US Bank 2002 Annual Report Download - page 84

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Premises and Equipment
Premises and equipment at December 31 consisted of the following:
(Dollars in Millions) 2002 2001
Land *************************************************************************************************** $ 275 $ 274
Buildings and improvements ****************************************************************************** 1,844 1,854
Furniture, fixtures and equipment ************************************************************************** 2,152 2,012
Capitalized building and equipment leases ****************************************************************** 173 173
Construction in progress ********************************************************************************** 48
4,448 4,321
Less accumulated depreciation and amortization ************************************************************ 2,751 2,580
Total ************************************************************************************************ $1,697 $1,741
Mortgage Servicing Rights
Changes in mortgage servicing rights are summarized as follows:
Year Ended December 31 (Dollars in Millions) 2002 2001
Balance at beginning of period ***************************************************************************** $ 360 $ 229
Rights purchased ***************************************************************************************** 229 25
Rights capitalized ***************************************************************************************** 357 315
Amortization********************************************************************************************** (94) (45)
Rights sold *********************************************************************************************** (24) (103)
Impairment *********************************************************************************************** (186) (61)
Balance at end of period ********************************************************************************** $ 642 $ 360
The Company serviced $43.1 billion and $22.0 billion approximately $81 million and $145 million, respectively. An
of mortgage loans for other investors as of December 31, upward movement in interest rates of 25 and 50 basis points
2002, and December 31, 2001, respectively. would increase the value of MSRs by approximately
The fair value of mortgage servicing rights (‘‘MSRs’’) $88 million and $169 million, respectively. The Company
was $655 million at December 31, 2002, and $360 million utilizes the investment portfolio as an economic hedge to this
at December 31, 2001. At December 31, 2002, the reduction possible adverse interest rate change. The Company also,
in the current fair value of MSRs to immediate 25 and from time to time, purchases principal-only securities that act
50 basis point adverse interest rate changes would be as a partial economic hedge.
Intangible Assets
The Company adopted SFAS 142 on January 1, 2002. The undiscounted cash flow model. As a result of the initial
most significant changes made by SFAS 142 are that impairment test from the adoption of SFAS 142, the
goodwill and other indefinite lived intangible assets are no Company recognized an impairment loss of $58.8 million
longer amortized and will be tested for impairment at least resulting in an after-tax loss of $37.2 million in the first
annually. The amortization provisions of SFAS 142 apply to quarter of 2002. The impairment was primarily related to
goodwill and intangible assets acquired after June 30, 2001. the purchase of a transportation leasing company in 1998
With respect to goodwill and intangible assets acquired by the equipment leasing business. This charge was
prior to July 1, 2001, the amortization provisions of recognized as a ‘‘cumulative effect of change in accounting
SFAS 142 were effective upon adoption of SFAS 142. principles’’ in the income statement. The fair value of that
Prior to the adoption of SFAS 142, the Company reporting unit was estimated using the present value of
evaluated goodwill for impairment under a projected future expected cash flows.
82 U.S. Bancorp
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