3
Form 10-Q/September 30, 2012
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2012
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, including zip code)
651-466-3000
(Registrants telephone number, including area code)
(not applicable)
(Former name, former address and former fiscal year, if changed since last report)
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, and (2) has been subject to such filing requirements for the past 90 days.
YES þ NO ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
YES þ NO ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ | Accelerated filer ¨ | |
Non-accelerated filer ¨ | Smaller reporting company ¨ | |
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES ¨ NO þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.
Class Common Stock, $.01 Par Value |
Outstanding as of October 31, 2012 1,880,370,592 shares |
Table of Contents and Form 10-Q Cross Reference Index
Part I Financial Information |
||||
1) Managements Discussion and Analysis of Financial Condition and Results of Operations (Item 2) |
||||
3 | ||||
4 | ||||
6 | ||||
34 | ||||
35 | ||||
35 | ||||
2) Quantitative and Qualitative Disclosures About Market Risk/Corporate Risk Profile (Item 3) |
||||
a) Overview |
10 | |||
b) Credit Risk Management |
10 | |||
c) Residual Value Risk Management |
22 | |||
d) Operational Risk Management |
22 | |||
e) Interest Rate Risk Management |
24 | |||
f) Market Risk Management |
25 | |||
g) Liquidity Risk Management |
26 | |||
h) Capital Management |
27 | |||
28 | ||||
36 | ||||
78 | ||||
2) Unregistered Sales of Equity Securities and Use of Proceeds (Item 2) |
78 | |||
78 | ||||
79 | ||||
80 |
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995.
This quarterly report on Form 10-Q contains forward-looking statements about U.S. Bancorp. 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 made. 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. Global and domestic economies could fail to recover from the recent economic downturn or could experience another severe contraction, which could adversely affect U.S. Bancorps revenues and the values of its assets and liabilities. Global financial markets could experience a recurrence of significant turbulence, which could reduce the availability of funding to certain financial institutions and lead to a tightening of credit, a reduction of business activity, and increased market volatility. Continued stress in the commercial real estate markets, as well as a delay or failure of recovery in the residential real estate markets, could cause additional credit losses and deterioration in asset values. In addition, U.S. Bancorps business and financial performance is likely to be negatively impacted by effects of recently enacted and future legislation and regulation. U.S. Bancorps results could also be adversely affected by continued deterioration in general business and economic conditions; 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 securities held in its investment securities portfolio; legal and regulatory developments; increased competition from both banks and non-banks; changes in customer behavior and preferences; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and managements ability to effectively manage credit risk, residual value risk, market risk, operational risk, interest rate risk, and liquidity risk.
For discussion of these and other risks that may cause actual results to differ from expectations, refer to U.S. Bancorps Annual Report on Form 10-K for the year ended December 31, 2011, on file with the Securities and Exchange Commission, including the sections entitled Risk Factors and Corporate Risk Profile contained in Exhibit 13, and all subsequent filings with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. Forward-looking statements speak only as of the date they are made, and U.S. Bancorp undertakes no obligation to update them in light of new information or future events.
U. S. Bancorp | 1 |
Table 1 |
Selected Financial Data |
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||
(Dollars and Shares in Millions, Except Per Share Data) | 2012 | 2011 | Percent Change |
2012 | 2011 | Percent Change |
||||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||||||
Net interest income (taxable-equivalent basis) (a) |
$ | 2,783 | $ | 2,624 | 6.1 | % | $ | 8,186 | $ | 7,675 | 6.7 | % | ||||||||||||
Noninterest income |
2,395 | 2,180 | 9.9 | 7,008 | 6,351 | 10.3 | ||||||||||||||||||
Securities gains (losses), net |
1 | (9 | ) | * | (18 | ) | (22 | ) | 18.2 | |||||||||||||||
Total net revenue |
5,179 | 4,795 | 8.0 | 15,176 | 14,004 | 8.4 | ||||||||||||||||||
Noninterest expense |
2,609 | 2,476 | 5.4 | 7,770 | 7,215 | 7.7 | ||||||||||||||||||
Provision for credit losses |
488 | 519 | (6.0 | ) | 1,439 | 1,846 | (22.0 | ) | ||||||||||||||||
Income before taxes |
2,082 | 1,800 | 15.7 | 5,967 | 4,943 | 20.7 | ||||||||||||||||||
Taxable-equivalent adjustment |
57 | 58 | (1.7 | ) | 168 | 169 | (.6 | ) | ||||||||||||||||
Applicable income taxes |
593 | 490 | 21.0 | 1,684 | 1,314 | 28.2 | ||||||||||||||||||
Net income |
1,432 | 1,252 | 14.4 | 4,115 | 3,460 | 18.9 | ||||||||||||||||||
Net (income) loss attributable to noncontrolling interests |
42 | 21 | * | 112 | 62 | 80.6 | ||||||||||||||||||
Net income attributable to U.S. Bancorp |
$ | 1,474 | $ | 1,273 | 15.8 | $ | 4,227 | $ | 3,522 | 20.0 | ||||||||||||||
Net income applicable to U.S. Bancorp common shareholders |
$ | 1,404 | $ | 1,237 | 13.5 | $ | 4,034 | $ | 3,407 | 18.4 | ||||||||||||||
Per Common Share |
||||||||||||||||||||||||
Earnings per share |
$ | .74 | $ | .65 | 13.8 | % | $ | 2.13 | $ | 1.78 | 19.7 | % | ||||||||||||
Diluted earnings per share |
.74 | .64 | 15.6 | 2.12 | 1.77 | 19.8 | ||||||||||||||||||
Dividends declared per share |
.195 | .125 | 56.0 | .585 | .375 | 56.0 | ||||||||||||||||||
Book value per share |
18.03 | 16.01 | 12.6 | |||||||||||||||||||||
Market value per share |
34.30 | 23.54 | 45.7 | |||||||||||||||||||||
Average common shares outstanding |
1,886 | 1,915 | (1.5 | ) | 1,892 | 1,918 | (1.4 | ) | ||||||||||||||||
Average diluted common shares outstanding |
1,897 | 1,922 | (1.3 | ) | 1,901 | 1,926 | (1.3 | ) | ||||||||||||||||
Financial Ratios |
||||||||||||||||||||||||
Return on average assets |
1.70 | % | 1.57 | % | 1.66 | % | 1.50 | % | ||||||||||||||||
Return on average common equity |
16.5 | 16.1 | 16.4 | 15.5 | ||||||||||||||||||||
Net interest margin (taxable-equivalent basis) (a) |
3.59 | 3.65 | 3.59 | 3.67 | ||||||||||||||||||||
Efficiency ratio (b) |
50.4 | 51.5 | 51.1 | 51.4 | ||||||||||||||||||||
Net charge-offs as a percent of average loans outstanding |
.99 | 1.31 | 1.02 | 1.49 | ||||||||||||||||||||
Average Balances |
||||||||||||||||||||||||
Loans |
$ | 216,928 | $ | 202,169 | 7.3 | % | $ | 213,731 | $ | 199,533 | 7.1 | % | ||||||||||||
Loans held for sale |
8,432 | 3,946 | * | 7,557 | 4,382 | 72.5 | ||||||||||||||||||
Investment securities (c) |
72,454 | 66,252 | 9.4 | 72,371 | 61,907 | 16.9 | ||||||||||||||||||
Earning assets |
308,959 | 286,269 | 7.9 | 304,269 | 279,305 | 8.9 | ||||||||||||||||||
Assets |
345,653 | 321,581 | 7.5 | 340,807 | 314,079 | 8.5 | ||||||||||||||||||
Noninterest-bearing deposits |
68,127 | 58,606 | 16.2 | 65,423 | 50,558 | 29.4 | ||||||||||||||||||
Deposits |
239,281 | 215,369 | 11.1 | 232,978 | 209,735 | 11.1 | ||||||||||||||||||
Short-term borrowings |
27,843 | 30,597 | (9.0 | ) | 28,942 | 30,597 | (5.4 | ) | ||||||||||||||||
Long-term debt |
27,112 | 31,609 | (14.2 | ) | 29,388 | 31,786 | (7.5 | ) | ||||||||||||||||
Total U.S. Bancorp shareholders equity |
38,619 | 33,087 | 16.7 | 37,105 | 31,699 | 17.1 | ||||||||||||||||||
September 30, 2012 |
December 31, 2011 |
|||||||||||||||||||||||
Period End Balances |
||||||||||||||||||||||||
Loans |
$ | 218,150 | $ | 209,835 | 4.0 | % | ||||||||||||||||||
Investment securities |
74,145 | 70,814 | 4.7 | |||||||||||||||||||||
Assets |
352,253 | 340,122 | 3.6 | |||||||||||||||||||||
Deposits |
244,232 | 230,885 | 5.8 | |||||||||||||||||||||
Long-term debt |
26,264 | 31,953 | (17.8 | ) | ||||||||||||||||||||
Total U.S. Bancorp shareholders equity |
38,661 | 33,978 | 13.8 | |||||||||||||||||||||
Asset Quality |
||||||||||||||||||||||||
Nonperforming assets |
$ | 2,835 | $ | 3,774 | (24.9 | ) | ||||||||||||||||||
Allowance for credit losses |
4,771 | 5,014 | (4.8 | ) | ||||||||||||||||||||
Allowance for credit losses as a percentage of period-end loans |
2.19 | % | 2.39 | % | ||||||||||||||||||||
Capital Ratios |
||||||||||||||||||||||||
Tier 1 capital |
10.9 | % | 10.8 | % | ||||||||||||||||||||
Total risk-based capital |
13.3 | 13.3 | ||||||||||||||||||||||
Leverage |
9.2 | 9.1 | ||||||||||||||||||||||
Tangible common equity to tangible assets (d) |
7.2 | 6.6 | ||||||||||||||||||||||
Tangible common equity to risk-weighted assets using Basel I definition (d) |
8.8 | 8.1 | ||||||||||||||||||||||
Tier 1 common equity to risk-weighted assets using Basel I definition (d) |
9.0 | 8.6 | ||||||||||||||||||||||
Tier 1 common equity to risk-weighted assets using Basel III proposals published prior to June 2012 (d) |
| 8.2 | ||||||||||||||||||||||
Tier 1 common equity to risk-weighted assets approximated using proposed rules for the Basel III standardized approach released June 2012 (d) |
8.2 | |
* | Not meaningful. |
(a) | Presented on a fully taxable-equivalent basis utilizing a tax rate of 35 percent. |
(b) | Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding net securities gains (losses). |
(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. |
(d) | See Non-GAAP Financial Measures on page 34. |
2 | U. S. Bancorp |
Managements Discussion and Analysis
U. S. Bancorp | 3 |
4 | U. S. Bancorp |
Table 2 |
Noninterest Income |
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||
(Dollars in Millions) | 2012 | 2011 | Percent Change |
2012 | 2011 | Percent Change |
||||||||||||||||||
Credit and debit card revenue |
$ | 213 | $ | 289 | (26.3 | )% | $ | 650 | $ | 842 | (22.8 | )% | ||||||||||||
Corporate payment products revenue |
201 | 203 | (1.0 | ) | 566 | 563 | .5 | |||||||||||||||||
Merchant processing services |
345 | 338 | 2.1 | 1,041 | 977 | 6.6 | ||||||||||||||||||
ATM processing services |
87 | 115 | (24.3 | ) | 263 | 341 | (22.9 | ) | ||||||||||||||||
Trust and investment management fees |
265 | 241 | 10.0 | 779 | 755 | 3.2 | ||||||||||||||||||
Deposit service charges |
174 | 183 | (4.9 | ) | 483 | 488 | (1.0 | ) | ||||||||||||||||
Treasury management fees |
135 | 137 | (1.5 | ) | 411 | 418 | (1.7 | ) | ||||||||||||||||
Commercial products revenue |
225 | 212 | 6.1 | 652 | 621 | 5.0 | ||||||||||||||||||
Mortgage banking revenue |
519 | 245 | * | 1,461 | 683 | * | ||||||||||||||||||
Investment products fees and commissions |
38 | 31 | 22.6 | 111 | 98 | 13.3 | ||||||||||||||||||
Securities gains (losses), net |
1 | (9 | ) | * | (18 | ) | (22 | ) | 18.2 | |||||||||||||||
Other |
193 | 186 | 3.8 | 591 | 565 | 4.6 | ||||||||||||||||||
Total noninterest income |
$ | 2,396 | $ | 2,171 | 10.4 | % | $ | 6,990 | $ | 6,329 | 10.4 | % |
* | Not meaningful. |
U. S. Bancorp | 5 |
Table 3 |
Noninterest Expense |
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||
(Dollars in Millions) | 2012 | 2011 | Percent Change |
2012 | 2011 | Percent Change |
||||||||||||||||||
Compensation |
$ | 1,109 | $ | 1,021 | 8.6 | % | $ | 3,237 | $ | 2,984 | 8.5 | % | ||||||||||||
Employee benefits |
225 | 203 | 10.8 | 714 | 643 | 11.0 | ||||||||||||||||||
Net occupancy and equipment |
233 | 252 | (7.5 | ) | 683 | 750 | (8.9 | ) | ||||||||||||||||
Professional services |
144 | 100 | 44.0 | 364 | 252 | 44.4 | ||||||||||||||||||
Marketing and business development |
96 | 102 | (5.9 | ) | 285 | 257 | 10.9 | |||||||||||||||||
Technology and communications |
205 | 189 | 8.5 | 607 | 563 | 7.8 | ||||||||||||||||||
Postage, printing and supplies |
75 | 76 | (1.3 | ) | 226 | 226 | | |||||||||||||||||
Other intangibles |
67 | 75 | (10.7 | ) | 208 | 225 | (7.6 | ) | ||||||||||||||||
Other |
455 | 458 | (.7 | ) | 1,446 | 1,315 | 10.0 | |||||||||||||||||
Total noninterest expense |
$ | 2,609 | $ | 2,476 | 5.4 | % | $ | 7,770 | $ | 7,215 | 7.7 | % | ||||||||||||
Efficiency ratio (a) |
50.4 | % | 51.5 | % | 51.1 | % | 51.4 | % |
(a) | Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding securities gains (losses), net. |
6 | U. S. Bancorp |
U. S. Bancorp | 7 |
Table 4 |
Investment Securities |
Available-for-Sale | Held-to-Maturity | |||||||||||||||||||||||||||||||
At September 30, 2012 (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 |
$ | 72 | $ | 73 | .5 | 2.57 | % | $ | 50 | $ | 50 | .3 | .61 | % | ||||||||||||||||||
Maturing after one year through five years |
497 | 501 | 1.3 | .84 | 2,447 | 2,473 | 1.4 | 1.00 | ||||||||||||||||||||||||
Maturing after five years through ten years |
149 | 158 | 7.5 | 3.11 | | | | | ||||||||||||||||||||||||
Maturing after ten years |
10 | 11 | 10.9 | 2.89 | 60 | 60 | 12.4 | 1.96 | ||||||||||||||||||||||||
Total |
$ | 728 | $ | 743 | 2.6 | 1.51 | % | $ | 2,557 | $ | 2,583 | 1.7 | 1.01 | % | ||||||||||||||||||
Mortgage-Backed Securities (a) |
||||||||||||||||||||||||||||||||
Maturing in one year or less |
$ | 3,312 | $ | 3,315 | .6 | 1.58 | % | $ | 395 | $ | 396 | .7 | 1.52 | % | ||||||||||||||||||
Maturing after one year through five years |
23,074 | 23,876 | 3.0 | 2.46 | 30,583 | 31,260 | 3.1 | 2.17 | ||||||||||||||||||||||||
Maturing after five years through ten years |
3,074 | 3,045 | 6.4 | 2.26 | 740 | 758 | 7.4 | 1.50 | ||||||||||||||||||||||||
Maturing after ten years |
294 | 299 | 12.5 | 1.49 | 59 | 60 | 10.4 | 1.22 | ||||||||||||||||||||||||
Total |
$ | 29,754 | $ | 30,535 | 3.2 | 2.34 | % | $ | 31,777 | $ | 32,474 | 3.2 | 2.14 | % | ||||||||||||||||||
Asset-Backed Securities (a) |
||||||||||||||||||||||||||||||||
Maturing in one year or less |
$ | 8 | $ | 9 | | .24 | % | $ | | $ | 4 | .5 | 1.22 | % | ||||||||||||||||||
Maturing after one year through five years |
36 | 46 | 3.2 | 6.36 | 11 | 9 | 3.5 | .65 | ||||||||||||||||||||||||
Maturing after five years through ten years |
574 | 585 | 7.6 | 2.48 | 8 | 9 | 6.6 | .73 | ||||||||||||||||||||||||
Maturing after ten years |
| | 18.8 | 5.88 | 9 | 18 | 22.6 | .86 | ||||||||||||||||||||||||
Total |
$ | 618 | $ | 640 | 7.3 | 2.68 | % | $ | 28 | $ | 40 | 10.5 | .75 | % | ||||||||||||||||||
Obligations of State and Political Subdivisions (b) (c) |
||||||||||||||||||||||||||||||||
Maturing in one year or less |
$ | 81 | $ | 82 | .1 | 2.65 | % | $ | | $ | | .7 | 8.16 | % | ||||||||||||||||||
Maturing after one year through five years |
5,226 | 5,550 | 3.8 | 6.79 | 6 | 6 | 3.2 | 7.31 | ||||||||||||||||||||||||
Maturing after five years through ten years |
765 | 812 | 7.1 | 6.20 | 1 | 2 | 7.9 | 7.79 | ||||||||||||||||||||||||
Maturing after ten years |
13 | 13 | 17.2 | 15.83 | 14 | 14 | 14.6 | 5.42 | ||||||||||||||||||||||||
Total |
$ | 6,085 | $ | 6,457 | 4.2 | 6.68 | % | $ | 21 | $ | 22 | 10.9 | 6.13 | % | ||||||||||||||||||
Other Debt Securities |
||||||||||||||||||||||||||||||||
Maturing in one year or less |
$ | 6 | $ | 6 | .2 | 1.00 | % | $ | 3 | $ | 2 | .5 | 1.14 | % | ||||||||||||||||||
Maturing after one year through five years |
| | | | 94 | 91 | 3.5 | 1.30 | ||||||||||||||||||||||||
Maturing after five years through ten years |
| | | | 29 | 14 | 8.1 | 1.18 | ||||||||||||||||||||||||
Maturing after ten years |
813 | 709 | 25.3 | 3.21 | | | | | ||||||||||||||||||||||||
Total |
$ | 819 | $ | 715 | 25.1 | 3.19 | % | $ | 126 | $ | 107 | 4.4 | 1.27 | % | ||||||||||||||||||
Other Investments |
$ | 516 | $ | 546 | 15.8 | 2.97 | % | $ | | $ | | | | % | ||||||||||||||||||
Total investment securities (d) |
$ | 38,520 | $ | 39,636 | 4.0 | 3.04 | % | $ | 34,509 | $ | 35,226 | 3.1 | 2.06 | % |
(a) | Information related to asset and mortgage-backed securities included above is presented based upon weighted-average maturities anticipating 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, yield to maturity if 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 contractual maturity for securities with a fair value equal to or below par. |
(d) | The weighted-average maturity of the available-for-sale investment securities was 5.2 years at December 31, 2011, with a corresponding weighted-average yield of 3.19 percent. The weighted-average maturity of the held-to-maturity investment securities was 3.9 years at December 31, 2011, with a corresponding weighted-average yield of 2.21 percent. |
(e) | Average yields are presented on a fully-taxable equivalent basis under a tax rate of 35 percent. 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. Average yield and maturity calculations exclude equity securities that have no stated yield or maturity. |
September 30, 2012 | December 31, 2011 | |||||||||||||||
(Dollars in Millions) | Amortized Cost |
Percent of Total |
Amortized Cost |
Percent of Total |
||||||||||||
U.S. Treasury and agencies |
$ | 3,285 | 4.5 | % | $ | 3,605 | 5.1 | % | ||||||||
Mortgage-backed securities |
61,531 | 84.2 | 57,561 | 82.0 | ||||||||||||
Asset-backed securities |
646 | .9 | 949 | 1.4 | ||||||||||||
Obligations of state and political subdivisions |
6,106 | 8.4 | 6,417 | 9.1 | ||||||||||||
Other debt securities and investments |
1,461 | 2.0 | 1,701 | 2.4 | ||||||||||||
Total investment securities |
$ | 73,029 | 100.0 | % | $ | 70,233 | 100.0 | % |
8 | U. S. Bancorp |
U. S. Bancorp | 9 |
10 | U. S. Bancorp |
U. S. Bancorp | 11 |
12 | U. S. Bancorp |
U. S. Bancorp | 13 |
Table 5 |
Delinquent Loan Ratios as a Percent of Ending Loan Balances |
90 days or more past due excluding nonperforming loans | September 30, 2012 |
December 31, 2011 |
||||||
Commercial |
||||||||
Commercial |
.07 | % | .09 | % | ||||
Lease financing |
.02 | | ||||||
Total commercial |
.06 | .08 | ||||||
Commercial Real Estate |
||||||||
Commercial mortgages |
.02 | .02 | ||||||
Construction and development |
.10 | .13 | ||||||
Total commercial real estate |
.03 | .04 | ||||||
Residential Mortgages (a) |
.72 | .98 | ||||||
Credit Card |
1.18 | 1.36 | ||||||
Other Retail |
||||||||
Retail leasing |
.02 | .02 | ||||||
Other |
.23 | .43 | ||||||
Total other retail (b) |
.20 | .38 | ||||||
Total loans, excluding covered loans |
.31 | .43 | ||||||
Covered Loans |
5.61 | 6.15 | ||||||
Total loans |
.61 | % | .84 | % |
90 days or more past due including nonperforming loans | September 30, 2012 |
December 31, 2011 |
||||||
Commercial |
.31 | % | .63 | % | ||||
Commercial real estate |
1.75 | 2.55 | ||||||
Residential mortgages (a) |
2.52 | 2.73 | ||||||
Credit card |
2.18 | 2.65 | ||||||
Other retail (b) |
.64 | .52 | ||||||
Total loans, excluding covered loans |
1.24 | 1.54 | ||||||
Covered loans |
9.30 | 12.42 | ||||||
Total loans |
1.69 | % | 2.30 | % |
(a) | Delinquent loan ratios exclude $3.0 billion at September 30, 2012, and $2.6 billion at December 31, 2011, of loans purchased from GNMA mortgage pools whose repayments are primarily insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. Including these loans, the ratio of residential mortgages 90 days or more past due including all nonperforming loans was 9.64 percent at September 30, 2012, and 9.84 percent at December 31, 2011. |
(b) | Delinquent loan ratios exclude student loans that are guaranteed by the federal government. Including these loans, the ratio of total other retail loans 90 days or more past due including all nonperforming loans was 1.09 percent at September 30, 2012, and .99 percent at December 31, 2011. |
14 | U. S. Bancorp |
The following table provides summary delinquency information for residential mortgages, credit card and other retail loans included in the consumer lending segment:
Amount | As a Percent of Ending Loan Balances |
|||||||||||||||
(Dollars in Millions) | September 30, 2012 |
December 31, 2011 |
September 30, 2012 |
December 31, 2011 |
||||||||||||
Residential Mortgages (a) |
||||||||||||||||
30-89 days |
$ | 393 | $ | 404 | .93 | % | 1.09 | % | ||||||||
90 days or more |
301 | 364 | .72 | .98 | ||||||||||||
Nonperforming |
757 | 650 | 1.81 | 1.75 | ||||||||||||
Total |
$ | 1,451 | $ | 1,418 | 3.46 | % | 3.82 | % | ||||||||
Credit Card |
||||||||||||||||
30-89 days |
$ | 230 | $ | 238 | 1.41 | % | 1.37 | % | ||||||||
90 days or more |
194 | 236 | 1.18 | 1.36 | ||||||||||||
Nonperforming |
163 | 224 | .99 | 1.29 | ||||||||||||
Total |
$ | 587 | $ | 698 | 3.58 | % | 4.02 | % | ||||||||
Other Retail |
||||||||||||||||
Retail Leasing |
||||||||||||||||
30-89 days |
$ | 9 | $ | 10 | .17 | % | .19 | % | ||||||||
90 days or more |
1 | 1 | .02 | .02 | ||||||||||||
Nonperforming |
1 | | .02 | | ||||||||||||
Total |
$ | 11 | $ | 11 | .21 | % | .21 | % | ||||||||
Home Equity and Second Mortgages |
||||||||||||||||
30-89 days |
$ | 140 | $ | 162 | .81 | % | .90 | % | ||||||||
90 days or more |
54 | 133 | .32 | .73 | ||||||||||||
Nonperforming |
179 | 40 | 1.05 | .22 | ||||||||||||
Total |
$ | 373 | $ | 335 | 2.18 | % | 1.85 | % | ||||||||
Other (b) |
||||||||||||||||
30-89 days |
$ | 151 | $ | 168 | .59 | % | .68 | % | ||||||||
90 days or more |
42 | 50 | .16 | .20 | ||||||||||||
Nonperforming |
30 | 27 | .12 | .11 | ||||||||||||
Total |
$ | 223 | $ | 245 | .87 | % | .99 | % |
(a) | Excludes $3.0 billion and $2.6 billion at September 30, 2012, and December 31, 2011, respectively, of loans purchased from GNMA mortgage pools that are 90 days or more past due that continue to accrue interest. |
(b) | Includes revolving credit, installment, automobile and student loans. |
The following table provides information on delinquent and nonperforming consumer lending segment loans as a percent of ending loan balances, by channel:
Consumer Finance | Other Consumer Lending | |||||||||||||||
September 30, 2012 |
December 31, 2011 |
September 30, 2012 |
December 31, 2011 |
|||||||||||||
Residential Mortgages (a) |
||||||||||||||||
30-89 days |
1.83 | % | 1.87 | % | .51 | % | .67 | % | ||||||||
90 days or more |
1.19 | 1.71 | .49 | .59 | ||||||||||||
Nonperforming |
3.10 | 2.50 | 1.18 | 1.35 | ||||||||||||
Total |
6.12 | % | 6.08 | % | 2.18 | % | 2.61 | % | ||||||||
Credit Card |
||||||||||||||||
30-89 days |
| % | | % | 1.41 | % | 1.37 | % | ||||||||
90 days or more |
| | 1.18 | 1.36 | ||||||||||||
Nonperforming |
| | .99 | 1.29 | ||||||||||||
Total |
| % | | % | 3.58 | % | 4.02 | % | ||||||||
Other Retail |
||||||||||||||||
Retail Leasing |
||||||||||||||||
30-89 days |
| % | | % | .17 | % | .19 | % | ||||||||
90 days or more |
| | .02 | .02 | ||||||||||||
Nonperforming |
| | .02 | | ||||||||||||
Total |
| % | | % | .21 | % | .21 | % | ||||||||
Home Equity and Second Mortgages |
||||||||||||||||
30-89 days |
1.98 | % | 2.01 | % | .64 | % | .73 | % | ||||||||
90 days or more |
.59 | 1.42 | .28 | .63 | ||||||||||||
Nonperforming |
2.03 | .21 | .90 | .22 | ||||||||||||
Total |
4.60 | % | 3.64 | % | 1.82 | % | 1.58 | % | ||||||||
Other (b) |
||||||||||||||||
30-89 days |
6.27 | % | 4.92 | % | .52 | % | .60 | % | ||||||||
90 days or more |
1.25 | .90 | .15 | .19 | ||||||||||||
Nonperforming |
| | .12 | .11 | ||||||||||||
Total |
7.52 | % | 5.82 | % | .79 | % | .90 | % |
(a) | Excludes loans purchased from GNMA mortgage pools that are 90 days or more past due that continue to accrue interest. |
(b) | Includes revolving credit, installment, automobile and student loans. |
U. S. Bancorp | 15 |
16 | U. S. Bancorp |
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 September 30, 2012 (Dollars in Millions) |
Performing TDRs |
30-89 Days Past Due |
90 Days or More Past Due |
Nonperforming TDRs |
Total TDRs |
|||||||||||||||
Commercial |
$ | 230 | 4.3 | % | 1.5 | % | $ | 76 | (a) | $ | 306 | |||||||||
Commercial real estate |
583 | .8 | | 222 | (b) | 805 | ||||||||||||||
Residential mortgages |
2,076 | 6.8 | 5.1 | 326 | 2,402 | (d) | ||||||||||||||
Credit card |
300 | 10.4 | 6.8 | 162 | (c) | 462 | ||||||||||||||
Other retail |
198 | 8.4 | 3.6 | 71 | (c) | 269 | (e) | |||||||||||||
TDRs, excluding GNMA and covered loans |
3,387 | 6.0 | 4.0 | 857 | 4,244 | |||||||||||||||
Loans purchased from GNMA mortgage pools |
1,631 | 9.9 | 48.1 | | 1,631 | (f) | ||||||||||||||
Covered loans |
371 | 3.6 | 10.6 | 121 | 492 | |||||||||||||||
Total |
$ | 5,389 | 7.0 | % | 17.8 | % | $ | 978 | $ | 6,367 |
(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 $205 million of residential mortgage loans to borrowers that have had debt discharged through bankruptcy and $64 million in trial period arrangements. |
(e) | Includes $81 million of home equity and second mortgage loans to borrowers that have had debt discharged through bankruptcy and $2 million in trial period arrangements. |
(f) | Includes $153 million of Federal Housing Administration and Department of Veterans Affairs residential mortgage loans to borrowers that have had debt discharged through bankruptcy and $326 million in trial period arrangements. |
U. S. Bancorp | 17 |
Table 6 |
Nonperforming Assets (a) |
(Dollars in Millions) | September 30, 2012 |
December 31, 2011 |
||||||
Commercial |
||||||||
Commercial |
$ | 133 | $ | 280 | ||||
Lease financing |
19 | 32 | ||||||
Total commercial |
152 | 312 | ||||||
Commercial Real Estate |
||||||||
Commercial mortgages |
392 | 354 | ||||||
Construction and development |
239 | 545 | ||||||
Total commercial real estate |
631 | 899 | ||||||
Residential Mortgages (b) |
757 | 650 | ||||||
Credit Card |
163 | 224 | ||||||
Other Retail |
||||||||
Retail leasing |
1 | | ||||||
Other |
209 | 67 | ||||||
Total other retail |
210 | 67 | ||||||
Total nonperforming loans, excluding covered loans |
1,913 | 2,152 | ||||||
Covered Loans |
449 | 926 | ||||||
Total nonperforming loans |
2,362 | 3,078 | ||||||
Other Real Estate (c)(d) |
259 | 404 | ||||||
Covered Other Real Estate (d) |
198 | 274 | ||||||
Other Assets |
16 | 18 | ||||||
Total nonperforming assets |
$ | 2,835 | $ | 3,774 | ||||
Total nonperforming assets, excluding covered assets |
$ | 2,188 | $ | 2,574 | ||||
Excluding covered assets: |
||||||||
Accruing loans 90 days or more past due (b) |
$ | 644 | $ | 843 | ||||
Nonperforming loans to total loans |
.93 | % | 1.10 | % | ||||
Nonperforming assets to total loans plus other real estate (c) |
1.06 | % | 1.32 | % | ||||
Including covered assets: |
||||||||
Accruing loans 90 days or more past due (b) |
$ | 1,326 | $ | 1,753 | ||||
Nonperforming loans to total loans |
1.08 | % | 1.47 | % | ||||
Nonperforming assets to total loans plus other real estate (c) |
1.30 | % | 1.79 | % |
Changes in Nonperforming Assets
(Dollars in Millions) | Commercial and Commercial Real Estate |
Credit Card, Other Retail and Residential Mortgages (f) |
Covered Assets |
Total | ||||||||||||
Balance December 31, 2011 |
$ | 1,475 | $ | 1,099 | $ | 1,200 | $ | 3,774 | ||||||||
Additions to nonperforming assets |
||||||||||||||||
New nonaccrual loans and foreclosed properties |
710 | 898 | 209 | 1,817 | ||||||||||||
Advances on loans |
36 | | | 36 | ||||||||||||
Total additions |
746 | 898 | 209 | 1,853 | ||||||||||||
Reductions in nonperforming assets |
||||||||||||||||
Paydowns, payoffs |
(609 | ) | (242 | ) | (529 | ) | (1,380 | ) | ||||||||
Net sales |
(229 | ) | (111 | ) | (189 | ) | (529 | ) | ||||||||
Return to performing status |
(38 | ) | (90 | ) | (35 | ) | (163 | ) | ||||||||
Charge-offs (e) |
(414 | ) | (297 | ) | (9 | ) | (720 | ) | ||||||||
Total reductions |
(1,290 | ) | (740 | ) | (762 | ) | (2,792 | ) | ||||||||
Net additions to (reductions in) nonperforming assets |
(544 | ) | 158 | (553 | ) | (939 | ) | |||||||||
Balance September 30, 2012 |
$ | 931 | $ | 1,257 | $ | 647 | $ | 2,835 |
(a) | Throughout this document, nonperforming assets and related ratios do not include accruing loans 90 days or more past due. |
(b) | Excludes $3.0 billion and $2.6 billion at September 30, 2012, and December 31, 2011, 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 Department of Veterans Affairs. |
(c) | Foreclosed GNMA loans of $596 million and $692 million at September 30, 2012, and December 31, 2011, 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 Department of Veterans Affairs. |
(d) | Includes equity investments in entities whose principal assets are other real estate owned. |
(e) | Charge-offs exclude actions for certain card products and loan sales that were not classified as nonperforming at the time the charge-off occurred. |
(f) | Residential mortgage information excludes changes related to residential mortgages serviced by others. |
18 | U. S. Bancorp |
Table 7 |
Net Charge-offs as a Percent of Average Loans Outstanding |
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Commercial |
||||||||||||||||
Commercial |
.41 | % | .77 | % | .48 | % | .90 | % | ||||||||
Lease financing |
.50 | .61 | .71 | .81 | ||||||||||||
Total commercial |
.42 | .75 | .50 | .89 | ||||||||||||
Commercial Real Estate |
||||||||||||||||
Commercial mortgages |
.26 | .93 | .45 | .81 | ||||||||||||
Construction and development |
.33 | 3.43 | 1.05 | 4.60 | ||||||||||||
Total commercial real estate |
.27 | 1.39 | .55 | 1.56 | ||||||||||||
Residential Mortgages |
1.17 | 1.42 | 1.16 | 1.51 | ||||||||||||
Credit Card (a) |
4.01 | 4.40 | 4.05 | 5.35 | ||||||||||||
Other Retail |
||||||||||||||||
Retail leasing |
| (.08 | ) | .03 | | |||||||||||
Home equity and second mortgages |
2.04 | 1.59 | 1.71 | 1.66 | ||||||||||||
Other |
1.06 | 1.11 | .95 | 1.20 | ||||||||||||
Total other retail |
1.30 | 1.16 | 1.13 | 1.25 | ||||||||||||
Total loans, excluding covered loans |
1.04 | 1.42 | 1.09 | 1.62 | ||||||||||||
Covered Loans |
.06 | .08 | .03 | .08 | ||||||||||||
Total loans |
.99 | % | 1.31 | % | 1.02 | % | 1.49 | % |
(a) | Net charge-off as a percent of average loans outstanding, excluding portfolio purchases where the acquired loans were recorded at fair value at the purchase date, were 4.17 percent and 4.54 percent for the three months ended September 30, 2012 and 2011, respectively, and 4.21 percent and 5.53 percent for the nine months ended September 30, 2012 and 2011, respectively. |
U. S. Bancorp | 19 |
The following table provides an analysis of net charge-offs as a percent of average loans outstanding by channel:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
Average Loans | Percent of Average Loans |
Average Loans | Percent of Average Loans |
|||||||||||||||||||||||||||||
(Dollars in Millions) | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | ||||||||||||||||||||||||
Consumer Finance |
||||||||||||||||||||||||||||||||
Residential mortgages |
$ | 13,527 | $ | 12,397 | 2.71 | % | 2.59 | % | $ | 13,303 | $ | 12,127 | 2.49 | % | 2.87 | % | ||||||||||||||||
Home equity and second mortgages |
2,250 | 2,442 | 5.48 | 3.57 | 2,304 | 2,476 | 4.35 | 4.32 | ||||||||||||||||||||||||
Other |
333 | 501 | 4.78 | 3.96 | 376 | 536 | 3.91 | 2.99 | ||||||||||||||||||||||||
Other Consumer Lending |
||||||||||||||||||||||||||||||||
Residential mortgages |
$ | 27,442 | $ | 21,629 | .42 | % | .75 | % | $ | 26,025 | $ | 20,727 | .48 | % | .71 | % | ||||||||||||||||
Home equity and second mortgages |
15,079 | 16,068 | 1.53 | 1.28 | 15,315 | 16,172 | 1.32 | 1.25 | ||||||||||||||||||||||||
Other |
25,073 | 24,272 | 1.02 | 1.05 | 24,778 | 24,118 | .91 | 1.16 | ||||||||||||||||||||||||
Total Company |
||||||||||||||||||||||||||||||||
Residential mortgages |
$ | 40,969 | $ | 34,026 | 1.17 | % | 1.42 | % | $ | 39,328 | $ | 32,854 | 1.16 | % | 1.51 | % | ||||||||||||||||
Home equity and second mortgages |
17,329 | 18,510 | 2.04 | 1.59 | 17,619 | 18,648 | 1.71 | 1.66 | ||||||||||||||||||||||||
Other (a) |
25,406 | 24,773 | 1.06 | 1.11 | 25,154 | 24,654 | .95 | 1.20 |
(a) | Includes revolving credit, installment, automobile and student loans |
The following table provides further information on net charge-offs as a percent of average loans outstanding for the consumer finance loans:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
Average Loans | Percent of Loans |
Average Loans | Percent of Average Loans |
