UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
☑ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2018
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934 |
For the transition period from (not applicable)
Commission file number: 1-6880
U.S. Bancorp
(Exact name of registrant as specified in its charter)
Delaware | 41-0255900 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
800 Nicollet Mall, Minneapolis, Minnesota 55402
(Address of principal executive offices) (Zip Code)
(651) 466-3000
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Name of each exchange on which registered | |
Common Stock, $.01 par value per share |
New York Stock Exchange | |
Depositary Shares (each representing 1/100th interest in a
share of Series A |
New York Stock Exchange | |
Depositary Shares (each representing 1/1,000th interest in a share of
Series B |
New York Stock Exchange | |
Depositary Shares (each representing 1/1,000th interest in a share of
Series F |
New York Stock Exchange | |
Depositary Shares (each representing 1/1,000th interest in a share of
Series H |
New York Stock Exchange | |
Depositary Shares (each representing 1/1,000th interest in a share of
Series K |
New York Stock Exchange | |
0.850% Medium-Term Notes, Series X (Senior), due June 7, 2024 |
New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ☑ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
As of June 30, 2018, the aggregate market value of the registrants common stock held by non-affiliates of the registrant was $81.8 billion based on the closing sale price as reported on the New York Stock Exchange.
Indicate the number of shares outstanding of each of the registrants classes of common stock, as of the latest practicable date.
| ||
Class | Outstanding at January 31, 2019 | |
Common Stock, $.01 par value per share |
1,600,622,211 | |
| ||
|
DOCUMENTS INCORPORATED BY REFERENCE
Document |
Parts Into Which Incorporated | |||
1. | Portions of the Annual Report to Shareholders for the Fiscal Year Ended December 31, 2018 (the 2018 Annual Report) | Parts I and II | ||
2. | Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held April 16, 2019 (the Proxy Statement) | Part III |
PART I
Item 1. | Business |
Forward-Looking Statements
THE FOLLOWING INFORMATION APPEARS IN ACCORDANCE WITH THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: This report contains forward-looking statements about U.S. Bancorp (U.S. Bancorp or the Company). Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of U.S. Bancorp. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. Deterioration in general business and economic conditions or turbulence in domestic or global financial markets could adversely affect U.S. Bancorps revenues and the values of its assets and liabilities, reduce the availability of funding to certain financial institutions, lead to a tightening of credit and increase stock price volatility. Stress in the commercial real estate markets, as well as a downturn in the residential real estate markets, could cause credit losses and deterioration in asset values. In addition, changes to statutes, regulations, or regulatory policies or practices could affect U.S. Bancorp in substantial and unpredictable ways. U.S. Bancorps results could also be adversely affected by changes in interest rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of its investment securities; legal and regulatory developments; litigation; increased competition from both banks and non-banks; changes in the level of tariffs and other trade policies of the United States and its global trading partners; changes in customer behavior and preferences; breaches in data security; failures to safeguard personal information; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and managements ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputational risk.
For discussion of these and other risks that may cause actual results to differ from expectations, refer to the sections entitled Corporate Risk Profile on pages 38 to 59 and Risk Factors on pages 144 to 154 of the 2018 Annual Report. In addition, factors other than these risks also could adversely affect U.S. Bancorps results, and the reader should not consider these risks to be a complete set of all potential risks or uncertainties. Forward-looking statements speak only as of the date hereof, and U.S. Bancorp undertakes no obligation to update them in light of new information or future events.
General Business Description
U.S. Bancorp is a multi-state financial services holding company headquartered in Minneapolis, Minnesota. U.S. Bancorp was incorporated in Delaware in 1929 and operates as a financial holding company and a bank holding company under the Bank Holding Company Act of 1956. U.S. Bancorp provides a full range of financial services, including lending and depository services, cash management, capital markets, and trust and investment management services. It also engages in credit card services, merchant and ATM processing, mortgage banking, insurance, brokerage and leasing.
U.S. Bancorps banking subsidiary, U.S. Bank National Association, is engaged in the general banking business, principally in domestic markets. U.S. Bank National Association, with $356 billion in deposits at December 31, 2018, provides a wide range of products and services to individuals, businesses, institutional organizations, governmental entities and other financial institutions. Commercial and consumer lending services are principally offered to customers within the Companys domestic markets, to domestic customers with foreign operations and to large national customers operating in specific industries targeted by the Company. Lending services include traditional credit products as well as credit card services, lease financing and import/export trade, asset-backed lending, agricultural finance and other products. Depository services include checking
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accounts, savings accounts and time certificate contracts. Ancillary services such as capital markets, treasury management and receivable lock-box collection are provided to corporate customers. U.S. Bancorps bank and trust subsidiaries provide a full range of asset management and fiduciary services for individuals, estates, foundations, business corporations and charitable organizations.
Other U.S. Bancorp non-banking subsidiaries offer investment and insurance products to the Companys customers principally within its domestic markets, and fund administration services to a broad range of mutual and other funds.
Banking and investment services are provided through a network of 3,018 banking offices principally operating in the Midwest and West regions of the United States, through on-line services and over mobile devices. The Company operates a network of 4,681 ATMs and provides 24-hour, seven day a week telephone customer service. Mortgage banking services are provided through banking offices and loan production offices throughout the Companys domestic markets. Lending products may be originated through banking offices, indirect correspondents, brokers or other lending sources. The Company is also one of the largest providers of corporate and purchasing card services and corporate trust services in the United States. A wholly-owned subsidiary, Elavon, Inc. (Elavon), provides domestic merchant processing services directly to merchants and through a network of banking affiliations. Wholly-owned subsidiaries, and affiliates of Elavon, provide similar merchant services in Canada, Mexico and segments of Europe. The Company also provides corporate trust and fund administration services in Europe. These foreign operations are not significant to the Company.
On a full-time equivalent basis, as of December 31, 2018, U.S. Bancorp employed 73,333 people.
Competition
The commercial banking business is highly competitive. The Company competes with other commercial banks, savings and loan associations, mutual savings banks, finance companies, mortgage banking companies, credit unions, investment companies, credit card companies and a variety of other financial services, advisory and technology companies. In recent years, competition has increased from institutions not subject to the same regulatory restrictions as domestic banks and bank holding companies. Competition is based on a number of factors, including, among others, customer service, quality and range of products and services offered, price, reputation, interest rates on loans and deposits, lending limits and customer convenience. The Companys ability to continue to compete effectively also depends in large part on its ability to attract new employees and retain and motivate existing employees, while managing compensation and other costs.
Government Policies
The operations of the Companys various businesses are affected by federal and state laws and legislative changes and by policies of various regulatory authorities, including the statutes, and the rules and policies of regulatory authorities, of the numerous states in which they operate, the United States and foreign governments. These policies include, for example, statutory maximum legal lending rates, domestic monetary policies of the Board of Governors of the Federal Reserve System (the Federal Reserve), United States fiscal policy, international currency regulations and monetary policies and capital adequacy and liquidity constraints imposed by bank regulatory agencies.
Supervision and Regulation
U.S. Bancorp and its subsidiaries are subject to the extensive regulatory framework applicable to bank holding companies and their subsidiaries. This regulatory framework is intended primarily for the protection of depositors, the deposit insurance fund of the Federal Deposit Insurance Corporation (the FDIC), consumers, the stability of the financial system in the United States, and the health of the national economy, and not for investors in bank holding companies such as the Company.
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This section summarizes certain provisions of the principal laws and regulations applicable to the Company and its subsidiaries. The descriptions are not intended to be complete and are qualified in their entirety by reference to the full text of the statutes and regulations described below.
General As a bank holding company, the Company is subject to regulation under the Bank Holding Company Act (the BHC Act) and to inspection, examination and supervision by the Federal Reserve. U.S. Bank National Association and its subsidiaries, are subject to regulation, examination and supervision primarily by the Office of the Comptroller of the Currency (the OCC) and also by the FDIC, the Federal Reserve, the Consumer Financial Protection Bureau (the CFPB), the Securities and Exchange Commission (the SEC) and the Commodities Futures Trading Commission (the CFTC) in certain areas.
Supervision and regulation by the responsible regulatory agency generally includes comprehensive annual reviews of all major aspects of a bank holding companys or banks business and condition, and imposition of periodic reporting requirements and limitations on investments and certain types of activities. U.S. Bank National Association, the Company and the Companys non-bank affiliates must undergo regular on-site examinations by the appropriate regulatory agency, which examine for adherence to a range of legal and regulatory compliance responsibilities. If they deem the Company to be operating in a manner that is inconsistent with safe and sound banking practices, the applicable regulatory agencies can require the entry into informal or formal supervisory agreements, including board resolutions, memoranda of understanding, written agreements and consent or cease and desist orders, pursuant to which the Company would be required to take identified corrective actions to address cited concerns and to refrain from taking certain actions. Supervision and examinations are confidential, and the outcomes of these actions will not be made public.
Banking and other financial services statutes, regulations and policies are continually under review by Congress, state legislatures and federal and state regulatory agencies. In addition to laws and regulations, state and federal bank regulatory agencies may issue policy statements, interpretive letters and similar written guidance applicable to the Company and its subsidiaries. Any change in the statutes, regulations or regulatory policies applicable to the Company, including changes in their interpretation or implementation, could have a material effect on its business or organization.
Both the scope of the laws and regulations and the intensity of the supervision to which the Company is subject have increased in recent years in response to the financial crisis, as well as other factors such as technological and market changes. Regulatory enforcement and fines have also increased across the banking and financial services sector. Many of these changes have occurred as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) and its implementing regulations, most of which are now in place. While the regulatory environment has entered a period of rebalancing of the post financial crisis framework, the Company expects that its business will remain subject to extensive regulation and supervision.
On May 24, 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act (the EGRRCPA) was signed into law. Among other regulatory changes, the EGRRCPA amends various sections of the Dodd-Frank Act, including section 165, which was revised to raise the asset thresholds for determining the application of enhanced prudential standards for bank holding companies from $50 billion to $250 billion. Bank holding companies with $250 billion or more in total consolidated assets, including the Company, remain subject to the Dodd-Frank Act enhanced prudential standards requirements.
The Dodd-Frank Act, as amended by the EGRRCPA, however, mandates that the Federal Reserve tailor the enhanced prudential standards applicable to a banking holding company or category of bank holding companies based on several factors, including size, capital structure, complexity, and other risk-related factors. On October 31, 2018, the Federal banking regulators issued proposed rules pursuant to the EGRRCPA to adjust the thresholds at which certain enhanced prudential standards and capital and liquidity requirements would apply to United States bank holding companies and their depository institutions with $100 billion or more in total consolidated assets (the Proposed Tailoring Rules). Under the Proposed Tailoring Rules, these bank holding
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companies and banks, including the Company and U.S. Bank National Association, would be placed into one of four risk-based categories based on the banking organizations size, status as a global systemically important bank, cross-jurisdictional activity, weighted short-term wholesale funding, nonbank assets and off-balance sheet exposures. The extent to which enhanced prudential standards and certain other capital and liquidity standards would apply to these bank holding companies and banks would depend upon the banking organizations category. Under the Proposed Tailoring Rules, which remain subject to finalization and may be revised, the Company and U.S. Bank National Association would each qualify as a Category III banking organization subject to proposed requirements applicable to banking organizations that are not subject to Category I or II standards and that have at least $250 billion in total consolidated assets OR at least $100 billion in total consolidated assets and $75 billion or more in any one of three indicators: (1) nonbank assets, (2) weighted short-term wholesale funding, or (3) off-balance sheet exposures. In connection with the Proposed Tailoring Rules, the Federal Reserve indicated the firms that would fall into each of the four categories based on data for the second quarter of 2018. According to the Federal Reserves projections, which could change in accordance with any final rules, the Company and U.S. Bank National Association would be Category III banking organizations under the Proposed Tailoring Rules, and several regulatory requirements currently applicable to the Company and U.S. Bank National Association would be reduced or eliminated, as discussed in further detail in the paragraphs that follow.
The ultimate benefits or consequences of the EGRRCPA for the Company, U.S. Bank National Association, their other subsidiaries and their activities will depend on the final form of the Proposed Tailoring Rules and additional rulemakings to implement the Act that are expected to be issued by the United States banking agencies, which cannot be predicted.
Supervisory Ratings Federal banking regulators regularly examine the Company and U.S. Bank National Association to evaluate their financial condition and monitor their compliance with laws and regulatory policies. Following those exams, the Company and U.S. Bank National Association are assigned supervisory ratings. These ratings are considered confidential supervisory information and disclosure to third parties is not allowed without permission of the issuing regulator. Violations of laws and regulations or deemed deficiencies in risk management practices may be incorporated into these supervisory ratings. A downgrade in these ratings could limit the Companys ability to pursue acquisitions or conduct other expansionary activities for a period of time, require new or additional regulatory approvals before engaging in certain other business activities or investments, affect U.S. Bank National Associations deposit insurance assessment rate, and impose additional recordkeeping and corporate governance requirements, as well as generally increase regulatory scrutiny of the Company.
In November 2018, the Federal Reserve adopted a new rating system, the Large Financial Institution Rating System (LFI Rating System), to align its supervisory rating system for large financial institutions, including the Company, with its current supervisory programs for these firms. As compared to the rating system it replaces, which will continue to be used for smaller bank holding companies, the LFI Rating System places a greater emphasis on capital and liquidity, including related planning and risk management practices. The Company will receive its first ratings under the LFI Rating System in 2020. These ratings will remain confidential.
In August 2017, the Federal Reserve also issued proposed guidance with respect to its expectations regarding the supervisory role of boards of directors of large financial institutions. In addition, in January 2018, the Federal Reserve proposed guidance relating to the supervisory responsibilities of members of senior and business line management for risk management and controls at large financial institutions. Both of these proposals are meant to set regulatory expectations for the governance and controls component of the LFI Rating System.
Bank Holding Company Activities The Company elected to become a financial holding company as of March 13, 2000, pursuant to the provisions of the Gramm-Leach-Bliley Act (the GLBA). Under the GLBA, qualifying bank holding companies may engage in, and affiliate with financial companies engaging in, a broader range of activities than would otherwise be permitted for a bank holding company. Under the GLBAs system of
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functional regulation, the Federal Reserve acts as an umbrella regulator for the Company, and certain of the Companys subsidiaries are regulated directly by additional agencies based on the particular activities of those subsidiaries.
If a financial holding company or a depository institution controlled by a financial holding company ceases to be well-capitalized or well-managed, the Federal Reserve may impose corrective capital and managerial requirements on the financial holding company, and may place limitations on its ability to conduct all of the business activities that financial holding companies are generally permitted to conduct and its ability to make certain acquisitions. See Permissible Business Activities below. If the failure to meet these standards persists, a financial holding company may be required to divest its depository institution subsidiaries, or cease all activities other than those activities that may be conducted by bank holding companies that are not financial holding companies. In addition, if a depository institution controlled by a financial holding company does not receive a Community Reinvestment Act (CRA) rating of at least satisfactory at its most recent examination, the financial holding company will have limitations placed on its ability to conduct all of the business activities that financial holding companies are generally permitted to conduct and its ability to make certain acquisitions.
The Federal Reserve also requires bank holding companies to meet certain applicable capital and management standards. Failure by the Company to meet these standards could limit the Company from engaging in any new activity or acquiring other companies without the prior approval of the Federal Reserve.
Permissible Business Activities As a financial holding company, the Company may affiliate with securities firms and insurance companies and engage in other activities that are financial in nature or incidental or complementary to activities that are financial in nature. Financial in nature activities include the following: securities underwriting, dealing and market making; sponsoring mutual funds and investment companies; insurance underwriting and agency; merchant banking; and activities that the Federal Reserve, in consultation with the Secretary of the United States Treasury, determines to be financial in nature or incidental to such financial activity. Complementary activities are activities that the Federal Reserve determines upon application to be complementary to a financial activity and that do not pose a safety and soundness risk.
The Company generally is not required to obtain Federal Reserve approval to acquire a company (other than a bank holding company, bank or savings association) engaged in activities that are financial in nature or incidental to activities that are financial in nature, as determined by the Federal Reserve, as long as it meets the capital, managerial and CRA requirements to qualify as a financial holding company. However, the Company is required to receive approval for an acquisition in which the total consolidated assets to be acquired exceed $10 billion. Financial holding companies are also required to obtain the approval of the Federal Reserve before they may acquire more than five percent of the voting shares or substantially all of the assets of an unaffiliated bank holding company, bank or savings association. Banks must receive approval before they may acquire, merge with, acquire substantially all of the assets of or assume any deposits of a bank or savings association and may be required to receive approval for acquisitions of other companies.
Interstate Banking A bank holding company may acquire banks in states other than its home state, subject to any state requirement that the bank has been organized and operating for a minimum period of time (not to exceed five years). Also, such an acquisition is not permitted if the bank holding company controls, prior to or following the proposed acquisition, more than 10 percent of the total amount of deposits of insured depository institutions nationwide, or, if the acquisition is the bank holding companys initial entry into the state, more than 30 percent of the deposits of insured depository institutions in the state (or any lesser or greater amount set by the state).
Banks may merge across state lines to create interstate branches and are permitted to establish new branches in another state to the same extent as banks chartered by that state.
Regulatory Approval for Acquisitions In determining whether to approve a proposed bank acquisition, federal bank regulators will consider a number of factors, including the effect of the acquisition on competition,
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financial condition and future prospects (including current and projected capital ratios and levels); the competence, experience and integrity of management and its record of compliance with laws and regulations; the convenience and needs of the communities to be served (including the acquiring institutions record of compliance under the CRA); the effectiveness of the acquiring institution in combating money laundering activities; and the extent to which the transaction would result in greater or more concentrated risks to the stability of the United States banking or financial system. In addition, approval of interstate transactions requires that the acquiror satisfy regulatory standards for well-capitalized and well-managed institutions.
Source of Strength The Company is required to act as a source of financial strength to U.S. Bank National Association, and to commit resources to support this subsidiary in circumstances where it might not otherwise do so. The Federal Reserve may require a bank holding company to make capital injections into a troubled subsidiary bank and may charge the bank holding company with engaging in unsafe and unsound practices if the bank holding company fails to commit resources to such a subsidiary bank or if it undertakes actions that the Federal Reserve believes might jeopardize the bank holding companys ability to commit resources to such subsidiary bank.
Under these requirements, the Company may in the future be required to provide financial assistance to U.S. Bank National Association, should it experience financial distress. Capital loans by the Company to U.S. Bank National Association would be subordinate in right of payment to deposits and certain other debts of U.S. Bank National Association. In the event of the Companys bankruptcy, any commitment by the Company to a federal bank regulatory agency to maintain the capital of U.S. Bank National Association would be assumed by the bankruptcy trustee and entitled to a priority of payment.
The Federal Reserve is prohibited from requiring payment by a bank holding company to a depository institution if the functional regulator of the depository institution objects to the payment. In those cases, the Federal Reserve could instead require the divestiture of the depository institution and impose operating restrictions pending the divestiture.
OCC Heightened Standards The OCC has issued guidelines establishing heightened standards for large national banks such as U.S. Bank National Association. The guidelines establish minimum standards for the design and implementation of a risk governance framework for banks. The OCC may take action against institutions that fail to meet these standards.
Enhanced Prudential Standards Under the Dodd-Frank Act, as modified by the EGRRCPA, bank holding companies with consolidated assets of more than $250 billion, such as the Company, are subject to certain enhanced prudential standards. The prudential standards include enhanced risk-based capital and leverage requirements, enhanced liquidity requirements, enhanced risk management and risk committee requirements, a requirement to submit a resolution plan, single-counterparty credit limits and stress tests. These standards also require the Federal Reserve to impose a maximum 15-to-1 debt-to-equity ratio on a bank holding company with total consolidated assets of $250 billion or more, if the Financial Stability Oversight Council determines that the company poses a grave threat to the financial stability of the United States and that the imposition of such a debt-to-equity requirement would mitigate such risk. In addition, the Federal Reserve is required to establish early remediation requirements for bank holding companies with total consolidated assets of $250 billion or more.
Certain of the enhanced prudential standards applicable to the Company are described below in further detail, including changes that have been proposed to these requirements under the Proposed Tailoring Rules.
Dividend Restrictions The Company is a legal entity separate and distinct from its subsidiaries. Typically, the majority of the Companys operating funds are received in the form of dividends paid to the Company by U.S. Bank National Association. Federal law imposes limitations on the payment of dividends by national banks.
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In general, dividends payable by U.S. Bank National Association and the Companys trust bank subsidiaries, as national banking associations, are limited by rules that compare dividends to net income for periods defined by regulation.
The Companys ability to declare and pay dividends is also limited by Federal Reserve regulations and policy. Large bank holding companies such as the Company may generally only pay dividends and repurchase stock in accordance with a capital plan that has been reviewed by the Federal Reserve and as to which the Federal Reserve has not objected. See Comprehensive Capital Analysis and Review below for further details.
The OCC, the Federal Reserve and the FDIC also have authority to prohibit or limit the payment of dividends by the banking organizations they supervise (including the Company and U.S. Bank National Association), if, in the banking regulators opinion, payment of a dividend would constitute an unsafe or unsound practice in light of the financial condition of the banking organization.
The Company and U.S. Bank National Association must maintain the applicable common equity tier 1 capital conservation buffer to avoid becoming subject to restrictions on capital distributions, including dividends. As of January 1, 2019, the fully phased in common equity tier 1 capital conservation buffer is 2.5 percent. For more information on the common equity tier 1 capital conservation buffer and the stress buffer requirements that the Federal Reserve has proposed that would replace the common equity tier 1 capital conservation buffer for bank holding companies, see Capital Requirements and Proposed Stress Buffer Requirements below, respectively.
In addition, Federal Reserve policy on the payment of dividends, stock redemptions and stock repurchases requires that bank holding companies consult with and inform the Federal Reserve in advance of doing any of the following: declaring and paying dividends that could raise safety and soundness concerns (i.e. declaring and paying dividends that exceed earnings for the period for which dividends are being paid); redeeming or repurchasing capital instruments when experiencing financial weakness; and redeeming or repurchasing common stock and perpetual preferred stock, if the result will be a net reduction in the amount of such capital instruments outstanding for the quarter in which the reduction occurs.
Capital Requirements The Company is subject to certain regulatory risk-based capital and leverage requirements under the United States Basel III-based capital rules adopted by the Federal Reserve, and U.S. Bank National Association is subject to substantially similar rules adopted by the OCC. These rules implement the Basel III international regulatory capital standards in the United States, as well as certain provisions of the Dodd-Frank Act. These quantitative calculations are minimums, and the Federal Reserve and OCC may determine that a banking organization, based on its size, complexity or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner. The United States Basel III-based capital rules include two comprehensive methodologies for calculating risk-weighted assets: a general standardized approach and more risk-sensitive advanced approaches, with the Companys capital adequacy being evaluated against the methodology that is most restrictive.
Under the United States Basel III-based capital rules, the Company is subject to a minimum common equity tier 1 capital ratio (common equity tier 1 capital to risk-weighted assets) of 4.5 percent, a minimum tier 1 capital ratio of 6.0 percent and a minimum total capital ratio of 8.0 percent. The Company is also subject to a 2.5 percent common equity tier 1 capital conservation buffer and, if deployed, up to a 2.5 percent common equity tier 1 countercyclical capital buffer on top of the three minimum risk-weighted capital ratios listed above. Banking organizations that fail to meet the effective minimum ratios once the capital conservation buffer is taken into account will be subject to constraints on capital distributions, including dividends and share repurchases and certain discretionary executive compensation, with the severity of the constraints depending on the extent of the shortfall, with progressively more stringent constraints on capital actions as the Company approaches the minimum ratios.
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On April 10, 2018, the Federal Reserve issued a proposal that would create a single, integrated capital requirement by combining the capital conservation buffer requirement with the quantitative assessment of firms capital plans under the Federal Reserves Comprehensive Capital Analysis and Review (CCAR). Please refer to the Proposed Stress Buffer Requirements section below for further details. Although the proposal, if adopted, would change the way in which the minimum ratios are calculated, firms would continue to be subject to progressively more stringent constraints on capital actions as they approach the minimum ratios.
United States banking organizations are also subject to a minimum leverage ratio of 4.0 percent. Banking organizations that calculate their capital requirements using advanced approaches, including the Company, are also subject to a minimum Supplementary Leverage Ratio (SLR) of 3.0 percent that takes into account both on-balance sheet and certain off-balance sheet exposures. The SLR is defined as tier 1 capital divided by total leverage exposure, which includes both on- and off-balance sheet exposures. The Company began calculating and reporting its SLR beginning in the first quarter of 2015 and became subject to the minimum SLR requirement on January 1, 2018. At December 31, 2018, the Company exceeded the applicable minimum SLR requirement.
In December 2017, the Basel Committee finalized a package of revisions to the Basel III framework. The changes are meant to improve the calculation of risk-weighted assets and improve the comparability of capital ratios by (a) enhancing the robustness and risk sensitivity of the standardized approaches for credit risk, credit valuation adjustment (CVA) risk and operational risk; (b) constraining the use of the internal model approaches, by placing limits on certain inputs used to calculate capital requirements under the internal ratings-based (IRB) approach for credit risk and by removing the use of the internal model approaches for CVA risk and for operational risk; (c) introducing a leverage ratio buffer to further limit the leverage of global systemically important banks (G-SIBs); and (d) replacing the existing Basel II output floor with a more robust risk-sensitive floor based on the Committees revised Basel III standardized approaches. January 1, 2022 is the implementation date for the revised standardized approach for credit risk and leverage ratio, as well as the IRB, CVA, operational risk, and market risk frameworks. The output floor will be subject to a transitional period beginning in January 1, 2022, with full implementation by January 1, 2027. Federal banking regulators are expected to undertake rulemakings in future years to implement these revisions in the United States.
Under the Proposed Tailoring Rules, the Company, as a Category III banking organization, would no longer be required to calculate risk-based capital ratios under the advanced approaches for purposes of determining regulatory compliance. Instead, the Companys risk-based capital ratios would be calculated using only the standardized approach. The Company would remain subject to the SLR and the countercyclical capital buffer. In addition, the Company, as a Category III banking organization, would be permitted to opt out of recognizing accumulated other comprehensive income (AOCI) in common equity tier 1 capital for purposes of calculating its regulatory capital ratios. The Company cannot predict whether the final form of the Proposed Tailoring Rules will exempt the Company from using the advanced approaches to calculate risk-based capital ratios or permit the Company to opt out of including AOCI in its calculation of common equity tier 1 capital.
In addition, in December 2018, the United States federal banking agencies finalized rules that provide banking organizations the option to phase-in over a three year period, the day-one adverse effects on regulatory capital that may result from the adoption of the new current expected credit loss accounting rule. For further discussion of the new current expected credit loss accounting rule, see Note 2 of the Notes to Consolidated Financial Statements in the 2018 Annual Report.
For additional information regarding the Companys regulatory capital, see Capital Management in the 2018 Annual Report.
Prompt Corrective Action The Federal Deposit Insurance Corporation Improvement Act of 1991 (the FDICIA) provides a framework for regulation of depository institutions and their affiliates (including parent holding companies) by federal banking regulators. As part of that framework, the FDICIA requires the relevant
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federal banking regulator to take prompt corrective action with respect to a depository institution if that institution does not meet certain capital adequacy standards. Supervisory actions by the appropriate federal banking regulator under the prompt corrective action rules generally depend upon an institutions classification within five capital categories. An institution that fails to remain well-capitalized becomes subject to a series of restrictions that increase in severity as its capital condition weakens. Such restrictions may include a prohibition on capital distributions, restrictions on asset growth or restrictions on the ability to receive regulatory approval of applications. The FDICIA also provides for enhanced supervisory authority over undercapitalized institutions, including authority for the appointment of a conservator or receiver for the institution.
The regulations apply only to banks and not to bank holding companies such as the Company. However, the Federal Reserve is authorized to take appropriate action at the holding company level, based on the undercapitalized status of the holding companys subsidiary banking institutions. In certain instances relating to an undercapitalized banking institution, the bank holding company would be required to guarantee the performance of the undercapitalized subsidiarys capital restoration plan and could be liable for civil money damages for failure to fulfill those guarantee commitments.
Comprehensive Capital Analysis and Review The Federal Reserves capital plan rule currently requires large bank holding companies with assets in excess of $50 billion to submit capital plans to the Federal Reserve on an annual basis and to obtain approval from the Federal Reserve for capital distributions proposed in the capital plan in connection with its annual CCAR process. The Company may generally only pay dividends and repurchase stock in accordance with a capital plan that has been reviewed by the Federal Reserve and to which the Federal Reserve has not objected. These capital plans consist of a number of mandatory elements, including an assessment of a companys sources and uses of capital over a nine-quarter planning horizon assuming both expected and stressful conditions; a detailed description of a companys process for assessing capital adequacy; a demonstration of a companys ability to maintain capital above each minimum regulatory capital ratio under expected and stressful conditions; and a demonstration of a companys ability to achieve, readily and without difficulty, the minimum capital ratios and capital buffers under the United States Basel III-based capital rules.
The Company submitted its 2018 capital plan to the Federal Reserve in April 2018. The Federal Reserve did not object to the Companys 2018 capital plan.
The Company will submit its 2019 capital plan to the Federal Reserve by April 5, 2019, in accordance with instructions from the Federal Reserve. Applicable stress testing rules require the Federal Reserve to publish the results of its assessment of the Companys capital plan, including its planned capital distributions, no later than June 30, 2019.
In April 2018, the Federal Reserve issued a proposal to integrate its annual capital planning and stress testing requirements with certain ongoing regulatory capital requirements, which would make changes to capital planning and stress testing processes for bank holding companies subject to the proposed rule, including the Company. Please refer to the Proposed Stress Buffer Requirements section below for further details.
Stress Testing The Federal Reserves CCAR framework and the Dodd-Frank Act stress testing framework require large bank holding companies such as the Company to conduct company-run stress tests and subject them to supervisory stress tests conducted by the Federal Reserve. Among other things, the company-run stress tests employ stress scenarios developed by the Company as well as stress scenarios provided by the Federal Reserve and incorporate the Dodd-Frank Act capital actions, which are intended to normalize capital distributions across large United States bank holding companies. The Federal Reserve conducts CCAR and Dodd-Frank Act supervisory stress tests employing stress scenarios and internal supervisory models. The Federal Reserves CCAR and Dodd-Frank Act supervisory stress tests incorporate the Companys planned capital actions and the Dodd-Frank Act capital actions, respectively. The Federal Reserve and the Company are currently required to publish the results of the annual supervisory and annual company-run stress tests, respectively, no later than June 30 of each year. In addition, all large bank holding companies are currently required to submit a mid-cycle
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company-run stress test employing stress scenarios developed by the Company. The results of this stress test must be submitted to the Federal Reserve for review in early October of each year. The Company is required to publish its results of this stress test no later than the end of November of each year. The Federal Reserve currently publishes summaries of supervisory stress test results for each large bank holding company under both the adverse and severely adverse stress scenarios developed by the Federal Reserve.
National banks with assets in excess of $50 billion are currently required to submit annual company-run stress test results to the OCC concurrently with their parent bank holding companys CCAR submission to the Federal Reserve. The stress test is based on the OCCs stress scenarios (which are typically the same as the Federal Reserves stress scenarios) and capital actions that are appropriate for the economic conditions assumed in each scenario. U.S. Bank National Association will submit its stress test in accordance with regulatory requirements by April 5, 2019. The Company is required to publish the results of this stress test no later than June 30, 2019.
Under the Proposed EPS Tailoring Rule, the Company, as a Category III banking organization, would remain subject to annual supervisory stress tests but would be subject to company-run stress tests every two years, instead of annually. Consistent with EGRRCPA, the Federal Reserve also has proposed to eliminate the mid-cycle stress testing requirement for all banking organizations as of 2020 and eliminate the adverse scenario from all stress testing requirements. The Company cannot predict whether the Proposed EPS Tailoring Rule and other related issuances will be adopted as proposed or whether any changes will be made to it that would affect the stress testing requirements applicable to the Company.
Proposed Stress Buffer Requirements On April 10, 2018, the Federal Reserve issued a proposal to create a single capital requirement by integrating its annual capital planning and stress testing requirements with certain ongoing regulatory capital requirements. The proposal, which would apply to certain bank holding companies, including the Company, would introduce a stress capital buffer and a stress leverage buffer, or stress buffer requirements, and related changes to the capital planning and stress testing processes. For risk-based capital requirements, the stress capital buffer would replace the existing capital conservation buffer, which is 2.5 percent as of January 1, 2019. The stress capital buffer would equal the greater of (i) the maximum decline in the Companys common equity tier 1 capital ratio under the severely adverse scenario over the supervisory stress test measurement period, plus the sum of the ratios of the dollar amount of its planned common stock dividends to its projected risk-weighted assets for each of the fourth through seventh quarters of the supervisory stress test projection period, and (ii) 2.5 percent.
The proposal would make related changes to capital planning and stress testing processes for bank holding companies subject to the stress buffer requirements. In particular, the proposal would remove the 30 percent dividend payout ratio that has been used as a threshold for heightened supervisory scrutiny and would assume that bank holding companies maintain a constant level of assets and risk-weighted assets throughout the supervisory stress test projection period.
In November 2018, the Federal Reserves Vice Chairman for Supervision stated that the Federal Reserve does not expect that the proposed stress buffer requirements will go into effect before 2020, and that, although the Federal Reserve expects to finalize certain elements of those requirements as proposed, other elements of the proposal will be re-proposed and again subject to public comment.
Basel III Liquidity Requirements Bank holding companies and their domestic bank subsidiaries that calculate their capital requirements using the advanced approaches, including the Company and U.S. Bank National Association, are subject to a minimum Liquidity Coverage Ratio (LCR). The LCR is designed to ensure that bank holding companies have sufficient high-quality liquid assets to survive a significant liquidity stress event lasting for 30 calendar days.
In June 2016, the federal banking regulators proposed a rule to implement the Net Stable Funding Ratio (NSFR). The NSFR is designed to promote stable, longer-term funding of assets and business activities over a
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one-year time horizon and would apply to the Company and U.S. Bank National Association. Federal banking regulators continue to work on finalizing the rule to implement the NSFR.
Under the Proposed Tailoring Rules, the Company and U.S. Bank National Association, as Category III banking organizations with less than $75 billion of weighted short-term wholesale funding, would qualify for reduced LCR and proposed NSFR requirements calibrated at 70-85 percent of the full requirements. The Company cannot predict whether the final form of the Proposed Tailoring Rules will subject the Company and U.S. Bank National Association to reduced LCR and proposed NSFR requirements.
Single-Counterparty Credit Limits On June 14, 2018, the Federal Reserve finalized rules that establish single-counterparty credit limits (SCCL) for large banking organizations, including the Company. Under these rules, the Company is subject to a limit of 25 percent of Tier 1 capital for aggregate net credit exposures to any other unaffiliated counterparty. The Company must comply with the final SCCL rules beginning on January 1, 2020.
Deposit Insurance The DIF provides insurance coverage for certain deposits, up to a standard maximum deposit insurance amount of $250,000 per depositor and is funded through assessments on insured depository institutions, based on the risk each institution poses to the DIF. U.S. Bank National Association accepts customer deposits that are insured by the DIF and therefore must pay insurance premiums. The FDIC may increase U.S. Bank National Associations insurance premiums based on various factors, including the FDICs assessment of its risk profile. Until September 30, 2018, banks with $10 billion or more in total assets, such as U.S. Bank National Association, were required to pay an assessment surcharge. This requirement ended effective September 30, 2018, as a result of the FDICs reserve ratio exceeding 1.35 percent.
In addition, large insured depository institutions, including U.S. Bank National Association, are subject to enhanced deposit account recordkeeping and related information technology system requirements meant to facilitate prompt payment of insured deposits if such an institution were to fail. U.S. Bank National Association must comply with these new requirements by April 1, 2020.
Powers of the FDIC Upon Insolvency of an Insured Institution If the FDIC is appointed the conservator or receiver of an insured depository institution upon its insolvency or in certain other events, the FDIC has the power to (a) transfer any of the depository institutions assets and liabilities to a new obligor without the approval of the depository institutions creditors; (b) enforce the terms of the depository institutions contracts pursuant to their terms; or (c) repudiate or disaffirm any contracts (if the FDIC determines that performance of the contract is burdensome and that the repudiation or disaffirmation is necessary to promote the orderly administration of the depository institution). These provisions would be applicable to obligations and liabilities of the Companys insured depository institution subsidiary, U.S. Bank National Association.
Depositor Preference Under federal law, in the event of the liquidation or other resolution of an insured depository institution, the claims of a receiver of the institution for administrative expense and the claims of holders of domestic deposit liabilities (including the FDIC, as subrogee of the depositors) have priority over the claims of other unsecured creditors of the institution, including holders of publicly issued senior or subordinated debt and depositors in non-domestic offices. As a result, those debtholders and depositors would be treated differently from, and could receive, if anything, substantially less than, the depositors in domestic offices of the depository institution.
Orderly Liquidation Authority Upon the insolvency of a bank holding company, such as the Company, the FDIC may be appointed as conservator or receiver of the bank holding company if the Secretary of the Treasury determines (upon the written recommendation of the FDIC and the Federal Reserve and after consultation with the President of the United States) that certain conditions set forth in the Dodd-Frank Act regarding the potential impact on financial stability of the financial companys failure have been met. FDIC rules set forth a comprehensive method for the receivership of a covered financial company. Acting as a conservator or receiver,
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the FDIC would have broad powers to transfer any assets or liabilities of a bank holding company without the approval of its creditors.
Resolution Plans As a bank holding company with assets of $250 billion or more, the Company is required to submit annually to the Federal Reserve and the FDIC a resolution plan for the orderly resolution of the Company and its significant legal entities under the United States Bankruptcy Code or other applicable insolvency laws in a rapid and orderly fashion in the event of future material financial distress or failure. If the Federal Reserve and the FDIC jointly determine that the resolution plan is not credible and the deficiencies are not cured in a timely manner, they may jointly impose on the Company more stringent capital, leverage or liquidity requirements or restrictions on the Companys growth, activities or operations. If the Company were to fail to address the deficiencies in its resolution plan when required, it could eventually be required to divest certain assets or operations. The Company submitted its resolution plan to the Federal Reserve and the FDIC in December 2017. The Federal Reserve and FDIC have extended the filing deadline for certain bank holding companies, including the Company, and as a result the Companys next resolution plan is not due to the Federal Reserve and FDIC until December 31, 2019.
In addition, U.S. Bank National Association is required to file periodically a separate resolution plan with the FDIC that should enable the FDIC, as receiver, to resolve the institution under applicable receivership provisions of the Federal Deposit Insurance Act in a manner that ensures that depositors receive access to their insured deposits within one business day of the institutions failure, maximizes the net present value return from the sale or disposition of its assets and minimizes the amount of any loss to be realized by the institutions creditors. The Company submitted its insured depository institution resolution plan to the FDIC in July 2018. The FDICs Chairman has indicated that the FDIC intends to release an advanced notice of proposed rulemaking with respect to the FDICs bank resolution plan requirements meant to better tailor bank resolution plans to a firms size, complexity and risk profile. Until the FDICs revisions to its bank resolution plan requirement are finalized, no bank resolution plans will be required to be filed.
The public versions of the resolution plans previously submitted by the Company and U.S. Bank National Association are available on the FDICs website and, in the case of the Companys resolution plans, also on the Federal Reserves website.
Recovery Plans The OCC has established enforceable guidelines for recovery planning by insured national banks, insured federal savings associations, and insured federal branches of foreign banks with average total consolidated assets of $250 billion or more, which includes U.S. Bank National Association. The guidelines provide that a covered bank should develop and maintain a recovery plan that is appropriate for its individual risk profile, size, activities, and complexity, including the complexity of its organizational and legal entity structure. The guidelines state that a recovery plan should (a) establish triggers, which are quantitative or qualitative indicators of the risk or existence of severe stress that should always be escalated to management or the board of directors, as appropriate, for purposes of initiating a response; (b) identify a wide range of credible options that a covered bank could undertake to restore financial and operational strength and viability; and (c) address escalation procedures, management reports, and communication procedures. The board of U.S. Bank National Association approved a recovery plan pursuant to these guidelines in December 2018.
Liability of Commonly Controlled Institutions An FDIC-insured depository institution can be held liable for any loss incurred or expected to be incurred by the FDIC in connection with another FDIC-insured institution under common control with that institution being in default or in danger of default (commonly referred to as cross-guarantee liability). An FDIC claim for cross-guarantee liability against a depository institution is generally superior in right of payment to claims of the holding company and its affiliates against the depository institution.
Transactions with Affiliates There are various legal restrictions on the extent to which the Company and its non-bank subsidiaries may borrow or otherwise engage in certain types of transactions with U.S. Bank National
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Association. Under the Federal Reserve Act and Regulation W, U.S. Bank National Association (and its subsidiaries) is subject to quantitative and qualitative limits on extensions of credit, purchases of assets, and certain other transactions involving its non-bank affiliates. Additionally, transactions between U.S. Bank National Association and its non-bank affiliates are required to be on arms length terms and must be consistent with standards of safety and soundness.
Anti-Money Laundering and Sanctions The Company is subject to several federal laws that are designed to combat money laundering and terrorist financing, and to restrict transactions with persons, companies, or foreign governments sanctioned by United States authorities. This category of laws includes the Bank Secrecy Act (the BSA), the Money Laundering Control Act, the USA PATRIOT Act (collectively, AML laws), and implementing regulations for the International Emergency Economic Powers Act and the Trading with the Enemy Act, as administered by the United States Treasury Departments Office of Foreign Assets Control (sanctions laws).
As implemented by federal banking and securities regulators and the Department of the Treasury, AML laws obligate depository institutions and broker-dealers to verify their customers identity, conduct customer due diligence, report on suspicious activity, file reports of transactions in currency, and conduct enhanced due diligence on certain accounts. Sanctions laws prohibit persons of the United States from engaging in any transaction with a restricted person or restricted country. Depository institutions and broker-dealers are required by their respective federal regulators to maintain policies and procedures in order to ensure compliance with the above obligations. Federal regulators regularly examine BSA/Anti-Money Laundering (AML) and sanctions compliance programs to ensure their adequacy and effectiveness, and the frequency and extent of such examinations and the remedial actions resulting therefrom have been increasing.
Non-compliance with sanctions laws and/or AML laws or failure to maintain an adequate BSA/AML compliance program can lead to significant monetary penalties and reputational damage, and federal regulators evaluate the effectiveness of an applicant in combating money laundering when determining whether to approve a proposed bank merger, acquisition, restructuring, or other expansionary activity. There have been a number of significant enforcement actions against banks, broker-dealers and non-bank financial institutions with respect to sanctions laws and AML laws and some have resulted in substantial penalties, including against the Company and U.S. Bank National Association. See Note 22 of the Notes to Consolidated Financial Statements in the 2018 Annual Report.
Community Reinvestment Act U.S. Bank National Association is subject to the provisions of the CRA. Under the terms of the CRA, banks have a continuing and affirmative obligation, consistent with safe and sound operation, to help meet the credit needs of their communities, including providing credit to individuals residing in low-income and moderate-income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions, and does not limit an institutions discretion to develop the types of products and services that it believes are best suited to its particular community in a manner consistent with the CRA.
The OCC regularly assesses U.S. Bank National Association on its record in meeting the credit needs of the community served by that institution, including low-income and moderate-income neighborhoods. The assessment also is considered when the Federal Reserve or OCC reviews applications by banking institutions to acquire, merge or consolidate with another banking institution or its holding company, to establish a new branch office that will accept deposits, or to relocate an office. In the case of a bank holding company applying for approval to acquire a bank or other bank holding company, the Federal Reserve will assess the records of each subsidiary depository institution of the applicant bank holding company, and those records may be the basis for denying the application.
U.S. Bank National Association received a Satisfactory CRA rating in its most recent examination, covering the period from January 1, 2009 through December 31, 2011. The OCC commenced its most recent CRA exam in 2017, the results of which will be made public upon completion.
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In April 2018, the United States Department of Treasury issued a memorandum to the federal banking regulators with recommend changes to the CRAs implementing regulations to reduce their complexity and associated burden on banks. Leaders of the federal banking agencies recently have indicated their support for revising the CRA regulatory framework, and on August 28, 2018, the OCC issued an advance notice of proposed rulemaking to solicit ideas for building a new CRA framework. We will continue to evaluate the impact of any changes to the regulations implementing the CRA.
Regulation of Brokerage, Investment Advisory and Insurance Activities The Company conducts securities underwriting, dealing and brokerage activities in the United States through U.S. Bancorp Investments, Inc. (USBII) and other subsidiaries. These activities are subject to regulations of the SEC, the Financial Industry Regulatory Authority and other authorities, including state regulators. These regulations generally cover licensing of securities personnel, interactions with customers, trading operations and periodic examinations.
Securities regulators impose capital requirements on USBII and monitor its financial operations with periodic financial reviews. In addition, USBII is a member of the Securities Investor Protection Corporation, which oversees the liquidation of member broker-dealers that close when the broker-dealer is bankrupt or in financial trouble and imposes reporting requirements and assessments on USBII.
On May 9, 2018, the SEC proposed Regulation Best Interest, which would impose a new standard of conduct on SEC-registered broker-dealers when making recommendations to retail customers, clarify certain aspects of the fiduciary duty that an SEC-registered investment adviser owes to its clients and mandate summary disclosure to retail customers describing their relationship with and services offered by registered broker-dealers and investment advisers. The Company does not expect that the adoption of the proposed Regulation Best Interest, as proposed, would cause a significant change in the practices of USBII.
The operations of the First American family of funds, the Companys proprietary money market fund complex, also are subject to regulation by the SEC, including rules requiring a floating net asset value for institutional prime and tax-free money market funds and permitting the board of directors of the money market funds the ability to limit redemptions during periods of stress (allowing for the use of liquidity fees and redemption gates during such times).
The Companys operations in the areas of insurance brokerage and reinsurance of credit life insurance are subject to regulation and supervision by various state insurance regulatory authorities, including the licensing of insurance brokers and agents.
Regulation of Derivatives and the Swaps Marketplace Under the Dodd-Frank Act, U.S. Bank National Association, as a CFTC-registered swap dealer, is subject to rules regarding the regulation of the swaps marketplace and over-the-counter derivatives, including rules that require swap dealers and major swap participants to register with the CFTC and require them to meet robust business conduct standards to lower risk and promote market integrity, to meet certain recordkeeping and reporting requirements so that regulators can better monitor the markets, to centrally clear and trade swaps on regulated exchanges or execution facilities, and to be subject to certain capital and margin requirements. While the CFTC has finalized the majority of its regulations pursuant to the Dodd-Frank Act, the SEC, which has jurisdiction over security-based swaps, has not yet finalized all requirements, and entities that deal in security-based swaps are not yet required to register with the SEC as security-based swap dealers.
In addition, the Federal Reserve, the OCC, the FDIC, the Federal Housing Finance Agency, and the Farm Credit Administration have finalized a rule concerning swap margin and capital requirements for swap dealers regulated by these agencies. The final rule mandates the exchange of initial and variation margin for non-cleared swaps and non-cleared security-based swaps between swap entities regulated by the five agencies and certain counterparties. The amount of margin will vary based on the relative risk of the non-cleared swap or non-cleared security-based swap. The final rule phased in the variation margin requirements between September 1, 2016, and
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March 1, 2017. The initial margin requirements will phase in over four years, which began on September 1, 2016, and will be fully phased-in on September 1, 2020, depending on the level of derivatives activity of the swap dealer and the relevant counterparty.
