US Bank 2007 Annual Report Download - page 83

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The following table lists information related to nonperforming loans as of December 31:
(Dollars in Millions) 2007 2006
Loans on nonaccrual status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $540 $432
Restructured loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 38
Total nonperforming loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $557 $470
Interest income that would have been recognized at original contractual terms . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60 $ 55
Amount recognized as interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 16
Forgone revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41 $ 39
Activity in the allowance for credit losses was as follows:
(Dollars in Millions) 2007 2006 2005
Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,256 $2,251 $2,269
Add
Provision charged to operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 792 544 666
Deduct
Loans charged off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,032 763 949
Less recoveries of loans charged off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240 219 264
Net loans charged off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 792 544 685
Acquisitions and other changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 5 1
Balance at end of year(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,260 $2,256 $2,251
Components
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,058 $2,022 $2,041
Liability for unfunded credit commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 234 210
Total allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,260 $2,256 $2,251
(a) Included in this analysis is activity related to the Company’s liability for unfunded commitments, which is separately recorded in other liabilities in the Consolidated Balance Sheet.
A portion of the allowance for credit losses is allocated to commercial and commercial real estate loans deemed impaired.
These impaired loans are included in nonperforming assets. A summary of impaired loans and their related allowance for credit
losses is as follows:
(Dollars in Millions)
Recorded
Investment
Valuation
Allowance
Recorded
Investment
Valuation
Allowance
Recorded
Investment
Valuation
Allowance
2007 2006 2005
Impaired loans
Valuation allowance required. . . . . . . . . . $314 $34 $346 $44 $388 $37
No valuation allowance required . . . . . . . 107 – – – – –
Total impaired loans . . . . . . . . . . . . . . . . . . $421 $34 $346 $44 $388 $37
Average balance of impaired loans during the
year . . . . . . . . . . . . . . . . . . . . . . . . . . $366 $344 $412
Interest income recognized on impaired loans
during the year . . . . . . . . . . . . . . . . . . . – 4 2
Commitments to lend additional funds to customers
whose commercial and commercial real estate loans were
classified as nonaccrual or restructured at December 31,
2007, totaled $12 million.
In addition to impaired commercial and commercial
real estate loans, the Company had smaller balance
homogenous loans that are accruing interest at rates
considered to be below market rate. At December 31, 2007,
2006 and 2005, the recorded investment in these other
restructured loans was $551 million, $405 million and
$315 million, respectively, with average balances of
$466 million, $379 million, and $278 million during 2007,
2006 and 2005, respectively. The Company recognized
estimated interest income on these loans of $29 million,
$35 million, and $20 million during 2007, 2006 and 2005,
respectively.
For the years ended December 31, 2007, 2006 and
2005, the Company had net gains on the sale of loans of
$163 million, $104 million and $175 million, respectively,
which were included in noninterest income, primarily in
mortgage banking revenue.
The Company has equity interests in two joint ventures
that are accounted for utilizing the equity method. The
principal activity of one entity is to provide commercial real
U.S. BANCORP 81