|||||||||||||||||||||||||||||
(Dollars in Millions) | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | ||||||||||||||||||||||||
Residential mortgages |
||||||||||||||||||||||||||||||||
Sub-prime borrowers |
$ | 1,699 | $ | 1,940 | 7.49 | % | 6.14 | % | $ | 1,757 | $ | 2,009 | 6.61 | % | 6.12 | % | ||||||||||||||||
Other borrowers |
11,828 | 10,457 | 2.02 | 1.93 | 11,546 | 10,118 | 1.86 | 2.22 | ||||||||||||||||||||||||
Total |
$ | 13,527 | $ | 12,397 | 2.71 | % | 2.59 | % | $ | 13,303 | $ | 12,127 | 2.49 | % | 2.87 | % | ||||||||||||||||
Home equity and second mortgages |
||||||||||||||||||||||||||||||||
Sub-prime borrowers |
$ | 398 | $ | 480 | 11.00 | % | 8.27 | % | $ | 417 | $ | 503 | 8.65 | % | 9.30 | % | ||||||||||||||||
Other borrowers |
1,852 | 1,962 | 4.30 | 2.43 | 1,887 | 1,973 | 3.40 | 3.05 | ||||||||||||||||||||||||
Total |
$ | 2,250 | $ | 2,442 | 5.48 | % | 3.57 | % | $ | 2,304 | $ | 2,476 | 4.35 | % | 4.32 | % |
20 | U. S. Bancorp |
U. S. Bancorp | 21 |
22 | U. S. Bancorp |
Table 8 |
Summary of Allowance for Credit Losses |
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
(Dollars in Millions) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Balance at beginning of period |
$ | 4,864 | $ | 5,308 | $ | 5,014 | $ | 5,531 | ||||||||
Charge-Offs |
||||||||||||||||
Commercial |
||||||||||||||||
Commercial |
75 | 108 | 243 | 348 | ||||||||||||
Lease financing |
15 | 18 | 53 | 64 | ||||||||||||
Total commercial |
90 | 126 | 296 | 412 | ||||||||||||
Commercial real estate |
||||||||||||||||
Commercial mortgages |
33 | 70 | 123 | 185 | ||||||||||||
Construction and development |
14 | 61 | 83 | 261 | ||||||||||||
Total commercial real estate |
47 | 131 | 206 | 446 | ||||||||||||
Residential mortgages |
127 | 124 | 357 | 380 | ||||||||||||
Credit card |
186 | 203 | 585 | 712 | ||||||||||||
Other retail |
||||||||||||||||
Retail leasing |
3 | 2 | 7 | 8 | ||||||||||||
Home equity and second mortgages |
96 | 78 | 245 | 245 | ||||||||||||
Other |
88 | 95 | 251 | 298 | ||||||||||||
Total other retail |
187 | 175 | 503 | 551 | ||||||||||||
Covered loans (a) |
2 | 3 | 4 | 10 | ||||||||||||
Total charge-offs |
639 | 762 | 1,951 | 2,511 | ||||||||||||
Recoveries |
||||||||||||||||
Commercial |
||||||||||||||||
Commercial |
16 | 18 | 50 | 50 | ||||||||||||
Lease financing |
8 | 9 | 23 | 28 | ||||||||||||
Total commercial |
24 | 27 | 73 | 78 | ||||||||||||
Commercial real estate |
||||||||||||||||
Commercial mortgages |
13 | 2 | 21 | 13 | ||||||||||||
Construction and development |
9 | 4 | 36 | 19 | ||||||||||||
Total commercial real estate |
22 | 6 | 57 | 32 | ||||||||||||
Residential mortgages |
6 | 2 | 15 | 10 | ||||||||||||
Credit card |
19 | 25 | 79 | 71 | ||||||||||||
Other retail |
||||||||||||||||
Retail leasing |
3 | 3 | 6 | 8 | ||||||||||||
Home equity and second mortgages |
7 | 4 | 19 | 14 | ||||||||||||
Other |
20 | 26 | 72 | 77 | ||||||||||||
Total other retail |
30 | 33 | 97 | 99 | ||||||||||||
Covered loans (a) |
| | 1 | | ||||||||||||
Total recoveries |
101 | 93 | 322 | 290 | ||||||||||||
Net Charge-Offs |
||||||||||||||||
Commercial |
||||||||||||||||
Commercial |
59 | 90 | 193 | 298 | ||||||||||||
Lease financing |
7 | 9 | 30 | 36 | ||||||||||||
Total commercial |
66 | 99 | 223 | 334 | ||||||||||||
Commercial real estate |
||||||||||||||||
Commercial mortgages |
20 | 68 | 102 | 172 | ||||||||||||
Construction and development |
5 | 57 | 47 | 242 | ||||||||||||
Total commercial real estate |
25 | 125 | 149 | 414 | ||||||||||||
Residential mortgages |
121 | 122 | 342 | 370 | ||||||||||||
Credit card |
167 | 178 | 506 | 641 | ||||||||||||
Other retail |
||||||||||||||||
Retail leasing |
| (1 | ) | 1 | | |||||||||||
Home equity and second mortgages |
89 | 74 | 226 | 231 | ||||||||||||
Other |
68 | 69 | 179 | 221 | ||||||||||||
Total other retail |
157 | 142 | 406 | 452 | ||||||||||||
Covered loans (a) |
2 | 3 | 3 | 10 | ||||||||||||
Total net charge-offs |
538 | 669 | 1,629 | 2,221 | ||||||||||||
Provision for credit losses |
488 | 519 | 1,439 | 1,846 | ||||||||||||
Net change for credit losses to be reimbursed by the FDIC |
(10 | ) | 32 | (20 | ) | 34 | ||||||||||
Other changes |
(33 | ) | | (33 | ) | | ||||||||||
Balance at end of period |
$ | 4,771 | $ | 5,190 | $ | 4,771 | $ | 5,190 | ||||||||
Components |
||||||||||||||||
Allowance for loan losses, excluding losses to be reimbursed by the FDIC |
$ | 4,426 | $ | 4,823 | ||||||||||||
Allowance for credit losses to be reimbursed by the FDIC |
55 | 127 | ||||||||||||||
Liability for unfunded credit commitments |
290 | 240 | ||||||||||||||
Total allowance for credit losses |
$ | 4,771 | $ | 5,190 | ||||||||||||
Allowance for Credit Losses as a Percentage of |
||||||||||||||||
Period-end loans, excluding covered loans |
2.26 | % | 2.66 | % | ||||||||||||
Nonperforming loans, excluding covered loans |
244 | 196 | ||||||||||||||
Nonperforming and accruing loans 90 days or more past due, excluding covered loans |
182 | 149 | ||||||||||||||
Nonperforming assets, excluding covered assets |
213 | 166 | ||||||||||||||
Annualized net charge-offs, excluding covered loans |
219 | 190 | ||||||||||||||
Period-end loans |
2.19 | % | 2.53 | % | ||||||||||||
Nonperforming loans |
202 | 145 | ||||||||||||||
Nonperforming and accruing loans 90 days or more past due |
129 | 100 | ||||||||||||||
Nonperforming assets |
168 | 120 | ||||||||||||||
Annualized net charge-offs |
223 | 196 |
Note: | At September 30, 2012 and 2011, $1.8 billion and $1.9 billion, respectively, of the total allowance for credit losses related to incurred losses on credit card and other retail loans. |
(a) | Relates to covered loan charge-offs and recoveries not reimbursable by the FDIC. |
U. S. Bancorp | 23 |
24 | U. S. Bancorp |
Sensitivity of Net Interest Income
September 30, 2012 | December 31, 2011 | |||||||||||||||||||||||||||||||
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 |
* | 1.54 | % | * | 2.06 | % | * | 1.57 | % | * | 1.92 | % | ||||||||||||||||||||
* | Given the current level of interest rates, a downward rate scenario can not be computed. |
U. S. Bancorp | 25 |
26 | U. S. Bancorp |
U. S. Bancorp | 27 |
Table 9 |
Regulatory Capital Ratios |
(Dollars in Millions) | September 30, 2012 |
December 31, 2011 |
||||||
Tier 1 capital |
$ | 30,766 | $ | 29,173 | ||||
As a percent of risk-weighted assets |
10.9 | % | 10.8 | % | ||||
As a percent of adjusted quarterly average assets (leverage ratio) |
9.2 | % | 9.1 | % | ||||
Total risk-based capital |
$ | 37,559 | $ | 36,067 | ||||
As a percent of risk-weighted assets |
13.3 | % | 13.3 | % |
28 | U. S. Bancorp |
U. S. Bancorp | 29 |
Table 10 |
Line of Business Financial Performance |
Wholesale Banking and Commercial Real Estate |
Consumer and Small Business Banking |
|||||||||||||||||||||||
Three Months Ended September 30 (Dollars in Millions) |
2012 | 2011 | Percent Change |
2012 | 2011 | Percent Change |
||||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
$ | 526 | $ | 544 | (3.3 | )% | $ | 1,191 | $ | 1,153 | 3.3 | % | ||||||||||||
Noninterest income |
296 | 317 | (6.6 | ) | 931 | 707 | 31.7 | |||||||||||||||||
Securities gains (losses), net |
| | | | | | ||||||||||||||||||
Total net revenue |
822 | 861 | (4.5 | ) | 2,122 | 1,860 | 14.1 | |||||||||||||||||
Noninterest expense |
306 | 313 | (2.2 | ) | 1,251 | 1,164 | 7.5 | |||||||||||||||||
Other intangibles |
4 | 4 | | 13 | 19 | (31.6 | ) | |||||||||||||||||
Total noninterest expense |
310 | 317 | (2.2 | ) | 1,264 | 1,183 | 6.8 | |||||||||||||||||
Income before provision and income taxes |
512 | 544 | (5.9 | ) | 858 | 677 | 26.7 | |||||||||||||||||
Provision for credit losses |
| 65 | * | 346 | 330 | 4.8 | ||||||||||||||||||
Income before income taxes |
512 | 479 | 6.9 | 512 | 347 | 47.6 | ||||||||||||||||||
Income taxes and taxable-equivalent adjustment |
186 | 174 | 6.9 | 186 | 126 | 47.6 | ||||||||||||||||||
Net income |
326 | 305 | 6.9 | 326 | 221 | 47.5 | ||||||||||||||||||
Net (income) loss attributable to noncontrolling interests |
| (1 | ) | * | | | | |||||||||||||||||
Net income attributable to U.S. Bancorp |
$ | 326 | $ | 304 | 7.2 | $ | 326 | $ | 221 | 47.5 | ||||||||||||||
Average Balance Sheet |
||||||||||||||||||||||||
Commercial |
$ | 46,210 | $ | 38,020 | 21.5 | % | $ | 8,398 | $ | 7,332 | 14.5 | % | ||||||||||||
Commercial real estate |
19,681 | 19,224 | 2.4 | 16,208 | 15,656 | 3.5 | ||||||||||||||||||
Residential mortgages |
54 | 65 | (16.9 | ) | 40,526 | 33,561 | 20.8 | |||||||||||||||||
Credit card |
| | | | | | ||||||||||||||||||
Other retail |
7 | 4 | 75.0 | 45,656 | 46,000 | (.7 | ) | |||||||||||||||||
Total loans, excluding covered loans |
65,952 | 57,313 | 15.1 | 110,788 | 102,549 | 8.0 | ||||||||||||||||||
Covered loans |
806 | 1,320 | (38.9 | ) | 7,396 | 8,266 | (10.5 | ) | ||||||||||||||||
Total loans |
66,758 | 58,633 | 13.9 | 118,184 | 110,815 | 6.6 | ||||||||||||||||||
Goodwill |
1,604 | 1,604 | | 3,515 | 3,515 | | ||||||||||||||||||
Other intangible assets |
34 | 50 | (32.0 | ) | 1,764 | 1,946 | (9.4 | ) | ||||||||||||||||
Assets |
72,668 | 64,594 | 12.5 | 135,828 | 123,960 | 9.6 | ||||||||||||||||||
Noninterest-bearing deposits |
31,025 | 27,848 | 11.4 | 21,127 | 17,852 | 18.3 | ||||||||||||||||||
Interest checking |
7,890 | 10,974 | (28.1 | ) | 30,051 | 27,048 | 11.1 | |||||||||||||||||
Savings products |
10,320 | 9,351 | 10.4 | 43,723 | 40,762 | 7.3 | ||||||||||||||||||
Time deposits |
21,202 | 14,732 | 43.9 | 23,673 | 24,500 | (3.4 | ) | |||||||||||||||||
Total deposits |
70,437 | 62,905 | 12.0 | 118,574 | 110,162 | 7.6 | ||||||||||||||||||
Total U.S. Bancorp shareholders equity |
6,383 | 5,604 | 13.9 | 11,562 | 9,327 | 24.0 | ||||||||||||||||||
Wholesale Banking and Commercial Real Estate |
Consumer and Small Business Banking |
|||||||||||||||||||||||
Nine Months Ended September 30 (Dollars in Millions) |
2012 | 2011 | Percent Change |
2012 | 2011 | Percent Change |
||||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
$ | 1,580 | $ | 1,586 | (.4 | )% | $ | 3,551 | $ | 3,412 | 4.1 | % | ||||||||||||
Noninterest income |
923 | 936 | (1.4 | ) | 2,701 | 1,995 | 35.4 | |||||||||||||||||
Securities gains (losses), net |
| | | | | | ||||||||||||||||||
Total net revenue |
2,503 | 2,522 | (.8 | ) | 6,252 | 5,407 | 15.6 | |||||||||||||||||
Noninterest expense |
941 | 935 | .6 | 3,673 | 3,430 | 7.1 | ||||||||||||||||||
Other intangibles |
12 | 12 | | 39 | 57 | (31.6 | ) | |||||||||||||||||
Total noninterest expense |
953 | 947 | .6 | 3,712 | 3,487 | 6.5 | ||||||||||||||||||
Income before provision and income taxes |
1,550 | 1,575 | (1.6 | ) | 2,540 | 1,920 | 32.3 | |||||||||||||||||
Provision for credit losses |
3 | 356 | (99.2 | ) | 875 | 1,097 | (20.2 | ) | ||||||||||||||||
Income before income taxes |
1,547 | 1,219 | 26.9 | 1,665 | 823 | * | ||||||||||||||||||
Income taxes and taxable-equivalent adjustment |
563 | 443 | 27.1 | 605 | 299 | * | ||||||||||||||||||
Net income |
984 | 776 | 26.8 | 1,060 | 524 | * | ||||||||||||||||||
Net (income) loss attributable to noncontrolling interests |
| 5 | * | | (1 | ) | * | |||||||||||||||||
Net income attributable to U.S. Bancorp |
$ | 984 | $ | 781 | 26.0 | $ | 1,060 | $ | 523 | * | ||||||||||||||
Average Balance Sheet |
||||||||||||||||||||||||
Commercial |
$ | 44,376 | $ | 36,406 | 21.9 | % | $ | 8,127 | $ | 7,243 | 12.2 | % | ||||||||||||
Commercial real estate |
19,614 | 19,271 | 1.8 | 16,070 | 15,462 | 3.9 | ||||||||||||||||||
Residential mortgages |
60 | 68 | (11.8 | ) | 38,883 | 32,391 | 20.0 | |||||||||||||||||
Credit card |
| | | | | | ||||||||||||||||||
Other retail |
5 | 6 | (16.7 | ) | 45,604 | 45,691 | (.2 | ) | ||||||||||||||||
Total loans, excluding covered loans |
64,055 | 55,751 | 14.9 | 108,684 | 100,787 | 7.8 | ||||||||||||||||||
Covered loans |
1,003 | 1,589 | (36.9 | ) | 7,642 | 8,520 | (10.3 | ) | ||||||||||||||||
Total loans |
65,058 | 57,340 | 13.5 | 116,326 | 109,307 | 6.4 | ||||||||||||||||||
Goodwill |
1,604 | 1,604 | | 3,515 | 3,521 | (.2 | ) | |||||||||||||||||
Other intangible assets |
38 | 55 | (30.9 | ) | 1,784 | 2,138 | (16.6 | ) | ||||||||||||||||
Assets |
70,895 | 63,218 | 12.1 | 133,108 | 122,942 | 8.3 | ||||||||||||||||||
Noninterest-bearing deposits |
30,630 | 23,749 | 29.0 | 19,774 | 17,649 | 12.0 | ||||||||||||||||||
Interest checking |
10,608 | 13,024 | (18.6 | ) | 29,660 | 26,228 | 13.1 | |||||||||||||||||
Savings products |
8,918 | 9,555 | (6.7 | ) | 43,106 | 40,290 | 7.0 | |||||||||||||||||
Time deposits |
17,210 | 14,845 | 15.9 | 24,097 | 24,478 | (1.6 | ) | |||||||||||||||||
Total deposits |
67,366 | 61,173 | 10.1 | 116,637 | 108,645 | 7.4 | ||||||||||||||||||
Total U.S. Bancorp shareholders equity |
6,327 | 5,533 | 14.4 | 11,147 | 9,277 | 20.2 |
* | Not meaningful. |
30 | U. S. Bancorp |
Wealth Management and Securities Services |
Payment Services |
Treasury and Corporate Support |
Consolidated Company |
|||||||||||||||||||||||||||||||||||||||||||
2012 | 2011 | Percent Change |
2012 | 2011 | Percent Change |
2012 | 2011 | Percent Change |
2012 | 2011 | Percent Change |
|||||||||||||||||||||||||||||||||||
$ | 86 | $ | 89 | (3.4 | )% | $ | 382 | $ | 335 | 14.0 | % | $ | 598 | $ | 503 | 18.9 | % | $ | 2,783 | $ | 2,624 | 6.1 | % | |||||||||||||||||||||||
283 | 254 | 11.4 | 851 | 854 | (.4 | ) | 34 | 48 | (29.2 | ) | 2,395 | 2,180 | 9.9 | |||||||||||||||||||||||||||||||||
| | | | | | 1 | (9 | ) | * | 1 | (9 | ) | * | |||||||||||||||||||||||||||||||||
369 | 343 | 7.6 | 1,233 | 1,189 | 3.7 | 633 | 542 | 16.8 | 5,179 | 4,795 | 8.0 | |||||||||||||||||||||||||||||||||||
289 | 267 | 8.2 | 451 | 449 | .4 | 245 | 208 | 17.8 | 2,542 | 2,401 | 5.9 | |||||||||||||||||||||||||||||||||||
10 | 9 | 11.1 | 40 | 43 | (7.0 | ) | | | | 67 | 75 | (10.7 | ) | |||||||||||||||||||||||||||||||||
299 | 276 | 8.3 | 491 | 492 | (.2 | ) | 245 | 208 | 17.8 | 2,609 | 2,476 | 5.4 | ||||||||||||||||||||||||||||||||||
70 | 67 | 4.5 | 742 | 697 | 6.5 | 388 | 334 | 16.2 | 2,570 | 2,319 | 10.8 | |||||||||||||||||||||||||||||||||||
4 | 2 | * | 135 | 125 | 8.0 | 3 | (3 | ) | * | 488 | 519 | (6.0 | ) | |||||||||||||||||||||||||||||||||
66 | 65 | 1.5 | 607 | 572 | 6.1 | 385 | 337 | 14.2 | 2,082 | 1,800 | 15.7 | |||||||||||||||||||||||||||||||||||
24 | 24 | | 221 | 208 | 6.3 | 33 | 16 | * | 650 | 548 | 18.6 | |||||||||||||||||||||||||||||||||||
42 | 41 | 2.4 | 386 | 364 | 6.0 | 352 | 321 | 9.7 | 1,432 | 1,252 | 14.4 | |||||||||||||||||||||||||||||||||||
| | | (10 | ) | (10 | ) | | 52 | 32 | 62.5 | 42 | 21 | * | |||||||||||||||||||||||||||||||||
$ | 42 | $ | 41 | 2.4 | $ | 376 | $ | 354 | 6.2 | $ | 404 | $ | 353 | 14.4 | $ | 1,474 | $ | 1,273 | 15.8 | |||||||||||||||||||||||||||
$ | 1,398 | $ | 1,069 | 30.8 | % | $ | 6,062 | $ | 5,828 | 4.0 | % | $ | 124 | $ | 95 | 30.5 | % | $ | 62,192 | $ | 52,344 | 18.8 | % | |||||||||||||||||||||||
599 | 567 | 5.6 | | | | 142 | 122 | 16.4 | 36,630 | 35,569 | 3.0 | |||||||||||||||||||||||||||||||||||
384 | 392 | (2.0 | ) | | | | 5 | 8 | (37.5 | ) | 40,969 | 34,026 | 20.4 | |||||||||||||||||||||||||||||||||
| | | 16,551 | 16,057 | 3.1 | | | | 16,551 | 16,057 | 3.1 | |||||||||||||||||||||||||||||||||||
1,526 | 1,490 | 2.4 | 802 | 885 | (9.4 | ) | | 1 | * | 47,991 | 48,380 | (.8 | ) | |||||||||||||||||||||||||||||||||
3,907 | 3,518 | 11.1 | 23,415 | 22,770 | 2.8 | 271 | 226 | 19.9 | 204,333 | 186,376 | 9.6 | |||||||||||||||||||||||||||||||||||
11 | 12 | (8.3 | ) | 5 | 5 | | 4,377 | 6,190 | (29.3 | ) | 12,595 | 15,793 | (20.2 | ) | ||||||||||||||||||||||||||||||||
3,918 | 3,530 | 11.0 | 23,420 | 22,775 | 2.8 | 4,648 | 6,416 | (27.6 | ) | 216,928 | 202,169 | 7.3 | ||||||||||||||||||||||||||||||||||
1,469 | 1,463 | .4 | 2,346 | 2,367 | (.9 | ) | | | | 8,934 | 8,949 | (.2 | ) | |||||||||||||||||||||||||||||||||
165 | 179 | (7.8 | ) | 646 | 775 | (16.6 | ) | 4 | 5 | (20.0 | ) | 2,613 | 2,955 | (11.6 | ) | |||||||||||||||||||||||||||||||
6,698 | 5,976 | 12.1 | 29,522 | 28,235 | 4.6 | 100,937 | 98,816 | 2.1 | 345,653 | 321,581 | 7.5 | |||||||||||||||||||||||||||||||||||
14,856 | 11,801 | 25.9 | 623 | 653 | (4.6 | ) | 496 | 452 | 9.7 | 68,127 | 58,606 | 16.2 | ||||||||||||||||||||||||||||||||||
3,919 | 2,835 | 38.2 | 1,346 | 184 | * | 1 | 1 | | 43,207 | 41,042 | 5.3 | |||||||||||||||||||||||||||||||||||
23,051 | 21,314 | 8.1 | 40 | 31 | 29.0 | 139 | 207 | (32.9 | ) | 77,273 | 71,665 | 7.8 | ||||||||||||||||||||||||||||||||||
5,459 | 4,787 | 14.0 | | | | 340 | 37 | * | 50,674 | 44,056 | 15.0 | |||||||||||||||||||||||||||||||||||
47,285 | 40,737 | 16.1 | 2,009 | 868 | * | 976 | 697 | 40.0 | 239,281 | 215,369 | 11.1 | |||||||||||||||||||||||||||||||||||
2,241 | 2,075 | 8.0 | 5,654 | 5,276 | 7.2 | 12,779 | 10,805 | 18.3 | 38,619 | 33,087 | 16.7 | |||||||||||||||||||||||||||||||||||
Wealth Management and Securities Services |
Payment Services |
Treasury and Corporate Support |
Consolidated Company |
|||||||||||||||||||||||||||||||||||||||||||
2012 | 2011 | Percent Change |
2012 | 2011 | Percent Change |
2012 | 2011 | Percent Change |
2012 | 2011 | Percent Change |
|||||||||||||||||||||||||||||||||||
$ | 263 | $ | 259 | 1.5 | % | $ | 1,154 | $ | 995 | 16.0 | % | $ | 1,638 | $ | 1,423 | 15.1 | % | $ | 8,186 | $ | 7,675 | 6.7 | % | |||||||||||||||||||||||
828 | 793 | 4.4 | 2,399 | 2,443 | (1.8 | ) | 157 | 184 | (14.7 | ) | 7,008 | 6,351 | 10.3 | |||||||||||||||||||||||||||||||||
| | | | | | (18 | ) | (22 | ) | 18.2 | (18 | ) | (22 | ) | 18.2 | |||||||||||||||||||||||||||||||
1,091 | 1,052 | 3.7 | 3,553 | 3,438 | 3.3 | 1,777 | 1,585 | 12.1 | 15,176 | 14,004 | 8.4 | |||||||||||||||||||||||||||||||||||
856 | 802 | 6.7 | 1,344 | 1,306 | 2.9 | 748 | 517 | 44.7 | 7,562 | 6,990 | 8.2 | |||||||||||||||||||||||||||||||||||
30 | 27 | 11.1 | 127 | 129 | (1.6 | ) | | | | 208 | 225 | (7.6 | ) | |||||||||||||||||||||||||||||||||
886 | 829 | 6.9 | 1,471 | 1,435 | 2.5 | 748 | 517 | 44.7 | 7,770 | 7,215 | 7.7 | |||||||||||||||||||||||||||||||||||
205 | 223 | (8.1 | ) | 2,082 | 2,003 | 3.9 | 1,029 | 1,068 | (3.7 | ) | 7,406 | 6,789 | 9.1 | |||||||||||||||||||||||||||||||||
6 | 3 | * | 548 | 377 | 45.4 | 7 | 13 | (46.2 | ) | 1,439 | 1,846 | (22.0 | ) | |||||||||||||||||||||||||||||||||
199 | 220 | (9.5 | ) | 1,534 | 1,626 | (5.7 | ) | 1,022 | 1,055 | (3.1 | ) | 5,967 | 4,943 | 20.7 | ||||||||||||||||||||||||||||||||
72 | 81 | (11.1 | ) | 558 | 591 | (5.6 | ) | 54 | 69 | (21.7 | ) | 1,852 | 1,483 | 24.9 | ||||||||||||||||||||||||||||||||
127 | 139 | (8.6 | ) | 976 | 1,035 | (5.7 | ) | 968 | 986 | (1.8 | ) | 4,115 | 3,460 | 18.9 | ||||||||||||||||||||||||||||||||
| | | (30 | ) | (29 | ) | (3.4 | ) | 142 | 87 | 63.2 | 112 | 62 | 80.6 | ||||||||||||||||||||||||||||||||
$ | 127 | $ | 139 | (8.6 | ) | $ | 946 | $ | 1,006 | (6.0 | ) | $ | 1,110 | $ | 1,073 | 3.4 | $ | 4,227 | $ | 3,522 | 20.0 | |||||||||||||||||||||||||
$ | 1,267 | $ | 1,069 | 18.5 | % | $ | 5,904 | $ | 5,561 | 6.2 | % | $ | 116 | $ | 104 | 11.5 | % | $ | 59,790 | $ | 50,383 | 18.7 | % | |||||||||||||||||||||||
582 | 575 | 1.2 | | | | 123 | 109 | 12.8 | 36,389 | 35,417 | 2.7 | |||||||||||||||||||||||||||||||||||
379 | 385 | (1.6 | ) | | | | 6 | 10 | (40.0 | ) | 39,328 | 32,854 | 19.7 | |||||||||||||||||||||||||||||||||
| | | 16,675 | 16,022 | 4.1 | | | | 16,675 | 16,022 | 4.1 | |||||||||||||||||||||||||||||||||||
1,513 | 1,547 | (2.2 | ) | 817 | 909 | (10.1 | ) | 1 | 1 | | 47,940 | 48,154 | (.4 | ) | ||||||||||||||||||||||||||||||||
3,741 | 3,576 | 4.6 | 23,396 | 22,492 | 4.0 | 246 | 224 | 9.8 | 200,122 | 182,830 | 9.5 | |||||||||||||||||||||||||||||||||||
12 | 12 | | 5 | 4 | 25.0 | 4,947 | 6,578 | (24.8 | ) | 13,609 | 16,703 | (18.5 | ) | |||||||||||||||||||||||||||||||||
3,753 | 3,588 | 4.6 | 23,401 | 22,496 | 4.0 | 5,193 | 6,802 | (23.7 | ) | 213,731 | 199,533 | 7.1 | ||||||||||||||||||||||||||||||||||
1,468 | 1,463 | .3 | 2,349 | 2,365 | (.7 | ) | | | | 8,936 | 8,953 | (.2 | ) | |||||||||||||||||||||||||||||||||
172 | 188 | (8.5 | ) | 717 | 806 | (11.0 | ) | 4 | 5 | (20.0 | ) | 2,715 | 3,192 | (14.9 | ) | |||||||||||||||||||||||||||||||
6,454 | 6,018 | 7.2 | 29,685 | 27,679 | 7.2 | 100,665 | 94,222 | 6.8 | 340,807 | 314,079 | 8.5 | |||||||||||||||||||||||||||||||||||
13,899 | 8,176 | 70.2 | 638 | 684 | (6.7 | ) | 482 | 300 | 60.7 | 65,423 | 50,558 | 29.4 | ||||||||||||||||||||||||||||||||||
3,924 | 2,908 | 34.9 | 1,329 | 174 | * | 1 | 1 | | 45,522 | 42,335 | 7.5 | |||||||||||||||||||||||||||||||||||
23,163 | 21,329 | 8.6 | 37 | 29 | 27.6 | 136 | 192 | (29.2 | ) | 75,360 | 71,395 | 5.6 | ||||||||||||||||||||||||||||||||||
4,888 | 5,919 | (17.4 | ) | | | | 478 | 205 | * | 46,673 | 45,447 | 2.7 | ||||||||||||||||||||||||||||||||||
45,874 | 38,332 | 19.7 | 2,004 | 887 | * | 1,097 | 698 | 57.2 | 232,978 | 209,735 | 11.1 | |||||||||||||||||||||||||||||||||||
2,223 | 2,078 | 7.0 | 5,681 | 5,272 | 7.8 | 11,727 | 9,539 | 22.9 | 37,105 | 31,699 | 17.1 |
U. S. Bancorp | 31 |
32 | U. S. Bancorp |
U. S. Bancorp | 33 |
34 | U. S. Bancorp |
U. S. Bancorp | 35 |
U.S. Bancorp
Consolidated Balance Sheet
(Dollars in Millions) | September 30, 2012 |
December 31, 2011 |
||||||
(Unaudited) | ||||||||
Assets |
||||||||
Cash and due from banks |
$ | 9,382 | $ | 13,962 | ||||
Investment securities |
||||||||
Held-to-maturity (fair value $35,226 and $19,216, respectively; including $1,146 and $155 pledged as collateral, respectively) (a) |
34,509 | 18,877 | ||||||
Available-for-sale ($2,217 and $6,831 pledged as collateral, respectively) (a) |
39,636 | 51,937 | ||||||
Loans held for sale (included $9,815 and $6,925 of mortgage loans carried at fair value, respectively) |
9,879 | 7,156 | ||||||
Loans |
||||||||
Commercial |
62,910 | 56,648 | ||||||
Commercial real estate |
36,813 | 35,851 | ||||||
Residential mortgages |
41,902 | 37,082 | ||||||
Credit card |
16,402 | 17,360 | ||||||
Other retail |
47,965 | 48,107 | ||||||
Total loans, excluding covered loans |
205,992 | 195,048 | ||||||
Covered loans |
12,158 | 14,787 | ||||||
Total loans |
218,150 | 209,835 | ||||||
Less allowance for loan losses |
(4,481 | ) | (4,753 | ) | ||||
Net loans |
213,669 | 205,082 | ||||||
Premises and equipment |
2,650 | 2,657 | ||||||
Goodwill |
8,943 | 8,927 | ||||||
Other intangible assets |
2,533 | 2,736 | ||||||
Other assets |
31,052 | 28,788 | ||||||
Total assets |
$ | 352,253 | $ | 340,122 | ||||
Liabilities and Shareholders Equity |
||||||||
Deposits |
||||||||
Noninterest-bearing |
$ | 72,982 | $ | 68,579 | ||||
Interest-bearing |
136,583 | 134,757 | ||||||
Time deposits greater than $100,000 |
34,667 | 27,549 | ||||||
Total deposits |
244,232 | 230,885 | ||||||
Short-term borrowings |
27,853 | 30,468 | ||||||
Long-term debt |
26,264 | 31,953 | ||||||
Other liabilities |
14,079 | 11,845 | ||||||
Total liabilities |
312,428 | 305,151 | ||||||
Shareholders equity |
||||||||
Preferred stock |
4,769 | 2,606 | ||||||
Common stock, par value $0.01 a shareauthorized: 4,000,000,000 shares; issued: 9/30/12 and 12/31/112,125,725,742 shares |
21 | 21 | ||||||
Capital surplus |
8,186 | 8,238 | ||||||
Retained earnings |
33,730 | 30,785 | ||||||
Less cost of common stock in treasury: 9/30/12245,650,205 shares; 12/31/11215,904,019 shares |
(7,442 | ) | (6,472 | ) | ||||
Accumulated other comprehensive income (loss) |
(603 | ) | (1,200 | ) | ||||
Total U.S. Bancorp shareholders equity |
38,661 | 33,978 | ||||||
Noncontrolling interests |
1,164 | 993 | ||||||
Total equity |
39,825 | 34,971 | ||||||
Total liabilities and equity |
$ | 352,253 | $ | 340,122 |
(a) | Includes only collateral pledged by the Company where counterparties have the right to sell or pledge the collateral. |
See | Notes to Consolidated Financial Statements. |
36 | U. S. Bancorp |
U.S. Bancorp
Consolidated Statement of Income
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
(Dollars and Shares in Millions, Except Per Share Data) (Unaudited) |
2012 | 2011 | 2012 | 2011 | ||||||||||||
Interest Income |
||||||||||||||||
Loans |
$ | 2,650 | $ | 2,621 | $ | 7,919 | $ | 7,736 | ||||||||
Loans held for sale |
76 | 42 | 208 | 139 | ||||||||||||
Investment securities |
438 | 470 | 1,376 | 1,357 | ||||||||||||
Other interest income |
63 | 67 | 184 | 187 | ||||||||||||
Total interest income |
3,227 | 3,200 | 9,687 | 9,419 | ||||||||||||
Interest Expense |
||||||||||||||||
Deposits |
172 | 202 | 530 | 646 | ||||||||||||
Short-term borrowings |
103 | 143 | 353 | 407 | ||||||||||||
Long-term debt |
226 | 289 | 786 | 860 | ||||||||||||
Total interest expense |
501 | 634 | 1,669 | 1,913 | ||||||||||||
Net interest income |
2,726 | 2,566 | 8,018 | 7,506 | ||||||||||||
Provision for credit losses |
488 | 519 | 1,439 | 1,846 | ||||||||||||
Net interest income after provision for credit losses |
2,238 | 2,047 | 6,579 | 5,660 | ||||||||||||
Noninterest Income |
||||||||||||||||
Credit and debit card revenue |
213 | 289 | 650 | 842 | ||||||||||||
Corporate payment products revenue |
201 | 203 | 566 | 563 | ||||||||||||
Merchant processing services |
345 | 338 | 1,041 | 977 | ||||||||||||
ATM processing services |
87 | 115 | 263 | 341 | ||||||||||||
Trust and investment management fees |
265 | 241 | 779 | 755 | ||||||||||||
Deposit service charges |
174 | 183 | 483 | 488 | ||||||||||||
Treasury management fees |
135 | 137 | 411 | 418 | ||||||||||||
Commercial products revenue |
225 | 212 | 652 | 621 | ||||||||||||
Mortgage banking revenue |
519 | 245 | 1,461 | 683 | ||||||||||||
Investment products fees and commissions |
38 | 31 | 111 | 98 | ||||||||||||
Securities gains (losses), net |
||||||||||||||||
Realized gains (losses), net |
16 | | 46 | 2 | ||||||||||||
Total other-than-temporary impairment |
(13 | ) | (11 | ) | (61 | ) | (41 | ) | ||||||||
Portion of other-than-temporary impairment recognized in other comprehensive income |
(2 | ) | 2 | (3 | ) | 17 | ||||||||||
Total securities gains (losses), net |
1 | (9 | ) | (18 | ) | (22 | ) | |||||||||
Other |
193 | 186 | 591 | 565 | ||||||||||||
Total noninterest income |
2,396 | 2,171 | 6,990 | 6,329 | ||||||||||||
Noninterest Expense |
||||||||||||||||
Compensation |
1,109 | 1,021 | 3,237 | 2,984 | ||||||||||||
Employee benefits |
225 | 203 | 714 | 643 | ||||||||||||
Net occupancy and equipment |
233 | 252 | 683 | 750 | ||||||||||||
Professional services |
144 | 100 | 364 | 252 | ||||||||||||
Marketing and business development |
96 | 102 | 285 | 257 | ||||||||||||
Technology and communications |
205 | 189 | 607 | 563 | ||||||||||||
Postage, printing and supplies |
75 | 76 | 226 | 226 | ||||||||||||
Other intangibles |
67 | 75 | 208 | 225 | ||||||||||||
Other |
455 | 458 | 1,446 | 1,315 | ||||||||||||
Total noninterest expense |
2,609 | 2,476 | 7,770 | 7,215 | ||||||||||||
Income before income taxes |
2,025 | 1,742 | 5,799 | 4,774 | ||||||||||||
Applicable income taxes |
593 | 490 | 1,684 | 1,314 | ||||||||||||
Net income |
1,432 | 1,252 | 4,115 | 3,460 | ||||||||||||
Net (income) loss attributable to noncontrolling interests |
42 | 21 | 112 | 62 | ||||||||||||
Net income attributable to U.S. Bancorp |
$ | 1,474 | $ | 1,273 | $ | 4,227 | $ | 3,522 | ||||||||
Net income applicable to U.S. Bancorp common shareholders |
$ | 1,404 | $ | 1,237 | $ | 4,034 | $ | 3,407 | ||||||||
Earnings per common share |
$ | .74 | $ | .65 | $ | 2.13 | $ | 1.78 | ||||||||
Diluted earnings per common share |
$ | .74 | $ | .64 | $ | 2.12 | $ | 1.77 | ||||||||
Dividends declared per common share |
$ | .195 | $ | .125 | $ | .585 | $ | .375 | ||||||||
Average common shares outstanding |
1,886 | 1,915 | 1,892 | 1,918 | ||||||||||||
Average diluted common shares outstanding |
1,897 | 1,922 | 1,901 | 1,926 |
See | Notes to Consolidated Financial Statements. |
U. S. Bancorp | 37 |
U.S. Bancorp
Consolidated Statement of Comprehensive Income
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
(Dollars in Millions) (Unaudited) |
2012 | 2011 | 2012 | 2011 | ||||||||||||
Net income |
$ | 1,432 | $ | 1,252 | $ | 4,115 | $ | 3,460 | ||||||||
Other comprehensive income (loss) |
||||||||||||||||
Changes in unrealized gains and losses on securities available-for-sale |
300 | 181 | 738 | 958 | ||||||||||||
Other-than-temporary impairment not recognized in earnings on securities available-for-sale |
2 | (2 | ) | 3 | (17 | ) | ||||||||||
Amortization of unrealized gains on securities transferred from available-for-sale to held-to-maturity |
(21 | ) | | (28 | ) | | ||||||||||
Changes in unrealized gains (losses) on derivative hedges |
(30 | ) | (196 | ) | (68 | ) | (323 | ) | ||||||||
Foreign currency translation |
26 | 1 | 34 | (16 | ) | |||||||||||
Reclassification to earnings of realized gains and losses |
90 | 92 | 288 | 270 | ||||||||||||
Income taxes related to other comprehensive income |
(140 | ) | (29 | ) | (370 | ) | (333 | ) | ||||||||
Total other comprehensive income (loss) |
227 | 47 | 597 | 539 | ||||||||||||
Comprehensive income |
1,659 | 1,299 | 4,712 | 3,999 | ||||||||||||
Comprehensive (income) loss attributable to noncontrolling interests |
42 | 21 | 112 | 62 | ||||||||||||
Comprehensive income attributable to U.S. Bancorp |
$ | 1,701 | $ | 1,320 | $ | 4,824 | $ | 4,061 |
See | Notes to Consolidated Financial Statements. |
38 | U. S. Bancorp |
U.S. Bancorp
Consolidated Statement of Shareholders Equity
U.S. Bancorp Shareholders | ||||||||||||||||||||||||||||||||||||||||
(Dollars and Shares in Millions) (Unaudited) |
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, 2010 |
1,921 | $ | 1,930 | $ | 21 | $ | 8,294 | $ | 27,005 | $ | (6,262 | ) | $ | (1,469 | ) | $ | 29,519 | $ | 803 | $ | 30,322 | |||||||||||||||||||
Change in accounting principle |
(2 | ) | (2 | ) | (2 | ) | ||||||||||||||||||||||||||||||||||
Net income (loss) |
3,522 | 3,522 | (62 | ) | 3,460 | |||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) |
539 | 539 | 539 | |||||||||||||||||||||||||||||||||||||
Preferred stock dividends |
(99 | ) | (99 | ) | (99 | ) | ||||||||||||||||||||||||||||||||||
Common stock dividends |
(722 | ) | (722 | ) | (722 | ) | ||||||||||||||||||||||||||||||||||
Issuance of preferred stock |
676 | 676 | 676 | |||||||||||||||||||||||||||||||||||||
Issuance of common and treasury stock |
8 | (121 | ) | 252 | 131 | 131 | ||||||||||||||||||||||||||||||||||
Purchase of treasury stock |
(16 | ) | (409 | ) | (409 | ) | (409 | ) | ||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests |
| (57 | ) | (57 | ) | |||||||||||||||||||||||||||||||||||
Net other changes in noncontrolling interests |
| 296 | 296 | |||||||||||||||||||||||||||||||||||||
Stock option and restricted stock grants |
75 | 75 | 75 | |||||||||||||||||||||||||||||||||||||
Balance September 30, 2011 |
1,913 | $ | 2,606 | $ | 21 | $ | 8,248 | $ | 29,704 | $ | (6,419 | ) | $ | (930 | ) | $ | 33,230 | $ | 980 | $ | 34,210 | |||||||||||||||||||
Balance December 31, 2011 |
1,910 | $ | 2,606 | $ | 21 | $ | 8,238 | $ | 30,785 | $ | (6,472 | ) | $ | (1,200 | ) | $ | 33,978 | $ | 993 | $ | 34,971 | |||||||||||||||||||
Net income (loss) |
4,227 | 4,227 | (112 | ) | 4,115 | |||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) |
597 | 597 | 597 | |||||||||||||||||||||||||||||||||||||
Preferred stock dividends |
(174 | ) | (174 | ) | (174 | ) | ||||||||||||||||||||||||||||||||||
Common stock dividends |
(1,108 | ) | (1,108 | ) | (1,108 | ) | ||||||||||||||||||||||||||||||||||
Issuance of preferred stock |
2,163 | 2,163 | 2,163 | |||||||||||||||||||||||||||||||||||||
Issuance of common and treasury stock |
16 | (111 | ) | 495 | 384 | 384 | ||||||||||||||||||||||||||||||||||
Purchase of treasury stock |
(46 | ) | (1,465 | ) | (1,465 | ) | (1,465 | ) | ||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests |
| (60 | ) | (60 | ) | |||||||||||||||||||||||||||||||||||
Net other changes in noncontrolling interests |
| 343 | 343 | |||||||||||||||||||||||||||||||||||||
Stock option and restricted stock grants |
59 | 59 | 59 | |||||||||||||||||||||||||||||||||||||
Balance September 30, 2012 |
1,880 | $ | 4,769 | $ | 21 | $ | 8,186 | $ | 33,730 | $ | (7,442 | ) | $ | (603 | ) | $ | 38,661 | $ | 1,164 | $ | 39,825 |
See Notes to Consolidated Financial Statements.
