UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
☑ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2016
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934 |
For the transition period from (not applicable)
Commission file number: 1-6880
U.S. Bancorp
(Exact name of registrant as specified in its charter)
Delaware | 41-0255900 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
800 Nicollet Mall, Minneapolis, Minnesota 55402
(Address of principal executive offices) (Zip Code)
(651) 466-3000
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Name of each exchange on which registered | |
Common Stock, $.01 par value per share |
New York Stock Exchange | |
Depositary Shares (each representing 1/100th interest in a share of Series A
|
New York Stock Exchange | |
Depositary Shares (each representing 1/1,000th interest in a share of Series B |
New York Stock Exchange | |
Depositary Shares (each representing 1/1,000th interest in a share of Series F |
New York Stock Exchange | |
Depositary Shares (each representing 1/1,000th interest in a share of Series G |
New York Stock Exchange | |
Depositary Shares (each representing 1/1,000th interest in a share of Series H |
New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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 ☑ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☑
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 | ☑ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ (Do not check if a smaller reporting company) | Smaller reporting company | ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
As of June 30, 2016, the aggregate market value of the registrants common stock held by non-affiliates of the registrant was $69.3 billion based on the closing sale price as reported on the New York Stock Exchange.
Indicate the number of shares outstanding of each of the registrants classes of common stock, as of the latest practicable date.
| ||
Class | Outstanding at January 31, 2017 | |
Common Stock, $.01 par value per share |
1,694,070,891 | |
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DOCUMENTS INCORPORATED BY REFERENCE
Document |
Parts Into Which Incorporated | |||
1. | Portions of the Annual Report to Shareholders for the Fiscal Year Ended December 31, 2016 (2016 Annual Report) | Parts I and II | ||
2. | Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held April 18, 2017 (Proxy Statement) | Part III |
PART I
Item 1. | Business |
Forward-Looking Statements
THE FOLLOWING INFORMATION APPEARS IN ACCORDANCE WITH THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: This report contains forward-looking statements about U.S. Bancorp (U.S. Bancorp or the Company). Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date hereof. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of U.S. Bancorp. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. A reversal or slowing of the current economic recovery or another severe contraction 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. Stress in the commercial real estate markets, as well as a downturn in the residential real estate markets could cause credit losses and deterioration in asset values. In addition, changes to statutes, regulations, or regulatory policies or practices could affect U.S. Bancorp in substantial and unpredictable ways. U.S. Bancorps results could also be adversely affected by 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; litigation; increased competition from both banks and non-banks; changes in customer behavior and preferences; breaches in data security; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and managements ability to effectively manage credit risk, market risk, operational risk, compliance risk, strategic risk, interest rate risk, liquidity risk and reputational risk.
For discussion of these and other risks that may cause actual results to differ from expectations, refer to the sections entitled Corporate Risk Profile on pages 38 60 and Risk Factors on pages 148 157 of the Companys 2016 Annual Report. However, factors other than these also could adversely affect U.S. Bancorps results, and the reader should not consider these factors to be a complete set of all potential risks or uncertainties. Forward-looking statements speak only as of the date hereof, and U.S. Bancorp undertakes no obligation to update them in light of new information or future events.
General Business Description
U.S. Bancorp is a multi-state financial services holding company headquartered in Minneapolis, Minnesota. U.S. Bancorp was incorporated in Delaware in 1929 and operates as a financial holding company and a bank holding company under the Bank Holding Company Act of 1956. U.S. Bancorp provides a full range of financial services, including lending and depository services, cash management, capital markets, and trust and investment management services. It also engages in credit card services, merchant and ATM processing, mortgage banking, insurance, brokerage and leasing.
U.S. Bancorps banking subsidiary, U.S. Bank National Association, is engaged in the general banking business, principally in domestic markets. U.S. Bank National Association, with $343 billion in deposits at December 31, 2016, provides a wide range of products and services to individuals, businesses, institutional organizations, governmental entities and other financial institutions. Commercial and consumer lending services are principally offered to customers within the Companys domestic markets, to domestic customers with foreign operations and to large national customers operating in specific industries targeted by the Company. Lending services include traditional credit products as well as credit card services, lease financing and import/export trade, asset-backed lending, agricultural finance and other products. Depository services include checking
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accounts, savings accounts and time certificate contracts. Ancillary services such as capital markets, treasury management and receivable lock-box collection are provided to corporate customers. U.S. Bancorps bank and trust subsidiaries provide a full range of asset management and fiduciary services for individuals, estates, foundations, business corporations and charitable organizations.
Other U.S. Bancorp non-banking subsidiaries offer investment and insurance products to the Companys customers principally within its markets, and fund administration services to a broad range of mutual and other funds.
Banking and investment services are provided through a network of 3,106 banking offices principally operating in the Midwest and West regions of the United States, through on-line services and over mobile devices. The Company operates a network of 4,842 ATMs and provides 24-hour, seven day a week telephone customer service. Mortgage banking services are provided through banking offices and loan production offices throughout the Companys markets. Lending products may be originated through banking offices, indirect correspondents, brokers or other lending sources. The Company is also one of the largest providers of corporate and purchasing card services and corporate trust services in the United States. A wholly-owned subsidiary, Elavon, Inc. (Elavon), provides merchant processing services directly to merchants and through a network of banking affiliations. Wholly-owned subsidiaries, and affiliates of Elavon, provide similar merchant services in Canada, Mexico and segments of Europe directly or through joint ventures with other financial institutions. The Company also provides corporate trust and fund administration services in Europe. These foreign operations are not significant to the Company.
On a full-time equivalent basis, as of December 31, 2016, U.S. Bancorp employed 71,191 people.
Competition
The commercial banking business is highly competitive. The Company competes with other commercial banks, savings and loan associations, mutual savings banks, finance companies, mortgage banking companies, credit unions, investment companies, credit card companies and a variety of other financial services, advisory and technology companies. In recent years, competition has increased from institutions not subject to the same regulatory restrictions as domestic banks and bank holding companies. Competition is based on a number of factors including, among others, customer service, quality and range of products and services offered, price, reputation, interest rates on loans and deposits, lending limits and customer convenience. The Companys ability to continue to compete effectively also depends in large part on its ability to attract new employees and retain and motivate existing employees, while managing compensation and other costs.
Government Policies
The operations of the Companys various operating units are affected by federal and state legislative changes and by policies of various regulatory authorities, including those of the numerous states in which they operate, the United States and foreign governments. These policies include, for example, statutory maximum legal lending rates, domestic monetary policies of the Board of Governors of the Federal Reserve System (the Federal Reserve), United States fiscal policy, international currency regulations and monetary policies and capital adequacy and liquidity constraints imposed by bank regulatory agencies.
Supervision and Regulation
U.S. Bancorp and its subsidiaries are subject to the extensive regulatory framework applicable to bank holding companies and their subsidiaries. This regulatory framework is intended primarily for the protection of depositors, the deposit insurance fund of the Federal Deposit Insurance Corporation (the FDIC), consumers, the stability of the financial system in the United States, and the health of the national economy, and not for investors in bank holding companies such as the Company.
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This section summarizes certain provisions of the principal laws and regulations applicable to the Company and its subsidiaries. The descriptions are not intended to be complete and are qualified in their entirety by reference to the full text of the statutes and regulations described below.
General As a bank holding company, the Company is subject to regulation under the Bank Holding Company Act (the BHC Act) and to inspection, examination and supervision by the Board of Governors of the Federal Reserve System (the Federal Reserve). U.S. Bank National Association and its subsidiaries, are subject to regulation and examination primarily by the Office of the Comptroller of the Currency (the OCC) and also by the FDIC, the Federal Reserve, the Consumer Financial Protection Bureau (the CFPB), the Securities and Exchange Commission (the SEC) and the Commodities Futures Trading Commission (the CFTC) in certain areas.
Supervision and regulation by the responsible regulatory agency generally include comprehensive annual reviews of all major aspects of a banks business and condition, and imposition of periodic reporting requirements and limitations on investments and certain types of activities. U.S. Bank National Association, the Company and the Companys non-bank affiliates must undergo regular on-site examinations by the appropriate regulatory agency, which examine for adherence to a range of legal and regulatory compliance responsibilities. If they deem the Company to be operating in a manner that is inconsistent with safe and sound banking practices, the applicable regulatory agencies can require the entry into informal or formal supervisory agreements, including board resolutions, memoranda of understanding, written agreements and consent or cease and desist orders, pursuant to which the Company would be required to take identified corrective actions to address cited concerns and to refrain from taking certain actions.
Dodd-Frank Act Substantial changes to the regulation of bank holding companies and their subsidiaries have occurred and will continue to occur as a result of the enactment in 2010 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act). Changes in applicable law or regulation, and in their application by regulatory agencies, have had and will continue to have a material effect on the business and results of the Company and its subsidiaries.
The Dodd-Frank Act significantly changed the regulatory framework for financial services companies, and since its enactment has required significant rulemaking and numerous studies and reports that will continue over the next several years. Among other things, it created a new Financial Stability Oversight Council (the Council) with broad authority to make recommendations covering enhanced prudential standards and more stringent supervision for large bank holding companies and certain non-bank financial services companies. The Dodd-Frank Act significantly reduced interchange fees on debit card transactions, changed the preemption of state laws applicable to national banks, increased the regulation of consumer mortgage banking and made numerous other changes, some of which are discussed below.
In addition to the Dodd-Frank Act, other legislative and regulatory proposals affecting banks have been made in recent years both domestically and internationally. Among other things, these proposals include significant additional capital and liquidity requirements and limitations on the size or types of activity in which banks may engage.
Bank Holding Company Activities The Company elected to become a financial holding company as of March 13, 2000, pursuant to the provisions of the Gramm-Leach-Bliley Act (the GLBA). Under the GLBA, qualifying bank holding companies may engage in, and affiliate with financial companies engaging in, a broader range of activities than would otherwise be permitted for a bank holding company. Under the GLBAs system of functional regulation, the Federal Reserve acts as an umbrella regulator for the Company, and certain of the Companys subsidiaries are regulated directly by additional agencies based on the particular activities of those subsidiaries.
If a financial holding company or a depository institution controlled by a financial holding company ceases to meet certain capital or management standards, the Federal Reserve may impose corrective capital and
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managerial requirements on the financial holding company, and may place limitations on its ability to conduct all of the business activities that financial holding companies are generally permitted to conduct. See Permissible Business Activities below. If the failure to meet these standards persists, a financial holding company may be required to divest its depository institution subsidiaries, or cease all activities other than those activities that may be conducted by bank holding companies that are not financial holding companies. In addition, the Federal Reserve requires bank holding companies to meet certain applicable capital and management standards. Failure by the Company to meet these standards could limit the Company from engaging in any new activity or acquiring other companies without the prior approval of the Federal Reserve.
Federal Reserve regulations also provide that, if any depository institution controlled by a financial holding company fails to maintain a satisfactory rating under the Community Reinvestment Act (CRA), the Federal Reserve must prohibit the financial holding company and its subsidiaries from engaging in the additional activities in which only financial holding companies may engage. See Community Reinvestment Act below.
U.S. Bank National Association received a Satisfactory CRA rating in its most recent examination, covering the period from January 1, 2009 through December 31, 2011. The OCC has scheduled a CRA examination in 2017.
Source of Strength The Dodd-Frank Act codified existing Federal Reserve policy requiring the Company to act as a source of financial strength to U.S. Bank National Association, and to commit resources to support this subsidiary in circumstances where it might not otherwise do so. However, because the GLBA provides for functional regulation of financial holding company activities by various regulators, the GLBA prohibits the Federal Reserve from requiring payment by a holding company to a depository institution if the functional regulator of the depository institution objects to the payment. In those cases, the Federal Reserve could instead require the divestiture of the depository institution and impose operating restrictions pending the divestiture. As a result of the Dodd-Frank Act, non-bank subsidiaries of a holding company that engage in activities permissible for an insured depository institution must be examined and regulated in a manner that is at least as stringent as if the activities were conducted by the lead depository institution of the holding company.
Enhanced Prudential Standards In March 2014, the Federal Reserve finalized a rule relating to enhanced prudential standards required under the Dodd-Frank Act for bank holding companies with over $50 billion in consolidated assets. The prudential standards include enhanced risk-based capital and leverage requirements, enhanced liquidity requirements, enhanced risk management and risk committee requirements, a requirement to submit a resolution plan, single-counterparty credit limits and stress tests. The rule incorporates the requirement that the Federal Reserve conduct annual supervisory capital adequacy stress tests of covered companies under baseline, adverse and severely adverse scenarios, and requires covered companies to conduct their own capital adequacy stress tests. The rule provides for notification to a covered company as to which the Council has determined to impose a debt-to-equity ratio of no more than 15-to-1, based upon the determination by the Council that (a) such company poses a grave threat to the financial stability of the United States and (b) the imposition of such a requirement is necessary to mitigate the risk that the company poses to the financial stability of the United States.
OCC Heightened Standards In September 2014, the OCC, under separate authority, finalized guidelines establishing heightened standards for large national banks such as U.S. Bank National Association. The guidelines establish minimum standards for the design and implementation of a risk governance framework for banks. The OCC may take action against institutions that fail to meet these standards.
Permissible Business Activities As a financial holding company, the Company may affiliate with securities firms and insurance companies and engage in other activities that are financial in nature or incidental or complementary to activities that are financial in nature. Financial in nature activities include the following: securities underwriting, dealing and market making; sponsoring mutual funds and investment companies; insurance underwriting and agency; merchant banking; and activities that the Federal Reserve, in consultation
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with the Secretary of the United States Treasury, determines to be financial in nature or incidental to such financial activity. Complementary activities are activities that the Federal Reserve determines upon application to be complementary to a financial activity and that do not pose a safety and soundness risk.
The Company generally is not required to obtain Federal Reserve approval to acquire a company (other than a bank holding company, bank or savings association) engaged in activities that are financial in nature or incidental to activities that are financial in nature, as determined by the Federal Reserve. However, the Dodd-Frank Act added a provision requiring approval if the total consolidated assets to be acquired exceed $10 billion. Financial holding companies are also required to obtain the approval of the Federal Reserve before they may acquire more than five percent of the voting shares or substantially all of the assets of an unaffiliated bank holding company, bank or savings association.
Interstate Banking Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the Riegle-Neal Act), a bank holding company may acquire banks in states other than its home state, subject to any state requirement that the bank has been organized and operating for a minimum period of time (not to exceed five years). Also, such an acquisition is not permitted if the bank holding company controls, prior to or following the proposed acquisition, more than 10 percent of the total amount of deposits of insured depository institutions nationwide, or, if the acquisition is the bank holding companys initial entry into the state, more than 30 percent of the deposits of insured depository institutions in the state (or any lesser or greater amount set by the state).
The Riegle-Neal Act also authorizes banks to merge across state lines to create interstate branches. Under the Dodd-Frank Act, banks are permitted to establish new branches in another state to the same extent as banks chartered in that state.
Regulatory Approval for Acquisitions In determining whether to approve a proposed bank acquisition, federal bank regulators will consider a number of factors, including the following: the effect of the acquisition on competition, financial condition and future prospects (including current and projected capital ratios and levels); the competence, experience and integrity of management and its record of compliance with laws and regulations; the convenience and needs of the communities to be served (including the acquiring institutions record of compliance under the CRA); the effectiveness of the acquiring institution in combating money laundering activities; and the extent to which the transaction would result in greater or more concentrated risks to the stability of the United States banking or financial system. In addition, under the Dodd-Frank Act, approval of interstate transactions requires that the acquiror satisfy regulatory standards for well-capitalized and well-managed institutions.
Dividend Restrictions The Company is a legal entity separate and distinct from its subsidiaries. Typically, the majority of the Companys operating funds are received in the form of dividends paid to the Company by U.S. Bank National Association. Federal law imposes limitations on the payment of dividends by national banks.
In general, dividends payable by U.S. Bank National Association and the Companys trust bank subsidiaries, as national banking associations, are limited by rules that compare dividends to net income for periods defined by regulation.
The OCC, the Federal Reserve and the FDIC also have authority to prohibit or limit the payment of dividends by the banking organizations they supervise (including the Company and U.S. Bank National Association), if, in the banking regulators opinion, payment of a dividend would constitute an unsafe or unsound practice in light of the financial condition of the banking organization. Subject to exceptions for well-capitalized and well-managed holding companies, Federal Reserve regulations also require approval of holding company purchases and redemptions of its securities if the gross consideration paid exceeds 10 percent of consolidated net worth for any 12-month period.
In addition, Federal Reserve policy on the payment of dividends, stock redemptions and stock repurchases requires that bank holding companies consult with and inform the Federal Reserve in advance of doing any of the
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following: declaring and paying dividends that could raise safety and soundness concerns (e.g., declaring and paying dividends that exceed earnings for the period for which dividends are being paid); redeeming or repurchasing capital instruments when experiencing financial weakness; and redeeming or repurchasing common stock and perpetual preferred stock, if the result will be a net reduction in the amount of such capital instruments outstanding for the quarter in which the reduction occurs.
In 2010, the Federal Reserve issued an addendum to its policy on dividends, stock redemptions and stock repurchases that is specifically applicable to the 19 largest bank holding companies (including the Company) that are covered by the Supervisory Capital Assessment Program. The addendum provides for Federal Reserve review of dividend increases, implementation of capital repurchase programs and other capital repurchases or redemptions.
The supervisory stress tests of the Company conducted by the Federal Reserve as part of its annual Comprehensive Capital Analysis and Review (CCAR) process also affect the ability of the Company to pay dividends and make other forms of capital distribution. See Comprehensive Capital Analysis and Review and Stress Testing below.
Capital Requirements The Company is subject to regulatory capital requirements established by the Federal Reserve, and U.S. Bank National Association is subject to substantially similar rules established by the OCC. These requirements have changed significantly as a result of standards established by the Basel Committee on Banking Supervision (the Basel Committee), an international organization that has the goal of creating standards for banking regulation, and the implementation of these standards and of relevant provisions of the Dodd-Frank Act by banking regulators in the United States. Minimum regulatory capital levels will significantly increase as these requirements are implemented and phased in.
Prior to 2014, regulatory capital requirements effective for the Company followed the 1988 capital accord of the Basel Committee known as Basel I. In implementing Basel I, federal banking regulators adopted risk-based capital and leverage rules that require the capital-to-assets ratios of financial institutions to meet certain minimum standards. The risk-based capital ratio is calculated by allocating assets and specified off-balance sheet financial instruments into risk-weighted categories (with higher levels of capital being required for the categories perceived as representing greater risk), and is used to determine the amount of a financial institutions total risk-weighted assets (RWAs). Under the rules, capital is divided into multiple tiers: common equity tier 1 capital, additional tier 1 capital and tier 2 capital. The amount of tier 2 capital may not exceed the amount of tier 1 capital. Total capital is the sum of tier 1 capital and tier 2 capital. The federal banking regulators also have established minimum leverage ratio guidelines. The leverage ratio is defined as tier 1 capital divided by adjusted average total on-balance sheet assets.
The Federal Reserve and the OCC approved a final rule in 2007 adopting international guidelines established by the Basel Committee known as Basel II. The Basel II framework consists of three pillars: (a) capital adequacy; (b) supervisory review (including the computation of capital and internal assessment processes); and (c) market discipline (including increased disclosure requirements). In December 2010, the Basel Committee issued a new set of international standards for determining regulatory capital known as Basel III. Federal banking regulators published the United States Basel III final rule in July 2013 to implement many aspects of these international standards as well as certain provisions of the Dodd-Frank Act. The United States Basel III final rule focuses regulatory capital on common equity tier 1 capital, introduces new regulatory adjustments and deductions from capital, narrows the eligibility criteria for regulatory capital instruments and makes other changes to the Basel I and Basel II frameworks. Specifically, Basel III includes two comprehensive methodologies for calculating risk-weighted assets: a general standardized approach and more risk-sensitive advanced approaches, with the Companys capital adequacy being evaluated against the Basel III methodology that is most restrictive. In December 2013, the Federal Reserve approved a final rule to revise the market risk capital rule, which addresses the market risk of significant trading activities, so that it conforms to the Basel III capital framework. The revised market risk capital rule was effective April 1, 2014.
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Beginning January 1, 2014, the regulatory capital requirements for the Company follow Basel III, subject to certain transition provisions from Basel I over the following four years to full implementation by January 1, 2018. Under the United States Basel III final rule, the Company is subject to a minimum common equity tier 1 capital ratio (common equity tier 1 capital to RWA) of 4.5 percent, a minimum tier 1 capital ratio of 6.0 percent and a minimum total capital ratio of 8.0 percent on a fully phased-in basis. In addition, the final rule provides that certain new items be deducted from common equity tier 1 capital and certain Basel I deductions be modified. The Company is also subject to a 2.5 percent common equity tier 1 capital conservation buffer and, if deployed, up to a 2.5 percent common equity tier 1 countercyclical buffer on a fully phased-in basis by 2019. United States banking organizations are subject to a minimum leverage ratio of 4.0 percent. The final rule also subjects banking organizations calculating their capital requirements using advanced approaches, including the Company, to a minimum Basel III supplementary leverage ratio of 3.0 percent that takes into account both on-balance sheet and certain off-balance sheet exposures.
The United States banking regulators also published final regulations in June 2011 implementing Section 171 of the Dodd-Frank Act, commonly known as the Collins Amendment, which requires that certain institutions supervised by the Federal Reserve, including the Company, be subject to minimum capital requirements that are not less than the generally applicable risk-based capital requirements. Prior to 2015, this minimum capital floor was based on Basel I. On January 1, 2015, the United States Basel III final rule replaced the Basel I-based capital floor with a standardized approach that, among other things, modifies the existing risk weights for certain types of asset classes. The capital floor applies to the calculation of both minimum risk-based capital requirements as well as the capital conservation buffer and, if deployed, the countercyclical capital buffer.
In September 2014, United States banking regulators approved a final rule that enhanced the regulatory Supplementary Leverage Ratio (SLR) requirement for banks calculating capital adequacy using advanced approaches under Basel III. The SLR is defined as tier 1 capital divided by total leverage exposure, which includes both on- and off-balance sheet exposures. The Company began calculating and reporting its SLR beginning in the first quarter of 2015; however, it is not subject to the minimum SLR requirement until January 1, 2018. At December 31, 2016, the Company exceeds the applicable minimum SLR requirement.
For additional information regarding the Companys regulatory capital, see Capital Management in the Companys 2016 Annual Report.
Comprehensive Capital Analysis and Review The Federal Reserves Capital Plans rule requires large bank holding companies with assets in excess of $50 billion to submit capital plans to the Federal Reserve on an annual basis and to obtain approval from the Federal Reserve for capital distributions proposed in the capital plan. These capital plans consist of a number of mandatory elements, including an assessment of a companys sources and uses of capital over a nine-quarter planning horizon assuming both expected and stressful conditions; a detailed description of a companys process for assessing capital adequacy; a demonstration of a companys ability to maintain capital above each minimum regulatory capital ratio and above a tier 1 common ratio of 5.0 percent under expected and stressful conditions; and a demonstration of a companys ability to achieve, readily and without difficulty, the minimum capital ratios and capital buffers under the Basel III framework as it comes into effect in the United States.
The Federal Reserve has issued a final rule specifying how large bank holding companies, including the Company, should incorporate the United States Basel III capital standards into their capital plans. Among other things, the final rule requires large bank holding companies to project both their common equity tier 1 capital ratio using the methodology under existing capital guidelines and their common equity tier 1 capital ratio under the United States Basel III capital standards, as such standards phase in over the nine-quarter planning horizon.
The Company will submit its 2017 capital plan to the Federal Reserve by April 5, 2017, in accordance with instructions from the Federal Reserve. Applicable stress testing rules require the Federal Reserve to publish the
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results of its assessment of the Companys capital plan, including its planned capital distributions, no later than June 30, 2017.
Stress Testing The Federal Reserves CCAR framework and the Dodd-Frank Act stress testing framework require large bank holding companies such as the Company to conduct company-run stress tests and subject them to supervisory stress tests conducted by the Federal Reserve. Among other things, the company-run stress tests employ stress scenarios developed by the Company as well as stress scenarios provided by the Federal Reserve and incorporate the Dodd-Frank Act capital actions, which are intended to normalize capital distributions across large United States bank holding companies. The Federal Reserve conducts CCAR and Dodd-Frank supervisory stress tests employing its adverse and severely adverse stress scenarios and internal supervisory models. The Federal Reserves CCAR and Dodd-Frank Act supervisory stress tests incorporate the Companys planned capital actions and the Dodd-Frank Act capital actions, respectively. The Federal Reserve and the Company are required to publish the results of the annual supervisory and annual company-run stress tests, respectively, no later than June 30 of each year. In addition, all large bank holding companies are required to submit a mid-cycle company-run stress test employing stress scenarios developed by the Company. The results of this stress test must be submitted to the Federal Reserve for review in early October of each year. The Company is required to publish its results of this stress test no later than the end of November of each year. The Federal Reserve currently publishes summaries of supervisory stress test results for each large bank holding company under both the adverse and severely adverse stress scenarios developed by the Federal Reserve.
National banks with assets in excess of $50 billion are required to submit annual company-run stress test results to the OCC concurrently with their parent bank holding companys CCAR submission to the Federal Reserve. The stress test is based on the OCCs stress scenarios (which are typically the same as the Federal Reserves stress scenarios) and capital actions that are appropriate for the economic conditions assumed in each scenario. U.S. Bank National Association will submit its stress test in accordance with regulatory requirements by April 5, 2017. The Company is required to publish the results of this stress test no later than June 30, 2017.
Basel III Liquidity Requirements The Basel Committee proposed in 2009 two minimum standards for limiting liquidity risk: the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR). The LCR is designed to ensure that bank holding companies have sufficient high-quality liquid assets to survive a significant liquidity stress event lasting for 30 calendar days. The NSFR is designed to promote stable, longer-term funding of assets and business activities over a one-year time horizon.
In October 2014, the federal banking regulators finalized a rule to implement the LCR in the United States. The rule applies the LCR standards to bank holding companies and their domestic bank subsidiaries calculating their capital requirements using advanced approaches, including the Company and U.S. Bank National Association. The LCR standards in the rule differ in certain respects from the Basel Committees version of the LCR, including a narrower definition of high-quality liquid assets, different prescribed cash inflow and outflow assumptions for certain types of instruments and transactions, a different methodology for calculating the LCR and a shorter phase-in schedule that ended on December 31, 2016. In June 2016, the federal banking regulators proposed a rule to implement a NSFR requirement in the United States that would apply to the Company and U.S. Bank National Association, consistent with the Basel Committee NSFR standard finalized in October 2014. The Basel Committee contemplates that the NSFR, including any revisions, will be implemented as a minimum standard by January 1, 2018.
Federal Deposit Insurance Corporation Improvement Act The Federal Deposit Insurance Corporation Improvement Act of 1991 (the FDICIA) provides a framework for regulation of depository institutions and their affiliates (including parent holding companies) by federal banking regulators. As part of that framework, the FDICIA requires the relevant federal banking regulator to take prompt corrective action with respect to a depository institution if that institution does not meet certain capital adequacy standards.
Supervisory actions by the appropriate federal banking regulator under the prompt corrective action rules generally depend upon an institutions classification within five capital categories. The United States Basel III
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final rule revises the capital ratio thresholds in the prompt corrective action framework to reflect the new Basel III capital ratios. This aspect of the United States Basel III rule became effective on January 1, 2015. The regulations apply only to banks and not to bank holding companies such as the Company; however, subject to limitations that may be imposed pursuant to the GLBA, the Federal Reserve is authorized to take appropriate action at the holding company level, based on the undercapitalized status of the holding companys subsidiary banking institutions. In certain instances relating to an undercapitalized banking institution, the bank holding company would be required to guarantee the performance of the undercapitalized subsidiarys capital restoration plan and could be liable for civil money damages for failure to fulfill those guarantee commitments.
Deposit Insurance Under current FDIC regulations, each depository institution is assigned to a risk category based on capital and supervisory measures. A depository institution is assessed premiums by the FDIC based on its risk category and the amount of deposits held. In 2009, the FDIC revised the method for calculating the assessment rate for depository institutions by introducing several adjustments to an institutions initial base assessment rate. The Dodd-Frank Act altered the assessment base for deposit insurance assessments from a deposit to an asset base, and seeks to fund part of the cost of the Dodd-Frank Act by increasing the reserve ratio of the deposit insurance fund to 1.35 percent of estimated insured deposits. The Dodd-Frank Act also requires that FDIC assessments be set in a manner that offsets the cost of the assessment increases for institutions with consolidated assets of less than $10 billion. This provision effectively places the increased assessment costs on larger financial institutions such as the Company.
The Dodd-Frank Act also permanently increased deposit insurance coverage from $100,000 per account ownership type to $250,000. In February 2011, the FDIC adopted a final rule implementing the Dodd-Frank Act provisions, which provides for use of a risk scorecard to determine deposit premiums. The effect of the rule was to increase the FDIC premiums paid by U.S. Bank National Association. In 2014, the FDIC adopted a final rule revising its deposit insurance assessment system to reflect changes in the regulatory capital rules that are effective in 2015 and 2018. The rule (a) revises the ratios and ratio thresholds relating to capital evaluations; (b) revises the assessment base calculation for custodial banks; and (c) requires that all highly complex institutions measure counterparty exposure for assessment purposes using the Basel III standardized approach in the regulatory capital rules.
In March 2016, in order to bring the reserve ratio of the deposit insurance fund to 1.35 percent, the FDIC finalized a surcharge on the quarterly assessments of insured depository institutions with total consolidated assets of $10 billion or more. The surcharges were first imposed in the third quarter of 2016, the calendar quarter after the reserve ratio of the deposit insurance fund first reached or exceeded 1.15 percent. The surcharge imposed on each insured depository institution equals an annual rate of 4.5 basis points applied to the institutions assessment base (with certain adjustments). The FDIC expects that these surcharges should be sufficient to raise the reserve ratio to 1.35 percent in approximately eight quarters (i.e., before the end of 2018). If, contrary to the FDICs expectations, the reserve ratio does not reach 1.35 percent by December 31, 2018, the FDIC plans to impose a shortfall assessment on insured depository institutions with total consolidated assets of $10 billion or more on March 31, 2019.
Powers of the FDIC Upon Insolvency of an Insured Institution If the FDIC is appointed the conservator or receiver of an insured depository institution upon its insolvency or in certain other events, the FDIC has the power to (a) transfer any of the depository institutions assets and liabilities to a new obligor without the approval of the depository institutions creditors; (b) enforce the terms of the depository institutions contracts pursuant to their terms; or (c) repudiate or disaffirm any contracts (if the FDIC determines that performance of the contract is burdensome and that the repudiation or disaffirmation is necessary to promote the orderly administration of the depository institution). These provisions would be applicable to obligations and liabilities of the Companys insured depository institution subsidiary, U.S. Bank National Association.
Depositor Preference Under federal law, in the event of the liquidation or other resolution of an insured depository institution, the claims of a receiver of the institution for administrative expense and the claims of
10
holders of domestic deposit liabilities (including the FDIC, as subrogee of the depositors) have priority over the claims of other unsecured creditors of the institution, including holders of publicly issued senior or subordinated debt and depositors in non-domestic offices. As a result, those debtholders and depositors would be treated differently from, and could receive, if anything, substantially less than, the depositors in domestic offices of the depository institution.
Orderly Liquidation Authority The Dodd-Frank Act created a new framework for the orderly liquidation of a covered financial company by the FDIC as receiver. A covered financial company is a financial company (including a bank holding company, but not an insured depository institution), in situations where the Secretary of the Treasury determines (upon the written recommendation of the FDIC and the Federal Reserve and after consultation with the President) that the conditions set forth in the Dodd-Frank Act regarding the potential impact on financial stability of the financial companys failure have been met. The rule sets forth a comprehensive method for the receivership of a covered financial company. The Company is a financial company and, therefore, is potentially subject to the orderly liquidation authority of the FDIC.
Resolution Plans The Federal Reserve and the FDIC have adopted a rule to implement the requirements of the Dodd-Frank Act regarding annual resolution plans for bank holding companies with assets of $50 billion or more (so-called Living Wills). The rule requires each covered company to produce a contingency resolution plan for the rapid and orderly resolution of the company in the event of material financial distress or failure. Resolution plans must include information regarding the manner and extent to which any insured depository institution affiliated with the company is adequately protected from risks arising from the activities of any non-bank subsidiaries of the company; full descriptions of ownership structure, assets, liabilities and contractual obligations of the company; identification of the cross-guarantees tied to different securities; identification of major counterparties; a process for determining to whom the collateral of the company is pledged; and any other information that the Federal Reserve and the FDIC jointly require by rule or order. Plans must analyze baseline, adverse, and severely adverse economic condition impacts. Plans must demonstrate, in the event of material financial distress or failure of the covered company, a reorganization or liquidation of the covered company under the federal bankruptcy code that could be accomplished within a reasonable period of time and in a manner that substantially mitigates the risk that the failure of the covered company would have serious adverse effects on financial stability in the United States. Covered companies and their subsidiaries are subject to more stringent capital, leverage and liquidity requirements or restrictions on growth, activities or operations if they fail to file an acceptable plan (i.e., the plan is determined to not be credible and deficiencies are not cured in a timely manner). Plans must typically be updated annually.
The FDIC has also adopted regulations under its own authority requiring an insured depository institution with $50 billion or more in total assets to submit periodically to the FDIC a contingency plan for the resolution of such institution in the event of its failure. The rule requires a covered depository institution to submit a resolution plan that should enable the FDIC, as receiver, to resolve the institution under applicable receivership provisions of the Federal Deposit Insurance Act in a manner that ensures that depositors receive access to their insured deposits within one business day of the institutions failure, maximizes the net present value return from the sale or disposition of its assets and minimizes the amount of any loss to be realized by the institutions creditors.
The Company filed its resolution plans pursuant to each rule in December 2015, and will periodically revise its plans as required.
Recovery Plans In September 2016, the OCC finalized a rule that establishes enforceable guidelines for recovery planning by insured national banks, insured federal savings associations, and insured federal branches of foreign banks with average total consolidated assets of $50 billion or more, which includes U.S. Bank National Association. The guidelines provide that a covered bank should develop and maintain a recovery plan that is appropriate for its individual risk profile, size, activities, and complexity, including the complexity of its organizational and legal entity structure. The guidelines state that a recovery plan should (a) establish triggers, which are quantitative or qualitative indicators of the risk or existence of severe stress that should always be
11
escalated to management or the board of directors, as appropriate, for purposes of initiating a response; (b) identify a wide range of credible options that a covered bank could undertake to restore financial and operational strength and viability; and (c) address escalation procedures, management reports, and communication procedures.
Liability of Commonly Controlled Institutions An FDIC-insured depository institution can be held liable for any loss incurred or expected to be incurred by the FDIC in connection with another FDIC-insured institution under common control with that institution being in default or in danger of default (commonly referred to as cross-guarantee liability). An FDIC claim for cross-guarantee liability against a depository institution is generally superior in right of payment to claims of the holding company and its affiliates against the depository institution.
Transactions with Affiliates There are various legal restrictions on the extent to which the Company and its non-bank subsidiaries may borrow or otherwise engage in certain types of transactions with U.S. Bank National Association. Under the Federal Reserve Act and Regulation W, U.S. Bank National Association (and its subsidiaries) is subject to quantitative and qualitative limits on extensions of credit, purchases of assets, and certain other transactions involving its non-bank affiliates. Additionally, transactions between U.S. Bank National Association and its non-bank affiliates are required to be on arms length terms and must be consistent with standards of safety and soundness.
Anti-Money Laundering and Sanctions The Company is subject to several federal laws that are designed to combat money laundering and terrorist financing, and to restrict transactions with persons, companies, or foreign governments sanctioned by United States authorities. This category of laws includes the Bank Secrecy Act, the Money Laundering Control Act, the USA PATRIOT Act (AML laws), and implementing regulations for the International Emergency Economic Powers Act and the Trading with the Enemy Act, as administered by the United States Treasury Departments Office of Foreign Assets Control (sanctions laws).
In October 2015, U.S. Bank National Association entered into a Consent Order with the OCC regarding its Bank Secrecy Act (BSA) /Anti-Money Laundering (AML) compliance program. U.S. Bank National Association has implemented a number of BSA/AML compliance program enhancements and is taking significant steps to remediate the issues identified in the Consent Order.
As implemented by federal banking and securities regulators and the Department of the Treasury, AML laws obligate depository institutions and broker-dealers to verify their customers identity, conduct customer due diligence, report on suspicious activity, file reports of transactions in currency, and conduct enhanced due diligence on certain accounts. Sanctions laws prohibit persons of the United States from engaging in any transaction with a restricted person or restricted country. Depository institutions and broker-dealers are required by their respective federal regulators to maintain policies and procedures in order to ensure compliance with the above obligations. Federal regulators regularly examine BSA/AML and sanctions compliance programs to ensure their adequacy and effectiveness, and the frequency and extent of such examinations and the remedial actions resulting therefrom have been increasing.
