US Bank 2004 Annual Report Download - page 57
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Please find page 57 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.units, capital is allocated taking into consideration fiduciary primarily due to a decision by the Federal government to
and operational risk, capital levels of independent pay fees for treasury management services rather than
organizations operating similar businesses, and regulatory maintain compensating balances. Noninterest income
requirements. decreased $10.8 million (1.4 percent) in 2004 to
Designations, assignments and allocations change from $750.1 million, compared to 2003 noninterest income of
time to time as management systems are enhanced, methods $760.9 million. The decrease in noninterest income in 2004
of evaluating performance or product lines change or was principally due to lower commercial products revenue
business segments are realigned to better respond to our resulting from the consolidation of the commercial loan
diverse customer base. During 2004, certain organization conduit in 2003. This revenue reduction was partially offset
and methodology changes were made and, accordingly, by growth in treasury management-related fees,
2003 results were restated and presented on a comparable international banking, syndication and customer derivative
basis. Due to organizational and methodology changes, the fees, equipment leasing and foreign exchange revenue.
Company’s basis of financial presentation differed in 2002. Treasury management-related fees were higher primarily due
The presentation of comparative business line results for to a change in the Federal government’s payment
2002 is not practical and has not been provided. methodology for treasury management services to fees for
services rather than maintaining compensating balances in
Wholesale Banking offers lending, depository, treasury the third quarter of 2003, partially offset by higher interest
management and other financial services to middle market, earnings credit on customers’ compensating balances and
large corporate and public sector clients. Wholesale Banking the impact of an industry-wide shift of payments from
contributed $1,079.6 million of the Company’s operating paper-based to electronic and card-based transactions.
earnings in 2004 and $850.3 million in 2003. The increase Noninterest expense was $643.5 million in 2004,
in operating earnings in 2004 was driven by reductions in compared with $686.1 million in 2003. The $42.6 million
the provision for credit losses and total noninterest expense, decrease (6.2 percent) was primarily driven by lower
partially offset by a decline in total net revenue, compared personnel-related costs, software expenses, loan workout
with 2003. expenses and net shared services expense. Loan workout
Total net revenue decreased $65.2 million (2.7 percent) expenses declined in 2004 as the credit quality of the loan
in 2004, compared with 2003. Net interest income, on a portfolio has improved. Net shared services expenses were
taxable-equivalent basis, decreased $55.9 million lower due to changes in transaction volumes related to
(3.4 percent), compared with 2003, as average loans customer accounts.
decreased $2.0 billion (4.6 percent) in 2004, average non- The provision for credit losses was $22.6 million and
interest bearing deposits decreased $2.1 billion $405.5 million in 2004 and 2003, respectively, a decline of
(13.9 percent) and average savings products declined $382.9 million (94.4 percent). The favorable change in the
$1.2 billion, compared with 2003. The decline in average provision for credit losses for Wholesale Banking business is
loans in 2004 was driven in part by soft commercial loan due to improving net charge-offs, which declined to
demand through mid 2004, in addition to the Company’s .05 percent of average loans in 2004 from .91 percent of
decisions to tighten credit availability to certain types of average loans in 2003. The reduction in net charge-offs was
lending products, industries and customers and reductions attributable, in part, to increased levels of commercial loan
due to asset workout strategies. This decline was partially recoveries, in addition to improvements in credit quality
offset by the consolidation of the commercial loan conduit driven by initiatives taken by the Company during the past
onto the Company’s balance sheet during the third quarter three years, including asset workout strategies and
of 2003. Loan spreads declined from a year ago due in part reductions in commitments to certain industries and
to competitive pricing and the consolidation of the high customers. Commercial loan recoveries are anticipated to
credit quality, low margin loans from the commercial loan return to more normalized levels during future periods.
conduit during 2003, partially offset by higher interest Nonperforming assets within Wholesale Banking were
recoveries in 2004 on previously charged-off loans. While $391.1 million at December 31, 2004, compared with
average noninterest-bearing deposits decreased 13.9 percent $743.6 million at December 31, 2003. Nonperforming
in 2004, compared with 2003, due to reductions in assets as a percentage of end-of-period loans were
government and mortgage-related deposits, the net interest .90 percent at December 31, 2004 and 1.76 percent at
spread on total deposits increased due to the funding benefit December 31, 2003. Refer to the ‘‘Corporate Risk Profile’’
associated with the impact of rising interest rates over the section for further information on factors impacting the
second half of 2004. The decline in mortgage-related credit quality of the loan portfolios.
deposits reflected lower production of mortgage banking
businesses while the decline in government deposits was
U.S. BANCORP 55