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Note 18 of the Notes to Consolidated Financial Statements provides a summary of the significant pension plan assumptions.
Because of the subjective nature of plan assumptions, a sensitivity analysis to hypothetical changes in the LTROR and the
discount rate is provided below:
Base
LTROR 6.9% 7.9% 8.9% 9.9% 10.9%
Incremental benefit (cost)***************************************************************** $ (43) $ (22) $ — $ 22 $ 43
Percent of 2005 net income ************************************************************** (.59)% (.30)% —% .30% .59%
Base
Discount rate 3.7% 4.7% 5.7% 6.7% 7.7%
Incremental benefit (cost)***************************************************************** $ (91) $ (45) $ — $ 40 $ 75
Percent of 2005 net income ************************************************************** (1.26)% (.62)% —% .55% 1.04%
Due to the complexity of forecasting pension plan Included in 2005 was a reduction of income tax
activities, the accounting method utilized for pension plans, expense of $94 million related to the resolution of federal
management’s ability to respond to factors impacting the income tax examinations covering substantially all of the
plans and the hypothetical nature of this information, the Company’s legal entities for the years 2000 through 2002.
actual changes in periodic pension costs could be different Included in 2004 was a reduction in income tax expense of
than the information provided in the sensitivity analysis. $90 million related to the resolution of federal income tax
examinations covering substantially all of the Company’s
Income Tax Expense The provision for income taxes was legal entities for the years 1995 through 1999 and
$2,082 million (an effective rate of 31.7 percent) in 2005, $16 million related to the resolution of a state tax
compared with $2,009 million (an effective rate of examination for tax years through 2000. The Company
32.5 percent) in 2004 and $1,941 million (an effective rate anticipates its effective tax rate for the foreseeable future to
of 34.3 percent) in 2003. The decrease in the effective tax approximate 33 percent.
rate from 2004 primarily reflects higher tax exempt income For further information on income taxes, refer to
from investment securities and insurance products and Note 20 of the Notes to Consolidated Financial Statements.
incremental tax credits generated from investments in
affordable housing and similar tax-advantaged projects.
LOAN PORTFOLIO DISTRIBUTION
2005 2004 2003 2002 2001
Percent Percent Percent Percent Percent
At December 31 (Dollars in Millions) Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total
Commercial
Commercial ****************************** $ 37,844 27.5% $ 35,210 27.9% $ 33,536 28.4% $ 36,584 31.5% $ 40,472 35.4%
Lease financing *************************** 5,098 3.7 4,963 3.9 4,990 4.2 5,360 4.6 5,858 5.1
Total commercial*********************** 42,942 31.2 40,173 31.8 38,526 32.6 41,944 36.1 46,330 40.5
Commercial real estate
Commercial mortgages ******************** 20,272 14.7 20,315 16.1 20,624 17.4 20,325 17.5 18,765 16.4
Construction and development ************** 8,191 6.0 7,270 5.7 6,618 5.6 6,542 5.6 6,608 5.8
Total commercial real estate ************* 28,463 20.7 27,585 21.8 27,242 23.0 26,867 23.1 25,373 22.2
Residential mortgages
Residential mortgages ********************* 14,538 10.5 9,722 7.7 7,332 6.2 6,446 5.6 5,746 5.0
Home equity loans, first liens**************** 6,192 4.5 5,645 4.5 6,125 5.2 3,300 2.8 2,083 1.8
Total residential mortgages ************** 20,730 15.0 15,367 12.2 13,457 11.4 9,746 8.4 7,829 6.8
Retail
Credit card ******************************* 7,137 5.2 6,603 5.2 5,933 5.0 5,665 4.9 5,889 5.1
Retail leasing ***************************** 7,338 5.3 7,166 5.7 6,029 5.1 5,680 4.9 4,906 4.3
Home equity and second mortgages********* 14,979 10.9 14,851 11.8 13,210 11.2 13,572 11.6 12,235 10.7
Other retail
Revolving credit************************ 2,504 1.8 2,541 2.0 2,540 2.1 2,650 2.3 2,673 2.3
Installment **************************** 3,582 2.6 2,767 2.2 2,380 2.0 2,258 1.9 2,292 2.0
Automobile**************************** 8,112 5.9 7,419 5.9 7,165 6.1 6,343 5.5 5,660 5.0
Student ****************************** 2,019 1.4 1,843 1.4 1,753 1.5 1,526 1.3 1,218 1.1
Total other retail ******************** 16,217 11.7 14,570 11.5 13,838 11.7 12,777 11.0 11,843 10.4
Total retail***************************** 45,671 33.1 43,190 34.2 39,010 33.0 37,694 32.4 34,873 30.5
Total loans************************* $137,806 100.0% $126,315 100.0% $118,235 100.0% $116,251 100.0% $114,405 100.0%
26 U.S. BANCORP
Table 6