Non-compliance with sanctions laws and/or AML laws or failure to maintain an adequate BSA/AML compliance program can lead to significant monetary penalties and reputational damage, and federal regulators evaluate the effectiveness of an applicant in combating money laundering when determining whether to approve a proposed bank merger, acquisition, restructuring, or other expansionary activity. There have been a number of significant enforcement actions against banks, broker-dealers and non-bank financial institutions with respect to sanctions laws and AML laws and some have resulted in substantial penalties, including criminal pleas.
Community Reinvestment Act U.S. Bank National Association is subject to the provisions of the CRA. Under the terms of the CRA, banks have a continuing and affirmative obligation, consistent with safe and sound operation, to help meet the credit needs of their communities, including providing credit to individuals residing in
12
low-income and moderate-income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions, and does not limit an institutions discretion to develop the types of products and services that it believes are best suited to its particular community in a manner consistent with the CRA.
The OCC regularly assesses U.S. Bank National Association on its record in meeting the credit needs of the community served by that institution, including low-income and moderate-income neighborhoods. The assessment also is considered when the Federal Reserve or OCC reviews applications by banking institutions to acquire, merge or consolidate with another banking institution or its holding company, to establish a new branch office that will accept deposits, or to relocate an office. In the case of a bank holding company applying for approval to acquire a bank or other bank holding company, the Federal Reserve will assess the records of each subsidiary depository institution of the applicant bank holding company, and those records may be the basis for denying the application.
U.S. Bank National Association received a Satisfactory CRA rating in its most recent examination, covering the period from January 1, 2009 through December 31, 2011.
Regulation of Brokerage, Investment Advisory and Insurance Activities The Company conducts securities underwriting, dealing and brokerage activities in the United States through U.S. Bancorp Investments, Inc. (USBII) and other subsidiaries. These activities are subject to regulations of the SEC, the Financial Industry Regulatory Authority and other authorities, including state regulators. These regulations generally cover licensing of securities personnel, interactions with customers, trading operations and periodic examinations.
Securities regulators impose capital requirements on USBII and monitor its financial operations with periodic financial reviews. In addition, USBII is a member of the Securities Investor Protection Corporation, which oversees the liquidation of member broker-dealers that close when the broker-dealer is bankrupt or in financial trouble and imposes reporting requirements and assessments on USBII.
The operations of the First American family of funds, the Companys proprietary money market fund complex, also are subject to regulation by the SEC. In July 2014, the SEC finalized rules regarding money market fund reform. The final rules require a floating net asset value for institutional prime and tax-free money market funds. The rules also give the board of directors of the money market funds the ability to limit redemptions during periods of stress (allowing for the use of liquidity fees and redemption gates during such times). Other changes include tightened diversification requirements and enhanced disclosure requirements.
The Companys operations in the areas of insurance brokerage and reinsurance of credit life insurance are subject to regulation and supervision by various state insurance regulatory authorities, including the licensing of insurance brokers and agents.
Regulation of Derivatives and the Swaps Marketplace Under the Dodd-Frank Act, the CFTC has issued and will continue to issue additional rules regarding the regulation of the swaps marketplace and over-the-counter derivatives. The rules require swap dealers and major swap participants to register with the CFTC and require them to meet robust business conduct standards to lower risk and promote market integrity, to meet certain recordkeeping and reporting requirements so that regulators can better monitor the markets, and to be subject to certain capital and margin requirements. U.S. Bank National Association is a registered swap dealer.
In addition, in October 2015, the Federal Reserve, the OCC, the FDIC, the Federal Housing Finance Agency, and the Farm Credit Administration finalized a rule concerning swap margin and capital requirements. The rule incorporates many aspects of the international framework for margin requirements for non-centrally cleared derivatives issued in September 2013 by the Basel Committee and the Board of the International Organization of Securities Commissions. The final rule mandates the exchange of initial and variation margin for non-cleared swaps and non-cleared security-based swaps between swap entities regulated by the five agencies and certain counterparties. The amount of margin will vary based on the relative risk of the non-cleared swap or
13
non-cleared security-based swap. The final rule phases in the variation margin requirements between September 1, 2016, and March 1, 2017. The initial margin requirements will phase in over four years, beginning on September 1, 2016. Additionally, the agencies issued a final rule on August 1, 2016 relating to the rules exemption from margin requirements for certain non-cleared swaps and non-cleared security-based swaps used for hedging purposes by commercial end-users and certain other counterparties.
Other swaps requirements have been modified by legislation. Section 716 of the Dodd-Frank Act required covered United States banks acting as dealers in commodity swaps, equity swaps and certain credit default swaps to push out such activities and conduct them through one or more non-bank affiliates. In December 2014, the Consolidated and Further Continuing Appropriations Act of 2015 was signed into law, which contains a provision that narrows the push-out requirements in Section 716 only to structured finance swaps.
Future regulations will likely impose additional operational and compliance costs, although the ultimate impact of regulations that have not yet been finalized remains unclear.
The Volcker Rule In December 2013, the SEC, the CFTC, the Federal Reserve, the OCC and the FDIC jointly issued a final rule to implement the so-called Volcker Rule under the Dodd-Frank Act. The Volcker Rule prohibits banking entities from engaging in proprietary trading, and prohibits certain interests in, or relationships with, hedge funds or private equity funds. The final rule also requires annual attestation by a banking entitys Chief Executive Officer that the banking entity has in place processes to establish, maintain, enforce, review, test and modify a Compliance Program established in a manner reasonably designed to achieve compliance with the final rule. The final rule became effective on April 1, 2014, and applies to the Company, U.S. Bank National Association and their affiliates. The Company has a Volcker compliance program in place that covers all of its subsidiaries and affiliates, including U.S. Bank National Association.
Financial Privacy Under the requirements imposed by the GLBA, the Company and its subsidiaries are required periodically to disclose to their retail customers the Companys policies and practices with respect to the sharing of nonpublic customer information with its affiliates and others, and the confidentiality and security of that information. Under the GLBA, retail customers also must be given the opportunity to opt out of information-sharing arrangements with non-affiliates, subject to certain exceptions set forth in the GLBA.
Incentive-Based Compensation Arrangements In April 2011, the Federal Reserve, the OCC, the FDIC, the SEC, the National Credit Union Administration and the Federal Housing Finance Agency issued a proposed rule under Section 956 of the Dodd-Frank Act that would require the reporting of incentive-based compensation arrangements by a covered financial institution, and prohibit incentive-based compensation arrangements at a covered financial institution that provide excessive compensation or that could expose the institution to inappropriate risks that could lead to material financial loss. In June 2016, those agencies issued a joint proposed rule to revise the proposed rule that had been issued in 2011 and that would prohibit incentive-based compensation arrangements that those agencies determine encourage inappropriate risks by certain financial institutions by providing excessive compensation or that could lead to material financial loss and require those financial institutions to disclose information concerning incentive-based compensation arrangements to the appropriate federal regulator.
Durbin Amendment A provision of the Dodd-Frank Act known as the Durbin Amendment required the Federal Reserve to establish a cap on the interchange fees that merchants pay banks for electronic clearing of debit transactions. The Federal Reserve issued final rules, effective October 1, 2011, for establishing standards, including a cap, for debit card interchange fees and prohibiting network exclusivity arrangements and routing restrictions. The final rule established standards for assessing whether debit card interchange fees received by debit card issuers were reasonable and proportional to the costs incurred by issuers for electronic debit transactions, and it established a maximum permissible interchange fee that an issuer may receive for an electronic debit transaction, which reduces fee revenue to debit card issuers such as the Company. Under the final rule, the maximum permissible interchange fee that an issuer may receive for an electronic debit transaction is
14
the sum of 21 cents per transaction, a 1 cent fraud prevention adjustment, and 5 basis points multiplied by the value of the transaction.
In July 2013, the United States District Court for the District of Columbia, in NACS, et al. v. Board of Governors of the Federal Reserve System, invalidated these regulations, ruling in favor of a group of retailers who argued that the new lower interchange fees had been inappropriately set too high. The United States Court of Appeals for the District of Columbia Circuit, in March 2014, reversed the district court, upheld the vast majority of the regulations, and remanded the matter to the district court for the limited purpose of reviewing the Federal Reserves treatment of transaction monitoring costs. In January 2015, the Supreme Court declined to review the Court of Appeals decision, which effectively keeps the final interchange fees rules intact.
Consumer Protection Regulation Retail banking activities are subject to a variety of statutes and regulations designed to protect consumers, including laws related to fair lending and the prohibition of unfair, deceptive, or abusive acts or practices in connection with the offer, sale, or provision of consumer financial products and services. These laws and regulations include the Truth-in-Lending, Truth-in-Savings, Home Mortgage Disclosure, Equal Credit Opportunity, Fair Credit Reporting, Fair Debt Collection Practices, Real Estate Settlement Procedures, Electronic Funds Transfer, Right to Financial Privacy and Servicemembers Civil Relief Acts. Interest and other charges collected or contracted for by banks are subject to state usury laws and federal laws concerning interest rates.
Consumer Financial Protection Bureau U.S. Bank National Association and its subsidiaries are subject to supervision and regulation by the CFPB with respect to federal consumer laws, including many of the laws and regulations described above. The CFPB has undertaken numerous rule-making and other initiatives, including issuing informal guidance and taking enforcement actions against certain financial institutions. The CFPBs rulemaking, examination and enforcement authority has and will continue to significantly affect financial institutions involved in the provision of consumer financial products and services, including the Company, U.S. Bank National Association, and the Companys other subsidiaries. These regulatory activities may limit the types of financial services and products the Company may offer, which in turn may reduce the Companys revenues.
Supervisory Ratings Federal banking regulators regularly examine the Company to evaluate its financial condition and monitor its compliance with laws and regulatory policies. Key products of such exams are supervisory ratings of the Companys overall condition, commonly referred to as the CAMELS rating for U.S. Bank National Association (which reflects the OCCs evaluation of certain components of the banks condition) and the RFI/C(D) rating for U.S. Bancorp (which reflects the Federal Reserves evaluation of certain components of the holding companys condition). Violations of laws and regulations or deemed deficiencies in risk management practices may be incorporated into these supervisory ratings. A downgrade in these ratings could limit the Companys ability to pursue acquisitions or conduct other expansionary activities for a period of time, require new or additional regulatory approvals before engaging in certain other business activities or investments, affect U.S. Bank National Associations deposit insurance assessment rate, and impose additional recordkeeping and corporate governance requirements, as well as generally increase regulatory scrutiny of the Company.
Other Supervision and Regulation The Company is subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (the Exchange Act), both as administered by the SEC, by virtue of the Companys status as a public company. As a listed company on the New York Stock Exchange (the NYSE), the Company is subject to the rules of the NYSE for listed companies.
Website Access to SEC Reports
U.S. Bancorps internet website can be found at usbank.com. U.S. Bancorp makes available free of charge on its website its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Exchange Act, as well as all
15
other reports filed by U.S. Bancorp with the SEC as soon as reasonably practicable after electronically filed with, or furnished to, the SEC.
Additional Information
Additional information in response to this Item 1 can be found in the Companys 2016 Annual Report on pages 62 to 66 under the heading Line of Business Financial Review. That information is incorporated into this report by reference.
Item 1A. | Risk Factors |
Information in response to this Item 1A can be found in the Companys 2016 Annual Report on pages 148 to 157 under the heading Risk Factors. That information is incorporated into this report by reference.
Item 1B. | Unresolved Staff Comments |
None.
Item 2. | Properties |
U.S. Bancorp and its significant subsidiaries occupy headquarter offices under a long-term lease in Minneapolis, Minnesota. The Company also leases nine freestanding operations centers in Cincinnati, Denver, Milwaukee, Minneapolis, Overland Park, Portland and St. Paul. The Company owns 11 principal operations centers in Cincinnati, Coeur dAlene, Fargo, Milwaukee, Olathe, Owensboro, Portland, St. Louis and St. Paul. At December 31, 2016, the Companys subsidiaries owned and operated a total of 1,514 facilities and leased an additional 1,987 facilities. The Company believes its current facilities are adequate to meet its needs. Additional information with respect to premises and equipment is presented in Note 8 of the Notes to Consolidated Financial Statements included in the Companys 2016 Annual Report. That information is incorporated into this report by reference.
Item 3. | Legal Proceedings |
Information in response to this Item 3 can be found in Note 22 of the Notes to Consolidated Financial Statements included in the Companys 2016 Annual Report. That information is incorporated into this report by reference.
Item 4. | Mine Safety Disclosures |
Not Applicable.
Capital Covenants
The Company has entered into several transactions involving the issuance of capital securities (Capital Securities) by certain Delaware statutory trusts formed by the Company (the Trusts), the issuance by the Company of preferred stock (Preferred Stock) or the issuance by an indirect subsidiary of U.S. Bank National Association of preferred stock exchangeable for the Companys Preferred Stock under certain circumstances (Exchangeable Preferred Stock). Simultaneously with the closing of certain of those transactions, the Company entered into a replacement capital covenant, as amended from time to time (as amended, each, a Replacement Capital Covenant and collectively, the Replacement Capital Covenants) for the benefit of persons that buy, hold or sell a specified series of long-term indebtedness of the Company or U.S. Bank National Association (the Covered Debt). Each of the Replacement Capital Covenants provides that neither the Company nor any of its subsidiaries (including any of the Trusts) will repay, redeem or purchase any of the Preferred Stock, Exchangeable Preferred Stock or the Capital Securities and the securities held by the Trust (the Other
16
Securities), as applicable, on or before the date specified in the applicable Replacement Capital Covenant, unless the Company has received proceeds from the sale of qualifying securities that (a) have equity-like characteristics that are the same as, or more equity-like than, the applicable characteristics of the Preferred Stock, the Exchangeable Preferred Stock, the Capital Securities or Other Securities, as applicable, at the time of repayment, redemption or purchase, and (b) the Company has obtained the prior approval of the Federal Reserve, if such approval is then required by the Federal Reserve or, in the case of the Exchangeable Preferred Stock, the approval of the OCC.
The Company will provide a copy of any Replacement Capital Covenant to a holder of the relevant Covered Debt. For copies of any of these documents, holders should write to Investor Relations, U.S. Bancorp, 800 Nicollet Mall, Minneapolis, Minnesota 55402, or call (866) 775-9668.
The following table identifies the closing date for each transaction, issuer, series of Capital Securities, Preferred Stock or Exchangeable Preferred Stock issued in the relevant transaction, Other Securities, if any, and applicable Covered Debt as of February 23, 2017, for those securities that remain outstanding.
Closing Date |
Issuer |
Capital Securities or Preferred Stock |
Other Securities |
Covered Debt | ||||
3/17/06 |
USB Capital IX and U.S. Bancorp |
USB Capital IXs $675,378,000 of 6.189% Fixed-to-Floating Rate Normal Income Trust Securities | U.S. Bancorps Series A Non-Cumulative Perpetual Preferred Stock | U.S. Bancorps 7.50% Subordinated Debentures due 2026 (CUSIP No. 911596AL8) | ||||
3/27/06 |
U.S. Bancorp | U.S. Bancorps 40,000,000 Depositary Shares ($25 per Depositary Share) each representing a 1/1000th interest in a share of Series B Non-Cumulative Perpetual Preferred Stock | Not Applicable | U.S. Bancorps 7.50% Subordinated Debentures due 2026 (CUSIP No. 911596AL8) | ||||
12/22/06 |
USB Realty Corp(a) and U.S. Bancorp |
USB Realty Corp.s 5,000 shares of Fixed-to-Floating-Rate Exchangeable Non-Cumulative Perpetual Series A Preferred Stock exchangeable for shares of U.S. Bancorps Series C Non-cumulative Perpetual Preferred Stock(b) | Not Applicable | U.S. Bancorps 7.50% Subordinated Debentures due 2026 (CUSIP No. 911596AL8) |
(a) | USB Realty Corp. is an indirect subsidiary of U.S. Bank National Association. |
(b) | Under certain circumstances, upon the direction of the OCC, each share of USB Realty Corp.s Series A Preferred Stock will be automatically exchanged for one share of U.S. Bancorps Series C Non-cumulative Perpetual Preferred Stock. |
17
PART II
Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
On June 29, 2016, the Company announced that its Board of Directors had approved an authorization to repurchase up to $2.6 billion of its common stock, from July 1, 2016 through June 30, 2017. Except as otherwise indicated in the table below, all shares repurchased during the fourth quarter of 2016 were repurchased under this authorization. The following table provides a detailed analysis of all shares repurchased by the Company or any affiliated purchaser during the fourth quarter of 2016:
Period |
Total Number of Shares Purchased |
Average Price Paid per Share |
Total Number of Shares Purchased as Part of Publicly Announced Program |
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (In Millions) |
||||||||||||
October 1-31 |
7,324,144 | (a) | $ | 44.28 | 7,274,144 | $ | 1,623 | |||||||||
November 1-30 |
4,078,648 | 47.37 | 4,078,648 | 1,430 | ||||||||||||
December 1-31 |
2,694,407 | 51.06 | 2,694,407 | 1,292 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
14,097,199 | (a) | $ | 46.47 | 14,047,199 | $ | 1,292 | |||||||||
|
|
|
|
|
|
|
|
(a) | Includes 50,000 shares of common stock purchased at an average price per share of $42.69, in open-market transactions by U.S. Bank National Association, the Companys principal banking subsidiary, in its capacity as trustee of the Companys Employee Retirement Savings Plan. |
Additional Information
Additional information in response to this Item 5 can be found in the Companys 2016 Annual Report on page 145 under the heading U.S. Bancorp Supplemental Financial Data (Unaudited). That information is incorporated into this report by reference.
Item 6. | Selected Financial Data |
Information in response to this Item 6 can be found in the Companys 2016 Annual Report on page 23 under the heading Table 1 Selected Financial Data. That information is incorporated into this report by reference.
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
Information in response to this Item 7 can be found in the Companys 2016 Annual Report on pages 22 to 71 under the heading Managements Discussion and Analysis. That information is incorporated into this report by reference.
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
Information in response to this Item 7A can be found in the Companys 2016 Annual Report on pages 38 to 60 under the heading Corporate Risk Profile. That information is incorporated into this report by reference.
Item 8. | Financial Statements and Supplementary Data |
Information in response to this Item 8 can be found in the Companys 2016 Annual Report on pages 72 to 147 under the headings Report of Management, Report of Independent Registered Public Accounting Firm, Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting, U.S. Bancorp Consolidated Balance Sheet, U.S. Bancorp Consolidated Statement of Income, U.S. Bancorp
18
Consolidated Statement of Comprehensive Income, U.S. Bancorp Consolidated Statement of Shareholders Equity, U.S. Bancorp Consolidated Statement of Cash Flows, Notes to Consolidated Financial Statements, U.S. Bancorp Consolidated Balance Sheet Five Year Summary (Unaudited), U.S. Bancorp Consolidated Statement of Income Five Year Summary (Unaudited), U.S. Bancorp Quarterly Consolidated Financial Data (Unaudited), U.S. Bancorp Supplemental Financial Data (Unaudited) and U.S. Bancorp Consolidated Daily Average Balance Sheet and Related Yields and Rates (Unaudited). That information is incorporated into this report by reference.
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
None.
Item 9A. | Controls and Procedures |
Information in response to this Item 9A can be found in the Companys 2016 Annual Report on page 71 under the heading Controls and Procedures and on pages 72 and 74 under the headings Report of Management and Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting. That information is incorporated into this report by reference.
Item 9B. | Other Information |
None.
19
PART III
Item 10. | Directors, Executive Officers and Corporate Governance |
Code of Ethics and Business Conduct
The Company has adopted a Code of Ethics and Business Conduct that applies to its principal executive officer, principal financial officer and principal accounting officer. The Companys Code of Ethics and Business Conduct can be found at www.usbank.com by clicking on About U.S. Bank and then clicking on Ethics under the Investor/Shareholder Information heading, which is located at the left side of the bottom of the page. The Company intends to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding amendments to, or waivers from, certain provisions of the Code of Ethics and Business Conduct that apply to its principal executive officer, principal financial officer and principal accounting officer by posting such information on its website, at the address and location specified above.
Executive Officers of the Registrant
Richard K. Davis
Mr. Davis is Chairman and Chief Executive Officer of U.S. Bancorp. Mr. Davis, 58, has served as Chairman of U.S. Bancorp since December 2007 and Chief Executive Officer since December 2006. He also served as President from October 2004 until January 2016. He served as Chief Operating Officer from October 2004 until December 2006. Mr. Davis has held management positions with the Company since joining Star Banc Corporation, one of its predecessors, in 1993 as Executive Vice President.
Jennie P. Carlson
Ms. Carlson is Executive Vice President, Human Resources, of U.S. Bancorp. Ms. Carlson, 56, has served in this position since January 2002. Until that time, she served as Executive Vice President, Deputy General Counsel and Corporate Secretary of U.S. Bancorp since the merger of Firstar Corporation and U.S. Bancorp in February 2001. From 1995 until the merger, she was General Counsel and Secretary of Firstar Corporation and Star Banc Corporation.
Andrew Cecere
Mr. Cecere is President and Chief Operating Officer of U.S. Bancorp. Mr. Cecere, 56, has served in this position since January 2016. From January 2015 until January 2016, he served as Vice Chairman and Chief Operating Officer. From February 2007 to January 2015, Mr. Cecere served as U.S. Bancorps Vice Chairman and Chief Financial Officer. Until that time, he served as Vice Chairman, Wealth Management and Securities Services of U.S. Bancorp since the merger of Firstar Corporation and U.S. Bancorp in February 2001. Previously, he had served as an executive officer of the former U.S. Bancorp, including as Chief Financial Officer from May 2000 through February 2001.
James L. Chosy
Mr. Chosy is Executive Vice President and General Counsel of U.S. Bancorp. Mr. Chosy, 53, has served in this position since March 1, 2013. He also served as Corporate Secretary of U.S. Bancorp from March 2013 until April 2016. From 2001 to 2013, he served as the General Counsel and Secretary of Piper Jaffray Companies. From 1995 to 2001, Mr. Chosy was Vice President and Associate General Counsel of U.S. Bancorp, having also served as Assistant Secretary of U.S. Bancorp from 1995 through 2000 and as Secretary from 2000 until 2001.
Terrance R. Dolan
Mr. Dolan is Vice Chairman and Chief Financial Officer of U.S. Bancorp. Mr. Dolan, 55, has served in this position since August 2016. From July 2010 to July 2016, he served as Vice Chairman, Wealth Management and
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Securities Services, of U.S. Bancorp. From September 1998 to July 2010, Mr. Dolan served as U.S. Bancorps Controller. He additionally held the title of Executive Vice President from January 2002 until June 2010 and Senior Vice President from September 1998 until January 2002.
John R. Elmore
Mr. Elmore is Vice Chairman, Community Banking and Branch Delivery, of U.S. Bancorp. Mr. Elmore, 60, has served in this position since March 2013. From 1999 to 2013, he served as Executive Vice President, Community Banking, of U.S. Bancorp and its predecessor company, Firstar Corporation.
Leslie V. Godridge
Ms. Godridge is Vice Chairman, Wholesale Banking, of U.S. Bancorp. Ms. Godridge, 61, has served in this position since January 2016. From February 2013 until December 2015, she served as Executive Vice President, National Corporate Specialized Industries and Global Treasury Management, of U.S. Bancorp. From February 2007, when she joined U.S. Bancorp, until January 2013, Ms. Godridge served as Executive Vice President, National Corporate and Institutional Banking, of U.S. Bancorp. Prior to that time, she served as Senior Executive Vice President and a member of the Executive Committee at The Bank of New York, where she was head of BNY Asset Management, Private Banking, Consumer Banking and Regional Commercial Banking from 2004 to 2006.
Gunjan Kedia
Ms. Kedia is Vice Chairman, Wealth Management and Securities Services, of U.S. Bancorp. Ms. Kedia, 45, has served in this position since joining U.S. Bancorp in December 2016. From October 2008 until May 2016, she served as Executive Vice President of State Street Corporation where she led the core investment servicing business in North and South America and served as a member of State Streets management committee, its senior most strategy and policy committee. Previously, Ms. Kedia was an Executive Vice President of global product management at Bank of New York Mellon from 2004 to 2008.
James B. Kelligrew
Mr. Kelligrew is Vice Chairman, Wholesale Banking, of U.S. Bancorp. Mr. Kelligrew, 51, has served in this position since January 2016. From March 2014 until December 2015, he served as Executive Vice President, Fixed Income and Capital Markets, of U.S. Bancorp, having served as Executive Vice President, Credit Fixed Income, of U.S. Bancorp from May 2009 to March 2014. Prior to that time, he held various leadership positions with Wells Fargo Securities from 2003 to 2009, and with Bank of America Securities from 1993 to 2003.
Shailesh M. Kotwal
Mr. Kotwal is Vice Chairman, Payment Services, of U.S. Bancorp. Mr. Kotwal, 52, has served in this position since joining U.S. Bancorp in March 2015. From July 2008 until May 2014, he served as Executive Vice President of TD Bank Group with responsibility for retail banking products and services and as Chair of its enterprise payments council. From 2006 until 2008, he served as President, International, of eFunds Corporation, a payment services company. Previously, Mr. Kotwal served in various leadership roles at American Express Company from 1989 until 2006, including responsibility for operations in North and South America, Europe and the Asia-Pacific regions.
P.W. Parker
Mr. Parker is Vice Chairman and Chief Risk Officer of U.S. Bancorp. Mr. Parker, 60, has served in this position since December 2013. From October 2007 until December 2013 he served as Executive Vice President and Chief Credit Officer of U.S. Bancorp. From March 2005 until October 2007, he served as Executive Vice President of Credit Portfolio Management of U.S. Bancorp, having served as Senior Vice President of Credit Portfolio Management of U.S. Bancorp since January 2002.
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Katherine B. Quinn
Ms. Quinn is Executive Vice President and Chief Strategy and Reputation Officer of U.S. Bancorp. Ms. Quinn, 52, has served in this position since joining U.S. Bancorp in September 2013 and has served on U.S. Bancorps Managing Committee since January 2015. From September 2010 until January 2013, she served as Chief Marketing Officer of WellPoint, Inc. (now known as Anthem, Inc.), a health insurance provider, having served as Head of Corporate Marketing of WellPoint from July 2005 until September 2010. Prior to that time, she served as Chief Marketing and Strategy Officer at The Hartford, an investment and insurance company, from 2003 until 2005.
Mark G. Runkel
Mr. Runkel is Executive Vice President and Chief Credit Officer of U.S. Bancorp. Mr. Runkel, 40, has served in this position since December 2013. From February 2011 until December 2013, he served as Senior Vice President and Credit Risk Group Manager of U.S. Bancorp Retail and Payment Services Credit Risk Management, having served as Senior Vice President and Risk Manager of U.S. Bancorp Retail and Small Business Credit Risk Management from June 2009 until February 2011. From March 2005 until May 2009, he served as Vice President and Risk Manager of U.S. Bancorp.
Kent V. Stone
Mr. Stone is Vice Chairman, Consumer Banking Sales and Support, of U.S. Bancorp. Mr. Stone, 59, has served in this position since March 2013. He served as an Executive Vice President of U.S. Bancorp from 2000 to 2013, most recently with responsibility for Consumer Banking Support Services since 2006, and held other senior leadership positions with U.S. Bancorp since 1991.
Jeffry H. von Gillern
Mr. von Gillern is Vice Chairman, Technology and Operations Services, of U.S. Bancorp. Mr. von Gillern, 51, has served in this position since July 2010. From April 2001, when he joined U.S. Bancorp, until July 2010, Mr. von Gillern served as Executive Vice President of U.S. Bancorp, additionally serving as Chief Information Officer from July 2007 until July 2010.
Additional Information
Additional information in response to this Item 10 can be found in the Companys Proxy Statement under the headings Other Matters Section 16(a) Beneficial Ownership Reporting Compliance, Proposal 1 Election of Directors, Corporate Governance Committee Responsibilities and Corporate Governance Committee Member Qualifications. That information is incorporated into this report by reference.
Item 11. | Executive Compensation |
Information in response to this Item 11 can be found in the Companys Proxy Statement under the headings Compensation Discussion and Analysis, Compensation Committee Report, Executive Compensation and Director Compensation. That information is incorporated into this report by reference.
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Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Equity Compensation Plan Information
The following table summarizes information regarding the Companys equity compensation plans in effect as of December 31, 2016:
Plan Category |
Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights |
Weighted-average Exercise Price of Outstanding Options, Warrants and Rights |
Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in the First Column) |
|||||||||
Equity compensation plans approved by security holders |
40,685,926 | (3) | ||||||||||
Stock Options |
16,921,621 | (1) | $ | 30.03 | ||||||||
Restricted Stock Units and Performance-Based Restricted Stock Units |
7,891,205 | (2) | - | |||||||||
Equity compensation plans not approved by security holders(4) |
521,344 | - | - | |||||||||
|
|
|
|
|||||||||
Total |
25,334,170 | 40,685,926 |
(1) | Includes shares underlying stock options under the U.S. Bancorp 2015 Stock Incentive Plan (the 2015 Plan), the U.S. Bancorp Amended and Restated 2007 Stock Incentive Plan (the 2007 Plan) and the U.S. Bancorp 2001 Stock Incentive Plan (the 2001 Plan). Excludes 137,620 shares, with a weighted-average exercise price of $19.86, underlying outstanding warrants assumed in connection with acquisitions by the Company. |
(2) | Includes shares underlying performance-based restricted stock units (awarded to the members of the Companys managing committee and settled in shares of the Companys common stock on a one-for-one basis) and restricted stock units (settled in shares of the Companys common stock on a one-for-one basis) under the 2015 Plan, the 2007 Plan and the 2001 Plan. No exercise price is paid upon vesting, and thus, no exercise price is included in the table. |
Includes an aggregate upward adjustment of 39,548 units subsequent to December 31, 2016, made to performance-based restricted stock units granted in 2016, to reflect the difference between (a) the number of units earned based on actual 2016 Company performance compared to absolute and relative targets set forth in each recipients award agreement and (b) the target number of units granted to managing committee members in February 2016.
Excludes 413,850 unvested shares of restricted stock awarded under the 2007 Plan. These unvested shares were issued when awarded and consequently are included in the number of common shares outstanding.
(3) | The 40,685,926 shares available for future issuance are reserved under the 2015 Plan. Future awards under the 2015 Plan may be made in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalents, stock awards, or other stock-based awards. |
(4) | These shares of common stock are issuable pursuant to various current and former deferred compensation plans of U.S. Bancorp and its predecessor entities. No exercise price is paid when shares are issued pursuant to the deferred compensation plans. |
The deferred compensation plans allow non-employee directors and members of senior management to defer all or part of their compensation until the earlier of retirement or termination of employment. The deferred compensation is deemed to be invested in one of several investment alternatives at the option of the participant, including shares of U.S. Bancorp common stock. Deferred compensation deemed to be invested
23
in U.S. Bancorp stock will be received in the form of shares of U.S. Bancorp common stock at the time of distribution, unless the Company chooses cash payment.
The 521,344 shares included in the table assume that participants in the plans whose deferred compensation had been deemed to be invested in U.S. Bancorp common stock had elected to receive all of that deferred compensation in shares of U.S. Bancorp common stock on December 31, 2016. The U.S. Bank Executive Employees Deferred Compensation Plan (2005 Statement) and the U.S. Bank Outside Directors Deferred Compensation Plan (2005 Statement) are the Companys only deferred compensation plans under which compensation may currently be deferred.
Additional Information
Additional information in response to this Item 12 can be found in the Companys Proxy Statement under the heading Security Ownership of Certain Beneficial Owners and Management. That information is incorporated into this report by reference.
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Information in response to this Item 13 can be found in the Companys Proxy Statement under the headings Corporate Governance Director Independence, Corporate Governance Committee Member Qualifications and Certain Relationships and Related Transactions. That information is incorporated into this report by reference.
Item 14. | Principal Accounting Fees and Services |
Information in response to this Item 14 can be found in the Companys Proxy Statement under the headings Audit Committee Report and Payment of Fees to Auditor Fees to Independent Auditor and Audit Committee Report and Payment of Fees to Auditor Administration of Engagement of Independent Auditor. That information is incorporated into this report by reference.
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PART IV
Item 15. | Exhibits, Financial Statement Schedules |
List of documents filed as part of this report
1. Financial Statements
| Report of Management |
| Report of Independent Registered Public Accounting Firm |
| Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting |
| U.S. Bancorp Consolidated Balance Sheet as of December 31, 2016 and 2015 |
| U.S. Bancorp Consolidated Statement of Income for each of the three years in the period ended December 31, 2016 |
| U.S. Bancorp Consolidated Statement of Comprehensive Income for each of the three years in the period ended December 31, 2016 |
| U.S. Bancorp Consolidated Statement of Shareholders Equity for each of the three years in the period ended December 31, 2016 |
| U.S. Bancorp Consolidated Statement of Cash Flows for each of the three years in the period ended December 31, 2016 |
| Notes to Consolidated Financial Statements |
| U.S. Bancorp Consolidated Balance Sheet Five Year Summary (Unaudited) |
| U.S. Bancorp Consolidated Statement of Income Five Year Summary (Unaudited) |
| U.S. Bancorp Quarterly Consolidated Financial Data (Unaudited) |
| U.S. Bancorp Supplemental Financial Data (Unaudited) |
| U.S. Bancorp Consolidated Daily Average Balance Sheet and Related Yields and Rates (Unaudited) |
2. Financial Statement Schedules
All financial statement schedules for the Company have been included in the consolidated financial statements or the related footnotes, or are either inapplicable or not required.
3. Exhibits
Shareholders may obtain a copy of any of the exhibits to this report upon payment of a fee covering the Companys reasonable expenses in furnishing the exhibits. You can request exhibits by writing to Investor Relations, U.S. Bancorp, 800 Nicollet Mall, Minneapolis, Minnesota 55402.
