US Bank 2005 Annual Report Download - page 25

in 2005. Nonperforming loans, principally reflecting The growth in credit and debit card revenue of
changes in the quality of commercial and commercial real 9.9 percent was principally driven by higher customer
estate loans, declined $96 million from December 31, 2004. transaction volumes and rate changes from a year ago. The
Net charge-offs declined $82 million from 2004, the result corporate payment products revenue growth of 19.9 percent
of lower gross charge-offs within the commercial and reflected growth in sales, card usage, rate changes and the
commercial real estate loan portfolios. This improvement in recent acquisition of a small aviation card business. ATM
commercial and commercial real estate net charge-offs was processing services revenue was higher by 30.9 percent
offset somewhat by higher residential and retail net charge- primarily due to the expansion of the ATM business in May
offs reflecting changes in the mix of these portfolios and the of 2005. Merchant processing services revenue was higher
impact of recently enacted bankruptcy legislation. by 14.1 percent in 2005, compared with 2004, reflecting an
In 2004, the decline in the provision for credit losses of increase in merchant sales volume and business expansion
$585 million (46.7 percent) reflected continuing in European markets. The increase in trust and investment
improvement in the credit quality of the loan portfolio and management fees was primarily attributable to improved
changing economic conditions. The changes in credit quality equity market conditions and account growth. Deposit
were broad-based across most industries resulting in service charges were higher by 15.0 percent year-over-year
improving credit risk ratings, a decline in nonperforming due to new account growth in the branches and higher
assets and lower total net charge-offs. Commercial loan transaction-related service activities. The growth in
demand was soft in most markets within the banking mortgage banking revenue was due to origination fees and
footprint during much of 2003 and 2004. Overall, credit gains from higher production volumes and increased
quality of the Company’s portfolios has improved since servicing income. Other income increased by 24.1 percent
2002 due to better economic conditions and enhancements from 2004, primarily due to higher income from equity
in collection efforts, underwriting and risk management investments and the cash surrender value of insurance
practices. In response to these changes, the Company’s products relative to 2004. Partially offsetting these positive
allowance for credit losses has trended downward since variances year-over-year were decreases in treasury
2002. Refer to ‘‘Corporate Risk Profile’’ for further management fees and commercial products revenue of
information on the provision for credit losses, net charge- 6.4 percent and 7.4 percent, respectively. The decrease in
offs, nonperforming assets and other factors considered by treasury management fees was due to higher earnings
the Company in assessing the credit quality of the loan credits on customers’ compensating balances, reflecting
portfolio and establishing the allowance for credit losses. rising interest rates relative to a year ago, partially offset by
growth in treasury management-related activities.
Noninterest Income Noninterest income in 2005 was Commercial products revenue declined due to reductions in
$6.0 billion, compared with $5.5 billion in 2004 and non-yield loan fees, syndications and fees for letters of
$5.3 billion in 2003. The $526 million (9.5 percent) credit.
increase in 2005 over 2004 was driven by strong organic In 2004, noninterest income increased $206 million
growth in the majority of fee income categories, particularly (3.9 percent), compared with 2003, driven by strong
payment processing revenues and deposit service charges. organic growth in most fee-based products and services
categories, particularly in payment processing revenue.
NONINTEREST INCOME
2005 2004
(Dollars in Millions) 2005 2004 2003 v 2004 v 2003
Credit and debit card revenue ********************************** $ 713 $ 649 $ 561 9.9% 15.7%
Corporate payment products revenue **************************** 488 407 361 19.9 12.7
ATM processing services *************************************** 229 175 166 30.9 5.4
Merchant processing services*********************************** 770 675 561 14.1 20.3
Trust and investment management fees ************************** 1,009 981 954 2.9 2.8
Deposit service charges**************************************** 928 807 716 15.0 12.7
Treasury management fees ************************************* 437 467 466 (6.4) 0.2
Commercial products revenue ********************************** 400 432 401 (7.4) 7.7
Mortgage banking revenue ************************************* 432 397 367 8.8 8.2
Investment products fees and commissions*********************** 152 156 145 (2.6) 7.6
Securities gains (losses), net ************************************ (106) (105) 245 1.0 *
Other ******************************************************** 593 478 370 24.1 29.2
Total noninterest income ************************************ $6,045 $5,519 $5,313 9.5% 3.9%
* Not meaningful
U.S. BANCORP 23
Table 4