US Bank 2007 Annual Report Download - page 24

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year decrease reflected a decline in personal and business
demand deposits, partially offset by higher trust deposits.
The decline in personal demand deposit balances occurred
within the Consumer Banking business line. The decline in
business demand deposits occurred within most business
lines as business customers utilized deposit balances to fund
business growth and meet other liquidity requirements.
Average total savings products increased $.9 billion
(1.7 percent) in 2007, compared with 2006, as increases in
interest checking balances more than offset declines in
money market and savings balances, primarily within
Consumer Banking. Interest checking balances increased
$2.6 billion (10.9 percent) in 2007, compared with 2006,
due to higher broker-dealer, government and institutional
trust balances. Average money market savings balances
declined year-over-year by $1.3 billion (5.0 percent) as a
result of the Company’s deposit pricing decisions for money
market products in relation to other fixed-rate deposit
products. During 2007, a portion of branch-based money
market savings accounts migrated to fixed-rate time
certificates, as customers took advantage of higher interest
rates for these products.
Average time certificates of deposit less than $100,000
were $.9 billion (6.5 percent) higher in 2007, compared with
2006. The year-over-year growth in time certificates less
than $100,000 was primarily due to branch-based time
deposits, reflecting customer migration to higher rate deposit
products and pricing decisions for these products. Average
time deposits greater than $100,000 were basically
unchanged in 2007, compared with 2006. Time deposits
greater than $100,000 are largely viewed as purchased funds
and are managed at levels deemed appropriate, given
alternative funding sources.
The decline in net interest income in 2006, compared
with 2005, reflected growth in average earning assets, more
than offset by a lower net interest margin. The $7.8 billion
(4.4 percent) increase in average earning assets for 2006,
compared with 2005, was primarily driven by growth in
average loans, partially offset by a decrease in average
investment securities. The 32 basis point decline in net
interest margin in 2006, compared with 2005, reflected the
competitive lending environment and the impact of a flatter
yield curve. The net interest margin also declined due to
funding incremental asset growth with higher cost wholesale
funding, share repurchases and asset/liability decisions. An
22 U.S. BANCORP
Table 3 NET INTEREST INCOME — CHANGES DUE TO RATE AND VOLUME (a)
(Dollars in Millions) Volume Yield/Rate Total Volume Yield/Rate Total
2007 v 2006 2006 v 2005
Increase (decrease) in
Interest Income
Investment securities . . . . . . . . . . . . . . . . . $ 70 $ 106 $176 $(100) $ 201 $ 101
Loans held for sale . . . . . . . . . . . . . . . . . . 41 – 41 20 35 55
Loans
Commercial. . . . . . . . . . . . . . . . . . . . . 155 19 174 164 304 468
Commercial real estate . . . . . . . . . . . . . (12) (13) (25) 51 249 300
Residential mortgages . . . . . . . . . . . . . 60 70 130 167 56 223
Retail . . . . . . . . . . . . . . . . . . . . . . . . . 279 199 478 167 410 577
Total loans . . . . . . . . . . . . . . . . . . . 482 275 757 549 1,019 1,568
Other earning assets . . . . . . . . . . . . . . . . . (22) 6 (16) 45 (2) 43
Total earning assets . . . . . . . . . . . . . 571 387 958 514 1,253 1,767
Interest Expense
Interest-bearing deposits
Interest checking . . . . . . . . . . . . . . . . . 25 93 118 5 93 98
Money market savings . . . . . . . . . . . . . (28) 110 82 (32) 243 211
Savings accounts . . . . . . . . . . . . . . . . . (1) 1 – (1) 5 4
Time certificates of deposit less than
$100,000 . . . . . . . . . . . . . . . . . . . . 34 86 120 17 118 135
Time deposits greater than $100,000. . . . 2 43 45 51 331 382
Total interest-bearing deposits . . . . . . 32 333 365 40 790 830
Short-term borrowings . . . . . . . . . . . . . . . . 229 60 289 179 373 552
Long-term debt. . . . . . . . . . . . . . . . . . . . . 201 129 330 145 538 683
Total interest-bearing liabilities . . . . . . 462 522 984 364 1,701 2,065
Increase (decrease) in net interest income . . $109 $(135) $ (26) $ 150 $ (448) $ (298)
(a) This table shows the components of the change in net interest income by volume and rate on a taxable-equivalent basis utilizing a tax rate of 35 percent. This table does not take into
account the level of noninterest-bearing funding, nor does it fully reflect changes in the mix of assets and liabilities. The change in interest not solely due to changes in volume or rates has
been allocated on a pro-rata basis to volume and yield/rate.