US Bank 2008 Annual Report Download - page 42

Within these product categories, the following table provides
information on delinquent and nonperforming loans as a
percent of ending loan balances, by channel:
December 31, 2008 2007 2008 2007
Consumer
Finance (a) Other Retail
Residential mortgages
30-89 days . . . ......... 3.96% 1.58% 1.06% .61%
90 days or more ......... 2.61 1.33 .79 .51
Nonperforming . ......... 1.60 .31 .38 .18
To t a l ............. 8.17% 3.22% 2.23% 1.30%
Retail
Credit card
30-89 days . . . ......... –% –% 2.73% 2.44%
90 days or more ......... – – 2.20 1.94
Nonperforming . ......... – – .49 .13
To t a l ............. –% –% 5.42% 4.51%
Retail leasing
30-89 days . . . ......... –% –% .95% .65%
90 days or more ......... – – .16 .10
Nonperforming . ......... – – – –
To t a l ............. –% –% 1.11% .75%
Home equity and second
mortgages
30-89 days . . . ......... 3.24% 2.53% .59% .41%
90 days or more ......... 2.36 1.78 .32 .21
Nonperforming . ......... .14 .11 .07 .06
To t a l ............. 5.74% 4.42% .98% .68%
Other retail
30-89 days . . . ......... 6.91% 6.38% 1.00% .88%
90 days or more ......... 1.98 1.66 .32 .33
Nonperforming . ......... – – .05 .02
To t a l ............. 8.89% 8.04% 1.37% 1.23%
(a) Consumer finance category included credit originated and managed by the consumer
finance division, as well as the majority of 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 at December 31,
2008, approximately $467 million and $121 million of these
delinquent and nonperforming residential mortgages and
other retail loans, respectively, were to customers that may
be defined as sub-prime borrowers, compared with
$227 million and $89 million, respectively at December 31,
2007.
The following table provides summary delinquency
information for covered assets:
December 31,
(Dollars in Millions) 2008 2007 2008 2007
Amount
As a Percent of
Ending
Loan Balances
30-89 days . . . . . . . . . . . . . . $ 740 – 6.46% –
90 days or more . . . . . . . . . . . 587 – 5.13 –
Nonperforming . . . . . . . . . . . . 643 – 5.62 –
To t a l ................ $1,970 – 17.21% –
Restructured Loans Accruing Interest In certain
circumstances, management may modify the terms of a loan
to maximize the collection of the loan balance. In most
cases, the modification is either a reduction in interest rate,
extension of the maturity date or a reduction in the principal
balance. Generally, the borrower is experiencing financial
difficulties or is expected to experience difficulties in the
near-term so concessionary modification is granted to the
borrower that would otherwise not be considered.
Restructured loans, except those where the principal balance
has been reduced, accrue interest as long as the borrower
complies with the revised terms and conditions and has
demonstrated repayment performance at a level
commensurate with the modified terms over several payment
cycles.
The majority of the Company’s loan restructurings
occur on a case-by-case basis in connection with ongoing
loan collection processes. However, in late 2007, the
Company began implementing a mortgage loan restructuring
program for certain qualifying borrowers. In general, certain
borrowers in the consumer finance division facing an interest
rate reset that are current in their repayment status, are
allowed to retain the lower of their existing interest rate or
the market interest rate as of their interest reset date.
Covered assets acquired from Downey and PFF that had
been restructured prior to the acquisitions are not considered
restructured loans for purposes of the Company’s accounting
and disclosure because they reflect the terms in place at the
date of the Company’s investment. Covered loans
restructured after the date of acquisition are considered
restructured loans to the Company and are accounted for in
the same manner as the Company’s other restructured loans.
The Company expects to restructure a substantial amount of
the covered assets over the next two years.
The following table provides a summary of restructured
loans that are performing in accordance with the modified
terms, and therefore continue to accrue interest:
December 31
(Dollars in Millions) 2008 2007 2008 2007
Amount
As a Percent
of Ending
Loan Balances
Commercial . . . . . . . . . . . . $ 35 $ 21 .06% .04%
Commercial real estate . . . . 138 – .42 –
Residential mortgages . . . . . 813 157 3.45 .69
Credit card . . . . . . . . . . . . 450 324 3.33 2.96
Other retail . . . . . . . . . . . . 73 49 .16 .12
To t a l .............. $1,509 $551 .81% .36%
Restructured loans that continue to accrue interest were
$958 million higher at December 31, 2008, compared with
December 31, 2007, reflecting the impact of residential
mortgage restructurings. The Company expects this trend to
continue in the near term as difficult economic conditions
continue and borrowers seek alternative payment
arrangements.
40 U.S. BANCORP