U. S. Bancorp | 39 |
U.S. Bancorp
Consolidated Statement of Cash Flows
(Dollars in Millions) (Unaudited) |
Nine Months Ended September 30, |
|||||||
2012 | 2011 | |||||||
Operating Activities |
||||||||
Net income attributable to U.S. Bancorp |
$ | 4,227 | $ | 3,522 | ||||
Adjustments to reconcile net income to net cash provided by operating activities |
||||||||
Provision for credit losses |
1,439 | 1,846 | ||||||
Depreciation and amortization of premises and equipment |
212 | 196 | ||||||
Amortization of intangibles |
208 | 225 | ||||||
Provision for deferred income taxes |
29 | 250 | ||||||
(Gain) loss on sale of loans held for sale |
(1,982 | ) | (469 | ) | ||||
(Gain) loss on sale of securities and other assets |
(198 | ) | (13 | ) | ||||
Loans originated for sale in the secondary market, net of repayments |
(60,331 | ) | (29,840 | ) | ||||
Proceeds from sales of loans held for sale |
59,052 | 33,091 | ||||||
Other, net |
1,219 | (53 | ) | |||||
Net cash provided by operating activities |
3,875 | 8,755 | ||||||
Investing Activities |
||||||||
Proceeds from sales of available-for-sale investment securities |
1,753 | 926 | ||||||
Proceeds from maturities of held-to-maturity investment securities |
4,005 | 714 | ||||||
Proceeds from maturities of available-for-sale investment securities |
11,664 | 7,872 | ||||||
Purchases of held-to-maturity investment securities |
(8,003 | ) | (15,192 | ) | ||||
Purchases of available-for-sale investment securities |
(12,065 | ) | (8,399 | ) | ||||
Net increase in loans outstanding |
(9,518 | ) | (8,458 | ) | ||||
Proceeds from sales of loans |
1,614 | 454 | ||||||
Purchases of loans |
(2,139 | ) | (1,750 | ) | ||||
Acquisitions, net of cash acquired |
94 | 650 | ||||||
Other, net |
(668 | ) | (1,006 | ) | ||||
Net cash used in investing activities |
(13,263 | ) | (24,189 | ) | ||||
Financing Activities |
||||||||
Net increase in deposits |
13,099 | 16,593 | ||||||
Net decrease in short-term borrowings |
(2,616 | ) | (644 | ) | ||||
Proceeds from issuance of long-term debt |
4,553 | 2,002 | ||||||
Principal payments or redemption of long-term debt |
(10,271 | ) | (3,048 | ) | ||||
Proceeds from issuance of preferred stock |
2,163 | 676 | ||||||
Proceeds from issuance of common stock |
342 | 125 | ||||||
Repurchase of common stock |
(1,343 | ) | (383 | ) | ||||
Cash dividends paid on preferred stock |
(139 | ) | (88 | ) | ||||
Cash dividends paid on common stock |
(980 | ) | (578 | ) | ||||
Net cash provided by financing activities |
4,808 | 14,655 | ||||||
Change in cash and due from banks |
(4,580 | ) | (779 | ) | ||||
Cash and due from banks at beginning of period |
13,962 | 14,487 | ||||||
Cash and due from banks at end of period |
$ | 9,382 | $ | 13,708 |
See Notes to Consolidated Financial Statements.
40 | U. S. Bancorp |
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 |
Basis of Presentation |
The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations and cash flow activity required in accordance with accounting principles generally accepted in the United States. In the opinion of management of U.S. Bancorp (the Company), all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of results for the interim periods have been made. These financial statements and notes should be read in conjunction with the consolidated financial statements and notes included in the Companys Annual Report on Form 10-K for the year ended December 31, 2011. Certain amounts in prior periods have been reclassified to conform to the current presentation.
Accounting policies for the lines of business are generally the same as those used in preparation of the consolidated financial statements with respect to activities specifically attributable to each business line. However, the preparation of business line results requires management to establish methodologies to allocate funding costs, expenses and other financial elements to each line of business. Table 10 Line of Business Financial Performance included in Managements Discussion and Analysis provides details of segment results. This information is incorporated by reference into these Notes to Consolidated Financial Statements.
U. S. Bancorp | 41 |
Note 2 |
Investment Securities |
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 were as follows:
September 30, 2012 | December 31, 2011 | |||||||||||||||||||||||||||||||||||||||
Unrealized Losses | Unrealized Losses | |||||||||||||||||||||||||||||||||||||||
(Dollars in Millions) | Amortized Cost |
Unrealized Gains |
Other-than- Temporary (e) |
Other (f) | Fair Value |
Amortized Cost |
Unrealized Gains |
Other-than- Temporary (e) |
Other (f) | Fair Value |
||||||||||||||||||||||||||||||
Held-to-maturity (a) |
||||||||||||||||||||||||||||||||||||||||
U.S. Treasury and agencies |
$ | 2,557 | $ | 26 | $ | | $ | | $ | 2,583 | $ | 2,560 | $ | 35 | $ | | $ | | $ | 2,595 | ||||||||||||||||||||
Mortgage-backed securities |
||||||||||||||||||||||||||||||||||||||||
Residential |
||||||||||||||||||||||||||||||||||||||||
Agency |
31,773 | 700 | | (3 | ) | 32,470 | 16,085 | 333 | | (3 | ) | 16,415 | ||||||||||||||||||||||||||||
Non-agency non-prime (d) |
1 | | | | 1 | 2 | | | | 2 | ||||||||||||||||||||||||||||||
Commercial non-agency |
3 | | | | 3 | 4 | | | (2 | ) | 2 | |||||||||||||||||||||||||||||
Asset-backed securities |
||||||||||||||||||||||||||||||||||||||||
Collateralized debt obligations/Collateralized loan obligations |
9 | 16 | | | 25 | 52 | 13 | | (2 | ) | 63 | |||||||||||||||||||||||||||||
Other |
19 | 2 | (4 | ) | (2 | ) | 15 | 23 | 1 | (6 | ) | (1 | ) | 17 | ||||||||||||||||||||||||||
Obligations of state and political subdivisions |
21 | 1 | | | 22 | 23 | 1 | | (1 | ) | 23 | |||||||||||||||||||||||||||||
Obligations of foreign governments |
7 | | | | 7 | 7 | | | | 7 | ||||||||||||||||||||||||||||||
Other debt securities |
119 | | | (19 | ) | 100 | 121 | | | (29 | ) | 92 | ||||||||||||||||||||||||||||
Total held-to-maturity |
$ | 34,509 | $ | 745 | $ | (4 | ) | $ | (24 | ) | $ | 35,226 | $ | 18,877 | $ | 383 | $ | (6 | ) | $ | (38 | ) | $ | 19,216 | ||||||||||||||||
Available-for-sale (b) |
||||||||||||||||||||||||||||||||||||||||
U.S. Treasury and agencies |
$ | 728 | $ | 15 | $ | | $ | | $ | 743 | $ | 1,045 | $ | 13 | $ | | $ | (1 | ) | $ | 1,057 | |||||||||||||||||||
Mortgage-backed securities |
||||||||||||||||||||||||||||||||||||||||
Residential |
||||||||||||||||||||||||||||||||||||||||
Agency |
28,494 | 874 | | (6 | ) | 29,362 | 39,337 | 981 | | (4 | ) | 40,314 | ||||||||||||||||||||||||||||
Non-agency |
||||||||||||||||||||||||||||||||||||||||
Prime (c) |
679 | | (38 | ) | (10 | ) | 631 | 911 | 5 | (63 | ) | (50 | ) | 803 | ||||||||||||||||||||||||||
Non-prime (d) |
388 | 1 | (48 | ) | (1 | ) | 340 | 1,047 | 9 | (247 | ) | (7 | ) | 802 | ||||||||||||||||||||||||||
Commercial |
||||||||||||||||||||||||||||||||||||||||
Agency |
193 | 9 | | | 202 | 133 | 7 | | | 140 | ||||||||||||||||||||||||||||||
Non-agency |
| | | | | 42 | 2 | | (2 | ) | 42 | |||||||||||||||||||||||||||||
Asset-backed securities |
||||||||||||||||||||||||||||||||||||||||
Collateralized debt obligations/Collateralized loan obligations |
33 | 9 | | | 42 | 180 | 31 | (3 | ) | (2 | ) | 206 | ||||||||||||||||||||||||||||
Other |
585 | 14 | | (1 | ) | 598 | 694 | 16 | (5 | ) | (24 | ) | 681 | |||||||||||||||||||||||||||
Obligations of state and political subdivisions |
6,085 | 372 | | | 6,457 | 6,394 | 167 | | (22 | ) | 6,539 | |||||||||||||||||||||||||||||
Obligations of foreign governments |
6 | | | | 6 | 6 | | | | 6 | ||||||||||||||||||||||||||||||
Corporate debt securities |
813 | 2 | | (106 | ) | 709 | 1,000 | 1 | | (174 | ) | 827 | ||||||||||||||||||||||||||||
Perpetual preferred securities |
268 | 29 | | (19 | ) | 278 | 379 | 25 | | (86 | ) | 318 | ||||||||||||||||||||||||||||
Other investments |
248 | 20 | | | 268 | 188 | 15 | | (1 | ) | 202 | |||||||||||||||||||||||||||||
Total available-for-sale |
$ | 38,520 | $ | 1,345 | $ | (86 | ) | $ | (143 | ) | $ | 39,636 | $ | 51,356 | $ | 1,272 | $ | (318 | ) | $ | (373 | ) | $ | 51,937 | ||||||||||||||||
(a) | Held-to-maturity investment securities are carried at historical cost or at fair value at the time of transfer from the available-for-sale to held-to-maturity category, adjusted for amortization of premiums and accretion of discounts and credit-related other-than-temporary impairment. |
(b) | 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. |
(c) | 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). When the Company determines the designation, prime securities typically have a weighted average credit score of 725 or higher and a loan-to-value of 80 percent or lower; however, other pool characteristics may result in designations that deviate from these credit score and loan-to-value thresholds. |
(d) | Includes all securities not meeting the conditions to be designated as prime. |
(e) | Represents impairment not related to credit for those investment securities that have been determined to be other-than-temporarily impaired. |
(f) | Represents unrealized losses on investment securities that have not been determined to be other-than-temporarily impaired. |
During the second quarter of 2012, the Company transferred $11.7 billion of available-for-sale agency mortgage-backed investment securities to the held-to-maturity category, reflecting the Companys intent to hold those securities to maturity.
The weighted-average maturity of the available-for-sale investment securities was 4.0 years at September 30, 2012, compared with 5.2 years at December 31, 2011. The corresponding weighted-average yields were 3.04 percent and 3.19 percent, respectively. The weighted-average maturity of the held-to-maturity investment securities was 3.1 years at September 30, 2012, and 3.9 years at December 31, 2011. The corresponding weighted-average yields were 2.06 percent and 2.21 percent, respectively.
For amortized cost, fair value and yield by maturity date of held-to-maturity and available-for-sale investment securities outstanding at September 30, 2012, refer to Table 4 included in Managements Discussion and Analysis which is incorporated by reference into these Notes to Consolidated Financial Statements.
Investment securities with a fair value of $16.5 billion at September 30, 2012, and $20.7 billion at December 31, 2011, were pledged to secure public, private and trust deposits, repurchase agreements and for other purposes required by contractual obligation or law. Included in these amounts were securities where the Company and certain counterparties have agreements granting the counterparties the right to sell or pledge the securities. Investment securities delivered under these types of arrangements had a fair value of $3.4 billion at September 30, 2012, and $7.0 billion at December 31, 2011.
42 | U. S. Bancorp |
The following table provides information about the amount of interest income from taxable and non-taxable investment securities:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(Dollars in Millions) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Taxable |
$ | 369 | $ | 394 | $ | 1,166 | $ | 1,127 | ||||||||
Non-taxable |
69 | 76 | 210 | 230 | ||||||||||||
Total interest income from investment securities |
$ | 438 | $ | 470 | $ | 1,376 | $ | 1,357 |
The following table provides information about the amount of gross gains and losses realized through the sales of available-for-sale investment securities:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(Dollars in Millions) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Realized gains |
$ | 115 | $ | 4 | $ | 145 | $ | 6 | ||||||||
Realized losses |
(99 | ) | (4 | ) | (99 | ) | (4 | ) | ||||||||
Net realized gains (losses) |
$ | 16 | $ | | $ | 46 | $ | 2 | ||||||||
Income tax (benefit) on net realized gains (losses) |
$ | 7 | $ | | $ | 18 | $ | 1 |
In 2007, the Company purchased certain structured investment securities (SIVs) from certain money market funds managed by an affiliate of the Company. Subsequent to the initial purchase, the Company exchanged its interest in the SIVs for a pro-rata portion of the underlying investment securities according to the applicable restructuring agreements. The SIVs and the investment securities received are collectively referred to as SIV-related securities. During the third quarter of 2012, the Company sold essentially all of the SIV-related securities.
Some of the SIV-related securities evidenced credit deterioration at the time of acquisition by the Company. All investment securities with evidence of credit deterioration at acquisition have been subsequently sold by the Company as of September 30, 2012. Changes in the accretable balance for these investment securities were as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(Dollars in Millions) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Balance at beginning of period |
$ | 93 | $ | 117 | $ | 100 | $ | 139 | ||||||||
Accretion |
(3 | ) | (4 | ) | (11 | ) | (13 | ) | ||||||||
Disposals |
(90 | ) | | (90 | ) | | ||||||||||
Other (a) |
| (6 | ) | 1 | (19 | ) | ||||||||||
Balance at end of period |
$ | | $ | 107 | $ | | $ | 107 |
(a) | Primarily represents changes in projected future cash flows related to variable rates on certain investment securities. |
The Company conducts a regular assessment of its investment securities with unrealized losses to determine whether investment securities are other-than-temporarily impaired considering, among other factors, the nature of the investment securities, credit ratings or financial condition of the issuer, the extent and duration of the unrealized loss, expected cash flows of underlying collateral, market conditions and whether the Company intends to sell or it is more likely than not the Company will be required to sell the investment securities.
The following tables summarize other-than-temporary impairment by investment category:
2012 | 2011 | |||||||||||||||||||||||||
Three Months Ended September 30 (Dollars in Millions) |
Losses Recorded in Earnings |
Other Gains (Losses) (c) |
Total | Losses Recorded in Earnings |
Other Gains (Losses) (c) |
Total | ||||||||||||||||||||
Available-for-sale |
||||||||||||||||||||||||||
Mortgage-backed securities |
||||||||||||||||||||||||||
Non-agency residential |
||||||||||||||||||||||||||
Prime (a) |
$ | (5 | ) | $ | (3 | ) | $ | (8 | ) | $ | | $ | | $ | | |||||||||||
Non-prime (b) |
(10 | ) | 5 | (5 | ) | (6 | ) | (4 | ) | (10 | ) | |||||||||||||||
Other asset-backed securities |
| | | (3 | ) | 2 | (1 | ) | ||||||||||||||||||
Total available-for-sale |
$ | (15 | ) | $ | 2 | $ | (13 | ) | $ | (9 | ) | $ | (2 | ) | $ | (11 | ) | |||||||||
(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) | Losses represent the non-credit portion of other-than-temporary impairment recorded in other comprehensive income for investment securities determined to be other-than-temporarily impaired during the period. Gains represent recoveries in the fair value of securities that have or previously had non-credit other-than-temporary impairment. |
U. S. Bancorp | 43 |
2012 | 2011 | |||||||||||||||||||||||
Nine Months Ended September 30 (Dollars in Millions) |
Losses Recorded in Earnings |
Other Gains (Losses) (c) |
Total | Losses Recorded in Earnings |
Other Gains (Losses) (c) |
Total | ||||||||||||||||||
Available-for-sale |
||||||||||||||||||||||||
Mortgage-backed securities |
||||||||||||||||||||||||
Non-agency residential |
||||||||||||||||||||||||
Prime (a) |
$ | (8 | ) | $ | (12 | ) | $ | (20 | ) | $ | (2 | ) | $ | (3 | ) | $ | (5 | ) | ||||||
Non-prime (b) |
(27 | ) | 15 | (12 | ) | (18 | ) | (16 | ) | (34 | ) | |||||||||||||
Commercial non-agency |
(1 | ) | (1 | ) | (2 | ) | | | | |||||||||||||||
Other asset-backed securities |
(1 | ) | 1 | | (4 | ) | 2 | (2 | ) | |||||||||||||||
Perpetual preferred securities |
(27 | ) | | (27 | ) | | | | ||||||||||||||||
Total available-for-sale |
$ | (64 | ) | $ | 3 | $ | (61 | ) | $ | (24 | ) | $ | (17 | ) | $ | (41 | ) | |||||||
(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) | Losses represent the non-credit portion of other-than-temporary impairment recorded in other comprehensive income for investment securities determined to be other-than-temporarily impaired during the period. Gains represent recoveries in the fair value of securities that have or previously had non-credit other-than-temporary impairment. |
The Company determined the other-than-temporary impairment recorded in earnings for debt securities not intended to be sold by estimating the future cash flows of each individual investment security, using market information where available, and discounting the cash flows at the original effective rate of the investment security. Other-than-temporary impairment recorded in other comprehensive income (loss) was measured as the difference between that discounted amount and the fair value of each investment security. For perpetual preferred securities determined to be other-than-temporarily impaired, the Company recorded a loss in earnings for the entire difference between the securities fair value and their amortized cost.
The following table includes the ranges for principal assumptions used for those available-for-sale non-agency mortgage-backed securities determined to be other-than-temporarily impaired:
Prime (a) | Non-Prime (b) | |||||||||||||||||||||||
Minimum | Maximum | Average | Minimum | Maximum | Average | |||||||||||||||||||
September 30, 2012 |
||||||||||||||||||||||||
Estimated lifetime prepayment rates |
7 | % | 18 | % | 14 | % | 3 | % | 10 | % | 6 | % | ||||||||||||
Lifetime probability of default rates |
2 | 4 | 3 | 2 | 10 | 6 | ||||||||||||||||||
Lifetime loss severity rates |
25 | 50 | 40 | 20 | 60 | 51 | ||||||||||||||||||
December 31, 2011 |
||||||||||||||||||||||||
Estimated lifetime prepayment rates |
4 | % | 15 | % | 14 | % | 2 | % | 11 | % | 6 | % | ||||||||||||
Lifetime probability of default rates |
2 | 9 | 3 | 1 | 20 | 5 | ||||||||||||||||||
Lifetime loss severity rates |
40 | 50 | 46 | 8 | 70 | 52 | ||||||||||||||||||
(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. |
Changes in the credit losses on debt securities (excludes perpetual preferred securities) are summarized as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(Dollars in Millions) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Balance at beginning of period |
$ | 277 | $ | 319 | $ | 298 | $ | 358 | ||||||||
Additions to credit losses due to other-than-temporary impairments |
||||||||||||||||
Credit losses on securities not previously considered other-than-temporarily impaired |
2 | 1 | 5 | 3 | ||||||||||||
Decreases in expected cash flows on securities for which other-than-temporary impairment was previously recognized |
13 | 8 | 32 | 21 | ||||||||||||
Total other-than-temporary impairment on debt securities |
15 | 9 | 37 | 24 | ||||||||||||
Other changes in credit losses |
||||||||||||||||
Increases in expected cash flows |
| (3 | ) | (14 | ) | (20 | ) | |||||||||
Realized losses (a) |
(4 | ) | (19 | ) | (33 | ) | (55 | ) | ||||||||
Credit losses on security sales and securities expected to be sold |
(142 | ) | | (142 | ) | (1 | ) | |||||||||
Balance at end of period |
$ | 146 | $ | 306 | $ | 146 | $ | 306 | ||||||||
(a) | Primarily represents principal losses allocated to mortgage and asset-backed securities in the Companys portfolio under the terms of the securitization transaction documents. |
44 | U. S. Bancorp |
At September 30, 2012, 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 September 30, 2012:
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 |
||||||||||||||||||||||||
Mortgage-backed securities |
||||||||||||||||||||||||
Residential |
||||||||||||||||||||||||
Agency |
$ | 1,563 | $ | (3 | ) | $ | 7 | $ | | $ | 1,570 | $ | (3 | ) | ||||||||||
Non-agency non-prime (a)(c) |
| | 1 | | 1 | | ||||||||||||||||||
Commercial non-agency |
| | 3 | | 3 | | ||||||||||||||||||
Other asset-backed securities |
1 | | 11 | (6 | ) | 12 | (6 | ) | ||||||||||||||||
Obligations of state and political subdivisions |
| | 5 | | 5 | | ||||||||||||||||||
Other debt securities |
| | 99 | (19 | ) | 99 | (19 | ) | ||||||||||||||||
Total held-to-maturity |
$ | 1,564 | $ | (3 | ) | $ | 126 | $ | (25 | ) | $ | 1,690 | $ | (28 | ) | |||||||||
Available-for-sale |
||||||||||||||||||||||||
U.S. Treasury and agencies |
$ | 10 | $ | | $ | | $ | | $ | 10 | $ | | ||||||||||||
Mortgage-backed securities |
||||||||||||||||||||||||
Residential |
||||||||||||||||||||||||
Agency |
3,005 | (6 | ) | 153 | | 3,158 | (6 | ) | ||||||||||||||||
Non-agency (a) |
||||||||||||||||||||||||
Prime (b) |
| | 625 | (48 | ) | 625 | (48 | ) | ||||||||||||||||
Non-prime (c) |
| | 311 | (49 | ) | 311 | (49 | ) | ||||||||||||||||
Other asset-backed securities |
| | 2 | (1 | ) | 2 | (1 | ) | ||||||||||||||||
Obligations of state and political subdivisions |
89 | | 4 | | 93 | | ||||||||||||||||||
Obligations of foreign governments |
6 | | | | 6 | | ||||||||||||||||||
Corporate debt securities |
| | 624 | (106 | ) | 624 | (106 | ) | ||||||||||||||||
Perpetual preferred securities |
22 | | 140 | (19 | ) | 162 | (19 | ) | ||||||||||||||||
Other investments |
| | 3 | | 3 | | ||||||||||||||||||
Total available-for-sale |
$ | 3,132 | $ | (6 | ) | $ | 1,862 | $ | (223 | ) | $ | 4,994 | $ | (229 | ) | |||||||||
(a) | The Company has $97 million of unrealized losses on residential non-agency mortgage-backed securities. Credit-related other-than-temporary impairment on these securities may occur if there is further deterioration in the underlying collateral pool performance. Borrower defaults may increase if current economic conditions persist or worsen. Additionally, further deterioration in home prices may increase the severity of projected losses. |
(b) | 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). |
(c) | Includes all securities not meeting the conditions to be designated as prime. |
The Company does not consider these unrealized losses to be credit-related. These unrealized losses primarily relate to changes in interest rates and market spreads subsequent to purchase. A substantial portion of investment securities that have unrealized losses are either corporate debt or mortgage-backed securities issued with high investment grade credit ratings. In general, the issuers of the investment securities are contractually prohibited from prepayment at less than par, and the Company did not pay significant purchase premiums for these investment securities. At September 30, 2012, the Company had no plans to sell investment securities with unrealized losses, and believes it is more likely than not it would not be required to sell such investment securities before recovery of their amortized cost.
U. S. Bancorp | 45 |
Note 3 |
Loans and Allowance for Credit Losses |
The composition of the loan portfolio, disaggregated by class and underlying specific portfolio type, was as follows:
September 30, 2012 | December 31, 2011 | |||||||||||||||
(Dollars in Millions) | Amount | Percent of Total |
Amount | Percent of Total |
||||||||||||
Commercial |
||||||||||||||||
Commercial |
$ | 57,415 | 26.3 | % | $ | 50,734 | 24.2 | % | ||||||||
Lease financing |
5,495 | 2.5 | 5,914 | 2.8 | ||||||||||||
Total commercial |
62,910 | 28.8 | 56,648 | 27.0 | ||||||||||||
Commercial real estate |
||||||||||||||||
Commercial mortgages |
30,831 | 14.1 | 29,664 | 14.1 | ||||||||||||
Construction and development |
5,982 | 2.8 | 6,187 | 3.0 | ||||||||||||
Total commercial real estate |
36,813 | 16.9 | 35,851 | 17.1 | ||||||||||||
Residential mortgages |
||||||||||||||||
Residential mortgages |
31,504 | 14.4 | 28,669 | 13.7 | ||||||||||||
Home equity loans, first liens |
10,398 | 4.8 | 8,413 | 4.0 | ||||||||||||
Total residential mortgages |
41,902 | 19.2 | 37,082 | 17.7 | ||||||||||||
Credit card |
16,402 | 7.5 | 17,360 | 8.3 | ||||||||||||
Other retail |
||||||||||||||||
Retail leasing |
5,332 | 2.4 | 5,118 | 2.4 | ||||||||||||
Home equity and second mortgages |
17,119 | 7.9 | 18,131 | 8.6 | ||||||||||||
Revolving credit |
3,320 | 1.5 | 3,344 | 1.6 | ||||||||||||
Installment |
5,474 | 2.5 | 5,348 | 2.6 | ||||||||||||
Automobile |
12,431 | 5.7 | 11,508 | 5.5 | ||||||||||||
Student |
4,289 | 2.0 | 4,658 | 2.2 | ||||||||||||
Total other retail |
47,965 | 22.0 | 48,107 | 22.9 | ||||||||||||
Total loans, excluding covered loans |
205,992 | 94.4 | 195,048 | 93.0 | ||||||||||||
Covered loans |
12,158 | 5.6 | 14,787 | 7.0 | ||||||||||||
Total loans |
$ | 218,150 | 100.0 | % | $ | 209,835 | 100.0 | % | ||||||||
The Company had loans of $73.2 billion at September 30, 2012, and $67.0 billion at December 31, 2011, pledged at the Federal Home Loan Bank (FHLB), and loans of $47.2 billion at September 30, 2012, and $47.2 billion at December 31, 2011, pledged at the Federal Reserve Bank.
Originated loans are reported at the principal amount outstanding, net of unearned interest and deferred fees and costs. Net unearned interest and deferred fees and costs amounted to $.8 billion at September 30, 2012, and $1.1 billion at December 31, 2011. All purchased loans and related indemnification assets are recorded at fair value at the date of purchase. The Company evaluates purchased loans for impairment at the date of purchase in accordance with applicable authoritative accounting guidance. Purchased loans with evidence of credit deterioration since origination for which it is probable that all contractually required payments will not be collected are considered purchased impaired loans. All other purchased loans are considered purchased nonimpaired loans.
On the acquisition date, the estimate of the contractually required payments receivable for all purchased impaired loans acquired in the first quarter 2012 acquisition of BankEast, a subsidiary of BankEast Corporation, from the Federal Deposit Insurance Corporation (FDIC) was $63 million, the cash flows expected to be collected was $41 million including interest, and the estimated fair value of the loans was $28 million. These amounts were determined based upon the estimated remaining life of the underlying loans, which includes the effects of estimated prepayments. For the purchased nonimpaired loans acquired in the BankEast transaction, the estimate as of the acquisition date of the contractually required payments receivable was $135 million, the contractual cash flows not expected to be collected was $22 million, and the estimated fair value of the loans was $96 million. The BankEast transaction did not include a loss sharing agreement.
46 | U. S. Bancorp |
Changes in the accretable balance for all purchased impaired loans, including those acquired in the BankEast transaction, were as follows:
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
(Dollars in Millions) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Balance at beginning of period |
$ | 2,431 | $ | 3,015 | $ | 2,619 | $ | 2,890 | ||||||||
Purchases |
| | 13 | 100 | ||||||||||||
Accretion |
(109 | ) | (110 | ) | (337 | ) | (337 | ) | ||||||||
Disposals |
(37 | ) | (43 | ) | (135 | ) | (47 | ) | ||||||||
Reclassifications (to)/from nonaccretable difference (a) |
58 | (170 | ) | 191 | 117 | |||||||||||
Other |
(14 | ) | (7 | ) | (22 | ) | (38 | ) | ||||||||
Balance at end of period |
$ | 2,329 | $ | 2,685 | $ | 2,329 | $ | 2,685 | ||||||||
(a) | Primarily relates to changes in expected credit performance. |
Allowance for Credit Losses The allowance for credit losses reserves for probable and estimable losses incurred in the Companys loan and lease portfolio and includes certain amounts that do not represent loss exposure to the Company because those losses are recoverable under loss sharing agreements with the FDIC. The allowance for credit losses is increased through provisions charged to operating earnings and reduced by net charge-offs. Management evaluates the allowance each quarter to ensure it appropriately reserves for incurred losses.
The allowance recorded for loans in the commercial lending segment is based on reviews of individual credit relationships and considers the migration analysis of commercial lending segment loans and actual loss experience. The Company currently uses an 11-year period of historical losses in considering actual loss experience. This timeframe and the results of the analysis are evaluated quarterly to determine the appropriateness. The allowance recorded for impaired loans greater than $5 million in the commercial lending segment is based on an individual loan analysis utilizing expected cash flows discounted using the original effective interest rate, the observable market price, or the fair value of the collateral for collateral-dependent loans. The allowance recorded for all other commercial lending segment loans is determined on a homogenous pool basis and includes consideration of product mix, risk characteristics of the portfolio, bankruptcy experience, and historical losses, adjusted for current trends. The Company also considers the impacts of any loan modifications made to commercial lending segment loans and any subsequent payment defaults to its expectations of cash flows, principal balance, and current expectations about the borrowers ability to pay in determining the allowance for credit losses.
The allowance recorded for purchased impaired and Troubled Debt Restructuring (TDR) loans in the consumer lending segment is determined on a homogenous pool basis utilizing expected cash flows discounted using the original effective interest rate of the pool. The allowance for collateral-dependent loans in the consumer lending segment is determined based on the fair value of the collateral. The allowance recorded for all other consumer lending segment loans is determined on a homogenous pool basis and includes consideration of product mix, risk characteristics of the portfolio, bankruptcy experience, delinquency status and historical losses, adjusted for current trends. The Company also considers any modifications made to consumer lending segment loans including the impacts of any subsequent payment defaults since modification in determining the allowance for credit losses, such as borrowers ability to pay under the restructured terms, and the timing and amount of payments.
Covered assets represent loans and other assets acquired from the FDIC, subject to loss sharing agreements, and include expected reimbursements from the FDIC. The allowance for covered segment loans is evaluated each quarter in a manner similar to that described for non-covered loans and represents any decreases in expected cash flows of those loans after the acquisition date. The provision for credit losses for covered segment loans considers the indemnification provided by the FDIC.
In addition, subsequent payment defaults on loan modifications considered TDRs are considered in the underlying factors used in the determination of the appropriateness of the allowance for credit losses. For each loan segment, the Company estimates future loan charge-offs through a variety of analysis, trends and underlying assumptions. With respect to the commercial lending segment, TDRs may be collectively evaluated for impairment where observed performance history, including defaults, is a primary driver of the loss allocation. For commercial TDRs individually evaluated for impairment, attributes of the borrower are the primary factors in determining the allowance for credit losses. However, incorporation of loss history is factored into the allowance methodology applied to this category of loans. With respect to the consumer lending segment, performance of the portfolio, including defaults on TDRs, is considered when estimating future cash flows.
U. S. Bancorp | 47 |
The Companys methodology for determining the appropriate allowance for credit losses for all the loan segments also considers the imprecision inherent in the methodologies used. As a result, in addition to the amounts determined under the methodologies described above, management also considers the potential impact of other qualitative factors which include, but are not limited to, economic factors; geographic and other concentration risks; delinquency and nonaccrual trends; current business conditions; changes in lending policy, underwriting standards, internal review and other relevant business practices; and the regulatory environment. The consideration of these items results in adjustments to allowance amounts included in the Companys allowance for credit losses for each of the above loan segments.
The Company also assesses the credit risk associated with off-balance sheet loan commitments, letters of credit, and derivatives. Credit risk associated with derivatives is reflected in the fair values recorded for those positions. The liability for off-balance sheet credit exposure related to loan commitments and other credit guarantees is included in other liabilities. Because business processes and credit risks associated with unfunded credit commitments are essentially the same as for loans, the Company utilizes similar processes to estimate its liability for unfunded credit commitments.
Activity in the allowance for credit losses by portfolio class was as follows:
Three Months Ended September 30 (Dollars in Millions) |
Commercial | Commercial Real Estate |
Residential Mortgages |
Credit Card |
Other Retail |
Total Loans, Excluding Covered Loans |
Covered Loans |
Total Loans |
||||||||||||||||||||||||
2012 |
||||||||||||||||||||||||||||||||
Balance at beginning of period |
$ | 1,037 | $ | 941 | $ | 939 | $ | 996 | $ | 828 | $ | 4,741 | $ | 123 | $ | 4,864 | ||||||||||||||||
Add |
||||||||||||||||||||||||||||||||
Provision for credit losses |
63 | (22 | ) | 143 | 119 | 185 | 488 | | 488 | |||||||||||||||||||||||
Deduct |
||||||||||||||||||||||||||||||||
Loans charged off |
90 | 47 | 127 | 186 | 187 | 637 | 2 | 639 | ||||||||||||||||||||||||
Less recoveries of loans charged off |
(24 | ) | (22 | ) | (6 | ) | (19 | ) | (30 | ) | (101 | ) | | (101 | ) | |||||||||||||||||
Net loans charged off |
66 | 25 | 121 | 167 | 157 | 536 | 2 | 538 | ||||||||||||||||||||||||
Net change for credit losses to be reimbursed by the FDIC |
| | | | | | (10 | ) | (10 | ) | ||||||||||||||||||||||
Other changes |
| | | (33 | ) | | (33 | ) | | (33 | ) | |||||||||||||||||||||
Balance at end of period |
$ | 1,034 | $ | 894 | $ | 961 | $ | 915 | $ | 856 | $ | 4,660 | $ | 111 | $ | 4,771 | ||||||||||||||||
2011 |
||||||||||||||||||||||||||||||||
Balance at beginning of period |
$ | 1,109 | $ | 1,258 | $ | 841 | $ | 1,140 | $ | 843 | $ | 5,191 | $ | 117 | $ | 5,308 | ||||||||||||||||
Add |
||||||||||||||||||||||||||||||||
Provision for credit losses |
15 | 88 | 168 | 106 | 131 | 508 | 11 | 519 | ||||||||||||||||||||||||
Deduct |
||||||||||||||||||||||||||||||||
Loans charged off |
126 | 131 | 124 | 203 | 175 | 759 | 3 | 762 | ||||||||||||||||||||||||
Less recoveries of loans charged off |
(27 | ) | (6 | ) | (2 | ) | (25 | ) | (33 | ) | (93 | ) | | (93 | ) | |||||||||||||||||
Net loans charged off |
99 | 125 | 122 | 178 | 142 | 666 | 3 | 669 | ||||||||||||||||||||||||
Net change for credit losses to be reimbursed by the FDIC |
| | | | | | 32 | 32 | ||||||||||||||||||||||||
Balance at end of period |
$ | 1,025 | $ | 1,221 | $ | 887 | $ | 1,068 | $ | 832 | $ | 5,033 | $ | 157 | $ | 5,190 | ||||||||||||||||
Nine Months Ended September 30 (Dollars in Millions) |
Commercial | Commercial Real Estate |
Residential Mortgages |
Credit Card |
Other Retail |
Total Loans, Excluding Covered Loans |
Covered Loans |
Total Loans |
||||||||||||||||||||||||
2012 |
||||||||||||||||||||||||||||||||
Balance at beginning of period |
$ | 1,010 | $ | 1,154 | $ | 927 | $ | 992 | $ | 831 | $ | 4,914 | $ | 100 | $ | 5,014 | ||||||||||||||||
Add |
||||||||||||||||||||||||||||||||
Provision for credit losses |
247 | (111 | ) | 376 | 462 | 431 | 1,405 | 34 | 1,439 | |||||||||||||||||||||||
Deduct |
||||||||||||||||||||||||||||||||
Loans charged off |
296 | 206 | 357 | 585 | 503 | 1,947 | 4 | 1,951 | ||||||||||||||||||||||||
Less recoveries of loans charged off |
(73 | ) | (57 | ) | (15 | ) | (79 | ) | (97 | ) | (321 | ) | (1 | ) | (322 | ) | ||||||||||||||||
Net loans charged off |
223 | 149 | 342 | 506 | 406 | 1,626 | 3 | 1,629 | ||||||||||||||||||||||||
Net change for credit losses to be reimbursed by the FDIC |
| | | | | | (20 | ) | (20 | ) | ||||||||||||||||||||||
Other change |
| | | (33 | ) | | (33 | ) | | (33 | ) | |||||||||||||||||||||
Balance at end of period |
$ | 1,034 | $ | 894 | $ | 961 | $ | 915 | $ | 856 | $ | 4,660 | $ | 111 | $ | 4,771 | ||||||||||||||||
2011 |
||||||||||||||||||||||||||||||||
Balance at beginning of period |
$ | 1,104 | $ | 1,291 | $ | 820 | $ | 1,395 | $ | 807 | $ | 5,417 | $ | 114 | $ | 5,531 | ||||||||||||||||
Add |
||||||||||||||||||||||||||||||||
Provision for credit losses |
255 | 344 | 437 | 314 | 477 | 1,827 | 19 | 1,846 | ||||||||||||||||||||||||
Deduct |
||||||||||||||||||||||||||||||||
Loans charged off |
412 | 446 | 380 | 712 | 551 | 2,501 | 10 | 2,511 | ||||||||||||||||||||||||
Less recoveries of loans charged off |
(78 | ) | (32 | ) | (10 | ) | (71 | ) | (99 | ) | (290 | ) | | (290 | ) | |||||||||||||||||
Net loans charged off |
334 | 414 | 370 | 641 | 452 | 2,211 | 10 | 2,221 | ||||||||||||||||||||||||
Net change for credit losses to be reimbursed by the FDIC |
| | | | | | 34 | 34 | ||||||||||||||||||||||||
Balance at end of period |
$ | 1,025 | $ | 1,221 | $ | 887 | $ | 1,068 | $ | 832 | $ | 5,033 | $ | 157 | $ | 5,190 | ||||||||||||||||
48 | U. S. Bancorp |
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 |
Total Loans, Excluding Covered Loans |
Covered Loans |
Total Loans |
||||||||||||||||||||||||
Allowance balance at September 30, 2012 related to |
||||||||||||||||||||||||||||||||
Loans individually evaluated for impairment (a) |
$ | 6 | $ | 33 | $ | | $ | | $ | | $ | 39 | $ | | $ | 39 | ||||||||||||||||
TDRs collectively evaluated for impairment |
31 | 28 | 464 | 167 | 59 | 749 | 1 | 750 | ||||||||||||||||||||||||
Other loans collectively evaluated for impairment |
997 | 828 | 497 | 748 | 797 | 3,867 | 21 | 3,888 | ||||||||||||||||||||||||
Loans acquired with deteriorated credit quality |
| 5 | | | | 5 | 89 | 94 | ||||||||||||||||||||||||
Total allowance for credit losses |
$ | 1,034 | $ | 894 | $ | 961 | $ | 915 | $ | 856 | $ | 4,660 | $ | 111 | $ | 4,771 | ||||||||||||||||
Allowance balance at December 31, 2011 related to |
||||||||||||||||||||||||||||||||
Loans individually evaluated for impairment (a) |
$ | 16 | $ | 61 | $ | 1 | $ | | $ | | $ | 78 | $ | 2 | $ | 80 | ||||||||||||||||
TDRs collectively evaluated for impairment |
40 | 33 | 490 | 219 | 57 | 839 | | 839 | ||||||||||||||||||||||||
Other loans collectively evaluated for impairment |
954 | 1,057 | 436 | 773 | 774 | 3,994 | 22 | 4,016 | ||||||||||||||||||||||||
Loans acquired with deteriorated credit quality |
| 3 | | | | 3 | 76 | 79 | ||||||||||||||||||||||||
Total allowance for credit losses |
$ | 1,010 | $ | 1,154 | $ | 927 | $ | 992 | $ | 831 | $ | 4,914 | $ | 100 | $ | 5,014 | ||||||||||||||||
(a) | Represents the allowance for credit losses related to loans greater than $5 million classified as nonperforming or TDRs. |
Additional detail of loan balances by portfolio class was as follows:
(Dollars in Millions) | Commercial | Commercial Real Estate |
Residential Mortgages |
Credit Card |
Other Retail |
Total Loans, Excluding Covered Loans |
Covered Loans (b) |
Total Loans |
||||||||||||||||||||||||
September 30, 2012 |
||||||||||||||||||||||||||||||||
Loans individually evaluated for impairment (a) |
$ | 132 | $ | 612 | $ | | $ | | $ | | $ | 744 | $ | 73 | $ | 817 | ||||||||||||||||
TDRs collectively evaluated for impairment |
179 | 383 | 4,033 | 462 | 269 | 5,326 | 137 | 5,463 | ||||||||||||||||||||||||
Other loans collectively evaluated for impairment |
62,594 | 35,699 | 37,863 | 15,940 | 47,696 | 199,792 | 6,564 | 206,356 | ||||||||||||||||||||||||
Loans acquired with deteriorated credit quality |
5 | 119 | 6 | | | 130 | 5,384 | 5,514 | ||||||||||||||||||||||||
Total loans |
$ | 62,910 | $ | 36,813 | $ | 41,902 | $ | 16,402 | $ | 47,965 | $ | 205,992 | $ | 12,158 | $ | 218,150 | ||||||||||||||||
December 31, 2011 |
||||||||||||||||||||||||||||||||
Loans individually evaluated for impairment (a) |
$ | 222 | $ | 812 | $ | 6 | $ | | $ | | $ | 1,040 | $ | 204 | $ | 1,244 | ||||||||||||||||
TDRs collectively evaluated for impairment |
277 | 331 | 3,430 | 584 | 148 | 4,770 | 113 | 4,883 | ||||||||||||||||||||||||
Other loans collectively evaluated for impairment |
56,138 | 34,574 | 33,642 | 16,776 | 47,959 | 189,089 | 8,616 | 197,705 | ||||||||||||||||||||||||
Loans acquired with deteriorated credit quality |
11 | 134 | 4 | | | 149 | 5,854 | 6,003 | ||||||||||||||||||||||||
Total loans |
$ | 56,648 | $ | 35,851 | $ | 37,082 | $ | 17,360 | $ | 48,107 | $ | 195,048 | $ | 14,787 | $ | 209,835 | ||||||||||||||||
(a) | Represents loans greater than $5 million classified as nonperforming or TDRs. |
(b) | Includes expected reimbursements from the FDIC under loss sharing agreements. |
Credit Quality The quality of the Companys loan portfolios is assessed as a function of net credit losses, levels of nonperforming assets and delinquencies, and credit quality ratings as defined by the Company.
