US Bank 2007 Annual Report Download - page 44

Download and view the complete annual report

Please find page 44 of the 2007 US Bank annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 126

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126

The following table provides an analysis of net charge-
offs as a percent of average loans outstanding managed by the
consumer finance division, compared with other retail loans:
Year Ended December 31
(Dollars in Millions) 2007 2006 2007 2006
Average Loans
Percent of
Average
Loans
Consumer Finance (a)
Residential mortgages . . . $ 9,129 $ 7,414 .58% .51%
Home equity and second
mortgages ......... 1,850 1,971 2.70 1.42
Other retail........... 414 399 3.38 4.76
Other Retail
Residential mortgages . . . $12,956 $13,639 .06% .02%
Home equity and second
mortgages ......... 14,073 13,175 .17 .17
Other retail........... 16,437 15,057 .90 .74
To t a l C o m p a n y
Residential mortgages . . . $22,085 $21,053 .28% .19%
Home equity and second
mortgages ......... 15,923 15,146 .46 .33
Other retail........... 16,850 15,456 .96 .85
(a) Consumer Finance category included credit originated and managed by USBCF, as well
as home equity and second mortgages with a loan-to-value greater than 100 percent
that were originated in the branches.
Within the consumer finance division, the Company
originates loans to customers that may be defined as sub-
prime borrowers. The following table provides further
information on net charge-offs as a percent of average loans
outstanding for this division:
Year Ended December 31
(Dollars in Millions) 2007 2006 2007 2006
Average Loans
Percent of
Average
Loans
Residential Mortgages
Sub-prime borrowers. . . . . . $3,158 $2,602 1.17% .95%
Other borrowers ......... 5,971 4,812 .27 .27
Total .............. $9,129 $7,414 .58% .51%
Home Equity And Second
Mortgages
Sub-prime borrowers. . . . . . $ 908 $ 842 3.41% 1.72%
Other borrowers ......... 942 1,129 2.02 1.20
Total .............. $1,850 $1,971 2.70% 1.42%
Analysis and Determination of the Allowance for Credit
Losses The allowance for loan losses provides coverage for
probable and estimable losses inherent in the Company’s
loan and lease portfolio. Management evaluates the
allowance each quarter to determine that it is adequate to
cover these inherent losses. The evaluation of each element
and the overall allowance is based on a continuing
assessment of problem loans, recent loss experience and
other factors, including regulatory guidance and economic
conditions. Because business processes and credit risks
associated with unfunded credit commitments are essentially
the same as for loans, the Company utilizes similar processes
to estimate its liability for unfunded credit commitments,
which is included in other liabilities in the Consolidated
Balance Sheet. Both the allowance for loan losses and the
liability for unfunded credit commitments are included in the
Company’s analysis of credit losses.
At December 31, 2007, the allowance for credit losses was
$2,260 million (1.47 percent of loans), compared with an
allowance of $2,256 million (1.57 percent of loans) at
December 31, 2006, and $2,251 million (1.65 percent of loans)
at December 31, 2005. The ratio of the allowance for credit
losses to nonperforming loans was 406 percent at December 31,
2007, compared with 480 percent and 414 percent at
December 31, 2006 and 2005, respectively. The ratio of the
allowance for credit losses to loan net charge-offs at
December 31, 2007, was 285 percent, compared with
415 percent and 329 percent at December 31, 2006 and 2005,
respectively. Management determined that the allowance for
credit losses was adequate at December 31, 2007.
Several factors were taken into consideration in
evaluating the allowance for credit losses at December 31,
2007, including the risk profile of the portfolios, loan net
charge-offs during the period, the level of nonperforming
42 U.S. BANCORP
Table 15 NET CHARGE-OFFS AS A PERCENT OF AVERAGE LOANS OUTSTANDING
Year Ended December 31 2007 2006 2005 2004 2003
Commercial
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24% .15% .12% .29% 1.34%
Lease financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61 .46 .85 1.42 1.65
Total commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29 .18 .20 .43 1.38
Commercial Real Estate
Commercial mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . .06 .01 .03 .09 .14
Construction and development . . . . . . . . . . . . . . . . . . . . . . . .11 .01 (.04) .13 .16
Total commercial real estate . . . . . . . . . . . . . . . . . . . . . . .08 .01 .01 .10 .14
Residential Mortgages ............................ .28 .19 .20 .20 .23
Retail
Credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.34 2.88 4.20 4.14 4.62
Retail leasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 .20 .35 .59 .86
Home equity and second mortgages . . . . . . . . . . . . . . . . . . . .46 .33 .46 .54 .70
Other retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .96 .85 1.33 1.35 1.79
Total retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.17 .92 1.30 1.36 1.68
Total loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54% .39% .52% .64% 1.07%