The Volcker Rule Section 13 of the BHC Act and its implementing regulations, commonly referred to as the Volcker Rule, prohibit banking entities from engaging in proprietary trading, and prohibits certain interests in, or relationships with, hedge funds or private equity funds. The Volcker Rule also requires annual attestation by a banking entitys Chief Executive Officer that the banking entity has in place processes to establish, maintain, enforce, review, test and modify a compliance program established in a manner reasonably designed to achieve compliance with the final rule. The Volcker Rule applies to the Company, U.S. Bank National Association and their affiliates. The Company has a Volcker Rule compliance program in place that covers all of its subsidiaries and affiliates, including U.S. Bank National Association.
In May 2018, the five federal agencies with rulemaking authority with respect to the Volcker Rule released a proposal to revise the Volcker Rule. The proposal would tailor the Volcker Rules compliance requirements to the amount of a firms trading activity, revise the definition of trading account, clarify certain key provisions in the Volcker Rule, and modify the information companies are required to provide the federal agencies. If adopted, the proposed changes to the definition of trading account would likely expand the scope of investing and trading activities subject to the Volcker Rules restrictions. The Company is currently evaluating the potential impact that this proposed rule would have on its investing and trading activities.
Data Privacy and Cybersecurity Federal and state law contains extensive consumer privacy protection provisions. The GLBA requires financial institutions to periodically disclose their privacy policies and practices relating to sharing such information and enables retail customers to opt out of the Companys ability to share information with unaffiliated third parties under certain circumstances. Other federal and state laws and regulations impact the Companys ability to share certain information with affiliates and non-affiliates for marketing and/or non-marketing purposes, or to contact customers with marketing offers. The GLBA also requires financial institutions to implement a comprehensive information security program that includes administrative, technical and physical safeguards to ensure the security and confidentiality of customer records and information. These security and privacy policies and procedures for the protection of personal and confidential information are in effect across all businesses and geographic locations. Federal law also makes it a criminal offense, except in limited circumstances, to obtain or attempt to obtain customer information of a financial nature by fraudulent or deceptive means.
Data privacy and data protection are areas of increasing state legislative focus. For example, in June of 2018, the Governor of California signed into law the California Consumer Protection Act of 2018 (the CCPA). The CCPA, which becomes effective on January 1, 2020, applies to for-profit businesses that conduct business in California and meet certain revenue or data collection thresholds. The CCPA will give consumers the right to request disclosure of information collected about them, and whether that information has been sold or shared with others, the right to request deletion of personal information (subject to certain exceptions), the right to opt out of the sale of the consumers personal information, and the right not to be discriminated against for exercising these rights. The CCPA contains several exemptions, including an exemption applicable to information that is collected, processed, sold or disclosed pursuant to the GLBA. The California Attorney General has not yet proposed or adopted regulations implementing the CCPA, and the California State Legislature has amended the Act since its passage. The Company has a physical footprint in California and will be required to comply with the CCPA. In addition, similar laws may be adopted by other states where the Company does business. The impact of the CCPA on the Companys business is yet to be determined. The federal government may also pass data privacy or data protection legislation. In addition, in the European Union (EU), privacy law is now governed by the General Data Protection Regulation (GDPR), which is directly binding and applicable for each EU member state from May 25, 2018. The GDPR contains enhanced compliance obligations and increased penalties for non-compliance compared to the prior law governing data privacy in the EU.
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Like other lenders, U.S. Bank National Association and other of the Companys subsidiaries use credit bureau data in their underwriting activities. Use of such data is regulated under the Fair Credit Reporting Act (FCRA), and the FCRA also regulates reporting information to credit bureaus, prescreening individuals for credit offers, sharing of information between affiliates, and using affiliate data for marketing purposes. Similar state laws may impose additional requirements on the Company and its subsidiaries.
The federal banking regulators, as well as the SEC, CFTC, and related self-regulatory organizations, regularly issue guidance regarding cybersecurity that is intended to enhance cyber risk management among financial institutions. A financial institution is expected to establish lines of defense and to ensure that their risk management processes also address the risk posed by potential threats to the institution. A financial institutions management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption and maintenance of the institutions operations after a cyber attack. A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations if the institution or its critical service providers fall victim to a cyber attack.
Consumer Protection Regulation Retail banking activities are subject to a variety of statutes and regulations designed to protect consumers, including laws related to fair lending and the prohibition of unfair, deceptive, or abusive acts or practices in connection with the offer, sale, or provision of consumer financial products and services. These laws and regulations include the Truth-in-Lending, Truth-in-Savings, Home Mortgage Disclosure, Equal Credit Opportunity, Fair Credit Reporting, Fair Debt Collection Practices, Real Estate Settlement Procedures, Electronic Funds Transfer, Right to Financial Privacy and Servicemembers Civil Relief Acts. Interest and other charges collected or contracted for by banks are subject to state usury laws and federal laws concerning interest rates.
Consumer Financial Protection Bureau U.S. Bank National Association and its subsidiaries are subject to supervision and regulation by the CFPB with respect to federal consumer laws, including many of the laws and regulations described above. The CFPB has undertaken numerous rule-making and other initiatives, including issuing informal guidance and taking enforcement actions against certain financial institutions. The CFPBs rulemaking, examination and enforcement authority has affected and will continue to impact financial institutions involved in the provision of consumer financial products and services, including the Company, U.S. Bank National Association, and the Companys other subsidiaries. These regulatory activities may limit the types of financial services and products the Company may offer, which in turn may reduce the Companys revenues.
Other Supervision and Regulation The Company is subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (the Exchange Act), both as administered by the SEC, by virtue of the Companys status as a public company. As a listed company on the New York Stock Exchange (the NYSE), the Company is subject to the rules of the NYSE for listed companies.
Website Access to SEC Reports
U.S. Bancorps internet website can be found at www.usbank.com. U.S. Bancorp makes available free of charge on its website its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Exchange Act, as well as all other reports filed by U.S. Bancorp with the SEC as soon as reasonably practicable after electronically filed with, or furnished to, the SEC.
Additional Information
Additional information in response to this Item 1 can be found in the 2018 Annual Report on pages 61 to 65 under the heading Line of Business Financial Review. That information is incorporated into this report by reference.
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Item 1A. | Risk Factors |
Information in response to this Item 1A can be found in the 2018 Annual Report on pages 144 to 154 under the heading Risk Factors. That information is incorporated into this report by reference.
Item 1B. | Unresolved Staff Comments |
None.
Item 2. | Properties |
U.S. Bancorp and its significant subsidiaries occupy headquarter offices under a long-term lease in Minneapolis, Minnesota. The Company also leases 10 freestanding operations centers in Cincinnati, Denver, Milwaukee, Minneapolis, Overland Park, Portland and St. Paul. The Company owns 11 principal operations centers in Cincinnati, Coeur dAlene, Fargo, Milwaukee, Olathe, Owensboro, Portland, St. Louis and St. Paul. At December 31, 2018, the Companys subsidiaries owned and operated a total of 1,498 facilities and leased an additional 1,928 facilities. The Company believes its current facilities are adequate to meet its needs. Additional information with respect to the Companys premises and equipment is presented in Note 8 of the Notes to Consolidated Financial Statements included in the 2018 Annual Report. That information is incorporated into this report by reference.
Item 3. | Legal Proceedings |
Information in response to this Item 3 can be found in Note 22 of the Notes to Consolidated Financial Statements included in the 2018 Annual Report. That information is incorporated into this report by reference.
Item 4. | Mine Safety Disclosures |
Not Applicable.
Capital Covenants
The Company has entered into several transactions involving the issuance of capital securities (Capital Securities) by certain Delaware statutory trusts formed by the Company (the Trusts), the issuance by the Company of preferred stock (Preferred Stock) or the issuance by an indirect subsidiary of U.S. Bank National Association of preferred stock exchangeable for the Companys Preferred Stock under certain circumstances (Exchangeable Preferred Stock). Simultaneously with the closing of certain of those transactions, the Company entered into a replacement capital covenant, as amended from time to time (as amended, each, a Replacement Capital Covenant and collectively, the Replacement Capital Covenants) for the benefit of persons that buy, hold or sell a specified series of long-term indebtedness of the Company or U.S. Bank National Association (the Covered Debt). Each of the Replacement Capital Covenants provides that neither the Company nor any of its subsidiaries (including any of the Trusts) will repay, redeem or purchase any of the Preferred Stock, Exchangeable Preferred Stock or the Capital Securities and the securities held by the Trust (the Other Securities), as applicable, on or before the date specified in the applicable Replacement Capital Covenant, unless the Company has received proceeds from the sale of qualifying securities that (a) have equity-like characteristics that are the same as, or more equity-like than, the applicable characteristics of the Preferred Stock, the Exchangeable Preferred Stock, the Capital Securities or Other Securities, as applicable, at the time of repayment, redemption or purchase, and (b) the Company has obtained the prior approval of the Federal Reserve, if such approval is then required by the Federal Reserve or, in the case of the Exchangeable Preferred Stock, the approval of the OCC.
The Company will provide a copy of any Replacement Capital Covenant to a holder of the relevant Covered Debt. For copies of any of these documents, holders should write to Investor Relations, U.S. Bancorp, 800 Nicollet Mall, Minneapolis, Minnesota 55402, or call (866) 775-9668.
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The following table identifies the closing date for each transaction, issuer, series of Capital Securities, Preferred Stock or Exchangeable Preferred Stock issued in the relevant transaction, Other Securities, if any, and applicable Covered Debt as of February 21, 2019, for those securities that remain outstanding.
Closing Date |
Issuer |
Capital Securities or Preferred Stock |
Other Securities |
Covered Debt | ||||
3/17/06 |
USB Capital IX and U.S. Bancorp |
USB Capital IXs $675,378,000 of 6.189% Fixed-to-Floating Rate Normal Income Trust Securities | U.S. Bancorps Series A Non-Cumulative Perpetual Preferred Stock | U.S. Bancorps 7.50% Subordinated Debentures due 2026 (CUSIP No. 911596AL8) | ||||
3/27/06 |
U.S. Bancorp | U.S. Bancorps 40,000,000 Depositary Shares ($25 per Depositary Share) each representing a 1/1000th interest in a share of Series B Non-Cumulative Perpetual Preferred Stock | Not Applicable | U.S. Bancorps 7.50% Subordinated Debentures due 2026 (CUSIP No. 911596AL8) | ||||
12/22/06 |
USB Realty Corp(a) and U.S. Bancorp |
USB Realty Corp.s 5,000 shares of Fixed-to-Floating-Rate Exchangeable Non-Cumulative Perpetual Series A Preferred Stock exchangeable for shares of U.S. Bancorps Series C Non-Cumulative Perpetual Preferred Stock(b) | Not Applicable | U.S. Bancorps 7.50% Subordinated Debentures due 2026 (CUSIP No. 911596AL8) |
(a) | USB Realty Corp. is an indirect subsidiary of U.S. Bank National Association. |
(b) | Under certain circumstances, upon the direction of the OCC, each share of USB Realty Corp.s Series A Preferred Stock will be automatically exchanged for one share of U.S. Bancorps Series C Non-Cumulative Perpetual Preferred Stock. |
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PART II
Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
On June 28, 2018, the Company announced its Board of Directors had approved an authorization to repurchase up to $3.0 billion of its common stock, from July 1, 2018 through June 30, 2019. Except as otherwise indicated in the table below, all shares repurchased during the fourth quarter of 2018 were repurchased under this authorization. The following table provides a detailed analysis of all shares repurchased by the Company or any affiliated purchaser during the fourth quarter of 2018:
Period |
Total Number of Shares Purchased |
Average Price Paid per Share |
Total Number of Shares Purchased as Part of Publicly Announced Program |
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (In Millions) |
||||||||||||
October 1-31 |
7,906,336 | (a) | $ | 51.75 | 7,806,336 | $ | 1,843 | |||||||||
November 1-30 |
4,526,196 | 53.56 | 4,526,196 | 1,601 | ||||||||||||
December 1-31 |
3,770,521 | (b) | 48.30 | 3,695,521 | 1,422 | |||||||||||
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|
|
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Total |
16,203,053 | (c) | $ | 51.46 | 16,028,053 | $ | 1,422 | |||||||||
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(a) | Includes 100,000 shares of common stock purchased, at an average price per share of $50.65, in open-market transactions by U.S. Bank National Association in its capacity as trustee of the U.S. Bank 401(k) Savings Plan, which is the Companys employee retirement savings plan. |
(b) | Includes 75,000 shares of common stock purchased, at an average price per share of $47.43, in open-market transactions by U.S. Bank National Association in its capacity as trustee of the U.S. Bank 401(k) Savings Plan. |
(c) | Includes 175,000 shares of common stock purchased, at an average price per share of $49.27, in open-market transactions by U.S. Bank National Association in its capacity as trustee of the U.S. Bank 401(k) Savings Plan. |
Additional Information
Additional information in response to this Item 5 can be found in the 2018 Annual Report on page 141 under the heading U.S. Bancorp Supplemental Financial Data (Unaudited). That information is incorporated into this report by reference.
Item 6. | Selected Financial Data |
Information in response to this Item 6 can be found in the 2018 Annual Report on page 23 under the heading Table 1 Selected Financial Data. That information is incorporated into this report by reference.
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
Information in response to this Item 7 can be found in the 2018 Annual Report on pages 22 to 70 under the heading Managements Discussion and Analysis. That information is incorporated into this report by reference.
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
Information in response to this Item 7A can be found in the 2018 Annual Report on pages 38 to 59 under the heading Corporate Risk Profile. That information is incorporated into this report by reference.
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Item 8. | Financial Statements and Supplementary Data |
Information in response to this Item 8 can be found in the 2018 Annual Report on pages 71 to 143 under the headings Report of Management, Report of Independent Registered Public Accounting Firm, Report of Independent Registered Public Accounting Firm, U.S. Bancorp Consolidated Balance Sheet, U.S. Bancorp Consolidated Statement of Income, U.S. Bancorp Consolidated Statement of Comprehensive Income, U.S. Bancorp Consolidated Statement of Shareholders Equity, U.S. Bancorp Consolidated Statement of Cash Flows, Notes to Consolidated Financial Statements, U.S. Bancorp Consolidated Balance Sheet Five Year Summary (Unaudited), U.S. Bancorp Consolidated Statement of Income Five Year Summary (Unaudited), U.S. Bancorp Quarterly Consolidated Financial Data (Unaudited), U.S. Bancorp Supplemental Financial Data (Unaudited) and U.S. Bancorp Consolidated Daily Average Balance Sheet and Related Yields and Rates (Unaudited). That information is incorporated into this report by reference.
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
None.
Item 9A. | Controls and Procedures |
Information in response to this Item 9A can be found in the 2018 Annual Report on page 70 under the heading Controls and Procedures and on pages 71 and 73 under the headings Report of Management and Report of Independent Registered Public Accounting Firm. That information is incorporated into this report by reference.
Item 9B. | Other Information |
None.
21
PART III
Item 10. | Directors, Executive Officers and Corporate Governance |
Code of Ethics and Business Conduct
The Company has adopted a Code of Ethics and Business Conduct that applies to its principal executive officer, principal financial officer and principal accounting officer. The Companys Code of Ethics and Business Conduct can be found at www.usbank.com by clicking on About Us and then clicking on Investor Relations and then clicking on Corporate Governance and then clicking on Code of Ethics. The Company intends to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding amendments to, or waivers from, certain provisions of the Code of Ethics and Business Conduct that apply to its principal executive officer, principal financial officer and principal accounting officer by posting such information on its website, at the address and location specified above.
Executive Officers of the Registrant
Andrew Cecere
Mr. Cecere is Chairman, President and Chief Executive Officer of U.S. Bancorp. Mr. Cecere, 58, has served as President of U.S. Bancorp since January 2016, Chief Executive Officer since April 2017 and Chairman since April 2018. He also served as Vice Chairman and Chief Operating Officer from January 2015 to January 2016 and was U.S. Bancorps Vice Chairman and Chief Financial Officer from February 2007 until January 2015. Until that time, he served as Vice Chairman, Wealth Management and Investment Services, of U.S. Bancorp since the merger of Firstar Corporation and U.S. Bancorp in February 2001. Previously, he had served as an executive officer of the former U.S. Bancorp, including as Chief Financial Officer from May 2000 through February 2001.
Ismat Aziz
Ms. Aziz is Executive Vice President and Chief Human Resources Officer of U.S. Bancorp. Ms. Aziz, 51, has served in this position since joining U.S. Bancorp in September 2018. She served as Chief Human Resources Officer of Sprint Corporation from May 2016 until September 2018. Ms. Aziz served as the Chief Human Resources Officer of Sams Club from April 2012 to April 2016, and as the Senior Vice President of Business Capability and Human Resources of Sams Club from August 2010 to April 2012. Prior to that time, she served as the Vice President of Business Capability and Human Resources at Sears Canada from June 2009 to August 2010.
James L. Chosy
Mr. Chosy is Executive Vice President and General Counsel of U.S. Bancorp. Mr. Chosy, 55, has served in this position since March 2013. He also served as Corporate Secretary of U.S. Bancorp from March 2013 until April 2016. From 2001 to 2013, he served as the General Counsel and Secretary of Piper Jaffray Companies. From 1995 to 2001, Mr. Chosy was Vice President and Associate General Counsel of U.S. Bancorp, having also served as Assistant Secretary of U.S. Bancorp from 1995 through 2000 and as Secretary from 2000 until 2001.
Terrance R. Dolan
Mr. Dolan is Vice Chairman and Chief Financial Officer of U.S. Bancorp. Mr. Dolan, 57, has served in this position since August 2016. From July 2010 to July 2016, he served as Vice Chairman, Wealth Management and Investment Services, of U.S. Bancorp. From September 1998 to July 2010, Mr. Dolan served as U.S. Bancorps Controller. He additionally held the title of Executive Vice President from January 2002 until June 2010 and Senior Vice President from September 1998 until January 2002.
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John R. Elmore
Mr. Elmore is Vice Chairman, Community Banking and Branch Delivery, of U.S. Bancorp. Mr. Elmore, 62, has served in this position since March 2013. From 1999 to 2013, he served as Executive Vice President, Community Banking, of U.S. Bancorp and its predecessor company, Firstar Corporation. Mr. Elmore will retire from U.S. Bancorp on March 1, 2019.
Leslie V. Godridge
Ms. Godridge is Vice Chairman, Corporate and Commercial Banking, of U.S. Bancorp. Ms. Godridge, 63, has served in this position since January 2016. From February 2013 until December 2015, she served as Executive Vice President, National Corporate Specialized Industries and Global Treasury Management, of U.S. Bancorp. From February 2007, when she joined U.S. Bancorp, until January 2013, Ms. Godridge served as Executive Vice President, National Corporate and Institutional Banking, of U.S. Bancorp. Prior to that time, she served as Senior Executive Vice President and a member of the Executive Committee at The Bank of New York, where she was head of BNY Asset Management, Private Banking, Consumer Banking and Regional Commercial Banking from 2004 to 2006.
Gunjan Kedia
Ms. Kedia is Vice Chairman, Wealth Management and Investment Services, of U.S. Bancorp. Ms. Kedia, 48, has served in this position since joining U.S. Bancorp in December 2016. From October 2008 until May 2016, she served as Executive Vice President of State Street Corporation where she led the core investment servicing business in North and South America and served as a member of State Streets management committee, its senior most strategy and policy committee. Previously, Ms. Kedia was an Executive Vice President of global product management at Bank of New York Mellon from 2004 to 2008.
James B. Kelligrew
Mr. Kelligrew is Vice Chairman, Corporate and Commercial Banking, of U.S. Bancorp. Mr. Kelligrew, 53, has served in this position since January 2016. From March 2014 until December 2015, he served as Executive Vice President, Fixed Income and Capital Markets, of U.S. Bancorp, having served as Executive Vice President, Credit Fixed Income, of U.S. Bancorp from May 2009 to March 2014. Prior to that time, he held various leadership positions with Wells Fargo Securities from 2003 to 2009, and with Bank of America Securities from 1993 to 2003.
Shailesh M. Kotwal
Mr. Kotwal is Vice Chairman, Payment Services, of U.S. Bancorp. Mr. Kotwal, 54, has served in this position since joining U.S. Bancorp in March 2015. From July 2008 until May 2014, he served as Executive Vice President of TD Bank Group with responsibility for retail banking products and services and as Chair of its enterprise payments council. From 2006 until 2008, he served as President, International, of eFunds Corporation. Previously, Mr. Kotwal served in various leadership roles at American Express Company from 1989 until 2006, including responsibility for operations in North and South America, Europe and the Asia-Pacific regions.
Katherine B. Quinn
Ms. Quinn is Vice Chairman and Chief Administrative Officer of U.S. Bancorp. Ms. Quinn, 54, has served in this position since April 2017. From September 2013 to April 2017, she served as Executive Vice President and Chief Strategy and Reputation Officer of U.S. Bancorp and has served on U.S. Bancorps Managing Committee since January 2015. From September 2010 until January 2013, she served as Chief Marketing Officer of WellPoint, Inc. (now known as Anthem, Inc.), having served as Head of Corporate Marketing of WellPoint from July 2005 until September 2010. Prior to that time, she served as Chief Marketing and Strategy Officer at The Hartford from 2003 until 2005.
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Jodi L. Richard
Ms. Richard is Vice Chairman and Chief Risk Officer of U.S. Bancorp. Ms. Richard, 50, has served in this position since October 2018. She served as Executive Vice President and Chief Operational Risk Officer of U.S. Bancorp from January 2018 until October 2018, having served as Senior Vice President and Chief Operational Risk Officer from 2014 until January 2018. Prior to that time, Ms. Richard held various senior leadership roles at HSBC from 2003 until 2014, including Executive Vice President and Head of Operational Risk and Internal Control at HSBC North America from 2008 to 2014. Ms. Richard started her career at the Office of the Comptroller of the Currency in 1990 as a national bank examiner.
Mark G. Runkel
Mr. Runkel is Executive Vice President and Chief Credit Officer of U.S. Bancorp. Mr. Runkel, 42, has served in this position since December 2013. From February 2011 until December 2013, he served as Senior Vice President and Credit Risk Group Manager of U.S. Bancorp Retail and Payment Services Credit Risk Management, having served as Senior Vice President and Risk Manager of U.S. Bancorp Retail and Small Business Credit Risk Management from June 2009 until February 2011. From March 2005 until May 2009, he served as Vice President and Risk Manager of U.S. Bancorp.
Jeffry H. von Gillern
Mr. von Gillern is Vice Chairman, Technology and Operations Services, of U.S. Bancorp. Mr. von Gillern, 53, has served in this position since July 2010. From April 2001, when he joined U.S. Bancorp, until July 2010, Mr. von Gillern served as Executive Vice President of U.S. Bancorp, additionally serving as Chief Information Officer from July 2007 until July 2010.
Timothy A. Welsh
Mr. Welsh is Vice Chairman, Consumer Banking Sales and Support, of U.S. Bancorp. Mr. Welsh, 53, has served in this position since joining U.S. Bancorp in July 2017. From July 2006 until June 2017, he served as a Senior Partner at McKinsey & Company where he specialized in financial services and the consumer experience. Previously, Mr. Welsh served as a Partner at McKinsey & Company from 1999 to 2006.
Additional Information
Additional information in response to this Item 10 can be found in the Proxy Statement under the headings Other Matters Section 16(a) Beneficial Ownership Reporting Compliance, Proposal 1 Election of Directors, Corporate Governance Committee Responsibilities and Corporate Governance Committee Member Qualifications. That information is incorporated into this report by reference.
Item 11. | Executive Compensation |
Information in response to this Item 11 can be found in the Proxy Statement under the headings Compensation Discussion and Analysis, Compensation Committee Report, Executive Compensation and Director Compensation. That information is incorporated into this report by reference.
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Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Equity Compensation Plan Information
The following table summarizes information regarding the Companys equity compensation plans in effect as of December 31, 2018:
Plan Category |
Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights |
Weighted-average Exercise Price of Outstanding Options, Warrants and Rights |
Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in the First Column) |
|||||||||
Equity compensation plans approved by security holders |
34,713,980 | (3) | ||||||||||
Stock Options |
9,115,010 | (1) | $ | 34.52 | ||||||||
Restricted Stock Units and Performance-Based Restricted Stock Units |
6,719,298 | (2) | - | |||||||||
Equity compensation plans not approved by security holders |
416,688 | (4) | - | - | ||||||||
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|
|
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Total |
16,250,996 | 34,713,980 |
(1) | Includes shares of the Companys common stock underlying stock options granted under the U.S. Bancorp 2015 Stock Incentive Plan (the 2015 Plan) and the U.S. Bancorp Amended and Restated 2007 Stock Incentive Plan (the 2007 Plan). |
(2) | Includes shares of the Companys common stock underlying performance-based restricted stock units (awarded to the members of the Companys Managing Committee and settled in shares of the Companys common stock on a one-for-one basis) and restricted stock units (settled in shares of the Companys common stock on a one-for-one basis) under the 2015 Plan, the 2007 Plan and the U.S. Bancorp 2001 Stock Incentive Plan. No exercise price is paid upon vesting, and thus, no exercise price is included in the table. |
(3) | The 34,713,980 shares of the Companys common stock available for future issuance are reserved under the 2015 Plan. Future awards under the 2015 Plan may be made in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalents, stock awards, or other stock-based awards. |
(4) | These shares of the Companys common stock are issuable pursuant to various current and former deferred compensation plans of U.S. Bancorp and its predecessor entities. No exercise price is paid when shares are issued pursuant to the deferred compensation plans. |
The deferred compensation plans allow non-employee directors and members of senior management to defer all or part of their compensation until the earlier of retirement or termination of employment. The deferred compensation is deemed to be invested in one of several investment alternatives at the option of the participant, including shares of U.S. Bancorp common stock. Deferred compensation deemed to be invested in U.S. Bancorp stock will be received in the form of shares of U.S. Bancorp common stock at the time of distribution, unless the Company chooses cash payment.
The 416,688 shares included in the table assume that participants in the plans whose deferred compensation had been deemed to be invested in the Companys common stock had elected to receive all of that deferred compensation in shares of the Companys common stock on December 31, 2018. The U.S. Bank Executive Employees Deferred Compensation Plan (2005 Statement) and the U.S. Bank Outside Directors Deferred Compensation Plan (2005 Statement) are the Companys only deferred compensation plans under which compensation may currently be deferred.
25
Additional Information
Additional information in response to this Item 12 can be found in the Proxy Statement under the heading Security Ownership of Certain Beneficial Owners and Management. That information is incorporated into this report by reference.
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Information in response to this Item 13 can be found in the Proxy Statement under the headings Corporate Governance Director Independence, Corporate Governance Committee Member Qualifications and Certain Relationships and Related Transactions. That information is incorporated into this report by reference.
Item 14. | Principal Accounting Fees and Services |
Information in response to this Item 14 can be found in the Proxy Statement under the headings Audit Committee Report and Payment of Fees to Auditor Fees to Independent Auditor and Audit Committee Report and Payment of Fees to Auditor Administration of Engagement of Independent Auditor. That information is incorporated into this report by reference.
26
PART IV
Item 15. | Exhibits, Financial Statement Schedules |
List of documents filed as part of this report
1. Financial Statements
| Report of Management |
| Report of Independent Registered Public Accounting Firm on the Financial Statements |
| Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting |
| U.S. Bancorp Consolidated Balance Sheet as of December 31, 2018 and 2017 |
| U.S. Bancorp Consolidated Statement of Income for each of the three years in the period ended December 31, 2018 |
| U.S. Bancorp Consolidated Statement of Comprehensive Income for each of the three years in the period ended December 31, 2018 |
| U.S. Bancorp Consolidated Statement of Shareholders Equity for each of the three years in the period ended December 31, 2018 |
| U.S. Bancorp Consolidated Statement of Cash Flows for each of the three years in the period ended December 31, 2018 |
| Notes to Consolidated Financial Statements |
| U.S. Bancorp Consolidated Balance Sheet Five Year Summary (Unaudited) |
| U.S. Bancorp Consolidated Statement of Income Five Year Summary (Unaudited) |
| U.S. Bancorp Quarterly Consolidated Financial Data (Unaudited) |
| U.S. Bancorp Supplemental Financial Data (Unaudited) |
| U.S. Bancorp Consolidated Daily Average Balance Sheet and Related Yields and Rates (Unaudited) |
2. Financial Statement Schedules
All financial statement schedules for the Company have been included in the consolidated financial statements or the related footnotes, or are either inapplicable or not required.
3. Exhibits
Shareholders may obtain a copy of any of the exhibits to this report upon payment of a fee covering the Companys reasonable expenses in furnishing the exhibits. You can request exhibits by writing to Investor Relations, U.S. Bancorp, 800 Nicollet Mall, Minneapolis, Minnesota 55402.
Exhibit Number |
Description | |
(1)3.1 |
Restated Certificate of Incorporation, as amended. Filed as Exhibit 3.1 to Form 10-Q for the quarterly period ended September 30, 2018. | |
(1)3.2 |
Amended and Restated Bylaws. Filed as Exhibit 3.1 to Form 8-K filed on January 20, 2016. | |
4.1 |
Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, copies of instruments defining the rights of holders of long-term debt are not filed. U.S. Bancorp agrees to furnish a copy thereof to the SEC upon request. | |
(1)(2)10.1(a) |
U.S. Bancorp 2001 Stock Incentive Plan. Filed as Exhibit 10.1 to Form 10-K for the year ended December 31, 2001. |
27
28
29
30
(1) | Exhibit has been previously filed with the SEC and is incorporated herein as an exhibit by reference to the prior filing. |
(2) | Management contracts or compensatory plans or arrangements. |
31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on February 21, 2019, on its behalf by the undersigned, thereunto duly authorized.
U.S. BANCORP | ||
By | /s/ ANDREW CECERE | |
Andrew Cecere | ||
Chairman, President and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on February 21, 2019, by the following persons on behalf of the registrant and in the capacities indicated.
Signature and Title |
/s/ ANDREW CECERE |
Andrew Cecere, |
Chairman, President and Chief Executive Officer (principal executive officer) |
/s/ TERRANCE R. DOLAN |
Terrance R. Dolan, |
Vice Chairman and Chief Financial Officer (principal financial officer) |
/s/ CRAIG E. GIFFORD |
Craig E. Gifford, |
Executive Vice President and Controller (principal accounting officer) |
WARNER L. BAXTER* |
Warner L. Baxter, Director |
DOROTHY J. BRIDGES* |
Dorothy J. Bridges, Director |
ELIZABETH L. BUSE* |
Elizabeth L. Buse, Director |
MARC N. CASPER* |
Mark N. Casper, Director |
ARTHUR D. COLLINS, JR.* |
Arthur D. Collins, Jr., Director |
KIMBERLY J. HARRIS* |
Kimberly J. Harris, Director |
ROLAND A. HERNANDEZ* |
Roland A. Hernandez, Director |
DOREEN WOO HO* |
Doreen Woo Ho, Director |
32
Signature and Title |
OLIVIA F. KIRTLEY* |
Olivia F. Kirtley, Director |
KAREN S. LYNCH* |
Karen S. Lynch, Director |
RICHARD P. MCKENNEY* |
Richard P. McKenney, Director |
YUSUF I. MEHDI* |
Yusuf I. Mehdi, Director |
DAVID B. OMALEY* |
David B. OMaley, Director |
ODELL M. OWENS, M.D., M.P.H.* |
ODell M. Owens, M.D., M.P.H., Director |
CRAIG D. SCHNUCK* |
Craig D. Schnuck, Director |
SCOTT W. WINE* |
Scott W. Wine, Director |
* | Andrew Cecere, by signing his name hereto, does hereby sign this document on behalf of each of the above named directors of the registrant pursuant to powers of attorney duly executed by such persons. |
Dated: February 21, 2019
By: | /s/ ANDREW CECERE | |
Andrew Cecere | ||
Attorney-In-Fact | ||
Chairman, President and Chief Executive Officer |
33
Exhibit 10.34
U.S. BANCORP
PERFORMANCE RESTRICTED STOCK UNIT AWARD AGREEMENT
THIS AGREEMENT is made as of <Grant Date> (the Grant Date), by and between U.S. Bancorp (the Company) and <Participant Name> (the Participant), together with the Completed Exhibit A which is incorporated herein by reference (collectively, the Agreement), sets forth the terms and conditions of a performance restricted stock unit award representing the right to receive <Number of Target Awards Granted> shares of common stock of the Company, par value $0.01 per share (the Common Stock). The grant of this performance restricted stock unit award is made pursuant to the Companys 2015 Stock Incentive Plan, which was approved by shareholders on April 21, 2015 (the Plan) and is subject to its terms. Capitalized terms that are not defined in the Agreement shall have the meaning ascribed to such terms in the Plan.
The Company and Participant agree as follows:
1. Award
Subject to the terms and conditions of the Plan and the Agreement, the Company grants to Participant a performance restricted stock unit award (the Units) entitling Participant to <Number of Target Awards Granted> performance restricted stock units (such number of units, the Target Award Number). The Target Award Number shall be adjusted upward or downward as provided in the Completed Exhibit A. The number of Units that Participant will receive under the Agreement, after giving effect to such adjustment, is referred to herein as the Final Award Number. Each Unit represents the right to receive one share of Common Stock, subject to the vesting requirements and distribution provisions of the Agreement and the terms of the Plan. The shares of Common Stock distributable to Participant with respect to the Units granted hereunder are referred to as the Shares. The Completed Exhibit A sets forth (a) the performance period over which the Final Award Number will be determined (the Performance Period), and (b) the date on which the Final Award Number will be determined (the Determination Date).
2. Vesting; Forfeiture
(a) Time-Based Vesting Conditions. Subject to the terms and conditions of the Agreement, if the Participant remains continuously employed by the Company or an Affiliate of the Company through the Vesting Date as set forth in the vesting schedule (the Vesting Schedule) detailed at the end of this Agreement in the Appendix: Vesting Schedule (the Scheduled Vesting Date), the number of Units equal to the Final Award Number shall become vested on the Scheduled Vesting Date and will be settled and Shares delivered in accordance with Section 3, provided that Participant has at all times since the Grant Date complied with the terms of any confidentiality and non-solicitation agreement between the Company or an Affiliate and the Participant. Except as otherwise provided in the Agreement, if Participant ceases to be an employee of the Company and its Affiliates prior to the Scheduled Vesting Date, all Units that have not become vested previously shall be immediately and irrevocably forfeited.
(b) Continued Vesting Upon Separation From Service Due to Retirement or Disability. Notwithstanding Section 2(a), if Participant has a Separation From Service (as defined in Section 10) with the Company or any Affiliate by reason of Retirement (as defined in Section 10) or Disability (as defined in Section 10), prior to the Scheduled Vesting Date, and provided such Separation From Service is not a Qualifying Termination (as defined in Section 10), the Units shall not be forfeited, but rather, the Final Award Number will be determined in accordance with Section 1 and the Units shall continue to vest on the Scheduled Vesting Date subject to the terms of the Agreement, including Section 2(f) hereof, and provided that Participant has at all times since the Grant Date complied with the terms of any confidentiality and non-solicitation agreement between the Company or an Affiliate and the Participant.
(c) Acceleration of Vesting Upon Death. If Participant ceases to be an employee by reason of death, or if Participant dies after a Separation From Service by reason of Retirement or Disability, prior to the Scheduled Vesting Date, then the Units will become vested in accordance with this Section 2(c). If such death occurs prior to the last day of the Performance Period, a number of Units equal to the Target Award Number will vest upon Participants death. If the death occurs on or after the last day of the Performance Period, then a number of Units equal to the Final Award Number will vest and be distributed to the Participant in accordance with Section 3(d). Notwithstanding the foregoing, such vesting is subject to the terms of the Agreement, including Section 2(f) hereof, and provided the Participant has at all times since the Grant Date complied with the terms of any confidentiality and non-solicitation agreement between the Company or an Affiliate and the Participant.
(d) Acceleration of Vesting Following a Qualifying Termination. Notwithstanding the vesting provisions contained in Sections 2(a) and 2(b) above, but subject to the other terms and conditions of the Agreement, if Participant experiences a Qualifying Termination prior to the Scheduled Vesting Date, then the Units will become vested in accordance with this Section 2(d). If the Qualifying Termination occurs prior to the last day of the Performance Period, a number of Units equal to the Target Award Number will vest upon Participants Qualifying Termination. If the Qualifying Termination occurs on or after the last date of the Performance Period, then a number of Units equal to the Final Award Number will vest and be distributed to the Participant in accordance with Section 3(b). Notwithstanding the foregoing, such accelerated vesting is subject to the terms of the Agreement, including Section 2(f) hereof, and provided that the Participant has at all times since the Grant Date complied with the terms of any confidentiality and non-solicitation agreement between the Company or an Affiliate and the Participant. Notwithstanding the foregoing, if in connection with a Change in Control the Units are adjusted, or units in the acquiring or surviving entity are substituted for the Units, or the Plan is terminated, in each case as permitted under the Plan and in accordance with Section 409A, then the terms of such adjustment, substitution or plan termination will govern the treatment of the Units.
(e) Forfeiture on Termination of Employment for Cause and on Breach of Confidentiality Agreement. If Participant violates the terms of any confidentiality and non-solicitation agreement between the Company or an Affiliate and the Participant, all Units that have not been settled (and Shares delivered) previously shall be immediately and irrevocably forfeited. If Participants employment with the Company is terminated for Cause, all Units that have not been settled (and Shares delivered) previously shall be immediately and irrevocably forfeited. Upon forfeiture, Participant shall have no rights relating to the forfeited Units (including, without limitation, any rights to receive a distribution of Shares with respect to the Units and the right to receive Dividend Equivalents).
(f) Special Risk-Related Cancellation Provisions. Notwithstanding any other provision of the Agreement, if at any time subsequent to the Grant Date the Committee determines, in its sole discretion, that Participant has subjected the Company to significant financial, reputational, or other risk by (i) failing to comply with Company policies and procedures, including the Code of Ethics and Business Conduct, (ii) violating any law or regulation, (iii) engaging in negligence or willful misconduct, or (iv) engaging in activity resulting in a significant or material control deficiency under the Sarbanes-Oxley Act of 2002, then all or part of the Units granted under the Agreement that have not been settled (and Shares delivered) at the time of such determination may be cancelled. If any Units are cancelled pursuant to this provision, Participant will have no rights with respect to the Units (including, without limitation, any rights to receive a distribution of Shares with respect to the Units and the right to receive Dividend Equivalents).
3. Distribution of Shares with Respect to Units
Subject to the terms of the Agreement, including the restrictions in this Section 3, following the vesting of Units and following the payment of any applicable withholding taxes pursuant to Section 7 hereof, the Company shall cause to be issued and delivered to Participant (including through book entry) Shares registered in the name of Participant or in the name of Participants legal representatives, beneficiaries or heirs, as the case may be, as follows:
(a) General Rule. As soon as administratively feasible following the Scheduled Vesting Date (but in no event later than December 31st of the year in which such Scheduled Vesting Date occurs), all Shares issuable pursuant to Units that become vested in accordance with Sections 2(a) through 2(c) hereof shall be distributed to Participant, or in the event of Participants death, to the representatives of Participant or to any Person to whom the Units have been transferred by will or the applicable laws of descent and distribution.
(b) Qualifying Termination Distributions. As soon as administratively feasible following a Separation From Service in connection with a Qualifying Termination (and in any case no later than 60 days following such Separation From Service except as otherwise provided in this Section 3(b)), all Shares issuable pursuant to Units that become vested in accordance with Sections 2(d) hereof shall be distributed to Participant. Notwithstanding the foregoing, any Shares issuable to a Specified Employee (as defined in Section 10) as a result of a Separation From Service in connection with a Qualifying Termination will not be delivered to such Specified Employee until the date that is six months and one day after the date of the Separation From Service. If in connection with a Change in Control the Units are adjusted, or units in the acquiring or surviving entity are substituted for the Units, or the Plan is terminated, in each case as permitted under the Plan and in accordance with Section 409A, then the terms of such adjustment, substitution or plan termination will govern the treatment of the Units, including the time and manner of settlement of the Units.
-2-
(c) Distributions Following Retirement or Disability. If a Participant has a Separation From Service due to Retirement or Disability (so long as such Separation From Service is not in connection with a Qualifying Termination), the distribution of Shares with respect to Units will not be accelerated, and Shares will be distributed as soon as administratively feasible following the applicable Scheduled Vesting Dates (but in no event later than December 31st of the year in which such Scheduled Vesting Date occurs).
(d) Distributions Following Death. As soon as administratively feasible following the death of a Participant (but in no event later than 90 days following such death) all Shares issuable pursuant to Units that become vested pursuant to Section 2(c) shall be distributed to the Participant.
In the event that the number of Shares distributable pursuant to this Section 3 is a number that is not a whole number, then the number of Shares distributed shall be rounded down to the nearest whole number.
4. Rights as Shareholder; Dividend Equivalents
Prior to the distribution of Shares with respect to Units pursuant to Section 3 above, Participant shall not have ownership or rights of ownership of any Shares underlying the Units; provided, however, that Participant shall be entitled to accrue cash Dividend Equivalents on outstanding Units (i.e. Units that have not been forfeited, cancelled or settled), whether vested or unvested, if cash dividends on the Common Stock are declared by the Board on or after the Grant Date. Prior to the Determination Date, Participant will accrue cash Dividend Equivalents on Units equal to the Target Award Number. Specifically, when cash dividends are paid with respect to a share of outstanding Common Stock, an amount of cash per Unit equal to the cash dividend paid with respect to a share of outstanding Common Stock will be accrued with respect to each Unit in Participants Target Award Number. On the Determination Date, the dollar amount of Participants cumulative accrued Dividend Equivalents as of the Determination Date will be multiplied by Participants Target Award Number Percentage to determine the amount of cash Dividend Equivalents that will be paid to Participant. Dividend Equivalents will be paid in cash as soon as administratively feasible following the date on which the underlying Units giving rise to the Dividend Equivalents are settled and paid out, but in no event later than December 31st of the year in which the underlying Units are distributed in accordance with Section 3. The Dividend Equivalents shall be treated as earnings on, and as a separate amount from, the Units for purposes of Section 409A of the Code.
5. Restriction on Transfer
Except for transfers by will or the applicable laws of descent and distribution, the Units cannot be sold, assigned, transferred, gifted, pledged, or in any manner encumbered, alienated, attached or disposed of, and any purported sale, assignment, transfer, gift, pledge, alienation, attachment or encumbrance shall be void and unenforceable against the Company. No such attempt to transfer the Units, whether voluntary or involuntary, by operation of law or otherwise (except by will or laws of descent and distribution), shall vest the purported transferee with any interest or right in or with respect to the Units or the Shares issuable with respect to the Units.
6. Securities Law Compliance
The delivery of all or any of the Shares in accordance with this Award shall be effective only at such time that the issuance of such Shares will not violate any state or federal securities or other laws. The Company is under no obligation to effect any registration of the Shares under the Securities Act of 1933 or to effect any state registration or qualification of the Shares. The Company may, in its sole discretion, delay the delivery of the Shares or place restrictive legends on such Shares in order to ensure that the issuance of any Shares will be in compliance with federal or state securities laws and the rules of the New York Stock Exchange or any other exchange upon which the Common Stock is traded.
-3-
7. Income Tax Withholding
In order to comply with all applicable federal, state, local and foreign income and payroll tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable withholding, income or other taxes, which are the sole and absolute responsibility of Participant, are withheld or collected from Participant. Without limiting the foregoing, the Company may, but is not obligated to, permit or require the satisfaction of tax withholding obligations through net Share settlement at the time of delivery of Shares (i.e. the Company withholds a portion of the Shares otherwise to be delivered with a Fair Market Value, as such term is defined in the Plan, equal to the amount of such taxes, but only to the extent necessary to satisfy certain statutory withholding requirements to avoid adverse accounting treatment under ASC 718) or through an open market sale of Shares otherwise to be delivered, in each case pursuant to such rules and procedures as may be established by the Company.
8. Miscellaneous
(a) The Agreement is issued pursuant to the Plan and is subject to its terms. The Plan is available for inspection during business hours at the principal office of the Company. In addition, the Plan may be viewed on the Fidelity Website at www.netbenefits.com (or the website of any other stock plan administrator selected by the Company in the future).
(b) The Agreement shall not confer on Participant any right with respect to continuance of employment with the Company or any Affiliate, nor will it interfere in any way with the right of the Company or any Affiliate to terminate such employment at any time.
(c) Participant acknowledges that the grant, vesting or any payment with respect to this Award, and the sale or other taxable disposition of the Shares issued with respect to the Units hereunder may have tax consequences pursuant to the Code or under local, state or international tax laws. It is intended that the Award shall comply with Section 409A of the Code, and the provisions of the Agreement and the Plan shall be construed and administered accordingly. Any amendment or modification of the Award (to the extent permitted under the terms of the Plan), will be undertaken in a manner intended to comply with Section 409A, to the extent applicable. Notwithstanding the foregoing, there is no guaranty or assurance as to the tax treatment of the Award. Participant acknowledges that Participant is relying solely and exclusively on Participants own professional tax and investment advisors with respect to any and all such matters (and is not relying, in any manner, on the Company or any of its employees or representatives). Participant understands and agrees that any and all tax consequences resulting from the Award and its grant, vesting, amendment, or any payment with respect thereto, and the sale or other taxable disposition of the Shares acquired pursuant to the Award, is solely and exclusively the responsibility of Participant without any expectation or understanding that the Company or any of its employees or representatives will pay or reimburse Participant for such taxes or other items.
9. Venue
Any claim or action brought with respect to this Award shall be brought in a federal or state court located in Minneapolis, Minnesota.
10. Definitions
For purposes of the Agreement, the following terms shall have the definitions as set forth below:
(a) Change in Control shall have the meaning ascribed to it in the Plan, but only if the event or circumstances constituting such change in control also constitute a change in ownership or effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company, within the meaning of Section 409A of the Code.
(b) Disability means leaving active employment and qualifying for and receiving disability benefits under the Companys long-term disability programs as in effect from time to time.
(c) Qualifying Termination means:
(A) Participants Separation From Service as a result of the Companys termination of Participants employment for any reason other than Cause within 12 months following a Change in Control, provided that such a termination will not be a Qualifying Termination if: i) the Company has notified the Participant in writing more than 30 days prior to the Announcement Date that Participants employment is not expected to
-4-
continue for more than 12 months following the date of such notification, and Participants employment is in fact terminated within such 12 month period; or ii) Participant has announced in writing, prior to the date the Company provides a Notice of Termination to Participant, that Participant intends to terminate his or her employment; or
(B) Participants Separation From Service as a result of Disability within 12 months following a Change in Control; or
(C) Participants Separation From Service (other than as a result of Participants termination of employment by the Company for Cause) within 12 months following a Change in Control, if, at the time of such Separation From Service, Participant is age 55 or older and has had 10 or more years of employment with the Company or its Affiliates following such Participants most recent date of hire by the Company or its Affiliates.
For purposes of this definition, the term Company shall be deemed to include any Person that has assumed this Award (or provided a substitute award to Participant) in connection with a Change in Control.
(d) Retirement means a Separation From Service (other than for Cause) by a Participant who is age 55 or older and has had 10 or more years of employment with the Company or its Affiliates following such Participants most recent date of hire by the Company or its Affiliates.
(e) Separation From Service means a Participants separation from service with the Company and its affiliates, as determined under Treasury Regulation section 1.409A-1(h)(1), provided, that the term affiliate shall mean a business entity which is affiliated in ownership with the Company and that is treated as a single employer under the rules of section 414(b) and (c) of the Code (applying the eighty percent common ownership standard).
(f) Specified Employee shall mean any Participant who is a specified employee for purposes of section 1.409A-1(i) of the U.S. Treasury Regulations, determined in accordance with the rules set forth in the separate document entitled U.S. Bank Specified Employee Determination.
