US Bank 2009 Annual Report Download - page 33

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Loans Held for Sale Loans held for sale, consisting primarily
of residential mortgages and student loans to be sold in the
secondary market, were $4.8 billion at December 31, 2009,
compared with $3.2 billion at December 31, 2008. The
increase in loans held for sale was principally due to an
increase in mortgage loan origination activity as a result of a
decline in market interest rates.
Investment Securities The Company uses its investment
securities portfolio for several purposes. It serves as a vehicle
to manage enterprise interest rate risk, generates interest and
dividend income from the investment of excess funds
depending on loan demand, provides liquidity and is used as
collateral for public deposits and wholesale funding sources.
While the Company intends to hold its investment securities
indefinitely, it may sell securities in response to structural
changes in the balance sheet and related interest rate risk
and to meet liquidity requirements, among other factors.
At December 31, 2009, investment securities totaled
$44.8 billion, compared with $39.5 billion at December 31,
2008. The $5.3 billion (13.3 percent) increase reflected
$3.1 billion of net investment purchases and a $2.2 billion
decrease in net unrealized losses. At December 31, 2009,
adjustable-rate financial instruments comprised 46 percent
of the investment securities portfolio, compared with
40 percent at December 31, 2008.
Average investment securities were $42.8 billion in
2009, essentially unchanged from 2008. The weighted-
average yield of the available-for-sale portfolio was
4.00 percent at December 31, 2009, compared with
4.56 percent at December 31, 2008. The average maturity of
the available-for-sale portfolio decreased to 7.1 years at
December 31, 2009, from 7.7 years at December 31, 2008.
Investment securities by type are shown in Table 11.
The Company conducts a regular assessment of its
investment portfolios to determine whether any securities are
other-than-temporarily impaired. During 2009, the Financial
Accounting Standards Board issued new accounting
guidance, which the Company adopted effective January 1,
2009, for the measurement and recognition of
other-than-temporary impairment for debt securities. This
guidance requires the portion of other-than-temporary
impairment related to factors other than anticipated credit
losses be recognized in other comprehensive income (loss),
rather than earnings.
At December 31, 2009, the Company’s net unrealized
loss on available-for-sale securities was $.6 billion, compared
with a net unrealized loss of $2.8 billion at December 31,
2008. The decrease in unrealized losses was primarily due to
increases in the fair value of agency mortgage-backed
securities and obligations of state and political subdivisions,
and to amounts recognized as other-than-temporary
impairments in earnings. When assessing impairment, the
Company considers the nature of the investment, the
financial condition of the issuer, the extent and duration of
unrealized loss, expected cash flows of underlying collateral
or assets and market conditions. At December 31, 2009, the
Company had no plans to sell securities with unrealized
losses and believes it is more likely than not it would not be
required to sell such securities before recovery of their
amortized cost.
U.S. BANCORP 31