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costs and $477.6 million of charges to exit business lines a shift in business mix as a result of the impact of
and products, sell credit portfolios or otherwise realign acquisitions, market demographics, the mix of product
business practices in the new Company. The Company also revenue and an increase in federal and state tax credits. The
incurred $190.5 million related to the accelerated vesting of improvement in the effective tax rate in 2002, compared
certain stock options and restricted stock, $207.1 million of with 2001, was primarily driven by a change in unitary
systems conversion and business integration costs, state tax apportionment factors, a decrease in non-
$48.7 million for lease cancellation and other building- deductible merger and restructuring-related charges and the
related costs, $226.8 million for transaction costs, funding a change in accounting for goodwill.
charitable foundation to reaffirm a commitment to its The Company’s net deferred tax liability was
markets and other costs, and a $62.2 million gain related to $1,556.4 million at December 31, 2003, compared with
the required sale of branches. $1,329.4 million for the year ended 2002. The change in
Refer to Notes 3 and 5 of the Notes to Consolidated 2003 primarily relates to leasing activities and a decrease in
Financial Statements for further information on these the net unrealized appreciation on available-for-sale
acquired businesses and merger and restructuring-related securities and financial instruments. For further information
items. on income taxes, refer to Note 20 of the Notes to
Consolidated Financial Statements.
Income Tax Expense The provision for income taxes was
$1,941.3 million (an effective rate of 34.4 percent) in 2003, BALANCE SHEET ANALYSIS
compared with $1,707.5 million (an effective rate of
Average earning assets were $160.8 billion in 2003,
34.6 percent) in 2002 and $818.3 million (an effective rate
compared with $147.4 billion in 2002. The increase in
of 34.9 percent) in 2001. The improvement in the effective
average earning assets of $13.4 billion (9.1 percent) was
tax rate in 2003, compared with 2002, primarily reflected a
primarily driven by growth in investment securities,
change in unitary state tax apportionment factors driven by
Loan Portfolio Distribution
2003 2002 2001 2000 1999
Percent Percent Percent Percent Percent
At December 31 (Dollars in Millions) Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total
Commercial
Commercial ********************** $ 33,536 28.4% $ 36,584 31.5% $ 40,472 35.4% $ 47,041 38.5% $ 42,021 37.1%
Lease financing ****************** 4,990 4.2 5,360 4.6 5,858 5.1 5,776 4.7 3,835 3.4
Total commercial ************** 38,526 32.6 41,944 36.1 46,330 40.5 52,817 43.2 45,856 40.5
Commercial real estate
Commercial mortgages************ 20,624 17.4 20,325 17.5 18,765 16.4 19,466 15.9 18,636 16.5
Construction and development ***** 6,618 5.6 6,542 5.6 6,608 5.8 6,977 5.7 6,506 5.7
Total commercial real estate **** 27,242 23.0 26,867 23.1 25,373 22.2 26,443 21.6 25,142 22.2
Residential mortgages
Residential mortgages ************ 7,332 6.2 6,446 5.6 5,746 5.0 * * * *
Home equity loans, first liens ****** 6,125 5.2 3,300 2.8 2,083 1.8 * * * *
Total residential mortgages ***** 13,457 11.4 9,746 8.4 7,829 6.8 9,397 7.7 12,760 11.3
Retail
Credit card*********************** 5,933 5.0 5,665 4.9 5,889 5.1 6,012 4.9 5,004 4.4
Retail leasing ******************** 6,029 5.1 5,680 4.9 4,906 4.3 4,153 3.4 2,123 1.9
Home equity and second
mortgages (a)***************** 13,210 11.2 13,572 11.6 12,235 10.7 11,956 9.7 * *
Other retail
Revolving credit *************** 2,540 2.1 2,650 2.3 2,673 2.3 2,750 2.2 * *
Installment******************** 2,380 2.0 2,258 1.9 2,292 2.0 2,186 1.8 * *
Automobile ******************* 7,165 6.1 6,343 5.5 5,660 5.0 5,609 4.6 * *
Student ********************** 1,753 1.5 1,526 1.3 1,218 1.1 1,042 .9 * *
Total other retail (a)********* 13,838 11.7 12,777 11.0 11,843 10.4 11,587 9.5 22,344 19.7
Total retail ******************** 39,010 33.0 37,694 32.4 34,873 30.5 33,708 27.5 29,471 26.0
Total loans **************** $118,235 100.0% $116,251 100.0% $114,405 100.0% $122,365 100.0% $113,229 100.0%
(a) Home equity and second mortgages are included in the total other retail category in 1999.
* Information not available
28 U.S. Bancorp
Table 6