US Bank 2004 Annual Report Download - page 22
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Please find page 22 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.based products and services (11.0 percent), particularly in charge-offs of $1,251.7 million during 2003, a reduction of
payment processing revenue, offset by a $349.7 million $484.6 million. The decline in net charge-offs was primarily
reduction in gains (losses) on sales of securities. The the result of declining levels of stressed and nonperforming
1.1 percent decline in net interest income reflected modest loans, continuing collection efforts and improving economic
growth in average earning assets, offset by lower net conditions. In response to improving credit conditions, the
interest margins. Also contributing to the year-over-year Company made a decision in 2004 to reduce the allowance
decline in net interest income was a reduction in loan fees, for credit losses. Refer to ‘‘Corporate Risk Profile’’ for
the result of fewer loan prepayments during a rising rate further information on the provision for credit losses, net
environment. In 2004, average earning assets increased charge-offs, nonperforming assets and factors considered by
$7.3 billion (4.5 percent), compared with 2003, primarily the Company in assessing the credit quality of the loan
due to growth in residential mortgages, retail loans and portfolio and establishing the allowance for credit losses.
investment securities, partially offset by a decline in Acquisition and Divestiture Activity On December 31,
commercial loans and loans held for sale related to 2003, the Company announced that it had completed the
mortgage banking activities. The net interest margin in tax-free distribution of Piper Jaffray Companies representing
2004 was 4.25 percent, compared with 4.49 percent in substantially all of the Company’s capital markets business
2003. The decline in net interest margin primarily reflected line. The Company distributed to our shareholders one
the competitive credit pricing environment, a preference to share of Piper Jaffray common stock for every 100 shares of
acquire adjustable-rate securities for asset/liability U.S. Bancorp common stock, by means of a special dividend
management purposes, lower prepayment fees, a modest of $685 million. This distribution did not include
increase in the percent of total earning assets funded by brokerage, financial advisory or asset management services
wholesale sources of funding and higher rates paid on offered to customers through other business units. The
wholesale funding due to the impact of rising rates. In Company continues to provide asset management services
addition, the net interest margin declined year-over-year as to its customers through the Private Client, Trust and Asset
a result of consolidating high credit quality, low margin Management business segment and access to investment
loans from Stellar, a commercial loan conduit, onto the products and services through its extensive network of
Company’s balance sheet beginning in the third quarter licensed financial advisors within the retail brokerage
of 2003. platform of the Consumer Banking business segment. In
Total noninterest expense was $5.8 billion in 2004, connection with the spin-off of Piper Jaffray, historical
compared with $5.6 billion in 2003. The increase in total financial results related to Piper Jaffray have been
noninterest expense of $187.6 million (3.4 percent), segregated and accounted for in the Company’s financial
primarily reflected a $154.8 million charge related to the statements as discontinued operations.
prepayment of a portion of the Company’s long-term debt. On June 29, 2004, the Company purchased the
The expense growth also reflected increases in remaining 50 percent ownership interest in EuroConex
compensation, employee benefits, professional services, Technologies Ltd (‘‘EuroConex’’) from the Bank of Ireland.
marketing and business development, technology and In addition, during the second and fourth quarters of 2004,
communications and other operating expense, as well as the Company completed three separate transactions to
expenses related to the expansion of the merchant acquiring acquire merchant processing businesses in Poland, the
business in Europe. These unfavorable variances were United Kingdom and Norway. In connection with these
partially offset by a favorable change in impairment charges transactions, EuroConex and its affiliates provide debit and
related to the MSR portfolio of $151.9 million and a credit card processing services to merchants, directly and
$46.2 million reduction in merger and restructuring-related through alliances with banking partners in these European
charges. Refer to ‘‘Acquisition and Divestiture Activity’’ for markets. These transactions represented total assets acquired
further information on the timing of acquisitions. The of $377 million and total liabilities assumed of $115 million
efficiency ratio (the ratio of noninterest expense to taxable- at the closing date. Included in total assets were contract
equivalent net revenue excluding net securities gains or and other intangibles with a fair value of $163 million and
losses) was 45.3 percent in 2004, compared with goodwill of $105 million. The goodwill reflected the
45.6 percent in 2003. strategic value of these businesses to the Company’s
The provision for credit losses was $669.6 million for European merchant processing business and anticipated
2004, compared with $1,254.0 million for 2003, a decrease economies of scale that will result from these transactions.
of $584.4 million (46.6 percent). The decrease in the On December 31, 2002, the Company acquired the
provision for credit losses reflected improving credit quality corporate trust business of State Street Bank and Trust
and economic conditions relative to 2003. Net charge-offs Company (‘‘State Street Corporate Trust’’) in a cash
during 2004 were $767.1 million, compared with net
20 U.S. BANCORP