Exhibit Number |
Description | |
3.1 |
Restated Certificate of Incorporation, as amended. | |
(1)3.2 |
Amended and Restated Bylaws. Filed as Exhibit 3.1 to Form 8-K filed on January 20, 2016. |
25
Exhibit Number |
Description | |
4.1 |
[Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, copies of instruments defining the rights of holders of long-term debt are not filed. U.S. Bancorp agrees to furnish a copy thereof to the SEC upon request.] | |
(1)(2)10.1(a) |
U.S. Bancorp 2001 Stock Incentive Plan. Filed as Exhibit 10.1 to Form 10-K for the year ended December 31, 2001. | |
(1)(2)10.1(b) |
Amendment No. 1 to U.S. Bancorp 2001 Stock Incentive Plan. Filed as Exhibit 10.2 to Form 10-K for the year ended December 31, 2002. | |
(1)(2)10.2 |
U.S. Bancorp 2006 Executive Incentive Plan. Filed as Exhibit 10.1 to Form 8-K filed on April 21, 2006. | |
(1)(2)10.3 |
U.S. Bancorp Executive Deferral Plan, as amended. Filed as Exhibit 10.7 to Form 10-K for the year ended December 31, 1999. | |
(1)(2)10.4 |
Summary of Nonqualified Supplemental Executive Retirement Plan, as amended, of the former U.S. Bancorp. Filed as Exhibit 10.4 to Form 10-K for the year ended December 31, 2001. | |
(1)(2)10.5 |
Form of Director Indemnification Agreement entered into with former directors of the former U.S. Bancorp. Filed as Exhibit 10.15 to Form 10-K for the year ended December 31, 1997. | |
(1)(2)10.6(a) |
U.S. Bancorp Non-Qualified Executive Retirement Plan. Filed as Exhibit 10.16 to Form 10-K for the year ended December 31, 2002. | |
(1)(2)10.6(b) |
First, Second and Third Amendments of U.S. Bancorp Non-Qualified Executive Retirement Plan. Filed as Exhibit 10.17 to Form 10-K for the year ended December 31, 2003. | |
(1)(2)10.6(c) |
Fourth Amendment of U.S. Bancorp Non-Qualified Executive Retirement Plan. Filed as Exhibit 10.1 to Form 8-K filed on December 23, 2004. | |
(1)(2)10.6(d) |
Fifth Amendment of U.S. Bancorp Non-Qualified Executive Retirement Plan. Filed as Exhibit 10.2 to Form 10-Q for the quarterly period ended March 31, 2005. | |
(1)(2)10.6(e) |
Sixth Amendment of U.S. Bancorp Non-Qualified Executive Retirement Plan. Filed as Exhibit 10.1 to Form 8-K filed on October 20, 2005. | |
(1)(2)10.6(f) |
Seventh Amendment of U.S. Bancorp Non-Qualified Executive Retirement Plan. Filed as Exhibit 10.1(g) to Form 8-K filed on January 7, 2009. | |
(1)(2)10.6(g) |
Eighth Amendment of U.S. Bancorp Non-Qualified Executive Retirement Plan. Filed as Exhibit 10.1(h) to Form 8-K filed on January 7, 2009. | |
(1)(2)10.6(h) |
Ninth Amendment of U.S. Bancorp Non-Qualified Executive Retirement Plan. Filed as Exhibit 10.1(i) to Form 8-K filed on January 7, 2009. | |
(1)(2)10.6(i) |
Tenth Amendment of U.S. Bancorp Non-Qualified Executive Retirement Plan. Filed as Exhibit 10.1(j) to Form 8-K filed on January 7, 2009. | |
(1)(2)10.6(j) |
Eleventh Amendment of U.S. Bancorp Non-Qualified Executive Retirement Plan. Filed as Exhibit 10.11(k) to Form 10-K for the year ended December 31, 2009. | |
(1)(2)10.6(k) |
Twelfth Amendment of U.S. Bancorp Non-Qualified Executive Retirement Plan. Filed as Exhibit 10.11(l) to Form 10-K for the year ended December 31, 2010. | |
(1)(2)10.6(l) |
Thirteenth Amendment of U.S. Bancorp Non-Qualified Executive Retirement Plan. Filed as Exhibit 10.6(l) to Form 10-K for the year ended December 31, 2013. |
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Exhibit Number |
Description | |
(1)(2)10.7(a) |
U.S. Bancorp Executive Employees Deferred Compensation Plan. Filed as Exhibit 10.18 to Form 10-K for the year ended December 31, 2003. | |
(1)(2)10.7(b) |
2011 Amendment of U.S. Bancorp Executive Employees Deferred Compensation Plan. Filed as Exhibit 10.9(b) to Form 10-K for the year ended December 31, 2011. | |
(1)(2)10.8(a) |
U.S. Bancorp 2005 Executive Employees Deferred Compensation Plan. Filed as Exhibit 10.2 to Form 8-K filed on December 21, 2005. | |
(1)(2)10.8(b) |
First Amendment of U.S. Bancorp 2005 Executive Employees Deferred Compensation Plan effective as of January 31, 2009. Filed as Exhibit 10.2(b) to Form 8-K filed on January 7, 2009. | |
(1)(2)10.8(c) |
Second Amendment of U.S. Bancorp 2005 Executive Employees Deferred Compensation Plan effective as of January 1, 2010. Filed as Exhibit 10.13(c) to Form 10-K for the year ended December 31, 2010. | |
(1)(2)10.8(d) |
Third Amendment of U.S. Bancorp 2005 Executive Employees Deferred Compensation Plan. Filed as Exhibit 10.10(d) to Form 10-K for the year ended December 31, 2011. | |
(1)(2)10.9(a) |
U.S. Bancorp Outside Directors Deferred Compensation Plan. Filed as Exhibit 10.19 to Form 10-K for the year ended December 31, 2003. | |
(1)(2)10.9(b) |
2011 Amendment of U.S. Bancorp Outside Directors Deferred Compensation Plan. Filed as Exhibit 10.11(b) to Form 10-K for the year ended December 31, 2011. | |
(1)(2)10.10(a) |
U.S. Bancorp 2005 Outside Directors Deferred Compensation Plan. Filed as Exhibit 10.1 to Form 8-K filed on December 21, 2005. | |
(1)(2)10.10(b) |
First Amendment of U.S. Bancorp 2005 Outside Directors Deferred Compensation Plan effective as of January 31, 2009. Filed as Exhibit 10.3(b) to Form 8-K filed on January 7, 2009. | |
(1)(2)10.10(c) |
Second Amendment of U.S. Bancorp 2005 Outside Directors Deferred Compensation Plan. Filed as Exhibit 10.12(c) to Form 10-K for the year ended December 31, 2011. | |
(1)(2)10.11 |
Form of Executive Officer Stock Option Agreement with cliff and performance vesting under U.S. Bancorp 2001 Stock Incentive Plan. Filed as Exhibit 10.1 to Form 10-Q for the quarterly period ended September 30, 2004. | |
(1)(2)10.12 |
Form of Executive Officer Stock Option Agreement with annual vesting under U.S. Bancorp 2001 Stock Incentive Plan. Filed as Exhibit 10.2 to Form 10-Q for the quarterly period ended September 30, 2004. | |
(1)(2)10.13 |
Form of 2006 Executive Officer Stock Option Agreement with annual vesting under U.S. Bancorp 2001 Stock Incentive Plan. Filed as Exhibit 10.1 to Form 8-K filed on January 17, 2006. | |
(1)(2)10.14 |
Form of Director Stock Option Agreement under U.S. Bancorp 2001 Stock Incentive Plan. Filed as Exhibit 10.4 to Form 10-Q for the quarterly period ended September 30, 2004. | |
(1)(2)10.15(a) |
Form of Director Restricted Stock Unit Award Agreement under U.S. Bancorp 2001 Stock Incentive Plan. Filed as Exhibit 10.5 to Form 10-Q for the quarterly period ended September 30, 2004. | |
(1)(2)10.15(b) |
Form of Amendment to Director Restricted Stock Unit Award Agreements under U.S. Bancorp 2001 Stock Incentive Plan dated as of December 31, 2008. Filed as Exhibit 10.5(b) to Form 8-K filed on January 7, 2009. |
27
Exhibit Number |
Description | |
(1)(2)10.16 |
Form of Executive Officer Restricted Stock Unit Award Agreement under U.S. Bancorp 2001 Stock Incentive Plan. Filed as Exhibit 10.6 to Form 10-Q for the quarterly period ended September 30, 2004. | |
(1)(2)10.17 |
U.S. Bancorp Amended and Restated 2007 Stock Incentive Plan. Filed as Exhibit 10.1 to Form 8-K filed on April 20, 2010. | |
(1)(2)10.18 |
Form of 2007 Non-Qualified Stock Option Agreement for Executive Officers under U.S. Bancorp Amended and Restated 2007 Stock Incentive Plan. Filed as Exhibit 10.2 to Form 8-K filed on April 18, 2007. | |
(1)(2)10.19 |
Form of Non-Qualified Stock Option Agreement for Executive Officers under U.S. Bancorp Amended and Restated 2007 Stock Incentive Plan to be used after December 31, 2008. Filed as Exhibit 10.8(a) to Form 8-K filed on January 7, 2009. | |
(1)(2)10.20 |
Form of Non-Qualified Stock Option Agreement for Executive Officers (as approved January 16, 2012) under U.S. Bancorp Amended and Restated 2007 Stock Incentive Plan. Filed as Exhibit 10.2 to Form 8-K filed on January 18, 2012. | |
(1)(2)10.21 |
Form of Non-Qualified Stock Option Agreement for Executive Officers (as approved November 14, 2012) under U.S. Bancorp Amended and Restated 2007 Stock Incentive Plan. Filed as Exhibit 10.2 to Form 8-K filed on November 19, 2012. | |
(1)(2)10.22 |
Form of Non-Qualified Stock Option Agreement for Executive Officers (as approved December 9, 2013) under U.S. Bancorp Amended and Restated 2007 Stock Incentive Plan. Filed as Exhibit 10.2 to Form 8-K filed on December 13, 2013. | |
(1)(2)10.23 |
Form of Non-Qualified Stock Option Agreement for Executive Officers under U.S. Bancorp Amended and Restated 2007 Stock Incentive Plan to be used after December 31, 2014. Filed as Exhibit 10.2 to Form 8-K filed on December 31, 2014. | |
(1)(2)10.24 |
Form of Restricted Stock Award Agreement for Executive Officers under U.S. Bancorp Amended and Restated 2007 Stock Incentive Plan to be used after December 31, 2008. Filed as Exhibit 10.9(a) to Form 8-K filed on January 7, 2009. | |
(1)(2)10.25 |
Form of Restricted Stock Award Agreement under U.S. Bancorp Amended and Restated 2007 Stock Incentive Plan. Filed as Exhibit 10.1 to Form 10-Q filed for the quarterly period ended September 30, 2012. | |
(1)(2)10.26 |
Form of Restricted Stock Unit Award Agreement under U.S. Bancorp Amended and Restated 2007 Stock Incentive Plan to be used after December 31, 2013. Filed as Exhibit 10.27 to Form 10-K for the year ended December 31, 2013. | |
(1)(2)10.27 |
Form of Restricted Stock Unit Award Agreement for Executive Officers under U.S. Bancorp Amended and Restated 2007 Stock Incentive Plan to be used after December 31, 2008. Filed as Exhibit 10.10(a) to Form 8-K filed on January 7, 2009. | |
(1)(2)10.28 |
Form of Performance Restricted Stock Unit Award Agreement for Executive Officers under U.S. Bancorp Amended and Restated 2007 Stock Incentive Plan to be used after December 31, 2008. Filed as Exhibit 10.1 to Form 8-K filed on March 6, 2009. | |
(1)(2)10.29 |
Form of Performance Restricted Stock Unit Award Agreement for Executive Officers (as approved February 14, 2011) under U.S. Bancorp Amended and Restated 2007 Stock Incentive Plan. Filed as Exhibit 10.1 to Form 8-K filed on February 16, 2011. | |
(1)(2)10.30 |
Form of Performance Restricted Stock Unit Award Agreement for Executive Officers (as approved January 16, 2012) under U.S. Bancorp Amended and Restated 2007 Stock Incentive Plan. Filed as Exhibit 10.1 to Form 8-K filed on January 18, 2012. |
28
Exhibit Number |
Description | |
(1)(2)10.31 |
Form of Performance Restricted Stock Unit Award Agreement for Executive Officers (as approved November 14, 2012) under U.S. Bancorp Amended and Restated 2007 Stock Incentive Plan. Filed as Exhibit 10.1 to Form 8-K filed on November 19, 2012. | |
(1)(2)10.32 |
Form of Performance Restricted Stock Unit Award Agreement for Executive Officers (as approved December 9, 2013) under U.S. Bancorp Amended and Restated 2007 Stock Incentive Plan. Filed as Exhibit 10.1 to Form 8-K filed on December 13, 2013. | |
(1)(2)10.33 |
Form of Performance Restricted Stock Unit Award Agreement for Executive Officers under U.S. Bancorp Amended and Restated 2007 Stock Incentive Plan to be used after December 31, 2014. Filed as Exhibit 10.1 to Form 8-K filed on December 31, 2014. | |
(1)(2)10.34 |
Form of 2007 Restricted Stock Unit Award Agreement for Non-Employee Directors under U.S. Bancorp Amended and Restated 2007 Stock Incentive Plan. Filed as Exhibit 10.1 to Form 10-Q/A for the quarterly period ended September 30, 2007. | |
(1)(2)10.35 |
Form of Restricted Stock Unit Award Agreement for Non-Employee Directors under U.S. Bancorp Amended and Restated 2007 Stock Incentive Plan to be used after December 31, 2008. Filed as Exhibit 10.11(a) to Form 8-K filed on January 7, 2009. | |
(1)(2)10.36 |
Form of Restricted Stock Unit Award Agreement for Non-Employee Directors under U.S. Bancorp Amended and Restated 2007 Stock Incentive Plan to be used after December 31, 2013. Filed as Exhibit 10.37 to Form 10-K for the year ended December 31, 2013. | |
(1)(2)10.37 |
U.S. Bancorp 2015 Stock Incentive Plan. Filed as Exhibit 10.1 to Form 8-K filed on April 23, 2015. | |
(1)(2)10.38 |
Form of Restricted Stock Unit Award Agreement for Non-Employee Directors under U.S. Bancorp 2015 Stock Incentive Plan (in use for grants made through 2016). Filed as Exhibit 10.2 to Form 8-K filed on April 23, 2015. | |
(1)(2)10.39 |
Form of Performance Restricted Stock Unit Award Agreement for Executive Officers under U.S. Bancorp 2015 Stock Incentive Plan (in use for grants made through 2016). Filed as Exhibit 10.3 to Form 8-K filed on April 23, 2015. | |
(1)(2)10.40 |
Form of Stock Option Award Agreement for Executive Officers under U.S. Bancorp 2015 Stock Incentive Plan (in use for grants made through 2016). Filed as Exhibit 10.4 to Form 8-K filed on April 23, 2015. | |
(2)10.41 |
Form of Restricted Stock Unit Agreement used for December 2016 grant to Gunjan Kedia under U.S. Bancorp 2015 Stock Incentive Plan. | |
(2)10.42 |
Form of Restricted Stock Unit Award Agreement for Non-Employee Directors under U.S. Bancorp 2015 Stock Incentive Plan (used for grants made after January 1, 2017). | |
(2)10.43 |
Form of Performance Restricted Stock Unit Award Agreement for Executive Officers under U.S. Bancorp 2015 Stock Incentive Plan (used for grants made after January 1, 2017). | |
(2)10.44 |
Form of Stock Option Award Agreement for Executive Officers under U.S. Bancorp 2015 Stock Incentive Plan (used for grants made after January 1, 2017). | |
12 |
Statement re: Computation of Ratio of Earnings to Fixed Charges. | |
13 |
2016 Annual Report, pages 21 through 160. | |
21 |
Subsidiaries of the Registrant. | |
23 |
Consent of Ernst & Young LLP. | |
24 |
Power of Attorney. | |
31.1 |
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. |
29
Exhibit Number |
Description | |
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 Annual Report on Form 10-K of the Company for the year ended December 31, 2016, 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. |
(1) | Exhibit has been previously filed with the SEC and is incorporated herein as an exhibit by reference to the prior filing. |
(2) | Management contracts or compensatory plans or arrangements. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on February 23, 2017, on its behalf by the undersigned, thereunto duly authorized.
U.S. BANCORP | ||
By | /s/ RICHARD K. DAVIS | |
Richard K. Davis | ||
Chairman and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on February 23, 2017, by the following persons on behalf of the registrant and in the capacities indicated.
Signature and Title |
/s/ RICHARD K. DAVIS |
Richard K. Davis, |
Chairman and Chief Executive Officer (principal executive officer) |
/s/ TERRANCE R. DOLAN |
Terrance R. Dolan, |
Vice Chairman and Chief Financial Officer (principal financial officer) |
/s/ CRAIG E. GIFFORD |
Craig E. Gifford, |
Executive Vice President and Controller (principal accounting officer) |
DOUGLAS M. BAKER, JR.* |
Douglas M. Baker, Jr., Director |
WARNER L. BAXTER* |
Warner L. Baxter, Director |
MARC N. CASPER* |
Mark N. Casper, Director |
/s/ ANDREW CECERE |
Andrew Cecere, Director |
ARTHUR D. COLLINS, JR.* |
Arthur D. Collins, Jr., Director |
KIMBERLY J. HARRIS* |
Kimberly J. Harris, Director |
ROLAND A. HERNANDEZ* |
Roland A. Hernandez, Director |
DOREEN WOO HO* |
Doreen Woo Ho, Director |
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Signature and Title |
OLIVIA F. KIRTLEY* |
Olivia F. Kirtley, Director |
KAREN S. LYNCH* |
Karen S. Lynch, Director |
DAVID B. OMALEY* |
David B. OMaley, Director |
ODELL M. OWENS, M.D., M.P.H.* |
ODell M. Owens, M.D., M.P.H., Director |
CRAIG D. SCHNUCK* |
Craig D. Schnuck, Director |
SCOTT W. WINE* |
Scott W. Wine, Director |
* | Andrew Cecere, by signing his name hereto, does hereby sign this document on behalf of each of the above named directors of the registrant pursuant to powers of attorney duly executed by such persons. |
Dated: February 23, 2017
By: | /s/ ANDREW CECERE | |
Andrew Cecere | ||
Attorney-In-Fact | ||
President and Chief Operating Officer |
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Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
U.S. BANCORP
U.S. Bancorp, a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:
The name of the corporation is U.S. Bancorp and the name under which the corporation was originally incorporated is First Bank Stock Investment Company. The date of filing of its original Certificate of Incorporation was April 2, 1929.
This Restated Certificate of Incorporation was duly adopted by the Board of Directors in accordance with Section 245 of the General Corporation Law of the State of Delaware and only restates and integrates and does not further amend the provisions of the Restated Certificate of Incorporation of U.S. Bancorp as heretofore restated, amended and supplemented. There is no discrepancy between those provisions and the provisions of this Restated Certificate of Incorporation.
The text of the Restated Certificate of Incorporation, as amended or supplemented heretofore, is hereby restated without further amendments or changes to read in its entirety as follows:
FIRST: The name of this corporation is U.S. Bancorp.
SECOND: The registered office of the corporation in the State of Delaware is to be located at 1209 Orange Street in the City of Wilmington, County of New Castle. The name of the registered agent at such address is The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any part of the world in any capacity in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware, and the corporation shall be authorized to exercise and enjoy all powers, rights and privileges which corporations organized under the General Corporation Law of Delaware may have under the laws of the State of Delaware as in force from time to time, including without limitation all powers, rights and privileges necessary or convenient to carry out all those acts and activities in which it may lawfully engage.
FOURTH: The total number of shares of all classes of stock which the corporation shall have the authority to issue is 4,050,000,000, consisting of 50,000,000 shares of Preferred Stock of the par value of $1.00 each and 4,000,000,000 shares of Common Stock of the par value of $.01 each.
The designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof, of each class of stock are as follows:
The Board of Directors is expressly authorized at any time, and from time to time, to provide for the issuance of shares of preferred stock in one or more series, with such voting powers, full or limited, or without voting powers and with such designations, preferences and
relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions providing for the issue thereof adopted by the board of directors, subject to the limitations prescribed by law and in accordance with the provisions hereof, including (but without limiting the generality thereof) the following:
(a) The designation of the series and the number of shares to constitute the series.
(b) The dividend rate of the series, the conditions and dates upon which such dividends shall be payable, the relation which such dividends shall bear to the dividends payable on any other class or classes of stock, and whether such dividends shall be cumulative or noncumulative.
(c) Whether the shares of the series shall be subject to redemption by the corporation and, if made subject to such redemption, the times, prices and other terms and conditions of such redemption.
(d) The terms and amount of any sinking fund provided for the purchase or redemption of the shares of the series.
(e) Whether or not the shares of the series shall be convertible into or exchangeable for shares of any other class or classes or of any other series of any class or classes of stock of the corporation, and, if provision be made for conversion or exchange, the times, prices, rates, adjustments and other terms and conditions of such conversion or exchange.
(f) The extent, if any, to which the holders of the shares of the series shall be entitled to vote with respect to the election of directors or otherwise.
(g) The restrictions, if any on the issue or reissue of any additional preferred stock.
(h) The rights of the holders of the shares of the series upon the dissolution, liquidation, or winding up of the corporation.
Subject to the prior or equal rights, if any, of the preferred stock of any and all series stated and expressed by the board of directors in the resolution or resolutions providing for the issuance of such preferred stock, the holders of common stock shall be entitled (i) to receive dividends when and as declared by the board of directors out of any funds legally available therefore, (ii) in the event of any dissolution, liquidation or winding up of the corporation, to receive the remaining assets of the corporation, ratably according to the number of shares of common stock held, and (iii) to one vote for each share of common stock held. No holder of common stock shall have any preemptive right to purchase or subscribe for any part of any issue of stock or of securities of the corporation convertible into stock of any class whatsoever, whether now or hereafter authorized.
Pursuant to the authority conferred by this Article FOURTH, the following series of Preferred Stock have been designated, each such series consisting of such number of shares, with such voting powers and with such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof as are stated and expressed in the exhibit with respect to such series attached hereto as specified below and incorporated herein by reference:
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Exhibit A Series A Non-Cumulative Perpetual Preferred Stock
Exhibit B Series B Non-Cumulative Perpetual Preferred Stock
Exhibit C Series C Non-Cumulative Perpetual Preferred Stock
Exhibit D Series F Non-Cumulative Perpetual Preferred Stock
Exhibit E Series G Non-Cumulative Perpetual Preferred Stock
Exhibit F Series H Non-Cumulative Perpetual Preferred Stock
FIFTH: In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized:
(a) To fix, determine and vary from time to time the amount to be maintained as surplus and the amount or amounts to be set apart as working capital.
(b) To adopt, amend, alter or repeal by-laws of the corporation, without any action on the part of the shareholders. The by-laws adopted by the directors may be amended, altered, changed, added to or repealed by the shareholders.
(c) To authorize and cause to be executed mortgages and liens, without limit as to amount, upon the real and personal property of this corporation.
(d) To sell, assign, convey or otherwise dispose of a part of the property, assets and effects of this corporation, less than the whole, or less than substantially the whole thereof, on such terms and conditions as they shall deem advisable, without the assent of the shareholders; and also to sell, assign, transfer, convey and otherwise dispose of the whole or substantially the whole of the property, assets, effects, franchises and good will of this corporation on such terms and conditions as they shall deem advisable, but only pursuant to the affirmative vote of the holders of a majority in amount of the stock then having voting power and at the time issued and outstanding, but in any event not less than the amount required by law.
(e) All of the powers of this corporation, insofar as the same lawfully may be vested by this certificate in the board of directors, are hereby conferred upon the board of directors of this corporation.
SIXTH: The affairs of the Corporation shall be conducted by a Board of Directors. Except as otherwise provided by this Article Sixth, the number of directors, not less than twelve (12) nor more than thirty (30), shall be fixed from time to time by the Bylaws. Commencing with the 2008 annual meeting of the stockholders, directors shall be elected annually for terms of one year and shall hold office until the next succeeding annual meeting. Directors elected at
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the 2005 annual meeting of stockholders shall hold office until the 2008 annual meeting of stockholders; directors elected at the 2006 annual meeting of stockholders shall hold office until the 2009 annual meeting of stockholders and directors elected at the 2007 annual meeting of stockholders shall hold office until the 2010 annual meeting of stockholders. In all cases, directors shall hold office until their respective successors are elected by the stockholders and have qualified.
In the event that the holders of any class or series of stock of the Corporation having a preference as to dividends or upon liquidation of the Corporation shall be entitled, by a separate class vote, to elect directors as may be specified pursuant to Article Fourth, then the provisions of such class or series of stock with respect to their rights shall apply. The number of directors that may be elected by the holders of any such class or series of stock shall be in addition to the number fixed pursuant to the preceding paragraph of this Article Sixth. Except as otherwise expressly provided pursuant to Article Fourth, the number of directors that may be so elected by the holders of any such class or series of stock shall be elected for terms expiring at the next annual meeting of stockholders and vacancies among directors so elected by the separate class vote of any such class or series of stock shall be filled by the remaining directors elected by such class or series, or, if there are no such remaining directors, by the holders of such class or series in the same manner in which such class or series initially elected a director.
If at any meeting for the election of directors, more than one class of stock, voting separately as classes, shall be entitled to elect one or more directors and there shall be a quorum of only one such class of stock, that class of stock shall be entitled to elect its quota of directors notwithstanding the absence of a quorum of the other class or classes of stock.
Vacancies and newly created directorships resulting from an increase in the number of directors, subject to the provision of Article Fourth, shall be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director, and such directors so chosen shall hold office until the next election of directors, and until their successors shall be elected and shall have qualified.
SEVENTH: No action required to be taken or which may be taken at any annual meeting or special meeting of stockholders may be taken without a meeting, and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied.
EIGHTH: No director of the corporation shall be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty by such director as a director; provided, however, that this Article Eighth shall not eliminate or limit the liability of a director to the extent provided by applicable law (i) for any breach of the directors duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. No amendment to or repeal of this Article Eighth shall apply to or have any effect on the liability or alleged liability of any director of the corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal.
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IN WITNESS WHEREOF, U.S. Bancorp has caused this Restated Certificate of Incorporation to be signed by its duly authorized officer as of this 19th day of June, 2013.
U.S. BANCORP | ||
By: | /s/ James L. Chosy | |
James L. Chosy Executive Vice President, General Counsel and Secretary |
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Exhibit A
CERTIFICATE OF DESIGNATIONS
OF
SERIES A NON-CUMULATIVE PERPETUAL PREFERRED STOCK
Section 1. Designation. The designation of the series of Preferred Stock shall be Series A Non-Cumulative Perpetual Preferred Stock (hereinafter referred to as the Series A Preferred Stock). Each share of Series A Preferred Stock shall be identical in all respects to every other share of Series A Preferred Stock. Series A Preferred Stock will rank equally with Parity Stock, if any, and will rank senior to Junior Stock with respect to the payment of dividends and the distribution of assets in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
Section 2. Number of Shares. The number of authorized shares of Series A Preferred Stock shall be 20,010. Such number may from time to time be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series A Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors of the Corporation, the Committee or any duly authorized committee of the Board of Directors of the Corporation and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Corporation shall have the authority to issue fractional shares of Series A Preferred Stock.
Section 3. Definitions. As used herein with respect to Series A Preferred Stock:
Business Day means each Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions in Minneapolis, Minnesota, New York, New York or Wilmington, Delaware are not authorized or obligated by law, regulation or executive order to close.
Depositary Company shall have the meaning set forth in Section 6(d) hereof.
Dividend Payment Date shall have the meaning set forth in Section 4(a) hereof.
Dividend Period shall have the meaning set forth in Section 4(a) hereof.
DTC means The Depository Trust Company, together with its successors and assigns.
Junior Stock means the Corporations common stock and any other class or series of stock of the Corporation hereafter authorized over which Series A Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Corporation.
London Banking Day means any day on which commercial banks are open for general business (including dealings in deposits in U.S. dollars) in London, England.
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Parity Stock means any other class or series of stock of the Corporation that ranks on a par with Series A Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Corporation.
Preferred Director shall have the meaning set forth in Section 7 hereof.
Reuters Screen LIBOR01 Page means the display designated on the Reuters 3000 Xtra (or such other page as may replace that page on that service or such other service as may be nominated by the British Bankers Association for the purpose of displaying London interbank offered rates for U.S. dollar deposits).
Series A Preferred Stock shall have the meaning set forth in Section 1 hereof.
Stock Purchase Date means the first to occur of any January 15, April 15, July 15 and October 15, or if any such day is not a Business Day, the next Business Day, after the Remarketing Settlement Date or the Remarketing Date of a Failed Remarketing, as such terms are defined in that certain Third Supplemental Indenture, dated as of March 17, 2006, between the Corporation and Wilmington Trust Company, as successor indenture trustee, amending and supplementing that certain Junior Subordinated Indenture dated as of August 28, 2005, between the Company and Delaware Trust Company, National Association, as thereby amended from time to time.
Three-Month LIBOR means, with respect to any Dividend Period, the rate (expressed as a percentage per annum) for deposits in U.S. dollars for a three-month period commencing on the first day of that Dividend Period, as that rate appears on Reuters Screen LIBOR01 Page as of 11:00 a.m. (London time) on the second London Banking Day preceding the first day of that Dividend Period. If such rate does not appear on Reuters Screen LIBOR01 Page, Three-Month LIBOR will be determined on the basis of the rates at which deposits in U.S. dollars for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1,000,000 are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by the Corporation, at approximately 11:00 A.M., London time on the second London Banking Day preceding the first day of that Dividend Period. U.S. Bank National Association, or such other bank as may be acting as calculation agent for the Corporation, will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, Three-Month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest .00001 of 1%) of such quotations. If fewer than two quotations are provided, Three-Month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest ..00001 of 1%) of the rates quoted by three major banks in New York City selected by the calculation agent, at approximately 11:00 a.m., New York City time, on the first day of that Dividend Period for loans in U.S. dollars to leading European banks for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1,000,000. However, if the banks selected by the calculation agent to provide quotations are not quoting as described above, Three-Month LIBOR for that Dividend Period will be the same as Three-Month LIBOR as determined for the previous Dividend Period, or in the case of the first Dividend Period, the most recent rate that could have been determined in accordance with the first sentence of this paragraph had Series A Preferred Stock been outstanding. The calculation agents establishment of Three-Month LIBOR and calculation of the amount of dividends for each Dividend Period will be on file at the principal offices of the Corporation, will be made available to any holder of Series A Preferred Stock upon request and will be final and binding in the absence of manifest error.
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Section 4. Dividends.
(a) Rate. Holders of Series A Preferred Stock shall be entitled to receive, if, as and when declared by the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation , but only out of assets legally available therefor, non-cumulative cash dividends on the liquidation preference of $100,000 per share of Series A Preferred Stock, and no more, payable on the following dates: (1) if the Series A Preferred Stock is issued prior to April 15, 2011, semi-annually in arrears on each April 15 and October 15 through April 15, 2011, and (2) from and including the later of April 15, 2011 and the Stock Purchase Date, quarterly in arrears on each July 15, October 15, January 15 and April 15; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day (without any interest or other payment in respect of such delay) (each such day on which dividends are payable a Dividend Payment Date). The period from and including the date of issuance of the Series A Preferred Stock or any Dividend Payment Date to but excluding the next Dividend Payment Date is a Dividend Period. Dividends on each share of Series A Preferred Stock will accrue on the liquidation preference of $100,000 per share (i) from the date of issuance to but not including the later of the Dividend Payment Date in April 2011 and the Stock Purchase Date at a rate per annum equal to 7.189%, and (ii) thereafter for each related Dividend Period at a rate per annum equal to the greater of (x) Three-Month LIBOR plus 1.02% or (y) 3.50%. The record date for payment of dividends on the Series A Preferred Stock shall be the last Business Day of the calendar month immediately preceding the month during which the Dividend Payment Date falls. The amount of dividends payable for any period prior to the later of the Dividend Payment Day in April 2011 and the date of original issuance of the Series A Preferred Stock shall be computed on the basis of a 360-day year consisting of twelve 30-day months and dividends for periods thereafter shall be computed on the basis of a 360-day year and the actual number of days elapsed.
(b) Non-Cumulative Dividends. Dividends on shares of Series A Preferred Stock shall be non-cumulative. To the extent that any dividends payable on the shares of Series A Preferred Stock on any Dividend Payment Date are not declared and paid, in full or otherwise, on such Dividend Payment Date, then such unpaid dividends shall not cumulate and shall cease to accrue and be payable and the Corporation shall have no obligation to pay, and the holders of Series A Preferred Stock shall have no right to receive, dividends accrued for such Dividend Period after the Dividend Payment Date for such Dividend Period or interest with respect to such dividends, whether or not dividends are declared for any subsequent Dividend Period with respect to Series A Preferred Stock, Parity Stock, Junior Stock or any other class or series of authorized preferred stock of the Corporation.
(c) Priority of Dividends. So long as any share of Series A Preferred Stock remains outstanding, (i) no dividend shall be declared or paid or set aside for payment and no distribution shall be declared or made or set aside for payment on any Junior Stock, other than a dividend payable solely in Junior Stock, (ii) no shares of Junior Stock shall be repurchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly
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(other than as a result of a reclassification of Junior Stock for or into Junior Stock, or the exchange or conversion of one share of Junior Stock for or into another share of Junior Stock, and other than through the use of the proceeds of a substantially contemporaneous sale of other shares of Junior Stock), nor shall any monies be paid to or made available for a sinking fund for the redemption of any such securities by the Corporation and (iii) no shares of Parity Stock shall be repurchased, redeemed or otherwise acquired for consideration by the Corporation otherwise than pursuant to pro rata offers to purchase all, or a pro rata portion, of the Series A Preferred Stock and such Parity Stock except by conversion into or exchange for Junior Stock, in each case unless full dividends on all outstanding shares of Series A Preferred Stock for the then-current Dividend Period have been paid in full or declared and a sum sufficient for the payment thereof set aside. The foregoing shall not restrict the ability of the Corporation, or any affiliate of the Corporation, to engage in any market-making transactions in the Junior Stock or Parity Stock in the ordinary course of business. When dividends are not paid in full upon the shares of Series A Preferred Stock and any Parity Stock, all dividends declared upon shares of Series A Preferred Stock and any Parity Stock shall be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share on Series A Preferred Stock, and accrued dividends, including any accumulations on Parity Stock, bear to each other. No interest will be payable in respect of any dividend payment on shares of Series A Preferred Stock that may be in arrears. If the Board of Directors of the Corporation determines not to pay any dividend or a full dividend on a Dividend Payment Date, the Corporation will provide, or cause to be provided, written notice to the holders of the Series A Preferred Stock prior to such date. Subject to the foregoing, and not otherwise, such dividends (payable in cash, stock or otherwise) as may be determined by the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may be declared and paid on any Junior Stock from time to time out of any assets legally available therefor, and the shares of Series A Preferred Stock or Parity Stock shall not be entitled to participate in any such dividend.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, holders of Series A Preferred Stock shall be entitled, out of assets legally available therefor, before any distribution or payment out of the assets of the Corporation may be made to or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of securities ranking senior to or on parity with Series A Preferred Stock upon liquidation and the rights of the Corporations depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $100,000 per share, plus any authorized, declared and unpaid dividends for the then-current Dividend Period to the date of liquidation. The holder of Series A Preferred Stock shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Corporation are not sufficient to pay in full the liquidation preference plus any authorized, declared and unpaid dividends to all holders of Series A Preferred Stock and all holders of any Parity Stock, the amounts paid to the holders of Series A Preferred Stock and to the holders of all Parity Stock shall be pro rata in accordance with the respective aggregate liquidation preferences plus any authorized, declared and unpaid dividends of Series A Preferred Stock and all such Parity Stock.
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(c) Residual Distributions. If the liquidation preference plus any authorized, declared and unpaid dividends has been paid in full to all holders of Series A Preferred Stock and all holders of any Parity Stock, the holders of Junior Stock shall be entitled to receive all remaining assets of the Corporation according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Corporation shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, nor shall the merger, consolidation or any other business combination transaction of the Corporation into or with any other corporation or person or the merger, consolidation or any other business combination transaction of any other corporation or person into or with the Corporation be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation.
Section 6. Redemption.
(a) Optional Redemption. So long as full dividends on all outstanding shares of Series A Preferred Stock for the then-current Dividend Period have been paid or declared and a sum sufficient for the payment thereof set aside, the Corporation, at the option of its Board of Directors or any duly authorized committee of the Board of Directors of the Corporation, may redeem in whole or in part the shares of Series A Preferred Stock at the time outstanding, at any time on or after the later of the Dividend Payment Date in April 2011 and the date of original issuance of the Series A Preferred Stock, upon notice given as provided in Section 6(b) below. The redemption price for shares of Series A Preferred Stock shall be $100,000 per share plus dividends that have been declared but not paid plus accrued and unpaid dividends for the then-current Dividend Period to the redemption date.
(b) Notice of Redemption. Notice of every redemption of shares of Series A Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the holders of record of such shares to be redeemed at their respective last addresses appearing on the stock register of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Notwithstanding the foregoing, if the Series A Preferred Stock is held in book-entry form through DTC, the Corporation may give such notice in any manner permitted by DTC. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Series A Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series A Preferred Stock. Each notice shall state (i) the redemption date; (ii) the number of shares of Series A Preferred Stock to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed by such holder; (iii) the redemption price; (iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
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(c) Partial Redemption. In case of any redemption of only part of the shares of Series A Preferred Stock at the time outstanding, the shares of Series A Preferred Stock to be redeemed shall be selected either pro rata from the holders of record of Series A Preferred Stock in proportion to the number of Series A Preferred Stock held by such holders or by lot or in such other manner as the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may determine to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors of the Corporation, the Committee or any duly authorized committee of the Board of Directors shall have full power and authority to prescribe the terms and conditions upon which shares of Series A Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all assets necessary for the redemption have been set aside by the Corporation, separate and apart from its other assets, in trust for the pro rata benefit of the holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Corporation with a bank or trust company selected by the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors (the Depositary Company) in trust for the pro rata benefit of the holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue after such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption from such bank or trust company at any time after the redemption date from the funds so deposited, without interest. The Corporation shall be entitled to receive, from time to time, from the Depositary Company any interest accrued on such funds, and the holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Corporation, and in the event of such repayment to the Corporation, the holders of record of the shares so called for redemption shall be deemed to be unsecured creditors of the Corporation for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Corporation, but shall in no event be entitled to any interest.
Section 7. Voting Rights. The holders of Series A Preferred Stock will have no voting rights and will not be entitled to elect any directors, except as expressly provided by law and except that:
(a) Supermajority Voting RightsAmendments. Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series A Preferred Stock at the time outstanding, voting separately as a class, shall be required to authorize any amendment of the Certificate of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any certificate of designations or any similar document relating to any series of preferred stock) which will materially and adversely affect the powers, preferences, privileges or rights of the Series A Preferred Stock, taken as a whole; provided, however, that any increase in the amount of the authorized or issued Series A Preferred Stock
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or authorized preferred stock of the Corporation or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock ranking equally with and/or junior to the Series A Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and/or the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to adversely affect the powers, preferences, privileges or rights of the Series A Preferred Stock.
(b) Supermajority Voting RightsPriority. Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series A Preferred Stock and all other Parity Stock, at the time outstanding, voting as a single class without regard to series, shall be required to issue, authorize or increase the authorized amount of, or to issue or authorize any obligation or security convertible into or evidencing the right to purchase, any additional class or series of stock ranking prior to the shares of the Series A Preferred Stock and all other Parity Stock as to dividends or the distribution of assets upon liquidation, dissolution or winding up of the Corporation.
(c) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series A Preferred Stock or any other class or series of preferred stock that ranks on parity with the Series A Preferred Stock as to payment of dividends, and upon which voting rights equivalent to those granted by this Section 7(c) have been conferred and are exercisable, have not been paid in an aggregate amount equal, as to any class or series, to at least six quarterly Dividend Periods (whether consecutive or not), the number of directors constituting the Board of Directors of the Corporation shall be increased by two, and the holders of the Series A Preferred Stock (together with holders of any other class of the Corporations authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist), shall have the right, voting separately as a single class without regard to series, to the exclusion of the holders of common stock, to elect two directors of the Corporation to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that the election of such directors must not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Corporations securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors of the Corporation shall at no time include more than two such directors. Each such director elected by the holders of shares of Series A Preferred Stock and any other class or series of preferred stock that ranks on parity with the Series A Preferred Stock as to payment of dividends is a Preferred Director.
