US Bank 2011 Annual Report Download - page 40

The following table provides further information on the
loan-to-values of home equity and second mortgages
specifically for the consumer finance division at December 31,
2011:
(Dollars in Millions) Lines Loans Total
Percent
of Total
Sub-Prime Borrowers
Less than or equal to 80% ...... $ 39 $ 31 $ 70 2.9%
Over 80% through 90%......... 19 23 42 1.8
Over 90% through 100% ....... 17 41 58 2.4
Over 100% ...................... 57 221 278 11.6
No LTV/CLTV available ......... – 2 2 .1
Total ......................... $ 132 $318 $ 450 18.8%
Other Borrowers
Less than or equal to 80% ...... $ 673 $ 31 $ 704 29.5%
Over 80% through 90%......... 347 26 373 15.6
Over 90% through 100% ....... 201 24 225 9.4
Over 100% ...................... 509 126 635 26.6
No LTV/CLTV available ......... 3 – 3 .1
Total ......................... $1,733 $207 $1,940 81.2%
Total Consumer Finance ...... $1,865 $525 $2,390 100.0%
The total amount of consumer lending segment
residential mortgage, home equity and second mortgage loans
to customers that may be defined as sub-prime borrowers
represented only .7 percent of total assets at December 31,
2011, compared with .9 percent at December 31, 2010.
Covered loans included $1.5 billion in loans with negative-
amortization payment options at December 31, 2011,
compared with $1.6 billion at December 31, 2010. Other than
covered loans, the Company does not have any residential
mortgages with payment schedules that would cause balances
to increase over time.
Home equity and second mortgages were $18.1 billion at
December 31, 2011, and included $5.2 billion of home equity
lines in a first lien position and $12.9 billion of home equity
and second mortgage loans and lines in a junior lien position.
Loans and lines in a junior lien position at December 31,
2011, included approximately $3.7 billion of loans and lines
for which the Company also serviced the related first lien
loan, and approximately $9.2 billion where the Company did
not service the related first lien loan. The Company was able
to determine the status of the related first liens on
approximately 65 percent of the total portfolio using
information the Company has as the servicer of the first lien
or information it received from its primary regulator on loans
serviced by other large servicers. The Company uses this
information to estimate the first lien status on the remainder
of the portfolio. The Company also evaluates other indicators
of credit risk for these junior lien loans and lines including
delinquency, estimated average combined loan-to-value ratios
and weighted average credit scores in making its assessment of
credit risk, related loss estimates and determining the
allowance for credit losses.
The following table provides a summary of delinquency
statistics and other credit quality indicators for the Company’s
junior lien positions at December 31, 2011:
Junior Liens Behind
(Dollars in Millions)
Company Owned
or Serviced
First Lien
Third Party
First Lien Total
Total ........................ $3,717 $9,166 $12,883
Percent 30 – 89 days past
due ....................... 1.59% 1.97% 1.86%
Percent 90 days or more
past due .................. .83% .93% .90%
Weighted-average CLTV .... 90% 88% 89%
Weighted-average credit
score ..................... 761 757 759
See the Analysis and Determination of the Allowance for
Credit Losses section for additional information on how the
Company determines the allowance for credit losses for loans
in a junior lien position.
The decline in housing prices over the past several years
has deteriorated the collateral support of the residential
mortgage, home equity and second mortgage portfolios.
However, the underwriting criteria the Company employs
consider the relevant income and credit characteristics of the
borrower, such that the collateral is not the primary source of
repayment.
Credit card and other retail loans principally reflect the
Company’s focus on consumers within its geographical
footprint of branches and certain niche lending activities that
are nationally focused. Approximately 69.8 percent of the
Company’s credit card balances relate to cards originated
through the Company’s branches or co-branded, travel and
affinity programs that generally experience better credit
quality performance than portfolios generated through other
channels.
Tables 9, 10 and 11 provide a geographical summary of
the residential mortgage, credit card and other retail loan
portfolios, respectively.
Assets acquired by the Company in FDIC-assisted
transactions included nonperforming loans and other loans
with characteristics indicative of a high credit risk profile,
including a substantial concentration in California, loans with
negative-amortization payment options, and homebuilder and
other construction finance loans. Because most of these loans
are covered under loss sharing agreements with the FDIC, the
Company’s financial exposure to losses from these assets is
substantially reduced. To the extent actual losses exceed the
Company’s estimates at acquisition, the Company’s financial
risk would only be its share of those losses under the loss
sharing agreements.
38 U.S. BANCORP