US Bank 2009 Annual Report Download - page 133

interest margin. Federal Reserve Board policies can also
materially affect the value of financial instruments that the
Company holds, such as debt securities and mortgage
servicing rights.
The Company and its bank subsidiaries are heavily
regulated at the federal and state levels. This regulation is to
protect depositors, federal deposit insurance funds and the
banking system as a whole. Congress and state legislatures
and federal and state agencies continually review banking
laws, regulations and policies for possible changes. Changes
in statutes, regulations or policies could affect the Company
in substantial and unpredictable ways, including limiting the
types of financial services and products that the Company
offers and/or increasing the ability of non-banks to offer
competing financial services and products. The Company
cannot predict whether any of this potential legislation will
be enacted, and if enacted, the effect that it or any
regulations would have on the Company’s financial
condition or results of operations.
The Company could experience an unexpected inability to
obtain needed liquidity The Company’s liquidity could be
constrained by an unexpected inability to access the capital
markets due to a variety of market dislocations or
interruptions. If the Company is unable to meet its funding
needs on a timely basis, its business would be adversely
affected.
The soundness of other financial institutions could
adversely affect the Company The Company’s ability to
engage in routine funding transactions could be adversely
affected by the actions and commercial soundness of other
financial institutions. Financial services institutions are
interrelated as a result of trading, clearing, counterparty or
other relationships. The Company has exposure to many
different counterparties, and the Company routinely
executes transactions with counterparties in the financial
industry, including brokers and dealers, commercial banks,
investment banks, mutual and hedge funds, and other
institutional clients. As a result, defaults by, or even rumors
or questions about, one or more financial services
institutions, or the financial services industry generally, could
lead to losses or defaults by the Company or by other
institutions. Many of these transactions expose the Company
to credit risk in the event of default of the Company’s
counterparty or client. In addition, the Company’s credit risk
may be exacerbated when the collateral held by the
Company cannot be realized upon or is liquidated at prices
not sufficient to recover the full amount of the financial
instrument exposure due the Company. There is no
assurance that any such losses would not materially and
adversely affect the Company’s results of operations.
The financial services industry is highly competitive, and
competitive pressures could intensify and adversely affect
the Company’s financial results The Company operates in a
highly competitive industry that could become even more
competitive as a result of legislative, regulatory and
technological changes, as well as continued industry
consolidation which may increase in connection with current
economic and market conditions. The Company competes
with other commercial banks, savings and loan associations,
mutual savings banks, finance companies, mortgage banking
companies, credit unions and investment companies. In
addition, technology has lowered barriers to entry and made
it possible for non-banks to offer products and services
traditionally provided by banks. Many of the Company’s
competitors have fewer regulatory constraints and some
have lower cost structures. Also, the potential need to adapt
to industry changes in information technology systems, on
which the Company and financial services industry are
highly dependent, could present operational issues and
require capital spending.
Changes in consumer use of banks and changes in
consumer spending and saving habits could adversely
affect the Company’s financial results Technology and other
changes now allow many consumers to complete financial
transactions without using banks. For example, consumers
can pay bills and transfer funds directly without going
through a bank. This “disintermediation” could result in the
loss of fee income, as well as the loss of customer deposits
and income generated from those deposits. In addition,
changes in consumer spending and saving habits could
adversely affect the Company’s operations, and the
Company may be unable to timely develop competitive new
products and services in response to these changes that are
accepted by new and existing customers.
Changes in the domestic interest rate environment could
reduce the Company’s net interest income The operations
of financial institutions such as the Company are dependent
to a large degree on net interest income, which is the
difference between interest income from loans and
investments and interest expense on deposits and
borrowings. An institution’s net interest income is
significantly affected by market rates of interest, which in
turn are affected by prevailing economic conditions, by the
fiscal and monetary policies of the federal government and
by the policies of various regulatory agencies. Like all
financial institutions, the Company’s balance sheet is
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