Appendix
Vesting Schedule
<Vesting Schedule>
-5-
EXHIBIT A TO
PERFORMANCE RESTRICTED STOCK UNIT AWARD AGREEMENT
This Exhibit A to the Performance Restricted Stock Unit Award Agreement sets forth the manner in which the Final Award Number will be determined for each Participant.
Definitions
Capitalized terms used but not defined herein shall have the same meanings assigned to them in the Plan, and the Performance Restricted Stock Unit Award Agreement. The following terms used in the text of this Exhibit A and in the ROE Performance Matrix shall have the meanings set forth below:
Company ROE Maximum means ____%.
Company ROE Minimum means ____%.
Company ROE Result means the ROE achieved by the Company during the Performance Period.
Company ROE Target means ____%.
Determination Date means the date on which the Final Award Number is determined, which date shall not be later than 45 days after the last day of the Performance Period.
Final Award Number means the Final Award Number determined in accordance with this Exhibit A.
Peer Group Companies means the following companies: ____________________________________.
Peer Group ROE Ranking Maximum means the ____ percentile.
Peer Group ROE Ranking Minimum means the ____ percentile.
Peer Group ROE Ranking Target means the ____ percentile.
Peer Group ROE means the ROE achieved by the Peer Group Companies during the Performance Period.
Peer Group ROE Ranking means the percentile rank of the Company ROE Result relative to Peer Group ROE.
Performance Period means the period commencing on January 1, 20__ and ending December 31, 20__.
ROE means (a) net income applicable to the common shareholders of a company during the Performance Period, divided by (b) that companys average common shareholders equity during the Performance Period.
ROE Performance Matrix means the ROE Performance Matrix set forth in this Exhibit A.
Target Award Number means the Target Award Number set forth in a Participants Performance Restricted Stock Unit Award Agreement.
Target Award Number Percentage means the Target Award Number Percentage determined in accordance with the ROE Performance Matrix and the related rules set forth in this Exhibit A.
-6-
Determination of Final Award Number
Each Participant has been granted a number of Units equal to the Target Award Number. The Target Award Number will be adjusted upward or downward depending on (a) whether the Company ROE Result is greater or less than the Company ROE Target, and (b) the Peer Group ROE Ranking. The Final Award Number for each Participant will be determined by multiplying (i) the Target Award Number Percentage by (ii) the Target Award Number. The Target Award Number Percentage will be determined in accordance with the following ROE Performance Matrix and the related rules below:
ROE PERFORMANCE MATRIX
Company Result (Vertical |
Target Award Number Percentage | |||||||||||||
Company ROE Maximum (__%) or more | 75 | % | 125 | % | 150 | % | ||||||||
Company ROE Target (___%) | 50 | % | 100 | % | 125 | % | ||||||||
Company ROE Minimum (___%) or less (but greater than zero) |
25 | % | 50 | % | 75 | % | ||||||||
Company ROE is 0% or less | 0 | % | 0 | % | 0 | % | ||||||||
Peer Group ROE Ranking Minimum or below |
Peer Group ROE Ranking Target |
Peer Group ROE Ranking Maximum or above |
||||||||||||
|
Peer Group ROE Ranking (Horizontal Axis) |
|
In determining the Target Award Number Percentage in accordance with the ROE Performance Matrix, the following rules will apply:
| If the Company ROE Result is greater than the Company ROE Minimum and less than the Company ROE Target, the Target Award Number Percentage on the vertical axis will be determined by interpolation of the Company ROE Result between the Company ROE Minimum and the Company ROE Target. |
| If the Company ROE Result is greater than the Company ROE Target and less than the Company ROE Maximum, the Target Award Number Percentage on the vertical axis will be determined by interpolation of the Company ROE Result between the Company ROE Target and the Company ROE Maximum. |
| If the Peer Group ROE Ranking is greater than the Peer Group ROE Ranking Minimum and less than the Peer Group ROE Ranking Target, the Target Award Number Percentage on the horizontal axis will be determined by interpolation of the Peer Group ROE Ranking between the Peer Group ROE Minimum and the Peer Group ROE Target. |
| If the Peer Group ROE Ranking is greater than the Peer ROE Group Ranking Target and less than the Peer Group ROE Ranking Maximum, the Target Award Number Percentage on the horizontal axis will be determined by interpolation of the Peer Group ROE Ranking between the Peer Group ROE Target and the Peer Group ROE Maximum. |
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| After the Target Award Number Percentage on each of the vertical axis and horizontal axis has been determined, the actual Target Award Number Percentage will be determined by interpolation of the data points (i.e., the percentages) set forth in the ROE Performance Matrix. |
| In no event shall the Target Award Number Percentage be greater than 150.0%. |
The Final Award Number for each Participant shall be determined by the Committee on the Determination Date.
Committee Determinations
The Committee shall make all determinations necessary to arrive at the Final Award Number for each Participant. The Committee shall determine the Company ROE Result by reference to the Companys audited financial statements as of and for the year ending on the last day of the Performance Period. The Committee shall determine the Peer Group ROE Ranking by reference to publicly available financial information regarding the Peer Companies. Any determination by the Committee pursuant to this Exhibit A will be binding upon each Participant and the Company.
No Fractional Units
In the event the Final Award Number is a number of Units that is not a whole number, then the Final Award Number shall be rounded down to the nearest whole number.
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EXHIBIT 13
F I N A N C I A L TA B L E O F C O N T E N T S
The following pages discuss in detail the financial results we achieved in
2018 results that reflect how we are creating the future now.
Table of Contents | 21 |
Managements Discussion and Analysis
Overview
22
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||||||
TABLE 1
|
Selected Financial Data |
Year Ended December 31 (Dollars and Shares in Millions, Except Per Share Data) |
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Condensed Income Statement |
||||||||||||||||||||
Net interest income |
$ | 12,919 | $ | 12,380 | $ | 11,666 | $ | 11,151 | $ | 10,949 | ||||||||||
Taxable-equivalent adjustment(a) |
116 | 205 | 203 | 213 | 222 | |||||||||||||||
|
|
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Net interest income (taxable-equivalent basis)(b) |
13,035 | 12,585 | 11,869 | 11,364 | 11,171 | |||||||||||||||
Noninterest income |
9,572 | 9,260 | 9,268 | 8,818 | 8,872 | |||||||||||||||
Securities gains (losses), net |
30 | 57 | 22 | | 3 | |||||||||||||||
|
|
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Total net revenue |
22,637 | 21,902 | 21,159 | 20,182 | 20,046 | |||||||||||||||
Noninterest expense |
12,464 | 12,790 | 11,527 | 10,807 | 10,600 | |||||||||||||||
Provision for credit losses |
1,379 | 1,390 | 1,324 | 1,132 | 1,229 | |||||||||||||||
|
|
|||||||||||||||||||
Income before taxes |
8,794 | 7,722 | 8,308 | 8,243 | 8,217 | |||||||||||||||
Income taxes and taxable-equivalent adjustment |
1,670 | 1,469 | 2,364 | 2,310 | 2,309 | |||||||||||||||
|
|
|||||||||||||||||||
Net income |
7,124 | 6,253 | 5,944 | 5,933 | 5,908 | |||||||||||||||
Net (income) loss attributable to noncontrolling interests |
(28 | ) | (35 | ) | (56 | ) | (54 | ) | (57 | ) | ||||||||||
|
|
|||||||||||||||||||
Net income attributable to U.S. Bancorp |
$ | 7,096 | $ | 6,218 | $ | 5,888 | $ | 5,879 | $ | 5,851 | ||||||||||
|
|
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Net income applicable to U.S. Bancorp common shareholders |
$ | 6,784 | $ | 5,913 | $ | 5,589 | $ | 5,608 | $ | 5,583 | ||||||||||
|
|
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Per Common Share |
||||||||||||||||||||
Earnings per share |
$ | 4.15 | $ | 3.53 | $ | 3.25 | $ | 3.18 | $ | 3.10 | ||||||||||
Diluted earnings per share |
4.14 | 3.51 | 3.24 | 3.16 | 3.08 | |||||||||||||||
Dividends declared per share |
1.34 | 1.16 | 1.07 | 1.01 | .97 | |||||||||||||||
Book value per share(c) |
28.01 | 26.34 | 24.63 | 23.28 | 21.68 | |||||||||||||||
Market value per share |
45.70 | 53.58 | 51.37 | 42.67 | 44.95 | |||||||||||||||
Average common shares outstanding |
1,634 | 1,677 | 1,718 | 1,764 | 1,803 | |||||||||||||||
Average diluted common shares outstanding |
1,638 | 1,683 | 1,724 | 1,772 | 1,813 | |||||||||||||||
Financial Ratios |
||||||||||||||||||||
Return on average assets |
1.55 | % | 1.39 | % | 1.36 | % | 1.44 | % | 1.54 | % | ||||||||||
Return on average common equity |
15.4 | 13.8 | 13.4 | 14.0 | 14.7 | |||||||||||||||
Net interest margin (taxable-equivalent basis)(a) |
3.14 | 3.10 | 3.04 | 3.09 | 3.28 | |||||||||||||||
Efficiency ratio(b) |
55.1 | 58.5 | 54.5 | 53.5 | 52.9 | |||||||||||||||
Net charge-offs as a percent of average loans outstanding |
.48 | .48 | .47 | .47 | .55 | |||||||||||||||
Average Balances |
||||||||||||||||||||
Loans |
$ | 280,701 | $ | 276,537 | $ | 267,811 | $ | 250,459 | $ | 241,692 | ||||||||||
Loans held for sale |
3,230 | 3,574 | 4,181 | 5,784 | 3,148 | |||||||||||||||
Investment securities(d) |
113,940 | 111,820 | 107,922 | 103,161 | 90,327 | |||||||||||||||
Earning assets |
415,067 | 406,421 | 389,877 | 367,445 | 340,994 | |||||||||||||||
Assets |
457,014 | 448,582 | 433,313 | 408,865 | 380,004 | |||||||||||||||
Noninterest-bearing deposits |
78,196 | 81,933 | 81,176 | 79,203 | 73,455 | |||||||||||||||
Deposits |
333,462 | 333,514 | 312,810 | 287,151 | 266,640 | |||||||||||||||
Short-term borrowings |
21,790 | 15,022 | 19,906 | 27,960 | 30,252 | |||||||||||||||
Long-term debt |
37,450 | 35,601 | 36,220 | 33,566 | 26,535 | |||||||||||||||
Total U.S. Bancorp shareholders equity |
49,763 | 48,466 | 47,339 | 44,813 | 42,837 | |||||||||||||||
Period End Balances |
||||||||||||||||||||
Loans |
$ | 286,810 | $ | 280,432 | $ | 273,207 | $ | 260,849 | $ | 247,851 | ||||||||||
Investment securities |
112,165 | 112,499 | 109,275 | 105,587 | 101,043 | |||||||||||||||
Assets |
467,374 | 462,040 | 445,964 | 421,853 | 402,529 | |||||||||||||||
Deposits |
345,475 | 347,215 | 334,590 | 300,400 | 282,733 | |||||||||||||||
Long-term debt |
41,340 | 32,259 | 33,323 | 32,078 | 32,260 | |||||||||||||||
Total U.S. Bancorp shareholders equity |
51,029 | 49,040 | 47,298 | 46,131 | 43,479 | |||||||||||||||
Asset Quality |
||||||||||||||||||||
Nonperforming assets |
$ | 989 | $ | 1,200 | $ | 1,603 | $ | 1,523 | $ | 1,808 | ||||||||||
Allowance for credit losses |
4,441 | 4,417 | 4,357 | 4,306 | 4,375 | |||||||||||||||
Allowance for credit losses as a percentage of period-end loans |
1.55 | % | 1.58 | % | 1.59 | % | 1.65 | % | 1.77 | % | ||||||||||
Capital Ratios |
||||||||||||||||||||
Basel III standardized approach: |
||||||||||||||||||||
Common equity tier 1 capital |
9.1 | % | 9.3 | % | 9.4 | % | 9.6 | % | 9.7 | % | ||||||||||
Tier 1 capital |
10.7 | 10.8 | 11.0 | 11.3 | 11.3 | |||||||||||||||
Total risk-based capital |
12.6 | 12.9 | 13.2 | 13.3 | 13.6 | |||||||||||||||
Leverage |
9.0 | 8.9 | 9.0 | 9.5 | 9.3 | |||||||||||||||
Common equity tier 1 capital to risk-weighted assets for the Basel III advanced approaches |
11.8 | 12.0 | 12.2 | 12.5 | 12.4 | |||||||||||||||
Tangible common equity to tangible assets(b) |
7.8 | 7.6 | 7.5 | 7.6 | 7.5 | |||||||||||||||
Tangible common equity to risk-weighted assets(b) |
9.4 | 9.4 | 9.2 | 9.2 | 9.3 | |||||||||||||||
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach(b) |
9.1 | 9.1 | 9.1 | 9.0 | ||||||||||||||||
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches(b) |
11.6 | 11.7 | 11.9 | 11.8 |
(a) | Based on federal income tax rates of 21 percent for 2018 and 35 percent for 2017, 2016, 2015 and 2014, for those assets and liabilities whose income or expense is not included for federal income tax purposes. |
(b) | See Non-GAAP Financial Measures beginning on page 66. |
(c) | Calculated as U.S. Bancorp common shareholders equity divided by common shares outstanding at end of the period. |
(d) | Excludes unrealized gains and losses on available-for-sale investment securities and any premiums or discounts recorded related to the transfer of investment securities at fair value from available-for-sale to held-to-maturity. |
23
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24
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||||||
TABLE 2
|
Analysis of Net Interest Income(a) |
Year Ended December 31 (Dollars in Millions) | 2018 | 2017 | 2016 | 2018 v 2017 |
2017 v 2016 |
|||||||||||||||
Components of Net Interest Income |
||||||||||||||||||||
Income on earning assets (taxable-equivalent basis) |
$ | 16,298 | $ | 14,559 | $ | 13,342 | $ | 1,739 | $ | 1,217 | ||||||||||
Expense on interest-bearing liabilities (taxable-equivalent basis) |
3,263 | 1,974 | 1,473 | 1,289 | 501 | |||||||||||||||
Net interest income (taxable-equivalent basis)(b) |
$ | 13,035 | $ | 12,585 | $ | 11,869 | $ | 450 | $ | 716 | ||||||||||
Net interest income, as reported |
$ | 12,919 | $ | 12,380 | $ | 11,666 | $ | 539 | $ | 714 | ||||||||||
Average Yields and Rates Paid |
||||||||||||||||||||
Earning assets yield (taxable-equivalent basis) |
3.93 | % | 3.58 | % | 3.42 | % | .35 | % | .16 | % | ||||||||||
Rate paid on interest-bearing liabilities (taxable-equivalent basis) |
1.04 | .65 | .51 | .39 | .14 | |||||||||||||||
Gross interest margin (taxable-equivalent basis) |
2.89 | % | 2.93 | % | 2.91 | % | (.04 | )% | .02 | % | ||||||||||
Net interest margin (taxable-equivalent basis) |
3.14 | % | 3.10 | % | 3.04 | % | .04 | % | .06 | % | ||||||||||
Average Balances |
||||||||||||||||||||
Investment securities(c) |
$ | 113,940 | $ | 111,820 | $ | 107,922 | $ | 2,120 | $ | 3,898 | ||||||||||
Loans |
280,701 | 276,537 | 267,811 | 4,164 | 8,726 | |||||||||||||||
Earning assets |
415,067 | 406,421 | 389,877 | 8,646 | 16,544 | |||||||||||||||
Interest-bearing liabilities |
314,506 | 302,204 | 287,760 | 12,302 | 14,444 |
(a) | Interest and rates are presented on a fully taxable-equivalent basis based on a federal income tax rate of 21 percent for 2018 and 35 percent for 2017 and 2016. |
(b) | See Non-GAAP Financial Measures beginning on page 66. |
(c) | Excludes unrealized gains and losses on available-for-sale investment securities and any premiums or discounts recorded related to the transfer of investment securities at fair value from available-for-sale to held-to-maturity. |
25
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TABLE 3
|
Net Interest Income Changes Due to Rate and Volume(a) |
2018 v 2017 | 2017 v 2016 | |||||||||||||||||||||||
Year Ended December 31 (Dollars in Millions) | Volume | Yield/Rate | Total | Volume | Yield/Rate | Total | ||||||||||||||||||
Increase (decrease) in |
||||||||||||||||||||||||
Interest Income |
||||||||||||||||||||||||
Investment securities |
$ | 44 | $ | 302 | $ | 346 | $ | 79 | $ | 68 | $ | 147 | ||||||||||||
Loans held for sale |
(14 | ) | 35 | 21 | (22 | ) | 12 | (10 | ) | |||||||||||||||
Loans |
||||||||||||||||||||||||
Commercial |
96 | 568 | 664 | 109 | 426 | 535 | ||||||||||||||||||
Commercial real estate |
(89 | ) | 182 | 93 | (38 | ) | 128 | 90 | ||||||||||||||||
Residential mortgages |
115 | 71 | 186 | 115 | (5 | ) | 110 | |||||||||||||||||
Credit card |
86 | 101 | 187 | 45 | 109 | 154 | ||||||||||||||||||
Other retail |
30 | 164 | 194 | 125 | 33 | 158 | ||||||||||||||||||
Covered loans |
(65 | ) | 24 | (41 | ) | (37 | ) | 12 | (25 | ) | ||||||||||||||
Total loans |
173 | 1,110 | 1,283 | 319 | 703 | 1,022 | ||||||||||||||||||
Other earning assets |
34 | 55 | 89 | 57 | 1 | 58 | ||||||||||||||||||
Total earning assets |
237 | 1,502 | 1,739 | 433 | 784 | 1,217 | ||||||||||||||||||
Interest Expense |
||||||||||||||||||||||||
Interest-bearing deposits |
||||||||||||||||||||||||
Interest checking |
3 | 63 | 66 | 4 | 38 | 42 | ||||||||||||||||||
Money market savings |
(29 | ) | 463 | 434 | 36 | 259 | 295 | |||||||||||||||||
Savings accounts |
1 | 23 | 24 | 3 | (5 | ) | (2 | ) | ||||||||||||||||
Time deposits |
41 | 263 | 304 | 5 | 79 | 84 | ||||||||||||||||||
Total interest-bearing deposits |
16 | 812 | 828 | 48 | 371 | 419 | ||||||||||||||||||
Short-term borrowings |
68 | 170 | 238 | (24 | ) | 76 | 52 | |||||||||||||||||
Long-term debt |
41 | 182 | 223 | (13 | ) | 43 | 30 | |||||||||||||||||
Total interest-bearing liabilities |
125 | 1,164 | 1,289 | 11 | 490 | 501 | ||||||||||||||||||
Increase (decrease) in net interest income |
$ | 112 | $ | 338 | $ | 450 | $ | 422 | $ | 294 | $ | 716 |
(a) | This table shows the components of the change in net interest income by volume and rate on a taxable-equivalent basis based on federal income tax rates of 21 percent for 2018 and 35 percent for 2017 and 2016. This table does not take into account the level of noninterest-bearing funding, nor does it fully reflect changes in the mix of assets and liabilities. The change in interest not solely due to changes in volume or rates has been allocated on a pro-rata basis to volume and yield/rate. |
26
|
||||||
TABLE 4
|
Noninterest Income |
Year Ended December 31 (Dollars in Millions) | 2018 | 2017 | 2016 | 2018 v 2017 |
2017 v 2016 |
|||||||||||||||
Credit and debit card revenue |
$ | 1,401 | $ | 1,289 | $ | 1,206 | 8.7 | % | 6.9 | % | ||||||||||
Corporate payment products revenue |
644 | 575 | 541 | 12.0 | 6.3 | |||||||||||||||
Merchant processing services |
1,531 | 1,486 | 1,498 | 3.0 | (.8 | ) | ||||||||||||||
ATM processing services |
308 | 303 | 277 | 1.7 | 9.4 | |||||||||||||||
Trust and investment management fees |
1,619 | 1,522 | 1,427 | 6.4 | 6.7 | |||||||||||||||
Deposit service charges |
762 | 732 | 706 | 4.1 | 3.7 | |||||||||||||||
Treasury management fees |
594 | 618 | 583 | (3.9 | ) | 6.0 | ||||||||||||||
Commercial products revenue |
895 | 954 | 971 | (6.2 | ) | (1.8 | ) | |||||||||||||
Mortgage banking revenue |
720 | 834 | 979 | (13.7 | ) | (14.8 | ) | |||||||||||||
Investment products fees |
188 | 173 | 169 | 8.7 | 2.4 | |||||||||||||||
Securities gains (losses), net |
30 | 57 | 22 | (47.4 | ) | * | ||||||||||||||
Other |
910 | 774 | 911 | 17.6 | (15.0 | ) | ||||||||||||||
Total noninterest income |
$ | 9,602 | $ | 9,317 | $ | 9,290 | 3.1 | % | .3 | % |
* | Not meaningful. |
27
|
||||
TABLE 5
|
Noninterest Expense |
Year Ended December 31 (Dollars in Millions) | 2018 | 2017 | 2016 | 2018 v 2017 |
2017 v 2016 |
|||||||||||||||||||
Compensation |
$ | 6,162 | $ | 5,746 | $ | 5,212 | 7.2 | % | 10.2 | % | ||||||||||||||
Employee benefits |
1,231 | 1,134 | 1,008 | 8.6 | 12.5 | |||||||||||||||||||
Net occupancy and equipment |
1,063 | 1,019 | 988 | 4.3 | 3.1 | |||||||||||||||||||
Professional services |
407 | 419 | 502 | (2.9 | ) | (16.5 | ) | |||||||||||||||||
Marketing and business development |
429 | 542 | 435 | (20.8 | ) | 24.6 | ||||||||||||||||||
Technology and communications |
978 | 903 | 877 | 8.3 | 3.0 | |||||||||||||||||||
Postage, printing and supplies |
324 | 323 | 311 | .3 | 3.9 | |||||||||||||||||||
Other intangibles |
161 | 175 | 179 | (8.0 | ) | (2.2 | ) | |||||||||||||||||
Other |
1,709 | 2,529 | 2,015 | (32.4 | ) | 25.5 | ||||||||||||||||||
Total noninterest expense |
$ | 12,464 | $ | 12,790 | $ | 11,527 | (2.5 | )% | 11.0 | % | ||||||||||||||
Efficiency ratio(a) |
55.1 | % | 58.5 | % | 54.5 | % |
(a) | See Non-GAAP Financial Measures beginning on page 66. |
28
|
||||||
29
|
||||
TABLE 6
|
Loan Portfolio Distribution |
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
At December 31 (Dollars in Millions) | Amount | Percent of Total |
Amount | Percent of Total |
Amount | Percent of Total |
Amount | Percent of Total |
Amount | Percent of Total |
||||||||||||||||||||||||||||||||||||||||||||||
Commercial |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial |
$ | 96,849 | 33.8 | % | $ | 91,958 | 32.8 | % | $ | 87,928 | 32.2 | % | $ | 83,116 | 31.9 | % | $ | 74,996 | 30.2 | % | ||||||||||||||||||||||||||||||||||||
Lease financing |
5,595 | 1.9 | 5,603 | 2.0 | 5,458 | 2.0 | 5,286 | 2.0 | 5,381 | 2.2 | ||||||||||||||||||||||||||||||||||||||||||||||
Total commercial |
102,444 | 35.7 | 97,561 | 34.8 | 93,386 | 34.2 | 88,402 | 33.9 | 80,377 | 32.4 | ||||||||||||||||||||||||||||||||||||||||||||||
Commercial Real Estate |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial mortgages |
28,596 | 10.0 | 29,367 | 10.5 | 31,592 | 11.6 | 31,773 | 12.2 | 33,360 | 13.5 | ||||||||||||||||||||||||||||||||||||||||||||||
Construction and development |
10,943 | 3.8 | 11,096 | 4.0 | 11,506 | 4.2 | 10,364 | 3.9 | 9,435 | 3.8 | ||||||||||||||||||||||||||||||||||||||||||||||
Total commercial real estate |
39,539 | 13.8 | 40,463 | 14.5 | 43,098 | 15.8 | 42,137 | 16.1 | 42,795 | 17.3 | ||||||||||||||||||||||||||||||||||||||||||||||
Residential Mortgages |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgages |
53,034 | 18.5 | 46,685 | 16.6 | 43,632 | 16.0 | 40,425 | 15.5 | 38,598 | 15.6 | ||||||||||||||||||||||||||||||||||||||||||||||
Home equity loans, first liens |
12,000 | 4.2 | 13,098 | 4.7 | 13,642 | 5.0 | 13,071 | 5.0 | 13,021 | 5.2 | ||||||||||||||||||||||||||||||||||||||||||||||
Total residential mortgages |
65,034 | 22.7 | 59,783 | 21.3 | 57,274 | 21.0 | 53,496 | 20.5 | 51,619 | 20.8 | ||||||||||||||||||||||||||||||||||||||||||||||
Credit Card |
23,363 | 8.1 | 22,180 | 7.9 | 21,749 | 7.9 | 21,012 | 8.1 | 18,515 | 7.5 | ||||||||||||||||||||||||||||||||||||||||||||||
Other Retail |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retail leasing |
8,546 | 3.0 | 7,988 | 2.8 | 6,316 | 2.3 | 5,232 | 2.0 | 5,871 | 2.4 | ||||||||||||||||||||||||||||||||||||||||||||||
Home equity and second mortgages |
16,122 | 5.6 | 16,327 | 5.8 | 16,369 | 6.0 | 16,384 | 6.3 | 15,916 | 6.4 | ||||||||||||||||||||||||||||||||||||||||||||||
Revolving credit |
3,088 | 1.1 | 3,183 | 1.1 | 3,282 | 1.2 | 3,354 | 1.3 | 3,309 | 1.3 | ||||||||||||||||||||||||||||||||||||||||||||||
Installment |
9,676 | 3.4 | 8,989 | 3.2 | 8,087 | 3.0 | 7,030 | 2.7 | 6,242 | 2.5 | ||||||||||||||||||||||||||||||||||||||||||||||
Automobile |
18,719 | 6.5 | 18,934 | 6.8 | 17,571 | 6.4 | 16,587 | 6.3 | 14,822 | 6.0 | ||||||||||||||||||||||||||||||||||||||||||||||
Student |
279 | .1 | 1,903 | .7 | 2,239 | .8 | 2,619 | 1.0 | 3,104 | 1.3 | ||||||||||||||||||||||||||||||||||||||||||||||
Total other retail |
56,430 | 19.7 | 57,324 | 20.4 | 53,864 | 19.7 | 51,206 | 19.6 | 49,264 | 19.9 | ||||||||||||||||||||||||||||||||||||||||||||||
Covered Loans |
| | 3,121 | 1.1 | 3,836 | 1.4 | 4,596 | 1.8 | 5,281 | 2.1 | ||||||||||||||||||||||||||||||||||||||||||||||
Total loans |
$ | 286,810 | 100.0 | % | $ | 280,432 | 100.0 | % | $ | 273,207 | 100.0 | % | $ | 260,849 | 100.0 | % | $ | 247,851 | 100.0 | % |
30
|
||||||
TABLE 7
|
Commercial Loans by Industry Group and Geography |
2018 | 2017 | |||||||||||||||
At December 31 (Dollars in Millions) | Loans | Percent | Loans | Percent | ||||||||||||
Industry Group |
||||||||||||||||
Manufacturing |
$ | 15,064 | 14.7 | % | $ | 14,710 | 15.1 | % | ||||||||
Real estate, rental and leasing |
12,270 | 12.0 | 12,461 | 12.8 | ||||||||||||
Finance and insurance |
10,301 | 10.0 | 8,639 | 8.8 | ||||||||||||
Wholesale trade |
8,310 | 8.1 | 7,383 | 7.6 | ||||||||||||
Retail trade |
8,211 | 8.0 | 8,952 | 9.2 | ||||||||||||
Healthcare and social assistance |
5,769 | 5.6 | 6,517 | 6.7 | ||||||||||||
Public administration |
4,773 | 4.7 | 5,116 | 5.2 | ||||||||||||
Arts, entertainment and recreation |
4,089 | 4.0 | 3,853 | 3.9 | ||||||||||||
Information |
3,576 | 3.5 | 3,403 | 3.5 | ||||||||||||
Transport and storage |
3,559 | 3.5 | 3,198 | 3.3 | ||||||||||||
Professional, scientific and technical services |
3,358 | 3.3 | 3,499 | 3.6 | ||||||||||||
Educational services |
3,139 | 3.1 | 3,414 | 3.5 | ||||||||||||
Utilities |
2,760 | 2.7 | 1,933 | 2.0 | ||||||||||||
Other services |
1,691 | 1.6 | 1,698 | 1.7 | ||||||||||||
Mining |
1,636 | 1.6 | 1,590 | 1.6 | ||||||||||||
Agriculture, forestry, fishing and hunting |
1,235 | 1.2 | 1,429 | 1.5 | ||||||||||||
Other |
12,703 | 12.4 | 9,766 | 10.0 | ||||||||||||
Total |
$ | 102,444 | 100.0 | % | $ | 97,561 | 100.0 | % | ||||||||
Geography |
||||||||||||||||
California |
$ | 13,507 | 13.2 | % | $ | 14,086 | 14.4 | % | ||||||||
Colorado |
4,071 | 4.0 | 3,979 | 4.1 | ||||||||||||
Illinois |
5,356 | 5.2 | 5,245 | 5.4 | ||||||||||||
Minnesota |
7,832 | 7.6 | 7,406 | 7.6 | ||||||||||||
Missouri |
3,274 | 3.2 | 3,525 | 3.6 | ||||||||||||
Ohio |
4,913 | 4.8 | 4,330 | 4.5 | ||||||||||||
Oregon |
2,135 | 2.1 | 2,044 | 2.1 | ||||||||||||
Washington |
3,672 | 3.6 | 3,699 | 3.8 | ||||||||||||
Wisconsin |
3,630 | 3.5 | 3,539 | 3.6 | ||||||||||||
Iowa, Kansas, Nebraska, North Dakota, South Dakota |
5,094 | 5.0 | 4,806 | 4.9 | ||||||||||||
Arkansas, Indiana, Kentucky, Tennessee |
5,488 | 5.3 | 5,206 | 5.3 | ||||||||||||
Idaho, Montana, Wyoming |
1,114 | 1.1 | 1,225 | 1.3 | ||||||||||||
Arizona, Nevada, New Mexico, Utah |
4,183 | 4.1 | 3,836 | 3.9 | ||||||||||||
Total banking region |
64,269 | 62.7 | 62,926 | 64.5 | ||||||||||||
Florida, Michigan, New York, Pennsylvania, Texas |
18,031 | 17.6 | 16,408 | 16.8 | ||||||||||||
All other states |
20,144 | 19.7 | 18,227 | 18.7 | ||||||||||||
Total outside Companys banking region |
38,175 | 37.3 | 34,635 | 35.5 | ||||||||||||
Total |
$ | 102,444 | 100.0 | % | $ | 97,561 | 100.0 | % |
31
|
||||
TABLE 8
|
Commercial Real Estate Loans by Property Type and Geography |
2018 | 2017 | |||||||||||||||
At December 31 (Dollars in Millions) | Loans | Percent | Loans | Percent | ||||||||||||
Property Type |
||||||||||||||||
Business owner occupied |
$ | 9,769 | 24.7 | % | $ | 10,205 | 25.2 | % | ||||||||
Commercial property |
||||||||||||||||
Industrial |
1,695 | 4.3 | 1,580 | 3.9 | ||||||||||||
Office |
5,351 | 13.5 | 5,023 | 12.4 | ||||||||||||
Retail |
4,150 | 10.5 | 4,502 | 11.1 | ||||||||||||
Other commercial |
3,399 | 8.6 | 3,757 | 9.3 | ||||||||||||
Multi-family |
8,592 | 21.7 | 8,922 | 22.0 | ||||||||||||
Hotel/motel |
3,520 | 8.9 | 3,719 | 9.2 | ||||||||||||
Residential homebuilders |
2,764 | 7.0 | 2,489 | 6.2 | ||||||||||||
Healthcare facilities |
299 | .8 | 266 | .7 | ||||||||||||
Total |
$ | 39,539 | 100.0 | % | $ | 40,463 | 100.0 | % | ||||||||
Geography |
||||||||||||||||
California |
$ | 9,784 | 24.7 | % | $ | 9,558 | 23.6 | % | ||||||||
Colorado |
1,883 | 4.8 | 1,764 | 4.4 | ||||||||||||
Illinois |
1,484 | 3.8 | 1,605 | 4.0 | ||||||||||||
Minnesota |
1,896 | 4.8 | 2,031 | 5.0 | ||||||||||||
Missouri |
1,157 | 2.9 | 1,359 | 3.3 | ||||||||||||
Ohio |
1,278 | 3.2 | 1,445 | 3.6 | ||||||||||||
Oregon |
1,718 | 4.3 | 1,847 | 4.6 | ||||||||||||
Washington |
3,383 | 8.6 | 3,499 | 8.6 | ||||||||||||
Wisconsin |
1,892 | 4.8 | 2,036 | 5.0 | ||||||||||||
Iowa, Kansas, Nebraska, North Dakota, South Dakota |
2,085 | 5.3 | 2,210 | 5.5 | ||||||||||||
Arkansas, Indiana, Kentucky, Tennessee |
2,045 | 5.2 | 1,889 | 4.7 | ||||||||||||
Idaho, Montana, Wyoming |
962 | 2.4 | 1,163 | 2.9 | ||||||||||||
Arizona, Nevada, New Mexico, Utah |
3,130 | 7.9 | 3,134 | 7.7 | ||||||||||||
Total banking region |
32,697 | 82.7 | 33,540 | 82.9 | ||||||||||||
Florida, Michigan, New York, Pennsylvania, Texas |
3,613 | 9.1 | 3,688 | 9.1 | ||||||||||||
All other states |
3,229 | 8.2 | 3,235 | 8.0 | ||||||||||||
Total outside Companys banking region |
6,842 | 17.3 | 6,923 | 17.1 | ||||||||||||
Total |
$ | 39,539 | 100.0 | % | $ | 40,463 | 100.0 | % |
32
|
||||||
TABLE 9
|
Residential Mortgages by Geography |
2018 | 2017 | |||||||||||||||||||
At December 31 (Dollars in Millions) | Loans | Percent | Loans | Percent | ||||||||||||||||
California |
$ | 20,176 | 31.0 | % | $ | 16,914 | 28.3 | % | ||||||||||||
Colorado |
3,586 | 5.5 | 3,380 | 5.7 | ||||||||||||||||
Illinois |
3,301 | 5.1 | 3,109 | 5.2 | ||||||||||||||||
Minnesota |
4,322 | 6.6 | 4,247 | 7.1 | ||||||||||||||||
Missouri |
1,710 | 2.6 | 1,748 | 2.9 | ||||||||||||||||
Ohio |
2,062 | 3.2 | 2,145 | 3.6 | ||||||||||||||||
Oregon |
2,427 | 3.7 | 2,413 | 4.0 | ||||||||||||||||
Washington |
3,702 | 5.7 | 3,403 | 5.7 | ||||||||||||||||
Wisconsin |
1,527 | 2.4 | 1,526 | 2.5 | ||||||||||||||||
Iowa, Kansas, Nebraska, North Dakota, South Dakota |
2,055 | 3.2 | 2,086 | 3.5 | ||||||||||||||||
Arkansas, Indiana, Kentucky, Tennessee |
3,170 | 4.9 | 3,166 | 5.3 | ||||||||||||||||
Idaho, Montana, Wyoming |
1,326 | 2.0 | 1,294 | 2.2 | ||||||||||||||||
Arizona, Nevada, New Mexico, Utah |
4,851 | 7.5 | 4,489 | 7.5 | ||||||||||||||||
Total banking region |
54,215 | 83.4 | 49,920 | 83.5 | ||||||||||||||||
Florida, Michigan, New York, Pennsylvania, Texas |
4,744 | 7.3 | 4,448 | 7.4 | ||||||||||||||||
All other states |
6,075 | 9.3 | 5,415 | 9.1 | ||||||||||||||||
Total outside Companys banking region |
10,819 | 16.6 | 9,863 | 16.5 | ||||||||||||||||
Total |
$ | 65,034 | 100.0 | % | $ | 59,783 | 100.0 | % |
TABLE 10
|
Credit Card Loans by Geography |
2018 | 2017 | |||||||||||||||||||
At December 31 (Dollars in Millions) | Loans | Percent | Loans | Percent | ||||||||||||||||
California |
$ | 2,399 | 10.3 | % | $ | 2,245 | 10.1 | % | ||||||||||||
Colorado |
808 | 3.5 | 772 | 3.5 | ||||||||||||||||
Illinois |
1,176 | 5.0 | 1,089 | 4.9 | ||||||||||||||||
Minnesota |
1,275 | 5.5 | 1,271 | 5.7 | ||||||||||||||||
Missouri |
758 | 3.2 | 725 | 3.3 | ||||||||||||||||
Ohio |
1,215 | 5.2 | 1,185 | 5.4 | ||||||||||||||||
Oregon |
684 | 2.9 | 666 | 3.0 | ||||||||||||||||
Washington |
877 | 3.8 | 857 | 3.9 | ||||||||||||||||
Wisconsin |
1,017 | 4.3 | 990 | 4.5 | ||||||||||||||||
Iowa, Kansas, Nebraska, North Dakota, South Dakota |
1,100 | 4.7 | 1,048 | 4.7 | ||||||||||||||||
Arkansas, Indiana, Kentucky, Tennessee |
1,661 | 7.1 | 1,603 | 7.2 | ||||||||||||||||
Idaho, Montana, Wyoming |
384 | 1.6 | 376 | 1.7 | ||||||||||||||||
Arizona, Nevada, New Mexico, Utah |
1,183 | 5.1 | 1,092 | 4.9 | ||||||||||||||||
Total banking region |
14,537 | 62.2 | 13,919 | 62.8 | ||||||||||||||||
Florida, Michigan, New York, Pennsylvania, Texas |
4,440 | 19.0 | 4,193 | 18.9 | ||||||||||||||||
All other states |
4,386 | 18.8 | 4,068 | 18.3 | ||||||||||||||||
Total outside Companys banking region |
8,826 | 37.8 | 8,261 | 37.2 | ||||||||||||||||
Total |
$ | 23,363 | 100.0 | % | $ | 22,180 | 100.0 | % |
33
|
||||
TABLE 11
|
Other Retail Loans by Geography |
2018 | 2017 | |||||||||||||||||||
At December 31 (Dollars in Millions) | Loans | Percent | Loans | Percent | ||||||||||||||||
California |
$ | 9,826 | 17.4 | % | $ | 9,119 | 15.9 | % | ||||||||||||
Colorado |
2,079 | 3.7 | 2,144 | 3.8 | ||||||||||||||||
Illinois |
2,938 | 5.2 | 3,193 | 5.6 | ||||||||||||||||
Minnesota |
3,298 | 5.8 | 3,619 | 6.3 | ||||||||||||||||
Missouri |
1,961 | 3.5 | 2,142 | 3.7 | ||||||||||||||||
Ohio |
2,626 | 4.7 | 2,800 | 4.9 | ||||||||||||||||
Oregon |
1,530 | 2.7 | 1,545 | 2.7 | ||||||||||||||||
Washington |
1,755 | 3.1 | 1,735 | 3.0 | ||||||||||||||||
Wisconsin |
1,350 | 2.4 | 1,562 | 2.7 | ||||||||||||||||
Iowa, Kansas, Nebraska, North Dakota, South Dakota |
2,343 | 4.2 | 2,534 | 4.4 | ||||||||||||||||
Arkansas, Indiana, Kentucky, Tennessee |
2,951 | 5.2 | 3,108 | 5.4 | ||||||||||||||||
Idaho, Montana, Wyoming |
1,043 | 1.8 | 1,033 | 1.8 | ||||||||||||||||
Arizona, Nevada, New Mexico, Utah |
2,976 | 5.3 | 2,958 | 5.2 | ||||||||||||||||
Total banking region |
36,676 | 65.0 | 37,492 | 65.4 | ||||||||||||||||
Florida, Michigan, New York, Pennsylvania, Texas |
11,752 | 20.8 | 11,547 | 20.1 | ||||||||||||||||
All other states |
8,002 | 14.2 | 8,285 | 14.5 | ||||||||||||||||
Total outside Companys banking region |
19,754 | 35.0 | 19,832 | 34.6 | ||||||||||||||||
Total |
$ | 56,430 | 100.0 | % | $ | 57,324 | 100.0 | % |
34
|
||||||
TABLE 12
|
Selected Loan Maturity Distribution |
At December 31, 2018 (Dollars in Millions) | One Year or Less |
Over One Through Five Years |
Over Five Years |
Total | ||||||||||||
Commercial |
$ | 38,934 | $ | 59,129 | $ | 4,381 | $ | 102,444 | ||||||||
Commercial real estate |
11,298 | 21,552 | 6,689 | 39,539 | ||||||||||||
Residential mortgages |
2,703 | 9,643 | 52,688 | 65,034 | ||||||||||||
Credit card |
23,363 | | | 23,363 | ||||||||||||
Other retail |
11,364 | 31,016 | 14,050 | 56,430 | ||||||||||||
Total loans |
$ | 87,662 | $ | 121,340 | $ | 77,808 | $ | 286,810 | ||||||||
Total of loans due after one year with |
||||||||||||||||
Predetermined interest rates |
$ | 93,295 | ||||||||||||||
Floating interest rates |
$ | 105,853 |
35
|
||||
TABLE 13
|
Investment Securities |
Available-for-Sale | Held-to-Maturity | |||||||||||||||||||||||||||||||||||
At December 31, 2018 (Dollars in Millions) | Amortized Cost |
Fair Value |
Weighted- Average Maturity in Years |
Weighted- Average Yield(e) |
Amortized Cost |
Fair Value |
Weighted- Average Maturity in Years |
Weighted- Average Yield(e) |
||||||||||||||||||||||||||||
U.S. Treasury and Agencies |
||||||||||||||||||||||||||||||||||||
Maturing in one year or less |
$ | 2,231 | $ | 2,221 | .5 | 1.49 | % | $ | 650 | $ | 647 | .5 | 1.73 | % | ||||||||||||||||||||||
Maturing after one year through five years |
16,735 | 16,416 | 2.8 | 1.75 | 3,459 | 3,338 | 4.2 | 1.64 | ||||||||||||||||||||||||||||
Maturing after five years through ten years |
638 | 620 | 7.4 | 2.82 | 993 | 976 | 5.9 | 2.36 | ||||||||||||||||||||||||||||
Maturing after ten years |
| | | | | | | | ||||||||||||||||||||||||||||
Total |
$ | 19,604 | $ | 19,257 | 2.7 | 1.76 | % | $ | 5,102 | $ | 4,961 | 4.1 | 1.79 | % | ||||||||||||||||||||||
Mortgage-Backed Securities(a) |
||||||||||||||||||||||||||||||||||||
Maturing in one year or less |
$ | 60 | $ | 60 | .2 | 3.85 | % | $ | 65 | $ | 65 | .8 | 2.37 | % | ||||||||||||||||||||||
Maturing after one year through five years |
19,058 | 18,598 | 4.4 | 2.38 | 18,247 | 17,688 | 4.1 | 2.17 | ||||||||||||||||||||||||||||
Maturing after five years through ten years |
18,987 | 18,648 | 6.4 | 2.81 | 22,280 | 21,891 | 6.2 | 2.84 | ||||||||||||||||||||||||||||
Maturing after ten years |
2,439 | 2,448 | 14.2 | 3.45 | 328 | 327 | 13.9 | 3.34 | ||||||||||||||||||||||||||||
Total |
$ | 40,544 | $ | 39,754 | 5.9 | 2.65 | % | $ | 40,920 | $ | 39,971 | 5.3 | 2.54 | % | ||||||||||||||||||||||
Asset-Backed Securities(a) |
||||||||||||||||||||||||||||||||||||
Maturing in one year or less |
$ | | $ | | | | % | $ | | $ | | | | % | ||||||||||||||||||||||
Maturing after one year through five years |
397 | 403 | 3.5 | 3.69 | 3 | 4 | 3.3 | 3.19 | ||||||||||||||||||||||||||||
Maturing after five years through ten years |
| | | | 2 | 3 | 5.6 | 3.29 | ||||||||||||||||||||||||||||
Maturing after ten years |
| | | | | 1 | 15.6 | 3.20 | ||||||||||||||||||||||||||||
Total |
$ | 397 | $ | 403 | 3.5 | 3.69 | % | $ | 5 | $ | 8 | 4.1 | 3.22 | % | ||||||||||||||||||||||
Obligations of State and Political Subdivisions(b)(c) |
||||||||||||||||||||||||||||||||||||
Maturing in one year or less |
$ | 284 | $ | 287 | .5 | 5.67 | % | $ | | $ | | .2 | 6.49 | % | ||||||||||||||||||||||
Maturing after one year through five years |
552 | 558 | 3.5 | 4.53 | 1 | 1 | 3.1 | 6.65 | ||||||||||||||||||||||||||||
Maturing after five years through ten years |
4,093 | 4,069 | 7.9 | 4.36 | 5 | 6 | 7.2 | 1.97 | ||||||||||||||||||||||||||||
Maturing after ten years |
1,907 | 1,787 | 19.1 | 4.09 | | | | | ||||||||||||||||||||||||||||
Total |
$ | 6,836 | $ | 6,701 | 10.4 | 4.35 | % | $ | 6 | $ | 7 | 6.8 | 2.45 | % | ||||||||||||||||||||||
Other |
||||||||||||||||||||||||||||||||||||
Maturing in one year or less |
$ | | $ | | | | % | $ | 9 | $ | 9 | .6 | 3.68 | % | ||||||||||||||||||||||
Maturing after one year through five years |
| | | | 8 | 8 | 1.4 | 3.34 | ||||||||||||||||||||||||||||
Maturing after five years through ten years |
| | | | | | | | ||||||||||||||||||||||||||||
Maturing after ten years |
| | | | | | | | ||||||||||||||||||||||||||||
Total |
$ | | $ | | | | % | $ | 17 | $ | 17 | 1.0 | 3.52 | % | ||||||||||||||||||||||
Total investment securities(d) |
$ | 67,381 | $ | 66,115 | 5.4 | 2.57 | % | $ | 46,050 | $ | 44,964 | 5.2 | 2.46 | % |
(a) | Information related to asset and mortgage-backed securities included above is presented based upon weighted-average maturities that take into account anticipated future prepayments. |
(b) | Information related to obligations of state and political subdivisions is presented based upon yield to first optional call date if the security is purchased at a premium, and yield to maturity if the security is purchased at par or a discount. |
(c) | Maturity calculations for obligations of state and political subdivisions are based on the first optional call date for securities with a fair value above par and the contractual maturity date for securities with a fair value equal to or below par. |
(d) | The weighted-average maturity of the available-for-sale investment securities was 5.1 years at December 31, 2017, with a corresponding weighted-average yield of 2.25 percent. The weighted-average maturity of the held-to-maturity investment securities was 4.7 years at December 31, 2017, with a corresponding weighted-average yield of 2.14 percent. |
(e) | Weighted-average yields for obligations of state and political subdivisions are presented on a fully-taxable equivalent basis based on a federal income tax rate of 21 percent for 2018 and 35 percent for 2017. Yields on available-for-sale and held-to-maturity investment securities are computed based on amortized cost balances, excluding any premiums or discounts recorded related to the transfer of investment securities at fair value from available-for-sale to held-to-maturity. |
2018 | 2017 | |||||||||||||||||||
At December 31 (Dollars in Millions) | Amortized Cost |
Percent of Total |
Amortized Cost |
Percent of Total |
||||||||||||||||
U.S. Treasury and agencies |
$ | 24,706 | 21.8 | % | $ | 28,767 | 25.5 | % | ||||||||||||
Mortgage-backed securities |
81,464 | 71.8 | 77,606 | 68.6 | ||||||||||||||||
Asset-backed securities |
402 | .4 | 419 | .4 | ||||||||||||||||
Obligations of state and political subdivisions |
6,842 | 6.0 | 6,246 | 5.5 | ||||||||||||||||
Other |
17 | | 41 | | ||||||||||||||||
Total investment securities |
$ | 113,431 | 100.0 | % | $ | 113,079 | 100.0 | % |
36
|
||||||
TABLE 14
|
Deposits |
The composition of deposits was as follows:
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
At December 31 (Dollars in Millions) | Amount | Percent of Total |
Amount | Percent of Total |
Amount | Percent of Total |
Amount | Percent of Total |
Amount | Percent of Total |
||||||||||||||||||||||||||||||||||||||||||||||
Noninterest-bearing deposits |
$ | 81,811 | 23.7 | % | $ | 87,557 | 25.2 | % | $ | 86,097 | 25.7 | % | $ | 83,766 | 27.9 | % | $ | 77,323 | 27.3 | % | ||||||||||||||||||||||||||||||||||||
Interest-bearing deposits |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest checking |
73,994 | 21.4 | 74,520 | 21.5 | 66,298 | 19.8 | 59,169 | 19.7 | 55,058 | 19.5 | ||||||||||||||||||||||||||||||||||||||||||||||
Money market savings |
100,396 | 29.1 | 107,973 | 31.1 | 109,947 | 32.9 | 86,159 | 28.7 | 76,536 | 27.1 | ||||||||||||||||||||||||||||||||||||||||||||||
Savings accounts |
44,720 | 12.9 | 43,809 | 12.6 | 41,783 | 12.5 | 38,468 | 12.8 | 35,249 | 12.4 | ||||||||||||||||||||||||||||||||||||||||||||||
Total savings deposits |
219,110 | 63.4 | 226,302 | 65.2 | 218,028 | 65.2 | 183,796 | 61.2 | 166,843 | 59.0 | ||||||||||||||||||||||||||||||||||||||||||||||
Time deposits less than $100,000 |
7,422 | 2.1 | 7,315 | 2.1 | 8,040 | 2.4 | 9,050 | 3.0 | 10,609 | 3.8 | ||||||||||||||||||||||||||||||||||||||||||||||
Time deposits greater than $100,000 |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic |
19,958 | 5.8 | 10,792 | 3.1 | 7,230 | 2.2 | 7,272 | 2.4 | 10,636 | 3.8 | ||||||||||||||||||||||||||||||||||||||||||||||
Foreign |
17,174 | 5.0 | 15,249 | 4.4 | 15,195 | 4.5 | 16,516 | 5.5 | 17,322 | 6.1 | ||||||||||||||||||||||||||||||||||||||||||||||
Total interest-bearing deposits |
263,664 | 76.3 | 259,658 | 74.8 | 248,493 | 74.3 | 216,634 | 72.1 | 205,410 | 72.7 | ||||||||||||||||||||||||||||||||||||||||||||||
Total deposits |
$ | 345,475 | 100.0 | % | $ | 347,215 | 100.0 | % | $ | 334,590 | 100.0 | % | $ | 300,400 | 100.0 | % | $ | 282,733 | 100.0 | % |
The maturity of time deposits was as follows:
Time Deposits Less Than $100,000 |
Time Deposits Greater Than $100,000 | |||||||||||||||
