US Bank 2006 Annual Report Download - page 33

December 31, 2005. The increase in loans held for sale was and time certificates of deposits less than $100,000,
principally due to an increase in residential mortgage partially offset by decreases in noninterest-bearing deposits,
balances. Average loans held for sale were $3.7 billion in savings accounts, money market savings and balances from
2006, compared with $3.3 billion in 2005. time deposits greater than $100,000. Average total deposits
decreased $.4 billion (.3 percent) from 2005, reflecting a
Investment Securities The Company uses its investment decline in average noninterest-bearing deposits, money
securities portfolio for several purposes. It serves as a vehicle market savings, and other savings accounts. The decreases
to manage interest rate risk, generates interest and dividend in these categories were partially offset by higher average
income from the investment of excess funds depending on interest checking and fixed-rate time certificate balances as
loan demand, provides liquidity and is used as collateral for branch-based customer balances migrated from lower rate
public deposits and wholesale funding sources. While it is the saving products to products with higher interest rate
Company’s intent to hold its investment securities offerings.
indefinitely, the Company may take actions in response to Noninterest-bearing deposits at December 31, 2006,
structural changes in the balance sheet and related interest decreased $.1 billion (.3 percent) from December 31, 2005.
rate risk and to meet liquidity requirements. The decrease was primarily attributed to a decline in
At December 31, 2006, investment securities, both business demand deposits as these customers reduced excess
available-for-sale and held-to-maturity, totaled liquidity to fund business growth. The change also reflected
$40.1 billion, compared with $39.8 billion at December 31, a migration of customers to interest-bearing products, given
2005. The $.3 billion (.9 percent) increase primarily rising interest rates. Average noninterest-bearing deposits in
reflected securities purchases of $7.5 billion, partially offset 2006 decreased $.5 billion (1.6 percent), compared with
by maturities and prepayments. Additionally, the Company 2005, due to similar factors.
reclassified $.5 billion of principal-only securities to the Interest-bearing savings deposits decreased $.3 billion
trading account effective January 1, 2006, in connection (.6 percent) at December 31, 2006, compared with
with the adoption of SFAS 156. At December 31, 2006, December 31, 2005. The decline in these deposit balances
approximately 37 percent of the investment securities was primarily related to reductions in money market
portfolio represented adjustable-rate financial instruments, savings and savings account balances, partially offset by an
compared with 41 percent at December 31, 2005. increase in interest checking accounts. The $1.7 billion
Adjustable-rate financial instruments include variable-rate (6.1 percent) decrease in money market savings account
collateralized mortgage obligations, mortgage-backed balances reflected the Company’s deposit pricing decisions
securities, agency securities, adjustable-rate money market for money market products in relation to other fixed-rate
accounts and asset-backed securities. The decline in the deposit products offered. A portion of branch-based money
percentage of adjustable-rate securities reflects decisions to market savings accounts migrated to fixed-rate time
purchase higher yielding fixed-rate municipal bonds and certificates in response to higher interest rates for these
certain preferred corporate debt instruments. Average products. The $1.7 billion (7.1 percent) increase in interest
investment securities were $2.1 billion (5.1 percent) lower checking account balances was due to an increase in trust
in 2006, compared with 2005. The decline principally and custody and government balances, partially offset by
reflected asset/liability management decisions to reduce the decreases in private banking balances. Average interest-
focus on residential mortgage-backed assets given the bearing savings deposits in 2006 decreased $2.1 billion
changing mix of the Company’s loan growth. (3.6 percent), compared with 2005, primarily driven by a
The weighted-average yield of the available-for-sale reduction in money market savings account balances of
portfolio was 5.32 percent at December 31, 2006, $2.6 billion (9.0 percent), partially offset by higher interest
compared with 4.89 percent at December 31, 2005. The checking account balances of $.8 billion (3.4 percent).
average maturity of the available-for-sale portfolio increased Interest-bearing time deposits at December 31, 2006,
to 6.6 years at December 31, 2006, up from 6.1 years at increased $.6 billion (1.7 percent), compared with
December 31, 2005. The relative mix of the type of December 31, 2005, primarily driven by an increase in time
investment securities maintained in the portfolio is provided certificates of deposit less than $100,000. The increase in
in Table 11. At December 31, 2006, the available-for-sale time certificates of deposit less than $100,000 was due to
portfolio included a $600 million net unrealized loss, the migration of a portion of customer noninterest-bearing
compared with a net unrealized loss of $662 million at and money market savings account balances to fixed-rate
December 31, 2005. deposits. Average time deposits greater than $100,000
Deposits Total deposits were $124.9 billion at increased $1.6 billion (7.7 percent) and average time
December 31, 2006, compared with $124.7 billion at certificates of deposit less than $100,000 increased
December 31, 2005, reflecting increases in interest checking $.6 billion (4.3 percent) in 2006, compared with 2005.
U.S. BANCORP 31