US Bank 2004 Annual Report Download - page 20
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Please find page 20 of the 2004 US Bank annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.MANAGEMENT’S DISCUSSION AND ANALYSIS
OVERVIEW and capital management practices and our ability to
generate capital through earnings.
In 2004, U.S. Bancorp and its subsidiaries (the ‘‘Company’’) In concert with achieving our stated financial
continued to demonstrate its financial strength and objectives, the Company exceeded its objective to return at
shareholder focus. We began the year with several specific least 80 percent of earnings to shareholders in the form of
financial objectives. The first goal was a focus on organic dividends and share repurchases by returning 109 percent of
revenue growth. While growth in net interest income has 2004 earnings to shareholders. In December 2004, we
been challenging for the banking industry due to rising announced an expanded share repurchase program and
interest rates and sluggish commercial loan growth, the further increased our cash dividend resulting in a
Company experienced strong growth in its fee-based 25.0 percent increase from the dividend rate in the fourth
revenues, particularly in payment processing services. The quarter of 2003. We continue to affirm our goal of
Company generated fee-based revenue growth of returning at least 80 percent of earnings to shareholders.
11.0 percent in 2004. By year-end, commercial loan
balances also displayed encouraging trends as the Company Earnings Summary The Company reported net income of
experienced its first year-over-year growth in quarterly $4.2 billion in 2004, or $2.18 per diluted share, compared
average balances since mid-2001. Retail loans continued to with $3.7 billion, or $1.93 per diluted share, in 2003. The
display strong growth in 2004. In 2005, the Company will 13.0 percent increase in earnings per diluted share
continue to focus on revenue growth driven by disciplined principally reflected growth in fee-based revenues and lower
strategic business initiatives, customer service and an credit costs. Return on average assets and return on average
emphasis on payment processing, retail banking and equity were 2.17 percent and 21.4 percent, respectively, in
commercial lending. The second goal was to continue 2004, compared with returns of 1.99 percent and
improving the credit quality of our loan portfolios. During 19.2 percent, respectively, in 2003. Net income in 2003
the year nonperforming assets declined 34.8 percent from a included after-tax income from discontinued operations of
year ago and total net charge-offs decreased to .63 percent $22.5 million, or $.01 per diluted share.
of average loans outstanding in 2004, compared with In 2004, the Company had income from continuing
1.06 percent in 2003. By year end 2004, the credit risk operations, net of tax, of $4.2 billion, or $2.18 per diluted
profile of the Company had improved to pre-2001 levels. In share, compared with $3.7 billion, or $1.92 per diluted
2005, the Company will continue to focus on credit quality share, in 2003. The Company’s results from continuing
and minimizing volatility of credit-related losses. Finally, operations in 2004 reflected slightly lower net interest
effectively managing costs is always a goal for the income, strong fee-based revenue growth and lower credit
Company. During 2004, our efficiency ratio (the ratio of costs. During 2004, certain elements of the Company’s
noninterest expense to taxable-equivalent net revenue operating results included the impact of management
excluding net securities gains or losses) improved to actions or specific events. In 2004, the Company undertook
45.3 percent, compared with 45.6 percent in 2003, and several asset/liability management actions in response to
continues to be a leader in the banking industry. The changing interest rates, including sales of investment
Company’s results for 2004 reflect the achievement of these securities and the prepayment of certain long-term debt.
operating objectives and help to position the Company to These actions enabled the Company to maintain an interest
achieve its long-term goal of 10 percent or greater growth rate risk position that is relatively neutral to rising interest
in earnings per diluted share. rates; however, the Company incurred $104.9 million of net
The Company’s strong performance is also reflected in securities losses in 2004, a net reduction of $349.7 million
our capital levels and the improving outlook by our credit from 2003, and debt prepayment costs of $154.8 million in
rating agencies relative to a year ago. Equity capital of the 2004. Also resulting from changes in interest rates, the
Company continued to be strong at 6.4 percent of tangible Company incurred a $56.8 million impairment of its
common assets at December 31, 2004, compared with portfolio of mortgage servicing rights (‘‘MSR’’), a favorable
6.5 percent at December 31, 2003. Credit ratings for the reduction in other intangibles expenses of $151.9 million
Company were upgraded by Fitch Ratings in September relative to 2003. Included in the provision for credit losses
2004 and Moody’s Investors Service in January 2005. in 2004 was a reduction in the allowance for credit losses
Credit ratings assigned by various credit rating agencies of $98.5 million, reflecting continued improvement in credit
reflect the favorable rating agency views of the direction of quality and economic conditions. In addition, the
the Company’s credit quality, risk management, liquidity Company’s effective income tax rate declined to
18 U.S. BANCORP