At December 31, 2018 (Dollars in Millions) | Domestic | Foreign | Total | |||||||||||||
Three months or less |
$ | 1,069 | $ | 5,060 | $ | 17,117 | $ | 23,246 | ||||||||
Three months through six months |
1,063 | 6,171 | 47 | 7,281 | ||||||||||||
Six months through one year |
1,924 | 5,813 | 8 | 7,745 | ||||||||||||
Thereafter |
3,366 | 2,914 | 2 | 6,282 | ||||||||||||
Total |
$ | 7,422 | $ | 19,958 | $ | 17,174 | $ | 44,554 |
37
|
||||
38
|
||||||
39
|
||||
40
|
||||||
41
|
||||
42
|
||||||
TABLE 15
|
Delinquent Loan Ratios as a Percent of Ending Loan Balances |
At December 31 90 days or more past due excluding nonperforming loans |
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Commercial |
||||||||||||||||||||
Commercial |
.07 | % | .06 | % | .06 | % | .06 | % | .05 | % | ||||||||||
Lease financing |
| | | | | |||||||||||||||
|
|
|||||||||||||||||||
Total commercial |
.07 | .06 | .06 | .05 | .05 | |||||||||||||||
Commercial Real Estate |
||||||||||||||||||||
Commercial mortgages |
| | .01 | | .02 | |||||||||||||||
Construction and development |
| .05 | .05 | .13 | .14 | |||||||||||||||
|
|
|||||||||||||||||||
Total commercial real estate |
| .01 | .02 | .03 | .05 | |||||||||||||||
Residential Mortgages(a) |
.18 | .22 | .27 | .33 | .40 | |||||||||||||||
Credit Card |
1.25 | 1.28 | 1.16 | 1.09 | 1.13 | |||||||||||||||
Other Retail |
||||||||||||||||||||
Retail leasing |
.04 | .03 | .02 | .02 | .02 | |||||||||||||||
Home equity and second mortgages |
.35 | .28 | .25 | .25 | .26 | |||||||||||||||
Other |
.15 | .15 | .13 | .11 | .12 | |||||||||||||||
|
|
|||||||||||||||||||
Total other retail |
.19 | .17 | .15 | .15 | .15 | |||||||||||||||
Covered Loans |
| 4.74 | 5.53 | 6.31 | 7.48 | |||||||||||||||
|
|
|||||||||||||||||||
Total loans |
.20 | % | .26 | % | .28 | % | .32 | % | .38 | % |
At December 31 90 days or more past due including nonperforming loans |
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Commercial |
.27 | % | .31 | % | .57 | % | .25 | % | .19 | % | ||||||||||
Commercial real estate |
.29 | .37 | .31 | .33 | .65 | |||||||||||||||
Residential mortgages(a) |
.63 | .96 | 1.31 | 1.66 | 2.07 | |||||||||||||||
Credit card |
1.25 | 1.28 | 1.18 | 1.13 | 1.30 | |||||||||||||||
Other retail |
.54 | .46 | .45 | .46 | .53 | |||||||||||||||
Covered loans |
| 4.93 | 5.68 | 6.48 | 7.74 | |||||||||||||||
Total loans |
.49 | % | .62 | % | .78 | % | .78 | % | .97 | % |
(a) | Delinquent loan ratios exclude $1.7 billion, $1.9 billion, $2.5 billion, $2.9 billion, and $3.1 billion at December 31, 2018, 2017, 2016, 2015, and 2014, respectively, of loans purchased from GNMA mortgage pools whose repayments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs. Including these loans, the ratio of residential mortgages 90 days or more past due including all nonperforming loans was 3.21 percent, 4.16 percent, 5.73 percent, 7.15 percent, and 8.02 percent at December 31, 2018, 2017, 2016, 2015, and 2014, respectively. |
43
|
||||
44
|
||||||
The following table provides a summary of TDRs by loan class, including the delinquency status for TDRs that continue to accrue interest and TDRs included in nonperforming assets:
As a Percent of Performing TDRs | ||||||||||||||||||||
At December 31, 2018 (Dollars in Millions) |
Performing TDRs |
30-89 Days Past Due |
90 Days or More Past Due |
Nonperforming TDRs |
Total TDRs |
|||||||||||||||
Commercial |
$ | 258 | 4.7 | % | 1.8 | % | $ | 106 | (a) | $ | 364 | |||||||||
Commercial real estate |
164 | 3.2 | | 34 | (b) | 198 | ||||||||||||||
Residential mortgages |
1,413 | 3.4 | 4.0 | 200 | 1,613 | (d) | ||||||||||||||
Credit card |
245 | 11.6 | 6.2 | | 245 | |||||||||||||||
Other retail |
138 | 7.5 | 8.2 | 45 | (c) | 183 | (e) | |||||||||||||
TDRs, excluding loans purchased from GNMA mortgage pools |
2,218 | 4.7 | 3.9 | 385 | 2,603 | |||||||||||||||
Loans purchased from GNMA mortgage pools(g) |
1,639 | | | | 1,639 | (f) | ||||||||||||||
Total |
$ | 3,857 | 2.7 | % | 2.3 | % | $ | 385 | $ | 4,242 |
(a) | Primarily represents loans less than six months from the modification date that have not met the performance period required to return to accrual status (generally six months) and small business credit cards with a modified rate equal to 0 percent. |
(b) | Primarily represents loans less than six months from the modification date that have not met the performance period required to return to accrual status (generally six months). |
(c) | Primarily represents loans with a modified rate equal to 0 percent. |
(d) | Includes $290 million of residential mortgage loans to borrowers that have had debt discharged through bankruptcy and $37 million in trial period arrangements or previously placed in trial period arrangements but not successfully completed. |
(e) | Includes $74 million of other retail loans to borrowers that have had debt discharged through bankruptcy and $10 million in trial period arrangements or previously placed in trial period arrangements but not successfully completed. |
(f) | Includes $192 million of Federal Housing Administration and United States Department of Veterans Affairs residential mortgage loans to borrowers that have had debt discharged through bankruptcy and $370 million in trial period arrangements or previously placed in trial period arrangements but not successfully completed. |
(g) | Approximately 6.1 percent and 45.8 percent of the total TDR loans purchased from GNMA mortgage pools are 30-89 days past due and 90 days or more past due, respectively, but are not classified as delinquent as their repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs. |
45
|
||||
TABLE 16
|
Nonperforming Assets(a) |
At December 31 (Dollars in Millions) | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Commercial |
||||||||||||||||||||
Commercial |
$ | 186 | $ | 225 | $ | 443 | $ | 160 | $ | 99 | ||||||||||
Lease financing |
23 | 24 | 40 | 14 | 13 | |||||||||||||||
Total commercial |
209 | 249 | 483 | 174 | 112 | |||||||||||||||
Commercial Real Estate |
||||||||||||||||||||
Commercial mortgages |
76 | 108 | 87 | 92 | 175 | |||||||||||||||
Construction and development |
39 | 34 | 37 | 35 | 84 | |||||||||||||||
Total commercial real estate |
115 | 142 | 124 | 127 | 259 | |||||||||||||||
Residential Mortgages(b) |
296 | 442 | 595 | 712 | 864 | |||||||||||||||
Credit Card |
| 1 | 3 | 9 | 30 | |||||||||||||||
Other Retail |
||||||||||||||||||||
Retail leasing |
12 | 8 | 2 | 3 | 1 | |||||||||||||||
Home equity and second mortgages |
145 | 126 | 128 | 136 | 170 | |||||||||||||||
Other |
40 | 34 | 27 | 23 | 16 | |||||||||||||||
Total other retail |
197 | 168 | 157 | 162 | 187 | |||||||||||||||
Covered Loans |
| 6 | 6 | 8 | 14 | |||||||||||||||
Total nonperforming loans |
817 | 1,008 | 1,368 | 1,192 | 1,466 | |||||||||||||||
Other Real Estate(c) |
111 | 141 | 186 | 280 | 288 | |||||||||||||||
Covered Other Real Estate |
| 21 | 26 | 32 | 37 | |||||||||||||||
Other Assets |
61 | 30 | 23 | 19 | 17 | |||||||||||||||
Total nonperforming assets |
$ | 989 | $ | 1,200 | $ | 1,603 | $ | 1,523 | $ | 1,808 | ||||||||||
Accruing loans 90 days or more past due(b) |
$ | 584 | $ | 720 | $ | 764 | $ | 831 | $ | 945 | ||||||||||
Nonperforming loans to total loans |
.28 | % | .36 | % | .50 | % | .46 | % | .59 | % | ||||||||||
Nonperforming assets to total loans plus other real estate(c) |
.34 | % | .43 | % | .59 | % | .58 | % | .73 | % |
Changes in Nonperforming Assets
(Dollars in Millions) | Commercial and Commercial Real Estate |
Residential Mortgages, |
Total | |||||||||
Balance December 31, 2017 |
$ | 404 | $ | 796 | $ | 1,200 | ||||||
Additions to nonperforming assets |
||||||||||||
New nonaccrual loans and foreclosed properties |
427 | 370 | 797 | |||||||||
Advances on loans |
18 | 4 | 22 | |||||||||
Total additions |
445 | 374 | 819 | |||||||||
Reductions in nonperforming assets |
||||||||||||
Paydowns, payoffs |
(167 | ) | (149 | ) | (316 | ) | ||||||
Net sales |
(131 | ) | (160 | ) | (291 | ) | ||||||
Return to performing status |
(20 | ) | (181 | ) | (201 | ) | ||||||
Charge-offs(d) |
(193 | ) | (29 | ) | (222 | ) | ||||||
Total reductions |
(511 | ) | (519 | ) | (1,030 | ) | ||||||
Net additions to (reductions in) nonperforming assets |
(66 | ) | (145 | ) | (211 | ) | ||||||
Balance December 31, 2018 |
$ | 338 | $ | 651 | $ | 989 |
(a) | Throughout this document, nonperforming assets and related ratios do not include accruing loans 90 days or more past due. |
(b) | Excludes $1.7 billion, $1.9 billion, $2.5 billion, $2.9 billion and $3.1 billion at December 31, 2018, 2017, 2016, 2015 and 2014, respectively, of loans purchased from GNMA mortgage pools that are 90 days or more past due that continue to accrue interest, as their repayments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs. |
(c) | Foreclosed GNMA loans of $235 million, $267 million, $373 million, $535 million and $641 million at December 31, 2018, 2017, 2016, 2015 and 2014, respectively, continue to accrue interest and are recorded as other assets and excluded from nonperforming assets because they are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs. |
(d) | Charge-offs exclude actions for certain card products and loan sales that were not classified as nonperforming at the time the charge-off occurred. |
46
|
||||||
The following table provides an analysis of OREO, excluding those balances reported as covered under FDIC loss sharing agreements in prior periods, as a percent of their related loan balances, including geographical location detail for residential (residential mortgage, home equity and second mortgage) and commercial (commercial and commercial real estate) loan balances:
Amount | As a Percent of Ending Loan Balances |
|||||||||||||||||||
(Dollars in Millions) | December 31, 2018 |
December 31, 2017 |
December 31, 2018 |
December 31, 2017 |
||||||||||||||||
Residential |
||||||||||||||||||||
Illinois |
$ | 11 | $ | 14 | .25 | % | .32 | % | ||||||||||||
California |
11 | 13 | .04 | .06 | ||||||||||||||||
New York |
8 | 8 | .97 | 1.01 | ||||||||||||||||
Ohio |
6 | 6 | .22 | .21 | ||||||||||||||||
New Jersey |
6 | 6 | 1.09 | 1.28 | ||||||||||||||||
All other states |
64 | 88 | .13 | .19 | ||||||||||||||||
Total residential |
106 | 135 | .13 | .18 | ||||||||||||||||
Commercial |
||||||||||||||||||||
California |
3 | 4 | .01 | .02 | ||||||||||||||||
Idaho |
1 | 1 | .09 | .07 | ||||||||||||||||
All other states |
1 | 1 | | | ||||||||||||||||
Total commercial |
5 | 6 | | | ||||||||||||||||
Total |
$ | 111 | $ | 141 | .04 | % | .05 | % |
47
|
||||
TABLE 17
|
Net Charge-offs as a Percent of Average Loans Outstanding |
Year Ended December 31 | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Commercial |
||||||||||||||||||||
Commercial |
.25 | % | .27 | % | .35 | % | .26 | % | .26 | % | ||||||||||
Lease financing |
.25 | .31 | .34 | .27 | .17 | |||||||||||||||
Total commercial |
.25 | .28 | .35 | .26 | .26 | |||||||||||||||
Commercial Real Estate |
||||||||||||||||||||
Commercial mortgages |
(.06 | ) | .03 | (.01 | ) | .02 | (.03 | ) | ||||||||||||
Construction and development |
(.02 | ) | (.07 | ) | (.08 | ) | (.33 | ) | (.05 | ) | ||||||||||
Total commercial real estate |
(.05 | ) | | (.03 | ) | (.07 | ) | (.03 | ) | |||||||||||
Residential Mortgages |
.03 | .06 | .11 | .21 | .38 | |||||||||||||||
Credit Card |
3.90 | 3.76 | 3.30 | 3.61 | 3.73 | |||||||||||||||
Other Retail |
||||||||||||||||||||
Retail leasing |
.15 | .14 | .09 | .09 | .03 | |||||||||||||||
Home equity and second mortgages |
(.02 | ) | (.03 | ) | .01 | .24 | .61 | |||||||||||||
Other |
.79 | .75 | .71 | .65 | .71 | |||||||||||||||
Total other retail |
.46 | .44 | .42 | .45 | .60 | |||||||||||||||
Covered Loans |
| | | | .15 | |||||||||||||||
Total loans |
.48 | % | .48 | % | .47 | % | .47 | % | .55 | % |
48
|
||||||
TABLE 18
|
Summary of Allowance for Credit Losses |
(Dollars in Millions) | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Balance at beginning of year |
$ | 4,417 | $ | 4,357 | $ | 4,306 | $ | 4,375 | $ | 4,537 | ||||||||||
Charge-Offs |
||||||||||||||||||||
Commercial |
||||||||||||||||||||
Commercial |
328 | 387 | 388 | 289 | 278 | |||||||||||||||
Lease financing |
22 | 27 | 29 | 25 | 27 | |||||||||||||||
|
|
|||||||||||||||||||
Total commercial |
350 | 414 | 417 | 314 | 305 | |||||||||||||||
Commercial real estate |
||||||||||||||||||||
Commercial mortgages |
6 | 28 | 12 | 20 | 21 | |||||||||||||||
Construction and development |
3 | 2 | 10 | 2 | 15 | |||||||||||||||
|
|
|||||||||||||||||||
Total commercial real estate |
9 | 30 | 22 | 22 | 36 | |||||||||||||||
Residential mortgages |
48 | 65 | 85 | 135 | 216 | |||||||||||||||
Credit card |
970 | 887 | 759 | 726 | 725 | |||||||||||||||
Other retail |
||||||||||||||||||||
Retail leasing |
21 | 16 | 9 | 8 | 6 | |||||||||||||||
Home equity and second mortgages |
25 | 31 | 40 | 73 | 121 | |||||||||||||||
Other |
337 | 308 | 283 | 238 | 257 | |||||||||||||||
|
|
|||||||||||||||||||
Total other retail |
383 | 355 | 332 | 319 | 384 | |||||||||||||||
Covered loans(a) |
| | | | 13 | |||||||||||||||
|
|
|||||||||||||||||||
Total charge-offs |
1,760 | 1,751 | 1,615 | 1,516 | 1,679 | |||||||||||||||
Recoveries |
||||||||||||||||||||
Commercial |
||||||||||||||||||||
Commercial |
91 | 140 | 81 | 84 | 92 | |||||||||||||||
Lease financing |
8 | 10 | 11 | 11 | 18 | |||||||||||||||
|
|
|||||||||||||||||||
Total commercial |
99 | 150 | 92 | 95 | 110 | |||||||||||||||
Commercial real estate |
||||||||||||||||||||
Commercial mortgages |
23 | 20 | 16 | 15 | 30 | |||||||||||||||
Construction and development |
5 | 10 | 19 | 35 | 19 | |||||||||||||||
|
|
|||||||||||||||||||
Total commercial real estate |
28 | 30 | 35 | 50 | 49 | |||||||||||||||
Residential mortgages |
31 | 28 | 25 | 26 | 21 | |||||||||||||||
Credit card |
124 | 101 | 83 | 75 | 67 | |||||||||||||||
Other retail |
||||||||||||||||||||
Retail leasing |
9 | 6 | 4 | 3 | 4 | |||||||||||||||
Home equity and second mortgages |
28 | 36 | 39 | 35 | 26 | |||||||||||||||
Other |
87 | 70 | 68 | 60 | 66 | |||||||||||||||
|
|
|||||||||||||||||||
Total other retail |
124 | 112 | 111 | 98 | 96 | |||||||||||||||
Covered loans(a) |
| | | | 2 | |||||||||||||||
|
|
|||||||||||||||||||
Total recoveries |
406 | 421 | 346 | 344 | 345 | |||||||||||||||
Net Charge-Offs |
||||||||||||||||||||
Commercial |
||||||||||||||||||||
Commercial |
237 | 247 | 307 | 205 | 186 | |||||||||||||||
Lease financing |
14 | 17 | 18 | 14 | 9 | |||||||||||||||
|
|
|||||||||||||||||||
Total commercial |
251 | 264 | 325 | 219 | 195 | |||||||||||||||
Commercial real estate |
||||||||||||||||||||
Commercial mortgages |
(17 | ) | 8 | (4 | ) | 5 | (9 | ) | ||||||||||||
Construction and development |
(2 | ) | (8 | ) | (9 | ) | (33 | ) | (4 | ) | ||||||||||
|
|
|||||||||||||||||||
Total commercial real estate |
(19 | ) | | (13 | ) | (28 | ) | (13 | ) | |||||||||||
Residential mortgages |
17 | 37 | 60 | 109 | 195 | |||||||||||||||
Credit card |
846 | 786 | 676 | 651 | 658 | |||||||||||||||
Other retail |
||||||||||||||||||||
Retail leasing |
12 | 10 | 5 | 5 | 2 | |||||||||||||||
Home equity and second mortgages |
(3 | ) | (5 | ) | 1 | 38 | 95 | |||||||||||||
Other |
250 | 238 | 215 | 178 | 191 | |||||||||||||||
|
|
|||||||||||||||||||
Total other retail |
259 | 243 | 221 | 221 | 288 | |||||||||||||||
Covered loans(a) |
| | | | 11 | |||||||||||||||
|
|
|||||||||||||||||||
Total net charge-offs |
1,354 | 1,330 | 1,269 | 1,172 | 1,334 | |||||||||||||||
Provision for credit losses |
1,379 | 1,390 | 1,324 | 1,132 | 1,229 | |||||||||||||||
Other changes(b) |
(1 | ) | | (4 | ) | (29 | ) | (57 | ) | |||||||||||
|
|
|||||||||||||||||||
Balance at end of year |
$ | 4,441 | $ | 4,417 | $ | 4,357 | $ | 4,306 | $ | 4,375 | ||||||||||
|
|
|||||||||||||||||||
Components |
||||||||||||||||||||
Allowance for loan losses |
$ | 3,973 | $ | 3,925 | $ | 3,813 | $ | 3,863 | $ | 4,039 | ||||||||||
Liability for unfunded credit commitments |
468 | 492 | 544 | 443 | 336 | |||||||||||||||
|
|
|||||||||||||||||||
Total allowance for credit losses |
$ | 4,441 | $ | 4,417 | $ | 4,357 | $ | 4,306 | $ | 4,375 | ||||||||||
|
|
|||||||||||||||||||
Allowance for Credit Losses as a Percentage of |
||||||||||||||||||||
Period-end loans |
1.55 | % | 1.58 | % | 1.59 | % | 1.65 | % | 1.77 | % | ||||||||||
Nonperforming loans |
544 | 438 | 318 | 361 | 298 | |||||||||||||||
Nonperforming and accruing loans 90 days or more past due |
317 | 256 | 204 | 213 | 181 | |||||||||||||||
Nonperforming assets |
449 | 368 | 272 | 283 | 242 | |||||||||||||||
Net charge-offs |
328 | 332 | 343 | 367 | 328 |
(a) | Relates to covered loan charge-offs and recoveries not reimbursable by the FDIC. |
(b) | Includes net changes in credit losses to be reimbursed by the FDIC and reductions in the allowance for covered loans where the reversal of a previously recorded allowance was offset by an associated decrease in the indemnification asset, and the impact of any loan sales. |
49
|
||||
TABLE 19
|
Elements of the Allowance for Credit Losses |
Allowance Amount | Allowance as a Percent of Loans | |||||||||||||||||||||||||||||||||||||||
At December 31 (Dollars in Millions) | 2018 | 2017 | 2016 | 2015 | 2014 | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||||||||||
Commercial |
||||||||||||||||||||||||||||||||||||||||
Commercial |
$ | 1,388 | $ | 1,298 | $ | 1,376 | $ | 1,231 | $ | 1,094 | 1.43 | % | 1.41 | % | 1.56 | % | 1.48 | % | 1.46 | % | ||||||||||||||||||||
Lease financing |
66 | 74 | 74 | 56 | 52 | 1.18 | 1.32 | 1.36 | 1.06 | .97 | ||||||||||||||||||||||||||||||
Total commercial |
1,454 | 1,372 | 1,450 | 1,287 | 1,146 | 1.42 | 1.41 | 1.55 | 1.46 | 1.43 | ||||||||||||||||||||||||||||||
Commercial Real Estate |
||||||||||||||||||||||||||||||||||||||||
Commercial mortgages |
269 | 295 | 282 | 285 | 479 | .94 | 1.00 | .89 | .90 | 1.44 | ||||||||||||||||||||||||||||||
Construction and development |
531 | 536 | 530 | 439 | 247 | 4.85 | 4.83 | 4.61 | 4.24 | 2.62 | ||||||||||||||||||||||||||||||
Total commercial real estate |
800 | 831 | 812 | 724 | 726 | 2.02 | 2.05 | 1.88 | 1.72 | 1.70 | ||||||||||||||||||||||||||||||
Residential Mortgages |
455 | 449 | 510 | 631 | 787 | .70 | .75 | .89 | 1.18 | 1.52 | ||||||||||||||||||||||||||||||
Credit Card |
1,102 | 1,056 | 934 | 883 | 880 | 4.72 | 4.76 | 4.29 | 4.20 | 4.75 | ||||||||||||||||||||||||||||||
Other Retail |
||||||||||||||||||||||||||||||||||||||||
Retail leasing |
25 | 21 | 11 | 12 | 14 | .29 | .26 | .17 | .23 | .24 | ||||||||||||||||||||||||||||||
Home equity and second mortgages |
265 | 298 | 300 | 448 | 470 | 1.64 | 1.83 | 1.83 | 2.73 | 2.95 | ||||||||||||||||||||||||||||||
Other |
340 | 359 | 306 | 283 | 287 | 1.07 | 1.09 | .98 | .96 | 1.04 | ||||||||||||||||||||||||||||||
Total other retail |
630 | 678 | 617 | 743 | 771 | 1.12 | 1.18 | 1.15 | 1.45 | 1.57 | ||||||||||||||||||||||||||||||
Covered Loans |
| 31 | 34 | 38 | 65 | | .99 | .89 | .83 | 1.23 | ||||||||||||||||||||||||||||||
Total allowance |
$ | 4,441 | $ | 4,417 | $ | 4,357 | $ | 4,306 | $ | 4,375 | 1.55 | % | 1.58 | % | 1.59 | % | 1.65 | % | 1.77 | % |
50
|
||||||
51
|
||||
TABLE 20
|
Sensitivity of Net Interest Income |
December 31, 2018 | December 31, 2017 | |||||||||||||||||||||||||||||||
Down 50 bps Immediate |
Up 50 bps Immediate |
Down 200 bps Gradual |
Up 200 bps Gradual |
Down 50 bps Immediate |
Up 50 bps Immediate |
Down 200 bps Gradual |
Up 200 bps Gradual |
|||||||||||||||||||||||||
Net interest income |
(1.43 | )% | 1.02 | % | (3.90 | )% | 1.45 | % | (2.07 | )% | 1.13 | % | * | 1.72 | % |
* | Given the level of interest rates, downward rate scenario is not computed. |
52
|
||||||
53
|
||||
54
|
||||||
55
|
||||
TABLE 21
|
Debt Ratings |
Moodys | Standard & Poors |
Fitch | Dominion Bond Rating Service |
|||||||||||||
U.S. Bancorp |
||||||||||||||||
Long-term issuer rating |
A1 | A+ | AA- | AA | ||||||||||||
Short-term issuer rating |
A-1 | F1+ | R-1 (middle) | |||||||||||||
Senior unsecured debt |
A1 | A+ | AA- | AA | ||||||||||||
Subordinated debt |
A1 | A- | A+ | AA (low) | ||||||||||||
Junior subordinated debt |
A2 | BBB | AA (low) | |||||||||||||
Preferred stock |
A3 | BBB | BBB | A | ||||||||||||
Commercial paper |
P-1 | F1+ | ||||||||||||||
U.S. Bank National Association |
||||||||||||||||
Long-term issuer rating |
A1 | AA- | AA- | AA (high) | ||||||||||||
Short-term issuer rating |
P-1 | A-1+ | F1+ | R-1 (high) | ||||||||||||
Long-term deposits |
Aa1 | AA | AA (high) | |||||||||||||
Short-term deposits |
P-1 | F1+ | ||||||||||||||
Senior unsecured debt |
A1 | AA- | AA- | AA (high) | ||||||||||||
Subordinated debt |
A1 | A | A+ | AA | ||||||||||||
Commercial paper |
P-1 | A-1+ | F1+ | |||||||||||||
Counterparty risk assessment |
Aa2(cr)/P-1(cr) | |||||||||||||||
Counterparty risk rating |
Aa3/P-1 | |||||||||||||||
Baseline credit assessment |
aa3 |
56
|
||||||
TABLE 22
|
Contractual Obligations |
Payments Due By Period | ||||||||||||||||||||
At December 31, 2018 (Dollars in Millions) | One Year or Less |
Over One Through Three Years |
Over Three Through Five Years |
Over Five Years |
Total | |||||||||||||||
Contractual Obligations(a) |
||||||||||||||||||||
Long-term debt(b) |
$ | 8,080 | $ | 13,126 | $ | 6,086 | $ | 14,048 | $ | 41,340 | ||||||||||
Operating leases |
291 | 491 | 348 | 482 | 1,612 | |||||||||||||||
Benefit obligations(c) |
23 | 53 | 59 | 200 | 335 | |||||||||||||||
Time deposits |
38,272 | 4,954 | 1,324 | 4 | 44,554 | |||||||||||||||
Contractual interest payments(d) |
1,861 | 1,620 | 967 | 1,012 | 5,460 | |||||||||||||||
Equity investment commitments |
1,839 | 877 | 29 | 65 | 2,810 | |||||||||||||||
Other(e) |
233 | 37 | 21 | 108 | 399 | |||||||||||||||
Total |
$ | 50,599 | $ | 21,158 | $ | 8,834 | $ | 15,919 | $ | 96,510 |
(a) | Unrecognized tax positions of $335 million at December 31, 2018, are excluded as the Company cannot make a reasonably reliable estimate of the period of cash settlement with the respective taxing authority. |
(b) | Includes obligations under capital leases. |
(c) | Amounts only include obligations related to the unfunded non-qualified pension plans. |
(d) | Includes accrued interest and future contractual interest obligations. |
(e) | Primarily includes purchase obligations for goods and services covered by noncancellable contracts including cancellation fees. |
57
|
||||
58
|
||||||
TABLE 23
|
Regulatory Capital Ratios |
U.S. Bancorp | U.S. Bank National Association |
|||||||||||||||
At December 31 (Dollars in Millions) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Basel III standardized approach: |
||||||||||||||||
Common equity tier 1 capital |
$ | 34,724 | $ | 34,369 | $ | 38,318 | $ | 37,586 | ||||||||
Tier 1 capital |
40,741 | 39,806 | 38,351 | 37,701 | ||||||||||||
Total risk-based capital |
48,178 | 47,503 | 45,960 | 45,466 | ||||||||||||
Risk-weighted assets |
381,661 | 367,771 | 374,299 | 361,973 | ||||||||||||
Common equity tier 1 capital as a percent of risk-weighted assets |
9.1 | % | 9.3 | % | 10.2 | % | 10.4 | % | ||||||||
Tier 1 capital as a percent of risk-weighted assets |
10.7 | 10.8 | 10.2 | 10.4 | ||||||||||||
Total risk-based capital as a percent of risk-weighted assets |
12.6 | 12.9 | 12.3 | 12.6 | ||||||||||||
Tier 1 capital as a percent of adjusted quarterly average assets (leverage ratio) |
9.0 | 8.9 | 8.6 | 8.6 | ||||||||||||
Basel III advanced approaches: |
||||||||||||||||
Common equity tier 1 capital |
$ | 34,724 | $ | 34,369 | $ | 38,318 | $ | 37,586 | ||||||||
Tier 1 capital |
40,741 | 39,806 | 38,351 | 37,701 | ||||||||||||
Total risk-based capital |
45,136 | 44,477 | 42,883 | 42,414 | ||||||||||||
Risk-weighted assets |
295,002 | 287,211 | 287,897 | 281,659 | ||||||||||||
Common equity tier 1 capital as a percent of risk-weighted assets |
11.8 | % | 12.0 | % | 13.3 | % | 13.3 | % | ||||||||
Tier 1 capital as a percent of risk-weighted assets |
13.8 | 13.9 | 13.3 | 13.4 | ||||||||||||
Total risk-based capital as a percent of risk-weighted assets |
15.3 | 15.5 | 14.9 | 15.1 | ||||||||||||
Tier 1 capital as a percent of total on- and off-balance sheet leverage exposure (total leverage exposure ratio) |
7.2 | 6.9 |
Bank Regulatory Capital Requirements
Minimum | Well- Capitalized |
|||||||
2018 |
||||||||
Common equity tier 1 capital as a percent of risk-weighted assets |
6.375 | % | 6.500 | % | ||||
Tier 1 capital as a percent of risk-weighted assets |
7.875 | 8.000 | ||||||
Total risk-based capital as a percent of risk-weighted assets |
9.875 | 10.000 | ||||||
Tier 1 capital as a percent of adjusted quarterly average assets (leverage ratio) |
4.000 | 5.000 | ||||||
Tier 1 capital as a percent of total on- and off-balance sheet leverage exposure (total leverage exposure ratio) |
3.000 | 3.000 | ||||||
2017 |
||||||||
Common equity tier 1 capital as a percent of risk-weighted assets |
5.750 | % | 6.500 | % | ||||
Tier 1 capital as a percent of risk-weighted assets |
7.250 | 8.000 | ||||||
Total risk-based capital as a percent of risk-weighted assets |
9.250 | 10.000 | ||||||
Tier 1 capital as a percent of adjusted quarterly average assets (leverage ratio) |
4.000 | 5.000 |
59
|
||||
TABLE 24
|
Fourth Quarter Results |
Three Months Ended December 31, |
||||||||
(Dollars and Shares in Millions, Except Per Share Data) | 2018 | 2017 | ||||||
Condensed Income Statement |
||||||||
Net interest income |
$ | 3,303 | $ | 3,175 | ||||
Taxable-equivalent adjustment(a) |
28 | 53 | ||||||
Net interest income (taxable-equivalent basis)(b) |
3,331 | 3,228 | ||||||
Noninterest income |
2,493 | 2,360 | ||||||
Securities gains (losses), net |
5 | 10 | ||||||
Total net revenue |
5,829 | 5,598 | ||||||
Noninterest expense |
3,280 | 3,899 | ||||||
Provision for credit losses |
368 | 335 | ||||||
Income before taxes |
2,181 | 1,364 | ||||||
Income taxes and taxable-equivalent adjustment |
319 | (322 | ) | |||||
Net income |
1,862 | 1,686 | ||||||
Net (income) loss attributable to noncontrolling interests |
(6 | ) | (4 | ) | ||||
Net income attributable to U.S. Bancorp |
$ | 1,856 | $ | 1,682 | ||||
Net income applicable to U.S. Bancorp common shareholders |
$ | 1,777 | $ | 1,611 | ||||
Per Common Share |
||||||||
Earnings per share |
$ | 1.10 | $ | .97 | ||||
Diluted earnings per share |
$ | 1.10 | $ | .97 | ||||
Dividends declared per share |
$ | .37 | $ | .30 | ||||
Average common shares outstanding |
1,615 | 1,659 | ||||||
Average diluted common shares outstanding |
1,618 | 1,664 | ||||||
Financial Ratios |
||||||||
Return on average assets |
1.59 | % | 1.46 | % | ||||
Return on average common equity |
15.8 | 14.7 | ||||||
Net interest margin (taxable-equivalent basis)(a) |
3.15 | 3.11 | ||||||
Efficiency ratio(b) |
56.3 | 69.8 |
(a) | Based on federal income tax rates of 21 percent for 2018 and 35 percent for 2017, for those assets and liabilities whose income or expense is not included for federal income tax purposes. |
(b) | See Non-GAAP Financial Measures beginning on page 66. |
60
|
||||||
61
|
||||
TABLE 25
|
Line of Business Financial Performance |
Corporate and Commercial Banking |
Consumer and Business Banking |
|||||||||||||||||||||||||||||||||||
Year Ended December 31 (Dollars in Millions) |
2018 | 2017 | Percent Change |
2018 | 2017 | Percent Change |
||||||||||||||||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
$ | 2,938 | $ | 2,905 | 1.1 | % | $ | 6,164 | $ | 5,832 | 5.7 | % | ||||||||||||||||||||||||
Noninterest income |
844 | 915 | (7.8 | ) | 2,302 | 2,386 | (3.5 | ) | ||||||||||||||||||||||||||||
Securities gains (losses), net |
| (3 | ) | * | | | | |||||||||||||||||||||||||||||
Total net revenue |
3,782 | 3,817 | (.9 | ) | 8,466 | 8,218 | 3.0 | |||||||||||||||||||||||||||||
Noninterest expense |
1,578 | 1,552 | 1.7 | 5,217 | 5,056 | 3.2 | ||||||||||||||||||||||||||||||
Other intangibles |
4 | 4 | | 27 | 30 | (10.0 | ) | |||||||||||||||||||||||||||||
Total noninterest expense |
1,582 | 1,556 | 1.7 | 5,244 | 5,086 | 3.1 | ||||||||||||||||||||||||||||||
Income before provision and income taxes |
2,200 | 2,261 | (2.7 | ) | 3,222 | 3,132 | 2.9 | |||||||||||||||||||||||||||||
Provision for credit losses |
65 | (14 | ) | * | 232 | 337 | (31.2 | ) | ||||||||||||||||||||||||||||
Income before income taxes |
2,135 | 2,275 | (6.2 | ) | 2,990 | 2,795 | 7.0 | |||||||||||||||||||||||||||||
Income taxes and taxable-equivalent adjustment |
534 | 828 | (35.5 | ) | 748 | 1,018 | (26.5 | ) | ||||||||||||||||||||||||||||
Net income |
1,601 | 1,447 | 10.6 | 2,242 | 1,777 | 26.2 | ||||||||||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests |
| | | | | | ||||||||||||||||||||||||||||||
Net income attributable to U.S. Bancorp |
$ | 1,601 | $ | 1,447 | 10.6 | $ | 2,242 | $ | 1,777 | 26.2 | ||||||||||||||||||||||||||
Average Balance Sheet |
||||||||||||||||||||||||||||||||||||
Commercial |
$ | 75,010 | $ | 73,483 | 2.1 | % | $ | 9,855 | $ | 9,980 | (1.3 | )% | ||||||||||||||||||||||||
Commercial real estate |
18,869 | 20,452 | (7.7 | ) | 16,272 | 16,702 | (2.6 | ) | ||||||||||||||||||||||||||||
Residential mortgages |
6 | 6 | | 58,549 | 55,939 | 4.7 | ||||||||||||||||||||||||||||||
Credit card |
| | | | | | ||||||||||||||||||||||||||||||
Other retail |
1 | | * | 53,990 | 53,199 | 1.5 | ||||||||||||||||||||||||||||||
Total loans, excluding covered loans |
93,886 | 93,941 | (.1 | ) | 138,666 | 135,820 | 2.1 | |||||||||||||||||||||||||||||
Covered loans |
| | | 2,169 | 3,445 | (37.0 | ) | |||||||||||||||||||||||||||||
Total loans |
93,886 | 93,941 | (.1 | ) | 140,835 | 139,265 | 1.1 | |||||||||||||||||||||||||||||
Goodwill |
1,647 | 1,647 | | 3,605 | 3,632 | (.7 | ) | |||||||||||||||||||||||||||||
Other intangible assets |
11 | 13 | (15.4 | ) | 2,953 | 2,740 | 7.8 | |||||||||||||||||||||||||||||
Assets |
102,834 | 102,528 | .3 | 155,290 | 153,815 | 1.0 | ||||||||||||||||||||||||||||||
Noninterest-bearing deposits |
33,074 | 36,030 | (8.2 | ) | 27,526 | 27,680 | (.6 | ) | ||||||||||||||||||||||||||||
Interest checking |
10,046 | 9,950 | 1.0 | 50,135 | 47,231 | 6.1 | ||||||||||||||||||||||||||||||
Savings products |
41,889 | 45,764 | (8.5 | ) | 61,484 | 60,496 | 1.6 | |||||||||||||||||||||||||||||
Time deposits |
17,966 | 16,136 | 11.3 | 13,321 | 12,894 | 3.3 | ||||||||||||||||||||||||||||||
Total deposits |
102,975 | 107,880 | (4.5 | ) | 152,466 | 148,301 | 2.8 | |||||||||||||||||||||||||||||
Total U.S. Bancorp shareholders equity |
10,465 | 9,870 | 6.0 | 11,816 | 11,133 | 6.1 |
* | Not meaningful |
(a) | Presented net of related rewards and rebate costs and certain partner payments of $2.2 billion and $2.0 billion for 2018 and 2017, respectively. |
(b) | Includes revenue generated from certain contracts with customers of $7.4 billion and $7.1 billion for 2018 and 2017, respectively. |
62
|
||||||
Wealth Management and Investment Services |
Payment Services |
Treasury and Corporate Support |
Consolidated Company |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2018 | 2017 | Percent Change |
2018 | 2017 | Percent Change |
2018 | 2017 | Percent Change |
2018 | 2017 | Percent Change |
|||||||||||||||||||||||||||||||||||||||||||||||||
$ | 1,122 | $ | 1,007 | 11.4 | % | $ | 2,445 | $ | 2,403 | 1.7 | % | $ | 366 | $ | 438 | (16.4 | )% | $ | 13,035 | $ | 12,585 | 3.6 | % | |||||||||||||||||||||||||||||||||||||
1,748 | 1,643 | 6.4 | 3,601 | (a) | 3,368 | (a) | 6.9 | 1,077 | 948 | 13.6 | 9,572 | (b) | 9,260 | (b) | 3.4 | |||||||||||||||||||||||||||||||||||||||||||||
| | | | | | 30 | 60 | (50.0 | ) | 30 | 57 | (47.4 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
2,870 | 2,650 | 8.3 | 6,046 | 5,771 | 4.8 | 1,473 | 1,446 | 1.9 | 22,637 | 21,902 | 3.4 | |||||||||||||||||||||||||||||||||||||||||||||||||
1,780 | 1,617 | 10.1 | 2,875 | 2,662 | 8.0 | 853 | 1,728 | (50.6 | ) | 12,303 | 12,615 | (2.5 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
16 | 20 | (20.0 | ) | 114 | 121 | (5.8 | ) | | | | 161 | 175 | (8.0 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
1,796 | 1,637 | 9.7 | 2,989 | 2,783 | 7.4 | 853 | 1,728 | (50.6 | ) | 12,464 | 12,790 | (2.5 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
1,074 | 1,013 | 6.0 | 3,057 | 2,988 | 2.3 | 620 | (282 | ) | * | 10,173 | 9,112 | 11.6 | ||||||||||||||||||||||||||||||||||||||||||||||||
(2 | ) | (1 | ) | * | 1,081 | 1,082 | (.1 | ) | 3 | (14 | ) | * | 1,379 | 1,390 | (.8 | ) | ||||||||||||||||||||||||||||||||||||||||||||
1,076 | 1,014 | 6.1 | 1,976 | 1,906 | 3.7 | 617 | (268 | ) | * | 8,794 | 7,722 | 13.9 | ||||||||||||||||||||||||||||||||||||||||||||||||
270 | 368 | (26.6 | ) | 495 | 693 | (28.6 | ) | (377 | ) | (1,438 | ) | 73.8 | 1,670 | 1,469 | 13.7 | |||||||||||||||||||||||||||||||||||||||||||||
806 | 646 | 24.8 | 1,481 | 1,213 | 22.1 | 994 | 1,170 | (15.0 | ) | 7,124 | 6,253 | 13.9 | ||||||||||||||||||||||||||||||||||||||||||||||||
| | | | (13 | ) | * | (28 | ) | (22 | ) | (27.3 | ) | (28 | ) | (35 | ) | 20.0 | |||||||||||||||||||||||||||||||||||||||||||
$ | 806 | $ | 646 | 24.8 | $ | 1,481 | $ | 1,200 | 23.4 | $ | 966 | $ | 1,148 | (15.9 | ) | $ | 7,096 | $ | 6,218 | 14.1 | ||||||||||||||||||||||||||||||||||||||||
$ | 3,779 | $ | 3,436 | 10.0 | % | $ | 9,026 | $ | 8,082 | 11.7 | % | $ | 1,184 | $ | 923 | 28.3 | % | $ | 98,854 | $ | 95,904 | 3.1 | % | |||||||||||||||||||||||||||||||||||||
520 | 511 | 1.8 | | | | 4,316 | 4,412 | (2.2 | ) | 39,977 | 42,077 | (5.0 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
3,333 | 2,831 | 17.7 | | | | 5 | 8 | (37.5 | ) | 61,893 | 58,784 | 5.3 | ||||||||||||||||||||||||||||||||||||||||||||||||
| | | 21,672 | 20,906 | 3.7 | | | | 21,672 | 20,906 | 3.7 | |||||||||||||||||||||||||||||||||||||||||||||||||
1,740 | 1,755 | (.9 | ) | 404 | 459 | (12.0 | ) | 1 | 3 | (66.7 | ) | 56,136 | 55,416 | 1.3 | ||||||||||||||||||||||||||||||||||||||||||||||
9,372 | 8,533 | 9.8 | 31,102 | 29,447 | 5.6 | 5,506 | 5,346 | 3.0 | 278,532 | 273,087 | 2.0 | |||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | 5 | * | 2,169 | 3,450 | (37.1 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
9,372 | 8,533 | 9.8 | 31,102 | 29,447 | 5.6 | 5,506 | 5,351 | 2.9 | 280,701 | 276,537 | 1.5 | |||||||||||||||||||||||||||||||||||||||||||||||||
1,618 | 1,617 | .1 | 2,569 | 2,465 | 4.2 | | | | 9,439 | 9,361 | .8 | |||||||||||||||||||||||||||||||||||||||||||||||||
63 | 81 | (22.2 | ) | 406 | 400 | 1.5 | | | | 3,433 | 3,234 | 6.2 | ||||||||||||||||||||||||||||||||||||||||||||||||
12,445 | 11,750 | 5.9 | 36,916 | 35,009 | 5.4 | 149,529 | 145,480 | 2.8 | 457,014 | 448,582 | 1.9 | |||||||||||||||||||||||||||||||||||||||||||||||||
14,011 | 14,846 | (5.6 | ) | 1,099 | 1,037 | 6.0 | 2,486 | 2,340 | 6.2 | 78,196 | 81,933 | (4.6 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
9,929 | 10,729 | (7.5 | ) | | | | 44 | 43 | 2.3 | 70,154 | 67,953 | 3.2 | ||||||||||||||||||||||||||||||||||||||||||||||||
42,223 | 42,978 | (1.8 | ) | 107 | 102 | 4.9 | 742 | 529 | 40.3 | 146,445 | 149,869 | (2.3 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
3,858 | 4,008 | (3.7 | ) | 3 | 2 | 50.0 | 3,519 | 719 | * | 38,667 | 33,759 | 14.5 | ||||||||||||||||||||||||||||||||||||||||||||||||
70,021 | 72,561 | (3.5 | ) | 1,209 | 1,141 | 6.0 | 6,791 | 3,631 | 87.0 | 333,462 | 333,514 | | ||||||||||||||||||||||||||||||||||||||||||||||||
2,475 | 2,421 | 2.2 | 6,629 | 6,275 | 5.6 | 19,006 | 19,398 | (2.0 | ) | 50,391 | 49,097 | 2.6 |
63
|
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64
|
||||||
65
|
||||
66
|
||||||
The following table shows the Companys calculation of these non-GAAP financial measures:
At December 31 (Dollars in Millions) | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Total equity |
$ | 51,657 | $ | 49,666 | $ | 47,933 | $ | 46,817 | $ | 44,168 | ||||||||||
Preferred stock |
(5,984 | ) | (5,419 | ) | (5,501 | ) | (5,501 | ) | (4,756 | ) | ||||||||||
Noncontrolling interests |
(628 | ) | (626 | ) | (635 | ) | (686 | ) | (689 | ) | ||||||||||
Goodwill (net of deferred tax liability)(1) |
(8,549 | ) | (8,613 | ) | (8,203 | ) | (8,295 | ) | (8,403 | ) | ||||||||||
Intangible assets, other than mortgage servicing rights |
(601 | ) | (583 | ) | (712 | ) | (838 | ) | (824 | ) | ||||||||||
|
|
|||||||||||||||||||
Tangible common equity(a) |
35,895 | 34,425 | 32,882 | 31,497 | 29,496 | |||||||||||||||
Total assets |
467,374 | 462,040 | 445,964 | 421,853 | 402,529 | |||||||||||||||
Goodwill (net of deferred tax liability)(1) |
(8,549 | ) | (8,613 | ) | (8,203 | ) | (8,295 | ) | (8,403 | ) | ||||||||||
Intangible assets, other than mortgage servicing rights |
(601 | ) | (583 | ) | (712 | ) | (838 | ) | (824 | ) | ||||||||||
|
|
|||||||||||||||||||
Tangible assets(b) |
458,224 | 452,844 | 437,049 | 412,720 | 393,302 | |||||||||||||||
Risk-weighted assets, determined in accordance with the Basel III standardized approach(c) |
381,661 | 367,771 | 358,237 | 341,360 | 317,398 | |||||||||||||||
Tangible common equity (as calculated above) |
34,425 | 32,882 | 31,497 | 29,496 | ||||||||||||||||
Adjustments(2) |
(550 | ) | (55 | ) | 67 | 172 | ||||||||||||||
|
|
|||||||||||||||||||
Common equity tier 1 capital estimated for the Basel III fully implemented standardized and advanced approaches(d) |
33,875 | 32,827 | 31,564 | 29,668 | ||||||||||||||||
Risk-weighted assets, determined in accordance with prescribed transitional standardized approach regulatory requirements |
367,771 | 358,237 | 341,360 | 317,398 | ||||||||||||||||
Adjustments(3) |
4,473 | 4,027 | 3,892 | 11,110 | ||||||||||||||||
|
|
|||||||||||||||||||
Risk-weighted assets estimated for the Basel III fully implemented standardized approach(e) |
372,244 | 362,264 | 345,252 | 328,508 | ||||||||||||||||
Risk-weighted assets, determined in accordance with prescribed transitional advanced approaches regulatory requirements |
287,211 | 277,141 | 261,668 | 248,596 | ||||||||||||||||
Adjustments(4) |
4,769 | 4,295 | 4,099 | 3,270 | ||||||||||||||||
|
|
|||||||||||||||||||
Risk-weighted assets estimated for the Basel III fully implemented advanced approaches(f) |
291,980 | 281,436 | 265,767 | 251,866 | ||||||||||||||||
Ratios |
||||||||||||||||||||
Tangible common equity to tangible assets(a)/(b) |
7.8 | % | 7.6 | % | 7.5 | % | 7.6 | % | 7.5 | % | ||||||||||
Tangible common equity to risk-weighted assets(a)/(c) |
9.4 | 9.4 | 9.2 | 9.2 | 9.3 | |||||||||||||||
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach(d)/(e) |
9.1 | 9.1 | 9.1 | 9.0 | ||||||||||||||||
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches(d)/(f) |
11.6 | 11.7 | 11.9 | 11.8 |
Three Months Ended December 31 |
Year Ended December 31 | |||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||
Net interest income |
$ | 3,303 | $ | 3,175 | $ | 12,919 | $ | 12,380 | $ | 11,666 | $ | 11,151 | $ | 10,949 | ||||||||||||||
Taxable-equivalent adjustment(5) |
28 | 53 | 116 | 205 | 203 | 213 | 222 | |||||||||||||||||||||
Net interest income, on a taxable-equivalent basis |
3,331 | 3,228 | 13,035 | 12,585 | 11,869 | 11,364 | 11,171 | |||||||||||||||||||||
Net interest income, on a taxable-equivalent basis (as calculated above) |
3,331 | 3,228 | 13,035 | 12,585 | 11,869 | 11,364 | 11,171 | |||||||||||||||||||||
Noninterest income |
2,498 | 2,370 | 9,602 | 9,317 | 9,290 | 8,818 | 8,875 | |||||||||||||||||||||
Less: Securities gains (losses), net |
5 | 10 | 30 | 57 | 22 | | 3 | |||||||||||||||||||||
Total net revenue, excluding net securities gains (losses)(g) |
5,824 | 5,588 | 22,607 | 21,845 | 21,137 | 20,182 | 20,043 | |||||||||||||||||||||
Noninterest expense(h) |
3,280 | 3,899 | 12,464 | 12,790 | 11,527 | 10,807 | 10,600 | |||||||||||||||||||||
Efficiency ratio(h)/(g) |
56.3 | % | 69.8 | % | 55.1 | % | 58.5 | % | 54.5 | % | 53.5 | % | 52.9 | % |
(1) | Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements. |
(2) | Includes net losses on cash flow hedges included in accumulated other comprehensive income (loss) and other adjustments. |
(3) | Includes higher risk-weighting for unfunded loan commitments, investment securities, residential mortgages, MSRs and other adjustments. |
(4) | Primarily reflects higher risk-weighting for MSRs. |
(5) | Based on federal income tax rates of 21 percent for 2018 and 35 percent for 2017, 2016, 2015 and 2014, for those assets and liabilities whose income or expense is not included for federal income tax purposes. |
67
|
||||
68
|
||||||
69
|
||||
70
|
||||||
Report of Management
Responsibility for the financial statements and other information presented throughout this Annual Report rests with the management of U.S. Bancorp. The Company believes the consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States and present the substance of transactions based on the circumstances and managements best estimates and judgment.
