US Bank 2002 Annual Report Download - page 40

$289.2 million (.38 percent of average loans outstanding) in The $253.5 million increase in total nonperforming
2000. Commercial and commercial real estate loan net assets in 2002 reflected an increase of $284.6 million in
charge-offs in 2002 continued to experience higher levels of nonperforming commercial and commercial real estate loans
net charge-offs related to the leasing portfolio including partially offset by a decrease of $27.1 million in
airline and other transportation related losses. Additionally, nonperforming residential mortgages and a $21.5 million
credit losses related to highly leveraged enterprise value decrease in nonperforming retail loans. The increase in
financings continued at elevated levels. Commercial and nonperforming commercial and commercial real estate
commercial real estate loan net charge-offs in 2001 included assets was principally due to the Company’s exposure to
approximately $313.2 million related to several factors certain communications, cable, manufacturing and highly
including: a large cattle fraud, collateral deterioration leveraged enterprise value financings. Nonperforming loans
specific to transportation equipment caused by the impact in the capital goods sector also increased in 2002. Although
of higher fuel prices and the weak economy, deterioration the level of nonperforming assets appeared to have
in the manufacturing, communications and technology stabilized in late 2002, the Company continues to remain
sectors and specific management decisions to accelerate its cautious regarding the economy and its impact on the credit
workout strategy for certain borrowers. Also included in quality of the portfolio. Nonperforming assets are expected
2001 commercial and commercial real estate loan net to remain at elevated levels until the economy rebounds.
charge-offs were $95 million in merger and restructuring- The $253.0 million increase in nonperforming assets in
related charge-offs and charge-offs of $160 million 2001 reflected an increase of $190.0 million of
associated with an accelerated loan workout strategy. nonperforming commercial and commercial real estate
Excluding loan net charge-offs associated with merger and
loans, a $22.2 million increase in nonperforming residential
restructuring-related items, commercial and commercial real
mortgages and a $23.8 million increase in nonperforming
estate loan net charge-offs were .98 percent of average loans
retail loans. The increase in nonperforming commercial
outstanding in 2002, 1.04 percent in 2001 and .38 percent
loans was primarily due to merger and restructuring-related
in 2000. The decrease in commercial and commercial real
and risk management actions taken during 2001; loans
estate loan net charge-offs in 2002 when compared with
2001, and the increase for 2001 when compared with 2000 written down to secondary market valuations and placed on
was driven by the specific credit actions noted above taken nonperforming status; and continued stress in certain
in the third quarter of 2001. sectors of the economy. The increase was partially offset by
Retail loan net charge-offs in 2002 were $674.0 million the disposition of nonperforming loans identified as part of
(1.85 percent of average loans outstanding), compared with the Company’s accelerated workout programs and
$649.3 million (1.94 percent of average loans outstanding) commercial charge-offs taken during 2001. Certain industry
in 2001 and $523.8 million (1.69 percent of average loans sectors, including agriculture, had stabilized or improved
outstanding) in 2000. The improvement in the retail loan from 2000. The increase in nonperforming residential
net charge-offs in 2002, compared with 2001, principally mortgages and retail loans generally reflected changes in
reflected changes in the mix of the retail loan portfolio to portfolio delinquencies and the national trends in
auto loans and leases and home equity products, and unemployment and personal bankruptcies during 2001.
improvement in ongoing collection efforts as a result of The Company had $50.0 million and $18.2 million
the successful completion of the integration efforts. The of restructured loans as of December 31, 2002 and 2001,
increase in retail loan net charge-offs for 2001, compared respectively. Commitments to lend additional funds under
with 2000, was primarily due to increased bankruptcies and restructured loans were $1.7 million and $3.7 million as
consumer delinquencies in 2001, reflecting the downturn of December 31, 2002 and 2001, respectively. Restructured
in economic conditions. loans performing under the restructured terms beyond a
specific timeframe are reported as accruing. Of the
Analysis of Nonperforming Assets Nonperforming assets Company’s total restructured loans at December 31, 2002,
include nonaccrual loans, restructured loans not performing $1.4 million were reported as accruing.
in accordance with modified terms, other real estate and Accruing loans 90 days or more past due totaled
other nonperforming assets owned by the Company. $426.4 million at December 31, 2002, compared with
Interest payments are typically applied against the principal $462.9 million at December 31, 2001, and $385.2 million
balance and not recorded as income. At December 31, at December 31, 2000. These loans were not included in
2002, total nonperforming assets were $1,373.5 million, nonperforming assets and continue to accrue interest
compared with $1,120.0 million at year-end 2001 and because they are adequately secured by collateral and/or are
$867.0 million at year-end 2000. The ratio of total in the process of collection and are reasonably expected to
nonperforming assets to total loans and other real estate result in repayment or restoration to current status. The
increased to 1.18 percent at December 31, 2002, compared ratio of delinquent loans to total loans declined slightly to
with .98 percent and .71 percent for the years ending 2001 .37 percent at December 31, 2002, compared with
and 2000, respectively. .40 percent at December 31, 2001.
38 U.S. Bancorp