US Bank 2010 Annual Report Download - page 87

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Covered assets represent loans and other assets acquired from the FDIC subject to loss sharing agreements and included
expected reimbursements from the FDIC of approximately $3.1 billion at December 31, 2010, and $3.9 billion at
December 31, 2009. The carrying amount of covered assets consisted of purchased impaired loans, purchased nonimpaired
loans, and other assets as shown in the following table:
December 31 (Dollars in Millions)
Purchased
impaired
loans
Purchased
nonimpaired
loans
Other
assets Total
Purchased
impaired
loans
Purchased
nonimpaired
loans
Other
assets Total
2010 2009
Commercial loans . . . . . . . . . . . . . . . . . . . . . . $ 70 $ 260 $ – $ 330 $ 86 $ 443 $ – $ 529
Commercial real estate loans . . . . . . . . . . . . . . 2,254 5,952 – 8,206 3,035 6,724 – 9,759
Residential mortgage loans . . . . . . . . . . . . . . . . 3,819 1,620 – 5,439 4,712 1,918 – 6,630
Retail loans . . . . . . . . . . . . . . . . . . . . . . . . . . – 930 – 930 30 978 – 1,008
Losses reimbursable by the FDIC . . . . . . . . . . . . – – 3,137 3,137 – – 3,933 3,933
Covered loans. . . . . . . . . . . . . . . . . . . . . . . 6,143 8,762 3,137 18,042 7,863 10,063 3,933 21,859
Foreclosed real estate . . . . . . . . . . . . . . . . . . . – – 453 453 – – 653 653
Total covered assets . . . . . . . . . . . . . . . . . . $6,143 $8,762 $3,590 $18,495 $7,863 $10,063 $4,586 $22,512
At December 31, 2010, $.5 billion of the purchased
impaired loans included in covered loans were classified as
nonperforming assets, compared with $1.1 billion at
December 31, 2009, because the expected cash flows are
primarily based on the liquidation of underlying collateral
and the timing and amount of the cash flows could not be
reasonably estimated. Interest income is recognized on other
purchased impaired loans in covered loans through accretion
of the difference between the carrying amount of those loans
and their expected cash flows. The initial determination of
the fair value of the purchased loans includes the impact of
expected credit losses and, therefore, no allowance for credit
losses is recorded at the purchase date. To the extent credit
deterioration occurs after the date of acquisition, the
Company records an allowance for credit losses.
Changes in the accretable balance for purchased impaired loans for the Downey, PFF and FBOP transactions were as follows:
Year Ended December 31 (Dollars in Millions) 2010 2009 2008
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,845 $2,719 $ –
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 356 2,774
Accretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (421) (358) (55)
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27) (56) –
Reclassifications (to)/from nonaccretable difference (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 536 384 –
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (43) (200) –
Balance at end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,890 $2,845 $2,719
(a) Primarily relates to improvements in expected credit performance and changes in variable rates.
U.S. BANCORP 85