US Bank 2004 Annual Report Download - page 24
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Please find page 24 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.loans in late 2004 as economic conditions continued to $2.6 billion (22.5 percent), $3.0 billion (7.9 percent) and
improve. The net interest margin in 2004 was 4.25 percent, $.1 billion (.5 percent), respectively. Growth in these
compared with 4.49 percent and 4.65 percent in 2003 and categories was offset somewhat by an overall decline in
2002, respectively. The 24 basis point decline in 2004 net average commercial loans of $2.0 billion (4.8 percent).
interest margin, compared with 2003, primarily reflected the Although the consolidation of loans from the Stellar
competitive credit pricing environment, a preference to commercial loan conduit had a positive impact on average
acquire adjustable-rate securities which have lower yields loan balances year-over-year, excess liquidity and improving
and a decline in prepayment fees. The net interest margin cash flows among corporate borrowers led to the overall
was also impacted by a modest increase in the percent of decrease in total commercial loans. The Company began to
total earning assets funded by wholesale sources of funding experience growth in average commercial loans in the
and higher rates paid on wholesale funding due to the fourth quarter of 2004.
impact of rising rates. The shift towards wholesale funding Average investment securities were $5.8 billion
reflects, in part, slower growth in deposits as growth in (15.5 percent) higher in 2004, compared with 2003,
mortgage banking escrows and government-related deposits reflecting the reinvestment of proceeds from declining
declined. It also reflects asset/liability decisions to issue average commercial loan balances and loans held for sale.
longer-term fixed-rate borrowings given the rising rate The Company utilizes the investment portfolio as part of its
environment. In addition, the net interest margin declined overall asset/liability management practices to minimize
year-over-year as a result of consolidating high credit structural interest rate and market valuation risks associated
quality, low margin loans from the Stellar commercial loan with changes in interest rates. During 2004, the Company
conduit onto the Company’s balance sheet beginning in the received proceeds from prepayments and maturities of
third quarter of 2003. investment securities of $12.3 billion. Also, the Company
Total average loans of $122.1 billion in 2004 were made a decision to sell $8.2 billion of fixed-rate securities,
$3.8 billion (3.2 percent) higher, compared with 2003, classified as available-for-sale, as part of interest rate risk
reflecting growth in average residential mortgages, average management actions given changes in rates during the year,
retail loans and average commercial real estate loans of recognizing a $104.9 million loss on the sale of securities.
Net Interest Income — Changes Due to Rate and Volume (a)
2004 v 2003 2003 v 2002
(Dollars in Millions) Volume Yield/Rate Total Volume Yield/Rate Total
Increase (decrease) in
Interest income
Investment securities ******************* $ 254.3 $(115.5) $ 138.8 $ 428.4 $ (235.2) $ 193.2
Loans held for sale ********************* (112.2) 1.5 (110.7) 62.7 (31.1) 31.6
Commercial loans ********************** (110.8) 8.3 (102.5) (149.0) (157.8) (306.8)
Commercial real estate****************** 7.3 (48.6) (41.3) 90.2 (141.9) (51.7)
Residential mortgage ******************* 160.2 (61.5) 98.7 232.5 (114.4) 118.1
Retail loans**************************** 210.4 (264.5) (54.1) 134.9 (363.9) (229.0)
Total loans ************************* 267.1 (366.3) (99.2) 308.6 (778.0) (469.4)
Other earning assets ******************* (13.7) 13.7 — 6.4 (2.4) 4.0
Total ****************************** 395.5 (466.6) (71.1) 806.1 (1,046.7) (240.6)
Interest expense
Interest checking*********************** 8.0 (21.5) (13.5) 22.6 (40.6) (18.0)
Money market accounts **************** 5.3 (87.8) (82.5) 87.7 (82.8) 4.9
Savings accounts ********************** 1.0 (6.8) (5.8) 3.5 (7.4) (3.9)
Time certificates of deposit less than
$100,000 ************************** (70.4) (39.2) (109.6) (146.3) (146.2) (292.5)
Time deposits greater than $100,000 ***** 24.6 (5.5) 19.1 26.3 (105.5) (79.2)
Total interest-bearing deposits ******** (31.5) (160.8) (192.3) (6.2) (382.5) (388.7)
Short-term borrowings ****************** 64.1 31.8 95.9 8.5 (64.6) (56.1)
Long-term debt ************************ 34.7 68.2 102.9 45.0 (211.1) (166.1)
Total ****************************** 67.3 (60.8) 6.5 47.3 (658.2) (610.9)
Increase (decrease) in net interest income $ 328.2 $(405.8) $ (77.6) $ 758.8 $ (388.5) $ 370.3
(a) This table shows the components of the change in net interest income by volume and rate on a taxable-equivalent basis utilizing a tax rate of 35 percent. This table does not take into
account the level of noninterest-bearing funding, nor does it fully reflect changes in the mix of assets and liabilities. The change in interest not solely due to changes in volume or rates has
been allocated on a pro-rata basis to volume and yield/rate.
22 U.S. BANCORP
Table 3