For all loan classes, loans are considered past due based on the number of days delinquent except for monthly amortizing loans which are classified delinquent based upon the number of contractually required payments not made (for example, two missed payments is considered 30 days delinquent).
Commercial lending segment loans are generally placed on nonaccrual status when the collection of principal and interest has become 90 days past due or is otherwise considered doubtful. When a loan is placed on nonaccrual status, unpaid accrued interest is reversed. Commercial lending segment loans are generally fully or partially charged down to the fair value of the collateral securing the loan, less costs to sell, when the loan is considered uncollectible.
Consumer lending segment loans are generally charged-off at a specific number of days or payments past due. Residential mortgages and other retail loans secured by 1-4 family properties are generally charged down to the fair market value of the collateral securing the loan, less costs to sell, at 180 days past due, and placed on nonaccrual status in instances where a partial charge-off occurs unless the loan is well secured and in the process of collection. Loans and lines in a junior lien position secured by 1-4 family properties are placed on nonaccrual status at 120 days past due or when behind a first lien that has become 180 days or greater past due or placed on nonaccrual status. Any secured consumer lending segment loan whose borrower has had debt discharged through bankruptcy, for which the loan amount exceeds the fair value of the collateral, is charged down to the fair value of the related collateral and the remaining balance is placed on nonaccrual status. Credit card loans continue to accrue interest until the account is charged off. Credit cards are charged off at 180 days past due. Other retail loans not secured by 1-4 family properties are charged-off at 120 days past due; and revolving consumer lines are charged off at 180 days past due. Similar to credit cards, other retail loans are generally not placed on nonaccrual status because of the relative short period of time to charge-off. Certain retail customers having financial difficulties may have the terms of their credit card and other loan agreements modified to require only principal payments and, as such, are reported as nonaccrual.
U. S. Bancorp | 49 |
For all loan classes, interest payments received on nonaccrual loans are generally recorded as a reduction to the loan carrying amount. Interest payments are generally recorded as reductions to a loans carrying amount while a loan is on nonaccrual and are recognized as interest income upon payoff of the loan. Interest income may be recognized for interest payments if the remaining carrying amount of the loan is believed to be collectible. In certain circumstances, loans in any class may be restored to accrual status, such as when none of the principal and interest is past due and prospects for future payment are no longer in doubt; or the loan becomes well secured and is in the process of collection. Loans where there has been a partial charge-off may be returned to accrual status if all principal and interest (including amounts previously charged-off) is expected to be collected and the loan is current.
Covered loans not considered to be purchased impaired are evaluated for delinquency, nonaccrual status and charge-off consistent with the class of loan they would be included in had the loss share coverage not been in place. Generally, purchased impaired loans are considered accruing loans. However, the timing and amount of future cash flows for some loans is not reasonably estimable. Those loans are classified as nonaccrual loans and interest income is not recognized until the timing and amount of the future cash flows can be reasonably estimated.
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 | |||||||||||||||
September 30, 2012 |
||||||||||||||||||||
Commercial |
$ | 62,502 | $ | 216 | $ | 40 | $ | 152 | $ | 62,910 | ||||||||||
Commercial real estate |
36,105 | 65 | 12 | 631 | 36,813 | |||||||||||||||
Residential mortgages (a) |
40,451 | 393 | 301 | 757 | 41,902 | |||||||||||||||
Credit card |
15,815 | 230 | 194 | 163 | 16,402 | |||||||||||||||
Other retail |
47,358 | 300 | 97 | 210 | 47,965 | |||||||||||||||
Total loans, excluding covered loans |
202,231 | 1,204 | 644 | 1,913 | 205,992 | |||||||||||||||
Covered loans |
10,758 | 269 | 682 | 449 | 12,158 | |||||||||||||||
Total loans |
$ | 212,989 | $ | 1,473 | $ | 1,326 | $ | 2,362 | $ | 218,150 | ||||||||||
December 31, 2011 |
||||||||||||||||||||
Commercial |
$ | 55,991 | $ | 300 | $ | 45 | $ | 312 | $ | 56,648 | ||||||||||
Commercial real estate |
34,800 | 138 | 14 | 899 | 35,851 | |||||||||||||||
Residential mortgages (a) |
35,664 | 404 | 364 | 650 | 37,082 | |||||||||||||||
Credit card |
16,662 | 238 | 236 | 224 | 17,360 | |||||||||||||||
Other retail |
47,516 | 340 | 184 | 67 | 48,107 | |||||||||||||||
Total loans, excluding covered loans |
190,633 | 1,420 | 843 | 2,152 | 195,048 | |||||||||||||||
Covered loans |
12,589 | 362 | 910 | 926 | 14,787 | |||||||||||||||
Total loans |
$ | 203,222 | $ | 1,782 | $ | 1,753 | $ | 3,078 | $ | 209,835 | ||||||||||
(a) | At September 30, 2012, $462 million of loans 30 89 days past due and $3.0 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 Department of Veterans Affairs, were classified as current, compared with $545 million and $2.6 billion at December 31, 2011, respectively. |
The Company classifies its loan portfolios using internal credit quality ratings on a quarterly basis. These ratings include: pass, special mention and classified, and are an important part of the Companys overall credit risk management process and evaluation of the allowance for credit losses. Loans with a pass rating represent those not classified on the Companys rating scale for problem credits, as minimal credit risk has been identified. Special mention loans are those that have a potential weakness deserving managements close attention. Classified loans are those where a well-defined weakness has been identified that may put full collection of contractual cash flows at risk. It is possible that others, given the same information, may reach different reasonable conclusions regarding the credit quality rating classification of specific loans.
50 | U. S. Bancorp |
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 | |||||||||||||||
September 30, 2012 |
||||||||||||||||||||
Commercial |
$ | 60,403 | $ | 1,265 | $ | 1,242 | $ | 2,507 | $ | 62,910 | ||||||||||
Commercial real estate |
33,326 | 785 | 2,702 | 3,487 | 36,813 | |||||||||||||||
Residential mortgages (b) |
40,666 | 24 | 1,212 | 1,236 | 41,902 | |||||||||||||||
Credit card |
16,046 | | 356 | 356 | 16,402 | |||||||||||||||
Other retail |
47,522 | 43 | 400 | 443 | 47,965 | |||||||||||||||
Total loans, excluding covered loans |
197,963 | 2,117 | 5,912 | 8,029 | 205,992 | |||||||||||||||
Covered loans |
11,544 | 96 | 518 | 614 | 12,158 | |||||||||||||||
Total loans |
$ | 209,507 | $ | 2,213 | $ | 6,430 | $ | 8,643 | $ | 218,150 | ||||||||||
Total outstanding commitments |
$ | 431,162 | $ | 3,725 | $ | 7,276 | $ | 11,001 | $ | 442,163 | ||||||||||
December 31, 2011 |
||||||||||||||||||||
Commercial |
$ | 54,003 | $ | 1,047 | $ | 1,598 | $ | 2,645 | $ | 56,648 | ||||||||||
Commercial real estate |
30,733 | 793 | 4,325 | 5,118 | 35,851 | |||||||||||||||
Residential mortgages (b) |
35,814 | 19 | 1,249 | 1,268 | 37,082 | |||||||||||||||
Credit card |
16,910 | | 450 | 450 | 17,360 | |||||||||||||||
Other retail |
47,665 | 24 | 418 | 442 | 48,107 | |||||||||||||||
Total loans, excluding covered loans |
185,125 | 1,883 | 8,040 | 9,923 | 195,048 | |||||||||||||||
Covered loans |
13,966 | 187 | 634 | 821 | 14,787 | |||||||||||||||
Total loans |
$ | 199,091 | $ | 2,070 | $ | 8,674 | $ | 10,744 | $ | 209,835 | ||||||||||
Total outstanding commitments |
$ | 410,457 | $ | 3,418 | $ | 9,690 | $ | 13,108 | $ | 423,565 | ||||||||||
(a) | Classified rating on consumer loans primarily based on delinquency status. |
(b) | At September 30, 2012, $3.0 billion of GNMA loans 90 days or more past due and $2.2 billion of restructured GNMA loans whose repayments are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs were classified with a pass rating, compared with $2.6 billion and $2.0 billion at December 31, 2011, 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. Impaired loans include all nonaccrual and TDR loans. For all loan classes, interest income on TDR loans is recognized under the modified terms and conditions if the borrower has demonstrated repayment performance at a level commensurate with the modified terms over several payment cycles. Interest income is not recognized on other impaired loans until the loan is paid off.
Factors used by the Company in determining whether all principal and interest payments due on commercial and commercial real estate loans will be collected and therefore whether those loans are impaired include, but are not limited to, the financial condition of the borrower, collateral and/or guarantees on the loan, and the borrowers estimated future ability to pay based on industry, geographic location and certain financial ratios. The evaluation of impairment on residential mortgages, credit card and other retail loans is primarily driven by delinquency status of individual loans or whether a loan has been modified. Individual covered loans, whose future losses are covered by loss sharing agreements with the FDIC that substantially reduce the risk of credit losses to the Company, are evaluated for impairment and accounted for in a manner consistent with the class of loan they would have been included in had the loss sharing coverage not been in place.
U. S. Bancorp | 51 |
A summary of impaired 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 |
||||||||||||
September 30, 2012 |
||||||||||||||||
Commercial |
$ | 382 | $ | 1,341 | $ | 40 | $ | 23 | ||||||||
Commercial real estate |
1,214 | 2,466 | 75 | 5 | ||||||||||||
Residential mortgages |
2,833 | 3,524 | 437 | | ||||||||||||
Credit card |
463 | 462 | 167 | | ||||||||||||
Other retail |
408 | 455 | 64 | 7 | ||||||||||||
Total impaired loans, excluding GNMA and covered loans |
5,300 | 8,248 | 783 | 35 | ||||||||||||
Loans purchased from GNMA mortgage pools |
1,631 | 1,631 | 36 | | ||||||||||||
Covered loans |
820 | 1,612 | 18 | 13 | ||||||||||||
Total |
$ | 7,751 | $ | 11,491 | $ | 837 | $ | 48 | ||||||||
December 31, 2011 |
||||||||||||||||
Commercial |
$ | 657 | $ | 1,437 | $ | 62 | $ | 68 | ||||||||
Commercial real estate |
1,436 | 2,503 | 124 | 25 | ||||||||||||
Residential mortgages |
2,652 | 3,193 | 482 | 2 | ||||||||||||
Credit card |
584 | 584 | 219 | | ||||||||||||
Other retail |
188 | 197 | 57 | | ||||||||||||
Total impaired loans, excluding GNMA and covered loans |
5,517 | 7,914 | 944 | 95 | ||||||||||||
Loans purchased from GNMA mortgage pools |
1,265 | 1,265 | 18 | | ||||||||||||
Covered loans |
1,170 | 1,642 | 43 | 49 | ||||||||||||
Total |
$ | 7,952 | $ | 10,821 | $ | 1,005 | $ | 144 | ||||||||
(a) | Substantially all loans classified as impaired at September 30, 2012 and December 31, 2011, had an associated allowance for credit losses. |
Additional information on impaired loans follows:
2012 | 2011 | |||||||||||||||
(Dollars in Millions) | Average Recorded Investment |
Interest Income Recognized |
Average Recorded Investment |
Interest Income Recognized |
||||||||||||
Three months ended September 30 |
||||||||||||||||
Commercial |
$ | 413 | $ | 6 | $ | 536 | $ | 4 | ||||||||
Commercial real estate |
1,250 | 12 | 1,558 | 6 | ||||||||||||
Residential mortgages |
2,752 | 31 | 2,573 | 24 | ||||||||||||
Credit card |
495 | 6 | 492 | 4 | ||||||||||||
Other retail |
354 | 3 | 165 | 1 | ||||||||||||
Total impaired loans, excluding GNMA and covered loans |
5,264 | 58 | 5,324 | 39 | ||||||||||||
Loans purchased from GNMA mortgage pools |
1,492 | 20 | 710 | 10 | ||||||||||||
Covered loans |
883 | 7 | 1,145 | 7 | ||||||||||||
Total |
$ | 7,639 | $ | 85 | $ | 7,179 | $ | 56 | ||||||||
Nine months ended September 30 |
||||||||||||||||
Commercial |
$ | 496 | $ | 11 | $ | 529 | $ | 7 | ||||||||
Commercial real estate |
1,371 | 29 | 1,519 | 10 | ||||||||||||
Residential mortgages |
2,692 | 87 | 2,540 | 74 | ||||||||||||
Credit card |
529 | 22 | 471 | 10 | ||||||||||||
Other retail |
259 | 7 | 160 | 3 | ||||||||||||
Total impaired loans, excluding GNMA and covered loans |
5,347 | 156 | 5,219 | 104 | ||||||||||||
Loans purchased from GNMA mortgage pools |
1,363 | 51 | 433 | 19 | ||||||||||||
Covered loans |
1,042 | 20 | 584 | 34 | ||||||||||||
Total |
$ | 7,752 | $ | 227 | $ | 6,236 | $ | 157 | ||||||||
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. Concessionary modifications are classified as TDRs unless the modification results in only an insignificant delay in payments to be received. The Company recognizes interest on TDRs if the borrower complies with the revised terms and conditions as agreed upon with the Company and has demonstrated repayment performance at a level commensurate with the modified terms over several payment cycles. To the extent a previous restructuring was insignificant, the Company considers the cumulative effect of past restructurings related to the receivable when determining whether a current restructuring is a TDR. Loans classified as TDRs are considered impaired loans for reporting and measurement purposes.
52 | U. S. Bancorp |
The following table provides a summary of loans modified as TDRs during the periods presented, by portfolio class:
2012 | 2011 | |||||||||||||||||||||||
(Dollars in Millions) | Number of Loans |
Pre-Modification Outstanding Loan Balance |
Post-Modification Outstanding Loan Balance |
Number of Loans |
Pre-Modification Outstanding Loan Balance |
Post-Modification Outstanding Loan Balance |
||||||||||||||||||
Three months ended September 30 |
||||||||||||||||||||||||
Commercial |
1,754 | $ | 54 | $ | 58 | 1,137 | $ | 89 | $ | 74 | ||||||||||||||
Commercial real estate |
63 | 91 | 80 | 115 | 124 | 115 | ||||||||||||||||||
Residential mortgages |
2,717 | 344 | 336 | 748 | 155 | 156 | ||||||||||||||||||
Credit card |
14,137 | 52 | 67 | 14,942 | 78 | 77 | ||||||||||||||||||
Other retail |
6,231 | 159 | 156 | 956 | 15 | 16 | ||||||||||||||||||
Total loans, excluding GNMA and covered loans |
24,902 | 700 | 697 | 17,898 | 461 | 438 | ||||||||||||||||||
Loans purchased from GNMA mortgage pools |
4,859 | 660 | 589 | 2,110 | 291 | 312 | ||||||||||||||||||
Covered loans |
73 | 49 | 46 | 67 | 148 | 133 | ||||||||||||||||||
Total loans |
29,834 | $ | 1,409 | $ | 1,332 | 20,075 | $ | 900 | $ | 883 | ||||||||||||||
Nine months ended September 30 |
||||||||||||||||||||||||
Commercial |
4,081 | $ | 215 | $ | 195 | 3,984 | $ | 337 | $ | 310 | ||||||||||||||
Commercial real estate |
245 | 416 | 390 | 380 | 906 | 896 | ||||||||||||||||||
Residential mortgages |
3,788 | 529 | 517 | 2,571 | 515 | 512 | ||||||||||||||||||
Credit card |
39,040 | 189 | 203 | 41,610 | 239 | 238 | ||||||||||||||||||
Other retail |
8,028 | 194 | 191 | 3,020 | 55 | 55 | ||||||||||||||||||
Total loans, excluding GNMA and covered loans |
55,182 | 1,543 | 1,496 | 51,565 | 2,052 | 2,011 | ||||||||||||||||||
Loans purchased from GNMA mortgage pools |
8,436 | 1,116 | 1,087 | 6,042 | 813 | 871 | ||||||||||||||||||
Covered loans |
166 | 246 | 234 | 233 | 456 | 430 | ||||||||||||||||||
Total loans |
63,784 | $ | 2,905 | $ | 2,817 | 57,840 | $ | 3,321 | $ | 3,312 | ||||||||||||||
Residential mortgages, home equity and second mortgages, and loans purchased from GNMA mortgage pools TDRs in the table above include trial period arrangements offered to customers during the periods presented. The post-modification balances for these loans reflect the current outstanding balance until a permanent modification is made. In addition, the post-modification balances typically include capitalization of unpaid accrued interest and/or fees under the various modification programs. At September 30, 2012, 250 residential mortgages, 29 home equity and second mortgage loans and 2,180 loans purchased from GNMA mortgage pools with outstanding balances of $43 million, $2 million and $263 million, respectively, were in a trial period and have estimated post-modification balances of $44 million, $2 million, and $271 million, respectively, assuming permanent modification occurs at the end of the trial period.
Many of the Companys TDRs are determined on a case-by-case basis in connection with ongoing loan collection processes. However, the Company has also implemented certain restructuring programs that may result in TDRs.
For the commercial lending segment, modifications generally result in the Company working with borrowers on a case-by-case basis. Commercial and commercial real estate modifications generally include extensions of the maturity date and may be accompanied by an increase or decrease to the interest rate, which may not be deemed a market rate of interest. In addition, the Company may work with the borrower in identifying other changes that mitigate loss to the Company, which may include additional collateral or guarantees to support the loan. To a lesser extent, the Company may waive contractual principal. The Company classifies these concessions as TDRs to the extent the Company determines that the borrower is experiencing financial difficulty.
Modifications for the consumer lending segment are generally part of programs the Company has initiated. The Company participates in the U.S. Department of Treasury Home Affordable Modification Program (HAMP). HAMP gives qualifying homeowners an opportunity to permanently modify residential mortgage loans and achieve more affordable monthly payments, with the U.S. Department of Treasury compensating the Company for a portion of the reduction in monthly amounts due from borrowers participating in this program. The Company also modifies residential mortgage loans under Federal Housing Administration, Department of Veterans Affairs, or other internal programs. Under these programs, the Company provides concessions to qualifying borrowers experiencing financial difficulties. The concessions may include adjustments to interest rates, conversion of adjustable rates to fixed rates, extension of maturity dates or deferrals of payments, capitalization of accrued interest and/or outstanding advances, or in limited situations, partial forgiveness of loan principal. In most instances, participation in residential mortgage loan restructuring programs requires the customer to complete a short-term trial period. A permanent loan modification is contingent on the customer successfully completing the trial period arrangement and the loan documents are not modified until that time. The Company reports loans in a trial period arrangement as TDRs.
U. S. Bancorp | 53 |
Credit card and other retail loan modifications are generally part of two distinct restructuring programs. The Company offers workout programs providing customers experiencing financial difficulty with modifications whereby balances may be amortized up to 60 months, and generally include waiver of fees and reduced interest rates. The Company also provides modification programs to qualifying customers experiencing a temporary financial hardship in which reductions are made to monthly required minimum payments for up to 12 months. Balances related to these programs are generally frozen, however, accounts may be reopened upon successful exit of the program, in which account privileges may be restored. In addition, the Company considers secured loans to consumer borrowers that have debt discharged through bankruptcy where the borrower has not reaffirmed the debt to be TDRs.
Modifications to loans in the covered segment are similar in nature to that described above for non-covered loans, and the evaluation and determination of TDR status is similar, except that acquired loans restructured after acquisition are not considered TDRs for purposes of the Companys accounting and disclosure if the loans evidenced credit deterioration as of the acquisition date and are accounted for in pools. Losses associated with the modification on covered loans, including the economic impact of interest rate reductions, are generally eligible for reimbursement under loss sharing agreements with the FDIC.
The following table provides a summary of TDR loans that defaulted (fully or partially charged-off or became 90 days or more past due) during the periods presented that were modified as TDRs within 12 months previous to default.
2012 | 2011 | |||||||||||||||
(Dollars in Millions) | Number of Loans |
Amount Defaulted |
Number of Loans |
Amount Defaulted |
||||||||||||
Three months ended September 30 |
||||||||||||||||
Commercial |
195 | $ | 2 | 245 | $ | 13 | ||||||||||
Commercial real estate |
13 | 12 | 29 | 32 | ||||||||||||
Residential mortgages |
116 | 30 | 96 | 20 | ||||||||||||
Credit card |
2,536 | 14 | 1,803 | 9 | ||||||||||||
Other retail |
189 | 4 | 141 | 2 | ||||||||||||
Total loans, excluding GNMA and covered loans |
3,049 | 62 | 2,314 | 76 | ||||||||||||
Loans purchased from GNMA mortgage pools |
248 | 34 | 222 | 31 | ||||||||||||
Covered loans |
8 | 3 | | | ||||||||||||
Total loans |
3,305 | $ | 99 | 2,536 | $ | 107 | ||||||||||
Nine months ended September 30 |
||||||||||||||||
Commercial |
652 | $ | 33 | 513 | $ | 23 | ||||||||||
Commercial real estate |
96 | 176 | 37 | 37 | ||||||||||||
Residential mortgages |
427 | 64 | 536 | 112 | ||||||||||||
Credit card |
7,452 | 42 | 5,366 | 27 | ||||||||||||
Other retail |
531 | 8 | 397 | 9 | ||||||||||||
Total loans, excluding GNMA and covered loans |
9,158 | 323 | 6,849 | 208 | ||||||||||||
Loans purchased from GNMA mortgage pools |
731 | 106 | 475 | 66 | ||||||||||||
Covered loans |
49 | 90 | | | ||||||||||||
Total loans |
9,938 | $ | 519 | 7,324 | $ | 274 | ||||||||||
In addition to the defaults in the table above, during the three months ended September 30, 2012, the Company had 309 residential mortgage loans, home equity and second mortgage loans, and loans purchased from GNMA mortgage pools with aggregate outstanding balances of $50 million where borrowers did not successfully complete the trial period arrangement and therefore are no longer eligible for a permanent modification under the applicable modification program.
Covered assets represent loans and other assets acquired from the FDIC, subject to loss sharing agreements, and include expected reimbursements from the FDIC. The carrying amount of the covered assets consisted of purchased impaired loans, purchased nonimpaired loans, and other assets as shown in the following table:
September 30, 2012 | December 31, 2011 | |||||||||||||||||||||||||||||||
(Dollars in Millions) | Purchased Impaired Loans |
Purchased Nonimpaired Loans |
Other Assets |
Total | Purchased Impaired Loans |
Purchased Nonimpaired Loans |
Other Assets |
Total | ||||||||||||||||||||||||
Commercial loans |
$ | 15 | $ | 144 | $ | | $ | 159 | $ | 68 | $ | 137 | $ | | $ | 205 | ||||||||||||||||
Commercial real estate loans |
1,519 | 3,104 | | 4,623 | 1,956 | 4,037 | | 5,993 | ||||||||||||||||||||||||
Residential mortgage loans |
3,850 | 1,184 | | 5,034 | 3,830 | 1,360 | | 5,190 | ||||||||||||||||||||||||
Credit card loans |
| 5 | | 5 | | 6 | | 6 | ||||||||||||||||||||||||
Other retail loans |
| 798 | | 798 | | 867 | | 867 | ||||||||||||||||||||||||
Losses reimbursable by the FDIC (a) |
| | 1,539 | 1,539 | | | 2,526 | 2,526 | ||||||||||||||||||||||||
Covered loans |
5,384 | 5,235 | 1,539 | 12,158 | 5,854 | 6,407 | 2,526 | 14,787 | ||||||||||||||||||||||||
Foreclosed real estate |
| | 198 | 198 | | | 274 | 274 | ||||||||||||||||||||||||
Total covered assets |
$ | 5,384 | $ | 5,235 | $ | 1,737 | $ | 12,356 | $ | 5,854 | $ | 6,407 | $ | 2,800 | $ | 15,061 | ||||||||||||||||
(a) | Relates to loss sharing agreements with remaining terms from 2 to 7 years. |
54 | U. S. Bancorp |
In October 2012, the Financial Accounting Standards Board issued accounting guidance, effective January 1, 2013, applicable to indemnification assets related to FDIC loss-sharing agreements. The guidance requires any reduction in the FDIC indemnification assets resulting from increases in expected cash flows of the covered assets, when there are no previous valuation allowances to reverse, to be amortized over the shorter of the remaining contractual term of the indemnification agreements or the remaining life of the covered assets. Currently, the Company amortizes these changes over the expected life of the covered assets. The Company is currently assessing the impact that this guidance will have on its financial statements.
At September 30, 2012, $93 million of the purchased impaired loans included in covered loans were classified as nonperforming assets, compared with $189 million at December 31, 2011, because the expected cash flows are primarily based on the liquidation of underlying collateral and the timing and amount of the cash flows could not be reasonably estimated. Interest income is recognized on other purchased impaired loans through accretion of the difference between the carrying amount of those loans and their expected cash flows. The initial determination of the fair value of the purchased loans includes the impact of expected credit losses and, therefore, no allowance for credit losses is recorded at the purchase date. To the extent credit deterioration occurs after the date of acquisition, the Company records an allowance for credit losses.
Net gains on the sale of loans of $419 million and $74 million for the three months ended September 30, 2012 and 2011, respectively, and $998 million and $340 million for the nine months ended September 30, 2012 and 2011, respectively, were included in noninterest income, primarily in mortgage banking revenue.
Note 4 |
Accounting for Transfers and Servicing of Financial Assets and Variable Interest Entities |
The Company sells financial assets in the normal course of business. The majority of the Companys financial asset sales are residential mortgage loan sales primarily to government-sponsored enterprises (GSEs) through established programs, the sale or syndication of tax-advantaged investments, commercial loan sales through participation agreements, and other individual or portfolio loan and securities sales. In accordance with the accounting guidance for asset transfers, the Company considers any ongoing involvement with transferred assets in determining whether the assets can be derecognized from the balance sheet. For loans sold under participation agreements, the Company also considers the terms of the loan participation agreement and whether they meet the definition of a participating interest and thus qualify for derecognition. With the exception of servicing and certain performance-based guarantees, the Companys continuing involvement with financial assets sold is minimal and generally limited to market customary representation and warranty clauses. The guarantees provided to certain third-parties in connection with the sale or syndication of certain assets, primarily loan portfolios and tax-advantaged investments, are further discussed in Note 12. When the Company sells financial assets, it may retain servicing rights and/or other interests in the transferred financial assets. The gain or loss on sale depends on the previous carrying amount of the transferred financial assets and the consideration received and any liabilities incurred in exchange for the transferred assets. Upon transfer, any servicing assets and other interests that continue to be held by the Company are initially recognized at fair value. For further information on mortgage servicing rights (MSRs), refer to Note 5. On a limited basis, the Company may acquire and package high-grade corporate bonds for select corporate customers, in which the Company generally has no continuing involvement with these transactions. Additionally, the Company is an authorized Government National Mortgage Association (GNMA) issuer and issues GNMA securities on a regular basis. The Company has no other asset securitizations or similar asset-backed financing arrangements that are off-balance sheet.
The Company is involved in various entities that are considered to be variable interest entities (VIEs). The Companys investments in VIEs primarily represent private investment funds or partnerships that make equity investments, provide debt financing or support community-based investments that may enable the Company to ensure regulatory compliance with the Community Reinvestment Act. In addition, the Company sponsors entities to which it transfers tax-advantaged investments. The Companys investments in these entities are designed to generate a return primarily through the realization of federal and state income tax credits over specified time periods. The Company realized federal and state income tax credits related to these investments of $227 million and $191 million for the three months ended September 30, 2012 and 2011, respectively, and $581 million and $510 million for the nine months ended September 30, 2012 and 2011, respectively. The Company amortizes its investments in these entities as the tax credits are realized. Amortization expense is recorded in tax expense for investments meeting certain characteristics, and in other noninterest expense for other investments. Amortization expense recorded in tax expense was
U. S. Bancorp | 55 |
$123 million and $60 million, and in other noninterest expense was $140 million and $144 million for the three months ended September 30, 2012 and 2011, respectively. Amortization expense recorded in tax expense was $316 million and $175 million, and in other noninterest expense was $361 million and $386 million for the nine months ended September 30, 2012 and 2011, respectively.
At September 30, 2012, approximately $6.7 billion of the Companys assets and $4.8 billion of its liabilities included on the consolidated balance sheet were related to community development and tax-advantaged investment VIEs which the Company has consolidated, compared with $5.6 billion and $4.0 billion, respectively, at December 31, 2011. The majority of the assets of these consolidated VIEs are reported in other assets, and the liabilities are reported in long-term debt. The assets of a particular VIE are the primary source of funds to settle its obligations. The creditors of the VIEs do not have recourse to the general credit of the Company. The Companys exposure to the consolidated VIEs is generally limited to the carrying value of its variable interests plus any related tax credits previously recognized or sold to others.
In addition, the Company sponsors a conduit to which it previously transferred high-grade investment securities. The Company consolidates the conduit because of its ability to manage the activities of the conduit. At September 30, 2012, $151 million of the held-to-maturity investment securities on the Companys consolidated balance sheet related to the conduit, compared with $202 million at December 31, 2011.
The Company also sponsors a municipal bond securities tender option bond program. The Company controls the activities of the programs entities, is entitled to the residual returns and provides credit, liquidity and remarketing arrangements to the program. As a result, the Company has consolidated the programs entities. At September 30, 2012, $5.3 billion of available-for-sale securities and $5.0 billion of short-term borrowings on the consolidated balance sheet were related to the tender option bond program, compared with $5.4 billion of available-for-sale securities and $5.3 billion of short-term borrowings at December 31, 2011.
The Company is not required to consolidate VIEs in which it has concluded it does not have a controlling financial interest, and thus is not the primary beneficiary. In such cases, the Company does not have both the power to direct the entities most significant activities and the obligation to absorb losses or right to receive benefits that could potentially be significant to the VIEs. The Companys investments in these unconsolidated VIEs generally are carried in other assets on the consolidated balance sheet. The Companys investments in unconsolidated VIEs at September 30, 2012, ranged from less than $1 million to $44 million, with an aggregate amount of approximately $1.7 billion, net of $1.1 billion of liabilities recorded primarily for unfunded capital commitments of the Company to specific project sponsors. The Companys investments in unconsolidated VIEs at December 31, 2011, ranged from less than $1 million to $37 million, with an aggregate amount of $1.8 billion, net of liabilities of $965 million for unfunded capital commitments. While the Company believes potential losses from these investments are remote, the Companys maximum exposure to loss from these unconsolidated VIEs was approximately $5.0 billion at September 30, 2012, compared with $4.8 billion at December 31, 2011. The maximum exposure to loss was primarily related to community development tax-advantaged investments and included $1.7 billion at September 30, 2012, and $1.8 billion at December 31, 2011, recorded on the Companys consolidated balance sheet and $3.2 billion at September 30, 2012, and $3.0 billion at December 31, 2011, of previously recorded tax credits which remain subject to recapture by taxing authorities based on compliance features required to be met at the project level. The remaining amounts related to investments in private investment funds and partnerships for which the maximum exposure to loss included amounts recorded on the consolidated balance sheet and any unfunded commitments. The maximum exposure was determined by assuming a scenario where the separate investments within the individual private funds were to become worthless, and the community-based business and housing projects and related tax credits completely failed and did not meet certain government compliance requirements.
56 | U. S. Bancorp |
Note 5 |
Mortgage Servicing Rights |
The Company serviced $211.3 billion of residential mortgage loans for others at September 30, 2012, and $191.1 billion at December 31, 2011. The net impact included in mortgage banking revenue of fair value changes of MSRs and derivatives used to economically hedge MSRs were net gains of $10 million and $7 million for the three months ended September 30, 2012 and 2011, respectively, and net gains of $72 million and $151 million for the nine months ended September 30, 2012 and 2011, respectively. Loan servicing fees, not including valuation changes, included in mortgage banking revenue, were $181 million and $166 million for the three months ended September 30, 2012 and 2011, respectively, and $526 million and $483 million for the nine months ended September 30, 2012 and 2011, respectively.
Changes in fair value of capitalized MSRs are summarized as follows:
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
(Dollars in Millions) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Balance at beginning of period |
$ | 1,594 | $ | 1,989 | $ | 1,519 | $ | 1,837 | ||||||||
Rights purchased |
10 | 5 | 39 | 16 | ||||||||||||
Rights capitalized |
224 | 101 | 700 | 416 | ||||||||||||
Changes in fair value of MSRs |
||||||||||||||||
Due to fluctuations in market interest rates (a) |
(123 | ) | (534 | ) | (298 | ) | (569 | ) | ||||||||
Due to revised assumptions or models (b) |
(2 | ) | 2 | (19 | ) | 27 | ||||||||||
Other changes in fair value (c) |
(150 | ) | (97 | ) | (388 | ) | (261 | ) | ||||||||
Balance at end of period |
$ | 1,553 | $ | 1,466 | $ | 1,553 | $ | 1,466 |
(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 discount rate, 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 MSRs portfolio and the related derivative instruments was as follows:
September 30, 2012 | December 31, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||
(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 |
$ | (262 | ) | $ | (162 | ) | $ | (94 | ) | $ | 109 | $ | 231 | $ | 483 | $ | (305 | ) | $ | (183 | ) | $ | (98 | ) | $ | 107 | $ | 223 | $ | 460 | ||||||||||||||||||
Derivative instrument hedges |
405 | 208 | 105 | (105 | ) | (210 | ) | (422 | ) | 378 | 204 | 104 | (107 | ) | (217 | ) | (445 | ) | ||||||||||||||||||||||||||||||
Net sensitivity |
$ | 143 | $ | 46 | $ | 11 | $ | 4 | $ | 21 | $ | 61 | $ | 73 | $ | 21 | $ | 6 | $ | | $ | 6 | $ | 15 |
The fair value of MSRs and their sensitivity to changes in interest rates is influenced by the mix of the servicing portfolio and characteristics of each segment of the portfolio. The Companys servicing portfolio consists of the distinct portfolios of government-insured mortgages, conventional mortgages and Mortgage Revenue Bond Programs (MRBP). The servicing portfolios are predominantly comprised of fixed-rate agency loans with limited adjustable-rate or jumbo mortgage loans. The MRBP division specializes in servicing loans made under state and local housing authority programs. These programs provide mortgages to low-income and moderate-income borrowers and are generally government-insured programs with a favorable rate subsidy, down payment and/or closing cost assistance.