In meeting its responsibilities for the reliability of the financial statements, management is responsible for establishing and maintaining an adequate system of internal control over financial reporting as defined by Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Companys system of internal control is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of publicly filed financial statements in accordance with accounting principles generally accepted in the United States.
To test compliance, the Company carries out an extensive audit program. This program includes a review for compliance with written policies and procedures and a comprehensive review of the adequacy and effectiveness of the system of internal control. Although control procedures are designed and tested, it must be recognized that there are limits inherent in all systems of internal control and, therefore, errors and irregularities may nevertheless occur. Also, estimates and judgments are required to assess and balance the relative cost and expected benefits of the controls. Projection of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Board of Directors of the Company has an Audit Committee composed of directors who are independent of U.S. Bancorp. The Audit Committee meets periodically with management, the internal auditors and the independent accountants to consider audit results and to discuss internal accounting control, auditing and financial reporting matters.
Management assessed the effectiveness of the Companys system of internal control over financial reporting as of December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in its Internal Control-Integrated Framework (2013 framework). Based on our assessment and those criteria, management believes the Company designed and maintained effective internal control over financial reporting as of December 31, 2018.
The Companys independent accountants, Ernst & Young LLP, have been engaged to render an independent professional opinion on the financial statements and issue an attestation report on the Companys internal control over financial reporting. Their opinion on the financial statements appearing on page 72 and their attestation on internal control over financial reporting appearing on page 73 are based on procedures conducted in accordance with auditing standards of the Public Company Accounting Oversight Board (United States).
71
|
||||
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of U.S. Bancorp
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of U.S. Bancorp (the Company) as of December 31, 2018 and 2017, and the related consolidated statements of income, comprehensive income, shareholders equity, and cash flows for each of the three years in the period ended December 31, 2018, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2018 and 2017, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Companys internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 21, 2019 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Companys auditor since 2003.
Minneapolis, Minnesota
February 21, 2019
72
|
||||||
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of U.S. Bancorp
Opinion on Internal Control over Financial Reporting
We have audited U.S. Bancorps internal control over financial reporting as of December 31, 2018, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, U.S. Bancorp (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2018 and 2017, and the related consolidated statements of income, comprehensive income, stockholders equity, and cash flows for each of the three years in the period ended December 31, 2018 and our report dated February 21, 2019 expressed an unqualified opinion thereon.
Basis for Opinion
The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Managements Assessment of U.S. Bancorps Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Minneapolis, Minnesota
February 21, 2019
73
|
||||
Consolidated Financial Statements and Notes Table of Contents
Consolidated Financial Statements |
||||
75 | ||||
76 | ||||
77 | ||||
78 | ||||
79 | ||||
Notes to Consolidated Financial Statements |
||||
80 | ||||
87 | ||||
88 | ||||
89 | ||||
91 | ||||
98 | ||||
Note 7 Accounting for Transfers and Servicing of Financial Assets and Variable Interest Entities |
98 | |||
99 | ||||
100 | ||||
101 | ||||
102 | ||||
102 | ||||
103 | ||||
104 | ||||
109 | ||||
109 | ||||
114 | ||||
116 | ||||
118 | ||||
Note 20 Netting Arrangements for Certain Financial Instruments and Securities Financing Activities |
123 | |||
125 | ||||
131 | ||||
135 | ||||
137 |
74
|
||||||
U.S. Bancorp
At December 31 (Dollars in Millions) | 2018 | 2017 | ||||||
Assets |
||||||||
Cash and due from banks |
$ | 21,453 | $ | 19,505 | ||||
Investment securities |
||||||||
Held-to-maturity (fair value $44,964 and $43,723, respectively) |
46,050 | 44,362 | ||||||
Available-for-sale ($2,057 and $689 pledged as collateral, respectively)(a) |
66,115 | 68,137 | ||||||
Loans held for sale (including $2,035 and $3,534 of mortgage loans carried at fair value, respectively) |
2,056 | 3,554 | ||||||
Loans |
||||||||
Commercial |
102,444 | 97,561 | ||||||
Commercial real estate |
39,539 | 40,463 | ||||||
Residential mortgages |
65,034 | 59,783 | ||||||
Credit card |
23,363 | 22,180 | ||||||
Other retail |
56,430 | 57,324 | ||||||
Covered loans |
| 3,121 | ||||||
|
|
|||||||
Total loans |
286,810 | 280,432 | ||||||
Less allowance for loan losses |
(3,973 | ) | (3,925 | ) | ||||
|
|
|||||||
Net loans |
282,837 | 276,507 | ||||||
Premises and equipment |
2,457 | 2,432 | ||||||
Goodwill |
9,369 | 9,434 | ||||||
Other intangible assets |
3,392 | 3,228 | ||||||
Other assets (including $843 and $238 of trading securities at fair value pledged as collateral, respectively)(a) |
33,645 | 34,881 | ||||||
|
|
|||||||
Total assets |
$ | 467,374 | $ | 462,040 | ||||
|
|
|||||||
Liabilities and Shareholders Equity |
||||||||
Deposits |
||||||||
Noninterest-bearing |
$ | 81,811 | $ | 87,557 | ||||
Interest-bearing(b) |
263,664 | 259,658 | ||||||
|
|
|||||||
Total deposits |
345,475 | 347,215 | ||||||
Short-term borrowings |
14,139 | 16,651 | ||||||
Long-term debt |
41,340 | 32,259 | ||||||
Other liabilities |
14,763 | 16,249 | ||||||
|
|
|||||||
Total liabilities |
415,717 | 412,374 | ||||||
Shareholders equity |
||||||||
Preferred stock |
5,984 | 5,419 | ||||||
Common stock, par value $0.01 a share authorized: 4,000,000,000 shares; issued: 2018 and 2017 2,125,725,742 shares |
21 | 21 | ||||||
Capital surplus |
8,469 | 8,464 | ||||||
Retained earnings |
59,065 | 54,142 | ||||||
Less cost of common stock in treasury: 2018 517,391,021 shares; 2017 470,080,231 shares |
(20,188 | ) | (17,602 | ) | ||||
Accumulated other comprehensive income (loss) |
(2,322 | ) | (1,404 | ) | ||||
|
|
|||||||
Total U.S. Bancorp shareholders equity |
51,029 | 49,040 | ||||||
Noncontrolling interests |
628 | 626 | ||||||
|
|
|||||||
Total equity |
51,657 | 49,666 | ||||||
|
|
|||||||
Total liabilities and equity |
$ | 467,374 | $ | 462,040 |
(a) | Includes only collateral pledged by the Company where counterparties have the right to sell or pledge the collateral. |
(b) | lncludes time deposits greater than $250,000 balances of $15.3 billion and $6.8 billion at December 31, 2018 and 2017, respectively. |
See Notes to Consolidated Financial Statements.
75
|
||||
U.S. Bancorp
Consolidated Statement of Income
Year Ended December 31 (Dollars and Shares in Millions, Except Per Share Data) | 2018 | 2017 | 2016 | |||||||||
Interest Income |
||||||||||||
Loans |
$ | 13,120 | $ | 11,788 | $ | 10,777 | ||||||
Loans held for sale |
165 | 144 | 154 | |||||||||
Investment securities |
2,616 | 2,232 | 2,078 | |||||||||
Other interest income |
272 | 182 | 125 | |||||||||
|
|
|||||||||||
Total interest income |
16,173 | 14,346 | 13,134 | |||||||||
Interest Expense |
||||||||||||
Deposits |
1,869 | 1,041 | 622 | |||||||||
Short-term borrowings |
378 | 141 | 92 | |||||||||
Long-term debt |
1,007 | 784 | 754 | |||||||||
|
|
|||||||||||
Total interest expense |
3,254 | 1,966 | 1,468 | |||||||||
|
|
|||||||||||
Net interest income |
12,919 | 12,380 | 11,666 | |||||||||
Provision for credit losses |
1,379 | 1,390 | 1,324 | |||||||||
|
|
|||||||||||
Net interest income after provision for credit losses |
11,540 | 10,990 | 10,342 | |||||||||
Noninterest Income |
||||||||||||
Credit and debit card revenue |
1,401 | 1,289 | 1,206 | |||||||||
Corporate payment products revenue |
644 | 575 | 541 | |||||||||
Merchant processing services |
1,531 | 1,486 | 1,498 | |||||||||
ATM processing services |
308 | 303 | 277 | |||||||||
Trust and investment management fees |
1,619 | 1,522 | 1,427 | |||||||||
Deposit service charges |
762 | 732 | 706 | |||||||||
Treasury management fees |
594 | 618 | 583 | |||||||||
Commercial products revenue |
895 | 954 | 971 | |||||||||
Mortgage banking revenue |
720 | 834 | 979 | |||||||||
Investment products fees |
188 | 173 | 169 | |||||||||
Securities gains (losses), net |
||||||||||||
Realized gains (losses), net |
30 | 57 | 27 | |||||||||
Total other-than-temporary impairment |
| | (6 | ) | ||||||||
Portion of other-than-temporary impairment recognized in other comprehensive income (loss) |
| | 1 | |||||||||
|
|
|||||||||||
Total securities gains (losses), net |
30 | 57 | 22 | |||||||||
Other |
910 | 774 | 911 | |||||||||
|
|
|||||||||||
Total noninterest income |
9,602 | 9,317 | 9,290 | |||||||||
Noninterest Expense |
||||||||||||
Compensation |
6,162 | 5,746 | 5,212 | |||||||||
Employee benefits |
1,231 | 1,134 | 1,008 | |||||||||
Net occupancy and equipment |
1,063 | 1,019 | 988 | |||||||||
Professional services |
407 | 419 | 502 | |||||||||
Marketing and business development |
429 | 542 | 435 | |||||||||
Technology and communications |
978 | 903 | 877 | |||||||||
Postage, printing and supplies |
324 | 323 | 311 | |||||||||
Other intangibles |
161 | 175 | 179 | |||||||||
Other |
1,709 | 2,529 | 2,015 | |||||||||
|
|
|||||||||||
Total noninterest expense |
12,464 | 12,790 | 11,527 | |||||||||
|
|
|||||||||||
Income before income taxes |
8,678 | 7,517 | 8,105 | |||||||||
Applicable income taxes |
1,554 | 1,264 | 2,161 | |||||||||
|
|
|||||||||||
Net income |
7,124 | 6,253 | 5,944 | |||||||||
Net (income) loss attributable to noncontrolling interests |
(28 | ) | (35 | ) | (56 | ) | ||||||
|
|
|||||||||||
Net income attributable to U.S. Bancorp |
$ | 7,096 | $ | 6,218 | $ | 5,888 | ||||||
|
|
|||||||||||
Net income applicable to U.S. Bancorp common shareholders |
$ | 6,784 | $ | 5,913 | $ | 5,589 | ||||||
|
|
|||||||||||
Earnings per common share |
$ | 4.15 | $ | 3.53 | $ | 3.25 | ||||||
Diluted earnings per common share |
$ | 4.14 | $ | 3.51 | $ | 3.24 | ||||||
Average common shares outstanding |
1,634 | 1,677 | 1,718 | |||||||||
Average diluted common shares outstanding |
1,638 | 1,683 | 1,724 |
See Notes to Consolidated Financial Statements.
76
|
||||||
U.S. Bancorp
Consolidated Statement of Comprehensive Income
Year Ended December 31 (Dollars in Millions) | 2018 | 2017 | 2016 | |||||||||
Net income |
$ | 7,124 | $ | 6,253 | $ | 5,944 | ||||||
Other Comprehensive Income (Loss) |
||||||||||||
Changes in unrealized gains and losses on investment securities available-for-sale |
(656 | ) | 178 | (858 | ) | |||||||
Other-than-temporary impairment not recognized in earnings on investment securities available-for-sale |
| | (1 | ) | ||||||||
Changes in unrealized gains and losses on derivative hedges |
39 | (5 | ) | 74 | ||||||||
Foreign currency translation |
3 | (2 | ) | (28 | ) | |||||||
Changes in unrealized gains and losses on retirement plans |
(302 | ) | (41 | ) | (255 | ) | ||||||
Reclassification to earnings of realized gains and losses |
93 | 77 | 247 | |||||||||
Income taxes related to other comprehensive income (loss) |
205 | (76 | ) | 305 | ||||||||
|
|
|||||||||||
Total other comprehensive income (loss) |
(618 | ) | 131 | (516 | ) | |||||||
|
|
|||||||||||
Comprehensive income |
6,506 | 6,384 | 5,428 | |||||||||
Comprehensive (income) loss attributable to noncontrolling interests |
(28 | ) | (35 | ) | (56 | ) | ||||||
|
|
|||||||||||
Comprehensive income attributable to U.S. Bancorp |
$ | 6,478 | $ | 6,349 | $ | 5,372 |
See Notes to Consolidated Financial Statements.
77
|
||||
U.S. Bancorp
Consolidated Statement of Shareholders Equity
U.S. Bancorp Shareholders | ||||||||||||||||||||||||||||||||||||||||
(Dollars and Shares in Millions, Except Per Share Data) |
Common Shares Outstanding |
Preferred Stock |
Common Stock |
Capital Surplus |
Retained Earnings |
Treasury Stock |
Accumulated Other Comprehensive Income (Loss) |
Total U.S. Bancorp Shareholders Equity |
Noncontrolling Interests |
Total Equity |
||||||||||||||||||||||||||||||
Balance December 31, 2015 |
1,745 | $ | 5,501 | $ | 21 | $ | 8,376 | $ | 46,377 | $ | (13,125 | ) | $ | (1,019 | ) | $ | 46,131 | $ | 686 | $ | 46,817 | |||||||||||||||||||
Net income (loss) |
5,888 | 5,888 | 56 | 5,944 | ||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) |
(516 | ) | (516 | ) | (516 | ) | ||||||||||||||||||||||||||||||||||
Preferred stock dividends(a) |
(281 | ) | (281 | ) | (281 | ) | ||||||||||||||||||||||||||||||||||
Common stock dividends ($1.07 per share) |
(1,842 | ) | (1,842 | ) | (1,842 | ) | ||||||||||||||||||||||||||||||||||
Issuance of common and treasury stock |
13 | (71 | ) | 445 | 374 | 374 | ||||||||||||||||||||||||||||||||||
Purchase of treasury stock |
(61 | ) | (2,600 | ) | (2,600 | ) | (2,600 | ) | ||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests |
| (56 | ) | (56 | ) | |||||||||||||||||||||||||||||||||||
Purchase of noncontrolling interests |
1 | 9 | 10 | (50 | ) | (40 | ) | |||||||||||||||||||||||||||||||||
Net other changes in noncontrolling interests |
| (1 | ) | (1 | ) | |||||||||||||||||||||||||||||||||||
Stock option and restricted stock grants |
134 | 134 | 134 | |||||||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||
Balance December 31, 2016 |
1,697 | $ | 5,501 | $ | 21 | $ | 8,440 | $ | 50,151 | $ | (15,280 | ) | $ | (1,535 | ) | $ | 47,298 | $ | 635 | $ | 47,933 | |||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||
Net income (loss) |
6,218 | 6,218 | 35 | 6,253 | ||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) |
131 | 131 | 131 | |||||||||||||||||||||||||||||||||||||
Preferred stock dividends(b) |
(267 | ) | (267 | ) | (267 | ) | ||||||||||||||||||||||||||||||||||
Common stock dividends ($1.16 per share) |
(1,950 | ) | (1,950 | ) | (1,950 | ) | ||||||||||||||||||||||||||||||||||
Issuance of preferred stock |
993 | 993 | 993 | |||||||||||||||||||||||||||||||||||||
Redemption of preferred stock |
(1,075 | ) | (10 | ) | (1,085 | ) | (1,085 | ) | ||||||||||||||||||||||||||||||||
Issuance of common and treasury stock |
8 | (138 | ) | 300 | 162 | 162 | ||||||||||||||||||||||||||||||||||
Purchase of treasury stock |
(49 | ) | (2,622 | ) | (2,622 | ) | (2,622 | ) | ||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests |
| (47 | ) | (47 | ) | |||||||||||||||||||||||||||||||||||
Net other changes in noncontrolling interests |
| 3 | 3 | |||||||||||||||||||||||||||||||||||||
Stock option and restricted stock grants |
162 | 162 | 162 | |||||||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||
Balance December 31, 2017 |
1,656 | $ | 5,419 | $ | 21 | $ | 8,464 | $ | 54,142 | $ | (17,602 | ) | $ | (1,404 | ) | $ | 49,040 | $ | 626 | $ | 49,666 | |||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||
Changes in accounting principles(c) |
299 | (300 | ) | (1 | ) | (1 | ) | |||||||||||||||||||||||||||||||||
Net income (loss) |
7,096 | 7,096 | 28 | 7,124 | ||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) |
(618 | ) | (618 | ) | (618 | ) | ||||||||||||||||||||||||||||||||||
Preferred stock dividends(d) |
(282 | ) | (282 | ) | (282 | ) | ||||||||||||||||||||||||||||||||||
Common stock dividends ($1.34 per share) |
(2,190 | ) | (2,190 | ) | (2,190 | ) | ||||||||||||||||||||||||||||||||||
Issuance of preferred stock |
565 | 565 | 565 | |||||||||||||||||||||||||||||||||||||
Issuance of common and treasury stock |
6 | (167 | ) | 258 | 91 | 91 | ||||||||||||||||||||||||||||||||||
Purchase of treasury stock |
(54 | ) | (2,844 | ) | (2,844 | ) | (2,844 | ) | ||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests |
| (31 | ) | (31 | ) | |||||||||||||||||||||||||||||||||||
Net other changes in noncontrolling interests |
| 5 | 5 | |||||||||||||||||||||||||||||||||||||
Stock option and restricted stock grants |
172 | 172 | 172 | |||||||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||
Balance December 31, 2018 |
1,608 | $ | 5,984 | $ | 21 | $ | 8,469 | $ | 59,065 | $ | (20,188 | ) | $ | (2,322 | ) | $ | 51,029 | $ | 628 | $ | 51,657 |
(a) | Reflects dividends declared per share on the Companys Series A, Series B, Series F, Series G, Series H and Series I Non-Cumulative Perpetual Preferred Stock of $3,558.382, $889.58, $1,625.00, $1,500.00, $1,287.52 and $1,281.25, respectively. |
(b) | Reflects dividends declared per share on the Companys Series A, Series B, Series F, Series G, Series H, Series I and Series J Non-Cumulative Perpetual Preferred Stock of $3,548.61, $887.15, $1,625.00, $375.00, $1,287.52, $1,281.25 and $890.69, respectively. |
(c) | Reflects the adoption of new accounting guidance on January 1, 2018 to reclassify the impact of the reduced federal statutory rate for corporations included in 2017 tax reform legislation from accumulated other comprehensive income to retained earnings. |
(d) | Reflects dividends declared per share on the Companys Series A, Series B, Series F, Series H, Series I, Series J and Series K Non-Cumulative Perpetual Preferred Stock of $3,548.61, $887.15, $1,625.00, $1,287.52, $1,281.25, $1,325.00 and $576.74, respectively. |
See Notes to Consolidated Financial Statements.
78
|
||||||
U.S. Bancorp
Consolidated Statement of Cash Flows
Year Ended December 31 (Dollars in Millions) | 2018 | 2017 | 2016 | |||||||||
Operating Activities |
||||||||||||
Net income attributable to U.S. Bancorp |
$ | 7,096 | $ | 6,218 | $ | 5,888 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities |
||||||||||||
Provision for credit losses |
1,379 | 1,390 | 1,324 | |||||||||
Depreciation and amortization of premises and equipment |
306 | 293 | 291 | |||||||||
Amortization of intangibles |
161 | 175 | 179 | |||||||||
(Gain) loss on sale of loans held for sale |
(394 | ) | (772 | ) | (954 | ) | ||||||
(Gain) loss on sale of securities and other assets |
(510 | ) | (502 | ) | (617 | ) | ||||||
Loans originated for sale in the secondary market, net of repayments |
(29,214 | ) | (35,743 | ) | (42,867 | ) | ||||||
Proceeds from sales of loans held for sale |
30,730 | 37,462 | 41,605 | |||||||||
Other, net |
1,010 | (2,049 | ) | 487 | ||||||||
|
|
|||||||||||
Net cash provided by operating activities |
10,564 | 6,472 | 5,336 | |||||||||
Investing Activities |
||||||||||||
Proceeds from sales of available-for-sale investment securities |
1,400 | 3,084 | 9,877 | |||||||||
Proceeds from maturities of held-to-maturity investment securities |
6,619 | 8,306 | 9,733 | |||||||||
Proceeds from maturities of available-for-sale investment securities |
11,411 | 13,042 | 14,625 | |||||||||
Purchases of held-to-maturity investment securities |
(9,793 | ) | (9,712 | ) | (9,171 | ) | ||||||
Purchases of available-for-sale investment securities |
(10,077 | ) | (17,860 | ) | (29,684 | ) | ||||||
Net increase in loans outstanding |
(9,234 | ) | (8,054 | ) | (13,383 | ) | ||||||
Proceeds from sales of loans |
4,862 | 2,458 | 2,604 | |||||||||
Purchases of loans |
(3,694 | ) | (3,040 | ) | (2,881 | ) | ||||||
Other, net |
(471 | ) | (350 | ) | 322 | |||||||
|
|
|||||||||||
Net cash used in investing activities |
(8,977 | ) | (12,126 | ) | (17,958 | ) | ||||||
Financing Activities |
||||||||||||
Net (decrease) increase in deposits |
(1,740 | ) | 12,625 | 34,192 | ||||||||
Net (decrease) increase in short-term borrowings |
(2,512 | ) | 2,688 | (13,914 | ) | |||||||
Proceeds from issuance of long-term debt |
12,078 | 9,434 | 10,715 | |||||||||
Principal payments or redemption of long-term debt |
(2,928 | ) | (10,517 | ) | (9,495 | ) | ||||||
Proceeds from issuance of preferred stock |
565 | 993 | | |||||||||
Proceeds from issuance of common stock |
86 | 159 | 355 | |||||||||
Repurchase of preferred stock |
| (1,085 | ) | | ||||||||
Repurchase of common stock |
(2,822 | ) | (2,631 | ) | (2,556 | ) | ||||||
Cash dividends paid on preferred stock |
(274 | ) | (284 | ) | (267 | ) | ||||||
Cash dividends paid on common stock |
(2,092 | ) | (1,928 | ) | (1,810 | ) | ||||||
Purchase of noncontrolling interests |
| | (40 | ) | ||||||||
|
|
|||||||||||
Net cash provided by financing activities |
361 | 9,454 | 17,180 | |||||||||
|
|
|||||||||||
Change in cash and due from banks |
1,948 | 3,800 | 4,558 | |||||||||
Cash and due from banks at beginning of period |
19,505 | 15,705 | 11,147 | |||||||||
|
|
|||||||||||
Cash and due from banks at end of period |
$ | 21,453 | $ | 19,505 | $ | 15,705 | ||||||
|
|
|||||||||||
Supplemental Cash Flow Disclosures |
||||||||||||
Cash paid for income taxes |
$ | 365 | $ | 555 | $ | 595 | ||||||
Cash paid for interest |
3,056 | 2,086 | 1,591 | |||||||||
Net noncash transfers to foreclosed property |
115 | 163 | 156 |
See Notes to Consolidated Financial Statements.
79
|
||||
81
|
||||
82
|
||||||
83
|
||||
84
|
||||||
85
|
||||
86
|
||||||
87
|
||||
88
|
||||||
|
Investment Securities
|
The Companys held-to-maturity investment securities are carried at historical cost, adjusted for amortization of premiums and accretion of discounts and credit-related other-than-temporary impairment. The Companys available-for-sale investment securities are carried at fair value with unrealized net gains or losses reported within accumulated other comprehensive income (loss) in shareholders equity.
The amortized cost, other-than-temporary impairment recorded in other comprehensive income (loss), gross unrealized holding gains and losses, and fair value of held-to-maturity and available-for-sale investment securities at December 31 were as follows:
2018 | 2017 | |||||||||||||||||||||||||||||||||||||||
Unrealized Losses | Unrealized Losses | |||||||||||||||||||||||||||||||||||||||
(Dollars in Millions) | Amortized Cost |
Unrealized Gains |
Other-than- Temporary(a) |
Other(b) | Fair Value | Amortized Cost |
Unrealized Gains |
Other-than- Temporary(a) |
Other(b) | Fair Value | ||||||||||||||||||||||||||||||
Held-to-maturity |
||||||||||||||||||||||||||||||||||||||||
U.S. Treasury and agencies |
$ | 5,102 | $ | 2 | $ | | $ | (143 | ) | $ | 4,961 | $ | 5,181 | $ | 5 | $ | | $ | (120 | ) | $ | 5,066 | ||||||||||||||||||
Residential agency mortgage-backed securities |
40,920 | 45 | | (994 | ) | 39,971 | 39,150 | 48 | | (579 | ) | 38,619 | ||||||||||||||||||||||||||||
Asset-backed securities |
||||||||||||||||||||||||||||||||||||||||
Collateralized debt obligations/Collateralized loan obligations |
| 1 | | | 1 | | 4 | | | 4 | ||||||||||||||||||||||||||||||
Other |
5 | 2 | | | 7 | 6 | 2 | | | 8 | ||||||||||||||||||||||||||||||
Obligations of state and political subdivisions |
6 | 1 | | | 7 | 6 | 1 | | | 7 | ||||||||||||||||||||||||||||||
Obligations of foreign governments |
9 | | | | 9 | 7 | | | | 7 | ||||||||||||||||||||||||||||||
Other |
8 | | | | 8 | 12 | | | | 12 | ||||||||||||||||||||||||||||||
Total held-to-maturity |
$ | 46,050 | $ | 51 | $ | | $ | (1,137 | ) | $ | 44,964 | $ | 44,362 | $ | 60 | $ | | $ | (699 | ) | $ | 43,723 | ||||||||||||||||||
Available-for-sale |
||||||||||||||||||||||||||||||||||||||||
U.S. Treasury and agencies |
$ | 19,604 | $ | 11 | $ | | $ | (358 | ) | $ | 19,257 | $ | 23,586 | $ | 3 | $ | | $ | (288 | ) | $ | 23,301 | ||||||||||||||||||
Mortgage-backed securities |
||||||||||||||||||||||||||||||||||||||||
Residential agency |
40,542 | 120 | | (910 | ) | 39,752 | 38,450 | 152 | | (571 | ) | 38,031 | ||||||||||||||||||||||||||||
Commercial agency |
2 | | | | 2 | 6 | | | | 6 | ||||||||||||||||||||||||||||||
Other asset-backed securities |
397 | 6 | | | 403 | 413 | 6 | | | 419 | ||||||||||||||||||||||||||||||
Obligations of state and political subdivisions |
6,836 | 37 | | (172 | ) | 6,701 | 6,240 | 147 | | (29 | ) | 6,358 | ||||||||||||||||||||||||||||
Other |
| | | | | 22 | | | | 22 | ||||||||||||||||||||||||||||||
Total available-for-sale |
$ | 67,381 | $ | 174 | $ | | $ | (1,440 | ) | $ | 66,115 | $ | 68,717 | $ | 308 | $ | | $ | (888 | ) | $ | 68,137 |
(a) | Represents impairment not related to credit for those investment securities that have been determined to be other-than-temporarily impaired. |
(b) | Represents unrealized losses on investment securities that have not been determined to be other-than-temporarily impaired. |
The following table provides information about the amount of interest income from taxable and non-taxable investment securities:
Year Ended December 31 (Dollars in Millions) | 2018 | 2017 | 2016 | |||||||||
Taxable |
$ | 2,396 | $ | 2,043 | $ | 1,878 | ||||||
Non-taxable |
220 | 189 | 200 | |||||||||
Total interest income from investment securities |
$ | 2,616 | $ | 2,232 | $ | 2,078 |
89
|
||||
The following table provides information about the amount of gross gains and losses realized through the sales of available-for-sale investment securities:
Year Ended December 31 (Dollars in Millions) | 2018 | 2017 | 2016 | |||||||||
Realized gains |
$ | 30 | $ | 75 | $ | 93 | ||||||
Realized losses |
| (18 | ) | (66 | ) | |||||||
Net realized gains (losses) |
$ | 30 | $ | 57 | $ | 27 | ||||||
Income tax (benefit) on net realized gains (losses) |
$ | 7 | $ | 22 | $ | 10 |
At December 31, 2018, certain investment securities had a fair value below amortized cost. The following table shows the gross unrealized losses and fair value of the Companys investment securities with unrealized losses, aggregated by investment category and length of time the individual investment securities have been in continuous unrealized loss positions, at December 31, 2018:
Less Than 12 Months | 12 Months or Greater | Total | ||||||||||||||||||||||
(Dollars in Millions) | Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
||||||||||||||||||
Held-to-maturity |
||||||||||||||||||||||||
U.S. Treasury and agencies |
$ | 182 | $ | (1 | ) | $ | 4,639 | $ | (142 | ) | $ | 4,821 | $ | (143 | ) | |||||||||
Residential agency mortgage-backed securities |
7,878 | (83 | ) | 25,570 | (911 | ) | 33,448 | (994 | ) | |||||||||||||||
Other asset-backed securities |
| | 2 | | 2 | | ||||||||||||||||||
Obligations of foreign governments |
1 | | | | 1 | | ||||||||||||||||||
Other |
| | 8 | | 8 | | ||||||||||||||||||
Total held-to-maturity |
$ | 8,061 | $ | (84 | ) | $ | 30,219 | $ | (1,053 | ) | $ | 38,280 | $ | (1,137 | ) | |||||||||
Available-for-sale |
||||||||||||||||||||||||
U.S. Treasury and agencies |
$ | 118 | $ | | $ | 17,828 | $ | (358 | ) | $ | 17,946 | $ | (358 | ) | ||||||||||
Residential agency mortgage-backed securities |
6,269 | (45 | ) | 23,694 | (865 | ) | 29,963 | (910 | ) | |||||||||||||||
Commercial agency mortgage-backed securities |
2 | | | | 2 | | ||||||||||||||||||
Obligations of state and political subdivisions |
2,623 | (60 | ) | 1,363 | (112 | ) | 3,986 | (172 | ) | |||||||||||||||
Total available-for-sale |
$ | 9,012 | $ | (105 | ) | $ | 42,885 | $ | (1,335 | ) | $ | 51,897 | $ | (1,440 | ) |
90
|
||||||
|
Loans and Allowance for Credit Losses |
The composition of the loan portfolio at December 31, disaggregated by class and underlying specific portfolio type, was as follows:
(Dollars in Millions) | 2018 | 2017 | ||||||
Commercial |
||||||||
Commercial |
$ | 96,849 | $ | 91,958 | ||||
Lease financing |
5,595 | 5,603 | ||||||
|
|
|||||||
Total commercial |
102,444 | 97,561 | ||||||
Commercial Real Estate |
||||||||
Commercial mortgages |
28,596 | 29,367 | ||||||
Construction and development |
10,943 | 11,096 | ||||||
|
|
|||||||
Total commercial real estate |
39,539 | 40,463 | ||||||
Residential Mortgages |
||||||||
Residential mortgages |
53,034 | 46,685 | ||||||
Home equity loans, first liens |
12,000 | 13,098 | ||||||
|
|
|||||||
Total residential mortgages |
65,034 | 59,783 | ||||||
Credit Card |
23,363 | 22,180 | ||||||
Other Retail |
||||||||
Retail leasing |
8,546 | 7,988 | ||||||
Home equity and second mortgages |
16,122 | 16,327 | ||||||
Revolving credit |
3,088 | 3,183 | ||||||
Installment |
9,676 | 8,989 | ||||||
Automobile |
18,719 | 18,934 | ||||||
Student(a) |
279 | 1,903 | ||||||
|
|
|||||||
Total other retail |
56,430 | 57,324 | ||||||
|
|
|||||||
Covered Loans(b) |
| 3,121 | ||||||
|
|
|||||||
Total loans |
$ | 286,810 | $ | 280,432 |
(a) | During 2018, the Company sold all of its federally guaranteed student loans. |
(b) | During 2018, the majority of the Companys covered loans were sold and the loss share coverage expired. As of December 31, 2018, any remaining loan balances were reclassified to be included in their respective portfolio category. |
91
|
||||
Activity in the allowance for credit losses by portfolio class was as follows:
(Dollars in Millions) | Commercial | Commercial Real Estate |
Residential Mortgages |
Credit Card |
Other Retail |
Covered Loans |
Total Loans |
|||||||||||||||||||||
Balance at December 31, 2017 |
$ | 1,372 | $ | 831 | $ | 449 | $ | 1,056 | $ | 678 | $ | 31 | $ | 4,417 | ||||||||||||||
Add |
||||||||||||||||||||||||||||
Provision for credit losses |
333 | (50 | ) | 23 | 892 | 211 | (30 | ) | 1,379 | |||||||||||||||||||
Deduct |
||||||||||||||||||||||||||||
Loans charged-off |
350 | 9 | 48 | 970 | 383 | | 1,760 | |||||||||||||||||||||
Less recoveries of loans charged-off |
(99 | ) | (28 | ) | (31 | ) | (124 | ) | (124 | ) | | (406 | ) | |||||||||||||||
|
|
|||||||||||||||||||||||||||
Net loans charged-off |
251 | (19 | ) | 17 | 846 | 259 | | 1,354 | ||||||||||||||||||||
Other changes(a) |
| | | | | (1 | ) | (1 | ) | |||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Balance at December 31, 2018 |
$ | 1,454 | $ | 800 | $ | 455 | $ | 1,102 | $ | 630 | $ | | $ | 4,441 | ||||||||||||||
|
|
|||||||||||||||||||||||||||
Balance at December 31, 2016 |
$ | 1,450 | $ | 812 | $ | 510 | $ | 934 | $ | 617 | $ | 34 | $ | 4,357 | ||||||||||||||
Add |
||||||||||||||||||||||||||||
Provision for credit losses |
186 | 19 | (24 | ) | 908 | 304 | (3 | ) | 1,390 | |||||||||||||||||||
Deduct |
||||||||||||||||||||||||||||
Loans charged-off |
414 | 30 | 65 | 887 | 355 | | 1,751 | |||||||||||||||||||||
Less recoveries of loans charged-off |
(150 | ) | (30 | ) | (28 | ) | (101 | ) | (112 | ) | | (421 | ) | |||||||||||||||
|
|
|||||||||||||||||||||||||||
Net loans charged-off |
264 | | 37 | 786 | 243 | | 1,330 | |||||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Balance at December 31, 2017 |
$ | 1,372 | $ | 831 | $ | 449 | $ | 1,056 | $ | 678 | $ | 31 | $ | 4,417 | ||||||||||||||
|
|
|||||||||||||||||||||||||||
Balance at December 31, 2015 |
$ | 1,287 | $ | 724 | $ | 631 | $ | 883 | $ | 743 | $ | 38 | $ | 4,306 | ||||||||||||||
Add |
||||||||||||||||||||||||||||
Provision for credit losses |
488 | 75 | (61 | ) | 728 | 95 | (1 | ) | 1,324 | |||||||||||||||||||
Deduct |
||||||||||||||||||||||||||||
Loans charged-off |
417 | 22 | 85 | 759 | 332 | | 1,615 | |||||||||||||||||||||
Less recoveries of loans charged-off |
(92 | ) | (35 | ) | (25 | ) | (83 | ) | (111 | ) | | (346 | ) | |||||||||||||||
|
|
|||||||||||||||||||||||||||
Net loans charged-off |
325 | (13 | ) | 60 | 676 | 221 | | 1,269 | ||||||||||||||||||||
Other changes(a) |
| | | (1 | ) | | (3 | ) | (4 | ) | ||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Balance at December 31, 2016 |
$ | 1,450 | $ | 812 | $ | 510 | $ | 934 | $ | 617 | $ | 34 | $ | 4,357 |
(a) | Includes net changes in credit losses to be reimbursed by the FDIC and reductions in the allowance for covered loans where the reversal of a previously recorded allowance was offset by an associated decrease in the indemnification asset, and the impact of any loan sales. |
Additional detail of the allowance for credit losses by portfolio class was as follows:
(Dollars in Millions) | Commercial | Commercial Real Estate |
Residential Mortgages |
Credit Card |
Other Retail |
Covered Loans |
Total Loans |
|||||||||||||||||||||
Allowance Balance at December 31, 2018 Related to |
||||||||||||||||||||||||||||
Loans individually evaluated for impairment(a) |
$ | 16 | $ | 8 | $ | | $ | | $ | | $ | | $ | 24 | ||||||||||||||
TDRs collectively evaluated for impairment |
15 | 3 | 126 | 69 | 12 | | 225 | |||||||||||||||||||||
Other loans collectively evaluated for impairment |
1,423 | 788 | 314 | 1,033 | 618 | | 4,176 | |||||||||||||||||||||
Loans acquired with deteriorated credit quality |
| 1 | 15 | | | | 16 | |||||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Total allowance for credit losses |
$ | 1,454 | $ | 800 | $ | 455 | $ | 1,102 | $ | 630 | $ | | $ | 4,441 | ||||||||||||||
|
|
|||||||||||||||||||||||||||
Allowance Balance at December 31, 2017 Related to |
||||||||||||||||||||||||||||
Loans individually evaluated for impairment(a) |
$ | 23 | $ | 4 | $ | | $ | | $ | | $ | | $ | 27 | ||||||||||||||
TDRs collectively evaluated for impairment |
14 | 4 | 139 | 60 | 19 | 1 | 237 | |||||||||||||||||||||
Other loans collectively evaluated for impairment |
1,335 | 818 | 310 | 996 | 659 | | 4,118 | |||||||||||||||||||||
Loans acquired with deteriorated credit quality |
| 5 | | | | 30 | 35 | |||||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Total allowance for credit losses |
$ | 1,372 | $ | 831 | $ | 449 | $ | 1,056 | $ | 678 | $ | 31 | $ | 4,417 |
(a) | Represents the allowance for credit losses related to loans greater than $5 million classified as nonperforming or TDRs. |
92
|
||||||
Additional detail of loan balances by portfolio class was as follows:
(Dollars in Millions) | Commercial | Commercial Real Estate |
Residential Mortgages |
Credit Card |
Other Retail |
Covered Loans(b) |
Total Loans | |||||||||||||||||||||
December 31, 2018 |
||||||||||||||||||||||||||||
Loans individually evaluated for impairment(a) |
$ | 262 | $ | 86 | $ | | $ | | $ | | $ | | $ | 348 | ||||||||||||||
TDRs collectively evaluated for impairment |
151 | 129 | 3,252 | 245 | 183 | | 3,960 | |||||||||||||||||||||
Other loans collectively evaluated for impairment |
102,031 | 39,297 | 61,465 | 23,118 | 56,247 | | 282,158 | |||||||||||||||||||||
Loans acquired with deteriorated credit quality |
| 27 | 317 | | | | 344 | |||||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Total loans |
$ | 102,444 | $ | 39,539 | $ | 65,034 | $ | 23,363 | $ | 56,430 | $ | | $ | 286,810 | ||||||||||||||
|
|
|||||||||||||||||||||||||||
December 31, 2017 |
||||||||||||||||||||||||||||
Loans individually evaluated for impairment(a) |
$ | 337 | $ | 71 | $ | | $ | | $ | | $ | | $ | 408 | ||||||||||||||
TDRs collectively evaluated for impairment |
148 | 145 | 3,524 | 230 | 186 | 36 | 4,269 | |||||||||||||||||||||
Other loans collectively evaluated for impairment |
97,076 | 40,174 | 56,258 | 21,950 | 57,138 | 1,073 | 273,669 | |||||||||||||||||||||
Loans acquired with deteriorated credit quality |
| 73 | 1 | | | 2,012 | 2,086 | |||||||||||||||||||||
|
|
|||||||||||||||||||||||||||
Total loans |
$ | 97,561 | $ | 40,463 | $ | 59,783 | $ | 22,180 | $ | 57,324 | $ | 3,121 | $ | 280,432 |
(a) | Represents loans greater than $5 million classified as nonperforming or TDRs. |
(b) | Includes expected reimbursements from the FDIC under loss sharing agreements. |
The following table provides a summary of loans by portfolio class, including the delinquency status of those that continue to accrue interest, and those that are nonperforming:
