US Bank 2009 Annual Report Download - page 62

Consumer Banking Consumer Banking delivers products and
services through banking offices, telephone servicing and
sales, on-line services, direct mail and ATM processing. It
encompasses community banking, metropolitan banking, in-
store banking, small business banking, consumer lending,
mortgage banking, consumer finance, workplace banking,
student banking and 24-hour banking. Consumer Banking
contributed $917 million of the Company’s net income in
2009, or an increase of $74 million (8.8 percent), compared
with 2008. Within Consumer Banking, the retail banking
division contributed $359 million of the total net income in
2009, or a decrease of $392 million (52.2 percent) from the
prior year. Mortgage banking contributed $558 million of
the business line’s net income in 2009, or an increase of
$466 million over the prior year, reflecting strong mortgage
loan production and improved loan sale profitability.
Total net revenue increased $1.0 billion (16.9 percent)
in 2009, compared with 2008. Net interest income, on a
taxable-equivalent basis, increased $151 million
(3.9 percent) in 2009, compared with 2008. The
year-over-year increase in net interest income was due to
increases in average loan and deposit balances, partially
offset by the decline in the margin benefit of deposits in a
declining interest rate environment. The increase in average
loan balances reflected core growth in most loan categories,
with the largest increases in retail loans and residential
mortgages. In addition, average loan balances increased due
to the Downey and PFF acquisitions in the fourth quarter of
2008, reflected primarily in covered assets. The favorable
change in retail loans was principally driven by increases in
home equity and federally guaranteed student loan balances.
The year-over-year increase in average deposits reflected core
increases, primarily within savings and time deposits. In
addition, average deposit balances increased due to the
Downey and PFF acquisitions in the fourth quarter of 2008.
Fee-based noninterest income increased $860 million
(41.3 percent) in 2009, compared with 2008. The
year-over-year increase in fee-based revenue was driven by
higher mortgage banking revenue due to strong mortgage
loan production and improved loan sale profitability, an
improvement in retail lease residual losses, and higher ATM
processing services fees, partially offset by lower deposit
service charges.
Total noninterest expense increased $440 million
(13.6 percent) in 2009, compared with 2008. The increase
reflected higher FDIC deposit insurance expense, mortgage
and ATM volume-related expenses, and higher credit related
costs associated with OREO and foreclosures.
The provision for credit losses increased $456 million
(31.9 percent) in 2009, compared with 2008. The increase
was due to growth in net charge-offs and stress in residential
mortgages, home equity and other installment and consumer
loan portfolios from a year ago. As a percentage of average
loans outstanding, net charge-offs increased to 1.50 percent
in 2009, compared with .95 percent in 2008. Commercial
and commercial real estate loan net charge-offs increased
$125 million and retail loan and residential mortgage net
charge-offs increased $519 million in 2009, compared with
2008. Nonperforming assets were $1.3 billion at
December 31, 2009, compared with $1.2 billion at
December 31, 2008. Nonperforming assets as a percentage
of period-end loans were 1.36 percent at December 31,
2009, compared with 1.24 percent at December 31, 2008.
Refer to the “Corporate Risk Profile” section for further
information on factors impacting the credit quality of the
loan portfolios.
Wealth Management & Securities Services Wealth
Management & Securities Services provides trust, private
banking, financial advisory, investment management, retail
brokerage, insurance, custody and mutual fund services
through five businesses: Wealth Management, Corporate
Trust, FAF Advisors, Institutional Trust & Custody and
Fund Services. Wealth Management & Securities Services
contributed $373 million of the Company’s net income in
2009, a decrease of $111 million (22.9 percent), compared
with 2008.
Total net revenue decreased $198 million (11.2 percent)
in 2009, compared with 2008. Net interest income, on a
taxable-equivalent basis, decreased $83 million
(18.7 percent) in 2009, compared with 2008. The decrease
in net interest income was primarily due to the reduction in
the margin benefit from deposits, partially offset by higher
deposit volumes. Noninterest income decreased $115 million
(8.7 percent) in 2009, compared with 2008, reflecting lower
assets under management account volume and the impact of
low interest rates on money market investment fees.
Total noninterest expense decreased $51 million
(5.1 percent) in 2009, compared with 2008. The decrease in
noninterest expense was primarily due to lower
compensation and employee benefits expense, litigation-
related costs and other intangibles expense, partially offset
by higher FDIC deposit insurance expense.
Payment Services Payment Services includes consumer and
business credit cards, stored-value cards, debit cards,
corporate and purchasing card services, consumer lines of
credit and merchant processing. Payment Services’ offerings
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