(ii) Election. The election of the Preferred Directors will take place at any annual meeting of stockholders or any special meeting of the holders of Series A Preferred Stock and any other class or series of the Corporations stock that ranks on parity with Series A Preferred Stock as to payment of dividends and for which dividends have not been paid, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(c)(i) above, the secretary of the
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Corporation may, and upon the written request of any holder of Series A Preferred Stock (addressed to the secretary at the Corporations principal office) must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series A Preferred Stock and any other class or series of preferred stock that ranks on parity with Series A Preferred Stock as to payment of dividends and for which dividends have not been paid for the election of the two directors to be elected by them as provided in Section 7(c)(iii) below. The Preferred Directors shall each be entitled to one vote per director on any matter.
(iii) Notice for Special Meeting. Notice for a special meeting will be given in a similar manner to that provided in the Corporations by-laws for a special meeting of the stockholders. If the secretary of the Corporation does not call a special meeting within 20 days after receipt of any such request, then any holder of Series A Preferred Stock may (at the Corporations expense) call such meeting, upon notice as provided in this Section 7(c)(iii), and for that purpose will have access to the stock register of the Corporation. The Preferred Directors elected at any such special meeting will hold office until the next annual meeting of the Corporations stockholders unless they have been previously terminated or removed pursuant to Section 7(c)(iv). In case any vacancy in the office of a Preferred Director occurs (other than prior to the initial election of the Preferred Directors), the vacancy may be filled by the written consent of the Preferred Director remaining in office, or if none remains in office, by the vote of the holders of the Series A Preferred Stock (together with holders of any other class of the Corporations authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) to serve until the next annual meeting of the stockholders.
(iv) Termination; Removal. Whenever full dividends have been paid regularly on the Series A Preferred Stock and any other class or series of preferred stock that ranks on parity with Series A Preferred Stock as to payment of dividends, if any, for at least four consecutive Dividend Periods, then the right of the holders of Series A Preferred Stock to elect such additional two directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future Dividend Periods). The terms of office of the Preferred Directors will immediately terminate and the number of directors constituting the Corporations board of directors will be reduced accordingly. Any Preferred Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of Series A Preferred Stock (together with holders of any other class of the Corporations authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) when they have the voting rights described in this Section 7(c).
Section 8. Conversion. The holders of Series A Preferred Stock shall not have any rights to convert such Series A Preferred Stock into shares of any other class of capital stock of the Corporation.
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Section 9. Rank. Notwithstanding anything set forth in the Certificate of Incorporation or this Certificate of Designations to the contrary, the Board of Directors of the Corporation, the Committee or any authorized committee of the Board of Directors of the Corporation, without the vote of the holders of the Series A Preferred Stock, may authorize and issue additional shares of Junior Stock, Parity Stock or, subject to the voting rights granted in Section 7(b), any class of securities ranking senior to the Series A Preferred Stock as to dividends and upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
Section 10. Repurchase. Subject to the limitations imposed herein, the Corporation may purchase and sell Series A Preferred Stock from time to time to such extent, in such manner, and upon such terms as the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may determine; provided, however, that the Corporation shall not use any of its funds for any such purchase when there are reasonable grounds to believe that the Corporation is, or by such purchase would be, rendered insolvent.
Section 11. Unissued or Reacquired Shares. Shares of Series A Preferred Stock not issued or which have been issued and converted, redeemed or otherwise purchased or acquired by the Corporation shall be restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 12. No Sinking Fund. Shares of series a preferred stock are not subject to the operation of a sinking fund.
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Exhibit B
CERTIFICATE OF DESIGNATION
OF
SERIES B NON-CUMULATIVE PERPETUAL PREFERRED STOCK
Section 1. Designation. The designation of the series of preferred stock shall be Series B Non-Cumulative Perpetual Preferred Stock (hereinafter referred to as the Series B Preferred Stock). Each share of Series B Preferred Stock shall be identical in all respects to every other share of Series B Preferred Stock. Series B Preferred Stock will rank equally with Parity Stock, if any, and will rank senior to Junior Stock with respect to the payment of dividends and the distribution of assets in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
Section 2. Number of Shares. The number of authorized shares of Series B Preferred Stock shall be 40,000. Such number may from time to time be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series B Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors of the Corporation, the Committee or any duly authorized committee of the Board of Directors of the Corporation and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Corporation shall have the authority to issue fractional shares of Series B Preferred Stock.
Section 3. Definitions. As used herein with respect to Series B Preferred Stock:
Business Day means each Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions are not authorized or obligated by law, regulation or executive order to close in New York, New York.
Depositary Company shall have the meaning set forth in Section 6(d) hereof.
Dividend Payment Date shall have the meaning set forth in Section 4(a) hereof.
Dividend Period shall have the meaning set forth in Section 4(a) hereof.
DTC means The Depositary Trust Company, together with its successors and assigns.
Junior Stock means the Corporations common stock and any other class or series of stock of the Corporation hereafter authorized over which Series B Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Corporation.
London Banking Day means any day on which commercial banks are open for general business (including dealings in deposits in U.S. dollars) in London, England.
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Parity Stock means any other class or series of stock of the Corporation that ranks on a par with Series B Preferred Stock in the payment of dividends and in the distribution of assets on any liquidation, dissolution or winding up of the Corporation.
Preferred Director shall have the meaning set forth in Section 7 hereof.
Series B Preferred Stock shall have the meaning set forth in Section 1 hereof.
Telerate Page 3750 means the display page so designated on the Moneyline/Telerate Service (or such other page as may replace that page on that service, or such other service as may be nominated as the information vendor, for the purpose of displaying rates or prices comparable to the London Interbank Offered Rate for U.S. dollar deposits).
Three-Month LIBOR means, with respect to any Dividend Period, the offered rate (expressed as a percentage per annum) for deposits in U.S. dollars for a three-month period commencing on the first day of that Dividend Period that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the second London Banking Day immediately preceding the first day of that Dividend Period. If such rate does not appear on Telerate Page 3750, Three-Month LIBOR will be determined on the basis of the rates at which deposits in U.S. dollars for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1,000,000 are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by the Corporation, at approximately 11:00 A.M., London time on the second London Banking Day immediately preceding the first day of that Dividend Period. U.S. Bank National Association, or such other bank as may be acting as calculation agent for the Corporation, will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, Three-Month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest .00001 of 1%) of such quotations. If fewer than two quotations are provided, Three-Month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest .00001 of 1%) of the rates quoted by three major banks in New York City selected by the Corporation, at approximately 11:00 a.m., New York City time, on the first day of that Dividend Period for loans in U.S. dollars to leading European banks for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1,000,000. However, if fewer than three banks selected by the Corporation to provide quotations are not quoting as described above, Three-Month LIBOR for that Dividend Period will be the same as Three-Month LIBOR as determined for the previous Dividend Period, or in the case of the first Dividend Period, the most recent rate that could have been determined in accordance with the first sentence of this paragraph had Series B Preferred Stock been outstanding. The calculation agents establishment of Three-Month LIBOR and calculation of the amount of dividends for each Dividend Period will be on file at the principal offices of the Corporation, will be made available to any holder of Series B Preferred Stock upon request and will be final and binding in the absence of manifest error.
Section 4. Dividends.
(a) Rate. Holders of Series B Preferred Stock shall be entitled to receive, if, as and when declared by the Board of Directors of the Corporation or any duly authorized
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committee of the Board of Directors of the Corporation, but only out of assets legally available therefor, non-cumulative cash dividends on the liquidation preference of $25,000 per share of Series B Preferred Stock, and no more, payable quarterly in arrears on each January 15, April 15, July 15 and October 15; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day (without any interest or other payment in respect of such delay) (each such day on which dividends are payable a Dividend Payment Date). The period from and including the date of issuance of the Series B Preferred Stock or any Dividend Payment Date to but excluding the next Dividend Payment Date is a Dividend Period. Dividends on each share of Series B Preferred Stock will accrue on the liquidation preference of $25,000 per share at a rate per annum equal to the greater of (i) Three-Month LIBOR plus 0.60%% or (ii) 3.50%. The record date for payment of dividends on the Series B Preferred Stock shall be the last Business Day of the calendar month immediately preceding the month during which the Dividend Payment Date falls. The amount of dividends payable shall be computed on the basis of a 360-day year and the actual number of days elapsed.
(b) Non-Cumulative Dividends. Dividends on shares of Series B Preferred Stock shall be non-cumulative. To the extent that any dividends payable on the shares of Series B Preferred Stock on any Dividend Payment Date are not declared and paid, in full or otherwise, on such Dividend Payment Date, then such unpaid dividends shall not cumulate and shall cease to accrue and be payable and the Corporation shall have no obligation to pay, and the holders of Series B Preferred Stock shall have no right to receive, dividends accrued for such Dividend Period after the Dividend Payment Date for such Dividend Period or interest with respect to such dividends, whether or not dividends are declared for any subsequent Dividend Period with respect to Series B Preferred Stock, Parity Stock, Junior Stock or any other class or series of authorized preferred stock of the Corporation.
(c) Priority of Dividends. So long as any share of Series B Preferred Stock remains outstanding, (i) no dividend shall be declared or paid or set aside for payment and no distribution shall be declared or made or set aside for payment on any Junior Stock, other than a dividend payable solely in Junior Stock, (ii) no shares of Junior Stock shall be repurchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly (other than as a result of a reclassification of Junior Stock for or into Junior Stock, or the exchange or conversion of one share of Junior Stock for or into another share of Junior Stock, and other than through the use of the proceeds of a substantially contemporaneous sale of other shares of Junior Stock), nor shall any monies be paid to or made available for a sinking fund for the redemption of any such securities by the Corporation and (iii) no shares of Parity Stock shall be repurchased, redeemed or otherwise acquired for consideration by the Corporation otherwise than pursuant to pro rata offers to purchase all, or a pro rata portion, of the Series B Preferred Stock and such Parity Stock except by conversion into or exchange for Junior Stock, in each case unless full dividends on all outstanding shares of Series B Preferred Stock for the then-current Dividend Period have been paid in full or declared and a sum sufficient for the payment thereof set aside. When dividends are not paid in full upon the shares of Series B Preferred Stock and any Parity Stock, all dividends declared upon shares of Series B Preferred Stock and any Parity Stock shall be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share on Series B Preferred Stock, and accrued dividends, including any accumulations on Parity Stock, bear to each other. No interest will be payable in
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respect of any dividend payment on shares of Series B Preferred Stock that may be in arrears. If the Board of Directors of the Corporation determines not to pay any dividend or a full dividend on a Dividend Payment Date, the Corporation will provide, or cause to be provided, written notice to the holders of the Series B Preferred Stock prior to such date. Subject to the foregoing, and not otherwise, such dividends (payable in cash, stock or otherwise) as may be determined by the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may be declared and paid on any Junior Stock from time to time out of any assets legally available therefor, and the shares of Series B Preferred Stock shall not be entitled to participate in any such dividend.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, holders of Series B Preferred Stock shall be entitled, out of assets legally available therefor, before any distribution or payment out of the assets of the Corporation may be made to or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of securities ranking senior to or on parity with Series B Preferred Stock upon liquidation and the rights of the Corporations depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share, plus any authorized, declared and unpaid dividends, without accumulation of any undeclared dividends, to the date of liquidation. The holder of Series B Preferred Stock shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Corporation are not sufficient to pay in full the liquidation preference plus any authorized, declared and unpaid dividends to all holders of Series B Preferred Stock and all holders of any Parity Stock, the amounts paid to the holders of Series B Preferred Stock and to the holders of all Parity Stock shall be pro rata in accordance with the respective aggregate liquidation preferences plus any authorized, declared and unpaid dividends of Series B Preferred Stock and all such Parity Stock.
(c) Residual Distributions. If the liquidation preference plus any authorized, declared and unpaid dividends has been paid in full to all holders of Series B Preferred Stock and all holders of any Parity Stock, the holders of Junior Stock shall be entitled to receive all remaining assets of the Corporation according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Corporation shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, nor shall the merger, consolidation or any other business combination transaction of the Corporation into or with any other corporation or person or the merger, consolidation or any other business combination transaction of any other corporation or person into or with the Corporation be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation.
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Section 6. Redemption.
(a) Optional Redemption. The Corporation, at the option of its Board of Directors or any duly authorized committee of the Board of Directors of the Corporation, may redeem in whole or in part the shares of Series B Preferred Stock at the time outstanding, at any time on or after the Dividend Payment Date in April 2011, upon notice given as provided in Section 6(b) below. The redemption price for shares of Series B Preferred Stock shall be $25,000 per share plus dividends that have been declared but not paid.
(b) Notice of Redemption. Notice of every redemption of shares of Series B Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the holders of record of such shares to be redeemed at their respective last addresses appearing on the stock register of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Notwithstanding the foregoing, if the Series B Preferred Stock is held in book-entry form through DTC, the Corporation may give such notice in any manner permitted by DTC. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Series B Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series B Preferred Stock. Each notice shall state (i) the redemption date; (ii) the number of shares of Series B Preferred Stock to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed by such holder; (iii) the redemption price; (iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series B Preferred Stock at the time outstanding, the shares of Series B Preferred Stock to be redeemed shall be selected either pro rata from the holders of record of Series B Preferred Stock in proportion to the number of Series B Preferred Stock held by such holders or by lot or in such other manner as the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may determine to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors of the Corporation, the Committee or any duly authorized committee of the Board of Directors shall have full power and authority to prescribe the terms and conditions upon which shares of Series B Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Corporation, separate and apart from its other assets, in trust for the pro rata benefit of the holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Corporation with a bank or trust company selected by the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors (the Depositary Company) in trust for the pro rata benefit of the holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect
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to such shares shall cease to accrue after such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption from such bank or trust company at any time after the redemption date from the funds so deposited, without interest. The Corporation shall be entitled to receive, from time to time, from the Depositary Company any interest accrued on such funds, and the holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Corporation, and in the event of such repayment to the Corporation, the holders of record of the shares so called for redemption shall be deemed to be unsecured creditors of the Corporation for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Corporation, but shall in no event be entitled to any interest.
Section 7. Voting Rights. The holders of Series B Preferred Stock will have no voting rights and will not be entitled to elect any directors, except as expressly provided by law and except that:
(a) Supermajority Voting RightsAmendments. Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares the Series B Preferred Stock at the time outstanding, voting separately as a class, shall be required to authorize any amendment of the Certificate of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any certificate of designation or any similar document relating to any series of preferred stock) which will materially and adversely affect the powers, preferences, privileges or rights of the Series B Preferred Stock, taken as a whole; provided, however, that any increase in the amount of the authorized or issued Series B Preferred Stock or authorized preferred stock of the Corporation or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock ranking equally with and/or junior to the Series B Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and/or the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to adversely affect the powers, preferences, privileges or rights of the Series B Preferred Stock.
(b) Supermajority Voting RightsPriority. Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series B Preferred Stock and all other Parity Stock, at the time outstanding, voting as a single class without regard to series, shall be required to issue, authorize or increase the authorized amount of, or to issue or authorize any obligation or security convertible into or evidencing the right to purchase, any additional class or series of stock ranking prior to the shares of the Series B Preferred Stock and all other Parity Stock as to dividends or the distribution of assets upon liquidation, dissolution or winding up of the Corporation;
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(c) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series B Preferred Stock or any other class or series of preferred stock that ranks on parity with the Series B Preferred Stock as to payment of dividends, and upon which voting rights equivalent to those granted by this Section 7(c) have been conferred and are exercisable, have not been paid in an aggregate amount equal, as to any class or series, to at least six quarterly Dividend Periods (whether consecutive or not), the number of directors constituting the Board of Directors of the Corporation shall be increased by two, and the holders of the Series B Preferred Stock (together with holders of any other class of the Corporations authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist), shall have the right, voting separately as a single class without regard to series, to the exclusion of the holders of common stock, to elect two directors of the Corporation to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that the election of such directors must not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Corporations securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors of the Corporation shall at no time include more than two such directors. Each such director elected by the holders of shares of Series B Preferred Stock and any other class or series of preferred stock that ranks on parity with the Series B Preferred Stock as to payment of dividends is a Preferred Director.
(ii) Election. The election of the Preferred Directors will take place at any annual meeting of stockholders or any special meeting of the holders of Series B Preferred Stock and any other class or series of our stock that ranks on parity with Series B Preferred Stock as to payment of dividends and for which dividends have not been paid, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(c)(i) above, the secretary of the Corporation may, and upon the written request of any holder of Series B Preferred Stock (addressed to the secretary at the Corporations principal office) must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series B Preferred Stock and any other class or series of preferred stock that ranks on parity with Series B Preferred Stock as to payment of dividends and for which dividends have not been paid for the election of the two directors to be elected by them as provided in Section 7(c)(iii) below. The Preferred Directors shall each be entitled to one vote per director on any matter.
(iii) Notice for Special Meeting. Notice for a special meeting will be given in a similar manner to that provided in the Corporations by-laws for a special meeting of the stockholders. If the secretary of the Corporation does not call a special meeting within 20 days after receipt of any such request, then any holder of Series B Preferred Stock may (at our expense) call such meeting, upon notice as provided in this Section 7(c)(iii), and for that purpose will have access to the stock register of the Corporation. The Preferred Directors elected at any such special meeting will hold office
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until the next annual meeting of our stockholders unless they have been previously terminated or removed pursuant to Section 7(c)(iv). In case any vacancy in the office of a Preferred Director occurs (other than prior to the initial election of the Preferred Directors), the vacancy may be filled by the written consent of the Preferred Director remaining in office, or if none remains in office, by the vote of the holders of the Series B Preferred Stock (together with holders of any other class of the Corporations authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) to serve until the next annual meeting of the stockholders.
(iv) Termination; Removal. Whenever full dividends have been paid regularly on the Series B Preferred Stock and any other class or series of preferred stock that ranks on parity with Series B Preferred Stock as to payment of dividends, if any, for at least four Dividend Periods, then the right of the holders of Series B Preferred Stock to elect such additional two directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future Dividend Periods). The terms of office of the Preferred Directors will immediately terminate and the number of directors constituting our board of directors will be reduced accordingly. Any Preferred Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of the Series B Preferred Stock (together with holders of any other class of the Corporations authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) when they have the voting rights described in this Section 7(c).
Section 8. Conversion. The holders of Series B Preferred Stock shall not have any rights to convert such Series B Preferred Stock into shares of any other class of capital stock of the Corporation.
Section 9. Rank. Notwithstanding anything set forth in the Certificate of Incorporation or this Certificate of Designation to the contrary, the Board of Directors of the Corporation, the Committee or any authorized committee of the Board of Directors of the Corporation, without the vote of the holders of the Series B Preferred Stock, may authorize and issue additional shares of Junior Stock, Parity Stock or, subject to the voting rights granted in Section 7(b), any class of securities ranking senior to the Series B Preferred Stock as to dividends and the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
Section 10. Repurchase. Subject to the limitations imposed herein, the Corporation may purchase and sell Series B Preferred Stock from time to time to such extent, in such manner, and upon such terms as the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may determine; provided, however, that the Corporation shall not use any of its funds for any such purchase when there are reasonable grounds to believe that the Corporation is, or by such purchase would be, rendered insolvent.
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Section 11. Unissued or Reacquired Shares. Shares of Series B Preferred Stock not issued or which have been issued and converted, redeemed or otherwise purchased or acquired by the Corporation shall be restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 12. No Sinking Fund. Shares of Series B Preferred Stock are not subject to the operation of a sinking fund.
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Exhibit C
CERTIFICATE OF DESIGNATION
OF
SERIES C NON-CUMULATIVE PERPETUAL PREFERRED STOCK
Section 1. Designation. The designation of the series of preferred stock shall be Series C Non-Cumulative Perpetual Preferred Stock (hereinafter referred to as the Series C Preferred Stock). Each share of Series C Preferred Stock shall be identical in all respects to every other share of Series C Preferred Stock. Series C Preferred Stock will rank equally with Parity Stock, if any, and will rank senior to Junior Stock with respect to the payment of dividends and the distribution of assets in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
Section 2. Number of Shares. The number of authorized shares of Series C Preferred Stock shall be five thousand (5,000). Such number may from time to time be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series C Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors of the Corporation, the Committee or any duly authorized committee of the Board of Directors of the Corporation and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Corporation shall have the authority to issue fractional shares of Series C Preferred Stock.
Section 3. Definitions. As used herein with respect to Series C Preferred Stock:
Business Day means each Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions are not authorized or obligated by law, regulation or executive order to close in New York, New York.
Depositary Company shall have the meaning set forth in Section 6(d) hereof.
Dividend Payment Date shall have the meaning set forth in Section 4(a) hereof.
Dividend Period shall have the meaning set forth in Section 4(a) hereof.
DTC means The Depositary Trust Company, together with its successors and assigns.
Junior Stock means the Corporations common stock and any other class or series of stock of the Corporation hereafter authorized over which Series C Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Corporation.
London Banking Day means any day on which commercial banks are open for general business (including dealings in deposits in U.S. dollars) in London, England.
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Parity Stock means any other class or series of stock of the Corporation that ranks on a par with Series C Preferred Stock in the payment of dividends and in the distribution of assets on any liquidation, dissolution or winding up of the Corporation.
Preferred Director shall have the meaning set forth in Section 7 hereof.
Series C Preferred Stock shall have the meaning set forth in Section 1 hereof.
Telerate Page 3750 means the display page so designated on the Moneyline/Telerate Service (or such other page as may replace that page on that service, or such other service as may be nominated as the information vendor, for the purpose of displaying rates or prices comparable to the London Interbank Offered Rate for U.S. dollar deposits).
Three-Month LIBOR means, with respect to any Dividend Period beginning on or after January 15, 2012 and each Dividend Period thereafter, the offered rate (expressed as a percentage per annum) for deposits in U.S. dollars for a three-month period commencing on the first day of that Dividend Period that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the second London Banking Day immediately preceding the first day of that Dividend Period. If such rate does not appear on Telerate Page 3750, Three-Month LIBOR will be determined on the basis of the rates at which deposits in U.S. dollars for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1,000,000 are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by the Corporation, at approximately 11:00 A.M., London time on the second London Banking Day immediately preceding the first day of that Dividend Period. U.S. Bank National Association, or such other bank as may be acting as calculation agent for the Corporation, will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, Three-Month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest .00001 of 1%) of such quotations. If fewer than two quotations are provided, Three-Month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest .00001 of 1%) of the rates quoted by three major banks in New York City selected by the Corporation, at approximately 11:00 a.m., New York City time, on the first day of that Dividend Period for loans in U.S. dollars to leading European banks for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1,000,000. However, if fewer than three banks selected by the Corporation to provide quotations are not quoting as described above, Three-Month LIBOR for that Dividend Period will be the same as Three-Month LIBOR as determined for the previous Dividend Period, or in the case of the first Dividend Period, the most recent rate that could have been determined in accordance with the first sentence of this paragraph had Series C Preferred Stock been outstanding. The calculation agents establishment of Three-Month LIBOR and calculation of the amount of dividends for each Dividend Period will be on file at the principal offices of the Corporation, will be made available to any holder of Series C Preferred Stock upon request and will be final and binding in the absence of manifest error.
Section 4. Dividends.
(a) Rate. Holders of Series C Preferred Stock shall be entitled to receive, if, as and when declared by the Board of Directors of the Corporation or any duly authorized
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committee of the Board of Directors of the Corporation, but only out of assets legally available therefor, non-cumulative cash dividends on the liquidation preference of $100,000 per share of Series C Preferred Stock, and no more, payable quarterly in arrears on each January 15, April 15, July 15 and October 15; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day (without any interest or other payment in respect of such delay) (each such day on which dividends are payable a Dividend Payment Date). The period from and including the date of issuance of the Series C Preferred Stock or any Dividend Payment Date to but excluding the next Dividend Payment Date is a Dividend Period. Dividends on each share of Series C Preferred Stock will accrue on the liquidation preference of $100,000 per share (i) to but not including the Dividend Payment Date in January 2012 at a rate per annum equal to 6.091%, and (ii) thereafter for each related Dividend Period at a rate per annum equal to Three-Month LIBOR plus 1.147%.
(b) Non-Cumulative Dividends. Dividends on shares of Series C Preferred Stock shall be non-cumulative. To the extent that any dividends payable on the shares of Series C Preferred Stock on any Dividend Payment Date are not declared and paid, in full or otherwise, on such Dividend Payment Date, then such unpaid dividends shall not cumulate and shall cease to accrue and be payable and the Corporation shall have no obligation to pay, and the holders of Series C Preferred Stock shall have no right to receive, dividends accrued for such Dividend Period after the Dividend Payment Date for such Dividend Period or interest with respect to such dividends, whether or not dividends are declared for any subsequent Dividend Period with respect to Series C Preferred Stock, Parity Stock, Junior Stock or any other class or series of authorized preferred stock of the Corporation.
(c) Priority of Dividends. So long as any share of Series C Preferred Stock remains outstanding, (i) no dividend shall be declared or paid or set aside for payment and no distribution shall be declared or made or set aside for payment on any Junior Stock, other than a dividend payable solely in Junior Stock, (ii) no shares of Junior Stock shall be repurchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly (other than as a result of a reclassification of Junior Stock for or into Junior Stock, or the exchange or conversion of one share of Junior Stock for or into another share of Junior Stock, and other than through the use of the proceeds of a substantially contemporaneous sale of other shares of Junior Stock), nor shall any monies be paid to or made available for a sinking fund for the redemption of any such securities by the Corporation and (iii) no shares of Parity Stock shall be repurchased, redeemed or otherwise acquired for consideration by the Corporation otherwise than pursuant to pro rata offers to purchase all, or a pro rata portion, of the Series C Preferred Stock and such Parity Stock except by conversion into or exchange for Junior Stock, in each case unless full dividends on all outstanding shares of Series C Preferred Stock for the then-current Dividend Period have been paid in full or declared and a sum sufficient for the payment thereof set aside. When dividends are not paid in full upon the shares of Series C Preferred Stock and any Parity Stock, all dividends declared upon shares of Series C Preferred Stock and any Parity Stock shall be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share on Series C Preferred Stock, and accrued dividends, including any accumulations on Parity Stock, bear to each other. No interest will be payable in respect of any dividend payment on shares of Series C Preferred Stock that may be in arrears. If the Board of Directors of the Corporation determines not to pay any dividend or a full dividend
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on a Dividend Payment Date, the Corporation will provide, or cause to be provided, written notice to the holders of the Series C Preferred Stock prior to such date. Subject to the foregoing, and not otherwise, such dividends (payable in cash, stock or otherwise) as may be determined by the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may be declared and paid on any Junior Stock from time to time out of any assets legally available therefor, and the shares of Series C Preferred Stock shall not be entitled to participate in any such dividend.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, holders of Series C Preferred Stock shall be entitled, out of assets legally available therefor, before any distribution or payment out of the assets of the Corporation may be made to or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of securities ranking senior to or on parity with Series C Preferred Stock upon liquidation and the rights of the Corporations depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $100,000 per share, plus any authorized, declared and unpaid dividends, without accumulation of any undeclared dividends, to the date of liquidation. The holder of Series C Preferred Stock shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Corporation are not sufficient to pay in full the liquidation preference plus any authorized, declared and unpaid dividends to all holders of Series C Preferred Stock and all holders of any Parity Stock, the amounts paid to the holders of Series C Preferred Stock and to the holders of all Parity Stock shall be pro rata in accordance with the respective aggregate liquidation preferences plus any authorized, declared and unpaid dividends of Series C Preferred Stock and all such Parity Stock.
(c) Residual Distributions. If the liquidation preference plus any authorized, declared and unpaid dividends has been paid in full to all holders of Series C Preferred Stock and all holders of any Parity Stock, the holders of Junior Stock shall be entitled to receive all remaining assets of the Corporation according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Corporation shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, nor shall the merger, consolidation or any other business combination transaction of the Corporation into or with any other corporation or person or the merger, consolidation or any other business combination transaction of any other corporation or person into or with the Corporation be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation.
Section 6. Redemption.
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(a) Optional Redemption. The Corporation, at the option of its Board of Directors or any duly authorized committee of the Board of Directors of the Corporation, may redeem in whole or in part the shares of Series C Preferred Stock at the time outstanding at any time upon notice given as provided in Section 6(b) below. The redemption price for shares of Series C Preferred Stock shall be $100,000 per share plus dividends that have been declared but not paid.
(b) Notice of Redemption. Notice of every redemption of shares of Series C Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the holders of record of such shares to be redeemed at their respective last addresses appearing on the stock register of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Notwithstanding the foregoing, if the Series C Preferred Stock is held in book-entry form through DTC, the Corporation may give such notice in any manner permitted by DTC. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Series C Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series C Preferred Stock. Each notice shall state (i) the redemption date; (ii) the number of shares of Series C Preferred Stock to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed by such holder; (iii) the redemption price; (iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series C Preferred Stock at the time outstanding, the shares of Series C Preferred Stock to be redeemed shall be selected either pro rata from the holders of record of Series C Preferred Stock in proportion to the number of Series C Preferred Stock held by such holders or by lot or in such other manner as the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may determine to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors of the Corporation, the Committee or any duly authorized committee of the Board of Directors shall have full power and authority to prescribe the terms and conditions upon which shares of Series C Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Corporation, separate and apart from its other assets, in trust for the pro rata benefit of the holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Corporation with a bank or trust company selected by the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors (the Depositary Company) in trust for the pro rata benefit of the holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue after such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right
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of the holders thereof to receive the amount payable on such redemption from such bank or trust company at any time after the redemption date from the funds so deposited, without interest. The Corporation shall be entitled to receive, from time to time, from the Depositary Company any interest accrued on such funds, and the holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Corporation, and in the event of such repayment to the Corporation, the holders of record of the shares so called for redemption shall be deemed to be unsecured creditors of the Corporation for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Corporation, but shall in no event be entitled to any interest.
Section 7. Voting Rights. The holders of Series C Preferred Stock will have no voting rights and will not be entitled to elect any directors, except as expressly provided by law and except that:
(a) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series C Preferred Stock or any other class or series of preferred stock that ranks on parity with the Series C Preferred Stock as to payment of dividends, and upon which voting rights equivalent to those granted by this Section 7(a) have been conferred and are exercisable, have not been paid in an aggregate amount equal, as to any class or series, to at least six quarterly Dividend Periods (whether consecutive or not), the number of directors constituting the Board of Directors of the Corporation shall be increased by two, and the holders of the Series C Preferred Stock (together with holders of any other class of the Corporations authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist), shall have the right, voting separately as a single class without regard to series, to the exclusion of the holders of common stock, to elect two directors of the Corporation to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that the election of such directors must not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Corporations securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors of the Corporation shall at no time include more than two such directors. Each such director elected by the holders of shares of Series C Preferred Stock and any other class or series of preferred stock that ranks on parity with the Series C Preferred Stock as to payment of dividends is a Preferred Director.
(ii) Election. The election of the Preferred Directors will take place at any annual meeting of stockholders or any special meeting of the holders of Series C Preferred Stock and any other class or series of our stock that ranks on parity with Series C Preferred Stock as to payment of dividends and for which dividends have not been paid, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(a)(i) above, the secretary of the Corporation may, and upon the written request of any holder of Series C Preferred Stock (addressed to the secretary at
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the Corporations principal office) must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series C Preferred Stock and any other class or series of preferred stock that ranks on parity with Series C Preferred Stock as to payment of dividends and for which dividends have not been paid for the election of the two directors to be elected by them as provided in Section 7(a)(iii) below. The Preferred Directors shall each be entitled to one vote per director on any matter.
(iii) Notice for Special Meeting. Notice for a special meeting will be given in a similar manner to that provided in the Corporations by-laws for a special meeting of the stockholders. If the secretary of the Corporation does not call a special meeting within 20 days after receipt of any such request, then any holder of Series C Preferred Stock may (at our expense) call such meeting, upon notice as provided in this Section 7(a)(iii), and for that purpose will have access to the stock register of the Corporation. The Preferred Directors elected at any such special meeting will hold office until the next annual meeting of our stockholders unless they have been previously terminated or removed pursuant to Section 7(a)(iv). In case any vacancy in the office of a Preferred Director occurs (other than prior to the initial election of the Preferred Directors), the vacancy may be filled by the written consent of the Preferred Director remaining in office, or if none remains in office, by the vote of the holders of the Series C Preferred Stock (together with holders of any other class of the Corporations authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) to serve until the next annual meeting of the stockholders.
(iv) Termination; Removal. Whenever full dividends have been paid regularly on the Series C Preferred Stock and any other class or series of preferred stock that ranks on parity with Series C Preferred Stock as to payment of dividends, if any, for three consecutive Dividend Periods and full dividends have been paid or declared and set aside for payment for the fourth consecutive Dividend Period, then the right of the holders of Series C Preferred Stock to elect such additional two directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future Dividend Periods). The terms of office of the Preferred Directors will immediately terminate and the number of directors constituting our board of directors will be reduced accordingly. Any Preferred Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of the Series C Preferred Stock (together with holders of any other class of the Corporations authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) when they have the voting rights described in this Section 7(a).
Section 8. Conversion. The holders of Series C Preferred Stock shall not have any rights to convert such Series C Preferred Stock into shares of any other class of capital stock of the Corporation.
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Section 9. Rank. Notwithstanding anything set forth in the Certificate of Incorporation or this Certificate of Designation to the contrary, the Board of Directors of the Corporation, the Committee or any authorized committee of the Board of Directors of the Corporation, without the vote of the holders of the Series C Preferred Stock, may authorize and issue additional shares of Junior Stock, Parity Stock or, subject to the voting rights granted in Section 7(a), any class of securities ranking senior to the Series C Preferred Stock as to dividends and the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
Section 10. Repurchase. Subject to the limitations imposed herein, the Corporation may purchase and sell Series C Preferred Stock from time to time to such extent, in such manner, and upon such terms as the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may determine; provided, however, that the Corporation shall not use any of its funds for any such purchase when there are reasonable grounds to believe that the Corporation is, or by such purchase would be, rendered insolvent.
Section 11. Unissued or Reacquired Shares. Shares of Series C Preferred Stock not issued or which have been issued and converted, redeemed or otherwise purchased or acquired by the Corporation shall be restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 12. No Sinking Fund. Shares of Series C Preferred Stock are not subject to the operation of a sinking fund.
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Exhibit D
CERTIFICATE OF DESIGNATIONS
OF
SERIES F NON-CUMULATIVE PERPETUAL PREFERRED STOCK
OF
U.S. BANCORP
Section 1. Designation. The designation of the series of preferred stock shall be Series F Non-Cumulative Perpetual Preferred Stock (hereinafter referred to as the Series F Preferred Stock). Each share of Series F Preferred Stock shall be identical in all respects to every other share of Series F Preferred Stock. Series F Preferred Stock will rank equally with Parity Stock, if any, and will rank senior to Junior Stock with respect to the payment of dividends and the distribution of assets in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
Section 2. Number of Shares. The number of authorized shares of Series F Preferred Stock shall be 44,000. Such number may from time to time be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series F Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors of the Corporation, the Committee or any duly authorized committee of the Board of Directors of the Corporation and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Corporation shall have the authority to issue fractional shares of Series F Preferred Stock.
Section 3. Definitions. As used herein with respect to Series F Preferred Stock:
Appropriate Federal Banking Agency means the appropriate Federal banking agency with respect to the Corporation as defined in Section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. Section 1813(q)), or any successor provision.
Business Day means each Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions are not authorized or obligated by law, regulation or executive order to close in New York, New York.
Committee means the Risk Management Committee of the Board of Directors of the Corporation, or any successor committee thereto.
Corporation means U.S. Bancorp.
Depositary Company shall have the meaning set forth in Section 6(d) hereof.
Dividend Payment Date shall have the meaning set forth in Section 4(a) hereof.
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Dividend Period shall have the meaning set forth in Section 4(a) hereof.
DTC means The Depository Trust Company, together with its successors and assigns.
Junior Stock means the Corporations common stock and any other class or series of stock of the Corporation hereafter authorized over which Series F Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Corporation.
London Banking Day means any day on which commercial banks are open for general business (including dealings in deposits in U.S. dollars) in London, England.
Parity Stock means any other class or series of stock of the Corporation that ranks on a parity with Series F Preferred Stock in the payment of dividends and in the distribution of assets on any liquidation, dissolution or winding up of the Corporation.
Preferred Director shall have the meaning set forth in Section 7(c)(i) hereof.
Redemption Price shall have the meaning set forth in Section 6(a) hereof.
Regulatory Capital Treatment Event means the good faith determination by the Corporation that, as a result of (i) any amendment to, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of Series F Preferred Stock, (ii) any proposed change in those laws or regulations that is announced after the initial issuance of any share of Series F Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations that is announced after the initial issuance of any share of Series F Preferred Stock, there is more than an insubstantial risk that the Corporation will not be entitled to treat the full liquidation value of the shares of Series F Preferred Stock then outstanding as tier 1 capital (or its equivalent) for purposes of the capital adequacy guidelines of the Board of Governors of the Federal Reserve System, Regulation Y, 12 CFR 225 (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency), as then in effect and applicable, for as long as any share of Series F Preferred Stock is outstanding.