Accruing | ||||||||||||||||||||
(Dollars in Millions) | Current | 30-89 Days Past Due |
90 Days or More Past Due |
Nonperforming | Total | |||||||||||||||
December 31, 2018 |
||||||||||||||||||||
Commercial |
$ | 101,844 | $ | 322 | $ | 69 | $ | 209 | $ | 102,444 | ||||||||||
Commercial real estate |
39,354 | 70 | | 115 | 39,539 | |||||||||||||||
Residential mortgages(a) |
64,443 | 181 | 114 | 296 | 65,034 | |||||||||||||||
Credit card |
22,746 | 324 | 293 | | 23,363 | |||||||||||||||
Other retail |
55,722 | 403 | 108 | 197 | 56,430 | |||||||||||||||
|
|
|||||||||||||||||||
Total loans |
$ | 284,109 | $ | 1,300 | $ | 584 | $ | 817 | $ | 286,810 | ||||||||||
|
|
|||||||||||||||||||
December 31, 2017 |
||||||||||||||||||||
Commercial |
$ | 97,005 | $ | 250 | $ | 57 | $ | 249 | $ | 97,561 | ||||||||||
Commercial real estate |
40,279 | 36 | 6 | 142 | 40,463 | |||||||||||||||
Residential mortgages(a) |
59,013 | 198 | 130 | 442 | 59,783 | |||||||||||||||
Credit card |
21,593 | 302 | 284 | 1 | 22,180 | |||||||||||||||
Other retail |
56,685 | 376 | 95 | 168 | 57,324 | |||||||||||||||
Covered loans |
2,917 | 50 | 148 | 6 | 3,121 | |||||||||||||||
|
|
|||||||||||||||||||
Total loans |
$ | 277,492 | $ | 1,212 | $ | 720 | $ | 1,008 | $ | 280,432 |
(a) | At December 31, 2018, $430 million of loans 3089 days past due and $1.7 billion of loans 90 days or more past due purchased from Government National Mortgage Association (GNMA) mortgage pools whose repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs, were classified as current, compared with $385 million and $1.9 billion at December 31, 2017, respectively. |
93
|
||||
The following table provides a summary of loans by portfolio class and the Companys internal credit quality rating:
Criticized | ||||||||||||||||||||
(Dollars in Millions) | Pass | Special Mention |
Classified(a) | Total Criticized |
Total | |||||||||||||||
December 31, 2018 |
||||||||||||||||||||
Commercial |
$ | 100,014 | $ | 1,149 | $ | 1,281 | $ | 2,430 | $ | 102,444 | ||||||||||
Commercial real estate |
38,473 | 584 | 482 | 1,066 | 39,539 | |||||||||||||||
Residential mortgages(b) |
64,570 | 1 | 463 | 464 | 65,034 | |||||||||||||||
Credit card |
23,070 | | 293 | 293 | 23,363 | |||||||||||||||
Other retail |
56,101 | 6 | 323 | 329 | 56,430 | |||||||||||||||
|
|
|||||||||||||||||||
Total loans |
$ | 282,228 | $ | 1,740 | $ | 2,842 | $ | 4,582 | $ | 286,810 | ||||||||||
|
|
|||||||||||||||||||
Total outstanding commitments |
$ | 600,407 | $ | 2,801 | $ | 3,448 | $ | 6,249 | $ | 606,656 | ||||||||||
|
|
|||||||||||||||||||
December 31, 2017 |
||||||||||||||||||||
Commercial |
$ | 95,297 | $ | 1,130 | $ | 1,134 | $ | 2,264 | $ | 97,561 | ||||||||||
Commercial real estate |
39,162 | 648 | 653 | 1,301 | 40,463 | |||||||||||||||
Residential mortgages(b) |
59,141 | 16 | 626 | 642 | 59,783 | |||||||||||||||
Credit card |
21,895 | | 285 | 285 | 22,180 | |||||||||||||||
Other retail |
57,009 | 6 | 309 | 315 | 57,324 | |||||||||||||||
Covered loans |
3,072 | | 49 | 49 | 3,121 | |||||||||||||||
|
|
|||||||||||||||||||
Total loans |
$ | 275,576 | $ | 1,800 | $ | 3,056 | $ | 4,856 | $ | 280,432 | ||||||||||
|
|
|||||||||||||||||||
Total outstanding commitments |
$ | 584,072 | $ | 3,142 | $ | 3,987 | $ | 7,129 | $ | 591,201 |
(a) | Classified rating on consumer loans primarily based on delinquency status. |
(b) | At December 31, 2018, $1.7 billion of GNMA loans 90 days or more past due and $1.6 billion of restructured GNMA loans whose repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs were classified with a pass rating, compared with $1.9 billion and $1.7 billion at December 31, 2017, respectively. |
For all loan classes, a loan is considered to be impaired when, based on current events or information, it is probable the Company will be unable to collect all amounts due per the contractual terms of the loan agreement. A summary of impaired loans, which include all nonaccrual and TDR loans, by portfolio class was as follows:
(Dollars in Millions) | Period-end Recorded Investment(a) |
Unpaid Principal Balance |
Valuation Allowance |
Commitments to Lend Additional Funds |
||||||||||||
December 31, 2018 |
||||||||||||||||
Commercial |
$ | 467 | $ | 1,006 | $ | 32 | $ | 106 | ||||||||
Commercial real estate |
279 | 511 | 12 | 2 | ||||||||||||
Residential mortgages |
1,709 | 1,879 | 86 | | ||||||||||||
Credit card |
245 | 245 | 69 | | ||||||||||||
Other retail |
335 | 418 | 14 | 5 | ||||||||||||
|
|
|||||||||||||||
Total loans, excluding loans purchased from GNMA mortgage pools |
3,035 | 4,059 | 213 | 113 | ||||||||||||
Loans purchased from GNMA mortgage pools |
1,639 | 1,639 | 41 | | ||||||||||||
|
|
|||||||||||||||
Total |
$ | 4,674 | $ | 5,698 | $ | 254 | $ | 113 | ||||||||
|
|
|||||||||||||||
December 31, 2017 |
||||||||||||||||
Commercial |
$ | 550 | $ | 915 | $ | 44 | $ | 199 | ||||||||
Commercial real estate |
280 | 596 | 11 | | ||||||||||||
Residential mortgages |
1,946 | 2,339 | 116 | 1 | ||||||||||||
Credit card |
230 | 230 | 60 | | ||||||||||||
Other retail |
302 | 400 | 22 | 4 | ||||||||||||
Covered loans |
38 | 44 | 1 | | ||||||||||||
|
|
|||||||||||||||
Total loans, excluding loans purchased from GNMA mortgage pools |
3,346 | 4,524 | 254 | 204 | ||||||||||||
Loans purchased from GNMA mortgage pools |
1,681 | 1,681 | 25 | | ||||||||||||
|
|
|||||||||||||||
Total |
$ | 5,027 | $ | 6,205 | $ | 279 | $ | 204 |
(a) | Substantially all loans classified as impaired at December 31, 2018 and 2017, had an associated allowance for credit losses. The total amount of interest income recognized during 2018 on loans classified as impaired at December 31, 2018, excluding those acquired with deteriorated credit quality, was $164 million, compared to what would have been recognized at the original contractual terms of the loans of $226 million. |
94
|
||||||
Additional information on impaired loans for the years ended December 31 follows:
(Dollars in Millions) | Average Recorded Investment |
Interest Income Recognized |
||||||
2018 |
||||||||
Commercial |
$ | 497 | $ | 8 | ||||
Commercial real estate |
273 | 13 | ||||||
Residential mortgages |
1,817 | 76 | ||||||
Credit card |
236 | 3 | ||||||
Other retail |
309 | 16 | ||||||
Covered loans |
25 | 1 | ||||||
|
|
|||||||
Total loans, excluding loans purchased from GNMA mortgage pools |
3,157 | 117 | ||||||
Loans purchased from GNMA mortgage pools |
1,640 | 47 | ||||||
|
|
|||||||
Total |
$ | 4,797 | $ | 164 | ||||
|
|
|||||||
2017 |
||||||||
Commercial |
$ | 683 | $ | 7 | ||||
Commercial real estate |
273 | 11 | ||||||
Residential mortgages |
2,135 | 103 | ||||||
Credit card |
229 | 3 | ||||||
Other retail |
287 | 14 | ||||||
Covered loans |
37 | 1 | ||||||
|
|
|||||||
Total loans, excluding loans purchased from GNMA mortgage pools |
3,644 | 139 | ||||||
Loans purchased from GNMA mortgage pools |
1,672 | 65 | ||||||
|
|
|||||||
Total |
$ | 5,316 | $ | 204 | ||||
|
|
|||||||
2016 |
||||||||
Commercial |
$ | 799 | $ | 9 | ||||
Commercial real estate |
324 | 15 | ||||||
Residential mortgages |
2,422 | 124 | ||||||
Credit card |
214 | 4 | ||||||
Other retail |
293 | 13 | ||||||
Covered loans |
38 | 1 | ||||||
|
|
|||||||
Total loans, excluding loans purchased from GNMA mortgage pools |
4,090 | 166 | ||||||
Loans purchased from GNMA mortgage pools |
1,620 | 71 | ||||||
|
|
|||||||
Total |
$ | 5,710 | $ | 237 |
95
|
||||
Troubled Debt Restructurings In certain circumstances, the Company may modify the terms of a loan to maximize the collection of amounts due when a borrower is experiencing financial difficulties or is expected to experience difficulties in the near-term. The following table provides a summary of loans modified as TDRs for the years ended December 31, by portfolio class:
(Dollars in Millions) | Number of Loans |
Pre-Modification Balance |
Post-Modification Balance |
|||||||||
2018 |
||||||||||||
Commercial |
2,824 | $ | 336 | $ | 311 | |||||||
Commercial real estate |
127 | 168 | 169 | |||||||||
Residential mortgages |
526 | 73 | 69 | |||||||||
Credit card |
33,318 | 169 | 171 | |||||||||
Other retail |
2,462 | 58 | 55 | |||||||||
Covered loans |
3 | 1 | 1 | |||||||||
|
|
|||||||||||
Total loans, excluding loans purchased from GNMA mortgage pools |
39,260 | 805 | 776 | |||||||||
Loans purchased from GNMA mortgage pools |
6,268 | 821 | 803 | |||||||||
|
|
|||||||||||
Total loans |
45,528 | $ | 1,626 | $ | 1,579 | |||||||
|
|
|||||||||||
2017 |
||||||||||||
Commercial |
2,758 | $ | 380 | $ | 328 | |||||||
Commercial real estate |
128 | 82 | 78 | |||||||||
Residential mortgages |
800 | 90 | 88 | |||||||||
Credit card |
33,615 | 161 | 162 | |||||||||
Other retail |
3,881 | 79 | 68 | |||||||||
Covered loans |
11 | 2 | 2 | |||||||||
|
|
|||||||||||
Total loans, excluding loans purchased from GNMA mortgage pools |
41,193 | 794 | 726 | |||||||||
Loans purchased from GNMA mortgage pools |
6,791 | 881 | 867 | |||||||||
|
|
|||||||||||
Total loans |
47,984 | $ | 1,675 | $ | 1,593 | |||||||
|
|
|||||||||||
2016 |
||||||||||||
Commercial |
2,352 | $ | 844 | $ | 699 | |||||||
Commercial real estate |
102 | 259 | 256 | |||||||||
Residential mortgages |
1,576 | 168 | 178 | |||||||||
Credit card |
31,394 | 151 | 153 | |||||||||
Other retail |
2,235 | 41 | 40 | |||||||||
Covered loans |
39 | 6 | 7 | |||||||||
|
|
|||||||||||
Total loans, excluding loans purchased from GNMA mortgage pools |
37,698 | 1,469 | 1,333 | |||||||||
Loans purchased from GNMA mortgage pools |
11,260 | 1,274 | 1,267 | |||||||||
|
|
|||||||||||
Total loans |
48,958 | $ | 2,743 | $ | 2,600 |
96
|
||||||
The following table provides a summary of TDR loans that defaulted (fully or partially charged-off or became 90 days or more past due) for the years ended December 31, that were modified as TDRs within 12 months previous to default:
(Dollars in Millions) | Number of Loans |
Amount Defaulted |
||||||
2018 |
||||||||
Commercial |
836 | $ | 71 | |||||
Commercial real estate |
39 | 15 | ||||||
Residential mortgages |
191 | 18 | ||||||
Credit card |
8,012 | 35 | ||||||
Other retail |
334 | 5 | ||||||
Covered loans |
1 | | ||||||
|
|
|||||||
Total loans, excluding loans purchased from GNMA mortgage pools |
9,413 | 144 | ||||||
Loans purchased from GNMA mortgage pools |
1,447 | 187 | ||||||
|
|
|||||||
Total loans |
10,860 | $ | 331 | |||||
|
|
|||||||
2017 |
||||||||
Commercial |
724 | $ | 53 | |||||
Commercial real estate |
36 | 9 | ||||||
Residential mortgages |
374 | 41 | ||||||
Credit card |
8,372 | 36 | ||||||
Other retail |
415 | 5 | ||||||
Covered loans |
4 | | ||||||
|
|
|||||||
Total loans, excluding loans purchased from GNMA mortgage pools |
9,925 | 144 | ||||||
Loans purchased from GNMA mortgage pools |
1,369 | 177 | ||||||
|
|
|||||||
Total loans |
11,294 | $ | 321 | |||||
|
|
|||||||
2016 |
||||||||
Commercial |
531 | $ | 24 | |||||
Commercial real estate |
27 | 12 | ||||||
Residential mortgages |
132 | 17 | ||||||
Credit card |
6,827 | 30 | ||||||
Other retail |
434 | 9 | ||||||
Covered loans |
4 | 1 | ||||||
|
|
|||||||
Total loans, excluding loans purchased from GNMA mortgage pools |
7,955 | 93 | ||||||
Loans purchased from GNMA mortgage pools |
202 | 25 | ||||||
|
|
|||||||
Total loans |
8,157 | $ | 118 |
97
|
||||
|
Leases |
The components of the net investment in sales-type and direct financing leases at December 31 were as follows:
(Dollars in Millions) | 2018 | 2017 | ||||||
Aggregate future minimum lease payments to be received |
$ | 13,222 | $ | 12,709 | ||||
Unguaranteed residual values accruing to the lessors benefit |
1,877 | 1,731 | ||||||
Unearned income |
(1,272 | ) | (1,205 | ) | ||||
Initial direct costs |
257 | 274 | ||||||
|
|
|||||||
Total net investment in sales-type and direct financing leases(a) |
$ | 14,084 | $ | 13,509 |
(a) | The accumulated allowance for uncollectible minimum lease payments was $90 million and $94 million at December 31, 2018 and 2017, respectively. |
The minimum future lease payments to be received from sales-type and direct financing leases were as follows at December 31, 2018:
(Dollars in Millions) | ||||
2019 |
$ | 4,264 | ||
2020 |
4,146 | |||
2021 |
2,777 | |||
2022 |
1,177 | |||
2023 |
335 | |||
Thereafter |
523 |
|
Accounting for Transfers and Servicing of Financial Assets and Variable Interest | |
|
Entities |
98
|
||||||
|
Premises and Equipment |
Premises and equipment at December 31 consisted of the following:
(Dollars in Millions) | 2018 | 2017 | ||||||
Land |
$ | 515 | $ | 520 | ||||
Buildings and improvements |
3,481 | 3,425 | ||||||
Furniture, fixtures and equipment |
3,110 | 2,951 | ||||||
Capitalized building and equipment leases |
121 | 130 | ||||||
Construction in progress |
20 | 35 | ||||||
|
|
|||||||
7,247 | 7,061 | |||||||
Less accumulated depreciation and amortization |
(4,790 | ) | (4,629 | ) | ||||
|
|
|||||||
Total |
$ | 2,457 | $ | 2,432 |
99
|
||||
|
Mortgage Servicing Rights |
Changes in fair value of capitalized MSRs for the years ended December 31, are summarized as follows:
(Dollars in Millions) | 2018 | 2017 | 2016 | |||||||||
Balance at beginning of period |
$ | 2,645 | $ | 2,591 | $ | 2,512 | ||||||
Rights purchased |
8 | 13 | 43 | |||||||||
Rights capitalized |
397 | 445 | 524 | |||||||||
Rights sold |
(27 | ) | | | ||||||||
Changes in fair value of MSRs |
||||||||||||
Due to fluctuations in market interest rates(a) |
98 | (23 | ) | (55 | ) | |||||||
Due to revised assumptions or models(b) |
56 | 18 | 19 | |||||||||
Other changes in fair value(c) |
(386 | ) | (399 | ) | (452 | ) | ||||||
|
|
|||||||||||
Balance at end of period |
$ | 2,791 | $ | 2,645 | $ | 2,591 |
(a) | Includes changes in MSR value associated with changes in market interest rates, including estimated prepayment rates and anticipated earnings on escrow deposits. |
(b) | Includes changes in MSR value not caused by changes in market interest rates, such as changes in cost to service, ancillary income and option adjusted spread, as well as the impact of any model changes. |
(c) | Primarily represents changes due to realization of expected cash flows over time (decay). |
The estimated sensitivity to changes in interest rates of the fair value of the MSR portfolio and the related derivative instruments as of December 31 follows:
2018 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||
(Dollars in Millions) | Down 100 bps |
Down 50 bps |
Down 25 bps |
Up 25 bps |
Up 50 bps |
Up 100 bps |
Down 100 bps |
Down 50 bps |
Down 25 bps |
Up 25 bps |
Up 50 bps |
Up 100 bps |
||||||||||||||||||||||||||||||||||||
MSR portfolio |
$ | (501 | ) | $ | (223 | ) | $ | (105 | ) | $ | 92 | $ | 171 | $ | 295 | $ | (520 | ) | $ | (231 | ) | $ | (109 | ) | $ | 95 | $ | 177 | $ | 302 | ||||||||||||||||||
Derivative instrument hedges |
455 | 215 | 104 | (94 | ) | (177 | ) | (321 | ) | 453 | 216 | 105 | (96 | ) | (184 | ) | (336 | ) | ||||||||||||||||||||||||||||||
Net sensitivity |
$ | (46 | ) | $ | (8 | ) | $ | (1 | ) | $ | (2 | ) | $ | (6 | ) | $ | (26 | ) | $ | (67 | ) | $ | (15 | ) | $ | (4 | ) | $ | (1 | ) | $ | (7 | ) | $ | (34 | ) |
A summary of the Companys MSRs and related characteristics by portfolio as of December 31 follows:
2018 | 2017 | |||||||||||||||||||||||||||||||
(Dollars in Millions) | HFA | Government | Conventional(d) | Total | HFA | Government | Conventional(d) | Total | ||||||||||||||||||||||||
Servicing portfolio(a) |
$ | 44,384 | $ | 35,990 | $ | 148,910 | $ | 229,284 | $ | 40,737 | $ | 36,756 | $ | 155,353 | $ | 232,846 | ||||||||||||||||
Fair value |
$ | 526 | $ | 465 | $ | 1,800 | $ | 2,791 | $ | 450 | $ | 428 | $ | 1,767 | $ | 2,645 | ||||||||||||||||
Value (bps)(b) |
119 | 129 | 121 | 122 | 110 | 116 | 114 | 114 | ||||||||||||||||||||||||
Weighted-average servicing fees (bps) |
34 | 36 | 27 | 30 | 35 | 34 | 27 | 29 | ||||||||||||||||||||||||
Multiple (value/servicing fees) |
3.45 | 3.63 | 4.52 | 4.11 | 3.17 | 3.38 | 4.24 | 3.86 | ||||||||||||||||||||||||
Weighted-average note rate |
4.59 | % | 3.97 | % | 4.06 | % | 4.15 | % | 4.43 | % | 3.92 | % | 4.02 | % | 4.08 | % | ||||||||||||||||
Weighted-average age (in years) |
3.3 | 4.7 | 4.5 | 4.3 | 3.0 | 4.3 | 4.2 | 4.0 | ||||||||||||||||||||||||
Weighted-average expected prepayment (constant prepayment rate) |
9.8 | % | 11.0 | % | 9.1 | % | 9.5 | % | 9.8 | % | 11.6 | % | 9.7 | % | 10.0 | % | ||||||||||||||||
Weighted-average expected life (in years) |
7.7 | 6.7 | 7.1 | 7.2 | 7.7 | 6.5 | 6.9 | 7.0 | ||||||||||||||||||||||||
Weighted-average option adjusted spread(c) |
8.6 | % | 8.3 | % | 7.2 | % | 7.6 | % | 9.9 | % | 9.2 | % | 7.2 | % | 8.0 | % |
(a) | Represents principal balance of mortgages having corresponding MSR asset. |
(b) | Calculated as fair value divided by the servicing portfolio. |
(c) | Option adjusted spread is the incremental spread added to the risk-free rate to reflect optionality and other risk inherent in the MSRs. |
(d) | Represents loans sold primarily to GSEs. |
100
|
||||||
|
Intangible Assets |
Intangible assets consisted of the following:
At December 31 (Dollars in Millions) | Estimated Life(a) |
Amortization Method(b) |
Balance | |||||||||||
2018 | 2017 | |||||||||||||
Goodwill |
(c) | $ | 9,369 | $ | 9,434 | |||||||||
Merchant processing contracts |
6 years/8 years | SL/AC | 155 | 89 | ||||||||||
Core deposit benefits |
22 years/5 years | SL/AC | 104 | 131 | ||||||||||
Mortgage servicing rights |
(c) | 2,791 | 2,645 | |||||||||||
Trust relationships |
10 years/7 years | SL/AC | 34 | 45 | ||||||||||
Other identified intangibles |
5 years/4 years | SL/AC | 308 | 318 | ||||||||||
Total |
$ | 12,761 | $ | 12,662 |
(a) | Estimated life represents the amortization period for assets subject to the straight line method and the weighted average or life of the underlying cash flows amortization period for intangibles subject to accelerated methods. If more than one amortization method is used for a category, the estimated life for each method is calculated and reported separately. |
(b) | Amortization methods: SL = straight line method |
AC | = accelerated methods generally based on cash flows |
(c) | Goodwill is evaluated for impairment, but not amortized. Mortgage servicing rights are recorded at fair value, and are not amortized. |
Aggregate amortization expense consisted of the following:
Year Ended December 31 (Dollars in Millions) | 2018 | 2017 | 2016 | |||||||||
Merchant processing contracts |
$ | 24 | $ | 24 | $ | 28 | ||||||
Core deposit benefits |
26 | 30 | 34 | |||||||||
Trust relationships |
11 | 14 | 16 | |||||||||
Other identified intangibles |
100 | 107 | 101 | |||||||||
|
|
|||||||||||
Total |
$ | 161 | $ | 175 | $ | 179 |
The estimated amortization expense for the next five years is as follows:
(Dollars in Millions) | ||||
2019 |
$ | 141 | ||
2020 |
113 | |||
2021 |
90 | |||
2022 |
74 | |||
2023 |
45 |
The following table reflects the changes in the carrying value of goodwill for the years ended December 31, 2018, 2017 and 2016:
(Dollars in Millions) | Corporate and Commercial Banking |
Consumer and Business Banking |
Wealth Management and Investment Services |
Payment Services |
Treasury and Corporate Support |
Consolidated Company |
||||||||||||||||||
Balance at December 31, 2015 |
$ | 1,647 | $ | 3,681 | $ | 1,567 | $ | 2,466 | $ | | $ | 9,361 | ||||||||||||
Foreign exchange translation and other |
| | (1 | ) | (16 | ) | | (17 | ) | |||||||||||||||
|
|
|||||||||||||||||||||||
Balance at December 31, 2016 |
$ | 1,647 | $ | 3,681 | $ | 1,566 | $ | 2,450 | $ | | $ | 9,344 | ||||||||||||
Goodwill acquired |
| | | 62 | | 62 | ||||||||||||||||||
Foreign exchange translation and other |
| | 3 | 25 | | 28 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Balance at December 31, 2017 |
$ | 1,647 | $ | 3,681 | $ | 1,569 | $ | 2,537 | $ | | $ | 9,434 | ||||||||||||
Goodwill acquired |
| | | 105 | | 105 | ||||||||||||||||||
Disposal |
| (155 | ) | | | | (155 | ) | ||||||||||||||||
Foreign exchange translation and other |
| (51 | ) | 49 | (13 | ) | | (15 | ) | |||||||||||||||
|
|
|||||||||||||||||||||||
Balance at December 31, 2018 |
$ | 1,647 | $ | 3,475 | $ | 1,618 | $ | 2,629 | $ | | $ | 9,369 |
101
|
||||
|
Deposits |
The composition of deposits at December 31 was as follows:
(Dollars in Millions) | 2018 | 2017 | ||||||
Noninterest-bearing deposits |
$ | 81,811 | $ | 87,557 | ||||
Interest-bearing deposits |
||||||||
Interest checking |
73,994 | 74,520 | ||||||
Money market savings |
100,396 | 107,973 | ||||||
Savings accounts |
44,720 | 43,809 | ||||||
Time deposits |
44,554 | 33,356 | ||||||
|
|
|||||||
Total interest-bearing deposits |
263,664 | 259,658 | ||||||
|
|
|||||||
Total deposits |
$ | 345,475 | $ | 347,215 |
The maturities of time deposits outstanding at December 31, 2018 were as follows:
(Dollars in Millions) | ||||
2019 |
$ | 38,272 | ||
2020 |
3,214 | |||
2021 |
1,740 | |||
2022 |
726 | |||
2023 |
598 | |||
Thereafter |
4 | |||
|
|
|||
Total |
$ | 44,554 |
|
Short-Term Borrowings(a) |
The following table is a summary of short-term borrowings for the last three years:
2018 | 2017 | 2016 | ||||||||||||||||||||||
(Dollars in Millions) | Amount | Rate | Amount | Rate | Amount | Rate | ||||||||||||||||||
At year-end |
||||||||||||||||||||||||
Federal funds purchased |
$ | 458 | 2.05 | % | $ | 252 | .77 | % | $ | 447 | .30 | % | ||||||||||||
Securities sold under agreements to repurchase |
2,582 | 2.20 | 803 | .61 | 801 | .12 | ||||||||||||||||||
Commercial paper |
6,940 | 1.35 | 8,303 | .68 | 10,010 | .30 | ||||||||||||||||||
Other short-term borrowings |
4,159 | 2.68 | 7,293 | 2.13 | 2,705 | 1.00 | ||||||||||||||||||
Total |
$ | 14,139 | 1.92 | % | $ | 16,651 | 1.31 | % | $ | 13,963 | .43 | % | ||||||||||||
Average for the year |
||||||||||||||||||||||||
Federal funds purchased |
$ | 1,070 | 1.70 | % | $ | 528 | .86 | % | $ | 1,015 | .30 | % | ||||||||||||
Securities sold under agreements to repurchase |
2,279 | 1.87 | 917 | .44 | 891 | .18 | ||||||||||||||||||
Commercial paper |
6,929 | .94 | 8,236 | .49 | 14,827 | .26 | ||||||||||||||||||
Other short-term borrowings |
11,512 | 2.27 | 5,341 | 1.90 | 3,173 | 1.67 | ||||||||||||||||||
Total |
$ | 21,790 | 1.78 | % | $ | 15,022 | 1.00 | % | $ | 19,906 | .48 | % | ||||||||||||
Maximum month-end balance |
||||||||||||||||||||||||
Federal funds purchased |
$ | 4,532 | $ | 600 | $ | 2,487 | ||||||||||||||||||
Securities sold under agreements to repurchase |
3,225 | 927 | 1,177 | |||||||||||||||||||||
Commercial paper |
7,846 | 9,950 | 21,441 | |||||||||||||||||||||
Other short-term borrowings |
16,588 | 7,293 | 6,771 |
(a) | Interest and rates are presented on a fully taxable-equivalent basis utilizing a tax rate of 21 percent for 2018 and 35 percent for 2017 and 2016. |
102
|
||||||
|
Long-Term Debt |
Long-term debt (debt with original maturities of more than one year) at December 31 consisted of the following:
(Dollars in Millions) | Rate Type |
Rate(a) | Maturity Date | 2018 | 2017 | |||||||||||||||
U.S. Bancorp (Parent Company) |
||||||||||||||||||||
Subordinated notes |
Fixed | 2.950 | % | 2022 | $ | 1,300 | $ | 1,300 | ||||||||||||
Fixed | 3.600 | % | 2024 | 1,000 | 1,000 | |||||||||||||||
Fixed | 7.500 | % | 2026 | 199 | 199 | |||||||||||||||
Fixed | 3.100 | % | 2026 | 1,000 | 1,000 | |||||||||||||||
Medium-term notes |
Fixed | .850% - 4.125 | % | 2019 - 2028 | 12,345 | 11,299 | ||||||||||||||
Floating | 2.890% - 3.127 | % | 2019 - 2022 | 500 | 1,000 | |||||||||||||||
Other(b) |
(53 | ) | (29 | ) | ||||||||||||||||
|
|
|||||||||||||||||||
Subtotal |
16,291 | 15,769 | ||||||||||||||||||
Subsidiaries |
||||||||||||||||||||
Federal Home Loan Bank advances |
Fixed | 1.250% - 8.250 | % | 2019 - 2026 | 307 | 208 | ||||||||||||||
Floating | 2.650% - 3.175 | % | 2019 - 2026 | 4,272 | 5,272 | |||||||||||||||
Bank notes |
Fixed | 1.400% - 3.450 | % | 2019 - 2025 | 11,600 | 6,200 | ||||||||||||||
Floating | 2.177% - 3.009 | % | 2019 - 2058 | 7,864 | 3,810 | |||||||||||||||
Other(c) |
1,006 | 1,000 | ||||||||||||||||||
|
|
|||||||||||||||||||
Subtotal |
25,049 | 16,490 | ||||||||||||||||||
|
|
|||||||||||||||||||
Total |
$ | 41,340 | $ | 32,259 |
(a) | Weighted-average interest rates of medium-term notes, Federal Home Loan Bank advances and bank notes were 2.84 percent, 2.96 percent and 2.63 percent, respectively. |
(b) | Includes debt issuance fees and unrealized gains and losses and deferred amounts relating to derivative instruments. |
(c) | Includes consolidated community development and tax-advantaged investment VIEs, capitalized lease obligations, debt issuance fees, and unrealized gains and losses and deferred amounts relating to derivative instruments. |
103
|
||||
|
Shareholders Equity |
The number of shares issued and outstanding and the carrying amount of each outstanding series of the Companys preferred stock were as follows:
2018 | 2017 | |||||||||||||||||||||||||||||||
At December 31 (Dollars in Millions) | Shares Issued and Outstanding |
Liquidation Preference |
Discount | Carrying Amount |
Shares Issued and Outstanding |
Liquidation Preference |
Discount | Carrying Amount |
||||||||||||||||||||||||
Series A |
12,510 | $ | 1,251 | $ | 145 | $ | 1,106 | 12,510 | $ | 1,251 | $ | 145 | $ | 1,106 | ||||||||||||||||||
Series B |
40,000 | 1,000 | | 1,000 | 40,000 | 1,000 | | 1,000 | ||||||||||||||||||||||||
Series F |
44,000 | 1,100 | 12 | 1,088 | 44,000 | 1,100 | 12 | 1,088 | ||||||||||||||||||||||||
Series H |
20,000 | 500 | 13 | 487 | 20,000 | 500 | 13 | 487 | ||||||||||||||||||||||||
Series I |
30,000 | 750 | 5 | 745 | 30,000 | 750 | 5 | 745 | ||||||||||||||||||||||||
Series J |
40,000 | 1,000 | 7 | 993 | 40,000 | 1,000 | 7 | 993 | ||||||||||||||||||||||||
Series K |
23,000 | 575 | 10 | 565 | | | | | ||||||||||||||||||||||||
Total preferred stock(a) |
209,510 | $ | 6,176 | $ | 192 | $ | 5,984 | 186,510 | $ | 5,601 | $ | 182 | $ | 5,419 |
(a) | The par value of all shares issued and outstanding at December 31, 2018 and 2017, was $1.00 per share. |
104
|
||||||
105
|
||||
Shareholders equity is affected by transactions and valuations of asset and liability positions that require adjustments to accumulated other comprehensive income (loss). The reconciliation of the transactions affecting accumulated other comprehensive income (loss) included in shareholders equity for the years ended December 31, is as follows:
(Dollars in Millions) | Unrealized Gains (Losses) on Investment Securities Available-For-Sale |
Unrealized
Gains (Losses) on Investment Securities Transferred From Available-For-Sale to Held-To-Maturity |
Unrealized Gains (Losses) on Derivative Hedges |
Unrealized Gains (Losses) on Retirement Plans |
Foreign Currency Translation |
Total | ||||||||||||||||||
2018 |
||||||||||||||||||||||||
Balance at beginning of period |
$ | (357 | ) | $ | 17 | $ | 71 | $ | (1,066 | ) | $ | (69 | ) | $ | (1,404 | ) | ||||||||
Revaluation of tax related balances(a) |
(77 | ) | 4 | 15 | (229 | ) | (13 | ) | (300 | ) | ||||||||||||||
Changes in unrealized gains and losses |
(656 | ) | | 39 | (302 | ) | | (919 | ) | |||||||||||||||
Foreign currency translation adjustment(b) |
| | | | 3 | 3 | ||||||||||||||||||
Reclassification to earnings of realized gains and losses |
(30 | ) | (9 | ) | (5 | ) | 137 | | 93 | |||||||||||||||
Applicable income taxes |
174 | 2 | (8 | ) | 42 | (5 | ) | 205 | ||||||||||||||||
|
|
|||||||||||||||||||||||
Balance at end of period |
$ | (946 | ) | $ | 14 | $ | 112 | $ | (1,418 | ) | $ | (84 | ) | $ | (2,322 | ) | ||||||||
|
|
|||||||||||||||||||||||
2017 |
||||||||||||||||||||||||
Balance at beginning of period |
$ | (431 | ) | $ | 25 | $ | 55 | $ | (1,113 | ) | $ | (71 | ) | $ | (1,535 | ) | ||||||||
Changes in unrealized gains and losses |
178 | | (5 | ) | (41 | ) | | 132 | ||||||||||||||||
Foreign currency translation adjustment(b) |
| | | | (2 | ) | (2 | ) | ||||||||||||||||
Reclassification to earnings of realized gains and losses |
(57 | ) | (13 | ) | 30 | 117 | | 77 | ||||||||||||||||
Applicable income taxes |
(47 | ) | 5 | (9 | ) | (29 | ) | 4 | (76 | ) | ||||||||||||||
|
|
|||||||||||||||||||||||
Balance at end of period |
$ | (357 | ) | $ | 17 | $ | 71 | $ | (1,066 | ) | $ | (69 | ) | $ | (1,404 | ) | ||||||||
|
|
|||||||||||||||||||||||
2016 |
||||||||||||||||||||||||
Balance at beginning of period |
$ | 111 | $ | 36 | $ | (67 | ) | $ | (1,056 | ) | $ | (43 | ) | $ | (1,019 | ) | ||||||||
Changes in unrealized gains and losses |
(858 | ) | | 74 | (255 | ) | | (1,039 | ) | |||||||||||||||
Other-than-temporary impairment not recognized in earnings on securities available-for-sale |
(1 | ) | | | | | (1 | ) | ||||||||||||||||
Foreign currency translation |
| | | | (28 | ) | (28 | ) | ||||||||||||||||
Reclassification to earnings of realized gains and losses |
(22 | ) | (18 | ) | 124 | 163 | | 247 | ||||||||||||||||
Applicable income taxes |
339 | 7 | (76 | ) | 35 | | 305 | |||||||||||||||||
|
|
|||||||||||||||||||||||
Balance at end of period |
$ | (431 | ) | $ | 25 | $ | 55 | $ | (1,113 | ) | $ | (71 | ) | $ | (1,535 | ) |
(a) | Reflects the adoption of new accounting guidance on January 1, 2018 to reclassify the impact of the reduced federal statutory rate for corporations included in 2017 tax reform legislation from accumulated other comprehensive income to retained earnings. |
(b) | Represents the impact of changes in foreign currency exchange rates on the Companys investment in foreign operations and related hedges. |
106
|
||||||
Additional detail about the impact to net income for items reclassified out of accumulated other comprehensive income (loss) and into earnings for the years ended December 31, is as follows:
Impact to Net Income | Affected Line Item in
the | |||||||||||||
(Dollars in Millions) | 2018 | 2017 | 2016 | |||||||||||
Unrealized gains (losses) on investment securities available-for-sale |
||||||||||||||
Realized gains (losses) on sale of investment securities |
$ | 30 | $ | 57 | $ | 27 | Total securities gains (losses), net | |||||||
Other-than-temporary impairment recognized in earnings |
| | (5 | ) | ||||||||||
|
|
|||||||||||||
30 | 57 | 22 | Total before tax | |||||||||||
(7 | ) | (22 | ) | (9 | ) | Applicable income taxes | ||||||||
|
|
|||||||||||||
23 | 35 | 13 | Net-of-tax | |||||||||||
Unrealized gains (losses) on investment securities transferred from available-for-sale to held-to-maturity |
||||||||||||||
Amortization of unrealized gains |
9 | 13 | 18 | Interest income | ||||||||||
(2 | ) | (5 | ) | (7 | ) | Applicable income taxes | ||||||||
|
|
|||||||||||||
7 | 8 | 11 | Net-of-tax | |||||||||||
Unrealized gains (losses) on derivative hedges |
||||||||||||||
Realized gains (losses) on derivative hedges |
5 | (30 | ) | (124 | ) | Interest expense | ||||||||
(2 | ) | 11 | 48 | Applicable income taxes | ||||||||||
|
|
|||||||||||||
3 | (19 | ) | (76 | ) | Net-of-tax | |||||||||
Unrealized gains (losses) on retirement plans |
||||||||||||||
Actuarial gains (losses) and prior service cost (credit) amortization |
(137 | ) | (117 | ) | (163 | ) | Other noninterest expense | |||||||
35 | 45 | 63 | Applicable income taxes | |||||||||||
|
|
|||||||||||||
(102 | ) | (72 | ) | (100 | ) | Net-of-tax | ||||||||
Total impact to net income |
$ | (69 | ) | $ | (48 | ) | $ | (152 | ) |
107
|
||||
The following table provides the components of the Companys regulatory capital at December 31:
(Dollars in Millions) | 2018 | 2017 | ||||||
Basel III standardized approach: |
||||||||
Common shareholders equity |
$ | 45,045 | $ | 43,621 | ||||
Less intangible assets |
||||||||
Goodwill (net of deferred tax liability) |
(8,549 | ) | (8,613 | ) | ||||
Other disallowed intangible assets |
(601 | ) | (466 | ) | ||||
Other(a) |
(1,171 | ) | (173 | ) | ||||
|
|
|||||||
Total common equity tier 1 capital |
34,724 | 34,369 | ||||||
Qualifying preferred stock |
5,984 | 5,419 | ||||||
Noncontrolling interests eligible for tier 1 capital |
36 | 117 | ||||||
Other(b) |
(3 | ) | (99 | ) | ||||
|
|
|||||||
Total tier 1 capital |
40,741 | 39,806 | ||||||
Eligible portion of allowance for credit losses |
4,441 | 4,417 | ||||||
Subordinated debt and noncontrolling interests eligible for tier 2 capital |
2,996 | 3,280 | ||||||
|
|
|||||||
Total tier 2 capital |
7,437 | 7,697 | ||||||
|
|
|||||||
Total risk-based capital |
$ | 48,178 | $ | 47,503 | ||||
|
|
|||||||
Risk-weighted assets |
$ | 381,661 | $ | 367,771 | ||||
Basel III advanced approaches: |
||||||||
Common shareholders equity |
$ | 45,045 | $ | 43,621 | ||||
Less intangible assets |
||||||||
Goodwill (net of deferred tax liability) |
(8,549 | ) | (8,613 | ) | ||||
Other disallowed intangible assets |
(601 | ) | (466 | ) | ||||
Other(a) |
(1,171 | ) | (173 | ) | ||||
|
|
|||||||
Total common equity tier 1 capital |
34,724 | 34,369 | ||||||
Qualifying preferred stock |
5,984 | 5,419 | ||||||
Noncontrolling interests eligible for tier 1 capital |
36 | 117 | ||||||
Other(b) |
(3 | ) | (99 | ) | ||||
|
|
|||||||
Total tier 1 capital |
40,741 | 39,806 | ||||||
Eligible portion of allowance for credit losses |
1,399 | 1,391 | ||||||
Subordinated debt and noncontrolling interests eligible for tier 2 capital |
2,996 | 3,280 | ||||||
|
|
|||||||
Total tier 2 capital |
4,395 | 4,671 | ||||||
|
|
|||||||
Total risk-based capital |
$ | 45,136 | $ | 44,477 | ||||
|
|
|||||||
Risk-weighted assets |
$ | 295,002 | $ | 287,211 |
(a) | Includes the impact of items included in other comprehensive income (loss), such as unrealized gains (losses) on available-for-sale securities, accumulated net gains on cash flow hedges, pension liability adjustments, etc., and the portion of deferred tax assets related to net operating loss and tax credit carryforwards not eligible for common equity tier 1 capital. |
(b) | Includes the remaining portion of deferred tax assets not eligible for total tier 1 capital. |
108
|
||||||
|
Earnings Per Share |
The components of earnings per share were:
Year Ended December 31 (Dollars and Shares in Millions, Except Per Share Data) |
2018 | 2017 | 2016 | |||||||||
Net income attributable to U.S. Bancorp |
$ | 7,096 | $ | 6,218 | $ | 5,888 | ||||||
Preferred dividends |
(282 | ) | (267 | ) | (281 | ) | ||||||
Impact of preferred stock redemption(a) |
| (10 | ) | | ||||||||
Impact of the purchase of noncontrolling interests(b) |
| | 9 | |||||||||
Earnings allocated to participating stock awards |
(30 | ) | (28 | ) | (27 | ) | ||||||
|
|
|||||||||||
Net income applicable to U.S. Bancorp common shareholders |
$ | 6,784 | $ | 5,913 | $ | 5,589 | ||||||
|
|
|||||||||||
Average common shares outstanding |
1,634 | 1,677 | 1,718 | |||||||||
Net effect of the exercise and assumed purchase of stock awards |
4 | 6 | 6 | |||||||||
|
|
|||||||||||
Average diluted common shares outstanding |
1,638 | 1,683 | 1,724 | |||||||||
|
|
|||||||||||
Earnings per common share |
$ | 4.15 | $ | 3.53 | $ | 3.25 | ||||||
Diluted earnings per common share |
$ | 4.14 | $ | 3.51 | $ | 3.24 |
(a) | Represents stock issuance costs originally recorded in preferred stock upon the issuance of the Companys Series G Preferred Stock that were reclassified to retained earnings on the date the Company announced its intent to redeem the outstanding shares. |
(b) | Represents the difference between the carrying amount and amount paid by the Company to purchase third party investor holdings of the preferred stock of USB Realty Corp, a consolidated subsidiary of the Company. |
Options outstanding at December 31, 2018, 2017 and 2016, to purchase 1 million common shares, were not included in the computation of diluted earnings per share for the years ended December 31, 2018, 2017 and 2016, because they were antidilutive.
