US Bank 2002 Annual Report Download - page 34

The Company’s commercial real estate mortgages and On a core basis, average retail loans increased $1.8 billion
construction loans had unfunded commitments of (5.3 percent) from a year ago with growth in most retail
$7.9 billion at December 31, 2002, compared with loan categories. Of the total retail loans outstanding,
$6.0 billion at December 31, 2001. The Company also approximately 89.8 percent are to customers located in the
finances the operations of real estate developers and other Company’s banking region.
entities with operations related to real estate. These loans Loans Held for Sale At December 31, 2002, loans held for
are not secured directly by real estate and are subject to sale, consisting primarily of residential mortgages to be sold
terms and conditions similar to commercial loans. These in the secondary markets, were $4.2 billion, compared with
loans were included in the commercial loan category and $2.8 billion at December 31, 2001. The $1.3 billion
totaled $635 million at December 31, 2002. (47.5 percent) increase primarily reflected strong mortgage
Residential Mortgages Residential mortgages held in the loan origination volume in connection with refinancing
loan portfolio were $9.7 billion at December 31, 2002, activity in 2002 given the declining interest rates for
compared with $7.8 billion at December 31, 2001, an residential mortgage loans. Residential mortgage production
increase of $1.9 billion (24.5 percent). The increase in was $23.2 billion in 2002, compared with $15.6 billion in
residential mortgages was driven by an increase in 2001. This is substantially higher than mortgage production
refinancing given the current rate environment and strong of $6.7 billion in 2000.
growth in first lien home equity loans through the Investment Securities The Company uses its investment
Company’s Consumer Finance division. The increase also securities portfolio for several purposes. It serves as a
reflects a decision to retain adjustable rate mortgages in the vehicle to manage interest rate and prepayment risk,
portfolio for asset liability management purposes and a generates interest and dividend income from the investment
reclassification of approximately $.7 billion to the of excess funds depending on loan demand, provides
residential mortgages category predominately from the liquidity and is used as collateral for public deposits and
commercial loan category. This growth was partially offset wholesale funding sources.
by approximately $.9 billion in residential loan sales during At December 31, 2002, investment securities, both
2002. Average residential mortgages of $8.4 billion were available-for-sale and held-to-maturity, totaled
essentially unchanged from a year ago. $28.5 billion, compared with $26.6 billion at December 31,
2001. The $1.9 billion (7.1 percent) increase reflected the
Retail Total retail loans outstanding, which include credit reinvestment of proceeds from loan sales, declines in
card, retail leasing, home equity and second mortgages and commercial and commercial real estate loan balances and
other retail loans, were $37.7 billion at December 31, 2002, deposits assumed from the recent Bay View transaction.
compared with $34.9 billion at December 31, 2001. The During 2002, the Company sold $13.7 billion of fixed-rate
increase of $2.8 billion (8.1 percent) was driven by an securities, in part to realign the portfolio to hedge against
increase in home equity lines during the recent declining interest rate changes and to generate gains given the impact
rate environment and an increase in the retail leasing of prepayments in the mortgage servicing rights portfolio. A
portfolio. This growth was partially offset by two credit portion of the fixed-rate securities sold was replaced with
card sales in 2002 that totaled approximately $483 million. floating-rate securities in conjunction with the Company’s
interest rate risk management strategies. At December 31,
Average retail loans increased $3.1 billion (9.1 percent) to
2002, approximately 18.6 percent of the investment
$36.5 billion in 2002. Impacting the growth in average
securities portfolio represented adjustable rate financial
retail loans in 2002, compared with 2001, were portfolio instruments, compared with 15.6 percent as of
sales of $1.3 billion in 2001 related to the high loan-to- December 31, 2001.
value home equity portfolio and indirect automobile loans.
Selected Loan Maturity Distribution
Over One
One Year Through Over Five
December 31, 2002 (Dollars in Millions) or Less Five Years Years Total
Commercial *********************************************************** $21,037 $18,039 $ 2,868 $ 41,944
Commercial real estate************************************************* 7,382 13,147 6,338 26,867
Residential mortgages ************************************************* 841 1,827 7,078 9,746
Retail **************************************************************** 11,660 16,010 10,024 37,694
Total loans ********************************************************** $40,920 $49,023 $26,308 $116,251
Total of loans due after one year with
Predetermined interest rates ****************************************** $ 38,185
Floating interest rates ************************************************ $ 37,146
32 U.S. Bancorp
Table 10