US Bank 2011 Annual Report Download - page 63

Orders; develop and implement other plans and programs to
enhance residential mortgage servicing and foreclosure
processes; retain an independent consultant to conduct a
review of certain residential mortgage foreclosure actions and
to remediate errors or deficiencies identified by the consultant;
and oversee compliance with the Consent Orders and the new
plans and programs. The Company has made significant
progress in complying with these requirements.
The Company has long been committed to sound
modification and foreclosure practices and is committed to
revising its practices where necessary to satisfy the
requirements of the Consent Orders. The Company does not
believe that the resolution of any outstanding issues will
materially affect its financial position, results of operations, or
ability to conduct normal business activities.
Wealth Management and Securities Services Wealth
Management and Securities Services provides private banking,
financial advisory services, investment management, retail
brokerage services, insurance, trust, custody and fund
servicing through five businesses: Wealth Management,
Corporate Trust Services, U.S. Bancorp Asset Management,
Institutional Trust & Custody and Fund Services. Wealth
Management and Securities Services contributed $184 million
of the Company’s net income in 2011, a decrease of $39
million (17.5 percent), compared with 2010.
Total net revenue increased $5 million (.4 percent) in
2011, compared with 2010. Net interest income, on a taxable-
equivalent basis, increased $65 million (22.2 percent) in 2011,
compared with 2010. The increase in net interest income was
primarily due to higher average deposit balances, including
the impact of the securitization trust administration
acquisition. Total noninterest income decreased $60 million
(5.4 percent) in 2011, compared with 2010. Trust and
investment management fees declined, primarily due to the
sale of the Company’s proprietary long-term mutual fund
business in the fourth quarter of 2010 and money market
investment fee waivers due to the low interest rate
environment, partially offset by the impact of the fourth
quarter 2010 securitization trust administration acquisition
and improved market conditions during 2011. Additionally,
investment product fees were higher due to increased sales
volumes.
Total noninterest expense increased $81 million (7.8
percent) in 2011, compared with 2010. The increase in
noninterest expense was primarily due to higher total
compensation and employee benefits expense, higher net
shared services expense and the impact of the securitization
trust administration acquisition, partially offset by reductions
in other intangibles expense and expenses related to the
Company’s proprietary long-term mutual fund business that
was sold in late 2010.
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 contributed
$1.3 billion of the Company’s net income in 2011, or an
increase of $552 million (71.1 percent) compared with 2010.
The increase was primarily due to lower provision for credit
losses and higher total net revenue, partially offset by an
increase in total noninterest expense.
Total net revenue increased $108 million (2.4 percent) in
2011, compared with 2010. Net interest income, on a taxable-
equivalent basis, increased $11 million (.8 percent) in 2011,
compared with 2010, primarily due to higher loan yields,
partially offset by lower retail credit card average loan
balances. Noninterest income increased $97 million (3.1
percent) in 2011, compared with 2010, primarily due to
increased transaction volumes and new business initiatives,
partially offset by a decline in credit and debit card revenue
due to the impact of legislative-related changes to debit card
interchange fees.
Total noninterest expense increased $48 million (2.5
percent) in 2011, compared with 2010, due to higher total
compensation, employee benefits and processing costs,
partially offset by lower other intangibles expense. The
provision for credit losses decreased $828 million (62.0
percent) in 2011, compared with 2010, primarily due to lower
net charge-offs and a reduction in the reserve allocation due to
improved loss rates. As a percentage of average loans
outstanding, net charge-offs were 4.47 percent in 2011,
compared with 6.32 percent in 2010.
Treasury and Corporate Support Treasury and Corporate
Support includes the Company’s investment portfolios, most
covered commercial and commercial real estate loans and
related other real estate owned, funding, capital management,
asset securitization, interest rate risk management, the net
effect of transfer pricing related to average balances and the
residual aggregate of those expenses associated with corporate
activities that are managed on a consolidated basis. Treasury
and Corporate Support recorded net income of $1.5 billion in
2011, compared with $1.2 billion in 2010.
Total net revenue increased $439 million (22.4 percent)
in 2011, compared with 2010. Net interest income, on a
taxable-equivalent basis, increased $172 million (9.9 percent)
in 2011, compared with 2010, reflecting the impact of the
planned growth in the investment portfolio, wholesale funding
decisions and the Company’s asset/liability position. Total
noninterest income increased $267 million in 2011, compared
with 2010, primarily due to the 2011 merchant settlement and
FCB gains, and lower net securities losses, partially offset by
the 2010 Nuveen gain.
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