US Bank 2002 Annual Report Download - page 54

Fourth Quarter Summary
Financial Results and Ratios on an Operating Basis (a)
Three Months Ended
December 31,
(Dollars in Millions) 2002 2001
Condensed Income Statement
Net interest income (taxable-equivalent basis) ************************************************************* $1,775.0 $1,674.2
Noninterest income ************************************************************************************* 1,439.9 1,312.2
Securities gains, net ************************************************************************************ 106.2 22.0
Total net revenue *********************************************************************************** 3,321.1 3,008.4
Noninterest expense************************************************************************************ 1,551.2 1,503.9
Provision for credit losses ******************************************************************************* 349.0 265.8
Income before taxes and merger and restructuring-related items ***************************************** 1,420.9 1,238.7
Taxable-equivalent adjustment *************************************************************************** 9.2 9.9
Income taxes ****************************************************************************************** 491.6 443.6
Operating earnings ************************************************************************************* 920.1 785.2
Merger and restructuring-related items (after-tax) ********************************************************** (70.3) (89.8)
Net income in accordance with GAAP ***************************************************************** $ 849.8 $ 695.4
Financial Ratios
Return on average assets ******************************************************************************* 2.05% 1.85%
Return on average equity ******************************************************************************* 20.4 18.6
Efficiency ratio ***************************************************************************************** 48.3 50.4
Banking efficiency ratio (b) ****************************************************************************** 44.1 46.6
(a) The Company analyzes its performance on a net income basis in accordance with accounting principles generally accepted in the United States, as well as on an operating basis
before merger and restructuring-related items and cumulative effect of change in accounting principles referred to as ‘‘operating earnings.’’ Operating earnings are presented as
supplemental information to enhance the reader’s understanding of, and highlight trends in, the Company’s financial results excluding the impact of merger and restructuring-
related items of specific business acquisitions and restructuring activities and cumulative effect of change in accounting principles. Operating earnings should not be viewed as a
substitute for net income and earnings per share as determined in accordance with accounting principles generally accepted in the United States. Merger and restructuring-related
items excluded from net income to derive operating earnings may be significant and may not be comparable to other companies.
(b) Without investment banking and brokerage activity.
offset by $161.0 million of noteworthy expense items in the fourth quarter of 2002 over the fourth quarter of
and asset write-downs. Notable favorable items in the 2001 reflected higher net free funds, the funding benefits of
fourth quarter included gains on the sale of securities of the declining interest rate environment, a more favorable
$106.2 million, an increase of $84.2 million over the funding mix and improving spreads due to product repricing
fourth quarter of 2001, and a $46.5 million gain on the dynamics, and a shift in mix toward retail loans, partially
sale of a co-branded credit card portfolio. Offsetting these offset by lower yields on the investment portfolio.
favorable items were the recognition of $54.1 million of The provision for credit losses for the fourth quarter of
MSR impairment, an increase of $26.8 million over the 2002 was $349.0 million, an increase of $83.2 million over
fourth quarter of 2001, a $50.0 million litigation charge, the fourth quarter of 2001. This higher level of provision
including investment banking regulatory matters at Piper, for credit losses reflected an increase in nonperforming
incremental personnel costs of $31.4 million for assets and net charge-offs year-over-year reflecting
rationalizing the Company’s post-integration technology, continued weakness in certain industry sectors and the
operations, and support functions, and a $25.5 million impact of the weak economy on highly leveraged enterprise
leasing residual impairment. value financings.
Fourth quarter net interest income, on a taxable- Fourth quarter 2002 noninterest income was
equivalent basis, was $1,775.0 million, compared with $1,546.1 million, an increase of $211.9 million
$1,674.2 million in the fourth quarter of 2001. Average (15.9 percent) over the same quarter of 2001. The growth
earning assets for the fourth quarter of 2002 increased over in noninterest income over the fourth quarter of 2001 was
the fourth quarter of 2001 by $6.9 million (4.7 percent), driven by net securities gains, growth in core banking
primarily driven by increases in the investment portfolio, product revenues of $60.8 million (4.6 percent), a
loans held for sale and retail loan growth, partially offset by $46.5 million gain on the sale of a co-branded credit card
a decline in commercial and commercial real estate loans. portfolio, a reduction in equity investment losses of
The net interest margin in the fourth quarter of 2002 was $29.0 million relative to the fourth quarter of 2001, and
4.63 percent, compared with 4.57 percent in the fourth acquisitions, including Leader and the Bay View branches,
quarter of 2001. The improvement in the net interest margin which contributed approximately $18.3 million of the
52 U.S. Bancorp
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