowance Investment Allowance Investment Allowance
Impaired Loans
Valuation allowance required********* $992 $157 $ 694 $125 $487 $57
No valuation allowance required****** ————127—
Total impaired loans ******************* $992 $157 $ 694 $125 $614 $57
Average balance of impaired loans during
the year **************************** $839 $ 780 $526
Interest income recognized on impaired
loans during the year **************** — — 7.8
Commitments to lend additional funds to customers Accounting for Transfers and Servicing
whose loans were classified as nonaccrual or restructured at of Financial Assets and Extinguishments
December 31, 2002, totaled $123.9 million. During 2002 of Liabilities
there were $1.4 million of loans that were restructured at
FINANCIAL ASSET SALES
market interest rates and returned to an accruing status.
The allowance for credit losses includes credit loss When the Company sells financial assets, it may retain
liability related to off-balance sheet loan commitments. At interest-only strips, servicing rights, residual rights to a cash
December 31, 2002, the allowance for credit losses includes reserve account and/or other retained interests in the sold
an estimated $131.4 million credit loss liability related to financial assets. The gain or loss on sale depends in part on
the Company’s $58.3 billion of commercial off-balance the previous carrying amount of the financial assets
sheet loan commitments and letters of credit. involved in the transfer and is allocated between the assets
sold and the retained interests based on their relative fair
values at the date of transfer. Quoted market prices are
used to determine retained interest fair values when readily
available. Since quotes are generally not available for
retained interests, the Company estimates fair value based
78 U.S. Bancorp
Note 9