US Bank 2012 Annual Report Download - page 68

compared with 2011, driven by the net impact of lower rates
on loans and the impact of lower rates on the margin benefit
from deposits, partially offset by higher average loan and
deposit balances. Noninterest income was essentially flat in
2012, compared with 2011.
Noninterest expense increased $12 million (.9 percent) in
2012, compared with 2011, primarily due to higher
compensation and employee benefits expense, partially offset
by lower costs related to other real estate owned. The
provision for credit losses decreased $423 million
(99.8 percent) in 2012, compared with 2011. The favorable
change was primarily due to lower net charge-offs and a
reduction in the reserve allocation. Nonperforming assets
were $520 million at December 31, 2012, compared with
$979 million at December 31, 2011. Nonperforming assets as
a percentage of period-end loans were .75 percent at
December 31, 2012, compared with 1.58 percent at
December 31, 2011. Refer to the “Corporate Risk Profile”
section for further information on factors impacting the credit
quality of the loan portfolios.
Consumer and Small Business Banking Consumer and Small
Business Banking delivers products and services through
banking offices, telephone servicing and sales, on-line services,
direct mail, ATM processing and over mobile devices, such as
mobile phones and tablet computers. It encompasses
community banking, metropolitan banking, in-store banking,
small business banking, consumer lending, mortgage banking,
workplace banking, student banking and 24-hour banking.
Consumer and Small Business Banking contributed $1.3
billion of the Company’s net income in 2012, or an increase
of $554 million (71.0 percent), compared with 2011. The
increase was due to higher total net revenue and lower
provision for credit losses, partially offset by an increase in
noninterest expense. Within Consumer and Small Business
Banking, the retail banking division contributed $471 million
of the total net income in 2012, or an increase of $104 million
(28.3 percent) over the prior year. Mortgage banking
contributed $863 million of the business line’s net income in
2012, or an increase of $450 million over the prior year.
Total net revenue increased $954 million (13.0
percent) in 2012, compared with 2011. Net interest income,
on a taxable-equivalent basis, increased $132 million
(2.9 percent) in 2012, compared with 2011. The year-over-
year increase in net interest income was primarily due to
higher average loan and deposit balances, partially offset by
lower loan rates and the impact of lower rates on the margin
benefit from deposits. Noninterest income increased $822
million (29.9 percent) in 2012, compared with 2011,
primarily the result of strong mortgage origination and sales
revenue, as well as an increase in loan servicing revenue,
partially offset by a decrease in ATM processing services
revenue as a result of the change in presentation of the
surcharge revenue passed through to others.
Noninterest expense increased $312 million (6.6 percent)
in 2012, compared with 2011. The increase reflected the
foreclosure-related regulatory settlement accrual and higher
mortgage servicing review-related costs, higher compensation
and employee benefits expense, and higher net shared services
costs, partially offset by lower net occupancy and equipment
expense due to the presentation change to ATM surcharge
revenue passed through to others and lower FDIC assessments
and other intangibles expense.
The provision for credit losses decreased $231 million
(16.6 percent) in 2012, compared with 2011, due to lower net
charge-offs and a reduction in the reserve allocation. As a
percentage of average loans outstanding, net charge-offs
decreased to .92 percent in 2012, compared with 1.19 percent
in 2011. Nonperforming assets were $1.4 billion at
December 31, 2012, unchanged from December 31, 2011.
Nonperforming assets as a percentage of period-end loans
were 1.16 percent at December 31, 2012, compared with 1.21
percent at December 31, 2011. Refer to the “Corporate Risk
Profile” section for further information on factors impacting
the credit quality of the loan portfolios.
Wealth Management and Securities Services Wealth
Management and Securities Services provides private banking,
financial advisory services, investment management, retail
brokerage services, insurance, trust, custody and fund
servicing through five businesses: Wealth Management,
Corporate Trust Services, U.S. Bancorp Asset Management,
Institutional Trust & Custody and Fund Services. Wealth
Management and Securities Services contributed $171 million
of the Company’s net income in 2012, a decrease of $9
million (5.0 percent), compared with 2011. The decrease from
the prior year was primarily due to higher noninterest
expense, partially offset by higher noninterest income.
Total net revenue increased $69 million (4.9 percent) in
2012, compared with 2011. Noninterest income increased
$70 million (6.7 percent) in 2012, compared with 2011,
primarily due to the impact of improved market conditions,
business expansion and an increase in investment product fees
and commissions.
Noninterest expense increased $74 million (6.6 percent)
in 2012, compared with 2011. The increase in noninterest
expense was primarily due to higher compensation and
employee benefits expense and an increase in net shared
services costs.
Payment Services Payment Services includes consumer and
business credit cards, stored-value cards, debit cards,
corporate and purchasing card services, consumer lines of
credit and merchant processing. Payment Services contributed
$1.3 billion of the Company’s net income in 2012, or a
64 U.S. BANCORP