US Bank 2003 Annual Report Download - page 55

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a change in loan mix and a decline in the margin benefit approximately $12.6 million. This change in the interchange
from net free funds due to lower average interest rates. In rate, in addition to higher customer loyalty rewards
addition, the net interest margin declined year-over-year as expenses, however, was more than offset by the impact of
a result of consolidating high credit quality, low margin increases in transaction volumes and other rate adjustments.
loans from the Stellar commercial loan conduit onto the The corporate payment products revenue growth reflected
Company’s balance sheet during the third quarter of 2003. growth in sales and card usage. Merchant processing
Fourth quarter 2003 noninterest income declined services revenue was higher in the fourth quarter of 2003
6.4 percent from the same period of a year ago. The decline than the same quarter of 2002 by $4.0 million
is primarily due to a net reduction in securities gains (2.8 percent), due to an increase in transaction volume,
(losses) of $106.3 million year-over-year. In addition, which was partially offset by lower processing spreads
included in fourth quarter of 2002 was a $46.5 million gain resulting from revenue-sharing associated with specific
on the sale of an out-of-market credit card portfolio. Credit banking alliances and changes in the mix of merchants. The
and debit card revenue and corporate payment products favorable variance in trust and investment management fees
revenue were higher in the fourth quarter of 2003 than the of $33.0 million (15.4 percent) in the fourth quarter of
fourth quarter of 2002 by $9.7 million (6.8 percent) and 2003 over the same period of 2002 was principally driven
$8.3 million (10.3 percent), respectively. Although credit by the acquisition of State Street Corporate Trust, which
and debit card revenue grew year-over-year, the growth was contributed approximately $21.1 million in fees during the
somewhat muted due to the impact of the settlement of the fourth quarter of 2003. In addition, trust and investment
antitrust litigation brought against VISA USA and management fees benefited from higher equity market
Mastercard by Wal-Mart Stores, Inc., Sears Roebuck & Co. valuations and account growth year-over-year. Treasury
and other retailers, which lowered the interchange rate on management fees grew by $13.7 million (13.4 percent) in
signature debit transactions beginning August 2003. The the fourth quarter of 2003 over the same period of 2002.
year-over-year impact of the VISA settlement on credit and The increase in treasury management fees year-over-year
debit card revenue for the quarter was a decline of was driven, in part, by a change during the third quarter of
Fourth Quarter Summary
Three Months Ended
December 31,
(In Millions, Except Per Share Data) 2003 2002
Condensed Income Statement
Net interest income (taxable-equivalent basis) (a) ********************************************************** $1,816.7 $1,765.3
Noninterest income ************************************************************************************* 1,296.7 1,279.5
Securities gains (losses), net **************************************************************************** (.1) 106.2
Total net revenue *********************************************************************************** 3,113.3 3,151.0
Noninterest expense************************************************************************************ 1,342.4 1,486.6
Provision for credit losses ******************************************************************************* 286.0 349.0
Income from continuing operations before taxes ******************************************************** 1,484.9 1,315.4
Taxable-equivalent adjustment *************************************************************************** 7.2 7.7
Applicable income taxes ******************************************************************************** 507.4 449.1
Income from continuing operations ******************************************************************** 970.3 858.6
Discontinued operations (after-tax) *********************************************************************** 6.7 (38.9)
Net income***************************************************************************************** $ 977.0 $ 819.7
Per Common Share
Earnings per share ************************************************************************************* $ .51 $ .43
Diluted earnings per share ****************************************************************************** .50 .43
Dividends declared per share**************************************************************************** .240 .195
Average shares outstanding ***************************************************************************** 1,927.3 1,916.2
Average diluted shares outstanding ********************************************************************** 1,950.8 1,923.6
Financial Ratios
Return on average assets ******************************************************************************* 2.05% 1.83%
Return on average equity ******************************************************************************* 19.4 17.8
Net interest margin (taxable-equivalent basis) ************************************************************* 4.42 4.65
Efficiency ratio (b) ************************************************************************************** 43.1 48.8
(a) Interest and rates are presented on a fully taxable-equivalent basis utilizing a tax rate of 35 percent.
(b) Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding securities gains (losses), net.
U.S. Bancorp 53
Table 21