US Bank 2004 Annual Report Download - page 83
Download and view the complete annual report
Please find page 83 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.During the third quarter of 2003, the Company did not within the conduit, the impact to the Company’s financial
reissue more than 90 percent of the commercial paper statements was not significant. In the third quarter of 2003,
funding of Stellar Funding Group, Inc. (‘‘Stellar’’), a average commercial loan balances increased by
commercial loan conduit. This action caused the conduit to approximately $2 billion and the resulting increase in net
lose its status as a qualifying special purpose entity. As a interest income was offset by a similar decline in conduit fee
result, the Company recorded all of Stellar’s assets and income within commercial products revenue. Prior to
liabilities at fair value and the results of operations in the December 31, 2003, the remaining commercial paper
consolidated financial statements of the Company. Given borrowings held by third-party investors matured and the
the floating-rate nature and high credit quality of the assets conduit was legally dissolved.
Sensitivity Analysis At December 31, 2004, key economic assumptions and the sensitivity of the current fair value of residual
cash flows to immediate 10 percent and 20 percent adverse changes in those assumptions were as follows:
Unsecured
Small
Business Investment
December 31, 2004 (Dollars in Millions) Receivables Securities
Current economic assumptions sensitivity analysis
Carrying value (fair value) of retained interests ******************************************************** $121.0 $ 56.8
Weighted average life (in years) ******************************************************************** .9 2.1
Expected remaining life (a) ********************************************************************** 2.3 years 4.1 years
Impact of 10% adverse change ******************************************************************** $ (.7) $ (5.6)
Impact of 20% adverse change ******************************************************************** (3.0) (10.3)
Expected credit losses (annual) (b)************************************************************** 6.3%-9.5% NA
Impact of 10% adverse change ******************************************************************** $ (1.4) $ —
Impact of 20% adverse change ******************************************************************** (3.9) —
Residual cash flow discount rate *************************************************************** 11.0% 7.5%
Impact of 10% adverse change ******************************************************************** $ (.2) $ (.4)
Impact of 20% adverse change ******************************************************************** (1.5) (.7)
Interest rate on variable rate loans and bonds (c)(d) ******************************************* Prime LIBOR
Impact of 10% adverse change ******************************************************************** $— $—
Impact of 20% adverse change ******************************************************************** (1.1) —
(a) For the small business receivables a monthly principal payment rate assumption is used to value the residual interests.
(b) Credit losses are zero for the investment securities conduit as the investments are all AAA/Aaa rated or insured investments.
(c) For the small business receivables interest income is base on Prime + contractual spread.
(d) The investment securities conduit is mostly match funded. Therefore, interest rate movements create no material impact to the value of the residual interest.
These sensitivities are hypothetical and should be used interest is calculated without changing any other
with caution. As the figures indicate, changes in fair value assumptions; in reality, changes in one factor may result in
based on a 10 percent variation in assumptions generally changes in another (for example, increases in market
cannot be extrapolated because the relationship of the interest rates may result in lower prepayments and increased
change in the assumptions to the change in fair value may credit losses), which might magnify or counteract the
not be linear. Also, in this table the effect of a variation in sensitivities.
a particular assumption on the fair value of the retained
Cash Flow Information The table below summarizes certain cash flows received from and paid to conduit or structured entities
for the asset sales described above: Unsecured
Indirect Small
Commercial Automobile Business Investment
Year Ended December 31 (Dollars in Millions) Loans Loans Receivables (a) Securities
2004
Proceeds from
New sales and securitizations ********************************************** $ — $— $ — $—
Collections used by trust to purchase new receivables in revolving securitizations **** — — 328.7 —
Servicing and other fees received and cash flows on retained interests**************** — — 73.7 35.5
2003
Proceeds from
New sales and securitizations ********************************************** $ — $— $ — $—
Collections used by trust to purchase new receivables in revolving securitizations **** — — 420.6 —
Servicing and other fees received and cash flows on retained interests**************** 23.9 24.3 85.3 51.8
Net cash flow from loan conduit consolidation************************************ (1,884.0) — — —
(a) The small business credit securitization is a revolving transaction where proceeds are reinvested until their legal terminations.
U.S. BANCORP 81