Reuters Screen LIBOR01 Page means the display designated on the Reuters 3000 Xtra (or such other page as may replace that page on that service or such other service as may be nominated by the British Bankers Association for the purpose of displaying London interbank offered rates for U.S. dollar deposits).
Series F Preferred Stock shall have the meaning set forth in Section 1 hereof.
Three-Month LIBOR means, with respect to any Dividend Period beginning on or after January 15, 2022, the rate (expressed as a percentage per annum) for deposits in U.S. dollars for a three-month period commencing on the first day of that Dividend Period, as that rate appears on Reuters Screen LIBOR01 Page as of 11:00 a.m. (London time) on the second London Banking Day preceding the first day of that Dividend Period. If such rate does not appear on Reuters Screen LIBOR01 Page, Three-Month LIBOR will be determined on the basis of the rates at which deposits in U.S. dollars for a three-month period commencing on the first day of that Dividend
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Period and in a principal amount of not less than $1,000,000 are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by the Corporation, at approximately 11:00 a.m. (London time), on the second London Banking Day preceding the first day of that Dividend Period. U.S. Bank National Association, or such other bank as may be acting as calculation agent for the Corporation, will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, Three-Month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest .00001 of 1%) of such quotations. If fewer than two quotations are provided, Three-Month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest .00001 of 1%) of the rates quoted by three major banks in New York City selected by the calculation agent, at approximately 11:00 a.m. (New York City time), on the first day of that Dividend Period for loans in U.S. dollars to leading European banks for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1,000,000. However, if the banks selected by the calculation agent to provide quotations are not quoting as described above, Three-Month LIBOR for that Dividend Period will be the same as Three-Month LIBOR as determined for the previous Dividend Period, or in the case of the first Dividend Period beginning on or after January 15, 2022, the most recent rate that could have been determined in accordance with the first sentence of this paragraph had the dividend rate been a floating rate during the period prior to January 15, 2022. The calculation agents establishment of Three-Month LIBOR and calculation of the amount of dividends for each Dividend Period will be on file at the principal offices of the Corporation, will be made available to any holder of Series F Preferred Stock upon request and will be final and binding in the absence of manifest error.
Section 4. Dividends.
(a) Rate. Holders of Series F Preferred Stock shall be entitled to receive, if, as and when declared by the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation, but only out of assets legally available therefor, non-cumulative cash dividends on the liquidation preference of $25,000 per share of Series F Preferred Stock, and no more, payable quarterly in arrears on each January 15, April 15, July 15 or October 15; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day (without any interest or other payment in respect of such delay) (each such day on which dividends are payable a Dividend Payment Date). The period from and including the date of issuance of the Series F Preferred Stock or any Dividend Payment Date to but excluding the next Dividend Payment Date is a Dividend Period. Dividends on each share of Series F Preferred Stock will accrue on the liquidation preference of $25,000 per share (i) from the date of issuance to but not including the Dividend Payment Date on January 15, 2022 at a rate per annum equal to 6.50%, and (ii) thereafter for each related Dividend Period at a rate per annum equal to Three-Month LIBOR plus 4.468%. The record date for payment of dividends on the Series F Preferred Stock shall be the last Business Day of the calendar month immediately preceding the month during which the Dividend Payment Date falls. The amount of dividends payable for any period prior to January 15, 2022 shall be computed on the basis of a 360-day year consisting of twelve 30-day months and dividends for periods thereafter shall be computed on the basis of a 360-day year and the actual number of days elapsed. Notwithstanding any other provision hereof, dividends on the Series F Preferred Stock shall not be declared, paid or set aside for payment to the extent such act would cause the Corporation to fail to comply with laws and regulations applicable thereto, including applicable capital adequacy guidelines.
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(b) Non-Cumulative Dividends. Dividends on shares of Series F Preferred Stock shall be non-cumulative. To the extent that any dividends payable on the shares of Series F Preferred Stock on any Dividend Payment Date are not declared and paid, in full or otherwise, on such Dividend Payment Date, then such unpaid dividends shall not cumulate and shall cease to accrue and be payable and the Corporation shall have no obligation to pay, and the holders of Series F Preferred Stock shall have no right to receive, dividends accrued for such Dividend Period after the Dividend Payment Date for such Dividend Period or interest with respect to such dividends, whether or not dividends are declared for any subsequent Dividend Period with respect to Series F Preferred Stock, Parity Stock, Junior Stock or any other class or series of authorized preferred stock of the Corporation.
(c) Priority of Dividends. So long as any share of Series F Preferred Stock remains outstanding, (i) no dividend shall be declared or paid or set aside for payment and no distribution shall be declared or made or set aside for payment on any Junior Stock, other than a dividend payable solely in Junior Stock, (ii) no shares of Junior Stock shall be repurchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly (other than as a result of a reclassification of Junior Stock for or into Junior Stock, or the exchange or conversion of one share of Junior Stock for or into another share of Junior Stock, and other than through the use of the proceeds of a substantially contemporaneous sale of other shares of Junior Stock), nor shall any monies be paid to or made available for a sinking fund for the redemption of any such securities by the Corporation and (iii) no shares of Parity Stock shall be repurchased, redeemed or otherwise acquired for consideration by the Corporation otherwise than pursuant to pro rata offers to purchase all, or a pro rata portion, of the Series F Preferred Stock and such Parity Stock except by conversion into or exchange for Junior Stock, in each case unless full dividends on all outstanding shares of Series F Preferred Stock for the then-current Dividend Period have been paid in full or declared and a sum sufficient for the payment thereof set aside. When dividends are not paid in full upon the shares of Series F Preferred Stock and any Parity Stock, all dividends declared upon shares of Series F Preferred Stock and any Parity Stock shall be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share on Series F Preferred Stock, and accrued dividends, including any accumulations, on Parity Stock, bear to each other. No interest will be payable in respect of any dividend payment on shares of Series F Preferred Stock that may be in arrears. If the Board of Directors of the Corporation determines not to pay any dividend or a full dividend on a Dividend Payment Date, the Corporation will provide, or cause to be provided, written notice to the holders of the Series F Preferred Stock prior to such date. Subject to the foregoing, and not otherwise, dividends (payable in cash, stock or otherwise) as may be determined by the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may be declared and paid on any Junior Stock from time to time out of any assets legally available therefor, and the shares of Series F Preferred Stock or Parity Stock shall not be entitled to participate in any such dividend.
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Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, holders of Series F Preferred Stock shall be entitled, out of assets legally available therefor, before any distribution or payment out of the assets of the Corporation may be made to or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of securities ranking senior to or on parity with Series F Preferred Stock upon liquidation and the rights of the Corporations depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share, plus any authorized, declared and unpaid dividends, without accumulation of any undeclared dividends, to the date of liquidation. The holder of Series F Preferred Stock shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Corporation are not sufficient to pay in full the liquidation preference plus any authorized, declared and unpaid dividends to all holders of Series F Preferred Stock and all holders of any Parity Stock, the amounts paid to the holders of Series F Preferred Stock and to the holders of all Parity Stock shall be pro rata in accordance with the respective aggregate liquidation preferences plus any authorized, declared and unpaid dividends of Series F Preferred Stock and all such Parity Stock.
(c) Residual Distributions. If the liquidation preference plus any authorized, declared and unpaid dividends has been paid in full to all holders of Series F Preferred Stock and all holders of any Parity Stock, the holders of Junior Stock shall be entitled to receive all remaining assets of the Corporation according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Corporation shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, nor shall the merger, consolidation or any other business combination transaction of the Corporation into or with any other corporation or person or the merger, consolidation or any other business combination transaction of any other corporation or person into or with the Corporation be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation.
Section 6. Redemption.
(a) Optional Redemption. The Corporation, at the option of its Board of Directors or any duly authorized committee of the Board of Directors of the Corporation, may redeem in whole or in part the shares of Series F Preferred Stock at the time outstanding, at any time on or after the Dividend Payment Date in January, 2022, upon notice given as provided in Section 6(b) below. The redemption price for shares of Series F Preferred Stock shall be $25,000 per share plus dividends that have been declared but not paid (the Redemption Price). Notwithstanding the foregoing, within 90 days following the occurrence of a Regulatory Capital Treatment Event, the Corporation, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, at any time, all (but not less than all) of the shares of Series F Preferred Stock at the time outstanding, upon notice given as provided Subsection (b) below, at the Redemption Price applicable on such date of redemption.
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(b) Notice of Redemption. Notice of every redemption of shares of Series F Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the holders of record of such shares to be redeemed at their respective last addresses appearing on the stock register of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Notwithstanding the foregoing, if the Series F Preferred Stock is held in book-entry form through DTC, the Corporation may give such notice in any manner permitted by DTC. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Series F Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series F Preferred Stock. Each notice shall state (i) the redemption date; (ii) the number of shares of Series F Preferred Stock to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed by such holder; (iii) the Redemption Price; (iv) the place or places where the certificates for such shares are to be surrendered for payment of the Redemption Price; and (v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series F Preferred Stock at the time outstanding, the shares of Series F Preferred Stock to be redeemed shall be selected either pro rata from the holders of record of Series F Preferred Stock in proportion to the number of Series F Preferred Stock held by such holders or by lot or in such other manner as the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may determine to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors of the Corporation, the Committee or any duly authorized committee of the Board of Directors shall have full power and authority to prescribe the terms and conditions upon which shares of Series F Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Corporation, separate and apart from its other assets, in trust for the pro rata benefit of the holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Corporation with a bank or trust company selected by the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors (the Depositary Company) in trust for the pro rata benefit of the holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue after such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption from such bank or trust company at any time after the redemption date from the funds so deposited, without interest. The Corporation shall be entitled to receive, from time to time, from the Depositary
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Company any interest accrued on such funds, and the holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Corporation, and in the event of such repayment to the Corporation, the holders of record of the shares so called for redemption shall be deemed to be unsecured creditors of the Corporation for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Corporation, but shall in no event be entitled to any interest.
Section 7. Voting Rights. The holders of Series F Preferred Stock will have no voting rights and will not be entitled to elect any directors, except as expressly provided by law and except that:
(a) Supermajority Voting RightsAmendments. Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series F Preferred Stock at the time outstanding, voting separately as a class, shall be required to authorize any amendment of the Certificate of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any certificate of designations or any similar document relating to any series of preferred stock) which will materially and adversely affect the powers, preferences, privileges or rights of the Series F Preferred Stock, taken as a whole; provided, however, that any increase in the amount of the authorized or issued Series F Preferred Stock or authorized preferred stock of the Corporation or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock ranking equally with and/or junior to the Series F Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and/or the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to adversely affect the powers, preferences, privileges or rights of the Series F Preferred Stock.
(b) Supermajority Voting RightsPriority. Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series F Preferred Stock and all other Parity Stock, at the time outstanding, voting as a single class without regard to series, shall be required to issue, authorize or increase the authorized amount of, or to issue or authorize any obligation or security convertible into or evidencing the right to purchase, any additional class or series of stock ranking prior to the shares of the Series F Preferred Stock and all other Parity Stock as to dividends or the distribution of assets upon liquidation, dissolution or winding up of the Corporation;
(c) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series F Preferred Stock or any other class or series of preferred stock that ranks on parity with the Series F Preferred Stock as to payment of dividends, and upon which voting rights equivalent to those granted by this Section 7(c) have been conferred and are exercisable, have not been paid in an aggregate amount equal, as to any class or series, to at least six quarterly Dividend Periods (whether consecutive or not), the number of directors constituting the Board of Directors of the Corporation shall be increased by two, and the
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holders of the Series F Preferred Stock (together with holders of any other class of the Corporations authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist), shall have the right, voting separately as a single class without regard to series, to the exclusion of the holders of common stock, to elect two directors of the Corporation to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that the election of such directors must not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Corporations securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors of the Corporation shall at no time include more than two such directors. Each such director elected by the holders of shares of Series F Preferred Stock and any other class or series of preferred stock that ranks on parity with the Series F Preferred Stock as to payment of dividends is a Preferred Director.
(ii) Election. The election of the Preferred Directors will take place at any annual meeting of stockholders or any special meeting of the holders of Series F Preferred Stock and any other class or series of the Corporations stock that ranks on parity with Series F Preferred Stock as to payment of dividends and for which dividends have not been paid, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(c)(i) above, the secretary of the Corporation may, and upon the written request of any holder of Series F Preferred Stock (addressed to the secretary at the Corporations principal office) must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series F Preferred Stock, and any other class or series of preferred stock that ranks on parity with Series F Preferred Stock as to payment of dividends and for which dividends have not been paid, for the election of the two directors to be elected by them as provided in Section 7(c)(iii) below. The Preferred Directors shall each be entitled to one vote per director on any matter.
(iii) Notice for Special Meeting. Notice for a special meeting will be given in a similar manner to that provided in the Corporations by-laws for a special meeting of the stockholders. If the secretary of the Corporation does not call a special meeting within 20 days after receipt of any such request, then any holder of Series F Preferred Stock may (at the Corporations expense) call such meeting, upon notice as provided in this Section 7(c)(iii), and for that purpose will have access to the stock register of the Corporation. The Preferred Directors elected at any such special meeting will hold office until the next annual meeting of the Corporations stockholders unless they have been previously terminated or removed pursuant to Section 7(c)(iv). In case any vacancy in the office of a Preferred Director occurs (other than prior to the initial election of the Preferred Directors), the vacancy may be filled by the written consent of the Preferred Director remaining in office, or if none remains in office, by the vote of the holders of the Series F Preferred Stock (together with holders of any other class of the Corporations authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) to serve until the next annual meeting of the stockholders.
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(iv) Termination; Removal. Whenever full dividends have been paid regularly on the Series F Preferred Stock and any other class or series of preferred stock that ranks on parity with Series F Preferred Stock as to payment of dividends, if any, for at least four consecutive Dividend Periods, then the right of the holders of Series F Preferred Stock to elect such additional two directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future Dividend Periods). The terms of office of the Preferred Directors will immediately terminate and the number of directors constituting the Corporations board of directors will be reduced accordingly. Any Preferred Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of Series F Preferred Stock (together with holders of any other class of the Corporations authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) when they have the voting rights described in this Section 7(c).
Section 8. Conversion. The holders of Series F Preferred Stock shall not have any rights to convert such Series F Preferred Stock into shares of any other class of capital stock of the Corporation.
Section 9. Rank. Notwithstanding anything set forth in the Certificate of Incorporation or this Certificate of Designations to the contrary, the Board of Directors of the Corporation, the Committee or any authorized committee of the Board of Directors of the Corporation, without the vote of the holders of the Series F Preferred Stock, may authorize and issue additional shares of Junior Stock, Parity Stock or, subject to the voting rights granted in Section 7(b), any class of securities ranking senior to the Series F Preferred Stock as to dividends and the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
Section 10. Repurchase. Subject to the limitations imposed herein, the Corporation may purchase and sell Series F Preferred Stock from time to time to such extent, in such manner, and upon such terms as the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may determine; provided, however, that the Corporation shall not use any of its funds for any such purchase when there are reasonable grounds to believe that the Corporation is, or by such purchase would be, rendered insolvent.
Section 11. Unissued or Reacquired Shares. Shares of Series F Preferred Stock not issued or which have been issued and converted, redeemed or otherwise purchased or acquired by the Corporation shall be restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 12. No Sinking Fund. Shares of Series F Preferred Stock are not subject to the operation of a sinking fund.
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Exhibit E
CERTIFICATE OF DESIGNATIONS
OF
SERIES G NON-CUMULATIVE PERPETUAL PREFERRED STOCK
OF
U.S. BANCORP
Section 1. Designation. The designation of the series of preferred stock shall be Series G Non-Cumulative Perpetual Preferred Stock (hereinafter referred to as the Series G Preferred Stock). Each share of Series G Preferred Stock shall be identical in all respects to every other share of Series G Preferred Stock. Series G Preferred Stock will rank equally with Parity Stock, if any, and will rank senior to Junior Stock with respect to the payment of dividends and the distribution of assets in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
Section 2. Number of Shares. The number of authorized shares of Series G Preferred Stock shall be 49,910. Such number may from time to time be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series G Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors of the Corporation, the Committee or any duly authorized committee of the Board of Directors of the Corporation and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Corporation shall have the authority to issue fractional shares of Series G Preferred Stock.
Section 3. Definitions. As used herein with respect to Series G Preferred Stock:
Appropriate Federal Banking Agency means the appropriate Federal banking agency with respect to the Corporation as defined in Section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. Section 1813(q)), or any successor provision.
Business Day means each Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions are not authorized or obligated by law, regulation or executive order to close in New York, New York.
Committee means the Risk Management Committee of the Board of Directors of the Corporation, or any successor committee thereto.
Corporation means U.S. Bancorp.
Depositary Company shall have the meaning set forth in Section 6(d) hereof.
Dividend Payment Date shall have the meaning set forth in Section 4(a) hereof.
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Dividend Period shall have the meaning set forth in Section 4(a) hereof.
DTC means The Depository Trust Company, together with its successors and assigns.
Junior Stock means the Corporations common stock and any other class or series of stock of the Corporation hereafter authorized over which Series G Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Corporation.
London Banking Day means any day on which commercial banks are open for general business (including dealings in deposits in U.S. dollars) in London, England.
Parity Stock means any other class or series of stock of the Corporation that ranks on a parity with Series G Preferred Stock in the payment of dividends and in the distribution of assets on any liquidation, dissolution or winding up of the Corporation.
Preferred Director shall have the meaning set forth in Section 7(c)(i) hereof.
Redemption Price shall have the meaning set forth in Section 6(a) hereof.
Regulatory Capital Treatment Event means the good faith determination by the Corporation that, as a result of (i) any amendment to, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of Series G Preferred Stock, (ii) any proposed change in those laws or regulations that is announced after the initial issuance of any share of Series G Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations that is announced after the initial issuance of any share of Series G Preferred Stock, there is more than an insubstantial risk that the Corporation will not be entitled to treat the full liquidation value of the shares of Series G Preferred Stock then outstanding as tier 1 capital (or its equivalent) for purposes of the capital adequacy guidelines of the Board of Governors of the Federal Reserve System (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency), as then in effect and applicable, for as long as any share of Series G Preferred Stock is outstanding.
Reuters Screen LIBOR01 Page means the display designated on the Reuters 3000 Xtra (or such other page as may replace that page on that service or such other service as may be nominated by the British Bankers Association for the purpose of displaying London interbank offered rates for U.S. dollar deposits).
Series G Preferred Stock shall have the meaning set forth in Section 1 hereof.
Three-Month LIBOR means, with respect to any Dividend Period beginning on or after April 15, 2017, the rate (expressed as a percentage per annum) for deposits in U.S. dollars for a three-month period commencing on the first day of that Dividend Period, as that rate appears on Reuters Screen LIBOR01 Page as of 11:00 a.m. (London time) on the second London Banking Day preceding the first day of that Dividend Period. If such rate does not appear on Reuters Screen LIBOR01 Page, Three-Month LIBOR will be determined on the basis of the rates at which deposits in U.S. dollars for a three-month period commencing on the first day of that Dividend
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Period and in a principal amount of not less than $1,000,000 are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by the Corporation, at approximately 11:00 a.m. (London time), on the second London Banking Day preceding the first day of that Dividend Period. U.S. Bank National Association, or such other bank as may be acting as calculation agent for the Corporation, will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, Three-Month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest .00001 of 1%) of such quotations. If fewer than two quotations are provided, Three-Month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest .00001 of 1%) of the rates quoted by three major banks in New York City selected by the calculation agent, at approximately 11:00 a.m. (New York City time), on the first day of that Dividend Period for loans in U.S. dollars to leading European banks for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1,000,000. However, if the banks selected by the calculation agent to provide quotations are not quoting as described above, Three-Month LIBOR for that Dividend Period will be the same as Three-Month LIBOR as determined for the previous Dividend Period, or in the case of the first Dividend Period beginning on or after April 15, 2017, the most recent rate that could have been determined in accordance with the first sentence of this paragraph had the dividend rate been a floating rate during the period prior to April 15, 2017. The calculation agents establishment of Three-Month LIBOR and calculation of the amount of dividends for each Dividend Period will be on file at the principal offices of the Corporation, will be made available to any holder of Series G Preferred Stock upon request and will be final and binding in the absence of manifest error.
Section 4. Dividends.
(a) Rate. Holders of Series G Preferred Stock shall be entitled to receive, if, as and when declared by the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation, but only out of assets legally available therefor, non-cumulative cash dividends on the liquidation preference of $25,000 per share of Series G Preferred Stock, and no more, payable quarterly in arrears on each January 15, April 15, July 15 and October 15; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day (without any interest or other payment in respect of such delay) (each such day on which dividends are payable a Dividend Payment Date). The period from and including the date of issuance of the Series G Preferred Stock or any Dividend Payment Date to but excluding the next Dividend Payment Date is a Dividend Period. Dividends on each share of Series G Preferred Stock will accrue on the liquidation preference of $25,000 per share (i) from the date of issuance to but not including the Dividend Payment Date on April 15, 2017 at a rate per annum equal to 6.00%, and (ii) thereafter for each related Dividend Period at a rate per annum equal to Three-Month LIBOR plus 4.86125%. The record date for payment of dividends on the Series G Preferred Stock shall be the last Business Day of the calendar month immediately preceding the month during which the Dividend Payment Date falls. The amount of dividends payable for any period prior to April 15, 2017 shall be computed on the basis of a 360-day year consisting of twelve 30-day months and dividends for periods thereafter shall be computed on the basis of a 360-day year and the actual number of days elapsed. Notwithstanding any other provision hereof, dividends on the Series G Preferred Stock shall not be declared, paid or set aside for payment to the extent such act would cause the Corporation to fail to comply with laws and regulations applicable thereto, including applicable capital adequacy guidelines.
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(b) Non-Cumulative Dividends. Dividends on shares of Series G Preferred Stock shall be non-cumulative. To the extent that any dividends payable on the shares of Series G Preferred Stock on any Dividend Payment Date are not declared and paid, in full or otherwise, on such Dividend Payment Date, then such unpaid dividends shall not cumulate and shall cease to accrue and be payable and the Corporation shall have no obligation to pay, and the holders of Series G Preferred Stock shall have no right to receive, dividends accrued for such Dividend Period after the Dividend Payment Date for such Dividend Period or interest with respect to such dividends, whether or not dividends are declared for any subsequent Dividend Period with respect to Series G Preferred Stock, Parity Stock, Junior Stock or any other class or series of authorized preferred stock of the Corporation.
(c) Priority of Dividends. So long as any share of Series G Preferred Stock remains outstanding, (i) no dividend shall be declared or paid or set aside for payment and no distribution shall be declared or made or set aside for payment on any Junior Stock, other than a dividend payable solely in Junior Stock, (ii) no shares of Junior Stock shall be repurchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly (other than as a result of a reclassification of Junior Stock for or into Junior Stock, or the exchange or conversion of one share of Junior Stock for or into another share of Junior Stock, and other than through the use of the proceeds of a substantially contemporaneous sale of other shares of Junior Stock), nor shall any monies be paid to or made available for a sinking fund for the redemption of any such securities by the Corporation and (iii) no shares of Parity Stock shall be repurchased, redeemed or otherwise acquired for consideration by the Corporation otherwise than pursuant to pro rata offers to purchase all, or a pro rata portion, of the Series G Preferred Stock and such Parity Stock except by conversion into or exchange for Junior Stock, in each case unless full dividends on all outstanding shares of Series G Preferred Stock for the then-current Dividend Period have been paid in full or declared and a sum sufficient for the payment thereof set aside. When dividends are not paid in full upon the shares of Series G Preferred Stock and any Parity Stock, all dividends declared upon shares of Series G Preferred Stock and any Parity Stock shall be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share on Series G Preferred Stock, and accrued dividends, including any accumulations, on Parity Stock, bear to each other. No interest will be payable in respect of any dividend payment on shares of Series G Preferred Stock that may be in arrears. If the Board of Directors of the Corporation determines not to pay any dividend or a full dividend on a Dividend Payment Date, the Corporation will provide, or cause to be provided, written notice to the holders of the Series G Preferred Stock prior to such date. Subject to the foregoing, and not otherwise, dividends (payable in cash, stock or otherwise) as may be determined by the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may be declared and paid on any Junior Stock from time to time out of any assets legally available therefor, and the shares of Series G Preferred Stock or Parity Stock shall not be entitled to participate in any such dividend.
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Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, holders of Series G Preferred Stock shall be entitled, out of assets legally available therefor, before any distribution or payment out of the assets of the Corporation may be made to or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of securities ranking senior to or on parity with Series G Preferred Stock upon liquidation and the rights of the Corporations depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share, plus any authorized, declared and unpaid dividends, without accumulation of any undeclared dividends, to the date of liquidation. The holder of Series G Preferred Stock shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Corporation are not sufficient to pay in full the liquidation preference plus any authorized, declared and unpaid dividends to all holders of Series G Preferred Stock and all holders of any Parity Stock, the amounts paid to the holders of Series G Preferred Stock and to the holders of all Parity Stock shall be pro rata in accordance with the respective aggregate liquidation preferences plus any authorized, declared and unpaid dividends of Series G Preferred Stock and all such Parity Stock.
(c) Residual Distributions. If the liquidation preference plus any authorized, declared and unpaid dividends has been paid in full to all holders of Series G Preferred Stock and all holders of any Parity Stock, the holders of Junior Stock shall be entitled to receive all remaining assets of the Corporation according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Corporation shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, nor shall the merger, consolidation or any other business combination transaction of the Corporation into or with any other corporation or person or the merger, consolidation or any other business combination transaction of any other corporation or person into or with the Corporation be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation.
Section 6. Redemption.
(a) Optional Redemption. The Corporation, at the option of its Board of Directors or any duly authorized committee of the Board of Directors of the Corporation, may redeem in whole or in part the shares of Series G Preferred Stock at the time outstanding, at any time on or after the Dividend Payment Date in April, 2017, upon notice given as provided in Section 6(b) below. The redemption price for shares of Series G Preferred Stock shall be $25,000 per share plus dividends that have been declared but not paid (the Redemption Price). Notwithstanding the foregoing, within 90 days following the occurrence of a Regulatory Capital Treatment Event, the Corporation, at its option, subject to the approval of the Appropriate Federal Banking Agency, may provide notice of its intent to redeem as provided in Subsection (b) below, and subsequently redeem, all (but not less than all) of the shares of Series G Preferred Stock at the time outstanding, at the Redemption Price applicable on such date of redemption.
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(b) Notice of Redemption. Notice of every redemption of shares of Series G Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the holders of record of such shares to be redeemed at their respective last addresses appearing on the stock register of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Notwithstanding the foregoing, if the Series G Preferred Stock is held in book-entry form through DTC, the Corporation may give such notice in any manner permitted by DTC. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Series G Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series G Preferred Stock. Each notice shall state (i) the redemption date; (ii) the number of shares of Series G Preferred Stock to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed by such holder; (iii) the Redemption Price; (iv) the place or places where the certificates for such shares are to be surrendered for payment of the Redemption Price; and (v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series G Preferred Stock at the time outstanding, the shares of Series G Preferred Stock to be redeemed shall be selected either pro rata from the holders of record of Series G Preferred Stock in proportion to the number of Series G Preferred Stock held by such holders or by lot or in such other manner as the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may determine to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors of the Corporation, the Committee or any duly authorized committee of the Board of Directors shall have full power and authority to prescribe the terms and conditions upon which shares of Series G Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Corporation, separate and apart from its other assets, in trust for the pro rata benefit of the holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Corporation with a bank or trust company selected by the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors (the Depositary Company) in trust for the pro rata benefit of the holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue after such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption from such bank or trust company at any time after the redemption date from the funds so deposited, without interest. The Corporation shall be entitled to receive, from time to time, from the Depositary
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Company any interest accrued on such funds, and the holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Corporation, and in the event of such repayment to the Corporation, the holders of record of the shares so called for redemption shall be deemed to be unsecured creditors of the Corporation for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Corporation, but shall in no event be entitled to any interest.
Section 7. Voting Rights. The holders of Series G Preferred Stock will have no voting rights and will not be entitled to elect any directors, except as expressly provided by law and except that:
(a) Supermajority Voting RightsAmendments. Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series G Preferred Stock at the time outstanding, voting separately as a class, shall be required to authorize any amendment of the Certificate of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any certificate of designations or any similar document relating to any series of preferred stock) which will materially and adversely affect the powers, preferences, privileges or rights of the Series G Preferred Stock, taken as a whole; provided, however, that any increase in the amount of the authorized or issued Series G Preferred Stock or authorized preferred stock of the Corporation or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock ranking equally with and/or junior to the Series G Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and/or the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to adversely affect the powers, preferences, privileges or rights of the Series G Preferred Stock.
(b) Supermajority Voting RightsPriority. Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series G Preferred Stock and all other Parity Stock, at the time outstanding, voting as a single class without regard to series, shall be required to issue, authorize or increase the authorized amount of, or to issue or authorize any obligation or security convertible into or evidencing the right to purchase, any additional class or series of stock ranking prior to the shares of the Series G Preferred Stock and all other Parity Stock as to dividends or the distribution of assets upon liquidation, dissolution or winding up of the Corporation;
(c) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series G Preferred Stock or any other class or series of preferred stock that ranks on parity with the Series G Preferred Stock as to payment of dividends, and upon which voting rights equivalent to those granted by this Section 7(c) have been conferred and are exercisable, have not been paid in an aggregate amount equal, as to any class or series, to at least six quarterly Dividend Periods (whether consecutive or not), the number of directors constituting the Board of Directors of the Corporation shall be increased by two, and the
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holders of the Series G Preferred Stock (together with holders of any other class of the Corporations authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist), shall have the right, voting separately as a single class without regard to series, to the exclusion of the holders of common stock, to elect two directors of the Corporation to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that the election of such directors must not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Corporations securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors of the Corporation shall at no time include more than two such directors. Each such director elected by the holders of shares of Series G Preferred Stock and any other class or series of preferred stock that ranks on parity with the Series G Preferred Stock as to payment of dividends is a Preferred Director.
(ii) Election. The election of the Preferred Directors will take place at any annual meeting of stockholders or any special meeting of the holders of Series G Preferred Stock and any other class or series of the Corporations stock that ranks on parity with Series G Preferred Stock as to payment of dividends and for which dividends have not been paid, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(c)(i) above, the secretary of the Corporation may, and upon the written request of any holder of Series G Preferred Stock (addressed to the secretary at the Corporations principal office) must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series G Preferred Stock, and any other class or series of preferred stock that ranks on parity with Series G Preferred Stock as to payment of dividends and for which dividends have not been paid, for the election of the two directors to be elected by them as provided in Section 7(c)(iii) below. The Preferred Directors shall each be entitled to one vote per director on any matter.
(iii) Notice for Special Meeting. Notice for a special meeting will be given in a similar manner to that provided in the Corporations by-laws for a special meeting of the stockholders. If the secretary of the Corporation does not call a special meeting within 20 days after receipt of any such request, then any holder of Series G Preferred Stock may (at the Corporations expense) call such meeting, upon notice as provided in this Section 7(c)(iii), and for that purpose will have access to the stock register of the Corporation. The Preferred Directors elected at any such special meeting will hold office until the next annual meeting of the Corporations stockholders unless they have been previously terminated or removed pursuant to Section 7(c)(iv). In case any vacancy in the office of a Preferred Director occurs (other than prior to the initial election of the Preferred Directors), the vacancy may be filled by the written consent of the Preferred Director remaining in office, or if none remains in office, by the vote of the holders of the Series G Preferred Stock (together with holders of any other class of the Corporations authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) to serve until the next annual meeting of the stockholders.
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(iv) Termination; Removal. Whenever full dividends have been paid regularly on the Series G Preferred Stock and any other class or series of preferred stock that ranks on parity with Series G Preferred Stock as to payment of dividends, if any, for at least four consecutive Dividend Periods, then the right of the holders of Series G Preferred Stock to elect such additional two directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future Dividend Periods). The terms of office of the Preferred Directors will immediately terminate and the number of directors constituting the Corporations board of directors will be reduced accordingly. Any Preferred Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of Series G Preferred Stock (together with holders of any other class of the Corporations authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) when they have the voting rights described in this Section 7(c).
Section 8. Conversion. The holders of Series G Preferred Stock shall not have any rights to convert such Series G Preferred Stock into shares of any other class of capital stock of the Corporation.
Section 9. Rank. Notwithstanding anything set forth in the Certificate of Incorporation or this Certificate of Designations to the contrary, the Board of Directors of the Corporation, the Committee or any authorized committee of the Board of Directors of the Corporation, without the vote of the holders of the Series G Preferred Stock, may authorize and issue additional shares of Junior Stock, Parity Stock or, subject to the voting rights granted in Section 7(b), any class of securities ranking senior to the Series G Preferred Stock as to dividends and the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
Section 10. Repurchase. Subject to the limitations imposed herein, the Corporation may purchase and sell Series G Preferred Stock from time to time to such extent, in such manner, and upon such terms as the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may determine; provided, however, that the Corporation shall not use any of its funds for any such purchase when there are reasonable grounds to believe that the Corporation is, or by such purchase would be, rendered insolvent.
Section 11. Unissued or Reacquired Shares. Shares of Series G Preferred Stock not issued or which have been issued and converted, redeemed or otherwise purchased or acquired by the Corporation shall be restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 12. No Sinking Fund. Shares of Series G Preferred Stock are not subject to the operation of a sinking fund.
* * * * * *
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Exhibit F
CERTIFICATE OF DESIGNATIONS
OF
SERIES H NON-CUMULATIVE PERPETUAL PREFERRED STOCK
OF
U.S. BANCORP
Section 1. Designation. The designation of the series of preferred stock shall be Series H Non-Cumulative Perpetual Preferred Stock (hereinafter referred to as the Series H Preferred Stock). Each share of Series H Preferred Stock shall be identical in all respects to every other share of Series H Preferred Stock. Series H Preferred Stock will rank equally with Parity Stock, if any, and will rank senior to Junior Stock with respect to the payment of dividends and the distribution of assets in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
Section 2. Number of Shares. The number of authorized shares of Series H Preferred Stock shall be 21,000. Such number may from time to time be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series H Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors of the Corporation, the Committee or any duly authorized committee of the Board of Directors of the Corporation and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Corporation shall have the authority to issue fractional shares of Series H Preferred Stock.
Section 3. Definitions. As used herein with respect to Series H Preferred Stock:
Appropriate Federal Banking Agency means the appropriate Federal banking agency with respect to the Corporation as defined in Section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. Section 1813(q)), or any successor provision.
Business Day means each Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions are not authorized or obligated by law, regulation or executive order to close in New York, New York.
Committee means the Risk Management Committee of the Board of Directors of the Corporation, or any successor committee thereto.
Corporation means U.S. Bancorp.
Depositary Company shall have the meaning set forth in Section 6(d) hereof.
Dividend Payment Date shall have the meaning set forth in Section 4(a) hereof.
Dividend Period shall have the meaning set forth in Section 4(a) hereof.
DTC means The Depository Trust Company, together with its successors and assigns.
Junior Stock means the Corporations common stock and any other class or series of stock of the Corporation hereafter authorized over which Series H Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Corporation.
Parity Stock means any other class or series of stock of the Corporation that ranks on a parity with Series H Preferred Stock in the payment of dividends and in the distribution of assets on any liquidation, dissolution or winding up of the Corporation.
Preferred Director shall have the meaning set forth in Section 7(c)(i) hereof.
Redemption Price shall have the meaning set forth in Section 6(a) hereof.
Regulatory Capital Treatment Event means the good faith determination by the Corporation that, as a result of (i) any amendment to, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of Series H Preferred Stock, (ii) any proposed change in those laws or regulations that is announced after the initial issuance of any share of Series H Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations that is announced after the initial issuance of any share of Series H Preferred Stock, there is more than an insubstantial risk that the Corporation will not be entitled to treat the full liquidation value of the shares of Series H Preferred Stock then outstanding as tier 1 capital (or its equivalent) for purposes of the capital adequacy guidelines of the Board of Governors of the Federal Reserve System (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency), as then in effect and applicable, for as long as any share of Series H Preferred Stock is outstanding.
Series H Preferred Stock shall have the meaning set forth in Section 1 hereof.
Section 4. Dividends.
(a) Rate. Holders of Series H Preferred Stock shall be entitled to receive, if, as and when declared by the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation, but only out of assets legally available therefor, non-cumulative cash dividends on the liquidation preference of $25,000 per share of Series H Preferred Stock, and no more, payable quarterly in arrears on each January 15, April 15, July 15 and October 15; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day (without any interest or other payment in respect of such delay) (each such day on which dividends are payable a Dividend Payment Date). The period from and including the date of issuance of the Series H Preferred Stock or any Dividend Payment Date to but excluding the next Dividend Payment Date is a Dividend Period. Dividends on each share of Series H Preferred Stock will accrue on the liquidation preference of $25,000 per share at a rate per annum equal to 5.15%. The record date for payment of dividends on the
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Series H Preferred Stock shall be the last Business Day of the calendar month immediately preceding the month during which the Dividend Payment Date falls. The amount of dividends payable shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Notwithstanding any other provision hereof, dividends on the Series H Preferred Stock shall not be declared, paid or set aside for payment to the extent such act would cause the Corporation to fail to comply with laws and regulations applicable thereto, including applicable capital adequacy guidelines.
