US Bank 2005 Annual Report Download - page 76

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Activity in the allowance for credit losses was as follows:
(Dollars in Millions) 2005 2004 2003
Balance at beginning of year******************************************************************** $2,269 $2,369 $2,422
Add
Provision charged to operating expense******************************************************* 666 669 1,254
Deduct
Loans charged off************************************************************************** 949 1,074 1,494
Less recoveries of loans charged off ********************************************************** 264 307 242
Net loans charged off*********************************************************************** 685 767 1,252
Acquisitions and other changes ***************************************************************** 1 (2) (55)
Balance at end of year (a) ********************************************************************** $2,251 $2,269 $2,369
Components
Allowance for loan losses ******************************************************************* $2,041 $2,080 $2,184
Liability for unfunded credit commitments ***************************************************** 210 189 185
Total allowance for credit losses ********************************************************** $2,251 $2,269 $2,369
(a) Included in this analysis is activity related to the Company’s liability for unfunded commitments, which is separately recorded in other liabilities in the Consolidated Balance Sheet.
A portion of the allowance for credit losses is allocated to commercial and commercial real estate loans deemed impaired.
These impaired loans are included in nonperforming assets. A summary of impaired loans and their related allowance for
credit losses is as follows:
2005 2004 2003
Recorded Valuation Recorded Valuation Recorded Valuation
(Dollars in Millions) Investment Allowance Investment Allowance Investment Allowance
Impaired loans
Valuation allowance required*************** $388 $37 $489 $64 $841 $108
No valuation allowance required************ ——————
Total impaired loans ************************* $388 $37 $489 $64 $841 $108
Average balance of impaired loans during the
year************************************ $412 $600 $970
Interest income recognized on impaired loans
during the year ************************** 21—
Commitments to lend additional funds to customers restructured loans was $315 million and $227 million,
whose commercial or commercial real estate loans were respectively, with average balances of $278 million during
classified as nonaccrual or restructured at December 31, 2005 and $229 million during 2004. The Company
2005, totaled $35 million. At December 31, 2005, there recognized estimated interest income on these loans of
were $1 million of these loans that were restructured at $20 million $17 million during 2005 and 2004 respectively.
market interest rates and returned to an accruing status. Included in noninterest income, primarily in mortgage
In addition to impaired commercial and commercial banking revenue, for the years ended December 31, 2005,
real estate loans, the Company had smaller balance 2004 and 2003, the Company had net gains on the sale of
homogenous loans that are accruing interest at rates loans of $175 million, $171 million and $163 million,
considered to be below market rate. At December 31, 2005 respectively.
and 2004, the recorded investment in these other
LEASES
The components of the net investment in sales-type and direct financing leases at December 31 were as follows:
(Dollars in Millions) 2005 2004
Aggregate future minimum lease payments to be received ********************************************************* $13,023 $12,436
Unguaranteed residual values accruing to the lessor’s benefit ****************************************************** 392 615
Unearned income ******************************************************************************************** (1,556) (1,560)
Initial direct costs ******************************************************************************************** 268 264
Total net investment in sales-type and direct financing leases(a) ************************************************* $12,127 $11,755
(a) The accumulated allowance for uncollectible minimum lease payments was $112 million and $141 million at December 31, 2005 and 2004, respectively.
74 U.S. BANCORP
Note 8