A summary of the Companys MSRs and related characteristics by portfolio was as follows:
September 30, 2012 | December 31, 2011 | |||||||||||||||||||||||||||||||
(Dollars in Millions) | MRBP | Government | Conventional (b) | Total | MRBP | Government | Conventional (b) | Total | ||||||||||||||||||||||||
Servicing portfolio |
$ | 13,939 | $ | 38,162 | $ | 159,162 | $ | 211,263 | $ | 13,357 | $ | 32,567 | $ | 145,158 | $ | 191,082 | ||||||||||||||||
Fair market value |
$ | 154 | $ | 304 | $ | 1,095 | $ | 1,553 | $ | 155 | $ | 290 | $ | 1,074 | $ | 1,519 | ||||||||||||||||
Value (bps) (a) |
110 | 80 | 69 | 74 | 116 | 89 | 74 | 79 | ||||||||||||||||||||||||
Weighted-average servicing fees (bps) |
40 | 34 | 30 | 31 | 40 | 36 | 29 | 31 | ||||||||||||||||||||||||
Multiple (value/servicing fees) |
2.75 | 2.35 | 2.30 | 2.39 | 2.90 | 2.47 | 2.55 | 2.55 | ||||||||||||||||||||||||
Weighted-average note rate |
5.24 | % | 4.69 | % | 4.63 | % | 4.68 | % | 5.50 | % | 5.08 | % | 4.97 | % | 5.03 | % | ||||||||||||||||
Weighted-average age (in years) |
4.2 | 2.4 | 2.5 | 2.6 | 4.2 | 2.5 | 2.8 | 2.8 | ||||||||||||||||||||||||
Weighted-average expected prepayment (constant prepayment rate) |
13.1 | % | 21.6 | % | 23.1 | % | 22.2 | % | 12.9 | % | 21.1 | % | 22.1 | % | 21.3 | % | ||||||||||||||||
Weighted-average expected life (in years) |
6.2 | 4.0 | 3.5 | 3.8 | 6.4 | 4.0 | 3.8 | 4.0 | ||||||||||||||||||||||||
Weighted-average discount rate |
12.1 | % | 11.4 | % | 10.0 | % | 10.4 | % | 12.1 | % | 11.3 | % | 10.0 | % | 10.4 | % | ||||||||||||||||
(a) | Value is calculated as fair market value divided by the servicing portfolio. |
(b) | Represents loans sold primarily to GSEs. |
U. S. Bancorp | 57 |
Note 6 |
Preferred Stock |
At September 30, 2012 and December 31, 2011, the Company had authority to issue 50 million shares of preferred stock. The number of shares issued and outstanding and the carrying amount of each outstanding series of the Companys preferred stock was as follows:
September 30, 2012 | December 31, 2011 | |||||||||||||||||||||||||||||||
(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 D |
20,000 | 500 | | 500 | 20,000 | 500 | | 500 | ||||||||||||||||||||||||
Series F |
44,000 | 1,100 | 12 | 1,088 | | | | | ||||||||||||||||||||||||
Series G |
43,400 | 1,085 | 10 | 1,075 | | | | | ||||||||||||||||||||||||
Total preferred stock (a) |
159,910 | $ | 4,936 | $ | 167 | $ | 4,769 | 72,510 | $ | 2,751 | $ | 145 | $ | 2,606 | ||||||||||||||||||
(a) | The par value of all shares issued and outstanding at September 30, 2012 and December 31, 2011, was $1.00 per share. |
On January 23, 2012, the Company issued depositary shares representing an ownership interest in 44,000 shares of Series F Non-Cumulative Perpetual Preferred Stock with a liquidation preference of $25,000 per share (the Series F Preferred Stock), and on April 20, 2012, the Company issued depositary shares representing an ownership interest in 43,400 shares of Series G Non-Cumulative Perpetual Preferred Stock with a liquidation preference of $25,000 per share (the Series G Preferred Stock). The Series F Preferred Stock and Series G Preferred Stock have no stated maturity and will not be subject to any sinking fund or other obligation of the Company. Dividends, if declared, will accrue and be payable quarterly, in arrears, at a rate per annum equal to 6.50 percent from the date of issuance to, but excluding, January 15, 2022, and thereafter at a floating rate per annum equal to three-month LIBOR plus 4.468 percent for the Series F Preferred Stock, and 6.00 percent from the date of issuance to, but excluding, April 15, 2017, and thereafter at a floating rate per annum equal to three-month LIBOR plus 4.86125 percent for the Series G Preferred Stock. Both series are redeemable at the Companys option, in whole or in part, on or after January 15, 2022, for the Series F Preferred Stock and April 15, 2017, for the Series G Preferred Stock. Both series are redeemable at the Companys option, in whole, but not in part, prior to January 15, 2022, for the Series F Preferred Stock and prior to April 15, 2017, for the Series G Preferred Stock, within 90 days following an official administrative or judicial decision, amendment to, or change in the laws or regulations that would not allow the Company to treat the full liquidation value of the Series F Preferred Stock or Series G Preferred Stock, respectively, as Tier 1 capital for purposes of the capital adequacy guidelines of the Federal Reserve.
For further information on preferred stock, refer to Note 15 in the Companys Annual Report on Form 10-K for the year ended December 31, 2011.
Note 7 |
Earnings Per Share |
The components of earnings per share were:
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
(Dollars and Shares in Millions, Except Per Share Data) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Net income attributable to U.S. Bancorp |
$ | 1,474 | $ | 1,273 | $ | 4,227 | $ | 3,522 | ||||||||
Preferred dividends |
(64 | ) | (30 | ) | (174 | ) | (99 | ) | ||||||||
Earnings allocated to participating stock awards |
(6 | ) | (6 | ) | (19 | ) | (16 | ) | ||||||||
Net income applicable to U.S. Bancorp common shareholders |
$ | 1,404 | $ | 1,237 | $ | 4,034 | $ | 3,407 | ||||||||
Average common shares outstanding |
1,886 | 1,915 | 1,892 | 1,918 | ||||||||||||
Net effect of the exercise and assumed purchase of stock awards and conversion of outstanding convertible notes |
11 | 7 | 9 | 8 | ||||||||||||
Average diluted common shares outstanding |
1,897 | 1,922 | 1,901 | 1,926 | ||||||||||||
Earnings per common share |
$ | .74 | $ | .65 | $ | 2.13 | $ | 1.78 | ||||||||
Diluted earnings per common share |
$ | .74 | $ | .64 | $ | 2.12 | $ | 1.77 | ||||||||
Options and warrants outstanding at September 30, 2012 to purchase 10 million and 22 million common shares for the three months and nine months ended September 30, 2012, respectively, and outstanding at September 30, 2011 to purchase 60 million and 54 million common shares for the three months and nine months ended September 30, 2011,
58 | U. S. Bancorp |
respectively, were not included in the computation of diluted earnings per share because they were antidilutive. Convertible senior debentures that could potentially be converted into shares of the Companys common stock pursuant to specified formulas, were not included in the computation of dilutive earnings per share because they were antidilutive.
Note 8 |
Employee Benefits |
The components of net periodic benefit cost for the Companys retirement plans were:
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||||||||
Pension Plans | Postretirement Welfare Plan |
Pension Plans | Postretirement Welfare Plan |
|||||||||||||||||||||||||||||
(Dollars in Millions) | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | ||||||||||||||||||||||||
Service cost |
$ | 33 | $ | 30 | $ | 2 | $ | 1 | $ | 97 | $ | 89 | $ | 4 | $ | 3 | ||||||||||||||||
Interest cost |
42 | 42 | 1 | 3 | 126 | 126 | 5 | 7 | ||||||||||||||||||||||||
Expected return on plan assets |
(48 | ) | (52 | ) | (1 | ) | (1 | ) | (143 | ) | (155 | ) | (2 | ) | (3 | ) | ||||||||||||||||
Prior service cost (credit) and transition obligation (asset) amortization |
(2 | ) | (2 | ) | | | (4 | ) | (7 | ) | | | ||||||||||||||||||||
Actuarial loss (gain) amortization |
41 | 31 | (1 | ) | (2 | ) | 121 | 94 | (5 | ) | (5 | ) | ||||||||||||||||||||
Net periodic benefit cost |
$ | 66 | $ | 49 | $ | 1 | $ | 1 | $ | 197 | $ | 147 | $ | 2 | $ | 2 | ||||||||||||||||
Note 9 |
Income Taxes |
The components of income tax expense were:
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
(Dollars in Millions) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Federal |
||||||||||||||||
Current |
$ | 461 | $ | 450 | $ | 1,416 | $ | 907 | ||||||||
Deferred |
50 | (41 | ) | 26 | 232 | |||||||||||
Federal income tax |
511 | 409 | 1,442 | 1,139 | ||||||||||||
State |
||||||||||||||||
Current |
77 | 85 | 239 | 157 | ||||||||||||
Deferred |
5 | (4 | ) | 3 | 18 | |||||||||||
State income tax |
82 | 81 | 242 | 175 | ||||||||||||
Total income tax provision |
$ | 593 | $ | 490 | $ | 1,684 | $ | 1,314 | ||||||||
A reconciliation of expected income tax expense at the federal statutory rate of 35 percent to the Companys applicable income tax expense follows:
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
(Dollars in Millions) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Tax at statutory rate |
$ | 709 | $ | 610 | $ | 2,030 | $ | 1,671 | ||||||||
State income tax, at statutory rates, net of federal tax benefit |
53 | 53 | 157 | 114 | ||||||||||||
Tax effect of |
||||||||||||||||
Tax credits, net of related expenses |
(120 | ) | (124 | ) | (322 | ) | (319 | ) | ||||||||
Tax-exempt income |
(55 | ) | (57 | ) | (165 | ) | (170 | ) | ||||||||
Noncontrolling interests |
15 | 8 | 39 | 22 | ||||||||||||
Other items |
(9 | ) | | (55 | ) | (4 | ) | |||||||||
Applicable income taxes |
$ | 593 | $ | 490 | $ | 1,684 | $ | 1,314 | ||||||||
The Companys income tax returns are subject to review and examination by federal, state, local and foreign government authorities. On an ongoing basis, numerous federal, state, local and foreign examinations are in progress and cover multiple tax years. As of September 30, 2012, the federal taxing authority has completed its examination of the Company through the fiscal year ended December 31, 2008. The years open to examination by foreign, state and local government authorities vary by jurisdiction.
The Companys net deferred tax liability was $1.6 billion at September 30, 2012, and $1.1 billion at December 31, 2011.
U. S. Bancorp | 59 |
Note 10 |
Derivative Instruments |
The Company recognizes all derivatives in the consolidated balance sheet at fair value in other assets or in other liabilities. On the date the Company enters into a derivative contract, the derivative is designated as either a hedge of the fair value of a recognized asset or liability (fair value hedge); a hedge of a forecasted transaction or the variability of cash flows to be paid related to a recognized asset or liability (cash flow hedge); a hedge of the volatility of an investment in foreign operations driven by changes in foreign currency exchange rates (net investment hedge); or a designation is not made as it is a customer-related transaction, an economic hedge for asset/liability risk management purposes or another stand-alone derivative created through the Companys operations (free-standing derivative).
The following table provides information on the fair value of the Companys derivative positions:
September 30, 2012 | December 31, 2011 | |||||||||||||||
(Dollars in Millions) | Asset Derivatives |
Liability Derivatives |
Asset Derivatives |
Liability Derivatives |
||||||||||||
Total fair value of derivative positions |
$ | 2,176 | $ | 2,640 | $ | 1,913 | $ | 2,554 | ||||||||
Netting (a) |
(354 | ) | (1,687 | ) | (294 | ) | (1,889 | ) | ||||||||
Total |
$ | 1,822 | $ | 953 | $ | 1,619 | $ | 665 | ||||||||
(a) | Represents netting of derivative asset and liability balances, and related collateral, with the same counterparty subject to master netting agreements. At September 30, 2012, the amount of cash and money market investments collateral posted by counterparties that was netted against derivative assets was $89 million and the amount of cash collateral posted by the Company that was netted against derivative liabilities was $1.4 billion, compared with $88 million and $1.7 billion, respectively, at December 31, 2011. |
Of the Companys $65.5 billion of total notional amount of asset and liability management positions at September 30, 2012, $12.0 billion was designated as a fair value, cash flow or net investment hedge. When a derivative is designated as a fair value, cash flow or net investment hedge, the Company performs an assessment, at inception and, at a minimum, quarterly thereafter, to determine the effectiveness of the derivative in offsetting changes in the value or cash flows of the hedged item(s).
Fair Value Hedges These derivatives are primarily interest rate swaps that hedge the change in fair value related to interest rate changes of underlying fixed-rate debt and junior subordinated debentures. Changes in the fair value of derivatives designated as fair value hedges, and changes in the fair value of the hedged items, are recorded in earnings. All fair value hedges were highly effective for the nine months ended September 30, 2012, and the change in fair value attributed to hedge ineffectiveness was not material.
Cash Flow Hedges These derivatives are interest rate swaps that are hedges of the forecasted cash flows from the underlying variable-rate loans and debt. Changes in the fair value of derivatives designated as cash flow hedges are recorded in other comprehensive income (loss) until the cash flows of the hedged items are realized. If a derivative designated as a cash flow hedge is terminated or ceases to be highly effective, the gain or loss in other comprehensive income (loss) is amortized to earnings over the period the forecasted hedged transactions impact earnings. If a hedged forecasted transaction is no longer probable, hedge accounting is ceased and any gain or loss included in other comprehensive income (loss) is reported in earnings immediately, unless the forecasted transaction is at least reasonably possible of occurring, whereby the amounts within other comprehensive income (loss) remain. At September 30, 2012, the Company had $433 million (net-of-tax) of realized and unrealized losses on derivatives classified as cash flow hedges recorded in other comprehensive income (loss), compared with $489 million (net-of-tax) at December 31, 2011. The estimated amount to be reclassified from other comprehensive income (loss) into earnings during the remainder of 2012 and the next 12 months are losses of $33 million (net-of-tax) and $132 million (net-of-tax), respectively. This amount includes gains and losses related to hedges that were terminated early for which the forecasted transactions are still probable. All cash flow hedges were highly effective for the nine months ended September 30, 2012, and the change in fair value attributed to hedge ineffectiveness was not material.
Net Investment Hedges The Company uses forward commitments to sell specified amounts of certain foreign currencies and non-derivative debt instruments to hedge the volatility of its investment in foreign operations driven by fluctuations in foreign currency exchange rates. The ineffectiveness on all net investment hedges was not material for the nine months ended September 30, 2012. There were no derivatives designated as net investment hedges at September 30, 2012. At September 30, 2012, the carrying amount of non-derivative debt instruments designated as net investment hedges was $719 million. There were no non-derivative debt instruments designated as net investment hedges at December 31, 2011.
60 | U. S. Bancorp |
Other Derivative Positions The Company enters into free-standing derivatives to mitigate interest rate risk and for other risk management purposes. These derivatives include forward commitments to sell to-be-announced securities (TBAs) and other commitments to sell residential mortgage loans, which are used to economically hedge the interest rate risk related to residential mortgage loans held for sale and unfunded mortgage loan commitments. The Company also enters into interest rate swaps, forward commitments to buy TBAs, U.S. Treasury futures and options on U.S. Treasury futures to economically hedge the change in the fair value of the Companys MSRs. The Company also enters into foreign currency forwards to economically hedge remeasurement gains and losses the Company recognizes on foreign currency denominated assets and liabilities. In addition, the Company acts as a seller and buyer of interest rate derivatives and foreign exchange contracts for its customers. To mitigate the market and liquidity risk associated with these customer derivatives, the Company enters into similar offsetting positions with broker-dealers. The Company also has derivative contracts that are created through its operations, including commitments to originate mortgage loans held for sale and certain derivative financial guarantee contracts.
For additional information on the Companys purpose for entering into derivative transactions and its overall risk management strategies, refer to Management Discussion and Analysis Use of Derivatives to Manage Interest Rate and Other Risks which is incorporated by reference into these Notes to Consolidated Financial Statements.
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 |
||||||||||||||||||
September 30, 2012 |
||||||||||||||||||||||||
Fair value hedges |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Receive fixed/pay floating swaps |
$ | 500 | $ | 30 | 3.34 | $ | | $ | | | ||||||||||||||
Cash flow hedges |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Pay fixed/receive floating swaps |
| | | 4,468 | 771 | 3.96 | ||||||||||||||||||
Receive fixed/pay floating swaps |
7,000 | 51 | 2.10 | | | | ||||||||||||||||||
Other economic hedges |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Futures and forwards |
||||||||||||||||||||||||
Buy |
15,159 | 311 | .08 | 107 | 1 | .04 | ||||||||||||||||||
Sell |
2,720 | 7 | .14 | 17,673 | 389 | .08 | ||||||||||||||||||
Options |
||||||||||||||||||||||||
Purchased |
2,250 | | .07 | | | | ||||||||||||||||||
Written |
6,097 | 204 | .12 | 8 | 1 | .19 | ||||||||||||||||||
Receive fixed/pay floating swaps |
3,975 | 45 | 10.23 | | | | ||||||||||||||||||
Foreign exchange forward contracts |
1,125 | 7 | .02 | 1,446 | 5 | .03 | ||||||||||||||||||
Equity contracts |
32 | | .53 | 33 | 1 | 2.72 | ||||||||||||||||||
Credit contracts |
909 | 3 | 4.45 | 2,005 | 10 | 3.28 | ||||||||||||||||||
December 31, 2011 |
||||||||||||||||||||||||
Fair value hedges |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Receive fixed/pay floating swaps |
500 | 27 | 4.09 | | | | ||||||||||||||||||
Foreign exchange cross-currency swaps |
688 | 17 | 5.17 | 432 | 23 | 5.17 | ||||||||||||||||||
Cash flow hedges |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Pay fixed/receive floating swaps |
| | | 4,788 | 803 | 4.03 | ||||||||||||||||||
Receive fixed/pay floating swaps |
750 | | 2.75 | 6,250 | 6 | 2.86 | ||||||||||||||||||
Net investment hedges |
||||||||||||||||||||||||
Foreign exchange forward contracts |
708 | 4 | .08 | | | | ||||||||||||||||||
Other economic hedges |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Futures and forwards |
||||||||||||||||||||||||
Buy |
14,270 | 150 | .07 | 29 | | .12 | ||||||||||||||||||
Sell |
231 | 1 | .15 | 14,415 | 134 | .11 | ||||||||||||||||||
Options |
||||||||||||||||||||||||
Purchased |
1,250 | | .07 | | | | ||||||||||||||||||
Written |
4,421 | 80 | .10 | 11 | 1 | .13 | ||||||||||||||||||
Receive fixed/pay floating swaps |
2,625 | 9 | 10.21 | | | | ||||||||||||||||||
Foreign exchange forward contracts |
307 | 1 | .08 | 1,414 | 11 | .08 | ||||||||||||||||||
Equity contracts |
54 | 1 | 1.05 | 10 | | .64 | ||||||||||||||||||
Credit contracts |
800 | 7 | 3.71 | 1,600 | 8 | 3.59 |
U. S. Bancorp | 61 |
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 In Years |
Notional Value |
Fair Value |
Weighted-Average In Years |
||||||||||||||||||
September 30, 2012 |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Receive fixed/pay floating swaps |
$ | 17,262 | $ | 1,186 | 4.74 | $ | 359 | $ | 8 | 16.45 | ||||||||||||||
Pay fixed/receive floating swaps |
280 | 8 | 19.79 | 17,433 | 1,148 | 4.76 | ||||||||||||||||||
Options |
||||||||||||||||||||||||
Purchased |
3,014 | 15 | 5.34 | 28 | | 4.67 | ||||||||||||||||||
Written |
202 | | .73 | 2,839 | 15 | 5.66 | ||||||||||||||||||
Foreign exchange rate contracts |
||||||||||||||||||||||||
Forwards, spots and swaps (a) |
11,038 | 301 | .36 | 10,799 | 283 | .45 | ||||||||||||||||||
Options |
||||||||||||||||||||||||
Purchased |
346 | 8 | .65 | | | | ||||||||||||||||||
Written |
| | | 346 | 8 | .65 | ||||||||||||||||||
December 31, 2011 |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Receive fixed/pay floating swaps |
16,230 | 1,216 | 4.98 | 523 | 1 | 2.52 | ||||||||||||||||||
Pay fixed/receive floating swaps |
99 | | 1.81 | 16,206 | 1,182 | 5.10 | ||||||||||||||||||
Options |
||||||||||||||||||||||||
Purchased |
2,660 | 26 | 6.11 | | | | ||||||||||||||||||
Written |
| | | 2,660 | 26 | 6.11 | ||||||||||||||||||
Foreign exchange rate contracts |
||||||||||||||||||||||||
Forwards, spots and swaps (a) |
7,936 | 369 | .54 | 7,731 | 354 | .54 | ||||||||||||||||||
Options |
||||||||||||||||||||||||
Purchased |
127 | 5 | .41 | | | | ||||||||||||||||||
Written |
| | | 127 | 5 | .41 | ||||||||||||||||||
(a) | Reflects the net of long and short positions. |
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):
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
Gains (Losses) Recognized in Other Comprehensive Income (Loss) |
Gains (Losses) Reclassified from Other Comprehensive Income (Loss) into Earnings |
Gains (Losses) Recognized in Other Comprehensive Income (Loss) |
Gains (Losses) Reclassified from Other Comprehensive Income (Loss) into Earnings |
|||||||||||||||||||||||||||||
(Dollars in Millions) | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | ||||||||||||||||||||||||
Asset and Liability Management Positions |
||||||||||||||||||||||||||||||||
Cash flow hedges |
||||||||||||||||||||||||||||||||
Interest rate contracts (a) |
$ | (19 | ) | $ | (120 | ) | $ | (33 | ) | $ | (34 | ) | $ | (42 | ) | $ | (199 | ) | $ | (98 | ) | $ | (103 | ) | ||||||||
Net investment hedges |
||||||||||||||||||||||||||||||||
Foreign exchange forward contracts |
| (57 | ) | | | (6 | ) | (104 | ) | | | |||||||||||||||||||||
Non-derivative debt instruments |
(11 | ) | | | | 26 | | | | |||||||||||||||||||||||
Note: | Ineffectiveness on cash flow and net investment hedges was not material for the three and nine months ended September 30, 2012 and 2011. |
(a) | Gains (Losses) reclassified from other comprehensive income (loss) into interest income on loans and interest expense on long-term debt. |
62 | U. S. Bancorp |
The table below shows the gains (losses) recognized in earnings for fair value hedges, other economic hedges and the customer-related positions:
Location of Gains (Losses) Recognized in Earnings |
Three Months Ended |
Nine Months Ended |
||||||||||||||||||
(Dollars in Millions) | 2012 | 2011 | 2012 | 2011 | ||||||||||||||||
Asset and Liability Management Positions |
||||||||||||||||||||
Fair value hedges (a) |
||||||||||||||||||||
Interest rate contracts |
Other noninterest income | $ | 2 | $ | 1 | $ | 5 | $ | 25 | |||||||||||
Foreign exchange cross-currency swaps |
Other noninterest income | | (111 | ) | 42 | (13 | ) | |||||||||||||
Other economic hedges |
||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||
Futures and forwards |
Mortgage banking revenue | (44 | ) | 17 | 67 | (7 | ) | |||||||||||||
Purchased and written options |
Mortgage banking revenue | 290 | 181 | 689 | 323 | |||||||||||||||
Receive fixed/pay floating swaps |
Mortgage banking revenue | 48 | 377 | 186 | 479 | |||||||||||||||
Pay fixed/receive floating swaps |
Mortgage banking revenue | | 4 | | 4 | |||||||||||||||
Foreign exchange forward contracts |
Commercial products revenue | (25 | ) | (48 | ) | (62 | ) | (66 | ) | |||||||||||
Equity contracts |
Compensation expense | 1 | 1 | 2 | 2 | |||||||||||||||
Credit contracts |
Other noninterest income/expense | (2 | ) | 4 | (8 | ) | 2 | |||||||||||||
Customer-Related Positions |
||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||
Receive fixed/pay floating swaps |
Other noninterest income | (16 | ) | 366 | (10 | ) | 352 | |||||||||||||
Pay fixed/receive floating swaps |
Other noninterest income | 19 | (376 | ) | 15 | (365 | ) | |||||||||||||
Foreign exchange rate contracts |
||||||||||||||||||||
Forwards, spots and swaps |
Commercial products revenue | 13 | 14 | 36 | 41 |
(a) | Gains (Losses) on items hedged by interest rate contracts and foreign exchange forward contracts, included in noninterest income (expense), were $(2) million and zero for the three months ended September 30, 2012, respectively, and $(3) million and $117 million for the three months ended September 30, 2011, respectively. Gains (Losses) on items hedged by interest rate contracts and foreign exchange forward contracts, included in noninterest income (expense), were $(5) million and $(44) million for the nine months ended September 30, 2012, respectively, and $(27) million and $20 million for the nine months ended September 30, 2011, respectively. The ineffective portion was immaterial for the three and nine months ended September 30, 2012 and 2011. |
Derivatives are subject to credit risk associated with counterparties to the derivative contracts. The Company measures that credit risk using a credit valuation adjustment and includes it within the fair value of the derivative. The Company manages counterparty credit risk through diversification of its derivative positions among various counterparties, by entering into master netting agreements and, where possible, by requiring collateral agreements. A master netting agreement allows two counterparties, who have multiple derivative contracts with each other, the ability to net settle amounts under all contracts, including any related collateral posted, through a single payment and in a single currency. Collateral agreements require the counterparty to post, on a daily basis, collateral (typically cash or money market investments) equal to the Companys net derivative receivable. For highly-rated counterparties, the agreements may include minimum dollar posting thresholds, but allow for the Company to call for immediate, full collateral coverage when credit-rating thresholds are triggered by counterparties.
The Companys collateral agreements are bilateral and, therefore, contain provisions that require collateralization of the Companys net liability derivative positions. Required collateral coverage is based on certain net liability thresholds and contingent upon the Companys credit rating from two of the nationally recognized statistical rating organizations. If the Companys credit rating were to fall below credit ratings thresholds established in the collateral agreements, the counterparties to the derivatives could request immediate full collateral coverage for derivatives in net liability positions. The aggregate fair value of all derivatives under collateral agreements that were in a net liability position at September 30, 2012, was $1.7 billion. At September 30, 2012, the Company had $1.4 billion of cash posted as collateral against this net liability position.
Note 11 |
Fair Values of Assets and Liabilities |
The Company uses fair value measurements for the initial recording of certain assets and liabilities, periodic remeasurement of certain assets and liabilities, and disclosures. Derivatives, trading and available-for-sale investment securities, certain mortgage loans held for sale (MLHFS) and MSRs are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as loans held for sale, loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower-of-cost-or-fair value accounting or impairment write-downs of individual assets.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market
U. S. Bancorp | 63 |
participants on the measurement date. A fair value measurement reflects all of the assumptions that market participants would use in pricing the asset or liability, including assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset, and the risk of nonperformance.
The Company groups its assets and liabilities measured at fair value into a three-level hierarchy for valuation techniques used to measure financial assets and financial liabilities at fair value. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:
| Level 1 Quoted prices in active markets for identical assets or liabilities. Level 1 includes U.S. Treasury and exchange-traded instruments. |
| Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 includes debt securities that are traded less frequently than exchange-traded instruments and which are typically valued using third party pricing services; derivative contracts and other assets and liabilities, including securities, whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data; and MLHFS whose values are determined using quoted prices for similar assets or pricing models with inputs that are observable in the market or can be corroborated by observable market data. |
| Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category includes MSRs, certain debt securities and certain derivative contracts. |
When the Company changes its valuation inputs for measuring financial assets and financial liabilities at fair value, either due to changes in current market conditions or other factors, it may need to transfer those assets or liabilities to another level in the hierarchy based on the new inputs used. The Company recognizes these transfers at the end of the reporting period that the transfers occur. During the nine months ended September 30, 2012 and 2011, there were no transfers of financial assets or financial liabilities between the hierarchy levels.
The Company has processes and controls in place to increase the reliability of estimates it makes in determining fair value measurements. Items quoted on an exchange are verified to the quoted price. Items provided by a third party pricing service are subject to price verification procedures as discussed in more detail in the specific valuation discussions provided in the section that follows. For fair value measurements modeled internally, the Companys valuation models are subject to the Companys Model Risk Governance Policy and Program, as maintained by the Companys credit administration department. The purpose of model validation is to assess the accuracy of the models input, processing, and reporting components. All models are required to be independently reviewed and approved prior to being placed in use, and are subject to formal change control procedures. Under the Companys Model Risk Governance Policy, models are required to be reviewed at least annually to ensure they are operating as intended. Inputs into the models are market observable inputs whenever available. When market observable inputs are not available, the inputs are developed based upon analysis of historical experience and evaluation of other relevant market data. Significant unobservable model inputs are subject to review by senior management in corporate functions, who are independent from the modeling. Significant unobservable model inputs are also compared to actual results, typically on a quarterly basis. Significant Level 3 fair value measurements are also subject to corporate-level review and are benchmarked to market transactions or other market data, when available. Additional discussion of processes and controls are provided in the valuation methodologies section that follows.
The following section describes the valuation methodologies used by the Company to measure financial assets and liabilities at fair value and for estimating fair value for financial instruments not recorded at fair value as required under disclosure guidance related to the fair value of financial instruments. In addition, the following section includes an indication of the level of the fair value hierarchy in which the assets or liabilities are classified. Where appropriate, the description includes information about the valuation models and key inputs to those models. During the nine months ended September 30, 2012 and 2011, there were no significant changes to the valuation techniques used by the Company to measure fair value.
Cash and Due From Banks The carrying value of cash and due from banks approximate fair value and are classified within Level 1. Fair value is provided for disclosure purposes only.
64 | U. S. Bancorp |
Federal Funds Sold and Securities Purchased Under Resale Agreements The carrying value of federal funds sold and securities purchased under resale agreements approximate fair value because of the relatively short time between the origination of the instrument and its expected realization and are classified within Level 2. Fair value is provided for disclosure purposes only.
Investment Securities When quoted market prices for identical securities are available in an active market, these prices are used to determine fair value and these securities are classified within Level 1 of the fair value hierarchy. Level 1 investment securities are predominantly U.S. Treasury securities.
For other securities, quoted market prices may not be readily available for the specific securities. When possible, the Company determines fair value based on market observable information, including quoted market prices for similar securities, inactive transaction prices, and broker quotes. These securities are classified within Level 2 of the fair value hierarchy. Level 2 valuations are generally provided by a third party pricing service. The Company reviews the valuation methodologies utilized by the pricing service and, on a quarterly basis, reviews the security level prices provided by the pricing service against managements expectation of fair value, based on changes in various benchmarks and market knowledge from recent trading activity. Additionally, each quarter, the Company validates the fair value provided by the pricing services by comparing them to recent observable market trades (where available), broker provided quotes, or other independent secondary pricing sources. Prices obtained from the pricing service are adjusted if they are found to be inconsistent with observable market data. Level 2 investment securities are predominantly agency mortgage-backed securities, certain other asset-backed securities, municipal securities, corporate debt securities, agency debt securities and perpetual preferred securities.
The fair value of securities for which there are no market trades, or where trading is inactive as compared to normal market activity, are classified within Level 3 of the fair value hierarchy. The Company determines the fair value of these securities using a discounted cash flow methodology and incorporating observable market information, where available. These valuations are modeled by a unit within the Companys treasury department, which is separate from the portfolio management function. The valuations use assumptions regarding housing prices, interest rates and borrower performance. Inputs are refined and updated at least quarterly to reflect market developments and actual performance. The primary valuation drivers of these securities are the prepayment rates, default rates and default severities associated with the underlying collateral, as well as the discount rate used to calculate the present value of the projected cash flows. Level 3 fair values, including the assumptions used, are subject to review by senior management in corporate functions, who are independent from the modeling. The fair value measurements are also compared to fair values provided by third party pricing services, where available. Securities classified within Level 3 include non-agency mortgage-backed securities, non-agency commercial mortgage-backed securities, certain asset-backed securities, certain collateralized debt obligations and collateralized loan obligations, certain corporate debt securities and SIV-related securities.
Certain Mortgage Loans Held For Sale MLHFS measured at fair value, for which an active secondary market and readily available market prices exist, are initially valued at the transaction price and are subsequently valued by comparison to instruments with similar collateral and risk profiles. MLHFS are classified within Level 2. Included in mortgage banking revenue was a $241 million net gain and a $98 million net gain for the three months ended September 30, 2012 and 2011, respectively, and a $501 million net gain and a $38 million net loss for the nine months ended September 30, 2012 and 2011, respectively, from the changes to fair value of these MLHFS under fair value option accounting guidance. Changes in fair value due to instrument specific credit risk were immaterial. Interest income for MLHFS is measured based on contractual interest rates and reported as interest income in the Consolidated Statement of Income. Electing to measure MLHFS at fair value reduces certain timing differences and better matches changes in fair value of these assets with changes in the value of the derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting.
Loans The loan portfolio includes adjustable and fixed-rate loans, the fair value of which was estimated using discounted cash flow analyses and other valuation techniques. The expected cash flows of loans considered historical prepayment experiences and estimated credit losses and were discounted using current rates offered to borrowers of similar credit characteristics. Generally, loan fair values reflect Level 3 information. Fair value is provided for disclosure purposes only, with the exception of impaired collateral-based loans that are measured at fair value on a non-recurring basis utilizing the underlying collateral fair value.
U. S. Bancorp | 65 |
Mortgage Servicing Rights MSRs are valued using a discounted cash flow methodology and third party prices, if available. Accordingly, MSRs are classified within Level 3. The Company determines fair value by estimating the present value of the assets future cash flows using prepayment rates, discount rates, and other assumptions. The MSR valuations, as well as the assumptions used, are developed by the mortgage banking division and are subject to review by senior management in corporate functions, who are independent from the modeling. The MSR valuations and assumptions are validated through comparison to trade information and industry surveys when available, and are also compared to independent third party valuations each quarter. Risks inherent in MSR valuation include higher than expected prepayment rates and/or delayed receipt of cash flows. There is minimal market activity for MSRs, therefore the determination of fair value requires significant management judgment. Refer to Note 5 for further information on MSR valuation assumptions.
Derivatives The majority of derivatives held by the Company are executed over-the-counter and are valued using standard cash flow, Black-Derman-Toy and Monte Carlo valuation techniques. The models incorporate inputs, depending on the type of derivative, including interest rate curves, foreign exchange rates and volatility. In addition, all derivative values incorporate an assessment of the risk of counterparty nonperformance, measured based on the Companys evaluation of credit risk as well as external assessments of credit risk, where available. The Company monitors and manages its nonperformance risk by considering its ability to net derivative positions under master netting agreements, as well as collateral received or provided under collateral support agreements. Accordingly, the Company has elected to measure the fair value of derivatives, at a counterparty level, on a net basis. The majority of the derivatives are classified within Level 2 of the fair value hierarchy, as the significant inputs to the models, including nonperformance risk, are observable. However, certain derivative transactions are with counterparties where risk of nonperformance cannot be observed in the market, and therefore the credit valuation adjustments result in these derivatives being classified within Level 3 of the fair value hierarchy. The credit valuation adjustments for nonperformance risk are determined by the Companys treasury department using credit assumptions provided by credit administration. The credit assumptions are compared to actual results quarterly and are recalibrated as appropriate.
The Company also has commitments to sell, purchase and originate mortgage loans that meet the accounting requirements of a derivative. These mortgage loan commitments are valued by pricing models that include market observable and unobservable inputs, which result in the commitments being classified within Level 3 of the fair value hierarchy. The unobservable inputs include the percentage of commitments that actually become a closed loan and the MSR value that is inherent in the underlying loan value, both of which are developed by the Companys mortgage banking division. The closed loan percentages for the mortgage loan commitments are monitored on an on-going basis, as these percentages are also used for the Companys economic hedging activities. The inherent MSR value for the commitments are generated by the same models used for the Companys MSRs and thus are subject to the same processes and controls as described for the MSRs above.
Other Financial Instruments Other financial instruments include cost method equity investments and community development and tax-advantaged related assets and liabilities. The majority of the Companys cost method equity investments are in Federal Home Loan Bank and Federal Reserve Bank stock, whose carrying amounts approximate their fair value and are classified within Level 2. Investments in private equity and other limited partnership funds are estimated using fund provided net asset values. These equity investments are classified within Level 3. Fair value is provided for disclosure purposes only.
Community development and tax-advantaged investments generate a return primarily through the realization of federal and state income tax credits, with a duration typically equal to the period that the tax credits are realized. Asset balances primarily represent the assets of the underlying community development and tax-advantaged entities the Company consolidated per applicable authoritative accounting guidance. Liabilities of the underlying consolidated entities were included in long-term debt. The carrying value of the asset balances are a reasonable estimate of fair value and are classified within Level 3. Refer to Note 4 for further information on community development and tax-advantaged related assets and liabilities. Fair value is provided for disclosure purposes only.
Deposit Liabilities The fair value of demand deposits, savings accounts and certain money market deposits is equal to the amount payable on demand. The fair value of fixed-rate certificates of deposit was estimated by discounting the contractual cash flow using current market rates. Deposit liabilities are classified within Level 2. Fair value is provided for disclosure purposes only.
66 | U. S. Bancorp |
Short-term Borrowings Federal funds purchased, securities sold under agreements to repurchase, commercial paper and other short-term funds borrowed have floating rates or short-term maturities. The fair value of short-term borrowings was determined by discounting contractual cash flows using current market rates. Short-term borrowings are classified within Level 2. Fair value is provided for disclosure purposes only.
Long-term Debt The fair value for most long-term debt was determined by discounting contractual cash flows using current market rates. Junior subordinated debt instruments were valued using market quotes. Long-term debt is classified within Level 2. Fair value is provided for disclosure purposes only.
Loan Commitments, Letters of Credit and Guarantees The fair value of commitments, letters of credit and guarantees represents the estimated costs to terminate or otherwise settle the obligations with a third party. Other loan commitments, letters of credit and guarantees are not actively traded, and the Company estimates their fair value based on the related amount of unamortized deferred commitment fees adjusted for the probable losses for these arrangements. These arrangements are classified within Level 3. Fair value is provided for disclosure purposes only.
Significant Unobservable Inputs of Level 3 Assets and Liabilities
The following section provides information on the significant inputs used by the Company to determine the fair value measurements of Level 3 assets and liabilities recorded at fair value on the consolidated balance sheet. In addition, the following section includes a discussion of the sensitivity of the fair value measurements to changes in the significant inputs and a description of any interrelationships between these inputs for Level 3 assets and liabilities recorded at fair value on a recurring basis. The discussion below excludes nonrecurring fair value measurements of collateral value used for impairment measures for loans and other real estate owned. These valuations utilize third party appraisal or broker price opinions, and are classified as Level 3 due to the significant judgment involved.
Available-For-Sale Investment Securities The significant unobservable inputs used in the fair value measurement of the Companys modeled Level 3 available-for-sale investment securities are prepayment rates, probability of default and loss severities associated with the underlying collateral, as well as the discount margin used to calculate the present value of the projected cash flows. The majority of the Companys Level 3 securities were acquired at discounts. Increases in prepayment rates will typically result in higher fair values, as increased prepayment rates accelerate the receipt of expected cash flows and reduce exposure to credit losses. Increases in the probability of default and loss severities will result in lower fair values, as these increases reduce expected cash flows. Discount margin is the Companys estimate of the current market spread above the respective benchmark rate. Higher discount margin will result in lower fair values, as it reduces the present value of the expected cash flows.
Prepayment rates generally move in the opposite direction of market interest rates. In the current environment, an increase in the probability of default will generally be accompanied with an increase in loss severity, as both are impacted by underlying collateral values. Discount margins are influenced by market expectations about the securitys collateral performance, and therefore may directionally move with probability and severity of default; however, discount margins are also impacted by broader market forces, such as competing investment yields, sector liquidity, economic news, and other macroeconomic factors.
U. S. Bancorp | 67 |
The following table shows the significant valuation assumption ranges for Level 3 available-for-sale investment securities at September 30, 2012:
Minimum | Maximum | Average | ||||||||||
Residential Prime Non-Agency Mortgage-Backed Securities (a) |
||||||||||||
Estimated lifetime prepayment rates |
6 | % | 20 | % | 13 | % | ||||||
Lifetime probability of default rates |
| 5 | 3 | |||||||||
Lifetime loss severity rates |
25 | 80 | 42 | |||||||||
Discount margin |
3 | 7 | 5 | |||||||||
Residential Non-Prime Non-Agency Mortgage-Backed Securities (b) |
||||||||||||
Estimated lifetime prepayment rates |
2 | % | 10 | % | 6 | % | ||||||
Lifetime probability of default rates |
3 | 10 | 6 | |||||||||
Lifetime loss severity rates |
20 | 70 | 53 | |||||||||
Discount margin |
3 | 9 | 6 | |||||||||
Other Asset-Backed Securities |
||||||||||||
Estimated lifetime prepayment rates |
6 | % | 6 | % | 6 | % | ||||||
Lifetime probability of default rates |
4 | 4 | 4 | |||||||||
Lifetime loss severity rates |
40 | 40 | 40 | |||||||||
Discount margin |
18 | 18 | 18 | |||||||||
(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. |
Mortgage Servicing Rights The significant unobservable inputs used in the fair value measurement of the Companys MSRs are expected prepayments and the discount rate used to calculate the present value of the projected cash flows. Significant increases in either of these inputs in isolation would result in a significantly lower fair value measurement. Significant decreases in either of these inputs in isolation would result in a significantly higher fair value measurement. There is no direct interrelationship between prepayments and discount rate. Prepayment rates generally move in the opposite direction of market interest rates. Discount rates are generally impacted by changes in market return requirements.
