US Bank 2002 Annual Report Download - page 58

improvement in provision for credit losses reflected a second quarter of 2002, which contributed $48.3 million in
reduction in net charge-offs, the impact of reductions in 2002, compared with 2001. The additional growth in
total loan commitments and an improvement in the mortgage banking servicing and production revenue, net
projected loss ratios for commercial loan risk rating interest income from higher average loans held for sale and
categories that has occurred. These trends were attributable the increase in securities gains offset the increased MSR
to the improvement in credit quality driven by the impairments recognized in 2002.
Company’s asset workout strategies, reductions in Noninterest expense was $2,034.1 million in 2002,
commitments to certain industries and customers and lower compared with $1,864.9 million in 2001. The increase in
net charge-offs. Despite an improvement in risk ratings, noninterest expense in 2002 was attributable to the Leader
nonperforming assets within the Wholesale Banking acquisition of $34.5 million and recognition of higher
business line continues to be at elevated levels reflecting MSR impairments in 2002 of $186.0 million, compared
stress in several industry sectors increasing to $1.0 billion at with $60.8 million in 2001, partially offset by expense
December 31, 2002, from $738.7 million a year ago. Refer control initiatives.
to the ‘‘Corporate Risk Profile’’ section for further The provision for credit losses decreased $122.3 million
information on factors impacting the credit quality of the (22.2 percent) in 2002, compared with 2001. The decrease
loan portfolios. in the provision primarily reflected improvement in the
Community Banking commercial loan portfolio, including
Consumer Banking delivers products and services to the lower net charge-offs, reductions in loan commitments and
broad consumer market and small businesses through banking improvement in loss ratios on risk rated loan commitments.
offices, telemarketing, on-line services, direct mail and The change in the provision also reflected an improvement
automated teller machines (‘‘ATMs’’). It encompasses in retail loss ratios due to enhancements in collection efforts
community banking, metropolitan banking, small business and lower delinquency levels.
banking, consumer lending, mortgage banking, workplace
banking, student banking, 24-hour banking and investment Private Client, Trust and Asset Management provides
product and insurance sales. Consumer Banking contributed mutual fund processing services, trust, private banking and
$1,469.7 million of the Company’s net operating earnings in financial advisory services through four businesses, including:
2002 and $1,330.8 million in 2001, a 10.4 percent increase. the Private Client Group, Corporate Trust, Institutional Trust
Total net revenue increased 5.9 percent from 2001. Fee- and Custody, and Fund Services, LLC. The business segment
based revenue grew by 18.3 percent in 2002 while net also offers investment management services to several client
interest income increased 1.1 percent in 2002. The increase segments, including mutual funds, institutional customers,
in net interest income in 2002 was due to average loan and private asset management. Private Client, Trust and
growth, improved spreads on retail loans and residential Asset Management contributed $446.8 million of the
real estate loans, slightly lower non-earning asset balances Company’s net operating earnings in 2002, an increase of
and growth in noninterest-bearing deposit balances and the 1.5 percent, compared with 2001.
related funding benefit. Partially offsetting the increase in Total net revenue was $1,195.4 million in 2002,
net interest income was the impact of declining interest essentially flat, compared with 2001. Net interest income
rates on the funding benefit of consumer deposits. The increased .8 percent, compared with 2001. The increase in
increase in average loan balances of 4.3 percent reflected net interest income in 2002 is due to core growth of
core retail loan growth of 12.6 percent in 2002 offset by a 10.6 percent in retail loans, and lower non-earning asset
decline of 4.1 percent in commercial and commercial real balances and related funding costs partially offset by the
estate loans. The change in average deposits included core impact of declining rates on the funding benefit of deposits.
growth in noninterest-bearing, interest checking and savings Noninterest income decreased .3 percent, compared with
account balances, offset by a reduction in balances 2001. Core account growth was approximately 2.3 percent
associated with time deposits. The decline in lower margin in 2002 contributing $20.3 million. This growth was offset
time deposits primarily reflected a shift in product mix by a decrease in the value of assets under management
towards savings products. Fee-based revenue growth in driven by adverse capital market conditions relative to
2002 was driven by increases in deposit service charge 2001. Noninterest expense decreased $2.9 million
revenue, mortgage banking production and servicing (.6 percent), compared with 2001 primarily attributable to a
revenue, investment product revenue, securities gains and reduction in personnel costs.
lower end-of-term lease residual losses partially offset by The provision for credit losses decreased $7.0 million
lower trust and investment management fees. The growth in (27.6 percent) in 2002, compared with the same period of a
mortgage banking servicing and production revenue was year ago. Net charges-offs were $1.4 million higher in
partially attributable to the acquisition of Leader in the 2002, compared with 2001. The improvement in the
56 U.S. Bancorp