US Bank 2009 Annual Report Download - page 27

in 2008 over 2007 due to an increase in mortgage servicing
income and production revenue, partially offset by a
decrease in the valuation of MSRs net of related economic
hedging instruments. Other income was higher due to the
2008 gains related to the Company’s ownership position in
Visa Inc., partially offset by higher retail lease valuation
losses, lower equity investment revenue, market valuation
losses and the $62 million unfavorable impact to trading
income from the adoption of new accounting guidance.
Noninterest Expense Noninterest expense in 2009 was
$8.3 billion, compared with $7.3 billion in 2008 and
$6.9 billion in 2007. The Company’s efficiency ratio was
48.4 percent in 2009, compared with 46.9 percent in 2008.
The $933 million (12.7 percent) increase in noninterest
expense in 2009, compared with 2008, was principally due
to the impact of acquisitions, higher ongoing FDIC deposit
insurance expense, and a $123 million special assessment,
costs related to affordable housing and other tax-advantaged
investments, and marketing and business development
expense. Compensation expense increased 3.2 percent
primarily due to acquisitions, partially offset by reductions
from cost containment efforts. Employee benefits expense
increased 11.5 percent primarily due to increased pension
costs associated with previous declines in the value of
pension assets. Net occupancy and equipment expense, and
professional services expense increased 7.0 percent and
6.3 percent, respectively, primarily due to acquisitions, as
well as branch-based and other business expansion
initiatives. Marketing and business development expense
increased 21.9 percent principally due to costs related to the
introduction of new credit card products and advertising the
Company’s national branding strategy, while technology and
business communications expense increased 12.5 percent
primarily related to business expansion initiatives. Other
intangibles expense increased 9.0 percent due to
acquisitions. Other expense increased 44.3 percent due to
higher FDIC deposit insurance expense, including a
$123 million special assessment in the second quarter of
2009. Other expense also reflected increased costs related to
investments in affordable housing and other tax-advantaged
projects, higher merchant processing expenses, growth in
mortgage servicing expenses and costs associated with other
real estate owned.
The $441 million (6.4 percent) increase in noninterest
expense in 2008, compared with 2007, was principally due
to investments in business initiatives, including acquisitions,
higher credit collection costs, and incremental expenses
associated with investments in tax-advantaged projects,
partially offset by $330 million of charges recognized in
2007 for the Company’s proportionate share of a contingent
obligation to indemnify Visa Inc. for certain litigation
matters (“2007 Visa Charge”). Compensation expense was
higher in 2008 than 2007 due to growth in ongoing bank
operations, acquired businesses and other bank initiatives to
increase the Company’s banking presence and enhance
customer relationship management. Employee benefits
expense increased as higher payroll taxes and medical costs
were partially offset by lower pension costs. Net occupancy
and equipment expense increased primarily due to
acquisitions and branch-based and other business expansion
initiatives. Marketing and business development expense
increased due to costs incurred in 2008 for a national
advertising campaign, as well as a $25 million charitable
contribution made to the Company’s foundation in 2008.
Technology and communications expense increased due to
higher processing volumes and business expansion. Other
intangibles expense decreased reflecting the timing and
U.S. BANCORP 25
Table 5 Noninterest Expense
(Dollars in Millions) 2009 2008 2007
2009
v 2008
2008
v 2007
Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,135 $3,039 $2,640 3.2% 15.1%
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 574 515 494 11.5 4.3
Net occupancy and equipment . . . . . . . . . . . . . . . . . . . . . . . 836 781 738 7.0 5.8
Professional services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255 240 233 6.3 3.0
Marketing and business development . . . . . . . . . . . . . . . . . . 378 310 260 21.9 19.2
Technology and communications . . . . . . . . . . . . . . . . . . . . . 673 598 561 12.5 6.6
Postage, printing and supplies . . . . . . . . . . . . . . . . . . . . . . . 288 294 283 (2.0) 3.9
Other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387 355 376 9.0 (5.6)
Other (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,755 1,216 1,322 44.3 (8.0)
Total noninterest expense . . . . . . . . . . . . . . . . . . . . . . . . $8,281 $7,348 $6,907 12.7% 6.4%
Efficiency ratio (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48.4% 46.9% 49.2%
(a) Included in other expense in 2007 was a $330 million charge related to the Company’s contingent obligation to Visa Inc. for indemnification of certain litigation matters.
(b) Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding net securities gains (losses).