US Bank 2007 Annual Report Download - page 26

subsequent sale of the equity interests in a cardholder
association, a gain on the sale of a 401(k) defined
contribution recordkeeping business, and a favorable
settlement in the merchant processing business, offset by
lower mortgage banking revenue due to adopting fair value
accounting standards for MSRs.
The growth in credit and debit card revenue of
18.6 percent was primarily driven by an increase in
customer accounts and higher customer transaction volumes
from a year ago. The increase coincides with the strong
organic growth in credit card balances during the year. The
corporate payment products revenue growth of 13.3 percent
reflected growth in customer sales volumes and card usage,
and the impact of an acquired business. Merchant processing
services revenue was 14.3 percent higher in 2007, compared
with 2006, reflecting an increase in customers and sales
volumes on both a domestic and global basis. Trust and
investment management fees increased 8.4 percent primarily
due to core account growth and favorable equity market
conditions during the year. Deposit service charges were
3.4 percent higher year-over-year due primarily to increased
transaction-related fees and the impact of continued growth
in net new checking accounts. This growth in deposit
account-related revenue was muted somewhat as service
charges, traditionally reflected in this fee category, continued
to migrate to yield-related loan fees as customers utilized
new consumer products. Treasury management fees
increased 7.0 percent over the prior year due, in part, to new
customer account growth, new product offerings and higher
transaction volumes. Commercial products revenue increased
4.3 percent over the prior year due to higher syndication
fees, and foreign exchange and commercial leasing revenue.
Mortgage banking revenue increased 34.9 percent in 2007,
compared with 2006, due to an increase in mortgage
originations and servicing income, partially offset by an
adverse net change in the valuation of MSRs and related
economic hedging activities given changing interest rates. In
2006, mortgage banking revenue included a valuation loss of
$37 million related to the adoption of fair value accounting
for MSRs.
Growth in these fee-based revenue categories was
partially offset by slightly lower investment products fees
and commissions and a decline in other income. The
35.5 percent reduction of other revenue in 2007, compared
with 2006, included $107 million in valuation losses
recognized in 2007, related to securities purchased from
certain money market funds managed by an affiliate. In
addition, 2006 results reflected a $52 million gain on the
sale of a 401(k) defined contribution recordkeeping business,
$67 million of gains on the initial public offering and
subsequent sale of the equity interests in a cardholder
association, a $10 million favorable legal settlement within
the merchant processing business and a $50 million trading
gain related to terminating certain interest rate swaps.
The $801 million (13.3 percent) increase in 2006 over
2005, was driven by organic business growth in several fee
categories, expansion in trust and payment processing
businesses, a favorable change of $120 million in net
securities gains (losses) and other gains recorded in 2006 of
$179 million. These included the gains from terminated
interest rate swaps, equity gains from the initial public
offering and subsequent sale of the equity interests in a
cardholder association, gains from the sale of a 401(k)
defined contribution recordkeeping business and a favorable
legal settlement in the merchant processing business. The
growth in credit and debit card revenue was principally
driven by higher customer transaction sales volumes and fees
related to cash advances, balance transfers and over-limit
positions. The corporate payment products revenue growth
reflected organic growth in sales volumes and card usage,
enhancements in product pricing and acquired business
expansion. ATM processing services revenue was higher due
24 U.S. BANCORP
Table 4 NONINTEREST INCOME
(Dollars in Millions) 2007 2006 2005
2007
v 2006
2006
v 2005
Credit and debit card revenue . . . . . . . . . . . . . . . . . . . . .... $ 949 $ 800 $ 713 18.6% 12.2%
Corporate payment products revenue . . . . . . . . . . . . . . . .... 631 557 488 13.3 14.1
ATM processing services . . . . . . . . . . . . . . . . . . . . . . . .... 245 243 229 .8 6.1
Merchant processing services . . . . . . . . . . . . . . . . . . . . .... 1,101 963 770 14.3 25.1
Trust and investment management fees . . . . . . . . . . . . . .... 1,339 1,235 1,009 8.4 22.4
Deposit service charges . . . . . . . . . . . . . . . . . . . . . . . . .... 1,058 1,023 928 3.4 10.2
Treasury management fees. . . . . . . . . . . . . . . . . . . . . . .... 472 441 437 7.0 .9
Commercial products revenue . . . . . . . . . . . . . . . . . . . . .... 433 415 400 4.3 3.8
Mortgage banking revenue . . . . . . . . . . . . . . . . . . . . . . .... 259 192 432 34.9 (55.6)
Investment products fees and commissions . . . . . . . . . . . .... 146 150 152 (2.7) (1.3)
Securities gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . 15 14 (106) 7.1 *
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 524 813 593 (35.5) 37.1
Total noninterest income . . . . . . . . . . . . . . . . . . . . . .... $7,172 $6,846 $6,045 4.8% 13.3%
*Not meaningful