The following table shows the significant valuation assumption ranges for MSRs at September 30, 2012:
Minimum | Maximum | Average | ||||||||||
Expected prepayment |
14 | % | 35 | % | 22 | % | ||||||
Discount rate |
10 | 14 | 10 | |||||||||
Derivatives The Company has two distinct Level 3 derivative portfolios: (i) the Companys commitments to sell, purchase and originate mortgage loans that meet the requirements of a derivative, and (ii) the Companys asset/liability and customer-related derivatives that are Level 3 due to unobservable inputs related to measurement of risk of nonperformance by the counterparty.
The significant unobservable inputs used in the fair value measurement of the Companys derivative commitments to sell, purchase and originate mortgage loans are the percentage of commitments that actually become a closed loan and the MSR value that is inherent in the underlying loan value. A significant increase in the rate of loans that close would result in a larger derivative asset or liability. A significant increase in the inherent MSR value would result in an increase in the derivative asset or a reduction in the derivative liability. Expected loan close rates and the inherent MSR values are directly impacted by changes in market rates and will generally move in the same direction as interest rates.
The following table shows the significant valuation assumption ranges for the Companys derivative commitments to sell, purchase and originate mortgage loans at September 30, 2012:
Minimum | Maximum | Average | ||||||||||
Expected loan close rate |
9 | % | 100 | % | 73 | % | ||||||
Inherent MSR value (basis points per loan) |
10 | 195 | 99 | |||||||||
The significant unobservable input used in the fair value measurement of certain of the Companys asset/liability and customer-related derivatives is the credit valuation adjustment related to the risk of counterparty nonperformance. A significant increase in the credit valuation adjustment would result in a lower fair value measurement. A significant decrease in the credit valuation adjustment would result in a higher fair value measurement. The credit valuation adjustment is impacted by changes in the Companys assessment of the counterpartys credit position. At September 30, 2012, the minimum, maximum and average credit valuation adjustment as a percentage of the derivative contract fair value prior to adjustment was 0 percent, 97 percent and 6 percent, respectively.
68 | U. S. Bancorp |
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 | |||||||||||||||
September 30, 2012 |
||||||||||||||||||||
Available-for-sale securities |
||||||||||||||||||||
U.S. Treasury and agencies |
$ | 504 | $ | 239 | $ | | $ | | $ | 743 | ||||||||||
Mortgage-backed securities |
||||||||||||||||||||
Residential |
||||||||||||||||||||
Agency |
| 29,362 | | | 29,362 | |||||||||||||||
Non-agency |
||||||||||||||||||||
Prime (a) |
| | 631 | | 631 | |||||||||||||||
Non-prime (b) |
| | 340 | | 340 | |||||||||||||||
Commercial |
||||||||||||||||||||
Agency |
| 202 | | | 202 | |||||||||||||||
Asset-backed securities |
||||||||||||||||||||
Collateralized debt obligations/Collateralized loan obligations |
| 42 | | | 42 | |||||||||||||||
Other |
| 582 | 16 | | 598 | |||||||||||||||
Obligations of state and political subdivisions |
| 6,457 | | | 6,457 | |||||||||||||||
Obligations of foreign governments |
| 6 | | | 6 | |||||||||||||||
Corporate debt securities |
| 700 | 9 | | 709 | |||||||||||||||
Perpetual preferred securities |
| 278 | | | 278 | |||||||||||||||
Other investments |
256 | 12 | | | 268 | |||||||||||||||
Total available-for-sale |
760 | 37,880 | 996 | | 39,636 | |||||||||||||||
Mortgage loans held for sale |
| 9,815 | | | 9,815 | |||||||||||||||
Mortgage servicing rights |
| | 1,553 | | 1,553 | |||||||||||||||
Derivative assets |
| 637 | 1,539 | (354 | ) | 1,822 | ||||||||||||||
Other assets |
179 | 554 | | | 733 | |||||||||||||||
Total |
$ | 939 | $ | 48,886 | $ | 4,088 | $ | (354 | ) | $ | 53,559 | |||||||||
Derivative liabilities |
$ | | $ | 2,591 | $ | 49 | $ | (1,687 | ) | $ | 953 | |||||||||
Other liabilities |
39 | 553 | | | 592 | |||||||||||||||
Total |
$ | 39 | $ | 3,144 | $ | 49 | $ | (1,687 | ) | $ | 1,545 | |||||||||
December 31, 2011 |
||||||||||||||||||||
Available-for-sale securities |
||||||||||||||||||||
U.S. Treasury and agencies |
$ | 562 | $ | 495 | $ | | $ | | $ | 1,057 | ||||||||||
Mortgage-backed securities |
||||||||||||||||||||
Residential |
||||||||||||||||||||
Agency |
| 40,314 | | | 40,314 | |||||||||||||||
Non-agency |
||||||||||||||||||||
Prime (a) |
| | 803 | | 803 | |||||||||||||||
Non-prime (b) |
| | 802 | | 802 | |||||||||||||||
Commercial |
||||||||||||||||||||
Agency |
| 140 | | | 140 | |||||||||||||||
Non-agency |
| | 42 | | 42 | |||||||||||||||
Asset-backed securities |
||||||||||||||||||||
Collateralized debt obligations/Collateralized loan obligations |
| 86 | 120 | | 206 | |||||||||||||||
Other |
| 564 | 117 | | 681 | |||||||||||||||
Obligations of state and political subdivisions |
| 6,539 | | | 6,539 | |||||||||||||||
Obligations of foreign governments |
| 6 | | | 6 | |||||||||||||||
Corporate debt securities |
| 818 | 9 | | 827 | |||||||||||||||
Perpetual preferred securities |
| 318 | | | 318 | |||||||||||||||
Other investments |
193 | 9 | | | 202 | |||||||||||||||
Total available-for-sale |
755 | 49,289 | 1,893 | | 51,937 | |||||||||||||||
Mortgage loans held for sale |
| 6,925 | | | 6,925 | |||||||||||||||
Mortgage servicing rights |
| | 1,519 | | 1,519 | |||||||||||||||
Derivative assets |
| 632 | 1,281 | (294 | ) | 1,619 | ||||||||||||||
Other assets |
146 | 467 | | | 613 | |||||||||||||||
Total |
$ | 901 | $ | 57,313 | $ | 4,693 | $ | (294 | ) | $ | 62,613 | |||||||||
Derivative liabilities |
$ | | $ | 2,501 | $ | 53 | $ | (1,889 | ) | $ | 665 | |||||||||
Other liabilities |
75 | 538 | | | 613 | |||||||||||||||
Total |
$ | 75 | $ | 3,039 | $ | 53 | $ | (1,889 | ) | $ | 1,278 | |||||||||
(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. |
U. S. Bancorp | 69 |
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 three months ended September 30:
(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 |
Net Change in Unrealized Gains (Losses) Relating to Assets Still Held at End of Period |
||||||||||||||||||||||||||||||
2012 |
||||||||||||||||||||||||||||||||||||||||
Available-for-sale securities |
||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities |
||||||||||||||||||||||||||||||||||||||||
Residential non-agency |
||||||||||||||||||||||||||||||||||||||||
Prime (a) |
$ | 713 | $ | (4 | ) | $ | 23 | $ | | $ | (61 | ) | $ | (40 | ) | $ | | $ | | $ | 631 | $ | 26 | |||||||||||||||||
Non-prime (b) |
796 | (8 | ) | 132 | | (562 | ) | (18 | ) | | | 340 | 23 | |||||||||||||||||||||||||||
Commercial non-agency |
37 | | 2 | | (39 | ) | | | | | | |||||||||||||||||||||||||||||
Asset-backed securities |
||||||||||||||||||||||||||||||||||||||||
Collateralized debt obligations/Collateralized loan obligations |
102 | 2 | (7 | ) | | (96 | ) | (1 | ) | | | | | |||||||||||||||||||||||||||
Other |
112 | 1 | (4 | ) | 3 | (93 | ) | (3 | ) | | | 16 | 2 | |||||||||||||||||||||||||||
Corporate debt securities |
9 | | | | | | | | 9 | | ||||||||||||||||||||||||||||||
Total available-for-sale |
1,769 | (9 | )(c) | 146 | (f) | 3 | (851 | ) | (62 | ) | | | 996 | 51 | ||||||||||||||||||||||||||
Mortgage servicing rights |
1,594 | (275 | )(d) | | 10 | | | 224 | (g) | | 1,553 | (275 | )(d) | |||||||||||||||||||||||||||
Net derivative assets and liabilities |
1,360 | 843 | (e) | | 1 | (1 | ) | | | (713 | ) | 1,490 | (557 | )(h) | ||||||||||||||||||||||||||
2011 |
||||||||||||||||||||||||||||||||||||||||
Available-for-sale securities |
||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities |
||||||||||||||||||||||||||||||||||||||||
Residential non-agency |
||||||||||||||||||||||||||||||||||||||||
Prime (a) |
$ | 896 | $ | 1 | $ | (2 | ) | $ | | $ | | $ | (36 | ) | $ | | $ | | $ | 859 | $ | (2 | ) | |||||||||||||||||
Non-prime (b) |
895 | (2 | ) | (5 | ) | | | (31 | ) | | | 857 | (5 | ) | ||||||||||||||||||||||||||
Commercial non-agency |
50 | 1 | (1 | ) | | (4 | ) | (1 | ) | | | 45 | | |||||||||||||||||||||||||||
Asset-backed securities |
||||||||||||||||||||||||||||||||||||||||
Collateralized debt obligations/Collateralized loan obligations |
133 | 3 | (2 | ) | | | (9 | ) | | | 125 | (2 | ) | |||||||||||||||||||||||||||
Other |
129 | 1 | (4 | ) | | | (6 | ) | | | 120 | (4 | ) | |||||||||||||||||||||||||||
Corporate debt securities |
9 | | | | | | | | 9 | | ||||||||||||||||||||||||||||||
Total available-for-sale |
2,112 | 4 | (i) | (14 | )(f) | | (4 | ) | (83 | ) | | | 2,015 | (13 | ) | |||||||||||||||||||||||||
Mortgage servicing rights |
1,989 | (629 | )(d) | | 5 | | | 101 | (g) | | 1,466 | (629 | )(d) | |||||||||||||||||||||||||||
Net derivative assets and liabilities |
836 | 836 | (j) | | | (2 | ) | | | (340 | ) | 1,330 | 77 | (k) | ||||||||||||||||||||||||||
(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) | Approximately $(15) million included in securities gains (losses) and $6 million included in interest income. |
(d) | Included in mortgage banking revenue. |
(e) | Approximately $124 million included in other noninterest income and $719 million included in mortgage banking revenue. |
(f) | Included in changes in unrealized gains and losses on securities available-for-sale. |
(g) | Represents MSRs capitalized during the period. |
(h) | Approximately $7 million included in other noninterest income and $(564) million included in mortgage banking revenue. |
(i) | Approximately $(9) million included in other securities gains (losses) and $13 million included in interest income. |
(j) | Approximately $445 million included in other noninterest income and $391 million included in mortgage banking revenue. |
(k) | Approximately $317 million included in other noninterest income and $(240) million included in mortgage banking revenue. |
70 | U. S. Bancorp |
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 nine months ended September 30:
(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 |
Net Change in Unrealized Gains (Losses) Relating to Assets Still Held at End of Period |
||||||||||||||||||||||||||||||
2012 |
||||||||||||||||||||||||||||||||||||||||
Available-for-sale securities |
||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities |
||||||||||||||||||||||||||||||||||||||||
Residential non-agency |
||||||||||||||||||||||||||||||||||||||||
Prime (a) |
$ | 803 | $ | (5 | ) | $ | 60 | $ | | $ | (109 | ) | $ | (118 | ) | $ | | $ | | $ | 631 | $ | 58 | |||||||||||||||||
Non-prime (b) |
802 | (18 | ) | 197 | | (562 | ) | (79 | ) | | | 340 | 52 | |||||||||||||||||||||||||||
Commercial non-agency |
42 | 1 | | | (39 | ) | (4 | ) | | | | | ||||||||||||||||||||||||||||
Asset-backed securities |
||||||||||||||||||||||||||||||||||||||||
Collateralized debt obligations/Collateralized loan obligations |
120 | 12 | (8 | ) | | (103 | ) | (21 | ) | | | | | |||||||||||||||||||||||||||
Other |
117 | 7 | | 3 | (93 | ) | (18 | ) | | | 16 | 2 | ||||||||||||||||||||||||||||
Corporate debt securities |
9 | | | | | | | | 9 | | ||||||||||||||||||||||||||||||
Total available-for-sale |
1,893 | (3 | )(c) | 249 | (f) | 3 | (906 | ) | (240 | ) | | | 996 | 112 | ||||||||||||||||||||||||||
Mortgage servicing rights |
1,519 | (705 | )(d) | | 39 | | | 700 | (g) | | 1,553 | (705 | )(d) | |||||||||||||||||||||||||||
Net derivative assets and liabilities |
1,228 | 2,050 | (e) | | 1 | (3) | | | (1,786 | ) | 1,490 | (1,407 | )(h) | |||||||||||||||||||||||||||
2011 |
||||||||||||||||||||||||||||||||||||||||
Available-for-sale securities |
||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities |
||||||||||||||||||||||||||||||||||||||||
Residential non-agency |
||||||||||||||||||||||||||||||||||||||||
Prime (a) |
$ | 1,103 | $ | 4 | $ | 22 | $ | | $ | (115 | ) | $ | (155 | ) | $ | | $ | | $ | 859 | $ | 14 | ||||||||||||||||||
Non-prime (b) |
947 | (4 | ) | 27 | | (12 | ) | (101 | ) | | | 857 | 26 | |||||||||||||||||||||||||||
Commercial non-agency |
50 | 2 | (1 | ) | | (4 | ) | (2 | ) | | | 45 | | |||||||||||||||||||||||||||
Asset-backed securities |
||||||||||||||||||||||||||||||||||||||||
Collateralized debt obligations/Collateralized loan obligations |
135 | 10 | 6 | | | (26 | ) | | | 125 | 7 | |||||||||||||||||||||||||||||
Other |
133 | 8 | (2 | ) | | | (19 | ) | | | 120 | (2 | ) | |||||||||||||||||||||||||||
Corporate debt securities |
9 | | | | | | | | 9 | | ||||||||||||||||||||||||||||||
Total available-for-sale |
2,377 | 20 | (i) | 52 | (f) | | (131 | ) | (303 | ) | | | 2,015 | 45 | ||||||||||||||||||||||||||
Mortgage servicing rights |
1,837 | (803 | )(d) | | 16 | | | 416 | (g) | | 1,466 | (803 | )(d) | |||||||||||||||||||||||||||
Net derivative assets and liabilities |
851 | 1,252 | (j) | | | (5 | ) | | | (768 | ) | 1,330 | (92 | )(k) | ||||||||||||||||||||||||||
(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) | Approximately $(37) million included in securities gains (losses) and $34 million included in interest income. |
(d) | Included in mortgage banking revenue. |
(e) | Approximately $344 million included in other noninterest income and $1.7 billion included in mortgage banking revenue. |
(f) | Included in changes in unrealized gains and losses on securities available-for-sale. |
(g) | Represents MSRs capitalized during the period. |
(h) | Approximately $6 million included in other noninterest income and $1.4 billion included in mortgage banking revenue. |
(i) | Approximately $(24) million included in securities gains (losses) and $44 million included in interest income. |
(j) | Approximately $672 million included in other noninterest income and $580 million included in mortgage banking revenue. |
(k) | Approximately $303 million included in other noninterest income and $(395) million included in mortgage banking revenue. |
U. S. Bancorp | 71 |
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 adjusted carrying values and the level of valuation assumptions for assets measured at fair value on a nonrecurring basis:
September 30, 2012 | December 31, 2011 | |||||||||||||||||||||||||||||||
(Dollars in Millions) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Loans (a) |
$ | | $ | | $ | 138 | $ | 138 | $ | | $ | | $ | 168 | $ | 168 | ||||||||||||||||
Other assets (b) |
| | 204 | 204 | | | 310 | 310 | ||||||||||||||||||||||||
(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:
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
(Dollars in Millions) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Loans (a) |
$ | 12 | $ | 32 | $ | 51 | $ | 153 | ||||||||
Other assets (b) |
42 | 81 | 129 | 230 | ||||||||||||
(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:
September 30, 2012 | December 31, 2011 | |||||||||||||||||||||||
(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 |
$ | 9,815 | $ | 9,215 | $ | 600 | $ | 6,925 | $ | 6,635 | $ | 290 | ||||||||||||
Nonaccrual loans |
8 | 13 | (5 | ) | 10 | 15 | (5 | ) | ||||||||||||||||
Loans 90 days or more past due |
2 | 3 | (1 | ) | 3 | 4 | (1 | ) | ||||||||||||||||
Disclosures about Fair Value of Financial Instruments
The following table summarizes the estimated fair value for financial instruments as of September 30, 2012 and December 31, 2011, and includes financial instruments that are not accounted for at fair value. In accordance with disclosure guidance related to fair values of financial instruments, the Company did not include assets and liabilities that are not financial instruments, such as the value of goodwill, long-term relationships with deposit, credit card, merchant processing and trust customers, other purchased intangibles, premises and equipment, deferred taxes and other liabilities. Additionally, in accordance with the disclosure guidance, insurance contracts and investments accounted for under the equity method are excluded.
72 | U. S. Bancorp |
The estimated fair values of the Companys financial instruments are shown in the table below:
September 30, 2012 | December 31, 2011 | |||||||||||||||||||||||||||
Carrying Amount |
Fair Value | Carrying Amount |
Fair Value |
|||||||||||||||||||||||||
(Dollars in Millions) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Financial Assets |
||||||||||||||||||||||||||||
Cash and due from banks |
$ | 9,382 | $ | 9,382 | $ | | $ | | $ | 9,382 | $ | 13,962 | $ | 13,962 | ||||||||||||||
Federal funds sold and securities purchased under resale agreements |
166 | | 166 | | 166 | 64 | 64 | |||||||||||||||||||||
Investment securities held-to-maturity |
34,509 | 2,441 | 32,719 | 66 | 35,226 | 18,877 | 19,216 | |||||||||||||||||||||
Mortgages held for sale (a) |
| | | | | 3 | 3 | |||||||||||||||||||||
Other loans held for sale |
64 | | | 64 | 64 | 228 | 228 | |||||||||||||||||||||
Loans |
213,669 | | | 216,105 | 216,105 | 205,082 | 206,646 | |||||||||||||||||||||
Other financial instruments |
6,991 | | 1,246 | 5,771 | 7,017 | 6,095 | 6,140 | |||||||||||||||||||||
Financial Liabilities |
||||||||||||||||||||||||||||
Deposits |
244,232 | | 244,690 | | 244,690 | 230,885 | 231,184 | |||||||||||||||||||||
Short-term borrowings |
27,853 | | 27,885 | | 27,885 | 30,468 | 30,448 | |||||||||||||||||||||
Long-term debt |
26,264 | | 27,264 | | 27,264 | 31,953 | 32,664 | |||||||||||||||||||||
(a) | Balance excludes mortgages held for sale for which the fair value option under applicable accounting guidance was elected. |
The fair value of unfunded commitments, standby letters of credit and other guarantees is approximately equal to their carrying value. The carrying value of unfunded commitments and standby letters of credit was $393 million and $381 million at September 30, 2012 and December 31, 2011, respectively. The carrying value of other guarantees was $423 million and $359 million at September 30, 2012 and December 31, 2011, respectively.
Note 12 |
Guarantees and Contingent Liabilities |
Visa Restructuring and Card Association Litigation The Companys payment services business issues and acquires credit and debit card transactions through the Visa U.S.A. Inc. card association or its affiliates (collectively Visa). In 2007, Visa completed a restructuring and issued shares of Visa Inc. common stock to its financial institution members in contemplation of its initial public offering (IPO) completed in the first quarter of 2008 (the Visa Reorganization). As a part of the Visa Reorganization, the Company received its proportionate number of shares of Visa Inc. common stock, which were subsequently converted to Class B shares of Visa Inc. (Class B shares). Visa U.S.A. Inc. (Visa U.S.A.) and MasterCard International (collectively, the Card Associations), are defendants in antitrust lawsuits challenging the practices of the Card Associations (the Visa Litigation). Visa U.S.A. member banks have a contingent obligation to indemnify Visa Inc. under the Visa U.S.A. bylaws (which were modified at the time of the restructuring in October 2007) for potential losses arising from the Visa Litigation. The indemnification by the Visa U.S.A. member banks has no specific maximum amount.
Using proceeds from its IPO and through reductions to the conversion ratio applicable to the Class B shares held by Visa U.S.A. member banks, Visa Inc. has funded an escrow account for the benefit of member financial institutions to fund their indemnification obligations associated with the Visa Litigation. The receivable related to the escrow account is classified in other liabilities as a direct offset to the related Visa Litigation contingent liability. On July 13, 2012, Visa signed a memorandum of understanding to enter into a settlement agreement to resolve class action claims associated with the multi-district interchange litigation (the MOU agreement), the largest of the remaining Visa Litigation matters. The MOU agreement has not yet been approved by the court, is not yet binding, and may be challenged by some class members. At September 30, 2012, the carrying amount of the Companys liability related to the Visa Litigation matters, net of its share of the escrow fundings, was $65 million and included the Companys estimate of its share of the temporary reduction in interchange rates specified in the MOU agreement. The remaining Class B shares held by the Company will be eligible for conversion to Class A shares, and thereby become marketable, upon settlement of the Visa Litigation. These shares are excluded from the Companys financial instruments disclosures included in Note 11.
U. S. Bancorp | 73 |
The following table is a summary of other guarantees and contingent liabilities of the Company at September 30, 2012:
(Dollars in Millions) | Collateral Held |
Carrying Amount |
Maximum Potential Future Payments |
|||||||||||
Standby letters of credit |
$ | | $ | 81 | $ | 18,323 | ||||||||
Third-party borrowing arrangements |
| | 299 | |||||||||||
Securities lending indemnifications |
8,982 | | 8,737 | |||||||||||
Asset sales |
| 305 | 2,710 | (a) | ||||||||||
Merchant processing |
772 | 80 | 81,280 | |||||||||||
Contingent consideration arrangements |
| 3 | 6 | |||||||||||
Tender option bond program guarantee |
5,329 | | 5,047 | |||||||||||
Minimum revenue guarantees |
| 17 | 31 | |||||||||||
Other |
| 18 | 3,436 | |||||||||||
(a) | The maximum potential future payments do not include loan sales where the Company provides standard representation and warranties to the buyer against losses related to loan underwriting documentation defects that may have existed at the time of sale that generally are identified after the occurrence of a triggering event such as delinquency. For these types of loan sales, the maximum potential future payments is generally the unpaid principal balance of loans sold measured at the end of the current reporting period. Actual losses will be significantly less than the maximum exposure, as only a fraction of loans sold will have a representation and warranty breach, and any losses on repurchase would generally be mitigated by any collateral held against the loans. |
Merchant Processing The Company, through its subsidiaries, provides merchant processing services. Under the rules of credit card associations, a merchant processor retains a contingent liability for credit card transactions processed. This contingent liability arises in the event of a billing dispute between the merchant and a cardholder that is ultimately resolved in the cardholders favor. In this situation, the transaction is charged-back to the merchant and the disputed amount is credited or otherwise refunded to the cardholder. If the Company is unable to collect this amount from the merchant, it bears the loss for the amount of the refund paid to the cardholder.
The Company currently processes card transactions in the United States, Canada and Europe for airline companies. In the event of liquidation of these merchants, the Company could become financially liable for refunding tickets purchased through the credit card associations under the charge-back provisions. Charge-back risk related to these merchants is evaluated in a manner similar to credit risk assessments and, as such, merchant processing contracts contain various provisions to protect the Company in the event of default. At September 30, 2012, the value of airline tickets purchased to be delivered at a future date was $5.9 billion. The Company held collateral of $610 million in escrow deposits, letters of credit and indemnities from financial institutions, and liens on various assets.
Asset Sales The Company regularly sells loans to GSEs as part of its mortgage banking activities. The Company provides customary representation and warranties to the GSEs in conjunction with these sales. These representations and warranties generally require the Company to repurchase assets if it is subsequently determined that a loan did not meet specified criteria, such as a documentation deficiency or rescission of mortgage insurance. If the Company is unable to cure or refute a repurchase request, the Company is generally obligated to repurchase the loan or otherwise reimburse the counterparty for losses. At September 30, 2012, the Company had reserved $220 million for potential losses from representation and warranty obligations, compared with $160 million at December 31, 2011. The $60 million increase was primarily the result of the GSEs increasing the number of loans selected for repurchase review. The Companys reserve reflects managements best estimate of losses for representation and warranty obligations. The Companys reserving methodology uses current information about investor repurchase requests, and assumptions about defect rate, concur rate, repurchase mix, and loss severity, based upon the Companys most recent loss trends. The Company also considers qualitative factors that may result in anticipated losses differing from historical loss trends, such as loan vintage, underwriting characteristics and macroeconomic trends.
The following table is a rollforward of the Companys representation and warranty reserve:
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
(Dollars in Millions) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Balance at beginning of period |
$ | 216 | $ | 173 | $ | 160 | $ | 180 | ||||||||
Net realized losses |
(32 | ) | (31 | ) | (88 | ) | (106 | ) | ||||||||
Additions to reserve |
36 | 20 | 148 | 88 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at end of period |
$ | 220 | $ | 162 | $ | 220 | $ | 162 | ||||||||
As of September 30, 2012 and December 31, 2011, the Company had $118 million and $105 million, respectively, of unresolved representation and warranty claims from the GSEs. The Company does not have a significant amount of unresolved claims from investors other than the GSEs.
74 | U. S. Bancorp |
Checking Account Overdraft Fee Litigation The Company is a defendant in three separate cases primarily challenging the Companys daily ordering of debit transactions posted to customer checking accounts for the period from 2003 to 2010. On July 2, 2012, the Company reached a settlement in principle with the lead plaintiffs for these cases, subject to final documentation and court approvals. The settlement will provide for a payment by the Company of $55 million, which was previously accrued, in exchange for a release of claims asserted against the Company in these matters.
Mortgage-Related Actions and Investigations During the second quarter of 2011, the Company and its two primary banking subsidiaries entered into Consent Orders with U.S. federal banking regulators regarding the Companys residential mortgage servicing and foreclosure processes. The banking regulators have notified the Company of civil money penalties related to the Consent Orders; however, these penalties are not significant.
Other federal and state governmental authorities have reached a settlement agreement with five major financial institutions regarding their mortgage origination, servicing, and foreclosure activities. Those governmental authorities contacted other financial institutions, including the Company, to discuss their potential participation in a settlement. The Company has not agreed to any settlement at this point; however, if a settlement were reached it would likely include an agreement to comply with specified servicing standards, and settlement payments to governmental authorities as well as a monetary commitment that could be satisfied under various loan modification programs (in addition to the programs the Company already has in place). The Company has accrued $130 million with respect to these and related matters.
The Company is currently subject to other investigations and examinations by government agencies concerning mortgage-related practices, including those related to Federal Housing Administration insured residential home loans.
Other The Company is subject to various other litigation, investigations and legal and administrative cases and proceedings that arise in the ordinary course of its businesses. Due to their complex nature, it may be years before some matters are resolved. While it is impossible to ascertain the ultimate resolution or range of financial liability with respect to these contingent matters, the Company believes that the aggregate amount of such liabilities will not have a material adverse effect on the financial condition, results of operations or cash flows of the Company.
For additional information on the nature of the Companys guarantees and contingent liabilities, refer to Note 22 in the Companys Annual Report on Form 10-K for the year ended December 31, 2011.
Note 13 |
Subsequent Events |
The Company has evaluated the impact of events that have occurred subsequent to September 30, 2012 through the date the consolidated financial statements were filed with the United States Securities and Exchange Commission. Based on this evaluation, the Company has determined none of these events were required to be recognized or disclosed in the consolidated financial statements and related notes.
U. S. Bancorp | 75 |
U.S. Bancorp
Consolidated Daily Average Balance Sheet and Related Yields and Rates (a)
For the Three Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||||||||||||||||
(Dollars in Millions) (Unaudited) |
Average Balances |
Interest | Yields and Rates |
Average Balances |
Interest | Yields and Rates |
% Change Average Balances |
|||||||||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||||||||
Investment securities |
$ | 72,454 | $ | 475 | 2.62 | % | $ | 66,252 | $ | 511 | 3.08 | % | 9.4 | % | ||||||||||||||||||||||||
Loans held for sale |
8,432 | 76 | 3.59 | 3,946 | 42 | 4.17 | * | |||||||||||||||||||||||||||||||
Loans (b) |
||||||||||||||||||||||||||||||||||||||
Commercial |
62,192 | 546 | 3.50 | 52,344 | 521 | 3.96 | 18.8 | |||||||||||||||||||||||||||||||
Commercial real estate |
36,630 | 413 | 4.49 | 35,569 | 414 | 4.62 | 3.0 | |||||||||||||||||||||||||||||||
Residential mortgages |
40,969 | 464 | 4.52 | 34,026 | 408 | 4.79 | 20.4 | |||||||||||||||||||||||||||||||
Credit card |
16,551 | 425 | 10.22 | 16,057 | 389 | 9.60 | 3.1 | |||||||||||||||||||||||||||||||
Other retail |
47,991 | 621 | 5.15 | 48,380 | 671 | 5.51 | (.8 | ) | ||||||||||||||||||||||||||||||
Total loans, excluding covered loans |
204,333 | 2,469 | 4.81 | 186,376 | 2,403 | 5.12 | 9.6 | |||||||||||||||||||||||||||||||
Covered loans |
12,595 | 201 | 6.36 | 15,793 | 235 | 5.91 | (20.2 | ) | ||||||||||||||||||||||||||||||
Total loans |
216,928 | 2,670 | 4.90 | 202,169 | 2,638 | 5.19 | 7.3 | |||||||||||||||||||||||||||||||
Other earning assets |
11,145 | 63 | 2.24 | 13,902 | 67 | 1.92 | (19.8 | ) | ||||||||||||||||||||||||||||||
Total earning assets |
308,959 | 3,284 | 4.24 | 286,269 | 3,258 | 4.53 | 7.9 | |||||||||||||||||||||||||||||||
Allowance for loan losses |
(4,584 | ) | (5,079 | ) | 9.7 | |||||||||||||||||||||||||||||||||
Unrealized gain (loss) on investment securities |
1,184 | 470 | * | |||||||||||||||||||||||||||||||||||
Other assets |
40,094 | 39,921 | .4 | |||||||||||||||||||||||||||||||||||
Total assets |
$ | 345,653 | $ | 321,581 | 7.5 | |||||||||||||||||||||||||||||||||
Liabilities and Shareholders Equity |
||||||||||||||||||||||||||||||||||||||
Noninterest-bearing deposits |
$ | 68,127 | $ | 58,606 | 16.2 | % | ||||||||||||||||||||||||||||||||
Interest-bearing deposits |
||||||||||||||||||||||||||||||||||||||
Interest checking |
43,207 | 8 | .07 | 41,042 | 14 | .14 | 5.3 | |||||||||||||||||||||||||||||||
Money market savings |
47,530 | 18 | .15 | 44,623 | 16 | .14 | 6.5 | |||||||||||||||||||||||||||||||
Savings accounts |
29,743 | 17 | .22 | 27,042 | 26 | .38 | 10.0 | |||||||||||||||||||||||||||||||
Time certificates of deposit less than $100,000 |
14,362 | 60 | 1.67 | 15,251 | 74 | 1.92 | (5.8 | ) | ||||||||||||||||||||||||||||||
Time deposits greater than $100,000 |
36,312 | 69 | .76 | 28,805 | 72 | .99 | 26.1 | |||||||||||||||||||||||||||||||
Total interest-bearing deposits |
171,154 | 172 | .40 | 156,763 | 202 | .51 | 9.2 | |||||||||||||||||||||||||||||||
Short-term borrowings |
27,843 | 103 | 1.49 | 30,597 | 143 | 1.86 | (9.0 | ) | ||||||||||||||||||||||||||||||
Long-term debt |
27,112 | 226 | 3.33 | 31,609 | 289 | 3.64 | (14.2 | ) | ||||||||||||||||||||||||||||||
Total interest-bearing liabilities |
226,109 | 501 | .88 | 218,969 | 634 | 1.15 | 3.3 | |||||||||||||||||||||||||||||||
Other liabilities |
11,624 | 9,961 | 16.7 | |||||||||||||||||||||||||||||||||||
Shareholders equity |
||||||||||||||||||||||||||||||||||||||
Preferred equity |
4,769 | 2,606 | 83.0 | |||||||||||||||||||||||||||||||||||
Common equity |
33,850 | 30,481 | 11.1 | |||||||||||||||||||||||||||||||||||
Total U.S. Bancorp shareholders equity |
38,619 | 33,087 | 16.7 | |||||||||||||||||||||||||||||||||||
Noncontrolling interests |
1,174 | 958 | 22.5 | |||||||||||||||||||||||||||||||||||
Total equity |
39,793 | 34,045 | 16.9 | |||||||||||||||||||||||||||||||||||
Total liabilities and equity |
$ | 345,653 | $ | 321,581 | 7.5 | |||||||||||||||||||||||||||||||||
Net interest income |
$ | 2,783 | $ | 2,624 | ||||||||||||||||||||||||||||||||||
Gross interest margin |
3.36 | % | 3.38 | % | ||||||||||||||||||||||||||||||||||
Gross interest margin without taxable-equivalent increments |
3.29 | % | 3.30 | % | ||||||||||||||||||||||||||||||||||
Percent of Earning Assets |
||||||||||||||||||||||||||||||||||||||
Interest income |
4.24 | % | 4.53 | % | ||||||||||||||||||||||||||||||||||
Interest expense |
.65 | .88 | ||||||||||||||||||||||||||||||||||||
Net interest margin |
3.59 | % | 3.65 | % | ||||||||||||||||||||||||||||||||||
Net interest margin without taxable-equivalent increments |
3.52 | % | 3.57 | % |
* | Not meaningful |
(a) | Interest and rates are presented on a fully taxable-equivalent basis utilizing a tax rate of 35 percent. |
(b) | Interest income and rates on loans include loan fees. Nonaccrual loans are included in average loan balances. |
76 | U. S. Bancorp |
U.S. Bancorp
Consolidated Daily Average Balance Sheet and Related Yields and Rates (a)
For the Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||||||||||||||||||
(Dollars in Millions) (Unaudited) |
Average Balances |
Interest | Yields and Rates |
Average Balances |
Interest | Yields and Rates |
% Change Average Balances |
|||||||||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||||||||
Investment securities |
$ | 72,371 | $ | 1,487 | 2.74 | % | $ | 61,907 | $ | 1,479 | 3.19 | % | 16.9 | % | ||||||||||||||||||||||||
Loans held for sale |
7,557 | 208 | 3.67 | 4,382 | 139 | 4.22 | 72.5 | |||||||||||||||||||||||||||||||
Loans (b) |
||||||||||||||||||||||||||||||||||||||
Commercial |
59,790 | 1,620 | 3.62 | 50,383 | 1,539 | 4.08 | 18.7 | |||||||||||||||||||||||||||||||
Commercial real estate |
36,389 | 1,228 | 4.51 | 35,417 | 1,210 | 4.57 | 2.7 | |||||||||||||||||||||||||||||||
Residential mortgages |
39,328 | 1,357 | 4.60 | 32,854 | 1,201 | 4.88 | 19.7 | |||||||||||||||||||||||||||||||
Credit card |
16,675 | 1,267 | 10.15 | 16,022 | 1,141 | 9.52 | 4.1 | |||||||||||||||||||||||||||||||
Other retail |
47,940 | 1,873 | 5.22 | 48,154 | 1,992 | 5.53 | (.4 | ) | ||||||||||||||||||||||||||||||
Total loans, excluding covered loans |
200,122 | 7,345 | 4.90 | 182,830 | 7,083 | 5.18 | 9.5 | |||||||||||||||||||||||||||||||
Covered loans |
13,609 | 633 | 6.21 | 16,703 | 704 | 5.63 | (18.5 | ) | ||||||||||||||||||||||||||||||
Total loans |
213,731 | 7,978 | 4.98 | 199,533 | 7,787 | 5.22 | 7.1 | |||||||||||||||||||||||||||||||
Other earning assets |
10,610 | 185 | 2.32 | 13,483 | 187 | 1.85 | (21.3 | ) | ||||||||||||||||||||||||||||||
Total earning assets |
304,269 | 9,858 | 4.33 | 279,305 | 9,592 | 4.59 | 8.9 | |||||||||||||||||||||||||||||||
Allowance for loan losses |
(4,677 | ) | (5,275 | ) | 11.3 | |||||||||||||||||||||||||||||||||
Unrealized gain (loss) on investment securities |
1,000 | 137 | * | |||||||||||||||||||||||||||||||||||
Other assets |
40,215 | 39,912 | .8 | |||||||||||||||||||||||||||||||||||
Total assets |
$ | 340,807 | $ | 314,079 | 8.5 | |||||||||||||||||||||||||||||||||
Liabilities and Shareholders Equity |
||||||||||||||||||||||||||||||||||||||
Noninterest-bearing deposits |
$ | 65,423 | $ | 50,558 | 29.4 | % | ||||||||||||||||||||||||||||||||
Interest-bearing deposits |
||||||||||||||||||||||||||||||||||||||
Interest checking |
45,522 | 37 | .11 | 42,335 | 50 | .16 | 7.5 | |||||||||||||||||||||||||||||||
Money market savings |
45,977 | 44 | .13 | 45,091 | 62 | .18 | 2.0 | |||||||||||||||||||||||||||||||
Savings accounts |
29,383 | 53 | .24 | 26,304 | 89 | .45 | 11.7 | |||||||||||||||||||||||||||||||
Time certificates of deposit less than $100,000 |
14,695 | 191 | 1.73 | 15,294 | 219 | 1.92 | (3.9 | ) | ||||||||||||||||||||||||||||||
Time deposits greater than $100,000 |
31,978 | 205 | .86 | 30,153 | 226 | 1.00 | 6.1 | |||||||||||||||||||||||||||||||
Total interest-bearing deposits |
167,555 | 530 | .42 | 159,177 | 646 | .54 | 5.3 | |||||||||||||||||||||||||||||||
Short-term borrowings |
28,942 | 356 | 1.65 | 30,597 | 411 | 1.80 | (5.4 | ) | ||||||||||||||||||||||||||||||
Long-term debt |
29,388 | 786 | 3.57 | 31,786 | 860 | 3.62 | (7.5 | ) | ||||||||||||||||||||||||||||||
Total interest-bearing liabilities |
225,885 | 1,672 | .99 | 221,560 | 1,917 | 1.16 | 2.0 | |||||||||||||||||||||||||||||||
Other liabilities |
11,305 | 9,377 | 20.6 | |||||||||||||||||||||||||||||||||||
Shareholders equity |
||||||||||||||||||||||||||||||||||||||
Preferred equity |
4,250 | 2,349 | 80.9 | |||||||||||||||||||||||||||||||||||
Common equity |
32,855 | 29,350 | 11.9 | |||||||||||||||||||||||||||||||||||
Total U.S. Bancorp shareholders equity |
37,105 | 31,699 | 17.1 | |||||||||||||||||||||||||||||||||||
Noncontrolling interests |
1,089 | 885 | 23.1 | |||||||||||||||||||||||||||||||||||
Total equity |
38,194 | 32,584 | 17.2 | |||||||||||||||||||||||||||||||||||
Total liabilities and equity |
$ | 340,807 | $ | 314,079 | 8.5 | |||||||||||||||||||||||||||||||||
Net interest income |
$ | 8,186 | $ | 7,675 | ||||||||||||||||||||||||||||||||||
Gross interest margin |
3.34 | % | 3.43 | % | ||||||||||||||||||||||||||||||||||
Gross interest margin without taxable-equivalent increments |
3.27 | % | 3.35 | % | ||||||||||||||||||||||||||||||||||
Percent of Earning Assets |
||||||||||||||||||||||||||||||||||||||
Interest income |
4.33 | % | 4.59 | % | ||||||||||||||||||||||||||||||||||
Interest expense |
.74 | .92 | ||||||||||||||||||||||||||||||||||||
Net interest margin |
3.59 | % | 3.67 | % | ||||||||||||||||||||||||||||||||||
Net interest margin without taxable-equivalent increments |
3.52 | % | 3.59 | % |
* | Not meaningful |
(a) | Interest and rates are presented on a fully taxable-equivalent basis utilizing a tax rate of 35 percent. |
(b) | Interest income and rates on loans include loan fees. Nonaccrual loans are included in average loan balances. |
U. S. Bancorp | 77 |
Item 1A. Risk Factors There are a number of factors that may adversely affect the Companys business, financial results or stock price. Refer to Risk Factors in the Companys Annual Report on Form 10-K for the year ended December 31, 2011, for discussion of these risks.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Refer to the Capital Management section within Managements Discussion and Analysis in Part I for information regarding shares repurchased by the Company during the third quarter of 2012.
