US Bank 2011 Annual Report Download - page 62

treasury management, capital markets, foreign exchange,
international trade services and other financial services to
middle market, large corporate, commercial real estate,
financial institution and public sector clients. Wholesale
Banking and Commercial Real Estate contributed $1.0 billion
of the Company’s net income in 2011, or an increase of $632
million compared with 2010. The increase was primarily
driven by lower provision for credit losses and higher net
revenue, partially offset by higher noninterest expense.
Total net revenue increased $216 million (6.9 percent) in
2011, compared with 2010. Net interest income, on a taxable-
equivalent basis, increased $119 million (5.9 percent) in 2011,
compared with 2010, driven by higher average loan and
deposit balances and an increase in loan fees, partially offset
by the impact of declining rates on the margin benefit from
deposits. Total noninterest income increased $97 million (8.6
percent) in 2011, compared with 2010. The increase was
primarily due to growth in commercial products revenue,
including syndication and other capital markets fees,
commercial leasing, foreign exchange and international trade
revenue, and commercial loan fees. In addition, other revenue
increased due to higher equity investment and customer-
related derivative revenue.
Total noninterest expense increased $54 million (4.4
percent) in 2011, compared with 2010, primarily due to
higher total compensation and employee benefits expense, and
increased net shared services costs. The provision for credit
losses decreased $831 million (66.2 percent) in 2011,
compared with 2010. The favorable change was primarily due
to lower net charge-offs. Nonperforming assets were $979
million at December 31, 2011, compared with $1.6 billion at
December 31, 2010. Nonperforming assets as a percentage of
period-end loans were 1.58 percent at December 31, 2011,
compared with 2.87 percent at December 31, 2010. Refer to
the “Corporate Risk Profile” section for further information
on factors impacting the credit quality of the loan portfolios.
Consumer and Small Business Banking Consumer and Small
Business Banking delivers products and services through banking
offices, telephone servicing and sales, on-line services, direct
mail, ATM processing and over mobile devices. 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 and Small Business Banking
contributed $842 million of the Company’s net income in 2011,
or an increase of $148 million (21.3 percent), compared with
2010. Within Consumer and Small Business Banking, the retail
banking division contributed $340 million of the total net
income in 2011, or an increase of $239 million over the prior
year. Mortgage banking contributed $502 million of the
business line’s net income in 2011, or a decrease of $91 million
(15.3 percent) from the prior year.
Total net revenue increased $192 million (2.7 percent) in
2011, compared with 2010. Net interest income, on a taxable-
equivalent basis, increased $193 million (4.4 percent) in 2011,
compared with 2010. The year-over-year increase in net
interest income was primarily due to higher average loan and
deposit balances and improved loan yields, partially offset by
the impact of a decline in the margin benefit from deposits.
Total noninterest income was essentially unchanged in 2011,
compared with 2010, the result of higher retail product
revenue, due to improvement in retail lease end of term
results, and higher ATM processing servicing fees, offset by
year-over-year reductions in mortgage banking revenue,
principally due to lower mortgage loan production, and lower
deposit service charges, principally due to the impact of 2010
legislative and pricing changes.
Total noninterest expense increased $263 million (6.0
percent) in 2011, compared with 2010. The increase reflected
higher total compensation and employee benefits expense,
mortgage servicing-related professional services projects, net
shared services costs and net occupancy and equipment
expenses related to business expansion, partially offset by
lower other intangibles expense.
The provision for credit losses decreased $300 million
(17.7 percent) in 2011, compared with 2010, due to lower net
charge-offs and a reduction in the reserve allocation. As a
percentage of average loans outstanding, net charge-offs
decreased to 1.20 percent in 2011, compared with 1.50
percent in 2010. Nonperforming assets were $1.4 billion at
December 31, 2011, compared with $1.5 billion at
December 31, 2010. Nonperforming assets as a percentage of
period-end loans were 1.21 percent at December 31, 2011,
compared with 1.44 percent at December 31, 2010. Refer to
the “Corporate Risk Profile” section for further information
on factors impacting the credit quality of the loan portfolios.
During 2011, the Company’s two primary banking
subsidiaries, U.S. Bank National Association and U.S. Bank
National Association ND, entered into a Consent Order with
the Office of the Comptroller of the Currency regarding
residential mortgage servicing and foreclosure processes. The
Company also entered into a related Consent Order with the
Board of Governors of the Federal Reserve System. The
Consent Orders were the result of an interagency horizontal
review of the foreclosure practices of the 14 largest mortgage
servicers in the United States.
The Consent Orders mandate certain changes to the
Company’s mortgage servicing and foreclosure processes.
Specifically, the Consent Orders require the Company,
U.S. Bank National Association and U.S. Bank National
Association ND to, among other things, implement a
comprehensive action plan setting forth the steps necessary to
ensure residential mortgage servicing and foreclosure
processes are conducted in accordance with the Consent
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