|
Employee Benefits |
109
|
||||
The following table summarizes the changes in benefit obligations and plan assets for the years ended December 31, and the funded status and amounts recognized in the Consolidated Balance Sheet at December 31 for the retirement plans:
Pension Plans | Postretirement Welfare Plan |
|||||||||||||||
(Dollars in Millions) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Change In Projected Benefit Obligation(a) |
||||||||||||||||
Benefit obligation at beginning of measurement period |
$ | 5,720 | $ | 5,073 | $ | 68 | $ | 75 | ||||||||
Service cost |
208 | 187 | | | ||||||||||||
Interest cost |
224 | 220 | 2 | 2 | ||||||||||||
Participants contributions |
| | 8 | 8 | ||||||||||||
Actuarial loss (gain) |
(440 | ) | 430 | (7 | ) | (1 | ) | |||||||||
Lump sum settlements |
(50 | ) | (45 | ) | | | ||||||||||
Benefit payments |
(155 | ) | (145 | ) | (18 | ) | (18 | ) | ||||||||
Federal subsidy on benefits paid |
| | 1 | 2 | ||||||||||||
Benefit obligation at end of measurement period(b) |
$ | 5,507 | $ | 5,720 | $ | 54 | $ | 68 | ||||||||
Change In Fair Value Of Plan Assets(c) |
||||||||||||||||
Fair value at beginning of measurement period |
$ | 5,482 | $ | 3,769 | $ | 87 | $ | 82 | ||||||||
Actual return on plan assets |
(365 | ) | 665 | | 10 | |||||||||||
Employer contributions |
24 | 1,238 | 5 | 5 | ||||||||||||
Participants contributions |
| | 7 | 8 | ||||||||||||
Lump sum settlements |
(50 | ) | (45 | ) | | | ||||||||||
Benefit payments |
(155 | ) | (145 | ) | (18 | ) | (18 | ) | ||||||||
Fair value at end of measurement period |
$ | 4,936 | $ | 5,482 | $ | 81 | $ | 87 | ||||||||
Funded (Unfunded) Status |
$ | (571 | ) | $ | (238 | ) | $ | 27 | $ | 19 | ||||||
Components Of The Consolidated Balance Sheet |
||||||||||||||||
Noncurrent benefit asset |
$ | | $ | 270 | $ | 26 | $ | 19 | ||||||||
Current benefit liability |
(23 | ) | (23 | ) | | | ||||||||||
Noncurrent benefit liability |
(548 | ) | (485 | ) | | | ||||||||||
Recognized amount |
$ | (571 | ) | $ | (238 | ) | $ | 26 | $ | 19 | ||||||
Accumulated Other Comprehensive Income (Loss), Pretax |
||||||||||||||||
Net actuarial gain (loss) |
$ | (1,981 | ) | $ | (1,822 | ) | $ | 66 | $ | 68 | ||||||
Net prior service credit (cost) |
| | 18 | 22 | ||||||||||||
Recognized amount |
$ | (1,981 | ) | $ | (1,822 | ) | $ | 84 | $ | 90 |
(a) | The decrease and the increase in the projected benefit obligation for 2018 and 2017, respectively, were primarily due to discount rate changes. |
(b) | At December 31, 2018 and 2017, the accumulated benefit obligation for all pension plans was $5.0 billion and $5.2 billion, respectively. |
(c) | The decrease and the increase in the fair value of plan assets for 2018 and 2017, respectively, were primarily due to market conditions, as well as higher employer contributions in 2017. |
The following table provides information for pension plans with benefit obligations in excess of plan assets at December 31:
(Dollars in Millions) | 2018 | 2017 | ||||||
Pension Plans with Projected Benefit Obligations in Excess of Plan Assets |
||||||||
Projected benefit obligation |
$ | 5,507 | $ | 508 | ||||
Fair value of plan assets |
4,936 | | ||||||
Pension Plans with Accumulated Benefit Obligations in Excess of Plan Assets |
||||||||
Accumulated benefit obligation |
$ | 467 | $ | 485 | ||||
Fair value of plan assets |
| |
110
|
||||||
The following table sets forth the components of net periodic benefit cost and other amounts recognized in accumulated other comprehensive income (loss) for the years ended December 31 for the retirement plans:
Pension Plans | Postretirement Welfare Plan | |||||||||||||||||||||||
(Dollars in Millions) | 2018 | 2017 | 2016 | 2018 | 2017 | 2016 | ||||||||||||||||||
Components Of Net Periodic Benefit Cost |
||||||||||||||||||||||||
Service cost |
$ | 208 | $ | 187 | $ | 177 | $ | | $ | | $ | | ||||||||||||
Interest cost |
224 | 220 | 211 | 2 | 2 | 3 | ||||||||||||||||||
Expected return on plan assets |
(379 | ) | (284 | ) | (266 | ) | (3 | ) | (3 | ) | (1 | ) | ||||||||||||
Prior service cost (credit) and transition obligation (asset) amortization |
| (2 | ) | (5 | ) | (3 | ) | (3 | ) | (3 | ) | |||||||||||||
Actuarial loss (gain) amortization |
146 | 127 | 175 | (6 | ) | (5 | ) | (4 | ) | |||||||||||||||
Net periodic benefit cost |
$ | 199 | $ | 248 | $ | 292 | $ | (10 | ) | $ | (9 | ) | $ | (5 | ) | |||||||||
Other Changes In Plan Assets And Benefit Obligations |
||||||||||||||||||||||||
Recognized In Other Comprehensive Income (Loss) |
||||||||||||||||||||||||
Net actuarial gain (loss) arising during the year |
$ | (305 | ) | $ | (48 | ) | $ | (270 | ) | $ | 3 | $ | 7 | $ | 15 | |||||||||
Net actuarial loss (gain) amortized during the year |
146 | 127 | 175 | (6 | ) | (5 | ) | (4 | ) | |||||||||||||||
Net prior service cost (credit) and transition obligation (asset) amortized during the year |
| (2 | ) | (5 | ) | (3 | ) | (3 | ) | (3 | ) | |||||||||||||
Total recognized in other comprehensive income (loss) |
$ | (159 | ) | $ | 77 | $ | (100 | ) | $ | (6 | ) | $ | (1 | ) | $ | 8 | ||||||||
Total recognized in net periodic benefit cost and other comprehensive income (loss) |
$ | (358 | ) | $ | (171 | ) | $ | (392 | ) | $ | 4 | $ | 8 | $ | 13 |
The following table sets forth weighted average assumptions used to determine the projected benefit obligations at December 31:
Pension Plans | Postretirement Welfare Plan |
|||||||||||||||
(Dollars in Millions) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Discount rate(a) |
4.45 | % | 3.84 | % | 4.05 | % | 3.34 | % | ||||||||
Cash balance interest crediting rate |
3.00 | 3.00 | * | * | ||||||||||||
Rate of compensation increase(b) |
3.52 | 3.56 | * | * | ||||||||||||
Health care cost trend rate(c) |
||||||||||||||||
Prior to age 65 |
6.50 | % | 6.75 | % | ||||||||||||
After age 65 |
10.00 | % | 6.75 | % |
(a) | The discount rates were developed using a cash flow matching bond model with a modified duration for the qualified pension plan, non-qualified pension plan and postretirement welfare plan of 14.7, 11.5, and 5.9 years, respectively, for 2018, and 15.8, 12.3 and 6.1 years, respectively, for 2017. |
(b) | Determined on an active liability-weighted basis. |
(c) | The 2018 and 2017 pre-65 and post-65 rates are both assumed to decrease gradually to 5.00 percent by 2025 and remain at this level thereafter. |
* | Not applicable |
The following table sets forth weighted average assumptions used to determine net periodic benefit cost for the years ended December 31:
Pension Plans | Postretirement Welfare Plan | |||||||||||||||||||||||
(Dollars in Millions) | 2018 | 2017 | 2016 | 2018 | 2017 | 2016 | ||||||||||||||||||
Discount rate(a) |
3.84 | % | 4.27 | % | 4.45 | % | 3.34 | % | 3.57 | % | 3.59 | % | ||||||||||||
Cash balance interest crediting rate |
3.00 | 3.00 | 3.00 | * | * | * | ||||||||||||||||||
Expected return on plan assets(b) |
7.25 | 7.25 | 7.50 | 3.50 | 3.50 | 1.50 | ||||||||||||||||||
Rate of compensation increase(c) |
3.56 | 3.58 | 4.06 | * | * | * | ||||||||||||||||||
Health care cost trend rate(d) |
||||||||||||||||||||||||
Prior to age 65 |
6.75 | % | 7.00 | % | 6.50 | % | ||||||||||||||||||
After age 65 |
6.75 | 7.00 | 6.50 |
(a) | The discount rates were developed using a cash flow matching bond model with a modified duration for the qualified pension plan, non-qualified pension plan and postretirement welfare plan of 15.8, 12.3, and 6.1 years, respectively, for 2018, and 15.5, 12.1 and 6.2 years, respectively, for 2017. |
(b) | With the help of an independent pension consultant, the Company considers several sources when developing its expected long-term rates of return on plan assets assumptions, including, but not limited to, past returns and estimates of future returns given the plans asset allocation, economic conditions, and peer group LTROR information. The Company determines its expected long-term rates of return reflecting current economic conditions and plan assets. |
(c) | Determined on an active liability weighted basis. |
(d) | The 2018 and 2017 pre-65 and post-65 rates are both assumed to decrease gradually to 5.00 percent by 2025 and remain at that level thereafter. The 2016 pre-65 and post-65 rates are both assumed to decrease gradually to 5.00 percent by 2019. |
* | Not applicable |
111
|
||||
The following table summarizes plan investment assets measured at fair value at December 31:
Qualified Pension Plan | Welfare Plan | |||||||||||||||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||||||||||||||||||
(Dollars in Millions) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 1 | ||||||||||||||||||||||||||||||
Cash and cash equivalents |
$ | 54 | $ | | $ | | $ | 54 | $ | 727 | (a) | $ | | $ | | $ | 727 | $ | 40 | $ | 36 | |||||||||||||||||||
Debt securities |
631 | 904 | | 1,535 | 517 | 723 | | 1,240 | | | ||||||||||||||||||||||||||||||
Corporate stock |
||||||||||||||||||||||||||||||||||||||||
Real estate equity securities(b) |
109 | | | 109 | 216 | | | 216 | | | ||||||||||||||||||||||||||||||
Mutual funds |
||||||||||||||||||||||||||||||||||||||||
Debt securities |
| 295 | | 295 | | 205 | | 205 | | | ||||||||||||||||||||||||||||||
Emerging markets equity securities |
| 113 | | 113 | | 120 | | 120 | | | ||||||||||||||||||||||||||||||
Other |
| | 3 | 3 | | | 2 | 2 | | | ||||||||||||||||||||||||||||||
$ | 794 | $ | 1,312 | $ | 3 | 2,109 | $ | 1,460 | $ | 1,048 | $ | 2 | 2,510 | 40 | 36 | |||||||||||||||||||||||||
Plan investment assets not classified in fair value hierarchy(c): |
||||||||||||||||||||||||||||||||||||||||
Collective investment funds |
||||||||||||||||||||||||||||||||||||||||
Domestic equity securities |
1,183 | 1,327 | 23 | 29 | ||||||||||||||||||||||||||||||||||||
Mid-small cap equity securities(d) |
340 | 346 | | | ||||||||||||||||||||||||||||||||||||
International equity securities |
643 | 934 | 14 | 22 | ||||||||||||||||||||||||||||||||||||
Real estate securities |
146 | | | | ||||||||||||||||||||||||||||||||||||
Hedge funds(e) |
290 | 200 | | | ||||||||||||||||||||||||||||||||||||
Private equity funds(f) |
225 | 165 | | | ||||||||||||||||||||||||||||||||||||
Total plan investment assets at fair value |
$ | 4,936 | $ | 5,482 | $ | 77 | $ | 87 |
(a) | Includes an employer contribution made in late 2017 which was invested in various asset classes subsequent to December 31, 2017. |
(b) | At December 31, 2018 and 2017, securities included $56 million and $105 million in domestic equities, respectively, and $53 million and $111 million in international equities, respectively. |
(c) | These investments are valued based on net asset value per share as a practical expedient; fair values are provided to reconcile to total investment assets of the plans at fair value. |
(d) | At December 31, 2018 and 2017, securities included $340 million and $346 million in domestic equities, respectively. |
(e) | This category consists of several investment strategies diversified across several hedge fund managers. |
(f) | This category consists of several investment strategies diversified across several private equity fund managers. |
112
|
||||||
The following table summarizes the changes in fair value for qualified pension plan investment assets measured at fair value using significant unobservable inputs (Level 3) for the years ended December 31:
2018 | 2017 | 2016 | ||||||||||
(Dollars in Millions) | Other | Other | Other | |||||||||
Balance at beginning of period |
$ | 2 | $ | 1 | $ | 1 | ||||||
Purchases, sales, and settlements, net |
1 | 1 | | |||||||||
Balance at end of period |
$ | 3 | $ | 2 | $ | 1 |
The following benefit payments are expected to be paid from the retirement plans for the years ended December 31:
(Dollars in Millions) | Pension Plans |
Postretirement Welfare Plan(a) |
Medicare Part D Subsidy Receipts |
|||||||||
2019 |
$ | 216 | $ | 8 | $ | 1 | ||||||
2020 |
233 | 8 | 1 | |||||||||
2021 |
252 | 7 | 1 | |||||||||
2022 |
268 | 7 | 1 | |||||||||
2023 |
285 | 6 | 1 | |||||||||
2024-2028 |
1,692 | 24 | 2 |
(a) | Net of expected retiree contributions and before Medicare Part D subsidy. |
113
|
||||
|
Stock-Based Compensation |
Stock Option Awards
The following is a summary of stock options outstanding and exercised under prior and existing stock incentive plans of the Company:
Year Ended December 31 | Stock Options/Shares |
Weighted- Average Exercise Price |
Weighted-Average Remaining Contractual Term |
Aggregate Intrinsic Value (in millions) |
||||||||||||
2018 |
||||||||||||||||
Number outstanding at beginning of period |
12,668,467 | $ | 32.15 | |||||||||||||
Granted(a) |
| | ||||||||||||||
Exercised |
(3,443,494 | ) | 25.41 | |||||||||||||
Cancelled(b) |
(109,963 | ) | 46.72 | |||||||||||||
|
|
|||||||||||||||
Number outstanding at end of period(c) |
9,115,010 | $ | 34.52 | 4.3 | $ | 102 | ||||||||||
Exercisable at end of period |
7,372,036 | $ | 31.61 | 3.5 | $ | 104 | ||||||||||
2017 |
||||||||||||||||
Number outstanding at beginning of period |
17,059,241 | $ | 29.95 | |||||||||||||
Granted |
1,066,188 | 54.97 | ||||||||||||||
Exercised |
(5,389,741 | ) | 29.58 | |||||||||||||
Cancelled(b) |
(67,221 | ) | 43.31 | |||||||||||||
|
|
|||||||||||||||
Number outstanding at end of period(c) |
12,668,467 | $ | 32.15 | 4.5 | $ | 272 | ||||||||||
Exercisable at end of period |
9,647,937 | $ | 27.87 | 3.3 | $ | 248 | ||||||||||
2016 |
||||||||||||||||
Number outstanding at beginning of period |
25,725,708 | $ | 29.82 | |||||||||||||
Granted |
1,644,288 | 39.50 | ||||||||||||||
Exercised |
(10,163,668 | ) | 31.09 | |||||||||||||
Cancelled(b) |
(147,087 | ) | 35.18 | |||||||||||||
|
|
|||||||||||||||
Number outstanding at end of period(c) |
17,059,241 | $ | 29.95 | 4.1 | $ | 365 | ||||||||||
Exercisable at end of period |
13,856,142 | $ | 27.53 | 3.1 | $ | 330 |
(a) | The Company did not grant any stock option awards during 2018. |
(b) | Options cancelled include both non-vested (i.e., forfeitures) and vested options. |
(c) | Outstanding options include stock-based awards that may be forfeited in future periods. The impact of the estimated forfeitures is reflected in compensation expense. |
Year Ended December 31 | 2017 | 2016 | ||||||
Estimated fair value |
$ | 14.66 | $ | 10.28 | ||||
Risk-free interest rates |
2.0 | % | 1.3 | % | ||||
Dividend yield |
2.6 | % | 2.6 | % | ||||
Stock volatility factor |
.35 | .36 | ||||||
Expected life of options (in years) |
5.5 | 5.5 |
114
|
||||||
The following summarizes certain stock option activity of the Company:
Year Ended December 31 (Dollars in Millions) | 2018 | 2017 | 2016 | |||||||||
Fair value of options vested |
$ | 14 | $ | 13 | $ | 18 | ||||||
Intrinsic value of options exercised |
97 | 127 | 138 | |||||||||
Cash received from options exercised |
87 | 159 | 316 | |||||||||
Tax benefit realized from options exercised |
| 49 | 53 |
To satisfy option exercises, the Company predominantly uses treasury stock.
Additional information regarding stock options outstanding as of December 31, 2018, is as follows:
Outstanding Options | Exercisable Options | |||||||||||||||||||
Range of Exercise Prices | Shares | Weighted- Average Remaining Contractual Life (Years) |
Weighted- Average Exercise Price |
Shares | Weighted- Average Exercise Price |
|||||||||||||||
$11.02$20.00 |
684,748 | 0.1 | $ | 11.20 | 684,748 | $ | 11.20 | |||||||||||||
$20.01$25.00 |
856,259 | 1.2 | 23.84 | 856,259 | 23.84 | |||||||||||||||
$25.01$30.00 |
2,711,719 | 2.6 | 28.65 | 2,711,719 | 28.65 | |||||||||||||||
$30.01$35.00 |
700,487 | 4.0 | 33.98 | 700,487 | 33.98 | |||||||||||||||
$35.01$40.00 |
1,415,509 | 7.1 | 39.49 | 669,718 | 39.49 | |||||||||||||||
$40.01$45.00 |
1,737,831 | 5.6 | 42.41 | 1,490,255 | 42.10 | |||||||||||||||
$45.01$50.00 |
| | | | | |||||||||||||||
$50.01$55.01 |
1,008,457 | 8.1 | 54.97 | 258,850 | 54.97 | |||||||||||||||
9,115,010 | 4.3 | $ | 34.52 | 7,372,036 | $ | 31.61 |
Restricted Stock and Unit Awards
A summary of the status of the Companys restricted shares of stock and unit awards is presented below:
2018 | 2017 | 2016 | ||||||||||||||||||||||
Year Ended December 31 | Shares | Weighted- Value |
Shares | Weighted- Value |
Shares | Weighted- Value |
||||||||||||||||||
Outstanding at beginning of period |
7,446,955 | $ | 44.49 | 8,265,507 | $ | 39.50 | 6,894,831 | $ | 38.44 | |||||||||||||||
Granted |
3,213,023 | 55.03 | 2,850,927 | 54.45 | 4,879,421 | 39.65 | ||||||||||||||||||
Vested |
(3,373,323 | ) | 46.42 | (3,295,376 | ) | 40.66 | (3,069,035 | ) | 37.25 | |||||||||||||||
Cancelled |
(567,357 | ) | 49.07 | (374,103 | ) | 43.91 | (439,710 | ) | 40.18 | |||||||||||||||
Outstanding at end of period |
6,719,298 | $ | 48.17 | 7,446,955 | $ | 44.49 | 8,265,507 | $ | 39.50 |
115
|
||||
|
Income Taxes |
The components of income tax expense were:
Year Ended December 31 (Dollars in Millions) | 2018 | 2017 | 2016 | |||||||||
Federal |
||||||||||||
Current |
$ | 1,287 | $ | 2,086 | $ | 2,585 | ||||||
Deferred |
(148 | ) | (1,180 | ) | (711 | ) | ||||||
|
|
|||||||||||
Federal income tax |
1,139 | 906 | 1,874 | |||||||||
State |
||||||||||||
Current |
395 | 201 | 337 | |||||||||
Deferred |
20 | 157 | (50 | ) | ||||||||
|
|
|||||||||||
State income tax |
415 | 358 | 287 | |||||||||
|
|
|||||||||||
Total income tax provision |
$ | 1,554 | $ | 1,264 | $ | 2,161 |
A reconciliation of expected income tax expense at the federal statutory rate of 21 percent for 2018 and 35 percent for 2017 and 2016 to the Companys applicable income tax expense follows:
Year Ended December 31 (Dollars in Millions) | 2018 | 2017 | 2016 | |||||||||
Tax at statutory rate |
$ | 1,822 | $ | 2,631 | $ | 2,837 | ||||||
State income tax, at statutory rates, net of federal tax benefit |
352 | 281 | 244 | |||||||||
Tax effect of |
||||||||||||
Revaluation of tax related assets and liabilities(a) |
| (910 | ) | | ||||||||
Tax credits and benefits, net of related expenses |
(513 | ) | (774 | ) | (710 | ) | ||||||
Tax-exempt income |
(130 | ) | (200 | ) | (196 | ) | ||||||
Noncontrolling interests |
(6 | ) | (12 | ) | (20 | ) | ||||||
Nondeductible legal and regulatory expenses |
52 | 213 | 30 | |||||||||
Other items(b) |
(23 | ) | 35 | (24 | ) | |||||||
|
|
|||||||||||
Applicable income taxes |
$ | 1,554 | $ | 1,264 | $ | 2,161 |
(a) | In late 2017, tax legislation was enacted that, among other provisions, reduced the federal statutory rate for corporations from 35 percent to 21 percent effective in 2018. In accordance with generally accepted accounting principles, the Company revalued its deferred tax assets and liabilities at December 31, 2017, resulting in an estimated net tax benefit of $910 million, which the Company recorded in 2017. |
(b) | Includes excess tax benefits associated with stock-based compensation and adjustments related to deferred tax assets and liabilities. |
116
|
||||||
A reconciliation of the changes in the federal, state and foreign unrecognized tax position balances are summarized as follows:
Year Ended December 31 (Dollars in Millions) | 2018 | 2017 | 2016 | |||||||||
Balance at beginning of period |
$ | 287 | $ | 302 | $ | 243 | ||||||
Additions (reductions) for tax positions taken in prior years |
93 | 3 | 57 | |||||||||
Additions for tax positions taken in the current year |
10 | 9 | 12 | |||||||||
Exam resolutions |
(51 | ) | (23 | ) | (6 | ) | ||||||
Statute expirations |
(4 | ) | (4 | ) | (4 | ) | ||||||
|
|
|||||||||||
Balance at end of period |
$ | 335 | $ | 287 | $ | 302 |
The significant components of the Companys net deferred tax asset (liability) follows:
At December 31 (Dollars in Millions) | 2018 | 2017 | ||||||
Deferred Tax Assets |
||||||||
Federal, state and foreign net operating loss and credit carryforwards |
$ | 2,699 | $ | 2,249 | ||||
Allowance for credit losses |
1,141 | 1,116 | ||||||
Accrued expenses |
508 | 468 | ||||||
Securities available-for-sale and financial instruments |
278 | 111 | ||||||
Pension and postretirement benefits |
85 | | ||||||
Stock compensation |
79 | 79 | ||||||
Partnerships and other investment assets |
69 | 252 | ||||||
Fixed assets |
58 | | ||||||
Other deferred tax assets, net |
268 | 215 | ||||||
|
|
|||||||
Gross deferred tax assets |
5,185 | 4,490 | ||||||
Deferred Tax Liabilities |
||||||||
Leasing activities |
(2,652 | ) | (2,277 | ) | ||||
Goodwill and other intangible assets |
(703 | ) | (693 | ) | ||||
Mortgage servicing rights |
(642 | ) | (604 | ) | ||||
Loans |
(168 | ) | (160 | ) | ||||
Pension and postretirement benefits |
| (20 | ) | |||||
Fixed assets |
| (4 | ) | |||||
Other deferred tax liabilities, net |
(102 | ) | (131 | ) | ||||
|
|
|||||||
Gross deferred tax liabilities |
(4,267 | ) | (3,889 | ) | ||||
Valuation allowance |
(109 | ) | (128 | ) | ||||
|
|
|||||||
Net Deferred Tax Asset (Liability) |
$ | 809 | $ | 473 | ||||
|
117
|
||||
The following table summarizes the asset and liability management derivative positions of the Company:
Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||
(Dollars in Millions) | Notional Value |
Fair Value |
Weighted-Average In Years |
Notional Value |
Fair Value |
Weighted-Average In Years |
||||||||||||||||||
December 31, 2018 |
||||||||||||||||||||||||
Cash flow hedges |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Pay fixed/receive floating swaps |
$ | 7,422 | $ | 8 | 3.11 | $ | 4,320 | $ | | 1.77 | ||||||||||||||
Net investment hedges |
||||||||||||||||||||||||
Foreign exchange forward contracts |
209 | 5 | .05 | 223 | 1 | .05 | ||||||||||||||||||
Other economic hedges |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Futures and forwards |
||||||||||||||||||||||||
Buy |
2,839 | 27 | .07 | 1,140 | 5 | .05 | ||||||||||||||||||
Sell |
994 | 3 | .06 | 13,968 | 30 | .72 | ||||||||||||||||||
Options |
||||||||||||||||||||||||
Purchased |
5,080 | 88 | 10.77 | | | | ||||||||||||||||||
Written |
584 | 16 | .09 | 3 | | .09 | ||||||||||||||||||
Receive fixed/pay floating swaps |
3,605 | | 14.80 | 4,333 | | 6.97 | ||||||||||||||||||
Pay fixed/receive floating swaps |
4,333 | | 6.97 | 1,132 | | 7.64 | ||||||||||||||||||
Foreign exchange forward contracts |
549 | 7 | .03 | 75 | 1 | .05 | ||||||||||||||||||
Equity contracts |
19 | 1 | .82 | 104 | 2 | .45 | ||||||||||||||||||
Credit contracts |
2,318 | | 3.50 | 4,923 | 2 | 4.04 | ||||||||||||||||||
Other (a) |
1 | | .01 | 1,458 | 84 | 1.50 | ||||||||||||||||||
Total |
$ | 27,953 | $ | 155 | $ | 31,679 | $ | 125 | ||||||||||||||||
December 31, 2017 |
||||||||||||||||||||||||
Fair value hedges |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Receive fixed/pay floating swaps |
$ | 1,000 | $ | 28 | 6.70 | $ | 3,600 | $ | 16 | 1.55 | ||||||||||||||
Cash flow hedges |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Pay fixed/receive floating swaps |
3,772 | 5 | 6.73 | | | | ||||||||||||||||||
Net investment hedges |
||||||||||||||||||||||||
Foreign exchange forward contracts |
| | | 373 | 8 | .05 | ||||||||||||||||||
Other economic hedges |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Futures and forwards |
||||||||||||||||||||||||
Buy |
1,632 | 7 | .10 | 1,326 | 2 | .04 | ||||||||||||||||||
Sell |
15,291 | 10 | .89 | 4,511 | 10 | .03 | ||||||||||||||||||
Options |
||||||||||||||||||||||||
Purchased |
4,985 | 65 | 7.57 | | | | ||||||||||||||||||
Written |
1,285 | 21 | .10 | 5 | | .05 | ||||||||||||||||||
Receive fixed/pay floating swaps |
2,019 | 5 | 16.49 | 5,469 | | 8.43 | ||||||||||||||||||
Pay fixed/receive floating swaps |
4,844 | 21 | 7.69 | 46 | 1 | 6.70 | ||||||||||||||||||
Foreign exchange forward contracts |
147 | 1 | .02 | 669 | 8 | .04 | ||||||||||||||||||
Equity contracts |
45 | | 1.10 | 88 | 1 | .58 | ||||||||||||||||||
Credit contracts |
1,559 | | 3.41 | 3,779 | 1 | 3.16 | ||||||||||||||||||
Other (a) |
| | | 1,164 | 125 | 2.50 | ||||||||||||||||||
Total |
$ | 36,579 | $ | 163 | $ | 21,030 | $ | 172 |
(a) | Includes derivative liability swap agreements related to the sale of a portion of the Companys Class B common shares of Visa Inc. The Visa swap agreements had a total notional value, fair value and weighted average remaining maturity of $1.5 billion, $84 million and 1.50 years at December 31, 2018, respectively, compared to $1.2 billion, $125 million and 2.50 years at December 31, 2017, respectively. In addition, includes short-term underwriting purchase and sale commitments with total asset and liability notional values of $1 million at December 31, 2018. |
119
|
||||
The following table summarizes the customer-related derivative positions of the Company:
Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||
(Dollars in Millions) | Notional Value |
Fair Value |
Weighted-Average Remaining Maturity In Years |
Notional Value |
Fair Value |
Weighted-Average Remaining Maturity In Years |
||||||||||||||||||
December 31, 2018 |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Receive fixed/pay floating swaps |
$ | 44,976 | $ | 755 | 6.49 | $ | 62,597 | $ | 456 | 4.28 | ||||||||||||||
Pay fixed/receive floating swaps |
63,825 | 289 | 4.07 | 45,129 | 422 | 6.16 | ||||||||||||||||||
Options |
||||||||||||||||||||||||
Purchased |
41,711 | 51 | 1.54 | 1,940 | 30 | 1.98 | ||||||||||||||||||
Written |
2,060 | 32 | 2.07 | 39,538 | 51 | 1.44 | ||||||||||||||||||
Futures |
||||||||||||||||||||||||
Buy |
460 | | 1.58 | | | | ||||||||||||||||||
Sell |
| | | 6,190 | 1 | .59 | ||||||||||||||||||
Foreign exchange rate contracts |
||||||||||||||||||||||||
Forwards, spots and swaps |
26,210 | 681 | .91 | 25,571 | 663 | .88 | ||||||||||||||||||
Options |
||||||||||||||||||||||||
Purchased |
2,779 | 47 | .75 | | | | ||||||||||||||||||
Written |
| | | 2,779 | 47 | .75 | ||||||||||||||||||
Total |
$ | 182,021 | $ | 1,855 | $ | 183,744 | $ | 1,670 | ||||||||||||||||
December 31, 2017 |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Receive fixed/pay floating swaps |
$ | 28,681 | $ | 679 | 5.71 | $ | 59,990 | $ | 840 | 4.27 | ||||||||||||||
Pay fixed/receive floating swaps |
63,038 | 860 | 4.20 | 25,093 | 602 | 5.76 | ||||||||||||||||||
Options |
||||||||||||||||||||||||
Purchased |
29,091 | 22 | 1.61 | 880 | 14 | 4.24 | ||||||||||||||||||
Written |
880 | 15 | 4.24 | 27,056 | 20 | 1.50 | ||||||||||||||||||
Futures |
||||||||||||||||||||||||
Sell |
7,007 | 4 | 1.21 | | | | ||||||||||||||||||
Foreign exchange rate contracts |
||||||||||||||||||||||||
Forwards, spots and swaps |
24,099 | 656 | .81 | 23,440 | 636 | .83 | ||||||||||||||||||
Options |
||||||||||||||||||||||||
Purchased |
4,026 | 83 | 1.20 | | | | ||||||||||||||||||
Written |
| | | 4,026 | 83 | 1.20 | ||||||||||||||||||
Total |
$ | 156,822 | $ | 2,319 | $ | 140,485 | $ | 2,195 |
120
|
||||||
The table below shows the effective portion of the gains (losses) recognized in other comprehensive income (loss) and the gains (losses) reclassified from other comprehensive income (loss) into earnings (net-of-tax) for the years ended December 31:
Gains (Losses) Recognized in Other Comprehensive Income (Loss) |
Gains (Losses) Reclassified from Other Comprehensive Income (Loss) into Earnings |
|||||||||||||||||||||||
(Dollars in Millions) | 2018 | 2017 | 2016 | 2018 | 2017 | 2016 | ||||||||||||||||||
Asset and Liability Management Positions |
||||||||||||||||||||||||
Cash flow hedges |
||||||||||||||||||||||||
Interest rate contracts |
$ | 29 | $ | (3 | ) | $ | 46 | $ | 3 | $ | (19 | ) | $ | (76 | ) | |||||||||
Net investment hedges |
||||||||||||||||||||||||
Foreign exchange forward contracts |
39 | (56 | ) | 33 | | | | |||||||||||||||||
Non-derivative debt instruments |
32 | (46 | ) | | | | |
Note: The Company does not exclude components from effectiveness testing for cash flow and net investment hedges.
The table below shows the effect of fair value and cash flow hedge accounting on the Consolidated Statement of Income for the years ended December 31:
Other Noninterest Income | Interest Expense | |||||||||||||||||||||||
(Dollars in Millions) | 2018 | 2017 | 2016 | 2018 | 2017 | 2016 | ||||||||||||||||||
Total amount of income and expense line items presented in the Consolidated Statement of Income in which the effects of fair value or cash flow hedges are recorded |
$ | 910 | $ | 774 | $ | 911 | $ | 3,254 | $ | 1,966 | $ | 1,468 | ||||||||||||
Asset and Liability Management Positions |
||||||||||||||||||||||||
Fair value hedges |
||||||||||||||||||||||||
Interest rate contract derivatives |
| (28 | ) | (31 | ) | 5 | | | ||||||||||||||||
Hedged items |
| 28 | 31 | (5 | ) | | | |||||||||||||||||
Cash Flow hedges |
||||||||||||||||||||||||
Interest rate contract derivatives |
| | | (5 | ) | 30 | 124 |
Note: The Company does not exclude components from effectiveness testing for fair value and cash flow hedges. The Company did not reclassify gains or losses into earnings as a result of the
discontinuance of cash flow hedges during the years ended December 31, 2018, 2017 and 2016.
The table below shows cumulative hedging adjustments and the carrying amount of assets (liabilities) designated in fair value hedges:
Carrying Amount of the Hedged Assets (Liabilities) |
Cumulative Hedging Adjustment (a) |
|||||||||||||||
At December 31 (Dollars in Millions) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Line Item in the Consolidated Balance Sheet |
||||||||||||||||
Long-term Debt |
$ | | $ | 4,584 | $ | (27 | ) | $ | (8 | ) |
(a) | The cumulative hedging adjustment at December 31, 2018 relates to discontinued hedging relationships. The Company did not have any hedging adjustments for discontinued fair value hedges at December 31, 2017. |
121
|
||||
The table below shows the gains (losses) recognized in earnings for other economic hedges and the customer-related positions for the years ended December 31:
(Dollars in Millions) | Location of Gains (Losses) Recognized in Earnings |
2018 | 2017 | 2016 | ||||||||||||
Asset and Liability Management Positions |
||||||||||||||||
Other economic hedges |
||||||||||||||||
Interest rate contracts |
||||||||||||||||
Futures and forwards |
Mortgage banking revenue | $ | 110 | $ | 24 | $ | 101 | |||||||||
Purchased and written options |
Mortgage banking revenue | 188 | 237 | 331 | ||||||||||||
Receive fixed/pay floating swaps |
Mortgage banking revenue | 61 | 255 | 226 | ||||||||||||
Pay fixed/receive floating swaps |
Mortgage banking revenue | (172 | ) | (220 | ) | (140 | ) | |||||||||
Foreign exchange forward contracts |
Other noninterest income | 39 | (69 | ) | (14 | ) | ||||||||||
Equity contracts |
Compensation expense | (4 | ) | 1 | 1 | |||||||||||
Credit contracts |
Other noninterest income | 2 | 3 | 1 | ||||||||||||
Other |
Other noninterest income | 2 | (1 | ) | (39 | ) | ||||||||||
Customer-Related Positions |
||||||||||||||||
Interest rate contracts |
||||||||||||||||
Receive fixed/pay floating swaps |
Commercial products revenue | (192 | ) | (876 | ) | (708 | ) | |||||||||
Pay fixed/receive floating swaps |
Commercial products revenue | 239 | 943 | 769 | ||||||||||||
Purchased and written options |
Commercial products revenue | 2 | (24 | ) | (5 | ) | ||||||||||
Futures |
Commercial products revenue | 9 | (3 | ) | (6 | ) | ||||||||||
Foreign exchange rate contracts |
||||||||||||||||
Forwards, spots and swaps |
Commercial products revenue | 84 | 92 | 88 | ||||||||||||
Purchased and written options |
Commercial products revenue | | 2 | (1 | ) |
122
|
||||||
The following table summarizes the maturities by category of collateral pledged for repurchase agreements and securities loaned transactions:
(Dollars in Millions) | Overnight and Continuous |
Less Than 30 Days |
30-89 Days | Greater Than 90 Days |
Total | |||||||||||||||
December 31, 2018 |
||||||||||||||||||||
Repurchase agreements |
||||||||||||||||||||
U.S. Treasury and agencies |
$ | 134 | $ | | $ | | $ | | $ | 134 | ||||||||||
Residential agency mortgage-backed securities |
565 | | 945 | 470 | 1,980 | |||||||||||||||
Corporate debt securities |
480 | | | | 480 | |||||||||||||||
Total repurchase agreements |
1,179 | | 945 | 470 | 2,594 | |||||||||||||||
Securities loaned |
||||||||||||||||||||
Corporate debt securities |
227 | | | | 227 | |||||||||||||||
Total securities loaned |
227 | | | | 227 | |||||||||||||||
Gross amount of recognized liabilities |
$ | 1,406 | $ | | $ | 945 | $ | 470 | $ | 2,821 | ||||||||||
December 31, 2017 |
||||||||||||||||||||
Repurchase agreements |
||||||||||||||||||||
U.S. Treasury and agencies |
$ | 25 | $ | | $ | | $ | | $ | 25 | ||||||||||
Residential agency mortgage-backed securities |
644 | 30 | | | 674 | |||||||||||||||
Corporate debt securities |
104 | | | | 104 | |||||||||||||||
Total repurchase agreements |
773 | 30 | | | 803 | |||||||||||||||
Securities loaned |
||||||||||||||||||||
Corporate debt securities |
111 | | | | 111 | |||||||||||||||
Total securities loaned |
111 | | | | 111 | |||||||||||||||
Gross amount of recognized liabilities |
$ | 884 | $ | 30 | $ | | $ | | $ | 914 |
The following tables provide information on the Companys netting adjustments, and items not offset on the Consolidated Balance Sheet but available for offset in the event of default:
Gross |
Gross Amounts |
Net Amounts |
Gross Amounts Not Offset on the Consolidated Balance Sheet |
|||||||||||||||||||||
(Dollars in Millions) | Financial Instruments (b) |
Collateral Received (c) |
Net Amount | |||||||||||||||||||||
December 31, 2018 |
||||||||||||||||||||||||
Derivative assets (d) |
$ | 1,987 | $ | (942 | ) | $ | 1,045 | $ | (106 | ) | $ | (16 | ) | $ | 923 | |||||||||
Reverse repurchase agreements |
205 | | 205 | (114 | ) | (91 | ) | | ||||||||||||||||
Securities borrowed |
1,069 | | 1,069 | | (1,039 | ) | 30 | |||||||||||||||||
Total |
$ | 3,261 | $ | (942 | ) | $ | 2,319 | $ | (220 | ) | $ | (1,146 | ) | $ | 953 | |||||||||
December 31, 2017 |
||||||||||||||||||||||||
Derivative assets (d) |
$ | 1,759 | $ | (652 | ) | $ | 1,107 | $ | (110 | ) | $ | (5 | ) | $ | 992 | |||||||||
Reverse repurchase agreements |
24 | | 24 | (24 | ) | | | |||||||||||||||||
Securities borrowed |
923 | | 923 | | (896 | ) | 27 | |||||||||||||||||
Total |
$ | 2,706 | $ | (652 | ) | $ | 2,054 | $ | (134 | ) | $ | (901 | ) | $ | 1,019 |
(a) | Includes $236 million and $50 million of cash collateral related payables that were netted against derivative assets at December 31, 2018 and 2017, respectively. |
(b) | For derivative assets this includes any derivative liability fair values that could be offset in the event of counterparty default; for reverse repurchase agreements this includes any repurchase agreement payables that could be offset in the event of counterparty default; for securities borrowed this includes any securities loaned payables that could be offset in the event of counterparty default. |
(c) | Includes the fair value of securities received by the Company from the counterparty. These securities are not included on the Consolidated Balance Sheet unless the counterparty defaults. |
(d) | Excludes $23 million and $723 million at December 31, 2018 and 2017, respectively, of derivative assets not subject to netting arrangements. |
124
|
||||||
Gross |
Gross Amounts |
Net
Amounts |
Gross Amounts Not Offset on the Consolidated Balance Sheet |
|||||||||||||||||||||
(Dollars in Millions) | Financial Instruments(b) |
Collateral Pledged(c) |
Net Amount |
|||||||||||||||||||||
December 31, 2018 |
||||||||||||||||||||||||
Derivative liabilities (d) |
$ | 1,710 | $ | (946 | ) | $ | 764 | $ | (106 | ) | $ | | $ | 658 | ||||||||||
Repurchase agreements |
2,594 | | 2,594 | (114 | ) | (2,480 | ) | | ||||||||||||||||
Securities loaned |
227 | | 227 | | (224 | ) | 3 | |||||||||||||||||
Total |
$ | 4,531 | $ | (946 | ) | $ | 3,585 | $ | (220 | ) | $ | (2,704 | ) | $ | 661 | |||||||||
December 31, 2017 |
||||||||||||||||||||||||
Derivative liabilities (d) |
$ | 1,629 | $ | (1,130 | ) | $ | 499 | $ | (110 | ) | $ | | $ | 389 | ||||||||||
Repurchase agreements |
803 | | 803 | (24 | ) | (779 | ) | | ||||||||||||||||
Securities loaned |
111 | | 111 | | (110 | ) | 1 | |||||||||||||||||
Total |
$ | 2,543 | $ | (1,130 | ) | $ | 1,413 | $ | (134 | ) | $ | (889 | ) | $ | 390 |
(a) | Includes $240 million and $528 million of cash collateral related receivables that were netted against derivative liabilities at December 31, 2018 and 2017, respectively. |
(b) | For derivative liabilities this includes any derivative asset fair values that could be offset in the event of counterparty default; for repurchase agreements this includes any reverse repurchase agreement receivables that could be offset in the event of counterparty default; for securities loaned this includes any securities borrowed receivables that could be offset in the event of counterparty default. |
(c) | Includes the fair value of securities pledged by the Company to the counterparty. These securities are included on the Consolidated Balance Sheet unless the Company defaults. |
(d) | Excludes $85 million and $738 million at December 31, 2018 and 2017, respectively, of derivative liabilities not subject to netting arrangements. |
NOTE 21 | Fair Values of Assets and Liabilities |
125
|
||||
126
|
||||||
The following table shows the significant valuation assumption ranges for MSRs at December 31, 2018:
Minimum | Maximum | Weighted Average(a) |
||||||||||
Expected prepayment |
7 | % | 17 | % | 10 | % | ||||||
Option adjusted spread |
7 | 10 | 8 |
(a) | Determined based on the relative fair value of the related mortgage loans serviced. |
The following table shows the significant valuation assumption ranges for the Companys derivative commitments to purchase and originate mortgage loans at December 31, 2018:
Minimum | Maximum | Weighted Average(a) |
||||||||||
Expected loan close rate |
4 | % | 100 | % | 78 | % | ||||||
Inherent MSR value (basis points per loan) |
39 | 206 | 115 |
(a) | Determined based on the relative fair value of the related mortgage loans. |
127
|
||||
The following table summarizes the balances of assets and liabilities measured at fair value on a recurring basis:
(Dollars in Millions) | Level 1 | Level 2 | Level 3 | Netting | Total | |||||||||||||||
December 31, 2018 |
||||||||||||||||||||
Available-for-sale securities |
||||||||||||||||||||
U.S. Treasury and agencies |
$ | 18,585 | $ | 672 | $ | | $ | | $ | 19,257 | ||||||||||
Mortgage-backed securities |
||||||||||||||||||||
Residential agency |
| 39,752 | | | 39,752 | |||||||||||||||
Commercial agency |
| 2 | | | 2 | |||||||||||||||
Other asset-backed securities |
| 403 | | | 403 | |||||||||||||||
Obligations of state and political subdivisions |
| 6,701 | | | 6,701 | |||||||||||||||
Total available-for-sale |
18,585 | 47,530 | | | 66,115 | |||||||||||||||
Mortgage loans held for sale |
| 2,035 | | | 2,035 | |||||||||||||||
Mortgage servicing rights |
| | 2,791 | | 2,791 | |||||||||||||||
Derivative assets |
| 1,427 | 583 | (942 | ) | 1,068 | ||||||||||||||
Other assets |
392 | 1,273 | | | 1,665 | |||||||||||||||
Total |
$ | 18,977 | $ | 52,265 | $ | 3,374 | $ | (942 | ) | $ | 73,674 | |||||||||
Derivative liabilities |
$ | 1 | $ | 1,291 | $ | 503 | $ | (946 | ) | $ | 849 | |||||||||
Short-term borrowings and other liabilities(a) |
199 | 1,019 | | | 1,218 | |||||||||||||||
Total |
$ | 200 | $ | 2,310 | $ | 503 | $ | (946 | ) | $ | 2,067 | |||||||||
December 31, 2017 |
||||||||||||||||||||
Available-for-sale securities |
||||||||||||||||||||
U.S. Treasury and agencies |
$ | 22,572 | $ | 729 | $ | | $ | | $ | 23,301 | ||||||||||
Mortgage-backed securities |
||||||||||||||||||||
Residential agency |
| 38,031 | | | 38,031 | |||||||||||||||
Commercial agency |
| 6 | | | 6 | |||||||||||||||
Other asset-backed securities |
| 419 | | | 419 | |||||||||||||||
Obligations of state and political subdivisions |
| 6,358 | | | 6,358 | |||||||||||||||
Other |
22 | | | | 22 | |||||||||||||||
Total available-for-sale |
22,594 | 45,543 | | | 68,137 | |||||||||||||||
Mortgage loans held for sale |
| 3,534 | | | 3,534 | |||||||||||||||
Mortgage servicing rights |
| | 2,645 | | 2,645 | |||||||||||||||
Derivative assets |
6 | 1,960 | 516 | (652 | ) | 1,830 | ||||||||||||||
Other assets |
154 | 1,163 | | | 1,317 | |||||||||||||||
Total |
$ | 22,754 | $ | 52,200 | $ | 3,161 | $ | (652 | ) | $ | 77,463 | |||||||||
Derivative liabilities |
$ | | $ | 1,958 | $ | 409 | $ | (1,130 | ) | $ | 1,237 | |||||||||
Short-term borrowings and other liabilities(a) |
101 | 894 | | | 995 | |||||||||||||||
Total |
$ | 101 | $ | 2,852 | $ | 409 | $ | (1,130 | ) | $ | 2,232 |
Note: Excluded from the table above are equity investments without readily determinable fair values. The Company has elected to carry these investments at historical cost, adjusted for impairment and any changes resulting from observable price changes for identical or similar investments of the issuer. The aggregate carrying amount of these equity investments was $86 million at December 31, 2018. The Company has not recorded impairments or adjustments for observable price changes on these equity investments during 2018 or on a cumulative basis.
(a) | Primarily represents the Companys obligation on securities sold short required to be accounted for at fair value per applicable accounting guidance. |
128
|
||||||
The following table presents the changes in fair value for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31:
(Dollars in Millions) | Beginning of Period Balance |
Net Gains (Losses) Included in Net Income |
Net Gains (Losses) Included in Other Comprehensive Income (Loss) |
Purchases | Sales | Principal Payments |
Issuances | Settlements | End of Period Balance |
Net Change Held at End of Period |
||||||||||||||||||||||||||||||
2018 |
||||||||||||||||||||||||||||||||||||||||
Mortgage servicing rights |
$ | 2,645 | $ | (232 | )(c) | $ | | $ | 8 | $ | (27 | ) | $ | | $ | 397 | (e) | $ | | $ | 2,791 | $ | (232 | )(c) | ||||||||||||||||
Net derivative assets and liabilities |
107 | 21 | (d) | | 13 | (41 | ) | | | (20 | ) | 80 | 34 | (f) | ||||||||||||||||||||||||||
2017 |
||||||||||||||||||||||||||||||||||||||||
Available-for-sale securities |
||||||||||||||||||||||||||||||||||||||||
Residential non-agency mortgage-backed securities |
||||||||||||||||||||||||||||||||||||||||
Prime(a) |
$ | 242 | $ | | $ | (2 | ) | $ | | $ | (234 | ) | $ | (6 | ) | $ | | $ | | $ | | $ | | |||||||||||||||||
Non-prime(b) |
195 | | (17 | ) | | (175 | ) | (3 | ) | | | | | |||||||||||||||||||||||||||
Other asset-backed securities |
2 | | | | (2 | ) | | | | | | |||||||||||||||||||||||||||||
Corporate debt securities |
9 | | 2 | | (11 | ) | | | | | | |||||||||||||||||||||||||||||
Total available-for-sale |
448 | | (17 | )(g) | | (422 | ) | (9 | ) | | | | | |||||||||||||||||||||||||||
Mortgage servicing rights |
2,591 | (404 | )(c) | | 13 | | | 445 | (e) | | 2,645 | (404 | )(c) | |||||||||||||||||||||||||||
Net derivative assets and liabilities |
171 | 317 | (h) | | 1 | (10 | ) | | | (372 | ) | 107 | (52 | )(i) | ||||||||||||||||||||||||||
2016 |
||||||||||||||||||||||||||||||||||||||||
Available-for-sale securities |
||||||||||||||||||||||||||||||||||||||||
Residential non-agency mortgage-backed securities |
||||||||||||||||||||||||||||||||||||||||
Prime(a) |
$ | 318 | $ | (1 | ) | $ | | $ | | $ | | $ | (75 | ) | $ | | $ | | $ | 242 | $ | | ||||||||||||||||||
Non-prime(b) |
240 | (1 | ) | (2 | ) | | | (42 | ) | | | 195 | (2 | ) | ||||||||||||||||||||||||||
Other asset-backed securities |
2 | | | | | | | | 2 | | ||||||||||||||||||||||||||||||
Corporate debt securities |
9 | | | | | | | | 9 | | ||||||||||||||||||||||||||||||
Total available-for-sale |
569 | (2 | )(j) | (2 | )(g) | | | (117 | ) | | | 448 | (2 | ) | ||||||||||||||||||||||||||
Mortgage servicing rights |
2,512 | (488 | )(c) | | 43 | | | 524 | (e) | | 2,591 | (488 | )(c) | |||||||||||||||||||||||||||
Net derivative assets and liabilities |
498 | 332 | (k) | | 2 | (14 | ) | | | (647 | ) | 171 | (257 | )(l) |
(a) | Prime securities are those designated as such by the issuer at origination. When an issuer designation is unavailable, the Company determines at acquisition date the categorization based on asset pool characteristics (such as weighted-average credit score, loan-to-value, loan type, prevalence of low documentation loans) and deal performance (such as pool delinquencies and security market spreads). |
(b) | Includes all securities not meeting the conditions to be designated as prime. |
(c) | Included in mortgage banking revenue. |
(d) | Approximately $(139) million included in other noninterest income and $160 million included in mortgage banking revenue. |
(e) | Represents MSRs capitalized during the period. |
(f) | Approximately $14 million included in other noninterest income and $20 million included in mortgage banking revenue. |
(g) | Included in changes in unrealized gains and losses on investment securities available-for-sale. |
(h) | Approximately $21 million included in other noninterest income and $296 million included in mortgage banking revenue. |
(i) | Approximately $(77) million included in other noninterest income and $25 million included in mortgage banking revenue. |
(j) | Approximately $(3) million included in securities gains (losses) and $1 million included in interest income. |
(k) | Approximately $(77) million included in other noninterest income and $409 million included in mortgage banking revenue. |
(l) | Approximately $(276) million included in other noninterest income and $19 million included in mortgage banking revenue. |
129
|
||||
The Company is also required periodically to measure certain other financial assets at fair value on a nonrecurring basis. These measurements of fair value usually result from the application of lower-of-cost-or-fair value accounting or write-downs of individual assets.