10.1 | Form of 2012 Restricted Stock Award Agreement under U.S Bancorp Amended and Restated 2007 Stock Incentive Plan | |
12 | Computation of Ratio of Earnings to Fixed Charges | |
31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 | |
31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 | |
32 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. section 1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 | |
101 | Financial statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2012, formatted in Extensible Business Reporting Language: (i) the Consolidated Balance Sheet, (ii) the Consolidated Statement of Income, (iii) the Consolidated Statement of Comprehensive Income, (iv) the Consolidated Statement of Shareholders Equity, (v) the Consolidated Statement of Cash Flows and (vi) the Notes to Consolidated Financial Statements. |
78 | U. S. Bancorp |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
U.S. BANCORP | ||||||
By: | /S/ CRAIG E. GIFFORD | |||||
Craig E. Gifford | ||||||
Controller | ||||||
DATE: November 5, 2012 | (Principal Accounting Officer and Duly Authorized Officer) |
U. S. Bancorp | 79 |
Computation of Ratio of Earnings to Fixed Charges
(Dollars in Millions) | Three Months Ended September 30, 2012 |
Nine Months Ended September 30, 2012 |
||||||
Earnings |
| |||||||
1. Net income attributable to U.S. Bancorp |
$ | 1,474 | $ | 4,227 | ||||
2. Applicable income taxes, including expense related to unrecognized tax positions |
593 | 1,684 | ||||||
3. Net income attributable to U.S. Bancorp before income taxes (1 + 2) |
$ | 2,067 | $ | 5,911 | ||||
4. Fixed charges: |
||||||||
a. Interest expense excluding interest on deposits* |
$ | 329 | $ | 1,139 | ||||
b. Portion of rents representative of interest and amortization of debt expense |
25 | 77 | ||||||
c. Fixed charges excluding interest on deposits (4a + 4b) |
354 | 1,216 | ||||||
d. Interest on deposits |
172 | 530 | ||||||
e. Fixed charges including interest on deposits (4c + 4d) |
$ | 526 | $ | 1,746 | ||||
5. Amortization of interest capitalized |
$ | | $ | | ||||
6. Earnings excluding interest on deposits (3 + 4c + 5) |
2,421 | 7,127 | ||||||
7. Earnings including interest on deposits (3 + 4e + 5) |
2,593 | 7,657 | ||||||
8. Fixed charges excluding interest on deposits (4c) |
354 | 1,216 | ||||||
9. Fixed charges including interest on deposits (4e) |
526 | 1,746 | ||||||
Ratio of Earnings to Fixed Charges |
||||||||
10. Excluding interest on deposits (line 6/line 8) |
6.84 | 5.86 | ||||||
11. Including interest on deposits (line 7/line 9) |
4.93 | 4.39 | ||||||
* | Excludes interest expense related to unrecognized tax positions |
80 | U. S. Bancorp |
EXHIBIT 31.1
CERTIFICATION PURSUANT TO
RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934
I, Richard K. Davis, certify that:
(1) | I have reviewed this Quarterly Report on Form 10-Q 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 officers 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 officers 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/ RICHARD K. DAVIS | ||
Richard K. Davis | ||
Chief Executive Officer |
Dated: November 5, 2012
U. S. Bancorp | 81 |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934
I, Andrew Cecere, certify that:
(1) | I have reviewed this Quarterly Report on Form 10-Q 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 officers 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 officers 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 | ||
Chief Financial Officer |
Dated: November 5, 2012
82 | U. S. Bancorp |
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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 (the Form 10-Q) 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-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/S/ RICHARD K. DAVIS |
/S/ ANDREW CECERE | |||
Richard K. Davis | Andrew Cecere | |||
Chief Executive Officer | Chief Financial Officer |
Dated: November 5, 2012
U. S. Bancorp | 83 |
First Class U.S. Postage PAID Permit No. 2440 Minneapolis, MN |
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This report has been produced on recycled paper.
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EXHIBIT 10.1
NOTE: Restricted stock awards made to employees (Participants) of U.S. Bancorp (the Company) on and after January 1, 2012 will have the terms and conditions set forth in each Participants award summary (the Award Summary), which can be accessed on the Morgan Stanley Smith Barney Benefit Access Website at www.benefitaccess.com (or the website of any other stock plan administrator selected by the Company in the future). The Award Summary may be viewed at any time on this Website, and the Award Summary may also be printed out. In addition to the individual terms and conditions set forth in the Award Summary, each restricted stock award will have the terms and conditions set forth in the form of Restricted Stock Award Agreement below. As a condition of each restricted stock award, Participant accepts the terms and conditions of the Award Summary and the Restricted Stock Award Agreement.
U.S. BANCORP
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT sets forth the terms and conditions of a restricted stock award of Common Stock (the Common Stock), par value $0.01 per share, of the Company granted to each Participant by the Company pursuant to its Amended and Restated 2007 Stock Incentive Plan, which was approved by shareholders on April 20, 2010 (the Plan).
The Company and Participant agree as follows:
1. | Award |
Subject to the terms and conditions of this Agreement, the Company grants to Participant a restricted stock award of the number of shares of the Companys Common Stock (the Shares) set forth in Participants Award Summary. The date of grant of such award (the Grant Date) is also set forth in Participants Award Summary.
2. | Vesting |
(a) | Subject to the terms and conditions of this Agreement, the Shares shall vest as set forth in Participants Award Summary. |
(b) | Notwithstanding the vesting provision contained in Section 2(a) above, but subject to the other terms and conditions of this Agreement, if Participant has been continuously employed by the Company or any Affiliate of the Company until the date of a Qualifying Termination (as defined below), immediately upon such Qualifying Termination, Participant shall be vested in all of the Shares granted in this Agreement. For purposes of this Agreement, the following terms shall have the following definitions: |
(i) | Affiliate shall be defined as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). |
(ii) | Announcement Date shall mean the date of the public announcement of the transaction, event or course of action that results in a Change in Control. |
(iii) | Cause shall mean (A) the continued failure by Participant to substantially perform Participants duties with the Company or any Affiliate (other than any such failure resulting from Participants Disability (as defined in Section 5(b)), after a demand for substantial performance is delivered to Participant that specifically identifies the manner in which the Company believes that Participant has not substantially performed Participants duties, and Participant has failed to resume substantial performance of Participants duties on a continuous basis, (B) gross and willful misconduct during the course of employment (regardless of whether the misconduct occurs on the Companys premises), including, without limitation, theft, assault, battery, malicious destruction of property, arson, sabotage, embezzlement, harassment, acts or omissions which violate the Companys rules or policies (such as breaches of confidentiality), or other conduct which demonstrates a willful or reckless disregard of the interests of the Company or its Affiliates or (C) Participants conviction of a crime (including, without limitation, a misdemeanor offense) which impairs Participants ability substantially to perform Participants duties with the Company. |
(iv) | Change in Control shall mean any of the following occurring after the date of this Agreement: |
(A) | The acquisition by any Person (as defined in Section 2(b)(vi)) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of either (1) the then |
outstanding shares of Common Stock (the Outstanding Company Common Stock) or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the Outstanding Company Voting Securities); provided, however, that, for purposes of this clause (A), the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by a subsidiary of the Company or any employee benefit plan (or related trust) sponsored or maintained by the Company or a subsidiary of the Company (a Company Entity) or (iv) any acquisition by any corporation pursuant to a transaction which complies with clause (i), (ii) or (iii) of this clause (A); or |
(B) | Individuals who, as of the Grant Date, constitute the Companys Board of Directors (the Incumbent Board) cease for any reason to constitute at least a majority of the Board of Directors (except as a result of the death, retirement or disability of one or more members of the Incumbent Board); provided, however, that any individual becoming a director subsequent to the date of this Agreement whose election, or nomination for election by the Companys shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, (1) any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Incumbent Board, (2) any director designated by or on behalf of a Person who has entered into an agreement with the Company (or which is contemplating entering into an agreement) to effect a Business Combination (as defined in Section 2(b)(iv)(C)) with one or more entities that are not Company Entities or (3) any director who serves in connection with the act of the Board of Directors of increasing the number of directors and filling vacancies in connection with, or in contemplation of, any such Business Combination; or |
(C) | Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a Business Combination), in each case, unless, following such Business Combination, (1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock or the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Companys assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any Company Entity or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (3) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Business Combination; or |
(D) | Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. |
(v) | Notice of Termination shall mean a written notice which sets forth the date of termination of Participants employment. |
(vi) | Person shall be defined as defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act. |
(vii) | Qualifying Termination shall mean a termination of Participants employment with the Company or its Affiliates by the Company for any reason other than Cause within 12 months following a Change in Control; |
provided, however, that any such termination shall not be a Qualifying Termination if Participant has been notified in writing more than 30 days prior to the Announcement Date that Participants employment with the Company is not expected to continue for more than 12 months following the date of such notification; provided that such exclusion from Qualifying Termination shall only apply if Participants employment with the Company is terminated within such 12 month period; and provided, further, that any such termination shall not be a Qualifying Termination if Participant has announced in writing, prior to the date the Company provides Notice of Termination to Participant, the intention to terminate employment, subject to the condition that any such termination by the Company prior to Participants stated termination date shall be deemed to be termination by Participant on such stated date unless termination by the Company is for Participants gross and willful misconduct. |
(c) | Notwithstanding the provisions contained in Section 2(a) and Section 2(b) of this Agreement, if an accounting firm selected by the Company determines that the vesting of all or any of the Shares, when added to any other payment or benefit received or to be received by Participant in connection with a change in control of the Company, as determined pursuant to Section 280G of the Internal Revenue Code of 1986, as amended (the Code) (collectively, the Total Payments), would not be deductible (in whole or in part) solely as a result of Section 280G of the Code or would be subject to the excise tax provided for in Section 4999 of the Code (the imposition of Section 280G or 4999 of the Code, collectively, the Tax Penalty), then the vesting of all or any of the Shares shall not be accelerated, and no such vesting shall take place, until all of the Total Payments are deductible and not subject to the excise tax provided for in Section 4999 of the Code or until the vesting of none of the Shares is accelerated; provided, however, that Participant may, at Participants election and subject to such terms and conditions as the Company may establish, choose to have the Shares vest and instead have the Company reduce other payments or benefits otherwise to be received by Participant in connection with the change in control or other transaction giving rise to the acceleration of the vesting of the Shares until none of the Total Payments are subject to the Tax Penalty. Notwithstanding the foregoing, Participant shall not be permitted to elect to reduce other payments in order to permit accelerated vesting of the these Shares if: (i) such other payments are subject to Code Section 409A; and (ii) such reduction would result in an impermissible deferral or a substitution pursuant to Treasury Regulations 1.409A-3(f), or would violate any other provisions under Code Section 409A. |
(i) | In the event that it is subsequently determined that some or all of Participants Total Payments are not deductible solely as a result of Section 280G of the Code or are subject to the excise tax provided for in Section 4999 of the Code, the difference between the Total Payments and three times Participants base amount (as that term is defined in Section 280G of the Code) shall be treated, to the extent permitted by applicable law, as a loan by the Company, payable on demand by the Company, with interest at a rate equal to 120% of the applicable federal rate determined under Section 1274(d) of the Code, compounded semiannually. |
(ii) | For purposes of this Section 2(c), all computations and determinations under the Code shall be determined by the Company with the assistance of the accounting firm selected by the Company. |
3. | Special Vesting Condition |
(a) | Vesting condition. Notwithstanding the provisions of Participants Award Summary, if it shall be determined at any time subsequent to the Grant Date that Participant has, during the year in which the Grant Date occurs (the Grant Year), (i) failed to comply with Company policies and procedures, including the Code of Ethics and Business Conduct, (ii) violated any law or regulation, (iii) engaged in negligent or willful misconduct, or (iv) engaged in activity resulting in a significant or material Sarbanes-Oxley control deficiency, and such failure, violation, misconduct or activity (A) demonstrates an inadequate sensitivity to the inherent risks of Participants business line or functional area, and (B) results in, or is reasonably likely to result in, a material adverse impact (whether financial or reputational) on the Company or Participants business line or functional area, all or part of the Shares that have not yet become vested at the time of such determination may be cancelled and thus would not vest on the dates indicated in the Award Summary. Inadequate sensitivity to risk is demonstrated by imprudent activities that subject the Company to risk outcomes in future periods, including risks that may |
not be apparent at the time the activities are undertaken. The manner in which such determination is made, and the extent of any such cancellation of the unvested Shares, shall be in accordance with the provisions of Section 3(b) below. |
(b) | Procedures. Prior to each anniversary of the Grant Date (until the all of the Shares have become vested, or have otherwise been cancelled or forfeited), Participants manager shall take the following steps: (i) the manager will determine whether any of the events described in clauses (i) through (iv) in paragraph (a) above have occurred; (ii) in the event one or more such events have occurred, the manager will determine whether such event has the effect described in subclause (B) in paragraph (a) above; and (iii) if the manager has determined that such event has the effect described in subclause (B) in paragraph (a) above, the manager will further determine whether Participants actions were of the nature described in subclause (A) of paragraph (a) above. In making this latter determination, the manager will look to all relevant factors, including Participants position and authority, and Participants performance against company and business line policies (for example, credit, market and operational risk policies, as applicable) the Companys Code of Ethics and Business Conduct, and applicable regulatory, legal and compliance guidelines and audit findings. In making such determination, the manager will use a written risk scorecard, in the form developed for this purpose and as revised from time to time. In the event the manager determines that all of the conditions in clauses (b)(i),(ii) and (iii) of this subsection 3(b) exist, the manager shall then determine the number, if any, of any unvested Shares that is recommended to become ineligible to become vested and to be cancelled. If the manager recommends cancellation of any of the unvested Shares, the recommendation will be reviewed by the Incentive Review Committee. Any determination of the Incentive Review Committee shall be deemed conclusive and final and not subject to review or challenge by Participant. If the Incentive Review Committee determines that any unvested Shares will be ineligible to become vested and that such Shares shall be cancelled, Participant will no longer have any rights relating to the Shares, including the right to vote the Shares and the right to receive cash dividends. The normal vesting date in the year of such determination (as set forth in the Award Summary) shall be suspended until the conclusion of these procedures. |
4. | Restriction on Transfer |
Until the Shares vest pursuant to Section 2 or 5 of this Agreement, none of the Shares may be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance shall be void and unenforceable against the Company. No attempt to transfer the Shares, whether voluntary or involuntary, by operation of law or otherwise, shall vest the purported transferee with any interest or right in or with respect to the Shares.
5. | Forfeiture; Early Vesting |
(a) | If Participant ceases to be an employee of the Company or any Affiliate prior to vesting of the Shares pursuant to Section 2(a) or Section 2(b), all of Participants rights to all of the unvested Shares shall be immediately and irrevocably forfeited, except that if Participant ceases to be an employee by reason of death or Disability prior to the vesting of Shares under Section 2(a) or Section 2(b), Participant or his or her estate shall become immediately vested, as of the date of death or the date of termination of employment due to Disability, in all previously unvested Shares; provided however, that in the case of a termination due to Disability, accelerated vesting shall occur only if Participant has at all times following termination of employment, complied with the terms of such Confidentiality and Nonsolicitation Agreement. Upon forfeiture, Participant will no longer have any rights relating to the Shares, including the right to vote the Shares and the right to receive cash dividends. |
(b) | For purposes of this Agreement, 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. |
6. | Issuance and Custody of Shares |
(a) | The Company shall cause the Shares to be evidenced in book entry form on the books and records of its shareholders maintained by the Company and its stock transfer agent. The Participant shall not have access to any unvested Shares. Such Shares are subject to forfeiture, are not transferable and remain subject to the restrictions, terms and conditions contained in the Plan and this Agreement. |
(b) | After any Shares vest pursuant to Section 2 or 5 of this Agreement, the Company shall promptly release the restriction on the Shares and authorize the stock transfer agent to issue them to Participant or Participants legal representatives, beneficiaries or heirs, as the case may be. |
7. | Securities Law Compliance |
The delivery of all or any of the Shares shall only be effective 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 Companys Common Stock is traded.
8. | Distributions and Adjustments |
(a) | In the event that any dividend or other distribution (whether in the form of cash, shares of Common Stock, or other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Common Stock or other securities of the Company or other similar corporate transaction or event affecting the Shares would be reasonably likely to result in the diminution or enlargement of any of the benefits or potential benefits intended to be made available pursuant to this Agreement (including, without limitation, the benefits or potential benefits of provisions relating to the vesting of the Shares and any change in control provision), the committee of the Board of Directors administering the Plan (the Committee) shall, in order to prevent such diminution or enlargement of any such benefits or potential benefits, make adjustments to the award, including adjustments in the number and type of Shares that Participant would have received; provided, however, that the number of shares covered by the award shall always be a whole number. |
(b) | Any additional shares of Common Stock, any other securities of the Company and any other property (except for cash dividends) distributed with respect to the Shares prior to the date the Shares vest shall be subject to the same restrictions, terms and conditions as the Shares. Any cash dividends payable with respect to the Shares shall be distributed to Participant at the same time cash dividends are distributed to shareholders of the Company generally. |
(c) | Any additional shares of Common Stock, any securities and any other property (except for cash dividends) distributed with respect to the Shares prior to the date such Shares vest shall be promptly deposited with the Secretary or a custodian designated by the Secretary to be held in custody in accordance with Section 6(a) hereof. |
9. | Income Tax Withholding |
In order to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal or state payroll, withholding, income or other taxes, which are the sole and absolute responsibility of Participant, are withheld or collected from Participant. Participant may satisfy any applicable tax withholding obligations arising from the receipt of, or lapse of restrictions relating to, the Shares by check payable to the Company. In addition, Participant may, at Participants election, satisfy such obligations by electing to have the Company withhold 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. The election must be made on or before the date that the amount of tax to be withheld is determined.
10. | Miscellaneous |
(a) | This 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 U.S. Bancorp Intranet Website in the Human Resources, Compensation section of such website. |
(b) | This 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) | Until the Shares shall have been issued to Participant as provided in this Agreement, Participant shall have the rights to receive cash dividends and vote the Shares, but shall have no other rights of a shareholder with respect to the Shares. Participant shall have all of the rights of a shareholder with respect to the Shares after issuance thereof. |
11. | Venue |
Any claim or action brought with respect to this Award shall be brought in a federal or state court located in Minneapolis, Minnesota.
2012 Form of Restricted Stock Award Agreement for employees who have previously executed a confidentiality and nonsolicitation agreement.
Computation of Ratio of Earnings to Fixed Charges
(Dollars in Millions) | Three Months Ended September 30, 2012 |
Nine Months Ended September 30, 2012 |
||||||
Earnings |
| |||||||
1. Net income attributable to U.S. Bancorp |
$ | 1,474 | $ | 4,227 | ||||
2. Applicable income taxes, including expense related to unrecognized tax positions |
593 | 1,684 | ||||||
3. Net income attributable to U.S. Bancorp before income taxes (1 + 2) |
$ | 2,067 | $ | 5,911 | ||||
4. Fixed charges: |
||||||||
a. Interest expense excluding interest on deposits* |
$ | 329 | $ | 1,139 | ||||
b. Portion of rents representative of interest and amortization of debt expense |
25 | 77 | ||||||
c. Fixed charges excluding interest on deposits (4a + 4b) |
354 | 1,216 | ||||||
d. Interest on deposits |
172 | 530 | ||||||
e. Fixed charges including interest on deposits (4c + 4d) |
$ | 526 | $ | 1,746 | ||||
5. Amortization of interest capitalized |
$ | | $ | | ||||
6. Earnings excluding interest on deposits (3 + 4c + 5) |
2,421 | 7,127 | ||||||
7. Earnings including interest on deposits (3 + 4e + 5) |
2,593 | 7,657 | ||||||
8. Fixed charges excluding interest on deposits (4c) |
354 | 1,216 | ||||||
9. Fixed charges including interest on deposits (4e) |
526 | 1,746 | ||||||
Ratio of Earnings to Fixed Charges |
||||||||
10. Excluding interest on deposits (line 6/line 8) |
6.84 | 5.86 | ||||||
11. Including interest on deposits (line 7/line 9) |
4.93 | 4.39 | ||||||
* | Excludes interest expense related to unrecognized tax positions |
80 | U. S. Bancorp |
EXHIBIT 31.1
CERTIFICATION PURSUANT TO
RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934
I, Richard K. Davis, certify that:
(1) | I have reviewed this Quarterly Report on Form 10-Q 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 officers 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 officers 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/ RICHARD K. DAVIS | ||
Richard K. Davis | ||
Chief Executive Officer |
Dated: November 5, 2012
U. S. Bancorp | 81 |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934
I, Andrew Cecere, certify that:
(1) | I have reviewed this Quarterly Report on Form 10-Q 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 officers 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 officers 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 | ||
Chief Financial Officer |
Dated: November 5, 2012
82 | U. S. Bancorp |
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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 (the Form 10-Q) 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-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/S/ RICHARD K. DAVIS |
/S/ ANDREW CECERE | |||
Richard K. Davis | Andrew Cecere | |||
Chief Executive Officer | Chief Financial Officer |
Dated: November 5, 2012
U. S. Bancorp | 83 |
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Amount of Interest Income from Taxable and Non-Taxable Investment Securities (Detail) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
|
Taxable | $ 369 | $ 394 | $ 1,166 | $ 1,127 |
Non-taxable | 69 | 76 | 210 | 230 |
Total interest income from investment securities | $ 438 | $ 470 | $ 1,376 | $ 1,357 |
Changes in Accretable Balance for Purchased Impaired Loans (Detail) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
|||||||
Financing Receivable, Allowance for Credit Losses [Line Items] | ||||||||||
Balance at beginning of period | $ 2,431 | $ 3,015 | $ 2,619 | $ 2,890 | ||||||
Purchases | 13 | 100 | ||||||||
Accretion | (109) | (110) | (337) | (337) | ||||||
Disposals | (37) | (43) | (135) | (47) | ||||||
Reclassifications (to)/from nonaccretable difference (a) | 58 | [1] | (170) | [1] | 191 | [1] | 117 | [1] | ||
Other | (14) | (7) | (22) | (38) | ||||||
Balance at end of period | $ 2,329 | $ 2,685 | $ 2,329 | $ 2,685 | ||||||
|
Reconciliation of Expected Income Tax Expense at Federal Statutory Rate of 35% to Company's Applicable Income Tax Expense (Detail) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
|
Tax at statutory rate | $ 709 | $ 610 | $ 2,030 | $ 1,671 |
State income tax, at statutory rates, net of federal tax benefit | 53 | 53 | 157 | 114 |
Tax effect of | ||||
Tax credits, net of related expenses | (120) | (124) | (322) | (319) |
Tax-exempt income | (55) | (57) | (165) | (170) |
Noncontrolling interests | 15 | 8 | 39 | 22 |
Other items | (9) | (55) | (4) | |
Applicable income taxes | $ 593 | $ 490 | $ 1,684 | $ 1,314 |
Valuation Assumption Ranges for MSRs (Detail)
|
Sep. 30, 2012
|
Dec. 31, 2011
|
---|---|---|
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
Expected prepayment | 22.20% | 21.30% |
Discount rate | 10.40% | 10.40% |
Minimum
|
||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
Expected prepayment | 14.00% | |
Discount rate | 10.00% | |
Maximum
|
||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
Expected prepayment | 35.00% | |
Discount rate | 14.00% | |
Average
|
||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
Expected prepayment | 22.00% | |
Discount rate | 10.00% |
Valuation Assumption Ranges for Derivative Commitments (Detail)
|
Sep. 30, 2012
BasisPoint
|
---|---|
Minimum
|
|
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Expected loan close rate | 9.00% |
Inherent MSR value (basis points per loan) | 10 |
Maximum
|
|
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Expected loan close rate | 100.00% |
Inherent MSR value (basis points per loan) | 195 |
Average
|
|
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Expected loan close rate | 73.00% |
Inherent MSR value (basis points per loan) | 99 |
Customer-Related Derivative Positions of Company (Detail) (Customer-Related Positions, USD $)
In Millions, unless otherwise specified |
Sep. 30, 2012
Y
|
Dec. 31, 2011
Y
|
||||
---|---|---|---|---|---|---|
Interest rate contracts | Receive fixed/pay floating swaps
|
||||||
Derivative [Line Items] | ||||||
Notional Value, Assets | $ 17,262 | $ 16,230 | ||||
Fair Value, Assets | 1,186 | 1,216 | ||||
Derivative Asset Average Remaining Maturity Period | 4.74 | 4.98 | ||||
Notional Value, Liabilities | 359 | 523 | ||||
Fair Value, Liabilities | 8 | 1 | ||||
Derivative Liability Average Remaining Maturity Period | 16.45 | 2.52 | ||||
Interest rate contracts | Pay fixed/receive floating swaps
|
||||||
Derivative [Line Items] | ||||||
Notional Value, Assets | 280 | 99 | ||||
Fair Value, Assets | 8 | |||||
Derivative Asset Average Remaining Maturity Period | 19.79 | 1.81 | ||||
Notional Value, Liabilities | 17,433 | 16,206 | ||||
Fair Value, Liabilities | 1,148 | 1,182 | ||||
Derivative Liability Average Remaining Maturity Period | 4.76 | 5.10 | ||||
Interest rate contracts | Purchased options
|
||||||
Derivative [Line Items] | ||||||
Notional Value, Assets | 3,014 | 2,660 | ||||
Fair Value, Assets | 15 | 26 | ||||
Derivative Asset Average Remaining Maturity Period | 5.34 | 6.11 | ||||
Notional Value, Liabilities | 28 | |||||
Derivative Liability Average Remaining Maturity Period | 4.67 | |||||
Interest rate contracts | Written options
|
||||||
Derivative [Line Items] | ||||||
Notional Value, Assets | 202 | |||||
Derivative Asset Average Remaining Maturity Period | 0.73 | |||||
Notional Value, Liabilities | 2,839 | 2,660 | ||||
Fair Value, Liabilities | 15 | 26 | ||||
Derivative Liability Average Remaining Maturity Period | 5.66 | 6.11 | ||||
Foreign exchange contract | Purchased options
|
||||||
Derivative [Line Items] | ||||||
Notional Value, Assets | 346 | 127 | ||||
Fair Value, Assets | 8 | 5 | ||||
Derivative Asset Average Remaining Maturity Period | 0.65 | 0.41 | ||||
Foreign exchange contract | Written options
|
||||||
Derivative [Line Items] | ||||||
Notional Value, Liabilities | 346 | 127 | ||||
Fair Value, Liabilities | 8 | 5 | ||||
Derivative Liability Average Remaining Maturity Period | 0.65 | 0.41 | ||||
Foreign exchange contract | Forwards, spots and swaps
|
||||||
Derivative [Line Items] | ||||||
Notional Value, Assets | 11,038 | [1] | 7,936 | [1] | ||
Fair Value, Assets | 301 | [1] | 369 | [1] | ||
Derivative Asset Average Remaining Maturity Period | 0.36 | [1] | 0.54 | [1] | ||
Notional Value, Liabilities | 10,799 | [1] | 7,731 | [1] | ||
Fair Value, Liabilities | $ 283 | [1] | $ 354 | [1] | ||
Derivative Liability Average Remaining Maturity Period | 0.45 | [1] | 0.54 | [1] | ||
|
Carrying Amount of Covered Assets (Detail) (USD $)
In Millions, unless otherwise specified |
Sep. 30, 2012
|
Dec. 31, 2011
|
||||
---|---|---|---|---|---|---|
Covered Assets [Line Items] | ||||||
Purchased Impaired Loans | $ 5,384 | $ 5,854 | ||||
Purchased Non-impaired Loans | 5,235 | 6,407 | ||||
Other Assets | 1,737 | 2,800 | ||||
Total | 12,356 | 15,061 | ||||
Commercial
|
||||||
Covered Assets [Line Items] | ||||||
Purchased Impaired Loans | 15 | 68 | ||||
Purchased Non-impaired Loans | 144 | 137 | ||||
Total | 159 | 205 | ||||
Commercial Real Estate
|
||||||
Covered Assets [Line Items] | ||||||
Purchased Impaired Loans | 1,519 | 1,956 | ||||
Purchased Non-impaired Loans | 3,104 | 4,037 | ||||
Total | 4,623 | 5,993 | ||||
Residential Mortgages
|
||||||
Covered Assets [Line Items] | ||||||
Purchased Impaired Loans | 3,850 | 3,830 | ||||
Purchased Non-impaired Loans | 1,184 | 1,360 | ||||
Total | 5,034 | 5,190 | ||||
Credit Card
|
||||||
Covered Assets [Line Items] | ||||||
Purchased Non-impaired Loans | 5 | 6 | ||||
Total | 5 | 6 | ||||
Other Retail
|
||||||
Covered Assets [Line Items] | ||||||
Purchased Non-impaired Loans | 798 | 867 | ||||
Total | 798 | 867 | ||||
Losses reimbursable by FDIC
|
||||||
Covered Assets [Line Items] | ||||||
Other Assets | 1,539 | [1] | 2,526 | [1] | ||
Total | 1,539 | [1] | 2,526 | [1] | ||
Covered Loans
|
||||||
Covered Assets [Line Items] | ||||||
Purchased Impaired Loans | 5,384 | 5,854 | ||||
Purchased Non-impaired Loans | 5,235 | 6,407 | ||||
Other Assets | 1,539 | 2,526 | ||||
Total | 12,158 | 14,787 | ||||
Foreclosed real estate
|
||||||
Covered Assets [Line Items] | ||||||
Other Assets | 198 | 274 | ||||
Total | $ 198 | $ 274 | ||||
|
Fair Values of Assets and Liabilities - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
Dec. 31, 2011
|
|
Fair value measurement transfers from one level to another | $ 0 | $ 0 | |||
Mortgage loans held for sale measured at fair value gain losses | 241 | 98 | 501 | (38) | |
Assumed minimum credit valuation adjustment as percentage of underlying fair value of underlying derivative contracts | 0.00% | ||||
Assumed maximum credit valuation adjustment as percentage of underlying fair value of underlying derivative contracts | 97.00% | ||||
Assumed average credit valuation adjustment as percentage of underlying fair value of underlying derivative contracts | 6.00% | ||||
Net gains and losses on available for sale securities included in securities gains (losses) | (15) | (9) | (37) | (24) | |
Net gains and losses on available for sale securities included in interest income | 6 | 13 | 34 | 44 | |
Net gains and losses on net derivative assets and liabilities included in mortgage banking revenue | 719 | 391 | 1,700 | 580 | |
Net gains and losses on net derivative assets and liabilities included in noninterest income | 124 | 445 | 344 | 672 | |
Net change in net derivative assets and liabilities in unrealized gains (losses) included in noninterest income | 7 | 317 | 6 | 303 | |
Net change in net derivative assets and liabilities in unrealized gains (losses) included in mortgage banking revenue | (564) | (240) | 1,400 | (395) | |
Carrying value of unfunded commitments and standby letters of credit | 393 | 393 | 381 | ||
Carrying value of other guarantees | $ 423 | $ 423 | $ 359 |
Guarantees and Contingent Liabilities - Additional Information (Detail) (USD $)
|
9 Months Ended | |||||
---|---|---|---|---|---|---|
Sep. 30, 2012
|
Jun. 30, 2012
|
Dec. 31, 2011
|
Sep. 30, 2011
|
Jun. 30, 2011
|
Dec. 31, 2010
|
|
Liability related to remaining Visa Litigation, carrying amount | $ 65,000,000 | |||||
Value of airline tickets purchased to deliver at a future date | 5,900,000,000 | |||||
Company held collateral in escrow deposits, letters of credit and indemnities from financial institutions, and liens on various assets | 610,000,000 | |||||
Representation and warranty reserve | 220,000,000 | 216,000,000 | 160,000,000 | 162,000,000 | 173,000,000 | 180,000,000 |
Increase in representation and warranty reserve primarily due to an increase in the number of loans selected for repurchase review | 60,000,000 | |||||
Unresolved representation and warranty claims | 118,000,000 | 105,000,000 | ||||
Settlement amount by the Company in exchange for a release of claims | 55,000,000 | |||||
Accrual of potential settlement related to mortgage activities | $ 130,000,000 |
Changes in Fair Value for All Assets and Liabilities Measured at Fair Value on Recurring Basis using Significant Unobservable Inputs (Level 3) (Detail) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
Residential non-agency prime
|
Sep. 30, 2011
Residential non-agency prime
|
Sep. 30, 2012
Residential non-agency prime
|
Sep. 30, 2011
Residential non-agency prime
|
Sep. 30, 2012
Residential non-agency non-prime
|
Sep. 30, 2011
Residential non-agency non-prime
|
Sep. 30, 2012
Residential non-agency non-prime
|
Sep. 30, 2011
Residential non-agency non-prime
|
Sep. 30, 2012
Commercial Non-Agency Mortgage-Backed Securities
|
Sep. 30, 2011
Commercial Non-Agency Mortgage-Backed Securities
|
Sep. 30, 2012
Commercial Non-Agency Mortgage-Backed Securities
|
Sep. 30, 2011
Commercial Non-Agency Mortgage-Backed Securities
|
Sep. 30, 2012
Collateralized Loan Obligations
|
Sep. 30, 2011
Collateralized Loan Obligations
|
Sep. 30, 2012
Collateralized Loan Obligations
|
Sep. 30, 2011
Collateralized Loan Obligations
|
Sep. 30, 2012
Asset Backed Securities Other
|
Sep. 30, 2012
Asset Backed Securities Other
|
Sep. 30, 2012
Corporate debt securities
|
Jun. 30, 2012
Corporate debt securities
|
Dec. 31, 2011
Corporate debt securities
|
Sep. 30, 2011
Corporate debt securities
|
Jun. 30, 2011
Corporate debt securities
|
Dec. 31, 2010
Corporate debt securities
|
Sep. 30, 2012
Available-for-sale Securities
|
Sep. 30, 2011
Available-for-sale Securities
|
Sep. 30, 2012
Available-for-sale Securities
|
Sep. 30, 2011
Available-for-sale Securities
|
Sep. 30, 2012
Mortgage servicing rights
|
Sep. 30, 2011
Mortgage servicing rights
|
Sep. 30, 2012
Mortgage servicing rights
|
Sep. 30, 2011
Mortgage servicing rights
|
Sep. 30, 2012
Net derivative assets and liabilities
|
Sep. 30, 2011
Net derivative assets and liabilities
|
Sep. 30, 2012
Net derivative assets and liabilities
|
Sep. 30, 2011
Net derivative assets and liabilities
|
Sep. 30, 2011
Other asset-backed securities
|
Sep. 30, 2011
Other asset-backed securities
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning of Period Balance | $ 713 | [1] | $ 896 | [1] | $ 803 | [1] | $ 1,103 | [1] | $ 796 | [2] | $ 895 | [2] | $ 802 | [2] | $ 947 | [2] | $ 37 | $ 50 | $ 42 | $ 50 | $ 102 | $ 133 | $ 120 | $ 135 | $ 112 | $ 117 | $ 9 | $ 9 | $ 9 | $ 9 | $ 9 | $ 9 | $ 1,769 | $ 2,112 | $ 1,893 | $ 2,377 | $ 1,594 | $ 1,989 | $ 1,519 | $ 1,837 | $ 1,360 | $ 836 | $ 1,228 | $ 851 | $ 129 | $ 133 | ||||||||||||||||||||||||||||||||||||||||||||||
Net Gains (Losses) Included in Net Income | (4) | [1] | 1 | [1] | (5) | [1] | 4 | [1] | (8) | [2] | (2) | [2] | (18) | [2] | (4) | [2] | 1 | 1 | 2 | 2 | 3 | 12 | 10 | 1 | 7 | (9) | [3] | 4 | [4] | (3) | [5] | 20 | [6] | (275) | [7] | (629) | [7] | (705) | [7] | (803) | [7] | 843 | [8] | 836 | [9] | 2,050 | [10] | 1,252 | [11] | 1 | 8 | |||||||||||||||||||||||||||||||||||||||||
Net Gains (Losses) Included in Other Comprehensive Income (Loss) | 23 | [1] | (2) | [1] | 60 | [1] | 22 | [1] | 132 | [2] | (5) | [2] | 197 | [2] | 27 | [2] | 2 | (1) | (1) | (7) | (2) | (8) | 6 | (4) | 146 | [12] | (14) | [12] | 249 | [12] | 52 | [12] | (4) | (2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchases | 3 | 3 | 3 | 3 | 10 | 5 | 39 | 16 | 1 | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sales | (61) | [1] | (109) | [1] | (115) | [1] | (562) | [2] | (562) | [2] | (12) | [2] | (39) | (4) | (39) | (4) | (96) | (103) | (93) | (93) | (851) | (4) | (906) | (131) | (1) | (2) | (3) | (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principal Payments | (40) | [1] | (36) | [1] | (118) | [1] | (155) | [1] | (18) | [2] | (31) | [2] | (79) | [2] | (101) | [2] | (1) | (4) | (2) | (1) | (9) | (21) | (26) | (3) | (18) | (62) | (83) | (240) | (303) | (6) | (19) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuances | 224 | [13] | 101 | [13] | 700 | [13] | 416 | [13] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Settlements | (713) | (340) | (1,786) | (768) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
End of Period Balance | 631 | [1] | 859 | [1] | 631 | [1] | 859 | [1] | 340 | [2] | 857 | [2] | 340 | [2] | 857 | [2] | 45 | 45 | 125 | 125 | 16 | 16 | 9 | 9 | 9 | 9 | 9 | 9 | 996 | 2,015 | 996 | 2,015 | 1,553 | 1,466 | 1,553 | 1,466 | 1,490 | 1,330 | 1,490 | 1,330 | 120 | 120 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net Change in Unrealized Gains (Losses) Relating to Assets Still Held at End of Period | $ 26 | [1] | $ (2) | [1] | $ 58 | [1] | $ 14 | [1] | $ 23 | [2] | $ (5) | [2] | $ 52 | [2] | $ 26 | [2] | $ (2) | $ 7 | $ 2 | $ 2 | $ 51 | $ (13) | $ 112 | $ 45 | $ (275) | [7] | $ (629) | [7] | $ (705) | [7] | $ (803) | [7] | $ (557) | [14] | $ 77 | [15] | $ (1,407) | [16] | $ (92) | [17] | $ (4) | $ (2) | ||||||||||||||||||||||||||||||||||||||||||||||||||
|
Summary of Other Guarantees and Contingent Liabilities (Detail) (USD $)
In Millions, unless otherwise specified |
