US Bank 2006 Annual Report Download - page 37

commercial real estate at year end 2006 was approximately Within the consumer finance division approximately
$.7 billion in loans related to land held for development and $2.8 billion, or 35.1 percent of that division, represents loans
$2.2 billion of loans related to residential and commercial to customers that may be defined as sub-prime borrowers. Of
acquisition and development properties. These loans are these loans, 34.8 percent had a loan-to-value of less than or
subject to quarterly monitoring for changes in local market equal to 80 percent of the origination amount, while
conditions due to a higher credit risk profile. Acquisition and 24.2 percent had loan-to-values of over 80 percent through
development loans continued to perform well, despite a slow 90 percent and 39.1 percent had loan-to-values of over
down in the housing market and softening of demand. The 90 percent through 100 percent.
commercial real estate portfolio is diversified across the The following table provides further information for the
Company’s geographical markets with 92.0 percent of total consumer finance division:
commercial real estate loans outstanding at December 31, Percent
Interest of
2006, within the 24-state banking region. (Dollars in Millions) Only Amortizing Total Division
Residential mortgages represent an important financial
SUB-PRIME BORROWERS
product for consumer customers of the Company and are
Less than or equal to 80% *** $ 4 $ 985 $ 989 12.3%
originated through the Company’s branches, loan production
Over 80% through 90% ***** 6 681 687 8.5
offices, a wholesale network of originators and a consumer Over 90% through 100% **** 34 1,076 1,110 13.7
finance division. With respect to residential mortgages Over 100%**************** —5555.7
originated through these channels, the Company may either
Total****************** $ 44 $2,797 $2,841 35.2%
retain the loans on its balance sheet or sell its interest in the
OTHER BORROWERS
balances into the secondary market while retaining the
Less than or equal to 80% *** $ 690 $1,219 $1,909 23.6%
servicing rights and customer relationships. Utilizing the Over 80% through 90% ***** 740 670 1,410 17.4
secondary markets enables the Company to effectively reduce Over 90% through 100% **** 541 1,359 1,900 23.5
its credit and other asset/liability risks. For residential Over 100%**************** —2424.3
mortgages that are retained in the Company’s portfolio, credit Total****************** $1,971 $3,272 $5,243 64.8%
risk is also diversified by geography and by monitoring loan-
TOTAL CONSUMER
to-values during the underwriting process.
FINANCE ***************** $2,015 $6,069 $8,084 100.0%
The following table provides summary information of the The Company does not have any residential mortgages
loan-to-values of residential mortgages by distribution whose payment schedule would cause balances to increase
channel and type at December 31, 2006: over time.
Percent The retail loan portfolio principally reflects the
Interest of
(Dollars in Millions) Only Amortizing Total Total Company’s focus on consumers within its footprint of
branches and certain niche lending activities that are nationally
CONSUMER FINANCE
focused. Within the Company’s retail loan portfolio
Less than or equal to 80% ** $ 694 $ 2,204 $ 2,898 35.9%
approximately 82.7 percent of the credit card balances relate
Over 80% through 90% **** 746 1,351 2,097 25.9
Over 90% through 100% *** 575 2,435 3,010 37.2 to bank branch, co-branded and affinity programs that
Over 100%*************** —79791.0
generally experience better credit quality performance than
Total***************** $2,015 $ 6,069 $ 8,084 100.0% portfolios generated through national direct mail programs. At
December 31, 2006, approximately 80.8 percent of the student
TRADITIONAL BRANCH
Less than or equal to 80% ** $2,464 $10,224 $12,688 96.1% loan portfolio is federally guaranteed through various
Over 80% through 90% **** 109 232 341 2.6 programs reducing its risk profile.
Over 90% through 100% *** 120 52 172 1.3 Table 9 provides a geographical summary of the
Over 100%*************** ————
residential mortgage and retail loan portfolios.
Total***************** $2,693 $10,508 $13,201 100.0%
Loan Delinquencies Trends in delinquency ratios represent
TOTAL COMPANY an indicator, among other considerations, of credit risk
Less than or equal to 80% ** $3,158 $12,428 $15,586 73.2% within the Company’s loan portfolios. The entire balance of
Over 80% through 90% **** 855 1,583 2,438 11.5
an account is considered delinquent if the minimum
Over 90% through 100% *** 695 2,487 3,182 14.9
payment contractually required to be made is not received
Over 100%*************** —7979.4
by the specified date on the billing statement. The Company
Total***************** $4,708 $16,577 $21,285 100.0%
measures delinquencies, both including and excluding
Note: loan-to-values determined as of the date of origination.
nonperforming loans, to enable comparability with other
companies. Advances made pursuant to servicing
agreements to Government National Mortgage Association
U.S. BANCORP 35