US Bank 2008 Annual Report Download - page 62

with 2007. The unfavorable change was primarily due to
continued credit deterioration in the homebuilding and
commercial home supplier industries. Nonperforming assets
were $1,250 million at December 31, 2008, compared with
$336 million at December 31, 2007. Nonperforming assets
as a percentage of period-end loans were 1.94 percent at
December 31, 2008, compared with .60 percent at
December 31, 2007. Refer to the “Corporate Risk Profile”
section for further information on factors impacting the
credit quality of the loan portfolios.
Consumer Banking Consumer Banking delivers products and
services through banking offices, telephone servicing and
sales, on-line services, direct mail and ATM processing. It
encompasses community banking, metropolitan banking, in-
store banking, small business banking, consumer lending,
mortgage banking, consumer finance, workplace banking,
student banking and 24-hour banking. Consumer Banking
contributed $1,203 million of the Company’s net income in
2008, or a decrease of $627 million (34.3 percent),
compared with 2007. Within Consumer Banking, the retail
banking division contributed $1,090 million of the total net
income in 2008, or a decrease of 36.8 percent, compared
with the prior year. Mortgage banking contributed
$113 million of the business line’s net income in 2008, or an
increase of 6.6 percent, compared with the prior year.
Total net revenue decreased $185 million (3.0 percent)
in 2008, compared with 2007. Net interest income, on a
taxable-equivalent basis, increased $6 million (.2 percent) in
2008, compared with 2007, as increases in average loan
balances were offset by slightly lower deposit balances and a
decline in the margin benefit of deposits, given the declining
interest rate environment. The increase in average loan
balances reflected core growth in most loan categories, with
the largest increases in residential mortgages and retail loans.
In addition, average loan balances increased due to the
Downey and PFF acquisitions, reflected primarily in covered
assets. Residential mortgages were higher due to an increase
in mortgage banking activity. The favorable change in retail
loans was principally driven by an increase in installment
products, home equity lines and federally guaranteed student
loan balances due to both the transfer of balances from
loans held for sale and a portfolio purchase. The year-over-
year decrease in average deposits primarily reflected a
reduction in time deposits, partially offset by higher interest
checking and savings products. Average time deposit
balances declined $1.2 billion (6.0 percent) in 2008,
compared with 2007, and reflected the Company’s funding
and pricing decisions and competition for these deposits by
other financial institutions that have more limited access to
the wholesale funding sources given the current market
environment. Fee-based noninterest income decreased
$191 million (8.7 percent) in 2008, compared with 2007.
The decline in fee-based revenue was driven by lower retail
lease revenue, related to higher retail lease residual losses,
partially offset by growth in revenue from ATM processing
services, mortgage banking revenue, and higher deposit
service charges.
Total noninterest expense increased $340 million
(11.7 percent) in 2008, compared with 2007. The increase
included the net addition, including the impact of recent
acquisitions, of 141 in-store branches, 126 traditional
branches and 6 on-site branches at December 31, 2008,
compared with December 31, 2007. In addition, the increase
was primarily attributable to higher compensation and
employee benefit expense, which reflected business
investments in customer service and various promotional
activities, including further deployment of the PowerBank
initiative, the adoption of SFAS 157 and higher credit-related
costs associated with other real estate owned and
foreclosures.
The provision for credit losses increased $463 million in
2008, compared with 2007. The increase was attributable to
higher net charge-offs, reflecting portfolio growth and credit
deterioration in residential mortgages, home equity and
other installment and consumer loan portfolios from a year
ago. As a percentage of average loans outstanding, net
charge-offs were .96 percent in 2008, compared with
.43 percent in 2007. Commercial and commercial real estate
loan net charge-offs increased $57 million in 2008,
compared with 2007. Retail loan and residential mortgage
net charge-offs increased $406 million in 2008, compared
with 2007. In addition, there were $5 million of net charge-
offs in 2008 related to covered assets. Nonperforming assets
were $1,277 million at December 31, 2008, compared with
$326 million at December 31, 2007. Nonperforming assets
as a percentage of period-end loans were 1.38 percent at
December 31, 2008, compared with .44 percent at
December 31, 2007. Refer to the “Corporate Risk Profile”
section for further information on factors impacting the
credit quality of the loan portfolios.
Wealth Management & Securities Services Wealth
Management & Securities Services provides trust, private
banking, financial advisory, investment management, retail
brokerage services, insurance, custody and mutual fund
servicing through five businesses: Wealth Management,
Corporate Trust, FAF Advisors, Institutional Trust &
Custody and Fund Services. Wealth Management &
Securities Services contributed $541 million of the
Company’s net income in 2008, an increase of $4 million
(.7 percent), compared with 2007.
Total net revenue increased $41 million (2.2 percent) in
2008, compared with 2007. Net interest income, on a
taxable-equivalent basis, increased $12 million (2.5 percent)
in 2008, compared with 2007. The increase in net interest
60 U.S. BANCORP