Sep. 30, 2012
|
Dec. 31, 2011
|
|||
---|---|---|---|---|---|
Guarantor Obligations [Line Items] | |||||
Carrying Amount | $ 423 | $ 359 | |||
Standby letters of credit
|
|||||
Guarantor Obligations [Line Items] | |||||
Carrying Amount | 81 | ||||
Maximum Potential Future Payments | 18,323 | ||||
Third-party borrowing arrangements
|
|||||
Guarantor Obligations [Line Items] | |||||
Maximum Potential Future Payments | 299 | ||||
Securities lending indemnifications
|
|||||
Guarantor Obligations [Line Items] | |||||
Collateral Held | 8,982 | ||||
Maximum Potential Future Payments | 8,737 | ||||
Asset sales
|
|||||
Guarantor Obligations [Line Items] | |||||
Carrying Amount | 305 | [1] | |||
Maximum Potential Future Payments | 2,710 | [1] | |||
Merchant processing
|
|||||
Guarantor Obligations [Line Items] | |||||
Collateral Held | 772 | ||||
Carrying Amount | 80 | ||||
Maximum Potential Future Payments | 81,280 | ||||
Contingent consideration arrangements
|
|||||
Guarantor Obligations [Line Items] | |||||
Carrying Amount | 3 | ||||
Maximum Potential Future Payments | 6 | ||||
Tender option bond program guarantee
|
|||||
Guarantor Obligations [Line Items] | |||||
Collateral Held | 5,329 | ||||
Maximum Potential Future Payments | 5,047 | ||||
Minimum revenue guarantees
|
|||||
Guarantor Obligations [Line Items] | |||||
Carrying Amount | 17 | ||||
Maximum Potential Future Payments | 31 | ||||
Other
|
|||||
Guarantor Obligations [Line Items] | |||||
Carrying Amount | 18 | ||||
Maximum Potential Future Payments | $ 3,436 | ||||
|
Valuation Assumption Ranges for Level 3 Available-for-Sale Investment Securities (Detail)
|
Sep. 30, 2012
|
|||||
---|---|---|---|---|---|---|
Minimum | Residential Prime Non-Agency Mortgage-Backed Securities
|
||||||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||||||
Estimated lifetime prepayment rates | 6.00% | [1] | ||||
Lifetime loss severity rates | 25.00% | [1] | ||||
Discount margin | 3.00% | [1] | ||||
Minimum | Residential Non-Prime Non-Agency Mortgage-Backed Securities
|
||||||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||||||
Estimated lifetime prepayment rates | 2.00% | [2] | ||||
Lifetime probability of default rates | 3.00% | [2] | ||||
Lifetime loss severity rates | 20.00% | [2] | ||||
Discount margin | 3.00% | [2] | ||||
Minimum | Other asset-backed securities
|
||||||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||||||
Estimated lifetime prepayment rates | 6.00% | |||||
Lifetime probability of default rates | 4.00% | |||||
Lifetime loss severity rates | 40.00% | |||||
Discount margin | 18.00% | |||||
Maximum | Residential Prime Non-Agency Mortgage-Backed Securities
|
||||||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||||||
Estimated lifetime prepayment rates | 20.00% | [1] | ||||
Lifetime probability of default rates | 5.00% | [1] | ||||
Lifetime loss severity rates | 80.00% | [1] | ||||
Discount margin | 7.00% | [1] | ||||
Maximum | Residential Non-Prime Non-Agency Mortgage-Backed Securities
|
||||||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||||||
Estimated lifetime prepayment rates | 10.00% | [2] | ||||
Lifetime probability of default rates | 10.00% | [2] | ||||
Lifetime loss severity rates | 70.00% | [2] | ||||
Discount margin | 9.00% | [2] | ||||
Maximum | Other asset-backed securities
|
||||||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||||||
Estimated lifetime prepayment rates | 6.00% | |||||
Lifetime probability of default rates | 4.00% | |||||
Lifetime loss severity rates | 40.00% | |||||
Discount margin | 18.00% | |||||
Average | Residential Prime Non-Agency Mortgage-Backed Securities
|
||||||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||||||
Estimated lifetime prepayment rates | 13.00% | [1] | ||||
Lifetime probability of default rates | 3.00% | [1] | ||||
Lifetime loss severity rates | 42.00% | [1] | ||||
Discount margin | 5.00% | [1] | ||||
Average | Residential Non-Prime Non-Agency Mortgage-Backed Securities
|
||||||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||||||
Estimated lifetime prepayment rates | 6.00% | [2] | ||||
Lifetime probability of default rates | 6.00% | [2] | ||||
Lifetime loss severity rates | 53.00% | [2] | ||||
Discount margin | 6.00% | [2] | ||||
Average | Other asset-backed securities
|
||||||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||||||
Estimated lifetime prepayment rates | 6.00% | |||||
Lifetime probability of default rates | 4.00% | |||||
Lifetime loss severity rates | 40.00% | |||||
Discount margin | 18.00% | |||||
|
Derivative Position of Company (Detail) (USD $)
In Millions, unless otherwise specified |
Sep. 30, 2012
|
Dec. 31, 2011
|
||||
---|---|---|---|---|---|---|
Derivative Financial Instruments, Assets
|
||||||
Derivatives, Fair Value [Line Items] | ||||||
Derivative Asset, Fair Value | $ 2,176 | $ 1,913 | ||||
Netting | (354) | [1] | (294) | [1] | ||
Total | 1,822 | 1,619 | ||||
Derivative Financial Instruments, Liabilities
|
||||||
Derivatives, Fair Value [Line Items] | ||||||
Fair Value, Liabilities | 2,640 | 2,554 | ||||
Netting | (1,687) | [1] | (1,889) | [1] | ||
Derivative Liabilities | $ 953 | $ 665 | ||||
|
Mortgage Servicing Rights (Tables)
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2012
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Fair Value of Capitalized MSRs | Changes in fair value of capitalized MSRs are summarized as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sensitivity to Changes in Interest Rates to Fair Value of MSR's Portfolio and Related Derivative Instruments | The estimated sensitivity to changes in interest rates of the fair value of the MSRs portfolio and the related derivative instruments was as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MSRs and Related Characteristics by Portfolio | A summary of the Company’s MSRs and related characteristics by portfolio was as follows:
|
Additional Detail of Allowance for Credit Losses and Related Loan Balances by Portfolio Type (Detail) (USD $)
In Millions, unless otherwise specified |
Sep. 30, 2012
|
Jun. 30, 2012
|
Dec. 31, 2011
|
Sep. 30, 2011
|
Jun. 30, 2011
|
Dec. 31, 2010
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Allowance balance at December 31, 2011 related to | ||||||||||||||
Loans individually evaluated for impairment | $ 39 | [1] | $ 80 | [1] | ||||||||||
TDRs collectively evaluated for impairment | 750 | 839 | ||||||||||||
Other loans collectively evaluated for impairment | 3,888 | 4,016 | ||||||||||||
Loans acquired with deteriorated credit quality | 94 | 79 | ||||||||||||
Total allowance for credit losses | 4,771 | 4,864 | 5,014 | 5,190 | 5,308 | 5,531 | ||||||||
Loan balance at end of year: | ||||||||||||||
Loans individually evaluated for impairment | 817 | [2] | 1,244 | [2] | ||||||||||
TDRs collectively evaluated for impairment | 5,463 | 4,883 | ||||||||||||
Other loans collectively evaluated for impairment | 206,356 | 197,705 | ||||||||||||
Loans acquired with deteriorated credit quality | 5,514 | 6,003 | ||||||||||||
Total loans | 218,150 | 209,835 | ||||||||||||
Commercial
|
||||||||||||||
Allowance balance at December 31, 2011 related to | ||||||||||||||
Loans individually evaluated for impairment | 6 | [1] | 16 | [1] | ||||||||||
TDRs collectively evaluated for impairment | 31 | 40 | ||||||||||||
Other loans collectively evaluated for impairment | 997 | 954 | ||||||||||||
Total allowance for credit losses | 1,034 | 1,037 | 1,010 | 1,025 | 1,109 | 1,104 | ||||||||
Loan balance at end of year: | ||||||||||||||
Loans individually evaluated for impairment | 132 | [2] | 222 | [2] | ||||||||||
TDRs collectively evaluated for impairment | 179 | 277 | ||||||||||||
Other loans collectively evaluated for impairment | 62,594 | 56,138 | ||||||||||||
Loans acquired with deteriorated credit quality | 5 | 11 | ||||||||||||
Total loans | 62,910 | 56,648 | ||||||||||||
Commercial Real Estate
|
||||||||||||||
Allowance balance at December 31, 2011 related to | ||||||||||||||
Loans individually evaluated for impairment | 33 | [1] | 61 | [1] | ||||||||||
TDRs collectively evaluated for impairment | 28 | 33 | ||||||||||||
Other loans collectively evaluated for impairment | 828 | 1,057 | ||||||||||||
Loans acquired with deteriorated credit quality | 5 | 3 | ||||||||||||
Total allowance for credit losses | 894 | 941 | 1,154 | 1,221 | 1,258 | 1,291 | ||||||||
Loan balance at end of year: | ||||||||||||||
Loans individually evaluated for impairment | 612 | [2] | 812 | [2] | ||||||||||
TDRs collectively evaluated for impairment | 383 | 331 | ||||||||||||
Other loans collectively evaluated for impairment | 35,699 | 34,574 | ||||||||||||
Loans acquired with deteriorated credit quality | 119 | 134 | ||||||||||||
Total loans | 36,813 | 35,851 | ||||||||||||
Residential Mortgages
|
||||||||||||||
Allowance balance at December 31, 2011 related to | ||||||||||||||
Loans individually evaluated for impairment | 1 | [1] | ||||||||||||
TDRs collectively evaluated for impairment | 464 | 490 | ||||||||||||
Other loans collectively evaluated for impairment | 497 | 436 | ||||||||||||
Total allowance for credit losses | 961 | 939 | 927 | 887 | 841 | 820 | ||||||||
Loan balance at end of year: | ||||||||||||||
Loans individually evaluated for impairment | 6 | [2] | ||||||||||||
TDRs collectively evaluated for impairment | 4,033 | 3,430 | ||||||||||||
Other loans collectively evaluated for impairment | 37,863 | 33,642 | ||||||||||||
Loans acquired with deteriorated credit quality | 6 | 4 | ||||||||||||
Total loans | 41,902 | 37,082 | ||||||||||||
Credit Card
|
||||||||||||||
Allowance balance at December 31, 2011 related to | ||||||||||||||
TDRs collectively evaluated for impairment | 167 | 219 | ||||||||||||
Other loans collectively evaluated for impairment | 748 | 773 | ||||||||||||
Total allowance for credit losses | 915 | 996 | 992 | 1,068 | 1,140 | 1,395 | ||||||||
Loan balance at end of year: | ||||||||||||||
TDRs collectively evaluated for impairment | 462 | 584 | ||||||||||||
Other loans collectively evaluated for impairment | 15,940 | 16,776 | ||||||||||||
Total loans | 16,402 | 17,360 | ||||||||||||
Other Retail
|
||||||||||||||
Allowance balance at December 31, 2011 related to | ||||||||||||||
TDRs collectively evaluated for impairment | 59 | 57 | ||||||||||||
Other loans collectively evaluated for impairment | 797 | 774 | ||||||||||||
Total allowance for credit losses | 856 | 828 | 831 | 832 | 843 | 807 | ||||||||
Loan balance at end of year: | ||||||||||||||
TDRs collectively evaluated for impairment | 269 | 148 | ||||||||||||
Other loans collectively evaluated for impairment | 47,696 | 47,959 | ||||||||||||
Total loans | 47,965 | 48,107 | ||||||||||||
Total Loans, Excluding Covered Loans
|
||||||||||||||
Allowance balance at December 31, 2011 related to | ||||||||||||||
Loans individually evaluated for impairment | 39 | [1] | 78 | [1] | ||||||||||
TDRs collectively evaluated for impairment | 749 | 839 | ||||||||||||
Other loans collectively evaluated for impairment | 3,867 | 3,994 | ||||||||||||
Loans acquired with deteriorated credit quality | 5 | 3 | ||||||||||||
Total allowance for credit losses | 4,660 | 4,741 | 4,914 | 5,033 | 5,191 | 5,417 | ||||||||
Loan balance at end of year: | ||||||||||||||
Loans individually evaluated for impairment | 744 | [2] | 1,040 | [2] | ||||||||||
TDRs collectively evaluated for impairment | 5,326 | 4,770 | ||||||||||||
Other loans collectively evaluated for impairment | 199,792 | 189,089 | ||||||||||||
Loans acquired with deteriorated credit quality | 130 | 149 | ||||||||||||
Total loans | 205,992 | 195,048 | ||||||||||||
Covered Loans
|
||||||||||||||
Allowance balance at December 31, 2011 related to | ||||||||||||||
Loans individually evaluated for impairment | 2 | [1] | ||||||||||||
TDRs collectively evaluated for impairment | 1 | |||||||||||||
Other loans collectively evaluated for impairment | 21 | 22 | ||||||||||||
Loans acquired with deteriorated credit quality | 89 | 76 | ||||||||||||
Total allowance for credit losses | 111 | 123 | 100 | 157 | 117 | 114 | ||||||||
Loan balance at end of year: | ||||||||||||||
Loans individually evaluated for impairment | 73 | [2],[3] | 204 | [2],[3] | ||||||||||
TDRs collectively evaluated for impairment | 137 | [3] | 113 | [3] | ||||||||||
Other loans collectively evaluated for impairment | 6,564 | [3] | 8,616 | [3] | ||||||||||
Loans acquired with deteriorated credit quality | 5,384 | [3] | 5,854 | [3] | ||||||||||
Total loans | $ 12,158 | [3] | $ 14,787 | [3] | ||||||||||
|
Summary of Other than Temporary Impairment by Investment Category (Detail) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
|||||||||||
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ||||||||||||||
Other Gains (losses) | $ (2) | $ 2 | $ (3) | $ 17 | ||||||||||
Available-for-sale Securities
|
||||||||||||||
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ||||||||||||||
Losses Recorded in Earnings | (15) | (9) | (64) | (24) | ||||||||||
Other Gains (losses) | 2 | [1] | (2) | [1] | 3 | [1] | (17) | [1] | ||||||
Total Available for sale other-than-temporary impairment | (13) | (11) | (61) | (41) | ||||||||||
Residential non-agency prime | Available-for-sale Securities
|
||||||||||||||
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ||||||||||||||
Losses Recorded in Earnings | (5) | [2] | (8) | [2] | (2) | [2] | ||||||||
Other Gains (losses) | (3) | [1],[2] | (12) | [1],[2] | (3) | [1],[2] | ||||||||
Total Available for sale other-than-temporary impairment | (8) | [2] | (20) | [2] | (5) | [2] | ||||||||
Residential non-agency non-prime | Available-for-sale Securities
|
||||||||||||||
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ||||||||||||||
Losses Recorded in Earnings | (10) | [3] | (6) | [3] | (27) | [3] | (18) | [3] | ||||||
Other Gains (losses) | 5 | [1],[3] | (4) | [1],[3] | 15 | [1],[3] | (16) | [1],[3] | ||||||
Total Available for sale other-than-temporary impairment | (5) | [3] | (10) | [3] | (12) | [3] | (34) | [3] | ||||||
Other asset-backed securities | Available-for-sale Securities
|
||||||||||||||
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ||||||||||||||
Losses Recorded in Earnings | (3) | (1) | (4) | |||||||||||
Other Gains (losses) | 2 | [1] | 1 | [1] | 2 | [1] | ||||||||
Total Available for sale other-than-temporary impairment | (1) | (2) | ||||||||||||
Commercial Mortgage-Backed Securities | Non-agency | Available-for-sale Securities
|
||||||||||||||
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ||||||||||||||
Losses Recorded in Earnings | (1) | |||||||||||||
Other Gains (losses) | (1) | [1] | ||||||||||||
Total Available for sale other-than-temporary impairment | (2) | |||||||||||||
Perpetual preferred securities | Available-for-sale Securities
|
||||||||||||||
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items] | ||||||||||||||
Losses Recorded in Earnings | (27) | |||||||||||||
Total Available for sale other-than-temporary impairment | $ (27) | |||||||||||||
|
Summary of Gains (Losses) Recognized in Earnings for Fair Value Hedges, Other Economic Hedges and Customer-Related Positions (Detail) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
|||||||
Interest rate contracts | Other noninterest income expense | Fair value hedges
|
||||||||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||||||||
Gains (losses) recognized in earnings | $ 2 | [1] | $ 1 | [1] | $ 5 | [1] | $ 25 | [1] | ||
Foreign exchange cross-currency swaps | Other noninterest income expense | Fair value hedges
|
||||||||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||||||||
Gains (losses) recognized in earnings | (111) | [1] | 42 | [1] | (13) | [1] | ||||
Futures and forwards interest rate contract | Mortgage banking revenue | Other economic hedges
|
||||||||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||||||||
Gains (losses) recognized in earnings | (44) | 17 | 67 | (7) | ||||||
Purchased and written options interest rate contract | Mortgage banking revenue | Other economic hedges
|
||||||||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||||||||
Gains (losses) recognized in earnings | 290 | 181 | 689 | 323 | ||||||
Receive fixed pay floating swaps interest rate contract | Other noninterest income expense
|
||||||||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||||||||
Gains (losses) recognized in earnings | (16) | 366 | (10) | 352 | ||||||
Receive fixed pay floating swaps interest rate contract | Mortgage banking revenue | Other economic hedges
|
||||||||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||||||||
Gains (losses) recognized in earnings | 48 | 377 | 186 | 479 | ||||||
Pay fixed receive floating swaps interest rate contracts | Other noninterest income expense
|
||||||||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||||||||
Gains (losses) recognized in earnings | 19 | (376) | 15 | (365) | ||||||
Pay fixed receive floating swaps interest rate contracts | Mortgage banking revenue | Other economic hedges
|
||||||||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||||||||
Gains (losses) recognized in earnings | 4 | 4 | ||||||||
Foreign exchange forward contracts | Commercial products revenue | Other economic hedges
|
||||||||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||||||||
Gains (losses) recognized in earnings | (25) | (48) | (62) | (66) | ||||||
Equity contracts | Compensation expense | Other economic hedges
|
||||||||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||||||||
Gains (losses) recognized in earnings | 1 | 1 | 2 | 2 | ||||||
Credit contracts | Other noninterest income expense | Other economic hedges
|
||||||||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||||||||
Gains (losses) recognized in earnings | (2) | 4 | (8) | 2 | ||||||
Forwards spots and swaps foreign exchange contract | Commercial products revenue
|
||||||||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||||||||
Gains (losses) recognized in earnings | $ 13 | $ 14 | $ 36 | $ 41 | ||||||
|
Investment Securities Held To Maturities (Detail) (USD $)
In Millions, unless otherwise specified |
Sep. 30, 2012
|
Dec. 31, 2011
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Schedule of Held-to-maturity Securities [Line Items] | ||||||||||||||
Amortized Cost | $ 34,509 | [1],[2] | $ 18,877 | [1] | ||||||||||
Unrealized Gains | 745 | [1] | 383 | [1] | ||||||||||
Unrealized Losses Other-than-Temporary | (4) | [1],[3] | (6) | [1],[3] | ||||||||||
Unrealized Losses Other | (24) | [1],[3] | (38) | [1],[4] | ||||||||||
Fair Value | 35,226 | [1],[2] | 19,216 | [1] | ||||||||||
U.S. Treasury and Agencies
|
||||||||||||||
Schedule of Held-to-maturity Securities [Line Items] | ||||||||||||||
Amortized Cost | 2,557 | [1] | 2,560 | [1] | ||||||||||
Unrealized Gains | 26 | [1] | 35 | [1] | ||||||||||
Fair Value | 2,583 | [1] | 2,595 | [1] | ||||||||||
Collateralized debt/loan obligation asset-backed securities
|
||||||||||||||
Schedule of Held-to-maturity Securities [Line Items] | ||||||||||||||
Amortized Cost | 9 | [1] | 52 | [1] | ||||||||||
Unrealized Gains | 16 | [1] | 13 | [1] | ||||||||||
Unrealized Losses Other | (2) | [1],[4] | ||||||||||||
Fair Value | 25 | [1] | 63 | [1] | ||||||||||
Asset Backed Securities Other
|
||||||||||||||
Schedule of Held-to-maturity Securities [Line Items] | ||||||||||||||
Amortized Cost | 19 | [1] | 23 | [1] | ||||||||||
Unrealized Gains | 2 | [1] | 1 | [1] | ||||||||||
Unrealized Losses Other-than-Temporary | (4) | [1],[3] | (6) | [1],[3] | ||||||||||
Unrealized Losses Other | (2) | [1],[3] | (1) | [1],[4] | ||||||||||
Fair Value | 15 | [1] | 17 | [1] | ||||||||||
Obligations of state and political subdivisions
|
||||||||||||||
Schedule of Held-to-maturity Securities [Line Items] | ||||||||||||||
Amortized Cost | 21 | [1] | 23 | [1] | ||||||||||
Unrealized Gains | 1 | [1] | 1 | [1] | ||||||||||
Unrealized Losses Other | (1) | [1],[4] | ||||||||||||
Fair Value | 22 | [1] | 23 | [1] | ||||||||||
Obligations of Foreign Governments
|
||||||||||||||
Schedule of Held-to-maturity Securities [Line Items] | ||||||||||||||
Amortized Cost | 7 | [1] | 7 | [1] | ||||||||||
Fair Value | 7 | [1] | 7 | [1] | ||||||||||
Other debt securities
|
||||||||||||||
Schedule of Held-to-maturity Securities [Line Items] | ||||||||||||||
Amortized Cost | 119 | [1] | 121 | [1] | ||||||||||
Unrealized Losses Other | (19) | [1],[3] | (29) | [1],[4] | ||||||||||
Fair Value | 100 | [1] | 92 | [1] | ||||||||||
Residential Agency | Residential
|
||||||||||||||
Schedule of Held-to-maturity Securities [Line Items] | ||||||||||||||
Amortized Cost | 31,773 | [1] | 16,085 | [1] | ||||||||||
Unrealized Gains | 700 | [1] | 333 | [1] | ||||||||||
Unrealized Losses Other | (3) | [1],[3] | (3) | [1],[4] | ||||||||||
Fair Value | 32,470 | [1] | 16,415 | [1] | ||||||||||
Residential non-agency non-prime | Residential
|
||||||||||||||
Schedule of Held-to-maturity Securities [Line Items] | ||||||||||||||
Amortized Cost | 1 | [1],[5] | 2 | [1],[5] | ||||||||||
Fair Value | 1 | [1],[5] | 2 | [1],[5] | ||||||||||
Non-agency | Commercial Mortgage-Backed Securities
|
||||||||||||||
Schedule of Held-to-maturity Securities [Line Items] | ||||||||||||||
Amortized Cost | 3 | [1] | 4 | [1] | ||||||||||
Unrealized Losses Other | (2) | [1],[4] | ||||||||||||
Fair Value | $ 3 | [1] | $ 2 | [1] | ||||||||||
|
Summary of Loans by Portfolio Type and Company's Internal Credit Quality Rating (Detail) (USD $)
In Millions, unless otherwise specified |
9 Months Ended | 12 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
Dec. 31, 2011
|
|||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | $ 218,150 | $ 209,835 | ||||||
Total outstanding commitments | 442,163 | 423,565 | ||||||
Commercial Loan
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 62,910 | 56,648 | ||||||
Commercial Real Estate
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 36,813 | 35,851 | ||||||
Residential Mortgage
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 41,902 | [1] | 37,082 | [1] | ||||
Credit Card
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 16,402 | 17,360 | ||||||
Other Retail
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 47,965 | 48,107 | ||||||
Total Loans, Excluding Covered Loans
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 205,992 | 195,048 | ||||||
Covered loans
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 12,158 | 14,787 | ||||||
Pass Internal Credit Rating
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 209,507 | 199,091 | ||||||
Total outstanding commitments | 431,162 | 410,457 | ||||||
Pass Internal Credit Rating | Commercial Loan
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 60,403 | 54,003 | ||||||
Pass Internal Credit Rating | Commercial Real Estate
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 33,326 | 30,733 | ||||||
Pass Internal Credit Rating | Residential Mortgage
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 40,666 | [1] | 35,814 | [1] | ||||
Pass Internal Credit Rating | Credit Card
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 16,046 | 16,910 | ||||||
Pass Internal Credit Rating | Other Retail
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 47,522 | 47,665 | ||||||
Pass Internal Credit Rating | Total Loans, Excluding Covered Loans
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 197,963 | 185,125 | ||||||
Pass Internal Credit Rating | Covered loans
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 11,544 | 13,966 | ||||||
Special Mention Criticized Internal Credit Rating
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 2,213 | 2,070 | ||||||
Total outstanding commitments | 3,725 | 3,418 | ||||||
Special Mention Criticized Internal Credit Rating | Commercial Loan
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 1,265 | 1,047 | ||||||
Special Mention Criticized Internal Credit Rating | Commercial Real Estate
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 785 | 793 | ||||||
Special Mention Criticized Internal Credit Rating | Residential Mortgage
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 24 | [1] | 19 | [1] | ||||
Special Mention Criticized Internal Credit Rating | Other Retail
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 43 | 24 | ||||||
Special Mention Criticized Internal Credit Rating | Total Loans, Excluding Covered Loans
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 2,117 | 1,883 | ||||||
Special Mention Criticized Internal Credit Rating | Covered loans
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 96 | 187 | ||||||
Classified Criticized
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 6,430 | [2] | 8,674 | [2] | ||||
Total outstanding commitments | 7,276 | [2] | 9,690 | [2] | ||||
Classified Criticized | Commercial Loan
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 1,242 | [2] | 1,598 | [2] | ||||
Classified Criticized | Commercial Real Estate
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 2,702 | [2] | 4,325 | [2] | ||||
Classified Criticized | Residential Mortgage
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 1,212 | [1],[2] | 1,249 | [1],[2] | ||||
Classified Criticized | Credit Card
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 356 | [2] | 450 | [2] | ||||
Classified Criticized | Other Retail
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 400 | [2] | 418 | [2] | ||||
Classified Criticized | Total Loans, Excluding Covered Loans
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 5,912 | [2] | 8,040 | [2] | ||||
Classified Criticized | Covered loans
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 518 | [2] | 634 | [2] | ||||
Total Criticized
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 8,643 | 10,744 | ||||||
Total outstanding commitments | 11,001 | 13,108 | ||||||
Total Criticized | Commercial Loan
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 2,507 | 2,645 | ||||||
Total Criticized | Commercial Real Estate
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 3,487 | 5,118 | ||||||
Total Criticized | Residential Mortgage
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 1,236 | [1] | 1,268 | [1] | ||||
Total Criticized | Credit Card
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 356 | 450 | ||||||
Total Criticized | Other Retail
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 443 | 442 | ||||||
Total Criticized | Total Loans, Excluding Covered Loans
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | 8,029 | 9,923 | ||||||
Total Criticized | Covered loans
|
||||||||
Financing Receivable, Recorded Investment [Line Items] | ||||||||
Total loans | $ 614 | $ 821 | ||||||
|
Components of Net Periodic Benefit Cost (Detail) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
|
Pension Plans
|
||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | $ 33 | $ 30 | $ 97 | $ 89 |
Interest cost | 42 | 42 | 126 | 126 |
Expected return on plan assets | (48) | (52) | (143) | (155) |
Prior service cost (credit) and transition obligation (asset) amortization | (2) | (2) | (4) | (7) |
Actuarial loss (gain) amortization | 41 | 31 | 121 | 94 |
Net periodic benefit cost | 66 | 49 | 197 | 147 |
Postretirement Welfare Plan
|
||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | 2 | 1 | 4 | 3 |
Interest cost | 1 | 3 | 5 | 7 |
Expected return on plan assets | (1) | (1) | (2) | (3) |
Actuarial loss (gain) amortization | (1) | (2) | (5) | (5) |
Net periodic benefit cost | $ 1 | $ 1 | $ 2 | $ 2 |
Sensitivity to Changes in Interest Rates to Fair Value of MSRs Portfolio and Related Derivative Instruments (Detail) (USD $)
In Millions, unless otherwise specified |
Sep. 30, 2012
|
Dec. 31, 2011
|
---|---|---|
Down Scenario | MSR portfolio
|
||
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items] | ||
Net fair value 100 basis points | $ (262) | $ (305) |
Net fair value 50 basis points | (162) | (183) |
Net fair value 25 basis points | (94) | (98) |
Down Scenario | Derivative instrument hedges
|
||
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items] | ||
Net fair value 100 basis points | 405 | 378 |
Net fair value 50 basis points | 208 | 204 |
Net fair value 25 basis points | 105 | 104 |
Down Scenario | Net sensitivity
|
||
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items] | ||
Net fair value 100 basis points | 143 | 73 |
Net fair value 50 basis points | 46 | 21 |
Net fair value 25 basis points | 11 | 6 |
Up Scenario | MSR portfolio
|
||
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items] | ||
Net fair value 100 basis points | 483 | 460 |
Net fair value 50 basis points | 231 | 223 |
Net fair value 25 basis points | 109 | 107 |
Up Scenario | Derivative instrument hedges
|
||
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items] | ||
Net fair value 100 basis points | (422) | (445) |
Net fair value 50 basis points | (210) | (217) |
Net fair value 25 basis points | (105) | (107) |
Up Scenario | Net sensitivity
|
||
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items] | ||
Net fair value 100 basis points | 61 | 15 |
Net fair value 50 basis points | 21 | 6 |
Net fair value 25 basis points | $ 4 |
Loans and Allowance for Credit Losses - Additional Information (Detail) (USD $)
|
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
Mar. 31, 2012
|
Dec. 31, 2011
|
|
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Loans pledged at the Federal Home Loan Bank ("FHLB") | $ 73,200,000,000 | $ 73,200,000,000 | $ 67,000,000,000 | |||
Loans pledged at the Federal Reserve Bank | 47,200,000,000 | 47,200,000,000 | 47,200,000,000 | |||
Unearned interest and deferred fees and costs on loans | 800,000,000 | 800,000,000 | 1,100,000,000 | |||
Fair value of impaired loans acquired in BankEast transaction | 28,000,000 | |||||
Receivables of impaired loans acquired in BankEast transaction | 63,000,000 | |||||
Cash Receivables of impaired loans acquired in BankEast transaction to be collected with interest | 41,000,000 | |||||
Fair value of non-impaired loans acquired in BankEast transaction | 96,000,000 | |||||
Receivables of Non-Impaired Loans Acquired in BankEast transaction | 135,000,000 | |||||
Cash Receivables of non-impaired loans acquired in BankEast transaction not expected to be collected | 22,000,000 | |||||
Period for capturing full economic cycle in evaluation | 11 years | |||||
Minimum amount of loans for which allowance recorded for impaired purposes | 5,000,000 | |||||
Period of accruing loans related nonperforming assets and related ratios | 90 days | |||||
Extension included in Commercial Real Estate Modifications | up to 12 Months | |||||
Outstanding balance of loans where trial period was unsuccessful and no longer eligible for a permanent modification | 50,000,000 | |||||
Purchased impaired loans nonperforming assets | 93,000,000 | 93,000,000 | 189,000,000 | |||
Net gains on the sale of loan | 419,000,000 | 74,000,000 | 998,000,000 | 340,000,000 | ||
Government National Mortgage Association
|
||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Loans 30-89 days past due purchased from Government National Mortgage Association mortgage pools whose payments are insured by the Federal Housing Administration and classified as current | 462,000,000 | 462,000,000 | 545,000,000 | |||
Loans 90 days or more past due purchased from Government National Mortgage Association mortgage pools whose payments are insured by the Federal Housing Administration and classified as current | 3,000,000,000 | 3,000,000,000 | 2,600,000,000 | |||
Number of residential mortgage loans, home equity and second mortgage loans, and GNMA loans where trial period arrangement was unsuccessful | 309 | |||||
Government National Mortgage Association | Trouble Debt Restructure
|
||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Restructured GNMA loans that are classified with a pass rating | 2,200,000,000 | 2,200,000,000 | 2,000,000,000 | |||
Loans 90 days or more past due purchased from Government National Mortgage Association mortgage pools whose payments are insured by the Federal Housing Administration and classified as current | 3,000,000,000 | 3,000,000,000 | 2,600,000,000 | |||
Residential Mortgage
|
||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Number of loans in trial period | 250 | 250 | ||||
Outstanding balance of loans in trial period | 43,000,000 | 43,000,000 | ||||
Estimated post-modification balance of loans in trial period | 44,000,000 | 44,000,000 | ||||
Home Equity and Second Mortgages
|
||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Number of loans in trial period | 29 | 29 | ||||
Outstanding balance of loans in trial period | 2,000,000 | 2,000,000 | ||||
Estimated post-modification balance of loans in trial period | 2,000,000 | 2,000,000 | ||||
Loans purchased from GNMA
|
||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Number of loans in trial period | 2,180 | 2,180 | ||||
Outstanding balance of loans in trial period | 263,000,000 | 263,000,000 | ||||
Estimated post-modification balance of loans in trial period | $ 271,000,000 | $ 271,000,000 |
Investment Securities
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2012
|
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Investment Securities |
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 were as follows:
During the second quarter of 2012, the Company transferred $11.7 billion of available-for-sale agency mortgage-backed investment securities to the held-to-maturity category, reflecting the Company’s intent to hold those securities to maturity. The weighted-average maturity of the available-for-sale investment securities was 4.0 years at September 30, 2012, compared with 5.2 years at December 31, 2011. The corresponding weighted-average yields were 3.04 percent and 3.19 percent, respectively. The weighted-average maturity of the held-to-maturity investment securities was 3.1 years at September 30, 2012, and 3.9 years at December 31, 2011. The corresponding weighted-average yields were 2.06 percent and 2.21 percent, respectively. For amortized cost, fair value and yield by maturity date of held-to-maturity and available-for-sale investment securities outstanding at September 30, 2012, refer to Table 4 included in Management’s Discussion and Analysis which is incorporated by reference into these Notes to Consolidated Financial Statements. Investment securities with a fair value of $16.5 billion at September 30, 2012, and $20.7 billion at December 31, 2011, were pledged to secure public, private and trust deposits, repurchase agreements and for other purposes required by contractual obligation or law. Included in these amounts were securities where the Company and certain counterparties have agreements granting the counterparties the right to sell or pledge the securities. Investment securities delivered under these types of arrangements had a fair value of $3.4 billion at September 30, 2012, and $7.0 billion at December 31, 2011.
The following table provides information about the amount of interest income from taxable and non-taxable investment securities:
The following table provides information about the amount of gross gains and losses realized through the sales of available-for-sale investment securities:
In 2007, the Company purchased certain structured investment securities (“SIVs”) from certain money market funds managed by an affiliate of the Company. Subsequent to the initial purchase, the Company exchanged its interest in the SIVs for a pro-rata portion of the underlying investment securities according to the applicable restructuring agreements. The SIVs and the investment securities received are collectively referred to as “SIV-related securities”. During the third quarter of 2012, the Company sold essentially all of the SIV-related securities. Some of the SIV-related securities evidenced credit deterioration at the time of acquisition by the Company. All investment securities with evidence of credit deterioration at acquisition have been subsequently sold by the Company as of September 30, 2012. Changes in the accretable balance for these investment securities were as follows:
The Company conducts a regular assessment of its investment securities with unrealized losses to determine whether investment securities are other-than-temporarily impaired considering, among other factors, the nature of the investment securities, credit ratings or financial condition of the issuer, the extent and duration of the unrealized loss, expected cash flows of underlying collateral, market conditions and whether the Company intends to sell or it is more likely than not the Company will be required to sell the investment securities. The following tables summarize other-than-temporary impairment by investment category:
The Company determined the other-than-temporary impairment recorded in earnings for debt securities not intended to be sold by estimating the future cash flows of each individual investment security, using market information where available, and discounting the cash flows at the original effective rate of the investment security. Other-than-temporary impairment recorded in other comprehensive income (loss) was measured as the difference between that discounted amount and the fair value of each investment security. For perpetual preferred securities determined to be other-than-temporarily impaired, the Company recorded a loss in earnings for the entire difference between the securities’ fair value and their amortized cost. The following table includes the ranges for principal assumptions used for those available-for-sale non-agency mortgage-backed securities determined to be other-than-temporarily impaired:
Changes in the credit losses on debt securities (excludes perpetual preferred securities) are summarized as follows:
At September 30, 2012, certain investment securities had a fair value below amortized cost. The following table shows the gross unrealized losses and fair value of the Company’s 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 September 30, 2012:
The Company does not consider these unrealized losses to be credit-related. These unrealized losses primarily relate to changes in interest rates and market spreads subsequent to purchase. A substantial portion of investment securities that have unrealized losses are either corporate debt or mortgage-backed securities issued with high investment grade credit ratings. In general, the issuers of the investment securities are contractually prohibited from prepayment at less than par, and the Company did not pay significant purchase premiums for these investment securities. At September 30, 2012, the Company had no plans to sell investment securities with unrealized losses, and believes it is more likely than not it would not be required to sell such investment securities before recovery of their amortized cost. |
MSRs and Related Characteristics by Portfolio (Detail) (USD $)
In Millions, unless otherwise specified |
Sep. 30, 2012
BasisPoint
Y
Multiple
|
Jun. 30, 2012
|
Dec. 31, 2011
BasisPoint
Multiple
Y
|
Sep. 30, 2011
|
Jun. 30, 2011
|
Dec. 31, 2010
|
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Servicing Assets at Fair Value [Line Items] | ||||||||||||
Servicing portfolio | $ 211,263 | $ 191,082 | ||||||||||
Fair market value | 1,553 | 1,594 | 1,519 | 1,466 | 1,989 | 1,837 | ||||||
Value (bps) | 74 | [1] | 79 | [1] | ||||||||
Weighted-average servicing fees (bps) | 31 | 31 | ||||||||||
Multiple (value/servicing fees) | 2.39 | 2.55 | ||||||||||
Weighted-average note rate | 4.68% | 5.03% | ||||||||||
Weighted-average age (in years) | 2.6 | 2.8 | ||||||||||
Weighted-average expected prepayment (constant prepayment rate) | 22.20% | 21.30% | ||||||||||
Weighted-average expected life (in years) | 3.8 | 4.0 | ||||||||||
Weighted-average discount rate | 10.40% | 10.40% | ||||||||||
MRBP
|
||||||||||||
Servicing Assets at Fair Value [Line Items] | ||||||||||||
Servicing portfolio | 13,939 | 13,357 | ||||||||||
Fair market value | 154 | 155 | ||||||||||
Value (bps) | 110 | [1] | 116 | [1] | ||||||||
Weighted-average servicing fees (bps) | 40 | 40 | ||||||||||
Multiple (value/servicing fees) | 2.75 | 2.90 | ||||||||||
Weighted-average note rate | 5.24% | 5.50% | ||||||||||
Weighted-average age (in years) | 4.2 | 4.2 | ||||||||||
Weighted-average expected prepayment (constant prepayment rate) | 13.10% | 12.90% | ||||||||||
Weighted-average expected life (in years) | 6.2 | 6.4 | ||||||||||
Weighted-average discount rate | 12.10% | 12.10% | ||||||||||
Government
|
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Servicing Assets at Fair Value [Line Items] | ||||||||||||
Servicing portfolio | 38,162 | 32,567 | ||||||||||
Fair market value | 304 | 290 | ||||||||||
Value (bps) | 80 | [1] | 89 | [1] | ||||||||
Weighted-average servicing fees (bps) | 34 | 36 | ||||||||||
Multiple (value/servicing fees) | 2.35 | 2.47 | ||||||||||
Weighted-average note rate | 4.69% | 5.08% | ||||||||||
Weighted-average age (in years) | 2.4 | 2.5 | ||||||||||
Weighted-average expected prepayment (constant prepayment rate) | 21.60% | 21.10% | ||||||||||
Weighted-average expected life (in years) | 4.0 | 4.0 | ||||||||||
Weighted-average discount rate | 11.40% | 11.30% | ||||||||||
Conventional
|
||||||||||||
Servicing Assets at Fair Value [Line Items] | ||||||||||||
Servicing portfolio | 159,162 | [2] | 145,158 | [2] | ||||||||
Fair market value | $ 1,095 | [2] | $ 1,074 | [2] | ||||||||
Value (bps) | 69 | [1],[2] | 74 | [1],[2] | ||||||||
Weighted-average servicing fees (bps) | 30 | [2] | 29 | [2] | ||||||||
Multiple (value/servicing fees) | 2.30 | [2] | 2.55 | [2] | ||||||||
Weighted-average note rate | 4.63% | [2] | 4.97% | [2] | ||||||||
Weighted-average age (in years) | 2.5 | [2] | 2.8 | [2] | ||||||||
Weighted-average expected prepayment (constant prepayment rate) | 23.10% | [2] | 22.10% | [2] | ||||||||
Weighted-average expected life (in years) | 3.5 | [2] | 3.8 | [2] | ||||||||
Weighted-average discount rate | 10.00% | [2] | 10.00% | [2] | ||||||||
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