The following table summarizes the balances as of the measurement date of assets measured at fair value on a nonrecurring basis, and still held as of December 31:
2018 | 2017 | |||||||||||||||||||||||||||||||
(Dollars in Millions) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Loans(a) |
$ | | $ | | $ | 40 | $ | 40 | $ | | $ | | $ | 150 | $ | 150 | ||||||||||||||||
Other assets(b) |
| | 57 | 57 | | | 31 | 31 |
(a) | Represents the carrying value of loans for which adjustments were based on the fair value of the collateral, excluding loans fully charged-off. |
(b) | Primarily represents the fair value of foreclosed properties that were measured at fair value based on an appraisal or broker price opinion of the collateral subsequent to their initial acquisition. |
The following table summarizes losses recognized related to nonrecurring fair value measurements of individual assets or portfolios for the years ended December 31:
(Dollars in Millions) | 2018 | 2017 | 2016 | |||||||||
Loans(a) |
$ | 83 | $ | 171 | $ | 192 | ||||||
Other assets(b) |
26 | 20 | 32 |
(a) | Represents write-downs of loans which were based on the fair value of the collateral, excluding loans fully charged-off. |
(b) | Primarily represents related losses of foreclosed properties that were measured at fair value subsequent to their initial acquisition. |
Fair Value Option
The following table summarizes the differences between the aggregate fair value carrying amount of MLHFS for which the fair value option has been elected and the aggregate unpaid principal amount that the Company is contractually obligated to receive at maturity as of December 31:
2018 | 2017 | |||||||||||||||||||||||
(Dollars in Millions) | Fair Value Carrying Amount |
Aggregate Unpaid Principal |
Carrying Amount Over (Under) Unpaid Principal |
Fair Value Carrying Amount |
Aggregate Unpaid Principal |
Carrying Amount Over (Under) Unpaid Principal |
||||||||||||||||||
Total loans |
$ | 2,035 | $ | 1,972 | $ | 63 | $ | 3,534 | $ | 3,434 | $ | 100 | ||||||||||||
Nonaccrual loans |
2 | 2 | | 1 | 2 | (1 | ) | |||||||||||||||||
Loans 90 days or more past due |
| | | 1 | 1 | |
130
|
||||||
The estimated fair values of the Companys financial instruments as of December 31, are shown in the table below:
2018 | 2017 | |||||||||||||||||||||||||||||||||||||||
Carrying Amount |
Fair Value | Carrying Amount |
Fair Value | |||||||||||||||||||||||||||||||||||||
(Dollars in Millions) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||
Financial Assets |
||||||||||||||||||||||||||||||||||||||||
Cash and due from banks |
$ | 21,453 | $ | 21,453 | $ | | $ | | $ | 21,453 | $ | 19,505 | $ | 19,505 | $ | | $ | | $ | 19,505 | ||||||||||||||||||||
Federal funds sold and securities purchased under resale agreements |
306 | | 306 | | 306 | 93 | | 93 | | 93 | ||||||||||||||||||||||||||||||
Investment securities held-to-maturity |
46,050 | 4,594 | 40,359 | 11 | 44,964 | 44,362 | 4,613 | 39,095 | 15 | 43,723 | ||||||||||||||||||||||||||||||
Loans held for sale(a) |
21 | | | 21 | 21 | 20 | | | 20 | 20 | ||||||||||||||||||||||||||||||
Loans |
282,837 | | | 284,790 | 284,790 | 276,507 | | | 279,391 | 279,391 | ||||||||||||||||||||||||||||||
Other |
2,412 | | 1,241 | 1,171 | 2,412 | 2,393 | | 1,037 | 1,364 | 2,401 | ||||||||||||||||||||||||||||||
Financial Liabilities |
||||||||||||||||||||||||||||||||||||||||
Time deposits |
44,554 | | 44,140 | | 44,140 | 33,356 | | 33,120 | | 33,120 | ||||||||||||||||||||||||||||||
Short-term borrowings(b) |
12,921 | | 12,678 | | 12,678 | 15,656 | | 15,447 | | 15,447 | ||||||||||||||||||||||||||||||
Long-term debt |
41,340 | | 41,003 | | 41,003 | 32,259 | | 32,377 | | 32,377 | ||||||||||||||||||||||||||||||
Other |
1,726 | | | 1,726 | 1,726 | 1,556 | | | 1,556 | 1,556 |
(a) | Excludes mortgages held for sale for which the fair value option under applicable accounting guidance was elected. |
(b) | Excludes the Companys obligation on securities sold short required to be accounted for at fair value per applicable accounting guidance. |
|
Guarantees and Contingent Liabilities |
131
|
||||
132
|
||||||
133
|
||||
134
|
||||||
|
U.S. Bancorp (Parent Company)
|
Condensed Balance Sheet
At December 31 (Dollars in Millions) | 2018 | 2017 | ||||||
Assets |
||||||||
Due from banks, principally interest-bearing |
$ | 9,969 | $ | 9,157 | ||||
Available-for-sale securities |
921 | 963 | ||||||
Investments in bank subsidiaries |
47,549 | 46,435 | ||||||
Investments in nonbank subsidiaries |
2,568 | 2,540 | ||||||
Advances to bank subsidiaries |
3,800 | 3,300 | ||||||
Advances to nonbank subsidiaries |
2,543 | 2,055 | ||||||
Other assets |
813 | 1,079 | ||||||
|
|
|||||||
Total assets |
$ | 68,163 | $ | 65,529 | ||||
|
|
|||||||
Liabilities and Shareholders Equity |
||||||||
Short-term funds borrowed |
$ | | $ | 1 | ||||
Long-term debt |
16,291 | 15,769 | ||||||
Other liabilities |
843 | 719 | ||||||
Shareholders equity |
51,029 | 49,040 | ||||||
|
|
|||||||
Total liabilities and shareholders equity |
$ | 68,163 | $ | 65,529 |
135
|
||||
Condensed Income Statement
Year Ended December 31 (Dollars in Millions) | 2018 | 2017 | 2016 | |||||||||
Income |
||||||||||||
Dividends from bank subsidiaries |
$ | 5,300 | $ | 4,800 | $ | 2,100 | ||||||
Dividends from nonbank subsidiaries |
6 | 5 | 4 | |||||||||
Interest from subsidiaries |
220 | 159 | 140 | |||||||||
Other income |
33 | 41 | 57 | |||||||||
|
|
|||||||||||
Total income |
5,559 | 5,005 | 2,301 | |||||||||
Expense |
||||||||||||
Interest expense |
471 | 402 | 327 | |||||||||
Other expense |
133 | 124 | 123 | |||||||||
|
|
|||||||||||
Total expense |
604 | 526 | 450 | |||||||||
|
|
|||||||||||
Income before income taxes and equity in undistributed income of subsidiaries |
4,955 | 4,479 | 1,851 | |||||||||
Applicable income taxes |
(91 | ) | (176 | ) | (97 | ) | ||||||
|
|
|||||||||||
Income of parent company |
5,046 | 4,655 | 1,948 | |||||||||
Equity in undistributed income of subsidiaries |
2,050 | 1,563 | 3,940 | |||||||||
|
|
|||||||||||
Net income attributable to U.S. Bancorp |
$ | 7,096 | $ | 6,218 | $ | 5,888 |
Condensed Statement of Cash Flows
Year Ended December 31 (Dollars in Millions) | 2018 | 2017 | 2016 | |||||||||
Operating Activities |
||||||||||||
Net income attributable to U.S. Bancorp |
$ | 7,096 | $ | 6,218 | $ | 5,888 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities |
||||||||||||
Equity in undistributed income of subsidiaries |
(2,050 | ) | (1,563 | ) | (3,940 | ) | ||||||
Other, net |
359 | (125 | ) | 75 | ||||||||
|
|
|||||||||||
Net cash provided by operating activities |
5,405 | 4,530 | 2,023 | |||||||||
Investing Activities |
||||||||||||
Proceeds from sales and maturities of investment securities |
39 | 100 | 232 | |||||||||
Purchases of investment securities |
(10 | ) | (844 | ) | (120 | ) | ||||||
Net increase in short-term advances to subsidiaries |
(488 | ) | (790 | ) | (442 | ) | ||||||
Long-term advances to subsidiaries |
(500 | ) | | (750 | ) | |||||||
Principal collected on long-term advances to subsidiaries |
| 500 | 100 | |||||||||
Other, net |
304 | (12 | ) | (12 | ) | |||||||
|
|
|||||||||||
Net cash used in investing activities |
(655 | ) | (1,046 | ) | (992 | ) | ||||||
Financing Activities |
||||||||||||
Net decrease in short-term borrowings |
(1 | ) | (21 | ) | (3 | ) | ||||||
Proceeds from issuance of long-term debt |
2,100 | 3,920 | 3,550 | |||||||||
Principal payments or redemption of long-term debt |
(1,500 | ) | (1,250 | ) | (1,926 | ) | ||||||
Proceeds from issuance of preferred stock |
565 | 993 | | |||||||||
Proceeds from issuance of common stock |
86 | 159 | 355 | |||||||||
Repurchase of preferred stock |
| (1,085 | ) | | ||||||||
Repurchase of common stock |
(2,822 | ) | (2,631 | ) | (2,556 | ) | ||||||
Cash dividends paid on preferred stock |
(274 | ) | (284 | ) | (267 | ) | ||||||
Cash dividends paid on common stock |
(2,092 | ) | (1,928 | ) | (1,810 | ) | ||||||
|
|
|||||||||||
Net cash used in financing activities |
(3,938 | ) | (2,127 | ) | (2,657 | ) | ||||||
|
|
|||||||||||
Change in cash and due from banks |
812 | 1,357 | (1,626 | ) | ||||||||
Cash and due from banks at beginning of year |
9,157 | 7,800 | 9,426 | |||||||||
|
|
|||||||||||
Cash and due from banks at end of year |
$ | 9,969 | $ | 9,157 | $ | 7,800 |
136
|
||||||
U.S. Bancorp
Consolidated Balance SheetFive Year Summary (Unaudited)
At December 31 (Dollars in Millions) | 2018 | 2017 | 2016 | 2015 | 2014 | % Change 2018 v 2017 |
||||||||||||||||||
Assets |
||||||||||||||||||||||||
Cash and due from banks |
$ | 21,453 | $ | 19,505 | $ | 15,705 | $ | 11,147 | $ | 10,654 | 10.0 | % | ||||||||||||
Held-to-maturity securities |
46,050 | 44,362 | 42,991 | 43,590 | 44,974 | 3.8 | ||||||||||||||||||
Available-for-sale securities |
66,115 | 68,137 | 66,284 | 61,997 | 56,069 | (3.0 | ) | |||||||||||||||||
Loans held for sale |
2,056 | 3,554 | 4,826 | 3,184 | 4,792 | (42.1 | ) | |||||||||||||||||
Loans |
286,810 | 280,432 | 273,207 | 260,849 | 247,851 | 2.3 | ||||||||||||||||||
Less allowance for loan losses |
(3,973 | ) | (3,925 | ) | (3,813 | ) | (3,863 | ) | (4,039 | ) | (1.2 | ) | ||||||||||||
Net loans |
282,837 | 276,507 | 269,394 | 256,986 | 243,812 | 2.3 | ||||||||||||||||||
Other assets |
48,863 | 49,975 | 46,764 | 44,949 | 42,228 | (2.2 | ) | |||||||||||||||||
Total assets |
$ | 467,374 | $ | 462,040 | $ | 445,964 | $ | 421,853 | $ | 402,529 | 1.2 | |||||||||||||
Liabilities and Shareholders Equity |
||||||||||||||||||||||||
Deposits |
||||||||||||||||||||||||
Noninterest-bearing |
$ | 81,811 | $ | 87,557 | $ | 86,097 | $ | 83,766 | $ | 77,323 | (6.6 | )% | ||||||||||||
Interest-bearing |
263,664 | 259,658 | 248,493 | 216,634 | 205,410 | 1.5 | ||||||||||||||||||
Total deposits |
345,475 | 347,215 | 334,590 | 300,400 | 282,733 | (.5 | ) | |||||||||||||||||
Short-term borrowings |
14,139 | 16,651 | 13,963 | 27,877 | 29,893 | (15.1 | ) | |||||||||||||||||
Long-term debt |
41,340 | 32,259 | 33,323 | 32,078 | 32,260 | 28.2 | ||||||||||||||||||
Other liabilities |
14,763 | 16,249 | 16,155 | 14,681 | 13,475 | (9.1 | ) | |||||||||||||||||
Total liabilities |
415,717 | 412,374 | 398,031 | 375,036 | 358,361 | .8 | ||||||||||||||||||
Total U.S. Bancorp shareholders equity |
51,029 | 49,040 | 47,298 | 46,131 | 43,479 | 4.1 | ||||||||||||||||||
Noncontrolling interests |
628 | 626 | 635 | 686 | 689 | .3 | ||||||||||||||||||
Total equity |
51,657 | 49,666 | 47,933 | 46,817 | 44,168 | 4.0 | ||||||||||||||||||
Total liabilities and equity |
$ | 467,374 | $ | 462,040 | $ | 445,964 | $ | 421,853 | $ | 402,529 | 1.2 |
138
|
||||||
U.S. Bancorp
Consolidated Statement of Income Five-Year Summary (Unaudited)
Year Ended December 31 (Dollars in Millions) | 2018 | 2017 | 2016 | 2015 | 2014 | % Change 2018 v 2017 |
||||||||||||||||||
Interest Income |
||||||||||||||||||||||||
Loans |
$ | 13,120 | $ | 11,788 | $ | 10,777 | $ | 10,034 | $ | 10,101 | 11.3 | % | ||||||||||||
Loans held for sale |
165 | 144 | 154 | 206 | 128 | 14.6 | ||||||||||||||||||
Investment securities |
2,616 | 2,232 | 2,078 | 2,001 | 1,866 | 17.2 | ||||||||||||||||||
Other interest income |
272 | 182 | 125 | 136 | 121 | 49.5 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Total interest income |
16,173 | 14,346 | 13,134 | 12,377 | 12,216 | 12.7 | ||||||||||||||||||
Interest Expense |
||||||||||||||||||||||||
Deposits |
1,869 | 1,041 | 622 | 457 | 465 | 79.5 | ||||||||||||||||||
Short-term borrowings |
378 | 141 | 92 | 70 | 77 | * | ||||||||||||||||||
Long-term debt |
1,007 | 784 | 754 | 699 | 725 | 28.4 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Total interest expense |
3,254 | 1,966 | 1,468 | 1,226 | 1,267 | 65.5 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Net interest income |
12,919 | 12,380 | 11,666 | 11,151 | 10,949 | 4.4 | ||||||||||||||||||
Provision for credit losses |
1,379 | 1,390 | 1,324 | 1,132 | 1,229 | (.8 | ) | |||||||||||||||||
|
|
|||||||||||||||||||||||
Net interest income after provision for credit losses |
11,540 | 10,990 | 10,342 | 10,019 | 9,720 | 5.0 | ||||||||||||||||||
Noninterest Income |
||||||||||||||||||||||||
Credit and debit card revenue |
1,401 | 1,289 | 1,206 | 1,095 | 1,036 | 8.7 | ||||||||||||||||||
Corporate payment products revenue |
644 | 575 | 541 | 533 | 538 | 12.0 | ||||||||||||||||||
Merchant processing services |
1,531 | 1,486 | 1,498 | 1,468 | 1,437 | 3.0 | ||||||||||||||||||
ATM processing services |
308 | 303 | 277 | 259 | 262 | 1.7 | ||||||||||||||||||
Trust and investment management fees |
1,619 | 1,522 | 1,427 | 1,321 | 1,252 | 6.4 | ||||||||||||||||||
Deposit service charges |
762 | 732 | 706 | 683 | 675 | 4.1 | ||||||||||||||||||
Treasury management fees |
594 | 618 | 583 | 561 | 545 | (3.9 | ) | |||||||||||||||||
Commercial products revenue |
895 | 954 | 971 | 918 | 884 | (6.2 | ) | |||||||||||||||||
Mortgage banking revenue |
720 | 834 | 979 | 906 | 1,009 | (13.7 | ) | |||||||||||||||||
Investment products fees |
188 | 173 | 169 | 197 | 202 | 8.7 | ||||||||||||||||||
Securities gains (losses), net |
30 | 57 | 22 | | 3 | (47.4 | ) | |||||||||||||||||
Other |
910 | 774 | 911 | 877 | 1,032 | 17.6 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Total noninterest income |
9,602 | 9,317 | 9,290 | 8,818 | 8,875 | 3.1 | ||||||||||||||||||
Noninterest Expense |
||||||||||||||||||||||||
Compensation |
6,162 | 5,746 | 5,212 | 4,812 | 4,523 | 7.2 | ||||||||||||||||||
Employee benefits |
1,231 | 1,134 | 1,008 | 970 | 906 | 8.6 | ||||||||||||||||||
Net occupancy and equipment |
1,063 | 1,019 | 988 | 991 | 987 | 4.3 | ||||||||||||||||||
Professional services |
407 | 419 | 502 | 423 | 414 | (2.9 | ) | |||||||||||||||||
Marketing and business development |
429 | 542 | 435 | 360 | 381 | (20.8 | ) | |||||||||||||||||
Technology and communications |
978 | 903 | 877 | 816 | 792 | 8.3 | ||||||||||||||||||
Postage, printing and supplies |
324 | 323 | 311 | 297 | 328 | .3 | ||||||||||||||||||
Other intangibles |
161 | 175 | 179 | 174 | 199 | (8.0 | ) | |||||||||||||||||
Other |
1,709 | 2,529 | 2,015 | 1,964 | 2,070 | (32.4 | ) | |||||||||||||||||
|
|
|||||||||||||||||||||||
Total noninterest expense |
12,464 | 12,790 | 11,527 | 10,807 | 10,600 | (2.5 | ) | |||||||||||||||||
|
|
|||||||||||||||||||||||
Income before income taxes |
8,678 | 7,517 | 8,105 | 8,030 | 7,995 | 15.4 | ||||||||||||||||||
Applicable income taxes |
1,554 | 1,264 | 2,161 | 2,097 | 2,087 | 22.9 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Net income |
7,124 | 6,253 | 5,944 | 5,933 | 5,908 | 13.9 | ||||||||||||||||||
Net (income) loss attributable to noncontrolling interests |
(28 | ) | (35 | ) | (56 | ) | (54 | ) | (57 | ) | 20.0 | |||||||||||||
|
|
|||||||||||||||||||||||
Net income attributable to U.S. Bancorp |
$ | 7,096 | $ | 6,218 | $ | 5,888 | $ | 5,879 | $ | 5,851 | 14.1 | |||||||||||||
|
|
|||||||||||||||||||||||
Net income applicable to U.S. Bancorp common shareholders |
$ | 6,784 | $ | 5,913 | $ | 5,589 | $ | 5,608 | $ | 5,583 | 14.7 |
* | Not meaningful |
139
|
||||
U.S. Bancorp
Quarterly Consolidated Financial Data (Unaudited)
2018 |
|
2017 | ||||||||||||||||||||||||||||||||||
(Dollars in Millions, Except Per Share Data) | First Quarter |
Second Quarter |
Third Quarter |
Fourth Quarter |
First Quarter |
Second Quarter |
Third Quarter |
Fourth Quarter |
||||||||||||||||||||||||||||
Interest Income |
||||||||||||||||||||||||||||||||||||
Loans |
$ | 3,095 | $ | 3,197 | $ | 3,353 | $ | 3,475 | $ | 2,790 | $ | 2,889 | $ | 3,049 | $ | 3,060 | ||||||||||||||||||||
Loans held for sale |
33 | 39 | 36 | 57 | 35 | 29 | 40 | 40 | ||||||||||||||||||||||||||||
Investment securities |
613 | 653 | 661 | 689 | 530 | 555 | 568 | 579 | ||||||||||||||||||||||||||||
Other interest income |
50 | 59 | 73 | 90 | 38 | 46 | 47 | 51 | ||||||||||||||||||||||||||||
Total interest income |
3,791 | 3,948 | 4,123 | 4,311 | 3,393 | 3,519 | 3,704 | 3,730 | ||||||||||||||||||||||||||||
Interest Expense |
||||||||||||||||||||||||||||||||||||
Deposits |
345 | 427 | 491 | 606 | 199 | 238 | 293 | 311 | ||||||||||||||||||||||||||||
Short-term borrowings |
75 | 86 | 104 | 113 | 24 | 33 | 39 | 45 | ||||||||||||||||||||||||||||
Long-term debt |
203 | 238 | 277 | 289 | 190 | 199 | 196 | 199 | ||||||||||||||||||||||||||||
Total interest expense |
623 | 751 | 872 | 1,008 | 413 | 470 | 528 | 555 | ||||||||||||||||||||||||||||
Net interest income |
3,168 | 3,197 | 3,251 | 3,303 | 2,980 | 3,049 | 3,176 | 3,175 | ||||||||||||||||||||||||||||
Provision for credit losses |
341 | 327 | 343 | 368 | 345 | 350 | 360 | 335 | ||||||||||||||||||||||||||||
Net interest income after provision for credit losses |
2,827 | 2,870 | 2,908 | 2,935 | 2,635 | 2,699 | 2,816 | 2,840 | ||||||||||||||||||||||||||||
Noninterest Income |
||||||||||||||||||||||||||||||||||||
Credit and debit card revenue |
324 | 351 | 344 | 382 | 299 | 330 | 318 | 342 | ||||||||||||||||||||||||||||
Corporate payment products revenue |
154 | 158 | 169 | 163 | 137 | 140 | 150 | 148 | ||||||||||||||||||||||||||||
Merchant processing services |
363 | 387 | 392 | 389 | 354 | 381 | 377 | 374 | ||||||||||||||||||||||||||||
ATM processing services |
79 | 90 | 85 | 54 | 71 | 75 | 77 | 80 | ||||||||||||||||||||||||||||
Trust and investment management fees |
398 | 401 | 411 | 409 | 368 | 380 | 380 | 394 | ||||||||||||||||||||||||||||
Deposit service charges |
182 | 183 | 198 | 199 | 172 | 179 | 187 | 194 | ||||||||||||||||||||||||||||
Treasury management fees |
150 | 155 | 146 | 143 | 153 | 160 | 153 | 152 | ||||||||||||||||||||||||||||
Commercial products revenue |
220 | 234 | 216 | 225 | 247 | 243 | 240 | 224 | ||||||||||||||||||||||||||||
Mortgage banking revenue |
184 | 191 | 174 | 171 | 207 | 212 | 213 | 202 | ||||||||||||||||||||||||||||
Investment products fees |
46 | 47 | 47 | 48 | 42 | 44 | 42 | 45 | ||||||||||||||||||||||||||||
Securities gains (losses), net |
5 | 10 | 10 | 5 | 29 | 9 | 9 | 10 | ||||||||||||||||||||||||||||
Other |
167 | 207 | 226 | 310 | 180 | 195 | 194 | 205 | ||||||||||||||||||||||||||||
Total noninterest income |
2,272 | 2,414 | 2,418 | 2,498 | 2,259 | 2,348 | 2,340 | 2,370 | ||||||||||||||||||||||||||||
Noninterest Expense |
||||||||||||||||||||||||||||||||||||
Compensation |
1,523 | 1,542 | 1,529 | 1,568 | 1,391 | 1,416 | 1,440 | 1,499 | ||||||||||||||||||||||||||||
Employee benefits |
330 | 299 | 294 | 308 | 301 | 274 | 268 | 291 | ||||||||||||||||||||||||||||
Net occupancy and equipment |
265 | 262 | 270 | 266 | 247 | 255 | 258 | 259 | ||||||||||||||||||||||||||||
Professional services |
83 | 95 | 96 | 133 | 96 | 105 | 104 | 114 | ||||||||||||||||||||||||||||
Marketing and business development |
97 | 111 | 106 | 115 | 90 | 109 | 92 | 251 | ||||||||||||||||||||||||||||
Technology and communications |
235 | 242 | 247 | 254 | 217 | 223 | 227 | 236 | ||||||||||||||||||||||||||||
Postage, printing and supplies |
80 | 80 | 84 | 80 | 81 | 81 | 82 | 79 | ||||||||||||||||||||||||||||
Other intangibles |
39 | 40 | 41 | 41 | 44 | 43 | 44 | 44 | ||||||||||||||||||||||||||||
Other |
403 | 414 | 377 | 515 | 442 | 478 | 483 | 1,126 | ||||||||||||||||||||||||||||
Total noninterest expense |
3,055 | 3,085 | 3,044 | 3,280 | 2,909 | 2,984 | 2,998 | 3,899 | ||||||||||||||||||||||||||||
Income before income taxes |
2,044 | 2,199 | 2,282 | 2,153 | 1,985 | 2,063 | 2,158 | 1,311 | ||||||||||||||||||||||||||||
Applicable income taxes |
362 | 441 | 460 | 291 | 499 | 551 | 589 | (375 | ) | |||||||||||||||||||||||||||
Net income |
1,682 | 1,758 | 1,822 | 1,862 | 1,486 | 1,512 | 1,569 | 1,686 | ||||||||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests |
(7 | ) | (8 | ) | (7 | ) | (6 | ) | (13 | ) | (12 | ) | (6 | ) | (4 | ) | ||||||||||||||||||||
Net income attributable to U.S. Bancorp |
$ | 1,675 | $ | 1,750 | $ | 1,815 | $ | 1,856 | $ | 1,473 | $ | 1,500 | $ | 1,563 | $ | 1,682 | ||||||||||||||||||||
Net income applicable to U.S. Bancorp common shareholders |
$ | 1,597 | $ | 1,678 | $ | 1,732 | $ | 1,777 | $ | 1,387 | $ | 1,430 | $ | 1,485 | $ | 1,611 | ||||||||||||||||||||
Earnings per common share |
$ | .97 | $ | 1.02 | $ | 1.06 | $ | 1.10 | $ | .82 | $ | .85 | $ | .89 | $ | .97 | ||||||||||||||||||||
Diluted earnings per common share |
$ | .96 | $ | 1.02 | $ | 1.06 | $ | 1.10 | $ | .82 | $ | .85 | $ | .88 | $ | .97 |
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U.S. Bancorp
Supplemental Financial Data (Unaudited)
Earnings Per Common Share Summary | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Earnings per common share |
$ | 4.15 | $ | 3.53 | $ | 3.25 | $ | 3.18 | $ | 3.10 | ||||||||||
Diluted earnings per common share |
4.14 | 3.51 | 3.24 | 3.16 | 3.08 | |||||||||||||||
Dividends declared per common share |
1.340 | 1.160 | 1.070 | 1.010 | .965 | |||||||||||||||
Ratios | ||||||||||||||||||||
Return on average assets |
1.55 | % | 1.39 | % | 1.36 | % | 1.44 | % | 1.54 | % | ||||||||||
Return on average common equity |
15.4 | 13.8 | 13.4 | 14.0 | 14.7 | |||||||||||||||
Average total U.S. Bancorp shareholders equity to average assets |
10.9 | 10.8 | 10.9 | 11.0 | 11.3 | |||||||||||||||
Dividends per common share to net income per common share |
32.3 | 32.9 | 32.9 | 31.8 | 31.1 | |||||||||||||||
Other Statistics (Dollars and Shares in Millions) | ||||||||||||||||||||
Common shares outstanding(a) |
1,608 | 1,656 | 1,697 | 1,745 | 1,786 | |||||||||||||||
Average common shares outstanding and common stock equivalents |
||||||||||||||||||||
Earnings per common share |
1,634 | 1,677 | 1,718 | 1,764 | 1,803 | |||||||||||||||
Diluted earnings per common share |
1,638 | 1,683 | 1,724 | 1,772 | 1,813 | |||||||||||||||
Number of shareholders(b) |
35,154 | 36,841 | 38,794 | 40,666 | 44,114 | |||||||||||||||
Common dividends declared |
$ | 2,190 | $ | 1,950 | $ | 1,842 | $ | 1,785 | $ | 1,745 |
(a) | Defined as total common shares less common stock held in treasury at December 31. |
(b) | Based on number of common stock shareholders of record at December 31. |
The common stock of U.S. Bancorp is traded on the New York Stock Exchange, under the ticker symbol USB. At January 31, 2019, there were 35,093 holders of record of the Companys common stock.
Stock Performance Chart
The following chart compares the cumulative total shareholder return on the Companys common stock during the five years ended December 31, 2018, with the cumulative total return on the Standard & Poors 500 Index and the KBW Bank Index. The comparison assumes $100 was invested on December 31, 2013, in the Companys common stock and in each of the foregoing indices and assumes the reinvestment of all dividends. The comparisons in the graph are based upon historical data and are not indicative of, nor intended to forecast, future performance of the Companys common stock.
141
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U.S. Bancorp
Consolidated Daily Average Balance Sheet and Related Yields and Rates(a) (Unaudited)
2018 | 2017 | |||||||||||||||||||||||||||||||
Year Ended December 31 (Dollars in Millions) |
Average |
Interest | Yields and Rates |
Average Balances |
Interest | Yields and Rates |
||||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||
Investment securities |
$ | 113,940 | $ | 2,674 | 2.35 | % | $ | 111,820 | $ | 2,328 | 2.08 | % | ||||||||||||||||||||
Loans held for sale |
3,230 | 165 | 5.12 | 3,574 | 144 | 4.04 | ||||||||||||||||||||||||||
Loans(b) |
||||||||||||||||||||||||||||||||
Commercial |
98,854 | 3,795 | 3.84 | 95,904 | 3,131 | 3.26 | ||||||||||||||||||||||||||
Commercial real estate |
39,977 | 1,881 | 4.71 | 42,077 | 1,788 | 4.25 | ||||||||||||||||||||||||||
Residential mortgages |
61,893 | 2,366 | 3.82 | 58,784 | 2,180 | 3.71 | ||||||||||||||||||||||||||
Credit card |
21,672 | 2,545 | 11.74 | 20,906 | 2,358 | 11.28 | ||||||||||||||||||||||||||
Other retail |
56,136 | 2,466 | 4.39 | 55,416 | 2,272 | 4.10 | ||||||||||||||||||||||||||
Covered loans |
2,169 | 134 | 6.17 | 3,450 | 175 | 5.07 | ||||||||||||||||||||||||||
Total loans |
280,701 | 13,187 | 4.70 | 276,537 | 11,904 | 4.30 | ||||||||||||||||||||||||||
Other earning assets |
17,196 | 272 | 1.58 | 14,490 | 183 | 1.26 | ||||||||||||||||||||||||||
Total earning assets |
415,067 | 16,298 | 3.93 | 406,421 | 14,559 | 3.58 | ||||||||||||||||||||||||||
Allowance for loan losses |
(3,939 | ) | (3,862 | ) | ||||||||||||||||||||||||||||
Unrealized gain (loss) on investment securities |
(1,650 | ) | (348 | ) | ||||||||||||||||||||||||||||
Other assets |
47,536 | 46,371 | ||||||||||||||||||||||||||||||
Total assets |
$ | 457,014 | $ | 448,582 | ||||||||||||||||||||||||||||
Liabilities and Shareholders Equity |
||||||||||||||||||||||||||||||||
Noninterest-bearing deposits |
$ | 78,196 | $ | 81,933 | ||||||||||||||||||||||||||||
Interest-bearing deposits |
||||||||||||||||||||||||||||||||
Interest checking |
70,154 | 150 | .21 | 67,953 | 84 | .12 | ||||||||||||||||||||||||||
Money market savings |
101,732 | 1,078 | 1.06 | 106,476 | 644 | .61 | ||||||||||||||||||||||||||
Savings accounts |
44,713 | 56 | .13 | 43,393 | 32 | .07 | ||||||||||||||||||||||||||
Time deposits |
38,667 | 585 | 1.51 | 33,759 | 281 | .83 | ||||||||||||||||||||||||||
Total interest-bearing deposits |
255,266 | 1,869 | .73 | 251,581 | 1,041 | .41 | ||||||||||||||||||||||||||
Short-term borrowings |
21,790 | 387 | 1.78 | 15,022 | 149 | 1.00 | ||||||||||||||||||||||||||
Long-term debt |
37,450 | 1,007 | 2.69 | 35,601 | 784 | 2.20 | ||||||||||||||||||||||||||
Total interest-bearing liabilities |
314,506 | 3,263 | 1.04 | 302,204 | 1,974 | .65 | ||||||||||||||||||||||||||
Other liabilities |
13,921 | 15,348 | ||||||||||||||||||||||||||||||
Shareholders equity |
||||||||||||||||||||||||||||||||
Preferred equity |
5,636 | 5,490 | ||||||||||||||||||||||||||||||
Common equity |
44,127 | 42,976 | ||||||||||||||||||||||||||||||
Total U.S. Bancorp shareholders equity |
49,763 | 48,466 | ||||||||||||||||||||||||||||||
Noncontrolling interests |
628 | 631 | ||||||||||||||||||||||||||||||
Total equity |
50,391 | 49,097 | ||||||||||||||||||||||||||||||
Total liabilities and equity |
$ | 457,014 | $ | 448,582 | ||||||||||||||||||||||||||||
Net interest income |
$ | 13,035 | $ | 12,585 | ||||||||||||||||||||||||||||
Gross interest margin |
2.89 | % | 2.93 | % | ||||||||||||||||||||||||||||
Gross interest margin without taxable-equivalent increments |
2.86 | % | 2.88 | % | ||||||||||||||||||||||||||||
Percent of Earning Assets |
||||||||||||||||||||||||||||||||
Interest income |
3.93 | % | 3.58 | % | ||||||||||||||||||||||||||||
Interest expense |
.79 | .48 | ||||||||||||||||||||||||||||||
Net interest margin |
3.14 | % | 3.10 | % | ||||||||||||||||||||||||||||
Net interest margin without taxable-equivalent increments |
3.11 | % | 3.05 | % |
* | Not meaningful |
(a) | Interest and rates are presented on a fully taxable-equivalent basis based on a federal income tax rate of 21 percent for 2018 and 35 percent for 2017, 2016, 2015 and 2014. |
(b) | Interest income and rates on loans include loan fees. Nonaccrual loans are included in average loan balances. |
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2016 | 2015 | 2014 | 2018 v 2017 | |||||||||||||||||||||||||||||||||||||||||||||||
Average Balances |
Interest | Yields and Rates |
Average Balances |
Interest | Yields and Rates |
Average Balances |
Interest | Yields and Rates |
% Change Average Balances |
|||||||||||||||||||||||||||||||||||||||||
$ | 107,922 | $ | 2,181 | 2.02 | % | $ | 103,161 | $ | 2,120 | 2.06 | % | $ | 90,327 | $ | 1,991 | 2.21 | % | 1.9 | % | |||||||||||||||||||||||||||||||
4,181 | 154 | 3.70 | 5,784 | 206 | 3.56 | 3,148 | 128 | 4.08 | (9.6 | ) | ||||||||||||||||||||||||||||||||||||||||
92,043 | 2,596 | 2.82 | 84,083 | 2,281 | 2.71 | 75,734 | 2,228 | 2.94 | 3.1 | |||||||||||||||||||||||||||||||||||||||||
43,040 | 1,698 | 3.94 | 42,415 | 1,650 | 3.89 | 40,592 | 1,575 | 3.88 | (5.0 | ) | ||||||||||||||||||||||||||||||||||||||||
55,682 | 2,070 | 3.72 | 51,840 | 1,966 | 3.79 | 51,818 | 2,001 | 3.86 | 5.3 | |||||||||||||||||||||||||||||||||||||||||
20,490 | 2,204 | 10.76 | 18,057 | 1,944 | 10.77 | 17,635 | 1,805 | 10.23 | 3.7 | |||||||||||||||||||||||||||||||||||||||||
52,330 | 2,114 | 4.04 | 49,079 | 2,020 | 4.12 | 48,353 | 2,141 | 4.43 | 1.3 | |||||||||||||||||||||||||||||||||||||||||
4,226 | 200 | 4.73 | 4,985 | 271 | 5.42 | 7,560 | 452 | 5.97 | (37.1 | ) | ||||||||||||||||||||||||||||||||||||||||
267,811 | 10,882 | 4.06 | 250,459 | 10,132 | 4.05 | 241,692 | 10,202 | 4.22 | 1.5 | |||||||||||||||||||||||||||||||||||||||||
9,963 | 125 | 1.26 | 8,041 | 136 | 1.69 | 5,827 | 121 | 2.08 | 18.7 | |||||||||||||||||||||||||||||||||||||||||
389,877 | 13,342 | 3.42 | 367,445 | 12,594 | 3.43 | 340,994 | 12,442 | 3.65 | 2.1 | |||||||||||||||||||||||||||||||||||||||||
(3,837 | ) | (4,035 | ) | (4,187 | ) | (2.0 | ) | |||||||||||||||||||||||||||||||||||||||||||
593 | 710 | 466 | * | |||||||||||||||||||||||||||||||||||||||||||||||
46,680 | 44,745 | 42,731 | 2.5 | |||||||||||||||||||||||||||||||||||||||||||||||
$ | 433,313 | $ | 408,865 | $ | 380,004 | 1.9 | ||||||||||||||||||||||||||||||||||||||||||||
$ | 81,176 | $ | 79,203 | $ | 73,455 | (4.6 | )% | |||||||||||||||||||||||||||||||||||||||||||
61,726 | 42 | .07 | 55,974 | 30 | .05 | 53,248 | 35 | .07 | 3.2 | |||||||||||||||||||||||||||||||||||||||||
96,518 | 349 | .36 | 79,266 | 192 | .24 | 63,977 | 117 | .18 | (4.5 | ) | ||||||||||||||||||||||||||||||||||||||||
40,382 | 34 | .09 | 37,150 | 40 | .11 | 34,196 | 46 | .14 | 3.0 | |||||||||||||||||||||||||||||||||||||||||
33,008 | 197 | .60 | 35,558 | 195 | .55 | 41,764 | 267 | .64 | 14.5 | |||||||||||||||||||||||||||||||||||||||||
231,634 | 622 | .27 | 207,948 | 457 | .22 | 193,185 | 465 | .24 | 1.5 | |||||||||||||||||||||||||||||||||||||||||
19,906 | 97 | .49 | 27,960 | 74 | .27 | 30,252 | 81 | .27 | 45.1 | |||||||||||||||||||||||||||||||||||||||||
36,220 | 754 | 2.08 | 33,566 | 699 | 2.08 | 26,535 | 725 | 2.73 | 5.2 | |||||||||||||||||||||||||||||||||||||||||
287,760 | 1,473 | .51 | 269,474 | 1,230 | .46 | 249,972 | 1,271 | .51 | 4.1 | |||||||||||||||||||||||||||||||||||||||||
16,389 | 14,686 | 13,053 | (9.3 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
5,501 | 4,836 | 4,756 | 2.7 | |||||||||||||||||||||||||||||||||||||||||||||||
41,838 | 39,977 | 38,081 | 2.7 | |||||||||||||||||||||||||||||||||||||||||||||||
47,339 | 44,813 | 42,837 | 2.7 | |||||||||||||||||||||||||||||||||||||||||||||||
649 | 689 | 687 | (.5 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
47,988 | 45,502 | 43,524 | 2.6 | |||||||||||||||||||||||||||||||||||||||||||||||
$ | 433,313 | $ | 408,865 | $ | 380,004 | 1.9 | ||||||||||||||||||||||||||||||||||||||||||||
$ | 11,869 | $ | 11,364 | $ | 11,171 | |||||||||||||||||||||||||||||||||||||||||||||
2.91 | % | 2.97 | % | 3.14 | % | |||||||||||||||||||||||||||||||||||||||||||||
2.86 | % | 2.91 | % | 3.07 | % | |||||||||||||||||||||||||||||||||||||||||||||
3.42 | % | 3.43 | % | 3.65 | % | |||||||||||||||||||||||||||||||||||||||||||||
.38 | .34 | .37 | ||||||||||||||||||||||||||||||||||||||||||||||||
3.04 | % | 3.09 | % | 3.28 | % | |||||||||||||||||||||||||||||||||||||||||||||
2.99 | % | 3.03 | % | 3.21 | % |
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Company Information
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Executive Officers
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Directors
1. | Executive Committee |
2. | Audit Committee |
3. | Capital Planning Committee |
4. | Compensation and Human Resources Committee |
5. | Governance Committee |
6. | Public Responsibility Committee |
7. | Risk Management Committee |
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EXHIBIT 21
SUBSIDIARIES OF U.S. BANCORP
(JURISDICTIONS OF ORGANIZATION SHOWN IN PARENTHESES)
111 Tower Investors, Inc. (Minnesota) |
Daimler Title Co. (Delaware) |
DSL Service Company (California) |
Eclipse Funding LLC (Delaware) |
Elavon Canada Company (Canada) |
Elavon European Holdings B.V. (Netherlands) |
Elavon European Holdings C.V. (Netherlands) |
Elavon Financial Services DAC (Ireland) |
Elavon Latin American Holdings, LLC (Delaware) |
Elavon Merchant Services Mexico, S. de R.L. de C.V. (Mexico) |
Elavon Mexico Holding Company, S.A. de C.V. (Mexico) |
Elavon Operations Company, S. de R.I. de C.V. (Mexico) |
Elavon Puerto Rico, Inc. (Puerto Rico) |
Elavon Services Company, S. de R.I. de C.V. (Mexico) |
Elavon, Inc. (Georgia) |
EuroConex Technologies Limited (Ireland) |
Fairfield Financial Group, Inc. (Illinois) |
First Bank LaCrosse Building Corp. (Wisconsin) |
First LaCrosse Properties (Wisconsin) |
Firstar Capital Corporation (Ohio) |
Firstar Development, LLC (Delaware) |
Firstar Realty, L.L.C. (Illinois) |
Fixed Income Client Solutions LLC (Delaware) |
FSV Payment Systems, Inc. (Delaware) |
Galaxy Funding, Inc. (Delaware) |
HTD Leasing LLC (Delaware) |
HVT, Inc. (Delaware) |
Integrated Logistics, LLC (Georgia) |
MBS-UI Sub-CDE XVI, LLC (Delaware)
Mercantile Mortgage Financial Company (Illinois) |
Midwest Indemnity Inc. (Vermont) |
Mississippi Valley Company (Arizona) |
MMCA Lease Services, Inc. (Delaware) |
NILT, Inc. (Delaware) |
NuMaMe, LLC (Delaware) |
One Eleven Investors LLC (Delaware) |
Park Bank Initiatives, Inc. (Illinois) |
Pomona Financial Services, Inc. (California) |
Pullman Park Development, LLC (Illinois) |
Pullman Park Investment Fund I, LLC (Missouri) |
Pullman Transformation, Inc. (Delaware) |
Quasar Distributors, LLC (Delaware) |
Quintillion Services Limited (Ireland) |
RBC Community Development Sub 3, LLC (Delaware) |
Red Sky Risk Services, LLC (Delaware) |
RTRT, Inc. (Delaware) |
SCBD, LLC (Delaware) |
SCDA, LLC (Delaware) |
SCFD LLC (Delaware) |
Syncada Asia Pacific Private Limited (Singapore) |
Syncada Canada ULC (Canada) |
Syncada India Operations Private Limited (India) |
Syncada LLC (Delaware) |
Tarquad Corporation (Missouri) |
The Miami Valley Insurance Company (Arizona) |
TI Fleet Co. (Delaware) |
TLT Leasing Corp. (Delaware) |
TMTT, Inc. (Delaware) |
U.S. Bancorp Asset Management, Inc. (Delaware) |
U.S. Bancorp Community Development Corporation (Minnesota) |
U.S. Bancorp Community Investment Corporation (Delaware) |
U.S. Bancorp Fund Services, LLC (Wisconsin)
U.S. Bancorp Government Leasing and Finance, Inc. (Minnesota) |
U.S. Bancorp Insurance and Investments, Inc. (Wyoming) |
U.S. Bancorp Insurance Company, Inc. (Vermont) |
U.S. Bancorp Insurance Services of Montana, Inc. (Montana) |
U.S. Bancorp Insurance Services, LLC (Wisconsin) |
U.S. Bancorp Investments, Inc. (Delaware) |
U.S. Bancorp Missouri Low-Income Housing Tax Credit Fund, L.L.C. (Missouri) |
U.S. Bancorp Municipal Lending and Finance, Inc. (Minnesota) |
U.S. Bancorp Service Providers LLC (Delaware) |
U.S. Bank Global Fund Services (Cayman) Limited (Cayman Islands) |
U.S. Bank Global Fund Services (Guernsey) Limited (Guernsey) |
U.S. Bank Global Fund Services (Ireland) Limited (Ireland) |
U.S. Bank Global Fund Services (UK) Limited (United Kingdom) |
U.S. Bank National Association (a nationally chartered banking association) |
U.S. Bank Trust Company, National Association (a nationally chartered banking association) |
U.S. Bank Trust National Association (a nationally chartered banking association) |
U.S. Bank Trust National Association SD (a nationally chartered banking association) |
U.S. Bank Trustees Limited (United Kingdom) |
USB Americas Holdings Company (Delaware) |
USB Capital IX (Delaware) |
USB European Holdings Company (Delaware) |
USB Global Investments, LLC (Delaware) |
USB Leasing LLC (Delaware) |
USB Leasing LT (Delaware) |
USB Nominees (UK) Limited (United Kingdom) |
USB Realty Corp. (Delaware) |
USB Security Data Services Limited (Ireland) |
USBCDE, LLC (Delaware) |
VT Inc. (Alabama) |
Exhibit 23
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
Form |
Registration Statement No. |
Purpose | ||
S-3 |
333-217413 | Shelf Registration Statement | ||
S-8 |
333-74036 | U.S. Bancorp 2001 Stock Incentive Plan | ||
S-8 |
333-100671 | U.S. Bancorp 401(k) Savings Plan | ||
S-8 |
333-142194 | Various benefit plans of U.S. Bancorp | ||
S-8 |
333-166193 | Various benefit plans of U.S. Bancorp | ||
S-8
S-8
S-8
S-8 |
333-189506
333-195375
333-203620
333-227999 |
Various benefit plans of U.S. Bancorp
Various benefit plans of U.S. Bancorp
U.S. Bancorp 2015 Stock Incentive Plan
Various benefit plans of U.S. Bancorp |
of our reports dated February 21, 2019, with respect to the consolidated financial statements of U.S. Bancorp and the effectiveness of internal control over financial reporting of U.S. Bancorp, included in this 2018 Annual Report to Shareholders of U.S. Bancorp, which is incorporated by reference in this Annual Report (Form 10-K) of U.S. Bancorp for the year ended December 31, 2018.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
February 21, 2019
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors of U.S. Bancorp, a Delaware corporation, hereby constitutes and appoints Andrew Cecere and James L. Chosy, and each of them, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead in any and all capacities, to sign one or more Annual Reports for the Companys fiscal year ended December 31, 2018 on Form 10-K under the Securities Exchange Act of 1934, as amended, or such other form as any such attorney-in-fact may deem necessary or desirable, any amendments thereto, and all additional amendments thereto, each in such form as they or any one of them may approve, and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done so that such Annual Report shall comply with the Securities Exchange Act of 1934, as amended, and the applicable Rules and Regulations adopted or issued pursuant thereto, as fully and to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitute or resubstitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has set his or her hand this 15th day of January, 2019.
/s/ Warner L. Baxter |
|
/s/ Olivia F. Kirtley | ||
Warner L. Baxter | Olivia F. Kirtley | |||
/s/ Dorothy J. Bridges | /s/ Karen S. Lynch | |||
Dorothy J. Bridges | Karen S. Lynch | |||
/s/ Elizabeth L. Buse | /s/ Richard P. McKenney | |||
Elizabeth L. Buse | Richard P. McKenney | |||
/s/ Marc N. Casper | /s/ Yusuf I. Mehdi | |||
Marc N. Casper | Yusuf I. Mehdi | |||
/s/ Arthur D. Collins, Jr. | /s/ David B. OMaley | |||
Arthur D. Collins, Jr. | David B. OMaley | |||
/s/ Kimberly J. Harris | /s/ Odell M. Owens, M.D., M.P.H. | |||
Kimberly J. Harris | Odell M. Owens, M.D., M.P.H. | |||
/s/ Roland A. Hernandez | /s/ Craig D. Schnuck | |||
Roland A. Hernandez | Craig D. Schnuck | |||
/s/ Doreen Woo Ho | /s/ Scott W. Wine | |||
Doreen Woo Ho |
Scott W. Wine |
EXHIBIT 31.1
CERTIFICATION PURSUANT TO
RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934
I, Andrew Cecere, certify that:
(1) | I have reviewed this Annual Report on Form 10-K of U.S. Bancorp; |
(2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
(4) | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
(5) | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
/s/ ANDREW CECERE | ||||
Andrew Cecere | ||||
Dated: February 21, 2019 | Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934
I, Terrance R. Dolan, certify that:
(1) | I have reviewed this Annual Report on Form 10-K of U.S. Bancorp; |
(2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
(4) | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
(5) | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
/s/ TERRANCE R. DOLAN | ||||
Terrance R. Dolan | ||||
Dated: February 21, 2019 | Chief Financial Officer |
EXHIBIT 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, Chief Executive Officer and Chief Financial Officer of U.S. Bancorp, a Delaware corporation (the Company), do hereby certify that:
(1) The Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the Form 10-K) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ ANDREW CECERE | /s/ TERRANCE R. DOLAN | |||
Andrew Cecere | Terrance R. Dolan | |||
Chief Executive Officer | Chief Financial Officer |
Dated: February 21, 2019
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