(b) Non-Cumulative Dividends. Dividends on shares of Series H Preferred Stock shall be non-cumulative. To the extent that any dividends payable on the shares of Series H Preferred Stock on any Dividend Payment Date are not declared and paid, in full or otherwise, on such Dividend Payment Date, then such unpaid dividends shall not cumulate and shall case to accrue and be payable and the Corporation shall have no obligation to pay, and the holders of Series H Preferred Stock shall have no right to receive, dividends accrued for such Dividend Period after the Dividend Payment Date for such Dividend Period or interest with respect to such dividends, whether or not dividends are declared for any subsequent Dividend Period with respect to Series H Preferred Stock, Parity Stock, Junior Stock or any other class or series of authorized preferred stock of the Corporation.
(c) Priority of Dividends. So long as any share of Series H Preferred Stock remains outstanding, (i) no dividend shall be declared or paid or set aside for payment and no distribution shall be declared or made or set aside for payment on any Junior Stock, other than a dividend payable solely in Junior Stock, (ii) no shares of Junior Stock shall be repurchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly (other than as a result of a reclassification of Junior Stock for or into Junior Stock, or the exchange or conversion of one share of Junior Stock for or into another share of Junior Stock, and other than through the use of the proceeds of a substantially contemporaneous sale of other shares of Junior Stock), nor shall any monies be paid to or made available for a sinking fund for the redemption of any such securities by the Corporation and (iii) no shares of Parity Stock shall be repurchased, redeemed or otherwise acquired for consideration by the Corporation otherwise than pursuant to pro rata offers to purchase all, or a pro rata portion, of the Series H Preferred Stock and such Parity Stock except by conversion into or exchange for Junior Stock, in each case unless full dividends on all outstanding shares of Series H Preferred Stock for the then-current Dividend Period have been paid in full or declared and a sum sufficient for the payment thereof set aside. When dividends are not paid in full upon the shares of Series H Preferred Stock and any Parity Stock, all dividends declared upon shares of Series H Preferred Stock and any Parity Stock shall be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share on Series H Preferred Stock, and accrued dividends, including any accumulations, on Parity Stock, bear to each other. No interest will be payable in respect of any dividend payment on shares of Series H Preferred Stock that may be in arrears. If the Board of Directors of the Corporation determines not to pay any dividend or a full dividend on a Dividend Payment Date, the Corporation will provide, or cause to be provided, written notice to the holders of the Series H Preferred Stock prior to such date. Subject to the foregoing, and not otherwise, dividends (payable in cash, stock or otherwise) as may be determined by the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may be declared and paid on any Junior Stock from time to time out of any assets legally available therefor, and the shares of Series H Preferred Stock or Parity Stock shall not be entitled to participate in any such dividend.
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Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, holders of Series H Preferred Stock shall be entitled, out of assets legally available therefor, before any distribution or payment out of the assets of the Corporation may be made to or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of securities ranking senior to or on parity with Series H Preferred Stock upon liquidation and the rights of the Corporations depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share, plus any authorized, declared and unpaid dividends, without accumulation of any undeclared dividends, to the date of liquidation. The holder of Series H Preferred Stock shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Corporation are not sufficient to pay in full the liquidation preference plus any authorized, declared and unpaid dividends to all holders of Series H Preferred Stock and all holders of any Parity Stock, the amounts paid to the holders of Series H Preferred Stock and to the holders of all Parity Stock shall be pro rata in accordance with the respective aggregate liquidation preferences plus any authorized, declared and unpaid dividends of Series H Preferred Stock and all such Parity Stock.
(c) Residual Distributions. If the liquidation preference plus any authorized, declared and unpaid dividends has been paid in full to all holders of Series H Preferred Stock and all holders of any Parity Stock, the holders of Junior Stock shall be entitled to receive all remaining assets of the Corporation according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Corporation shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, nor shall the merger, consolidation or any other business combination transaction of the Corporation into or with any other corporation or person or the merger, consolidation or any other business combination transaction of any other corporation or person into or with the Corporation be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation.
Section 6. Redemption.
(a) Optional Redemption. The Corporation, at the option of its Board of Directors or any duly authorized committee of the Board of Directors of the Corporation, may redeem in whole or in part the shares of Series H Preferred Stock at the time outstanding, at any time on or after July 15, 2018, upon notice given as provided in Section 6(b) below. The redemption price for shares of Series H Preferred Stock shall be $25,000 per share plus
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dividends that have been declared but not paid (the Redemption Price). Notwithstanding the foregoing, within 90 days following the occurrence of a Regulatory Capital Treatment Event, the Corporation, at its option, subject to the approval of the Appropriate Federal Banking Agency, may provide notice of its intent to redeem as provided in Subsection (b) below, and subsequently redeem, all (but not less than all) of the shares of Series H Preferred Stock at the time outstanding, at the Redemption Price applicable on such date of redemption.
(b) Notice of Redemption. Notice of every redemption of shares of Series H Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the holders of record of such shares to be redeemed at their respective last addresses appearing on the stock register of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Notwithstanding the foregoing, if the Series H Preferred Stock is held in book-entry form through DTC, the Corporation may give such notice in any manner permitted by DTC. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Series H Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series H Preferred Stock. Each notice shall state (i) the redemption date; (ii) the number of shares of Series H Preferred Stock to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed by such holder; (iii) the Redemption Price; (iv) the place or places where the certificates for such shares are to be surrendered for payment of the Redemption Price; and (v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series H Preferred Stock at the time outstanding, the shares of Series H Preferred Stock to be redeemed shall be selected either pro rata from the holders of record of Series H Preferred Stock in proportion to the number of Series H Preferred Stock held by such holders or by lot or in such other manner as the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may determine to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors of the Corporation, the Committee or any duly authorized committee of the Board of Directors shall have full power and authority to prescribe the terms and conditions upon which shares of Series H Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Corporation, separate and apart from its other assets, in trust for the pro rata benefit of the holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Corporation with a bank or trust company selected by the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors (the Depositary Company) in trust for the pro rata benefit of the holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue after such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right
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of the holders thereof to receive the amount payable on such redemption from such bank or trust company at any time after the redemption date from the funds so deposited, without interest. The Corporation shall be entitled to receive, from time to time, from the Depositary Company any interest accrued on such funds, and the holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Corporation, and in the event of such repayment to the Corporation, the holders of record of the shares so called for redemption shall be deemed to be unsecured creditors of the Corporation for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Corporation, but shall in no event be entitled to any interest.
Section 7. Voting Rights. The holders of Series H Preferred Stock will have no voting rights and will not be entitled to elect any directors, except as expressly provided by law and except that:
(a) Supermajority Voting RightsAmendments. Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series H Preferred Stock at the time outstanding, voting separately as a class, shall be required to authorize any amendment of the Certificate of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any certificate of designations or any similar document relating to any series of preferred stock) which will materially and adversely affect the powers, preferences, privileges or rights of the Series H Preferred Stock, taken as a whole; provided, however, that any increase in the amount of the authorized or issued Series H Preferred Stock or authorized preferred stock of the Corporation or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock ranking equally with and/or junior to the Series H Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and/or the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to adversely affect the powers, preferences, privileges or rights of the Series H Preferred Stock.
(b) Supermajority Voting RightsPriority. Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series H Preferred Stock and all other Parity Stock, at the time outstanding, voting as a single class without regard to series, shall be required to issue, authorize or increase the authorized amount of, or to issue or authorize any obligation or security convertible into or evidencing the right to purchase, any additional class or series of stock ranking prior to the shares of the Series H Preferred Stock and all other Parity Stock as to dividends or the distribution of assets upon liquidation, dissolution or winding up of the Corporation;
(c) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series H Preferred Stock or any other class or series of preferred stock that ranks on parity with the Series H Preferred Stock as to payment of dividends, and upon which voting rights equivalent to those granted by this Section 7(c) have been conferred and are exercisable,
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have not been paid in an aggregate amount equal, as to any class or series, to at least six quarterly Dividend Periods (whether consecutive or not), the number of directors constituting the Board of Directors of the Corporation shall be increased by two, and the holders of the Series H Preferred Stock (together with holders of any other class of the Corporations authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist), shall have the right, voting separately as a single class without regard to series, to the exclusion of the holders of common stock, to elect two directors of the Corporation to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that the Board of Directors of the Corporation shall at no time include more than two such directors. Each such director elected by the holders of shares of Series H Preferred Stock and any other class or series of preferred stock that ranks on parity with the Series H Preferred Stock as to payment of dividends is a Preferred Director.
(ii) Election. The election of the Preferred Directors will take place at any annual meeting of stockholders or any special meeting of the holders of Series H Preferred Stock and any other class or series of the Corporations stock that ranks on parity with Series H Preferred Stock as to payment of dividends and for which dividends have not been paid, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(c)(i) above, the secretary of the Corporation may, and upon the written request of any holder of Series H Preferred Stock (addressed to the secretary at the Corporations principal office) must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series H Preferred Stock, and any other class or series of preferred stock that ranks on parity with Series H Preferred Stock as to payment of dividends and for which dividends have not been paid, for the election of the two directors to be elected by them as provided in Section 7(c)(iii) below. The Preferred Directors shall each be entitled to one vote per director on any matter.
(iii) Notice for Special Meeting. Notice for a special meeting will be given in a similar manner to that provided in the Corporations by-laws for a special meeting of the stockholders. If the secretary of the Corporation does not call a special meeting within 20 days after receipt of any such request, then any holder of Series H Preferred Stock may (at the Corporations expense) call such meeting, upon notice as provided in this Section 7(c)(iii), and for that purpose will have access to the stock register of the Corporation. The Preferred Directors elected at any such special meeting will hold office until the next annual meeting of the Corporations stockholders unless they have been previously terminated or removed pursuant to Section 7(c)(iv). In case any vacancy in the office of a Preferred Director occurs (other than prior to the initial election of the Preferred Directors), the vacancy may be filled by the written consent of the Preferred Director remaining in office, or if none remains in office, by the vote of the holders of the Series H Preferred Stock (together with holders of any other class of the Corporations authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) to serve until the next annual meeting of the stockholders.
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(iv) Termination; Removal. Whenever full dividends have been paid regularly on the Series H Preferred Stock and any other class or series of preferred stock that ranks on parity with Series H Preferred Stock as to payment of dividends, if any, for at least four consecutive Dividend Periods, then the right of the holders of Series H Preferred Stock to elect such additional two directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future Dividend Periods). The terms of office of the Preferred Directors will immediately terminate and the number of directors constituting the Corporations board of directors will be reduced accordingly. Any Preferred Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of Series H Preferred Stock (together with holders of any other class of the Corporations authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) when they have the voting rights described in this Section 7(c).
Section 8. Conversion. The holders of Series H Preferred Stock shall not have any rights to convert such Series H Preferred Stock into shares of any other class of capital stock of the Corporation.
Section 9. Rank. Notwithstanding anything set forth in the Certificate of Incorporation or this Certificate of Designations to the contrary, the Board of Directors of the Corporation, the Committee or any authorized committee of the Board of Directors of the Corporation, without the vote of the holders of the Series H Preferred Stock, may authorize and issue additional shares of Junior Stock, Parity Stock or, subject to the voting rights granted in Section 7(b), any class of securities ranking senior to the Series H Preferred Stock as to dividends and the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
Section 10. Repurchase. Subject to the limitations imposed herein, the Corporation may purchase and sell Series H Preferred Stock from time to time to such extent, in such manner, and upon such terms as the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may determine; provided, however, that the Corporation shall not use any of its funds for any such purchase when there are reasonable grounds to believe that the Corporation is, or by such purchase would be, rendered insolvent.
Section 11. Unissued or Reacquired Shares. Shares of Series H Preferred Stock not issued or which have been issued and converted, redeemed or otherwise purchased or acquired by the Corporation shall be restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 12. No Sinking Fund. Shares of Series H Preferred Stock are not subject to the operation of a sinking fund.
* * * * * *
[As filed with the Delaware Secretary of State on June 19, 2013.]
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CERTIFICATE OF DESIGNATIONS
OF
SERIES I NON-CUMULATIVE PERPETUAL PREFERRED STOCK
OF
U.S. BANCORP
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
U.S. Bancorp, a corporation organized and existing under the General Corporation Law of the State of Delaware (the Corporation), does hereby certify that:
1. On October 19, 2015, the Risk Management Committee (the Committee) of the Board of Directors of the Corporation (the Board), pursuant to authority conferred upon the Committee by the Board and by Section 141(c)(2) and (3) of the General Corporation Law of the State of Delaware, duly adopted resolutions establishing the terms of the Corporations Series I Non-Cumulative Perpetual Preferred Stock, $1.00 par value (the Series I Preferred Stock), and authorized a sub-committee of the Committee (the Subcommittee) to act on behalf of the Committee in establishing the liquidation preference, dividend rate, optional redemption date, number of authorized shares and certain other terms of the Series I Preferred Stock.
2. Thereafter, on November 16, 2015, the Subcommittee duly adopted the following resolution by written consent:
RESOLVED, that the designations, and certain other preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the Series I Preferred Stock, including those established by the Committee, and the additional terms established hereby, are as set forth in Exhibit A hereto, which is incorporated herein by reference.
IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation by its Vice Chairman and Chief Financial Officer this 18th day of November, 2015.
U.S. BANCORP | ||
By: | /s/ Kathleen Ashcraft Rogers | |
Kathleen Ashcraft Rogers | ||
Vice Chairman and Chief Financial Officer |
EXHIBIT A
TO
CERTIFICATE OF DESIGNATIONS
OF
SERIES I NON-CUMULATIVE PERPETUAL PREFERRED STOCK
OF
U.S. BANCORP
Section 1. Designation. The designation of the series of preferred stock shall be Series I Non-Cumulative Perpetual Preferred Stock (hereinafter referred to as the Series I Preferred Stock). Each share of Series I Preferred Stock shall be identical in all respects to every other share of Series I Preferred Stock. Series I Preferred Stock will rank equally with Parity Stock, if any, and will rank senior to Junior Stock with respect to the payment of dividends and the distribution of assets in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
Section 2. Number of Shares. The number of authorized shares of Series I Preferred Stock shall be 30,000. Such number may from time to time be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series I Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors of the Corporation, the Committee or any duly authorized committee of the Board of Directors of the Corporation and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Corporation shall have the authority to issue fractional shares of Series I Preferred Stock.
Section 3. Definitions. As used herein with respect to Series I Preferred Stock:
Appropriate Federal Banking Agency means the appropriate Federal banking agency with respect to the Corporation as defined in Section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. Section 1813(q)), or any successor provision.
Business Day means, for Dividend Periods prior to January 15, 2021, each Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions are not authorized or obligated by law, regulation or executive order to close in New York, New York, and for Dividend Periods on and after January 15, 2021, it means any date that would be considered a Business Day for Dividend Periods prior to January 15, 2021 that is also a London Banking Day.
Committee means the Risk Management Committee of the Board of Directors of the Corporation, or any successor committee thereto.
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Corporation means U.S. Bancorp.
Depositary Company shall have the meaning set forth in Section 6(d) hereof.
Dividend Payment Date shall have the meaning set forth in Section 4(a) hereof.
Dividend Period shall have the meaning set forth in Section 4(a) hereof.
DTC means The Depository Trust Company, together with its successors and assigns.
Junior Stock means the Corporations common stock and any other class or series of stock of the Corporation hereafter authorized over which Series I Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Corporation.
London Banking Day means any day on which commercial banks are open for general business (including dealings in deposits in U.S. dollars) in London, England.
Parity Stock means any other class or series of stock of the Corporation that ranks on a parity with Series I Preferred Stock in the payment of dividends and in the distribution of assets on any liquidation, dissolution or winding up of the Corporation.
Preferred Director shall have the meaning set forth in Section 7(c)(i) hereof.
Redemption Price shall have the meaning set forth in Section 6(a) hereof.
Regulatory Capital Treatment Event means the good faith determination by the Corporation that, as a result of (i) any amendment to, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of Series I Preferred Stock, (ii) any proposed change in those laws or regulations that is announced after the initial issuance of any share of Series I Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations that is announced after the initial issuance of any share of Series I Preferred Stock, there is more than an insubstantial risk that the Corporation will not be entitled to treat the full liquidation value of the shares of Series I Preferred Stock then outstanding as additional tier 1 capital (or its equivalent) for purposes of the capital adequacy guidelines of the Board of Governors of the Federal Reserve System (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency), as then in effect and applicable, for as long as any share of Series I Preferred Stock is outstanding.
Reuters Screen LIBOR01 Page means the display designated on the Reuters 3000 Xtra (or such other page as may replace that page on that service or such other service as may be nominated by the British Bankers Association for the purpose of displaying London interbank offered rates for U.S. dollar deposits).
Series I Preferred Stock shall have the meaning set forth in Section 1 hereof.
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Three-Month LIBOR means, with respect to any Dividend Period beginning on or after January 15, 2021, the rate (expressed as a percentage per annum) for deposits in U.S. dollars for a three-month period commencing on the first day of that Dividend Period, as that rate appears on Reuters Screen LIBOR01 Page as of 11:00 a.m. (London time) on the second London Banking Day preceding the first day of that Dividend Period. If such rate does not appear on Reuters Screen LIBOR01 Page, Three-Month LIBOR will be determined on the basis of the rates at which deposits in U.S. dollars for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1,000,000 are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by the Corporation, at approximately 11:00 a.m. (London time), on the second London Banking Day preceding the first day of that Dividend Period. U.S. Bank National Association, or such other bank as may be acting as calculation agent for the Corporation, will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, Three-Month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest .00001 of 1%) of such quotations. If fewer than two quotations are provided, Three-Month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest ..00001 of 1%) of the rates quoted by three major banks in New York City selected by the calculation agent, at approximately 11:00 a.m. (New York City time), on the first day of that Dividend Period for loans in U.S. dollars to leading European banks for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1,000,000. However, if the banks selected by the calculation agent to provide quotations are not quoting as described above, Three-Month LIBOR for that Dividend Period will be the same as Three-Month LIBOR as determined for the previous Dividend Period, or in the case of the first Dividend Period beginning on or after January 15, 2021, the most recent rate that could have been determined in accordance with the first sentence of this paragraph had the dividend rate been a floating rate during the period prior to January 15, 2021. The calculation agents establishment of Three-Month LIBOR and calculation of the amount of dividends for each Dividend Period will be on file at the principal offices of the Corporation, will be made available to any holder of Series I Preferred Stock upon request and will be final and binding in the absence of manifest error.
Section 4. Dividends.
(a) Rate. Holders of Series I Preferred Stock shall be entitled to receive, if, as and when declared by the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation, but only out of assets legally available therefor, non-cumulative cash dividends on the liquidation preference of $25,000 per share of Series I Preferred Stock, and no more, (i) from the date of issuance to, but excluding, January 15, 2021, at a rate per annum equal to 5.125%, payable semi-annually in arrears on each January 15 and July 15, commencing on January 15, 2016 through, and including, January 15, 2021, and (ii) from, and including, January 15, 2021, at a floating rate per annum equal to Three-Month LIBOR plus a spread of 3.486%, payable quarterly in arrears on each January 15, April 15, July 15 and October 15, commencing on April 15, 2021; provided, however, if any date on or prior to January 15, 2021 on which dividends otherwise would be payable is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day, without any interest or other payment in respect of such delay, and if any date after January 15, 2021 on which dividends otherwise would be payable is
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not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding Business Day unless that day falls in the next calendar month, in which case payment of any dividend otherwise payable on that date will be the immediately preceding Business Day, and dividends will accrue to the actual payment date (each such day on which dividends are payable a Dividend Payment Date). The period from and including the date of issuance of the Series I Preferred Stock or any Dividend Payment Date to but excluding the next Dividend Payment Date is a Dividend Period. The record date for payment of dividends on the Series I Preferred Stock shall be the last Business Day of the calendar month immediately preceding the month during which the Dividend Payment Date falls. The amount of dividends payable for any period prior to January 15, 2021 shall be computed on the basis of a 360-day year consisting of twelve 30-day months and dividends for periods thereafter shall be computed on the basis of a 360-day year and the actual number of days elapsed. Notwithstanding any other provision hereof, dividends on the Series I Preferred Stock shall not be declared, paid or set aside for payment to the extent such act would cause the Corporation to fail to comply with laws and regulations applicable thereto, including applicable capital adequacy guidelines.
(b) Non-Cumulative Dividends. Dividends on shares of Series I Preferred Stock shall be non-cumulative. To the extent that any dividends payable on the shares of Series I Preferred Stock on any Dividend Payment Date are not declared and paid, in full or otherwise, on such Dividend Payment Date, then such unpaid dividends shall not cumulate and shall cease to accrue and be payable and the Corporation shall have no obligation to pay, and the holders of Series I Preferred Stock shall have no right to receive, dividends accrued for such Dividend Period after the Dividend Payment Date for such Dividend Period or interest with respect to such dividends, whether or not dividends are declared for any subsequent Dividend Period with respect to Series I Preferred Stock, Parity Stock, Junior Stock or any other class or series of authorized preferred stock of the Corporation.
(c) Priority of Dividends. So long as any share of Series I Preferred Stock remains outstanding, (i) no dividend shall be declared or paid or set aside for payment and no distribution shall be declared or made or set aside for payment on any Junior Stock, other than a dividend payable solely in Junior Stock, (ii) no shares of Junior Stock shall be repurchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly (other than as a result of a reclassification of Junior Stock for or into Junior Stock, or the exchange or conversion of one share of Junior Stock for or into another share of Junior Stock, and other than through the use of the proceeds of a substantially contemporaneous sale of other shares of Junior Stock), nor shall any monies be paid to or made available for a sinking fund for the redemption of any such securities by the Corporation and (iii) no shares of Parity Stock shall be repurchased, redeemed or otherwise acquired for consideration by the Corporation otherwise than pursuant to pro rata offers to purchase all, or a pro rata portion, of the Series I Preferred Stock and such Parity Stock except by conversion into or exchange for Junior Stock, in each case unless full dividends on all outstanding shares of Series I Preferred Stock for the then-current Dividend Period have been paid in full or declared and a sum sufficient for the payment thereof set aside. When dividends are not paid in full upon the shares of Series I Preferred Stock and any Parity Stock, all dividends declared upon shares of Series I Preferred Stock and any Parity Stock shall be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share on Series I Preferred Stock, and accrued dividends, including
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any accumulations, on Parity Stock, bear to each other. No interest will be payable in respect of any dividend payment on shares of Series I Preferred Stock that may be in arrears. If the Board of Directors of the Corporation determines not to pay any dividend or a full dividend on a Dividend Payment Date, the Corporation will provide, or cause to be provided, written notice to the holders of the Series I Preferred Stock prior to such date. Subject to the foregoing, and not otherwise, dividends (payable in cash, stock or otherwise) as may be determined by the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may be declared and paid on any Junior Stock from time to time out of any assets legally available therefor, and the shares of Series I Preferred Stock or Parity Stock shall not be entitled to participate in any such dividend.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, holders of Series I Preferred Stock shall be entitled, out of assets legally available therefor, before any distribution or payment out of the assets of the Corporation may be made to or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of securities ranking senior to or on parity with Series I Preferred Stock upon liquidation and the rights of the Corporations depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share, plus any authorized, declared and unpaid dividends, without accumulation of any undeclared dividends, to the date of liquidation. The holder of Series I Preferred Stock shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Corporation are not sufficient to pay in full the liquidation preference plus any authorized, declared and unpaid dividends to all holders of Series I Preferred Stock and all holders of any Parity Stock, the amounts paid to the holders of Series I Preferred Stock and to the holders of all Parity Stock shall be pro rata in accordance with the respective aggregate liquidation preferences plus any authorized, declared and unpaid dividends of Series I Preferred Stock and all such Parity Stock.
(c) Residual Distributions. If the liquidation preference plus any authorized, declared and unpaid dividends has been paid in full to all holders of Series I Preferred Stock and all holders of any Parity Stock, the holders of Junior Stock shall be entitled to receive all remaining assets of the Corporation according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Corporation shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, nor shall the merger, consolidation or any other business combination transaction of the Corporation into or with any other corporation or person or the merger, consolidation or any other business combination transaction of any other corporation or person into or with the Corporation be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation.
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Section 6. Redemption.
(a) Optional Redemption. The Corporation, at the option of its Board of Directors or any duly authorized committee of the Board of Directors of the Corporation, may redeem in whole or in part the shares of Series I Preferred Stock at the time outstanding, at any time on or after January 15, 2021, upon notice given as provided in Section 6(b) below. The redemption price for shares of Series I Preferred Stock shall be $25,000 per share plus dividends that have been declared but not paid (the Redemption Price). Notwithstanding the foregoing, within 90 days following the occurrence of a Regulatory Capital Treatment Event, the Corporation, at its option, subject to the approval of the Appropriate Federal Banking Agency, may provide notice of its intent to redeem as provided in Section 6(b) below, and subsequently redeem, all (but not less than all) of the shares of Series I Preferred Stock at the time outstanding, at the Redemption Price applicable on such date of redemption.
(b) Notice of Redemption. Notice of every redemption of shares of Series I Preferred Stock shall be mailed by first-class mail, postage prepaid, addressed to the holders of record of such shares to be redeemed at their respective last addresses appearing on the stock register of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Notwithstanding the foregoing, if the Series I Preferred Stock is held in book-entry form through DTC, the Corporation may give such notice in any manner permitted by DTC. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Series I Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series I Preferred Stock. Each notice shall state (i) the redemption date; (ii) the number of shares of Series I Preferred Stock to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed by such holder; (iii) the Redemption Price; (iv) the place or places where the certificates for such shares are to be surrendered for payment of the Redemption Price; and (v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series I Preferred Stock at the time outstanding, the shares of Series I Preferred Stock to be redeemed shall be selected either pro rata from the holders of record of Series I Preferred Stock in proportion to the number of Series I Preferred Stock held by such holders or by lot or in such other manner as the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may determine to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors of the Corporation, the Committee or any duly authorized committee of the Board of Directors shall have full power and authority to prescribe the terms and conditions upon which shares of Series I Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Corporation, separate and apart from its other assets, in trust for the pro rata benefit of the holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Corporation with a bank or trust company
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selected by the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors (the Depositary Company) in trust for the pro rata benefit of the holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue after such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption from such bank or trust company at any time after the redemption date from the funds so deposited, without interest. The Corporation shall be entitled to receive, from time to time, from the Depositary Company any interest accrued on such funds, and the holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Corporation, and in the event of such repayment to the Corporation, the holders of record of the shares so called for redemption shall be deemed to be unsecured creditors of the Corporation for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Corporation, but shall in no event be entitled to any interest.
Section 7. Voting Rights. The holders of Series I Preferred Stock will have no voting rights and will not be entitled to elect any directors, except as expressly provided by law and except that:
(a) Supermajority Voting RightsAmendments. Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series I Preferred Stock at the time outstanding, voting separately as a class, shall be required to authorize any amendment of the Certificate of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any certificate of designations or any similar document relating to any series of preferred stock) which will materially and adversely affect the powers, preferences, privileges or rights of the Series I Preferred Stock, taken as a whole; provided, however, that any increase in the amount of the authorized or issued Series I Preferred Stock or authorized preferred stock of the Corporation or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock ranking equally with and/or junior to the Series I Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and/or the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to adversely affect the powers, preferences, privileges or rights of the Series I Preferred Stock.
(b) Supermajority Voting RightsPriority. Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series I Preferred Stock and all other Parity Stock, at the time outstanding, voting as a single class without regard to series, shall be required to issue, authorize or increase the authorized amount of, or to issue or authorize any obligation or security convertible into or evidencing the right to purchase, any additional class or series of stock ranking prior to the shares of the Series I Preferred Stock and all other Parity Stock as to dividends or the distribution of assets upon liquidation, dissolution or winding up of the Corporation.
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(c) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series I Preferred Stock or any other class or series of preferred stock that ranks on parity with the Series I Preferred Stock as to payment of dividends, and upon which voting rights equivalent to those granted by this Section 7(c) have been conferred and are exercisable, have not been paid in an aggregate amount equal, as to any class or series, to at least six quarterly Dividend Periods (whether consecutive or not), the number of directors constituting the Board of Directors of the Corporation shall be increased by two, and the holders of the Series I Preferred Stock (together with holders of any other class of the Corporations authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist), shall have the right, voting separately as a single class without regard to series, to the exclusion of the holders of common stock, to elect two directors of the Corporation to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that the Board of Directors of the Corporation shall at no time include more than two such directors. Each such director elected by the holders of shares of Series I Preferred Stock and any other class or series of preferred stock that ranks on parity with the Series I Preferred Stock as to payment of dividends is a Preferred Director.
(ii) Election. The election of the Preferred Directors will take place at any annual meeting of stockholders or any special meeting of the holders of Series I Preferred Stock and any other class or series of the Corporations stock that ranks on parity with Series I Preferred Stock as to payment of dividends and for which dividends have not been paid, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(c)(i) above, the secretary of the Corporation may, and upon the written request of any holder of Series I Preferred Stock (addressed to the secretary at the Corporations principal office) must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series I Preferred Stock, and any other class or series of preferred stock that ranks on parity with Series I Preferred Stock as to payment of dividends and for which dividends have not been paid, for the election of the two directors to be elected by them as provided in Section 7(c)(iii) below. The Preferred Directors shall each be entitled to one vote per director on any matter.
(iii) Notice for Special Meeting. Notice for a special meeting will be given in a similar manner to that provided in the Corporations by-laws for a special meeting of the stockholders. If the secretary of the Corporation does not call a special meeting within 20 days after receipt of any such request, then any holder of Series I Preferred Stock may (at the Corporations expense) call such meeting, upon notice as provided in this Section 7(c)(iii), and for that purpose will have access to the stock register of the Corporation. The Preferred Directors elected at any such special meeting will hold office until the next annual meeting of the Corporations stockholders unless they have been previously terminated or removed pursuant to Section 7(c)(iv). In case any vacancy in the office of a Preferred Director occurs (other than prior to the
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initial election of the Preferred Directors), the vacancy may be filled by the written consent of the Preferred Director remaining in office, or if none remains in office, by the vote of the holders of the Series I Preferred Stock (together with holders of any other class of the Corporations authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) to serve until the next annual meeting of the stockholders.
(iv) Termination; Removal. Whenever full dividends have been paid regularly on the Series I Preferred Stock and any other class or series of preferred stock that ranks on parity with Series I Preferred Stock as to payment of dividends, if any, for at least four consecutive Dividend Periods, then the right of the holders of Series I Preferred Stock to elect such additional two directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future Dividend Periods). The terms of office of the Preferred Directors will immediately terminate and the number of directors constituting the Corporations board of directors will be reduced accordingly. Any Preferred Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of Series I Preferred Stock (together with holders of any other class of the Corporations authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) when they have the voting rights described in this Section 7(c).
Section 8. Conversion. The holders of Series I Preferred Stock shall not have any rights to convert such Series I Preferred Stock into shares of any other class of capital stock of the Corporation.
Section 9. Rank. Notwithstanding anything set forth in the Certificate of Incorporation or this Certificate of Designations to the contrary, the Board of Directors of the Corporation, the Committee or any authorized committee of the Board of Directors of the Corporation, without the vote of the holders of the Series I Preferred Stock, may authorize and issue additional shares of Junior Stock, Parity Stock or, subject to the voting rights granted in Section 7(b), any class of securities ranking senior to the Series I Preferred Stock as to dividends and the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
Section 10. Repurchase. Subject to the limitations imposed herein, the Corporation may purchase and sell Series I Preferred Stock from time to time to such extent, in such manner, and upon such terms as the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may determine; provided, however, that the Corporation shall not use any of its funds for any such purchase when there are reasonable grounds to believe that the Corporation is, or by such purchase would be, rendered insolvent.
Section 11. Unissued or Reacquired Shares. Shares of Series I Preferred Stock not issued or which have been issued and converted, redeemed or otherwise purchased or acquired by the Corporation shall be restored to the status of authorized but unissued shares of preferred stock without designation as to series.
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Section 12. No Sinking Fund. Shares of Series I Preferred Stock are not subject to the operation of a sinking fund.
* * * * * *
[As filed with the Delaware Secretary of State on November 18, 2015.]
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CERTIFICATE OF DESIGNATIONS
OF
SERIES J NON-CUMULATIVE PERPETUAL PREFERRED STOCK
OF
U.S. BANCORP
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
U.S. Bancorp, a corporation organized and existing under the General Corporation Law of the State of Delaware (the Corporation), does hereby certify that:
1. On January 17, 2017, the Capital Planning Committee (the Committee) of the Board of Directors of the Corporation (the Board), pursuant to authority conferred upon the Committee by the Board and by Section 141(c)(2) and (3) of the General Corporation Law of the State of Delaware, duly adopted resolutions establishing the terms of the Corporations Series J Non-Cumulative Perpetual Preferred Stock, $1.00 par value (the Series J Preferred Stock), and authorized a sub-committee of the Committee (the Subcommittee) to act on behalf of the Committee in establishing the liquidation preference, dividend rate, optional redemption date, number of authorized shares and certain other terms of the Series J Preferred Stock.
2. Thereafter, on February 2, 2017, the Subcommittee duly adopted the following resolution by written consent:
RESOLVED, that the designations, and certain other preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the Series J Preferred Stock, including those established by the Committee, and the additional terms established hereby, are as set forth in Exhibit A hereto, which is incorporated herein by reference.
IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation by its Vice Chairman and Chief Financial Officer this 8th day of February, 2017.
U.S. BANCORP | ||
By: | /s/ Terrance R. Dolan | |
Name: Terrance R. Dolan | ||
Title: Vice Chairman and Chief Financial Officer |
EXHIBIT A
TO
CERTIFICATE OF DESIGNATIONS
OF
SERIES J NON-CUMULATIVE PERPETUAL PREFERRED STOCK
OF
U.S. BANCORP
Section 1. Designation. The designation of the series of preferred stock shall be Series J Non-Cumulative Perpetual Preferred Stock (hereinafter referred to as the Series J Preferred Stock). Each share of Series J Preferred Stock shall be identical in all respects to every other share of Series J Preferred Stock. Series J Preferred Stock will rank equally with Parity Stock, if any, and will rank senior to Junior Stock with respect to the payment of dividends and the distribution of assets in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
Section 2. Number of Shares. The number of authorized shares of Series J Preferred Stock shall be 40,000. Such number may from time to time be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series J Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors of the Corporation, the Committee or any duly authorized committee of the Board of Directors of the Corporation and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Corporation shall have the authority to issue fractional shares of Series J Preferred Stock.
Section 3. Definitions. As used herein with respect to Series J Preferred Stock:
Appropriate Federal Banking Agency means the appropriate Federal banking agency with respect to the Corporation as defined in Section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. Section 1813(q)), or any successor provision.
Business Day means, for Dividend Periods prior to April 15, 2027, each Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions are not authorized or obligated by law, regulation or executive order to close in New York, New York, and for Dividend Periods on and after April 15, 2027, any date that would be considered a Business Day for Dividend Periods prior to April 15, 2027 that is also a London Banking Day.
Committee means the Capital Planning Committee of the Board of Directors of the Corporation, or any successor committee thereto.
Corporation means U.S. Bancorp.
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Depositary Company shall have the meaning set forth in Section 6(d) hereof.
Designated LIBOR Page means the display on Bloomberg Page BBAM (or any successor or substitute page of such service, or any successor to such service selected by the Corporation), for the purpose of displaying the London interbank offered rates for U.S. dollars.
Dividend Payment Date shall have the meaning set forth in Section 4(a) hereof.
Dividend Period shall have the meaning set forth in Section 4(a) hereof.
DTC means The Depository Trust Company, together with its successors and assigns.
Junior Stock means the Corporations common stock and any other class or series of stock of the Corporation hereafter authorized over which Series J Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Corporation.
London Banking Day means any day on which commercial banks are open for general business (including dealings in deposits in U.S. dollars) in London, England.
Parity Stock means any other class or series of stock of the Corporation that ranks on a parity with Series J Preferred Stock in the payment of dividends and in the distribution of assets on any liquidation, dissolution or winding up of the Corporation.
Preferred Director shall have the meaning set forth in Section 7(c)(i) hereof.
Redemption Price shall have the meaning set forth in Section 6(a) hereof.
Regulatory Capital Treatment Event means the good faith determination by the Corporation that, as a result of (i) any amendment to, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of Series J Preferred Stock, (ii) any proposed change in those laws or regulations that is announced after the initial issuance of any share of Series J Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations that is announced after the initial issuance of any share of Series J Preferred Stock, there is more than an insubstantial risk that the Corporation will not be entitled to treat the full liquidation value of the shares of Series J Preferred Stock then outstanding as additional tier 1 capital (or its equivalent) for purposes of the capital adequacy guidelines of the Board of Governors of the Federal Reserve System (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency), as then in effect and applicable, for as long as any share of Series J Preferred Stock is outstanding.
Series J Preferred Stock shall have the meaning set forth in Section 1 hereof.
