US Bank 2004 Annual Report Download - page 56
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Please find page 56 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.rights, as well as operating expenses related to the information is available and is evaluated regularly in
expansion of the Company’s merchant acquiring business in deciding how to allocate resources and assess performance.
Europe of $24.2 million. The MSR impairment results from Basis for Financial Presentation Business line results are
a flattening yield curve despite recent increases in short-term derived from the Company’s business unit profitability
interest rates. The expense growth also reflected increases in reporting systems by specifically attributing managed
compensation, employee benefits, technology and balance sheet assets, deposits and other liabilities and their
communications and postage, printing and supplies. related income or expense. Funds transfer-pricing
Compensation expense was higher year-over-year by methodologies are utilized to allocate a cost of funds used
$39.8 million (7.4 percent) due to increases in salaries and or credit for funds provided to all business line assets and
stock-based compensation. The increase in salaries reflected liabilities using a matched funding concept. Also, the
business expansion of in-store branches, the expansion of business unit is allocated the taxable-equivalent benefit of
the Company’s merchant acquiring business in Europe and tax-exempt products. Noninterest income and expenses
other initiatives. Stock-based compensation was higher due directly managed by each business line, including fees,
to lower forfeitures relative to prior years. Employee service charges, salaries and benefits, and other direct costs
benefits increased year-over-year by $16.7 million are accounted for within each segment’s financial results in
(20.5 percent), primarily as a result of a $13.5 million a manner similar to the consolidated financial statements.
increase in pension expense and higher payroll taxes. Occupancy costs are allocated based on utilization of
Technology and communications expense rose by facilities by the lines of business. Noninterest expenses
$9.4 million (8.8 percent), reflecting technology investments incurred by centrally managed operations or business lines
that increased software expense amortization and the write- that directly support another business line’s operations are
off of capitalized software being replaced. Postage, printing charged to the applicable business line based on its
and supplies expense was higher by $3.1 million utilization of those services primarily measured by the
(5.0 percent), primarily due to new consumer credit card volume of customer activities. These allocated expenses are
accounts. The fourth quarter of 2004 included reported as net shared services expense. Certain corporate
$112.5 million of charges related to the prepayment of a activities that do not directly support the operations of the
portion of the Company’s long-term debt. Other expense lines of business are not charged to the lines of business.
was higher in the fourth quarter than the same quarter of Goodwill and other intangible assets are assigned to the
2003 by $25.1 million (15.2 percent). The year-over-year lines of business based on the mix of business of the
increase reflected increases in loan-related expense, acquired entity. The provision for credit losses within the
affordable housing operating costs and processing costs for Wholesale Banking, Consumer Banking, Private Client,
payment services products, the result of increases in Trust and Asset Management and Payment Services lines of
transaction volume year-over-year. Slightly offsetting these business is based on net charge-offs, while Treasury and
unfavorable variances was marketing and business Corporate Support reflects the residual component of the
development expense, which was lower by $1.9 million Company’s total consolidated provision for credit losses
(3.7 percent), reflecting the timing of marketing campaigns. determined in accordance with accounting principles
The provision for credit losses was $65.0 million for generally accepted in the United States. Income taxes are
the fourth quarter of 2004 and $286.0 million for the assessed to each line of business at a standard tax rate with
fourth quarter of 2003, a decrease of $221.0 million the residual tax expense or benefit to arrive at the
(77.3 percent). Net charge-offs in the fourth quarter of consolidated effective tax rate included in Treasury and
2004 were $163.6 million, compared with net charge-offs Corporate Support. Merger and restructuring-related
of $285.1 million during the fourth quarter of 2003. The charges, discontinued operations and cumulative effects of
decline from a year ago primarily reflected the release of the changes in accounting principles are not identified by or
allowance for credit losses of $98.5 million, improving allocated to lines of business. Within the Company, capital
credit quality and changing economic conditions. levels are evaluated and managed centrally; however, capital
is allocated to the operating segments to support evaluation
LINE OF BUSINESS FINANCIAL REVIEW of business performance. Capital allocations to the business
Within the Company, financial performance is measured by lines are based on the amount of goodwill and other
major lines of business, which include Wholesale Banking, intangibles, the extent of off-balance sheet managed assets
Consumer Banking, Private Client, Trust and Asset and lending commitments and the ratio of on-balance sheet
Management, Payment Services, and Treasury and assets relative to the total Company. Certain lines of
Corporate Support. These operating segments are business, such as Trust and Asset Management, have no
components of the Company about which financial significant balance sheet components. For these business
54 U.S. BANCORP