US Bank 2005 Annual Report Download - page 81

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A summary of the Company’s mortgage servicing rights and related characteristics by portfolio as of December 31, 2005, was
as follows:
(Dollars in Millions) MRBP Government Conventional Total
Servicing portfolio ************************************************************************* $7,206 $9,063 $52,737 $69,006
Fair market value************************************************************************** $ 118 $ 152 $ 853 $ 1,123
Value (bps) ******************************************************************************* 164 168 162 163
Weighted-average servicing fees (bps) ******************************************************* 42 45 35 37
Multiple (value/servicing fees) *************************************************************** 3.90 3.73 4.63 4.41
Weighted-average note rate **************************************************************** 6.03% 6.03% 5.70% 5.78%
Age (in years) ***************************************************************************** 3.7 2.7 2.1 2.3
Expected life (in years) ********************************************************************* 6.1 6.3 7.0 6.8
Discount rate ***************************************************************************** 10.5% 10.7% 10.1% 10.2%
INTANGIBLE ASSETS
Intangible assets consisted of the following:
Estimated Amortization Balance
December 31 (Dollars in Millions) Life (a) Method (b) 2005 2004
Goodwill ************************************************************ — — $7,005 $6,241
Merchant processing contracts ***************************************** 9 years/8 years SL/AC 767 714
Core deposit benefits ************************************************* 10 years/6 years SL/AC 262 336
Mortgage servicing rights ********************************************** 7 years AC 1,118 866
Trust relationships **************************************************** 15 years/7 years SL/AC 477 297
Other identified intangibles ********************************************* 8 years /4 years SL/AC 250 174
Total************************************************************* $9,879 $8,628
(a) Estimated life represents the amortization period for assets subject to the straight line method and the weighted average amortization period for intangibles subject to accelerated methods.
If more than one amortization method is used for a category, the estimated life for each method is calculated and reported separately.
(b) Amortization methods: SL = straight line method
AC = accelerated methods generally based on cash flows
Aggregate amortization expense consisted of the following:
Year Ended December 31 (Dollars in Millions) 2005 2004 2003
Merchant processing contracts****************************************************************** $ 138 $ 132 $ 132
Core deposit benefits ************************************************************************** 74 81 88
Mortgage servicing rights (a) ******************************************************************** 144 243 365
Trust relationships ***************************************************************************** 47 49 53
Other identified intangibles********************************************************************** 55 45 44
Total ************************************************************************************* $ 458 $ 550 $ 682
(a) Includes mortgage servicing rights reparation of $53 million and impairment of $57 million and $209 million for the years ended December 31, 2005, 2004 and 2003, respectively.
Below is the estimated amortization expense for the next five years:
(Dollars in Millions)
2006 ************************************************************************************************************************** $480
2007 ************************************************************************************************************************** 425
2008 ************************************************************************************************************************** 358
2009 ************************************************************************************************************************** 302
2010 ************************************************************************************************************************** 232
U.S. BANCORP 79
Note 12