Three-Month LIBOR means, with respect to any Dividend Period beginning on or after April 15, 2027, the rate (expressed as a percentage per annum) for deposits in U.S. dollars for a three-month period commencing on the first day of that Dividend Period, as that
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rate appears on the Designated LIBOR Page as of 11:00 a.m. (London time) on the second London Banking Day preceding the first day of that Dividend Period. If such rate does not appear on the Designated LIBOR Page, Three-Month LIBOR will be determined on the basis of the rates at which deposits in U.S. dollars for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1,000,000 are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by the Corporation, at approximately 11:00 a.m. (London time), on the second London Banking Day preceding the first day of that Dividend Period. U.S. Bank National Association, or such other bank as may be acting as calculation agent for the Corporation, will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, Three-Month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest .00001 of 1%) of such quotations. If fewer than two quotations are provided, Three-Month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest .00001 of 1%) of the rates quoted by three major banks in New York City selected by the calculation agent, at approximately 11:00 a.m. (New York City time), on the first day of that Dividend Period for loans in U.S. dollars to leading European banks for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1,000,000. However, if the banks selected by the calculation agent to provide quotations are not quoting as described above, Three-Month LIBOR for that Dividend Period will be the same as Three-Month LIBOR as determined for the previous Dividend Period, or in the case of the first Dividend Period beginning on or after April 15, 2027, the most recent rate that could have been determined in accordance with the first sentence of this paragraph had the dividend rate been a floating rate during the period prior to April 15, 2027. The calculation agents establishment of Three-Month LIBOR and calculation of the amount of dividends for each Dividend Period will be on file at the principal offices of the Corporation, will be made available to any holder of Series J Preferred Stock upon request and will be final and binding in the absence of manifest error.
Section 4. Dividends.
(a) Rate. Holders of Series J Preferred Stock shall be entitled to receive, if, as and when declared by the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation, but only out of assets legally available therefor, non-cumulative cash dividends on the liquidation preference of $25,000 per share of Series J Preferred Stock, and no more, (i) from the date of issuance to, but excluding, April 15, 2027, at a rate per annum equal to 5.300%, payable semi-annually in arrears on each April 15 and October 15, commencing on April 15, 2017 through, and including, April 15, 2027, and (ii) from, and including, April 15, 2027, at a floating rate per annum equal to Three-Month LIBOR plus a spread of 2.914%, payable quarterly in arrears on each January 15, April 15, July 15 and October 15, commencing on July 15, 2027; provided, however, if any date on or prior to April 15, 2027 on which dividends otherwise would be payable is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day, without any interest or other payment in respect of such delay, and if any date after April 15, 2027 on which dividends otherwise would be payable is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding Business Day unless that day falls in the next calendar month, in which case payment of any dividend otherwise payable on that date will be the immediately preceding
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Business Day, and dividends will accrue to the actual payment date (each such day on which dividends are payable a Dividend Payment Date). The period from and including the date of issuance of the Series J Preferred Stock or any Dividend Payment Date to but excluding the next Dividend Payment Date is a Dividend Period. The record date for payment of dividends on the Series J Preferred Stock shall be the last Business Day of the calendar month immediately preceding the month during which the Dividend Payment Date falls. The amount of dividends payable for any period prior to April 15, 2027 shall be computed on the basis of a 360-day year consisting of twelve 30-day months and dividends for periods thereafter shall be computed on the basis of a 360-day year and the actual number of days elapsed. Notwithstanding any other provision hereof, dividends on the Series J Preferred Stock shall not be declared, paid or set aside for payment to the extent such act would cause the Corporation to fail to comply with laws and regulations applicable thereto, including applicable capital adequacy guidelines.
(b) Non-Cumulative Dividends. Dividends on shares of Series J Preferred Stock shall be non-cumulative. To the extent that any dividends payable on the shares of Series J Preferred Stock on any Dividend Payment Date are not declared and paid, in full or otherwise, on such Dividend Payment Date, then such unpaid dividends shall not cumulate and shall cease to accrue and be payable and the Corporation shall have no obligation to pay, and the holders of Series J Preferred Stock shall have no right to receive, dividends accrued for such Dividend Period after the Dividend Payment Date for such Dividend Period or interest with respect to such dividends, whether or not dividends are declared for any subsequent Dividend Period with respect to Series J Preferred Stock, Parity Stock, Junior Stock or any other class or series of authorized preferred stock of the Corporation.
(c) Priority of Dividends. So long as any share of Series J Preferred Stock remains outstanding, (i) no dividend shall be declared or paid or set aside for payment and no distribution shall be declared or made or set aside for payment on any Junior Stock, other than a dividend payable solely in Junior Stock, (ii) no shares of Junior Stock shall be repurchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly (other than as a result of a reclassification of Junior Stock for or into Junior Stock, or the exchange or conversion of one share of Junior Stock for or into another share of Junior Stock, and other than through the use of the proceeds of a substantially contemporaneous sale of other shares of Junior Stock), nor shall any monies be paid to or made available for a sinking fund for the redemption of any such securities by the Corporation and (iii) no shares of Parity Stock shall be repurchased, redeemed or otherwise acquired for consideration by the Corporation otherwise than pursuant to pro rata offers to purchase all, or a pro rata portion, of the Series J Preferred Stock and such Parity Stock except by conversion into or exchange for Junior Stock, in each case unless full dividends on all outstanding shares of Series J Preferred Stock for the then-current Dividend Period have been paid in full or declared and a sum sufficient for the payment thereof set aside. When dividends are not paid in full upon the shares of Series J Preferred Stock and any Parity Stock, all dividends declared upon shares of Series J Preferred Stock and any Parity Stock shall be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share on Series J Preferred Stock, and accrued dividends, including any accumulations, on Parity Stock, bear to each other. No interest will be payable in respect of any dividend payment on shares of Series J Preferred Stock that may be in arrears. If the Board of Directors of the Corporation determines not to pay any dividend or a full dividend on a Dividend Payment Date, the Corporation will provide, or cause to be provided, written notice
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to the holders of the Series J Preferred Stock prior to such date. Subject to the foregoing, and not otherwise, dividends (payable in cash, stock or otherwise) as may be determined by the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may be declared and paid on any Junior Stock from time to time out of any assets legally available therefor, and the shares of Series J Preferred Stock or Parity Stock shall not be entitled to participate in any such dividend.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, holders of Series J Preferred Stock shall be entitled, out of assets legally available therefor, before any distribution or payment out of the assets of the Corporation may be made to or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of securities ranking senior to or on parity with Series J Preferred Stock upon liquidation and the rights of the Corporations depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share, plus any authorized, declared and unpaid dividends, without accumulation of any undeclared dividends, to the date of liquidation. The holder of Series J Preferred Stock shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Corporation are not sufficient to pay in full the liquidation preference plus any authorized, declared and unpaid dividends to all holders of Series J Preferred Stock and all holders of any Parity Stock, the amounts paid to the holders of Series J Preferred Stock and to the holders of all Parity Stock shall be pro rata in accordance with the respective aggregate liquidation preferences plus any authorized, declared and unpaid dividends of Series J Preferred Stock and all such Parity Stock.
(c) Residual Distributions. If the liquidation preference plus any authorized, declared and unpaid dividends has been paid in full to all holders of Series J Preferred Stock and all holders of any Parity Stock, the holders of Junior Stock shall be entitled to receive all remaining assets of the Corporation according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Corporation shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, nor shall the merger, consolidation or any other business combination transaction of the Corporation into or with any other corporation or person or the merger, consolidation or any other business combination transaction of any other corporation or person into or with the Corporation be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation.
Section 6. Redemption.
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(a) Optional Redemption. The Corporation, at the option of its Board of Directors or any duly authorized committee of the Board of Directors of the Corporation, may redeem in whole or in part the shares of Series J Preferred Stock at the time outstanding, at any time on or after April 15, 2027, upon notice given as provided in Section 6(b) below. The redemption price for shares of Series J Preferred Stock shall be $25,000 per share plus dividends that have been declared but not paid (the Redemption Price). Notwithstanding the foregoing, within 90 days following the occurrence of a Regulatory Capital Treatment Event, the Corporation, at its option, subject to the approval of the Appropriate Federal Banking Agency, may provide notice of its intent to redeem as provided in Section 6(b) below, and subsequently redeem, all (but not less than all) of the shares of Series J Preferred Stock at the time outstanding, at the Redemption Price applicable on such date of redemption.
(b) Notice of Redemption. Notice of every redemption of shares of Series J Preferred Stock shall be mailed by first-class mail, postage prepaid, addressed to the holders of record of such shares to be redeemed at their respective last addresses appearing on the stock register of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Notwithstanding the foregoing, if the Series J Preferred Stock is held in book-entry form through DTC, the Corporation may give such notice in any manner permitted by DTC. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Series J Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series J Preferred Stock. Each notice shall state (i) the redemption date; (ii) the number of shares of Series J Preferred Stock to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed by such holder; (iii) the Redemption Price; (iv) the place or places where the certificates for such shares are to be surrendered for payment of the Redemption Price; and (v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series J Preferred Stock at the time outstanding, the shares of Series J Preferred Stock to be redeemed shall be selected either pro rata from the holders of record of Series J Preferred Stock in proportion to the number of Series J Preferred Stock held by such holders or by lot or in such other manner as the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may determine to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors of the Corporation, the Committee or any duly authorized committee of the Board of Directors shall have full power and authority to prescribe the terms and conditions upon which shares of Series J Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Corporation, separate and apart from its other assets, in trust for the pro rata benefit of the holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Corporation with a bank or trust company selected by the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors (the Depositary Company) in trust for the pro rata benefit of the holders of
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the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue after such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption from such bank or trust company at any time after the redemption date from the funds so deposited, without interest. The Corporation shall be entitled to receive, from time to time, from the Depositary Company any interest accrued on such funds, and the holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Corporation, and in the event of such repayment to the Corporation, the holders of record of the shares so called for redemption shall be deemed to be unsecured creditors of the Corporation for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Corporation, but shall in no event be entitled to any interest.
Section 7. Voting Rights. The holders of Series J Preferred Stock will have no voting rights and will not be entitled to elect any directors, except as expressly provided by law and except that:
(a) Supermajority Voting RightsAmendments. Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series J Preferred Stock at the time outstanding, voting separately as a class, shall be required to authorize any amendment of the Certificate of Incorporation or of any certificate amendatory thereof or supplemental thereto (including any certificate of designations or any similar document relating to any series of preferred stock) which will materially and adversely affect the powers, preferences, privileges or rights of the Series J Preferred Stock, taken as a whole; provided, however, that any increase in the amount of the authorized or issued Series J Preferred Stock or authorized preferred stock of the Corporation or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock ranking equally with and/or junior to the Series J Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and/or the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to adversely affect the powers, preferences, privileges or rights of the Series J Preferred Stock.
(b) Supermajority Voting RightsPriority. Unless the vote or consent of the holders of a greater number of shares shall then be required by law, the affirmative vote or consent of the holders of at least 66-2/3% of all of the shares of the Series J Preferred Stock and all other Parity Stock, at the time outstanding, voting as a single class without regard to series, shall be required to issue, authorize or increase the authorized amount of, or to issue or authorize any obligation or security convertible into or evidencing the right to purchase, any additional class or series of stock ranking prior to the shares of the Series J Preferred Stock and all other Parity Stock as to dividends or the distribution of assets upon liquidation, dissolution or winding up of the Corporation.
(c) Special Voting Right.
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(i) Voting Right. If and whenever dividends on the Series J Preferred Stock or any other class or series of preferred stock that ranks on parity with the Series J Preferred Stock as to payment of dividends, and upon which voting rights equivalent to those granted by this Section 7(c) have been conferred and are exercisable, have not been paid in an aggregate amount equal, as to any class or series, to at least six quarterly Dividend Periods (whether consecutive or not) or their equivalent, the number of directors constituting the Board of Directors of the Corporation shall be increased by two, and the holders of the Series J Preferred Stock (together with holders of any other class of the Corporations authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist), shall have the right, voting separately as a single class without regard to series, to the exclusion of the holders of common stock, to elect two directors of the Corporation to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that the Board of Directors of the Corporation shall at no time include more than two such directors. Each such director elected by the holders of shares of Series J Preferred Stock and any other class or series of preferred stock that ranks on parity with the Series J Preferred Stock as to payment of dividends is a Preferred Director.
(ii) Election. The election of the Preferred Directors will take place at any annual meeting of stockholders or any special meeting of the holders of Series J Preferred Stock and any other class or series of the Corporations stock that ranks on parity with Series J Preferred Stock as to payment of dividends and for which dividends have not been paid, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(c)(i) above, the secretary of the Corporation may, and upon the written request of any holder of Series J Preferred Stock (addressed to the secretary at the Corporations principal office) must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series J Preferred Stock, and any other class or series of preferred stock that ranks on parity with Series J Preferred Stock as to payment of dividends and for which dividends have not been paid, for the election of the two directors to be elected by them as provided in Section 7(c)(iii) below. The Preferred Directors shall each be entitled to one vote per director on any matter.
(iii) Notice for Special Meeting. Notice for a special meeting will be given in a similar manner to that provided in the Corporations by-laws for a special meeting of the stockholders. If the secretary of the Corporation does not call a special meeting within 20 days after receipt of any such request, then any holder of Series J Preferred Stock may (at the Corporations expense) call such meeting, upon notice as provided in this Section 7(c)(iii), and for that purpose will have access to the stock register of the Corporation. The Preferred Directors elected at any such special meeting will hold office until the next annual meeting of the Corporations stockholders unless they have been previously terminated or removed pursuant to Section 7(c)(iv). In case any vacancy in the office of a Preferred Director occurs (other than prior to the initial election of the Preferred Directors), the vacancy may be filled by the written consent of the Preferred Director remaining in office, or if none remains in office, by the
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vote of the holders of the Series J Preferred Stock (together with holders of any other class of the Corporations authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) to serve until the next annual meeting of the stockholders.
(iv) Termination; Removal. Whenever full dividends have been paid regularly on the Series J Preferred Stock and any other class or series of preferred stock that ranks on parity with Series J Preferred Stock as to payment of dividends, if any, for at least four consecutive quarterly Dividend Periods or their equivalent, then the right of the holders of Series J Preferred Stock to elect such additional two directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future Dividend Periods). The terms of office of the Preferred Directors will immediately terminate and the number of directors constituting the Corporations board of directors will be reduced accordingly. Any Preferred Director may be removed at any time without cause by the holders of record of a majority of the outstanding shares of Series J Preferred Stock (together with holders of any other class of the Corporations authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) when they have the voting rights described in this Section 7(c).
Section 8. Conversion. The holders of Series J Preferred Stock shall not have any rights to convert such Series J Preferred Stock into shares of any other class of capital stock of the Corporation.
Section 9. Rank. Notwithstanding anything set forth in the Certificate of Incorporation or this Certificate of Designations to the contrary, the Board of Directors of the Corporation, the Committee or any authorized committee of the Board of Directors of the Corporation, without the vote of the holders of the Series J Preferred Stock, may authorize and issue additional shares of Junior Stock, Parity Stock or, subject to the voting rights granted in Section 7(b), any class of securities ranking senior to the Series J Preferred Stock as to dividends and the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
Section 10. Repurchase. Subject to the limitations imposed herein, the Corporation may purchase and sell Series J Preferred Stock from time to time to such extent, in such manner, and upon such terms as the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may determine; provided, however, that the Corporation shall not use any of its funds for any such purchase when there are reasonable grounds to believe that the Corporation is, or by such purchase would be, rendered insolvent.
Section 11. Unissued or Reacquired Shares. Shares of Series J Preferred Stock not issued or which have been issued and converted, redeemed or otherwise purchased or acquired by the Corporation shall be restored to the status of authorized but unissued shares of preferred stock without designation as to series.
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Section 12. No Sinking Fund. Shares of Series J Preferred Stock are not subject to the operation of a sinking fund.
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[As filed with the Delaware Secretary of State on February 8, 2017.]
A-10
Exhibit 10.41
NOTE: This Restricted Stock Unit Award Agreement is applicable to restricted stock unit awards made to certain employees (Participants) of U.S. Bancorp (the Company) on and after April 21, 2015. These restricted stock unit awards will have the terms and conditions set forth in each Participants award summary (the Award Summary), which can be accessed on the Morgan Stanley Website at www.stockplanconnect.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 unit award will have the terms and conditions set forth in the form of Restricted Stock Unit Award Agreement below. As a condition of each restricted stock unit award, Participant accepts the terms and conditions of the Award Summary and the Restricted Stock Unit Award Agreement.
U.S. BANCORP
RESTRICTED STOCK UNIT AWARD AGREEMENT
THIS AGREEMENT, together with the Award Summary which is incorporated herein by reference (collectively, the Agreement) sets forth the terms and conditions of a restricted stock unit award (RSU Award) representing the right to receive shares of common stock of the Company, par value $0.01 per share (the Common Stock). The grant of the RSU Award is pursuant to the Companys 2015 Stock Incentive Plan, which was approved by shareholders on April 21, 2015 (the Plan) and is subject to its terms. Capitalized terms that are not defined in the Agreement shall have the meaning ascribed to such terms in the Plan.
The Company and Participant agree as follows:
1. | Award |
Subject to the terms and conditions of the Plan and the Agreement, the Company grants to Participant an RSU Award entitling the Participant to the number of restricted stock units (the Units) set forth in Participants Award Summary. Each Unit represents the right to receive one share of Common Stock, subject to the vesting requirements and distribution provisions of the Agreement and the terms of the Plan. The shares of Common Stock distributable to Participant with respect to the Units granted hereunder are referred to as the Shares. Participants Award Summary sets forth the date of grant of this award (the Grant Date).
2. | Vesting; Forfeiture |
(a) Forfeiture if No Confidentiality and Non-solicitation Agreement on File. This RSU Award is conditioned upon the timely execution of a Confidentiality and Non-solicitation Agreement between the Company or an Affiliate and Participant, in a form acceptable to the Company (a CNS Agreement). If a properly executed CNS Agreement is not on file with the Company on the Grant Date, then, on or before the 60th day following the Grant Date, Participant must execute and deliver to the Company a CNS Agreement in a form satisfactory to the Company. If a CNS Agreement is not on file with the Company on or before the 60th day following the Grant Date, the Units will be immediately and irrevocably forfeited and Participant shall have no rights hereunder.
(b) Time-Based Vesting Conditions. Subject to the terms and conditions of the Agreement, the Units shall vest in installments on the date or dates set forth in the Participants Award Summary (each such date, a Scheduled Vesting Date) if Participant remains continuously employed by the Company or an Affiliate of the Company until the applicable Scheduled Vesting Date. Except as otherwise provided in the Agreement, if Participant ceases to be an employee of the Company or any Affiliate prior to an applicable Scheduled Vesting Date, all Units that have not become vested previously in accordance with the Award Summary shall be immediately and irrevocably forfeited.
(c) Vesting As a Result of Disability or Death. Notwithstanding the vesting provision contained in Section 2(b) above, and subject to the other terms and conditions of the Agreement, if Participant dies or experiences a Disability (as defined in Section 10) while in the employ of the Company or any Affiliate prior to a Scheduled Vesting Date, then the Units will not be forfeited and will be paid out in accordance with Section 3(b) hereof. Notwithstanding the foregoing, the provisions of this Section 2(c) will apply only if Participant has at all times complied with the terms of the CNS Agreement.
(d) Vesting As a Result of Participants Eligibility to Retire. Notwithstanding the vesting provision contained in Section 2(b) above, and subject to the terms and conditions of the Agreement, if, on the Grant Date, Participant is Eligible to Retire (as defined in Section 10), then the Units will become vested in the calendar year in which the Grant Date occurs and will be paid out in accordance with Section 3(c) hereof. If Participant is not Eligible to Retire as of the Grant Date, but has remained continuously employed by the Company or any Affiliate until Participant becomes Eligible to Retire, then the Units that are not vested as of such date will become vested in the calendar year in which Participant becomes Eligible to Retire, and will be paid out in accordance with Section 3(c). Notwithstanding the foregoing, the provisions of this Section 2(d) will apply only if Participant has at all times complied with the terms of the CNS Agreement.
(e) Vesting As a Result of Qualifying Termination. Notwithstanding the vesting provision contained in Section 2(b) above, and subject to the terms and conditions of the Agreement, if Participant has been continuously employed by the Company or any Affiliate until the date of a Qualifying Termination (as defined in Section 10), then the Units that are not vested at the time of such Qualifying Termination will not be forfeited, but instead will become vested in the calendar year in which the Qualifying Termination occurs, and will be paid out in accordance with Section 3(b) hereof. Notwithstanding the foregoing, the provisions of this Section 2(e) will apply only if Participant has at all times complied with the terms of the CNS Agreement.
(f) Forfeiture on Termination of Employment for Cause and on Breach of Confidentiality Agreement. Notwithstanding any other provisions in this Agreement, if Participant violates the terms of the CNS Agreement, all Units that have not been settled (and Shares delivered) previously shall be immediately and irrevocably forfeited. If Participants employment with the Company is terminated for Cause, all Units that have not been settled (and Shares delivered) previously shall be immediately and irrevocably forfeited.
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(g) Special Risk-Related Cancellation Provisions. Notwithstanding any other provision of the Agreement, if at any time subsequent to the Grant Date the Committee determines, in its sole discretion, that Participant has (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 control deficiency under the Sarbanes-Oxley Act of 2002, and such failure, violation, misconduct or activity (A) demonstrates an Inadequate Sensitivity (as defined below) 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 Units granted under the Agreement that have not been settled (and Shares delivered) at the time of such determination may be cancelled, and, if so cancelled, Participant will have no rights with respect to the Units. Inadequate Sensitivity means Participant has engaged in 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.
3. | Distribution of Shares with Respect to Units |
Subject to the restrictions in this Section 3, following the vesting of Units and following the payment of any applicable withholding taxes pursuant to Section 7, the Company shall cause to be issued and delivered to Participant (including through book entry) Shares registered in the name of Participant or in the name of Participants legal representatives, beneficiaries or heirs, as the case may be, as follows:
(a) Scheduled Vesting Date Distributions. As soon as administratively feasible following each Scheduled Vesting Date (but in no event later than December 31st of the year in which such Scheduled Vesting Date occurs), all Shares issuable pursuant to Units that become vested as of such Scheduled Vesting Date (and with respect to which Shares have not been distributed previously) shall be distributed to Participant.
(b) Distributions As a Result of a Qualifying Termination, Disability or Death. In the event of a Participants Qualifying Termination, Disability or death, all Shares issuable pursuant to Units that become vested as a result of such event (and with respect to which Shares have not been distributed previously) shall be distributed to Participant (or Participants estate, as the case may be) on or before March 15th of the calendar year immediately following the year in which the event occurs.
(c) Distributions As a Result of Participants Eligibility to Retire. If Participant is Eligible to Retire on the Grant Date, then all Units granted pursuant to this RSU Award will be settled and Shares will be distributed on or before March 15th of the calendar year immediately following the year in which the Grant Date occurs. If Participant is not Eligible to Retire as of the Grant Date, but remains continuously employed by the Company or any Affiliate until Participant becomes Eligible to Retire, then Units that have not been settled previously will be settled (and Shares will be delivered) on or before March 15th of the calendar year immediately following the year in which Participant becomes Eligible to Retire.
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In the event that the number of Shares distributable pursuant to this Section 3 is a number that is not a whole number, then the number of Shares distributed shall be rounded down to the nearest whole number.
4. | Rights as Shareholder; Dividend Equivalents |
Prior to the distribution of Shares with respect to Units pursuant to Section 3 above, Participant shall not have ownership or rights of ownership of any Shares underlying the Units; provided, however, that Participant shall be entitled to receive cash Dividend Equivalents on outstanding Units (i.e. Units that have not been forfeited or settled), whether vested or unvested, when cash dividends are declared by the Companys Board of Directors on the Common Stock. Such Dividend Equivalents will be in an amount of cash per Unit equal to the cash dividend paid with respect to a share of outstanding Common Stock. For avoidance of doubt, Participant will be eligible to receive Dividend Equivalents with respect to unvested Units only if Participant remains in continuous employment with the Company or an Affiliate through the applicable dividend record date as declared by the Board. Dividend Equivalents will be paid to Participant on the same payment dates as dividends to holders of the Common Stock are paid. Dividend Equivalents are subject to income and payroll tax withholding by the Company.
5. | Restriction on Transfer |
Except for transfers by will or the applicable laws of descent and distribution, the Units cannot be sold, assigned, transferred, gifted, pledged, or in any manner encumbered, alienated, attached or disposed of, and any purported sale, assignment, transfer, gift, pledge, alienation, attachment or encumbrance shall be void and unenforceable against the Company. No such attempt to transfer the Units, whether voluntary or involuntary, by operation of law or otherwise (except by will or laws of descent and distribution), shall vest the purported transferee with any interest or right in or with respect to the Units or the Shares issuable with respect to the Units.
6. | Securities Law Compliance |
The delivery of all or any of the Shares in accordance with this Award shall be effective only at such time that the issuance of such Shares will not violate any state or federal securities or other laws. The Company is under no obligation to effect any registration of the Shares under the Securities Act of 1933 or to effect any state registration or qualification of the Shares. The Company may, in its sole discretion, delay the delivery of the Shares or place restrictive legends on such Shares in order to ensure that the issuance of any Shares will be in compliance with federal or state securities laws and the rules of the New York Stock Exchange or any other exchange upon which the Companys Common Stock is traded.
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7. | Income Tax Withholding |
In order to comply with all applicable federal, state, local and foreign income and payroll tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable withholding, income or other taxes, which are the sole and absolute responsibility of Participant, are withheld or collected from Participant. Without limiting the foregoing, the Company may, but is not obligated to, permit or require the satisfaction of tax withholding obligations through net Share settlement at the time of delivery of Shares (i.e. the Company withholds a portion of the Shares otherwise to be delivered with a Fair Market Value equal to the amount of such taxes, but only to the extent necessary to satisfy certain statutory withholding requirements to avoid adverse accounting treatment under ASC 718) or through an open market sale of Shares otherwise to be delivered, in each case pursuant to such rules and procedures as may be established by the Company.
8. | Miscellaneous |
(a) The Agreement is issued pursuant to the Plan and is subject to its terms. The Plan is available for inspection during business hours at the principal office of the Company. In addition, the Plan may be viewed on the Morgan Stanley Website at www.stockplanconnect.com (or the website of any other stock plan administrator selected by the Company in the future).
(b) The Agreement shall not confer on Participant any right with respect to continuance of employment with the Company or any Affiliate, nor will it interfere in any way with the right of the Company or any Affiliate to terminate such employment at any time.
(c) Participant acknowledges that the grant, vesting or any payment with respect to this Award, and the sale or other taxable disposition of the Shares issued with respect to the Units hereunder may have tax consequences pursuant to the Code or under local, state or international tax laws. It is intended that the Award shall be exempt from Section 409A of the Code pursuant to Treasury Regulations Section 1.409A-1(b)(4), and the provisions of the Agreement and the Plan shall be construed and administered accordingly. Any amendment or modification of the Award (to the extent permitted under the terms of the Plan), will be undertaken in a manner intended to comply with Section 409A, to the extent applicable. Notwithstanding the foregoing, there is no guaranty or assurance as to the tax treatment of the Award. Participant acknowledges that Participant is relying solely and exclusively on Participants own professional tax and investment advisors with respect to any and all such matters (and is not relying, in any manner, on the Company or any of its employees or representatives). Participant understands and agrees that any and all tax consequences resulting from the Award and its grant, vesting, amendment, or any payment with respect thereto, and the sale or other taxable disposition of the Shares acquired pursuant to the Award, is solely and exclusively the responsibility of Participant without any expectation or understanding that the Company or any of its employees or representatives will pay or reimburse Participant for such taxes or other items.
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9. | Venue |
Any claim or action brought with respect to this Award shall be brought in a federal or state court located in Minneapolis, Minnesota.
10. | Definitions |
For purposes of the Agreement, the following terms shall have the definitions as set forth below:
(a) Disability means qualifying for and receiving disability benefits under the Companys long-term disability programs as in effect from time to time.
(b) Eligible to Retire means a Participant is age 59-1/2 or older and has had 10 or more years of employment with the Company or its Affiliates following such Participants most recent date of hire by the Company or its Affiliates.
(c) Qualifying Termination means Participants termination of employment with the Company and its Affiliates by the Company for any reason other than Cause within 12 months following a Change in Control, provided that such a termination will not be a Qualifying Termination if: (i) the Company has notified Participant in writing more than 30 days prior to the Announcement Date that Participants employment is not expected to continue for more than 12 months following the date of such notification, and Participants employment is in fact terminated within such 12-month period; or (ii) Participant has announced in writing, prior to the date the Company provides a Notice of Termination to Participant, that Participant intends to terminate his or her employment. For purposes of this definition, the term Company shall be deemed to include any Person that has assumed this RSU Award (or provided a substitute award to Participant) in connection with a Change in Control.
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Exhibit 10.42
NOTE: Restricted stock unit awards made to non-employee directors (Participants) of U.S. Bancorp (the Company) after January 1, 2017 will have the terms and conditions set forth in each Participants grant detail (the Grant Detail), which can be accessed on the Fidelity Website at www.netbenefits.com (or the website of any other stock plan administrator selected by the Company in the future). The Grant Detail may be viewed at any time on this Website, and the Grant Detail may also be printed out. In addition to the individual terms and conditions set forth in the Grant Detail, each restricted stock unit award will have the terms and conditions set forth in the form of Restricted Stock Unit Award Agreement below. As a condition to each restricted stock unit award, Participant accepts the terms and conditions of the Grant Detail and the Restricted Stock Unit Award Agreement.
U.S. BANCORP
RESTRICTED STOCK UNIT AWARD AGREEMENT FOR DIRECTORS
THIS AGREEMENT, together with the Grant Detail which is incorporated herein by reference (collectively, the Agreement), sets forth the terms and conditions of a restricted stock unit award (this RSU Award) representing the right to receive shares of Common Stock, par value $0.01 per share (the Common Stock), of the Company. The grant of this RSU Award is pursuant to the Companys 2015 Stock Incentive Plan, which was approved by shareholders on April 21, 2015 (the Plan), and is subject to its terms. Capitalized terms that are not defined in the Agreement shall have the meaning ascribed to such terms in the Plan.
The Company and Participant agree as follows:
1. | Award. |
Subject to the terms and conditions of the Plan and the Agreement, the Company grants to Participant this RSU Award entitling the Participant to the number of restricted stock units (the Units) set forth in Participants Grant Detail. Each Unit represents the right to receive one share of Common Stock, subject to the vesting requirements and distribution provisions of the Agreement and the terms of the Plan. The shares of Common Stock distributable with respect to the Units granted hereunder are referred to as the Shares. Participants Grant Detail sets forth the date of grant of this RSU Award (the Award Date).
2. | Vesting and Forfeiture. |
(a) | Except as otherwise expressly provided in this Agreement, the Units shall be fully vested as of the Award Date. |
(b) | If Participant is removed as a director by the Companys shareholders for cause, all Units shall be forfeited as of the date of such removal. Upon forfeiture, Participant shall have no rights relating to the Units (including, without limitation, any rights to receive a distribution of Shares with respect to the Units pursuant to Section 3 or to receive additional Units pursuant to Section 5). |
3. | Distribution Provisions. |
The Company shall deliver to Participant one Share for each vested Unit in accordance with the following provisions of this Section 3:
(a) | Separation From Service for Reasons other than Death. Upon Participants Separation From Service (as defined in Section 3(a)(3) below) for reasons other than death, the vested Units will be settled and the Shares will be delivered to Participant as follows: |
(1) | General Rule. Unless Participant has made a timely installment election in accordance with Section 3(a)(2), all vested Units will be settled, and the Company shall deliver to Participant one Share for each vested Unit (including Dividend Equivalent Units (as defined in Section 5) received pursuant to Section 5), at the time of Participants Separation From Service, or as soon thereafter as administratively feasible, but in no event later than ninety (90) days following the date of Participants Separation From Service. The date of delivery of the Shares is referred to as the Distribution Date. |
(2) | Installment Distribution Election. If Participant has made a timely written election, in a form acceptable to the Company (which election may be made by electronic communication) and in compliance with the requirements of Section 409A of the Code, to receive distributions of Shares in settlement of all vested Units in ten (10) annual installments, then the distribution of the Shares will occur in ten (10) substantially equal annual distributions. The number of Shares delivered in each annual distribution will be determined by dividing the total number of Units outstanding under this RSU Award (including Dividend Equivalent Units received pursuant to Section 5) immediately prior to the Installment Distribution Date (as defined below) by the number of remaining installments. The first distribution will occur as soon as administratively feasible following Participants Separation From Service. The remaining annual distributions will occur on the following nine (9) anniversary dates of Participants Separation From Service, or as soon as administratively feasible following such anniversary dates. The date of delivery of the Shares distributed in each annual distribution is referred to as an Installment Distribution Date. Except as otherwise permitted under Section 409A of the Code, an installment distribution election is irrevocable and must be made by the end of the calendar year prior to the year in which the services giving rise to the award of Units are performed. |
(3) | Separation from Service. Separation from Service means the first date on which Participant (i) has ceased to serve on the Board of the Company, and (ii) is not providing services as an independent contractor to the Company or to any other entity with which the Company would be considered to be a single employer under Section 414(b) and/or 414(c) of the Code, and the Company does not reasonably anticipate that Participant will provide such services in the future. |
Notwithstanding the foregoing, if Participant is a Specified Employee (as defined below) at the time of Participants Separation from Service, no Shares will be distributed to Participant until the date that is six months and one day after the date of the Separation from Service.
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Specified Employee means a Participant who is a specified employee for purposes of section 1.409A-1(i) of the U.S. Treasury Regulations and determined pursuant to the rules and procedures set forth in the separate document entitled U.S. Bank Specified Employee Determination.
(b) | Death. Notwithstanding the provisions of Section 3(a), if Participant dies before the full distribution of Shares with respect to the Units, all Units (including Dividend Equivalent Units received pursuant to Section 5) that remain outstanding will be settled, and Shares will be delivered to the representatives of Participant or to any Person to whom the Units have been transferred by will or the applicable laws of descent and distribution on the date that is sixty (60) days following Participants death. |
(c) | No Fractional Shares. In the event that the number of Shares distributable pursuant to this Section 3 is a number that is not a whole number, then the number of Shares distributed shall be rounded down to the nearest whole number. |
(d) | Ownership of Shares. Participant shall have no right, title or interest in, or, except as provided in Section 5, no right to receive distributions in respect of, or otherwise be considered the owner of, any of the Shares, unless and until the Shares have been distributed pursuant to Section 3(a) or (b). |
4. | Restriction on Transfer. |
Except for transfers by will or the applicable laws of descent and distribution, the Units cannot be sold, assigned, pledged, alienated, attached or otherwise transferred or encumbered, and any purported transfer shall be void and unenforceable against the Company. No attempt to transfer the Units, whether voluntary or involuntary, by operation of law or otherwise (except by will or laws of descent and distribution) shall vest the purported transferee with any interest or right in or with respect to the Units or the Shares.
5. | Dividend Equivalents. |
To the extent that the Company declares cash dividends on shares of Common Stock after the Award Date and prior to the Distribution Date or an Installment Distribution Date, as applicable, Participant shall be entitled to receive additional Units (Dividend Equivalent Units) on each dividend payment date (the Dividend Payment Date) (including any dividend declared prior to a Distribution Date or Installment Distribution Date, as applicable, and payable after such date, which, for purposes of this Section 5, shall be deemed paid on the Distribution Date or the Installment Distribution Date, as applicable) having a Fair Market Value on the Dividend Payment Date equal to the amount of cash dividends payable with respect to the number of shares of Common Stock distributable pursuant to the Units. Dividend Equivalent Units shall be vested as of the Dividend Payment Date.
6. | Securities Law Compliance. |
The delivery of all or any of the Shares in accordance with this RSU Award shall be effective only at such time that the issuance of such Shares will not violate any state or federal securities or other laws. The Company is under no obligation to effect any registration of the Shares under the
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Securities Act of 1933 or to effect any state registration or qualification of the Shares. The Company may, in its sole discretion, (i) delay the delivery of the Shares; or (ii) 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.
7. | Miscellaneous. |
(a) | The Company shall at all times during the term of this Agreement reserve and keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements of this Agreement. |
(b) | The Award is issued under the Plan and is subject to its terms. The Plan is available for inspection during business hours at the principal offices of the Company. In addition, the Plan may be viewed on the Fidelity Website at www.netbenefits.com (or the website of any other stock plan administrator selected by the Company in the future). |
(c) | Participant acknowledges that the grant and vesting of, or any distribution with respect to, this RSU Award, and the sale or other taxable disposition of the Shares issued with respect to the Units hereunder, may have tax consequences pursuant to the Code or under local, state or international tax laws. It is intended that the Plan, this Agreement and any permitted installment distribution election as described in Section 3(a) shall comply with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder, and the provisions of this Agreement shall be construed and administered accordingly. Any amendment or modification of the Award (to the extent permitted under the terms of the Plan), will be undertaken in a manner intended to comply with Section 409A, to the extent applicable. Notwithstanding the foregoing, there is no guaranty or assurance as to the tax treatment of the Award. Participant acknowledges that Participant is relying solely and exclusively on Participants own professional tax and investment advisors with respect to any and all such tax matters (and is not relying, in any manner, on the Company or any of its employees or representatives). Participant understands and agrees that any and all tax consequences resulting from this RSU Award and its grant, vesting, amendment or any distribution with respect thereto, and the sale or other taxable disposition of the Shares acquired pursuant to this RSU Award, is solely and exclusively the responsibility of Participant without any expectation or understanding that the Company or any of its employees or representatives will pay or reimburse Participant for such taxes. |
8. | Venue. |
Any claim or action brought with respect to this RSU Award shall be brought in a federal or state court located in Minneapolis, Minnesota.
