US Bank 2008 Annual Report Download - page 84

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Activity in the allowance for credit losses was as follows:
(Dollars in Millions) 2008 2007 2006
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,260 $2,256 $2,251
Add
Provision charged to operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,096 792 544
Deduct
Loans charged off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,009 1,032 763
Less recoveries of loans charged off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (190) (240) (219)
Net loans charged off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,819 792 544
Acquisitions and other changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 4 5
Balance at end of year (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,639 $2,260 $2,256
Components
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,514 $2,058 $2,022
Liability for unfunded credit commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 202 234
Total allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,639 $2,260 $2,256
(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 summary of impaired loans is as follows:
(Dollars in Millions)
Recorded
Investment
Valuation
Allowance
Recorded
Investment
Valuation
Allowance
Recorded
Investment
Valuation
Allowance
2008 2007 2006
Commercial and commercial real estate loans:
Period-end recorded investment
Valuation allowance required . . . . . . . $1,023 $115 $314 $34 $346 $44
No valuation allowance required . . . . . 514 – 107 – – –
Total . . . . . . . . . . . . . . . . . . . . . $1,537 $115 $421 $34 $346 $44
Average balance. . . . . . . . . . . . . . . . . . $1,006 $366 $344
Interest income recognized . . . . . . . . . . . 6 – 4
Commitments to lend additional funds . . . 107 12 23
Restructured accruing homogenous loans:
Period-end recorded investment . . . . . $1,336 $223 $551 $17 $405 $10
Average balance . . . . . . . . . . . . . . . 1,196 466 379
Interest income recognized . . . . . . . . 71 29 35
Nonaccrual homogenous loans:
Period-end recorded investment . . . . . $ 302 $ 29 $ 82 $ 1 $ 84 $ 1
For the years ended December 31, 2008, 2007 and
2006, the Company had net gains on the sale of loans of
$220 million, $163 million and $104 million, respectively,
which were included in noninterest income, primarily in
mortgage banking revenue.
The Company has equity interests in several joint
ventures that are accounted for utilizing the equity method.
The principal activities of these entities are to:
• develop land, construct and sell residential homes.
• provide commercial real estate financing for loans that
are subsequently sold or securitized.
• provide senior or subordinated financing to customers
for the construction, rehabilitation or development of
commercial real estate.
In connection with these joint ventures, the Company
may provide warehousing lines to support the operations.
Warehousing advances to the joint ventures are repaid when
the sale or securitization of loans is completed or the real
estate is permanently refinanced by others. At December 31,
2008 and 2007, the Company had $1.0 billion and
$2.3 billion, respectively, of outstanding advances to these
joint ventures.
82 U.S. BANCORP