US Bank 2004 Annual Report Download - page 85
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Please find page 85 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.Changes in the valuation allowance for capitalized mortgage servicing rights are summarized as follows:
Year Ended December 31 (Dollars in Millions) 2004 2003 2002
Balance at beginning of year ************************************************ $160 $ 207 $ 53
Additions charged to operations ****************************************** 57 209 186
Direct write-downs charged against the allowance ************************** (45) (256) (32)
Balance at end of year ***************************************************** $172 $ 160 $207
Changes in net carrying value of capitalized mortgage servicing rights are summarized as follows:
Year Ended December 31 (Dollars in Millions) 2004 2003 2002
Balance at beginning of year ************************************************ $ 670 $ 642 $ 360
Rights purchased******************************************************* 139 55 229
Rights capitalized******************************************************* 300 338 357
Amortization *********************************************************** (186) (156) (94)
Rights sold ************************************************************ — — (24)
Impairment ************************************************************ (57) (209) (186)
Balance at end of year ***************************************************** 866 670 642
Impairment valuation allowance******************************************* 172 160 207
Initial carrying value, net of amortization*************************************** $1,038 $ 830 $ 849
The key economic assumptions used to estimate the value of the mortgage servicing rights portfolio were as follows:
December 31 (Dollars in Millions) 2004 2003
Fair value *************************************************************************************** $872 $670
Expected weighted-average life (in years) ************************************************************ 5.5 5.2
Discount rate ************************************************************************************ 9.9% 9.9%
The estimated sensitivity of the fair value of the mortgage servicing rights portfolio to changes in interest rates at
December 31, 2004, was as follows:
Down Scenario Up Scenario
(Dollars in Millions) 50 bps 25 bps 25 bps 50 bps
Fair value************************************************************************************** $(258) $(133) $109 $177
The fair value of mortgage servicing rights and its mortgages and conventional mortgages. The MRBP division
sensitivity to changes in interest rates is influenced by the specializes in servicing loans made under state and local
mix of the servicing portfolio and characteristics of each housing authority programs. These programs provide
segment of the portfolio. In the current interest rate mortgages to low and moderate income borrowers and are
environment, mortgage loans originated as part of generally under government insured programs with down
government agency and state loan programs tend to payment or closing cost assistance. The conventional and
experience slower prepayment speeds and better cash flows government servicing portfolios are predominantly
than conventional mortgage loans. The Company’s servicing comprised of fixed-rate agency loans (FNMA, FHLMC,
portfolio consists of the distinct portfolios of Mortgage GNMA, FHLB and various housing agencies) with limited
Revenue Bond Programs (‘‘MRBP’’), government-related adjustable-rate or jumbo mortgage loans.
A summary of the Company’s mortgage servicing rights and related characteristics by portfolio as of December 31, 2004, was
as follows:
(Dollars in Millions) MRBP Government Conventional Total
Servicing portfolio ************************************************************************** $7,524 $9,204 $46,435 $63,163
Fair market value *************************************************************************** $ 126 $ 136 $ 610 $ 872
Value (bps) ******************************************************************************** 167 148 131 138
Weighted-average servicing fees (bps)********************************************************* 43 46 34 37
Multiple (value/servicing fees)***************************************************************** 3.88 3.22 3.85 3.73
Weighted-average note rate****************************************************************** 6.24% 6.04% 5.71% 5.82%
Age (in years) ****************************************************************************** 3.6 2.2 1.7 2.0
Expected life (in years) ********************************************************************** 6.3 5.1 5.4 5.5
Discount rate ****************************************************************************** 10.1% 11.0% 9.6% 9.9%
U.S. BANCORP 83