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Exhibit 10.43
NOTE: This Performance Restricted Stock Unit Award Agreement is applicable to performance restricted stock unit awards made to members of the Managing Committee (Participants) of U.S. Bancorp (the Company) on and after January 1, 2017. These performance restricted stock unit awards have the terms and conditions set forth in (a) each Participants grant detail (the Grant Detail), which can be accessed on the Fidelity Website at www.netbenefits.com (or the website of any other stock plan administrator selected by the Company in the future), and (b) the form of Exhibit A hereto (which will be completed to include all information called for therein) (the Completed Exhibit A) provided to such Participant as soon as administratively feasible following the date on which the award is made. The Grant Detail may be viewed at any time on this Website, and the Grant Detail may also be printed out. In addition to the individual terms and conditions set forth in the Grant Detail and the Completed Exhibit A, each performance restricted stock unit award will have the terms and conditions set forth in the form of Performance Restricted Stock Unit Award Agreement below. As a condition of each performance restricted stock unit award, Participant accepts the terms and conditions of the Performance Restricted Stock Unit Award Agreement, the Grant Detail and the Completed Exhibit A.
U.S. BANCORP
PERFORMANCE RESTRICTED STOCK UNIT AWARD AGREEMENT
THIS AGREEMENT, together with the Grant Detail and the Completed Exhibit A which are incorporated herein by reference (collectively, the Agreement), sets forth the terms and conditions of a performance restricted stock unit award representing the right to receive shares of common stock of the Company, par value $0.01 per share (the Common Stock). The grant of this performance restricted stock unit award is made pursuant to the Companys 2015 Stock Incentive Plan, which was approved by shareholders on April 21, 2015 (the Plan) and is subject to its terms. Capitalized terms that are not defined in the Agreement shall have the meaning ascribed to such terms in the Plan.
The Company and Participant agree as follows:
1. | Award |
Subject to the terms and conditions of the Plan and the Agreement, the Company grants to Participant a performance restricted stock unit award entitling Participant to the number of performance restricted stock units (the Units) equal to the Target Award Number set forth in Participants Grant Detail (such number of units, the Target Award Number). The Target Award Number shall be adjusted upward or downward as provided in the Completed Exhibit A. The number of Units that Participant will receive under the Agreement, after giving effect to such adjustment, is referred to herein as the Final Award Number. Each Unit represents the right to receive one share of Common Stock, subject to the vesting requirements and distribution provisions of the Agreement and the terms of the Plan. The shares of Common Stock distributable to Participant with respect to the Units granted hereunder are referred to as the Shares. Participants Grant Detail sets forth the date of grant of this award (the Grant Date). The Completed Exhibit A sets forth (a) the performance period over which the Final Award Number will be determined (the Performance Period), and (b) the date on which the Final Award Number will be determined (the Determination Date).
2. | Vesting; Forfeiture |
(a) Time-Based Vesting Conditions. Subject to the terms and conditions of the Agreement, the Units shall vest in installments on the date or dates set forth in the Participants Grant Detail (each such date, a Scheduled Vesting Date), if the Participant remains continuously employed by the Company or an Affiliate of the Company until the applicable Scheduled Vesting Date. Except as otherwise provided in the Agreement, if Participant ceases to be an employee of the Company or any Affiliate prior to an applicable Scheduled Vesting Date, all Units that have not become vested previously in accordance with the Grant Detail shall be immediately and irrevocably forfeited.
(b) Continued Vesting Upon Separation From Service Due to Retirement or Disability. Notwithstanding Section 2(a), if Participant has a Separation From Service (as defined in Section 10) with the Company or any Affiliate by reason of Disability (as defined in Section 10) or Retirement (as defined in Section 10), the Units shall not be forfeited, but rather, the Final Award Number will be determined in accordance with Section 1 (if not already determined prior to Retirement or Disability), and thereafter the Units shall continue to vest on the Scheduled Vesting Dates in accordance with Participants Grant Detail, subject to the terms of the Agreement, including Section 2(f) hereof, as though such Separation From Service had never occurred, so long as the Participant has at all times since the Grant Date complied with the terms of any confidentiality and non-solicitation agreement between the Company or an Affiliate and the Participant.
(c) Acceleration of Vesting upon Death. If Participant ceases to be an employee by reason of death, or if Participant dies after a Separation From Service with the Company or an Affiliate due to Disability or Retirement but prior to any Scheduled Vesting Date, then the Units will become vested in accordance with this Section 2(c). If such death occurs prior to the last day of the Performance Period, a number of Units equal to the Target Award Number will vest upon Participants death. If the death occurs on or after the last day of the Performance Period, then a number of Units equal to the Final Award Number will vest upon Participants death. Notwithstanding the foregoing, such accelerated vesting shall occur only if the Participant has at all times since the Grant Date complied with the terms of any confidentiality and non-solicitation agreement between the Company or an Affiliate and the Participant.
(d) Acceleration of Vesting Upon Qualifying Termination. Notwithstanding the vesting provisions contained in Sections 2(a) through (c) above, but subject to the other terms and conditions of the Agreement, if Participant has been continuously employed by the Company or any Affiliate until the date of a Qualifying Termination (as defined in Section 10), then immediately upon such Qualifying Termination, Participant shall be vested in the number of Units determined in accordance with this Section 2(d). If the Qualifying Termination occurs prior to the last day of the Performance Period, a number of Units equal to the Target Award Number will vest upon such Qualifying Termination. If the Qualifying Termination occurs on or after the last day of the Performance Period, a number of Units equal to the Final Award Number will vest upon such Qualifying Termination.
(e) Forfeiture on Termination of Employment for Cause and on Breach of Confidentiality Agreement. If Participant violates the terms of any confidentiality and non-solicitation agreement between the Company or an Affiliate and the Participant, all Units that have not been settled (and Shares delivered) previously shall be immediately and irrevocably forfeited. If Participants employment with the Company is terminated for Cause, all Units that have not been settled (and Shares delivered) previously shall be immediately and irrevocably forfeited. Upon forfeiture, Participant shall have no rights relating to the forfeited Units (including, without limitation, any rights to receive a distribution of Shares with respect to the Units and the right to receive Dividend Equivalents).
(f) Special Risk-Related Cancellation Provisions. Notwithstanding any other provision of the Agreement, if at any time subsequent to the Grant Date the Committee determines, in its sole discretion, that Participant has (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 control deficiency under the Sarbanes-Oxley Act of 2002, and such failure, violation, misconduct or activity (A) demonstrates an Inadequate Sensitivity (as defined below) 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 Units granted under the Agreement that have not been settled (and Shares delivered) at the time of such determination may be cancelled, and, if so cancelled, Participant will have no rights with respect to the Units. Inadequate Sensitivity means Participant has engaged in 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.
3. | Distribution of Shares with Respect to Units |
Subject to the restrictions in this Section 3, following the vesting of Units and following the payment of any applicable withholding taxes pursuant to Section 7 hereof, the Company shall cause to be issued and delivered to Participant (including through book entry) Shares registered in the name of Participant or in the name of Participants legal representatives, beneficiaries or heirs, as the case may be, as follows:
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(a) Scheduled Vesting Date Distributions. As soon as administratively feasible following each Scheduled Vesting Date (but in no event later than December 31st of the year in which such Scheduled Vesting Date occurs), all Shares issuable pursuant to Units that become vested as of such Scheduled Vesting Date (and with respect to which Shares have not been distributed previously) shall be distributed to Participant, or in the event of Participants death, to the representatives of Participant or to any Person to whom the Units have been transferred by will or the applicable laws of descent and distribution.
(b) Qualifying Termination Distributions. As soon as administratively feasible following a Separation From Service in connection with a Qualifying Termination (but in no event later than 60 days following such Separation From Service), all Shares issuable pursuant to Units that become vested as a result of such Qualifying Termination (and with respect to which Shares have not been distributed previously) shall be distributed to Participant. Notwithstanding the foregoing, any Shares issuable to a Specified Employee (as defined in Section 10) as a result of a Separation From Service in connection with a Qualifying Termination will not be delivered to such Specified Employee until the date that is six months and one day after the date of the Separation From Service.
(c) Distributions Following Retirement or Disability. If a Participant has a Separation From Service with the Company or its Affiliates due to Retirement or Disability (so long as such Separation From Service is not in connection with a Qualifying Termination), the distribution of Shares with respect to Units will not be accelerated, and Shares will be distributed as soon as administratively feasible following the applicable Scheduled Vesting Dates (but in no event later than December 31st of the year in which such Scheduled Vesting Date occurs).
(d) Distributions Following Death. As soon as administratively feasible following the death of a Participant (but in no event later than 90 days following such death) all Shares issuable pursuant to Units that become vested pursuant to Section 2(c) (and with respect to which Shares have not been distributed previously) shall be distributed to Participant.
In the event that the number of Shares distributable pursuant to this Section 3 is a number that is not a whole number, then the number of Shares distributed shall be rounded down to the nearest whole number.
4. | Rights as Shareholder; Dividend Equivalents |
Prior to the distribution of Shares with respect to Units pursuant to Section 3 above, Participant shall not have ownership or rights of ownership of any Shares underlying the Units; provided, however, that Participant shall be entitled to receive cash Dividend Equivalents on outstanding Units (i.e. Units that have not been forfeited or settled), whether vested or unvested, if cash dividends on the Common Stock are declared by the Board on or after the Grant Date. Participant shall be entitled to Dividend Equivalents with respect to a number of Units equal to the Final Award Number. Such Dividend Equivalents will be in an amount of cash per Unit equal to the cash dividend paid with respect to a share of outstanding Common Stock. The Dividend Equivalents shall be treated as earnings on, and as a separate amount from, the Units for purposes of Section 409A of the Code. Dividend Equivalents accrued prior to the Determination Date will be paid within 90 days following the last day of the Performance Period, and as a matter of administrative practice will be paid as soon as administratively feasible following the Determination Date. Dividend Equivalents relating to dividends declared after the Determination Date will be paid to Participant with respect to Units that have not been settled and paid out on the same payment dates as dividends are paid to holders of the Common Stock. Dividend Equivalents paid with respect to dividends declared before the delivery of the Shares underlying the Units will be treated as compensation income for tax purposes and will be subject to income and payroll tax withholding by the Company.
5. | Restriction on Transfer |
Except for transfers by will or the applicable laws of descent and distribution, the Units cannot be sold, assigned, transferred, gifted, pledged, or in any manner encumbered, alienated, attached or disposed of, and any purported sale, assignment, transfer, gift, pledge, alienation, attachment or encumbrance shall be void and unenforceable against the Company. No such attempt to transfer the Units, whether voluntary or involuntary, by operation of law or otherwise (except by will or laws of descent and distribution), shall vest the purported transferee with any interest or right in or with respect to the Units or the Shares issuable with respect to the Units.
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6. | Securities Law Compliance |
The delivery of all or any of the Shares in accordance with this Award shall be effective only at such time that the issuance of such Shares will not violate any state or federal securities or other laws. The Company is under no obligation to effect any registration of the Shares under the Securities Act of 1933 or to effect any state registration or qualification of the Shares. The Company may, in its sole discretion, delay the delivery of the Shares or place restrictive legends on such Shares in order to ensure that the issuance of any Shares will be in compliance with federal or state securities laws and the rules of the New York Stock Exchange or any other exchange upon which the Companys Common Stock is traded.
7. | Income Tax Withholding |
In order to comply with all applicable federal, state, local and foreign income and payroll tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable withholding, income or other taxes, which are the sole and absolute responsibility of Participant, are withheld or collected from Participant. Without limiting the foregoing, the Company may, but is not obligated to, permit or require the satisfaction of tax withholding obligations through net Share settlement at the time of delivery of Shares (i.e. the Company withholds a portion of the Shares otherwise to be delivered with a Fair Market Value, as such term is defined in the Plan, equal to the amount of such taxes, but only to the extent necessary to satisfy certain statutory withholding requirements to avoid adverse accounting treatment under ASC 718) or through an open market sale of Shares otherwise to be delivered, in each case pursuant to such rules and procedures as may be established by the Company.
8. | Miscellaneous |
(a) The Agreement is issued pursuant to the Plan and is subject to its terms. The Plan is available for inspection during business hours at the principal office of the Company. In addition, the Plan may be viewed on the Fidelity Website at www.netbenefits.com (or the website of any other stock plan administrator selected by the Company in the future).
(b) The Agreement shall not confer on Participant any right with respect to continuance of employment with the Company or any Affiliate, nor will it interfere in any way with the right of the Company or any Affiliate to terminate such employment at any time.
(c) Participant acknowledges that the grant, vesting or any payment with respect to this Award, and the sale or other taxable disposition of the Shares issued with respect to the Units hereunder may have tax consequences pursuant to the Code or under local, state or international tax laws. It is intended that the Award shall comply with Section 409A of the Code, and the provisions of the Agreement and the Plan shall be construed and administered accordingly. Any amendment or modification of the Award (to the extent permitted under the terms of the Plan), will be undertaken in a manner intended to comply with Section 409A, to the extent applicable. Notwithstanding the foregoing, there is no guaranty or assurance as to the tax treatment of the Award. Participant acknowledges that Participant is relying solely and exclusively on Participants own professional tax and investment advisors with respect to any and all such matters (and is not relying, in any manner, on the Company or any of its employees or representatives). Participant understands and agrees that any and all tax consequences resulting from the Award and its grant, vesting, amendment, or any payment with respect thereto, and the sale or other taxable disposition of the Shares acquired pursuant to the Award, is solely and exclusively the responsibility of Participant without any expectation or understanding that the Company or any of its employees or representatives will pay or reimburse Participant for such taxes or other items.
9. | Venue |
Any claim or action brought with respect to this Award shall be brought in a federal or state court located in Minneapolis, Minnesota.
10. | Definitions |
For purposes of the Agreement, the following terms shall have the definitions as set forth below:
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(a) Change in Control shall have the meaning ascribed to it in the Plan, but only if the event or circumstances constituting such change in control also constitute a change in ownership or effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company, within the meaning of Section 409A of the Code.
(b) Disability means leaving active employment and qualifying for and receiving disability benefits under the Companys long-term disability programs as in effect from time to time.
(c) Qualifying Termination means:
(A) Participants Separation From Service with the Company and its Affiliates as a result of the Companys termination of Participants employment for any reason other than Cause within 12 months following a Change in Control, provided that such a termination will not be a Qualifying Termination if: i) the Company has notified the Participant in writing more than 30 days prior to the Announcement Date that Participants employment is not expected to continue for more than 12 months following the date of such notification, and Participants employment is in fact terminated within such 12 month period; or ii) Participant has announced in writing, prior to the date the Company provides a Notice of Termination to Participant, that Participant intends to terminate his or her employment;
(B) Participants Separation From Service with the Company and its Affiliates as a result of Disability within 12 months following a Change in Control; or
(C) Participants Separation From Service with the Company and its Affiliates (other than as a result of Participants termination of employment by the Company for Cause) within 12 months following a Change in Control, if, at the time of such Separation From Service, Participant is age 59 1/2 or older and has had 10 or more years of employment with the Company or its Affiliates following such Participants most recent date of hire by the Company or its Affiliates.
For purposes of this definition, the term Company shall be deemed to include any Person that has assumed this Award (or provided a substitute award to Participant) in connection with a Change in Control.
(i) Retirement means a Separation From Service with the Company and its affiliates (other than for Cause) by a Participant who is age 59 1/2 or older and has had 10 or more years of employment with the Company or its Affiliates following such Participants most recent date of hire by the Company or its Affiliates.
(j) Separation From Service means a Participants separation from service with the Company and its affiliates, as determined under Treasury Regulation section 1.409A-1(h)(1), provided, that the term affiliate shall mean a business entity which is affiliated in ownership with the Company and that is treated as a single employer under the rules of section 414(b) and (c) of the Code (applying the eighty percent common ownership standard).
(k) Specified Employee shall mean any Participant who is a specified employee for purposes of section 1.409A-1(i) of the U.S. Treasury Regulations, determined in accordance with the rules set forth in the separate document entitled U.S. Bank Specified Employee Determination.
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EXHIBIT A
TO
PERFORMANCE RESTRICTED STOCK UNIT AWARD AGREEMENT
This Exhibit A to the Performance Restricted Stock Unit Award Agreement sets forth the manner in which the Final Award Number will be determined for each Participant.
Definitions
Capitalized terms used but not defined herein shall have the same meanings assigned to them in the Plan, the Performance Restricted Stock Unit Award Agreement and Participants Grant Detail. The following terms used in the text of this Exhibit A and in the ROE Performance Matrix shall have the meanings set forth below:
Company ROE Maximum means %.
Company ROE Minimum means %.
Company ROE Result means the ROE achieved by the Company during the Performance Period.
Company ROE Target means %.
Determination Date means the date on which the Final Award Number is determined, which date shall not be later than 45 days after the last day of the Performance Period.
Final Award Number means the Final Award Number determined in accordance with this Exhibit A.
Peer Group Companies means the following companies: .
Peer Group ROE Ranking Maximum means the percentile.
Peer Group ROE Ranking Minimum means the percentile.
Peer Group ROE Ranking Target means the percentile.
Peer Group ROE means the ROE achieved by the Peer Group Companies during the Performance Period.
Peer Group ROE Ranking means the percentile rank of the Company ROE Result relative to Peer Group ROE.
Performance Period means the year ending December 31, 2017.
ROE means (a) net income applicable to the common shareholders of a company during the Performance Period, divided by (b) that companys average common shareholders equity during the Performance Period.
ROE Performance Matrix means the ROE Performance Matrix set forth in this Exhibit A.
Target Award Number means the Target Award Number set forth in a Participants Grant Detail.
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Target Award Number Percentage means the Target Award Number Percentage determined in accordance with the ROE Performance Matrix and the related rules set forth in this Exhibit A.
Determination of Final Award Number
Each Participant has been granted a number of Units equal to the Target Award Number. The Target Award Number will be adjusted upward or downward depending on (a) whether the Company ROE Result is greater or less than the Company ROE Target, and (b) the Peer Group ROE Ranking. The Final Award Number for each Participant will be determined by multiplying (i) the Target Award Number Percentage by (ii) the Target Award Number. The Target Award Number Percentage will be determined in accordance with the following ROE Performance Matrix and the related rules below:
ROE PERFORMANCE MATRIX
Company ROE Result (Vertical Axis)
|
Target Award Number Percentage | |||||||
Company ROE Maximum ( %) or more | 75% | 112.5% | 125% | |||||
Company ROE Target ( %) |
50% | 100% | 112.5% | |||||
Company ROE Minimum ( %) or less (but greater than zero) |
25% | 50% | 75% | |||||
|
|
| ||||||
Company ROE is 0% or less |
0% | 0% | 0% | |||||
|
|
| ||||||
Peer Group |
Peer Group ROE Ranking Target |
Peer Group ROE Ranking Maximum or above | ||||||
Peer Group ROE Ranking (Horizontal Axis) |
In determining the Target Award Number Percentage in accordance with the ROE Performance Matrix, the following rules will apply:
| If the Company ROE Result is greater than the Company ROE Minimum and less than the Company ROE Target, the Target Award Number Percentage on the vertical axis will be determined by interpolation of the Company ROE Result between the Company ROE Minimum and the Company ROE Target. |
| If the Company ROE Result is greater than the Company ROE Target and less than the Company ROE Maximum, the Target Award Number Percentage on the vertical axis will be determined by interpolation of the Company ROE Result between the Company ROE Target and the Company ROE Maximum. |
| If the Peer Group ROE Ranking is greater than the Peer Group ROE Ranking Minimum and less than the Peer Group ROE Ranking Target, the Target Award Number Percentage on the horizontal axis will be determined by interpolation of the Peer Group ROE Ranking between the Peer Group ROE Minimum and the Peer Group ROE Target. |
| If the Peer Group ROE Ranking is greater than the Peer ROE Group Ranking Target and less than the Peer Group ROE Ranking Maximum, the Target Award Number Percentage on the horizontal axis will be determined by interpolation of the Peer Group ROE Ranking between the Peer Group ROE Target and the Peer Group ROE Maximum. |
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| After the Target Award Number Percentage on each of the vertical axis and horizontal axis has been determined, the actual Target Award Number Percentage will be determined by interpolation of the data points (i.e., the percentages) set forth in the ROE Performance Matrix. |
| In no event shall the Target Award Number Percentage be greater than 125.0%. |
The Final Award Number for each Participant shall be determined by the Committee on the Determination Date. The Grant Detail of each Participant shall be amended to reflect the Final Award Number as soon as administratively feasible after the Final Award Number for such Participant is determined.
Committee Determinations
The Committee shall make all determinations necessary to arrive at the Final Award Number for each Participant. The Committee shall determine the Company ROE Result by reference to the Companys audited financial statements as of and for the year ending on the last day of the Performance Period. The Committee shall determine the Peer Group ROE Ranking by reference to publicly available financial information regarding the Peer Companies. Any determination by the Committee pursuant to this Exhibit A will be binding upon each Participant and the Company.
No Fractional Units
In the event the Final Award Number is a number of Units that is not a whole number, then the Final Award Number shall be rounded down to the nearest whole number.
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Exhibit 10.44
NOTE: Stock options granted to members of the Managing Committee (Optionees) of U.S. Bancorp (the Company) on and after January 1, 2017 will have the terms and conditions set forth in each Optionees grant detail (the Grant Detail), which can be accessed on the Fidelity Website at www.netbenefits.com (or the website of any other stock plan administrator selected by the Company in the future). The Grant Detail may be viewed at any time on this Website, and the Grant Detail may also be printed out. In addition to the individual terms and conditions set forth in the Grant Detail, each stock option will have the terms and conditions set forth in the form of Non-Qualified Stock Option Agreement below. As a condition to each stock option grant, Optionee accepts the terms and conditions of the Grant Detail and the Non-Qualified Stock Option Agreement.
U.S. BANCORP
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, together with the Grant Detail which is incorporated herein by reference (collectively, the Agreement), sets forth the terms and conditions of a stock option for the purchase of common stock of the Company, par value $0.01 per share (the Common Stock), granted to Optionee by the Company. The grant of the Option is pursuant to the Companys 2015 Stock Incentive Plan, which was approved by shareholders on April 21, 2015 (the Plan), and is subject to its terms. Capitalized terms not defined in the Agreement shall have the meaning ascribed to such terms in the Plan.
The Company and Optionee agree as follows:
1. | Grant of Option |
Subject to the terms and conditions of the Plan and the Agreement, the Company grants Optionee the right and option (the Option) to purchase all or any part of an aggregate of the number of shares of Common Stock set forth in Optionees Grant Detail at the exercise price per share set forth in the Grant Detail. The date of grant of the Option (the Grant Date) and the expiration date of the Option (the Expiration Date) also are set forth in Optionees Grant Detail. The Option is not intended to be an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended.
2. | Vesting of Exercise Rights; Forfeiture; Expiration |
(a) Time-Based Vesting Conditions; Expiration. Subject to the terms and conditions of the Agreement, the Option (or a portion thereof) shall vest and may be exercised on or after the date or dates set forth in Optionees Grant Detail (each such date, a Scheduled Vesting Date) if Optionee remains continuously employed by the Company or an Affiliate of the Company until the applicable Scheduled Vesting Date. Except as otherwise provided in the Agreement, if Optionee ceases to be an employee of the Company or any Affiliate prior to an applicable Scheduled Vesting Date, any portion of the Option that has not previously become vested in accordance with the Grant Detail shall be immediately and irrevocably forfeited. Vested Options shall terminate and shall no longer be exercisable at the close of business on the Expiration Date, or on such earlier date as provided in this Section 2.
(b) Accelerated Vesting of Exercise Rights Upon Death. Notwithstanding the vesting provisions contained in Section 2(a), and subject to the other terms and conditions of the Agreement, if Optionee dies while in the employ of the Company or any Affiliate, then the vesting of the Option will accelerate upon the death of Optionee, and the Option will be fully exercisable in whole or in part at any time up to the earlier of (i) the last day of the three-year period commencing on the date of Optionees death and (ii) the Expiration Date of the Option. The Option may be exercised by the personal representatives or administrators of Optionee or by any Person or Persons to whom the Option has been transferred by will or the applicable laws of descent and distribution.
(c) Continued Vesting of Exercise Rights Upon Retirement or Disability. Notwithstanding the vesting provisions contained in Section 2(a), and subject to the other terms and conditions of the Agreement, upon the Retirement (as defined in Section 9) or Disability (as defined in Section 9) of Optionee, the unvested portion of the Option at the time of such Retirement or Disability shall not be forfeited, and instead will become exercisable in accordance with the terms of the Agreement as though such Retirement or Disability had never occurred. Notwithstanding the foregoing, if Optionee shall die following Disability or Retirement (but prior to the Expiration Date of the Option), then the unvested portion of the Option at the time of Optionees death, if any, will become exercisable in its entirety immediately upon Optionees death, and the Option will be exercisable in whole or in part by the personal representatives or administrators of Optionee, or by any Person or Persons to whom the Option has been transferred by will or the applicable laws of descent and distribution, at any time up to the earlier of (i) the last day of the three-year period commencing on the date of Optionees death and (ii) the Expiration Date of the Option.
(d) Extended Period to Exercise Option Following Early Retirement. If Optionees employment is terminated by reason of Early Retirement (as defined in Section 9), Optionee may exercise the portion of the Option that was vested on the date of such termination of employment at any time up to the earlier of (i) the last day of the three-year period commencing on the date of such termination of employment and (ii) the Expiration Date of the Option. If Optionee shall die following Early Retirement (but prior to the termination or expiration of the Option as determined in accordance with the immediately prior sentence), the personal representatives or administrators of Optionee, or the Person or Persons to whom the Option has been transferred by will or the applicable laws of descent and distribution, may exercise the Option in accordance with the provisions of this Section 2(d).
(e) Accelerated Vesting of Exercise Rights Upon Qualifying Termination. Notwithstanding the vesting provision contained in Section 2(a), and subject to the other terms and conditions of the Agreement, if Optionees employment is terminated pursuant to a Qualifying Termination (as defined in Section 9), the vesting of the Option will be accelerated and the Option may be exercised in full immediately upon such Qualifying Termination. Further, upon a Qualifying Termination, Optionee shall have the right to exercise the Option for a period of one year following such Qualifying Termination; provided, however, that no provision of this Section 2(e) shall shorten the period in which the Option may be exercised in the event of death, Disability, Retirement or Early Retirement as provided herein; and, provided further, that no Option shall be exercisable after the Expiration Date of the Option.
(f) Termination for Cause. If Optionees employment is terminated for Cause, the Option shall be terminated in its entirety and shall not be exercisable at any time on or after the date of the misconduct.
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(g) Exercise of Option Following Termination of Employment for any Reason other than Cause, Death, Disability, Retirement, Early Retirement or Qualifying Termination. If Optionees employment shall be terminated for any reason other than Cause, death, Disability, Retirement, Early Retirement or a Qualifying Termination, Optionee may exercise the Option, to the extent that the Option was exercisable by Optionee on the date of the termination of employment, at any time up to the earlier of (i) 90 days after such termination and (ii) the Expiration Date of the Option.
(h) Forfeiture upon Violation of Confidentiality and Non-solicitation Agreement. Notwithstanding any other provisions in this Agreement, if Optionee violates the terms of any confidentiality and non-solicitation agreement between the Company or an Affiliate and Participant, the Option shall terminate in its entirety and may no longer be exercised by Optionee (or by any representative or administrator of Optionee or any transferee of the Optionee by will or the applicable laws of decent and distribution) at any time on or after the occurrence of any such violation.
3. | Special Risk-Related Cancellation Provisions |
Notwithstanding any other provision of the Agreement, if at any time subsequent to the Grant Date the Committee determines, in its sole discretion, that Optionee has, (i) failed to comply with Company policies and procedures, including its 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 control deficiency under the Sarbanes-Oxley Act of 2002, and such failure, violation, misconduct or activity (A) demonstrates an Inadequate Sensitivity (as defined below) to the inherent risks of Optionees 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 Optionees business line or functional area, all or part of the Option granted under the Agreement that has not yet become vested (i.e. the portion that has not yet become exercisable) at the time of such determination may be cancelled, and, if so cancelled, all or such part of the Option will not become exercisable. Inadequate Sensitivity means Optionee has engaged in 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.
4. | Securities Law Compliance |
The exercise of all or any portion of this Option shall only be effective at such time that the sale of Common Stock issued pursuant to such exercise will not violate any state or federal securities or other laws. The Company is under no obligation to effect any registration of the stock subject to the Option under the Securities Act of 1933 or to effect any state registration or qualification of such Common Stock. The Company may, in its sole discretion, defer the effectiveness of any full or partial exercise of the Option in order to ensure that the issuance of stock upon exercise 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.
5. | Method of Exercise of Option |
Subject to the foregoing, the Option may be exercised in whole or part from time to time by contacting Fidelity (or any other stock plan administrator selected by the Company in the future) in accordance with procedures established by the Company. Information about exercising the Option can be accessed at USBnet (HRConnection) or www.USBankHR.com, or such other
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resource as established by the Company. When exercising the Option, the number of shares as to which the Option is being exercised must be specified, and the purchase price (together with all federal, state, local, and foreign taxes required to be withheld) must be paid. To the extent permitted under the option exercise procedures established by the Company and in effect at the time of exercise, Optionee may pay the purchase price (i) by check or other authorized money transfer; (ii) by delivery (through attestation) of already-owned Shares having a Fair Market Value on the exercise date equal to the applicable exercise price, which Shares are owned free and clear of any liens, claims, encumbrances or security interests; or (iii) such other means as permitted under the procedures established by the Company and in effect at the time of exercise. For this purpose, already-owned Shares must have been owned by Optionee for a minimum of six months prior to the date of exercise of the Option.
6. | Income Tax Withholding |
In order to comply with all applicable federal, state, local and foreign income and payroll tax laws or regulations, the Company or an Affiliate may take such action as it deems appropriate to ensure that all required withholdings with respect to taxes, which are the sole and absolute responsibility of Optionee, are withheld or collected from Optionee. By acceptance and exercise of the Option, Optionee authorizes the Company or an Affiliate to take such actions, which may include, but are not limited to: (i) withholding from proceeds of the sale of Shares acquired upon exercise of the Option, or withholding a portion of the Shares otherwise to be delivered upon exercise of the Option, in each case such Shares having a Fair Market Value equal to the amount of such taxes (but only to the extent necessary to satisfy certain statutory withholding requirements to avoid adverse accounting treatment under ASC 718); (ii) withholding from Optionees wages or other cash compensation paid to Optionee by the Company or an Affiliate; and (iii) permitting Optionee to deliver shares of Common Stock (other than the Shares issuable upon exercise of the Option) having a Fair Market Value equal to the amount of tax required to be withheld, which shares must have been owned by Optionee for a minimum of six months prior to the date of exercise of the Option.
7. | Miscellaneous |
(a) The Agreement shall not give Optionee 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. In addition, the Company or any Affiliate may at any time dismiss Optionee from employment, free from any liability or claim under the Plan. The holder of the Option will not be deemed to be the holder of any shares subject to the Option unless and until the Option has been exercised and the purchase price of the shares purchased has been paid.
(b) The Option may not be transferred, other than by will or the laws of descent and distribution and during Optionees lifetime the Option is exercisable only by Optionee (or by Optionees guardian or legal representative in the case of disability).
(c) The Company shall at all times during the term of the Option reserve and keep available such number of shares of the Companys Common Stock as will be sufficient to satisfy the requirements of the Agreement.
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(d) The Option 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 can be accessed on the Fidelity Website at www.netbenefits.com (or the website of any other stock plan administrator selected by the Company in the future).
(e) Optionee acknowledges that the grant, vesting, exercise or amendment of the Option, and the sale or other taxable disposition of the Shares issued with respect to the Option, may have tax consequences pursuant to the Code or under local, state or international tax laws. It is intended that the Option shall be exempt from Section 409A of the Code and the provisions of the Agreement and the Plan shall be construed and administered accordingly. Any amendment or modification of the Option (to the extent permitted under the terms of the Plan), will be undertaken in a manner intended to comply with Section 409A, to the extent applicable. Notwithstanding the foregoing, there is no guaranty or assurance as to the tax treatment of the Option. Optionee acknowledges that Optionee is relying solely and exclusively on Optionees own professional tax and investment advisors with respect to any and all such matters (and is not relying, in any manner, on the Company or any of its employees or representatives). Optionee understands and agrees that any and all tax consequences resulting from the Option and its grant, vesting, exercise, amendment or any payment with respect thereto, and the sale or other taxable disposition of the Shares acquired pursuant to the Option, is solely and exclusively the responsibility of Optionee without any expectation or understanding that the Company or any of its employees or representatives will pay or reimburse Optionee for such taxes or other items.
8. | Venue |
Any claim or action brought with respect to this Award shall be brought in a federal or state court located in Minneapolis, Minnesota.
9. | Definitions |
(a) Disability means qualifying for and receiving disability benefits under the Companys long-term disability programs as in effect from time to time.
(b) Early Retirement means termination of employment (other than for Cause) by a Person who is age 55 or older and has had 10 or more years of employment with the Company or its Affiliates following such Persons most recent date of hire by the Company or its Affiliates.
(c) Qualifying Termination means a termination of Optionees 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 that such a termination will not be a Qualifying Termination if:
(A) | the Company has notified Optionee in writing more than 30 days prior to the Announcement Date that Optionees employment is not expected to continue for more than 12 months following the date of such notification, and Optionees employment is in fact terminated within such 12-month period; or |
(B) | Optionee has announced in writing, prior to the date the Company provides a Notice of Termination to Optionee, that Optionee intends to terminate his or her employment. |
5
For purposes of this definition, the term Company shall be deemed to include any Person that has assumed the Option (or provided a substitute award to Optionee) in connection with a Change in Control.
(d) Retirement means the termination of employment (other than for Cause) by a Person who is age 59 1/2 or older and has had 10 or more years of employment with the Company or its Affiliates following such Persons most recent date of hire by the Company or its Affiliates.
6
EXHIBIT 12
Computation of Ratio of Earnings to Fixed Charges
Year Ended December 31 (Dollars in Millions) | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
Earnings |
||||||||||||||||||||||||
1. |
Net income attributable to U.S. Bancorp | $ | 5,888 | $ | 5,879 | $ | 5,851 | $ | 5,836 | $ | 5,647 | |||||||||||||
2. |
Applicable income taxes, including expense related to unrecognized tax positions | 2,161 | 2,097 | 2,087 | 2,032 | 2,236 | ||||||||||||||||||
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3. |
Net income attributable to U.S. Bancorp before income taxes (1 + 2) | $ | 8,049 | $ | 7,976 | $ | 7,938 | $ | 7,868 | $ | 7,883 | |||||||||||||
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4. |
Fixed charges: | |||||||||||||||||||||||
a. | Interest expense excluding interest on deposits* | $ | 1,017 | $ | 944 | $ | 988 | $ | 1,120 | $ | 1,447 | |||||||||||||
b. | Portion of rents representative of interest and amortization of debt expense | 109 | 109 | 112 | 108 | 103 | ||||||||||||||||||
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c. | Fixed charges excluding interest on deposits (4a + 4b) | 1,126 | 1,053 | 1,100 | 1,228 | 1,550 | ||||||||||||||||||
d. | Interest on deposits | 622 | 457 | 465 | 561 | 691 | ||||||||||||||||||
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e. | Fixed charges including interest on deposits (4c + 4d) | $ | 1,748 | $ | 1,510 | $ | 1,565 | $ | 1,789 | $ | 2,241 | |||||||||||||
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5. |
Amortization of interest capitalized | $ | | $ | | $ | | $ | | $ | | |||||||||||||
6. |
Earnings excluding interest on deposits (3 + 4c + 5) | 9,175 | 9,029 | 9,038 | 9,096 | 9,433 | ||||||||||||||||||
7. |
Earnings including interest on deposits (3 + 4e + 5) | 9,797 | 9,486 | 9,503 | 9,657 | 10,124 | ||||||||||||||||||
8. |
Fixed charges excluding interest on deposits (4c) | 1,126 | 1,053 | 1,100 | 1,228 | 1,550 | ||||||||||||||||||
9. |
Fixed charges including interest on deposits (4e) | 1,748 | 1,510 | 1,565 | 1,789 | 2,241 | ||||||||||||||||||
Ratio of Earnings to Fixed Charges |
||||||||||||||||||||||||
10. |
Excluding interest on deposits (line 6/line 8) | 8.15 | 8.57 | 8.22 | 7.41 | 6.09 | ||||||||||||||||||
11. |
Including interest on deposits (line 7/line 9) | 5.60 | 6.28 | 6.07 | 5.40 | 4.52 |
Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends
Year Ended December 31 (Dollars in Millions) | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
Earnings |
||||||||||||||||||||||||
1. |
Net income attributable to U.S. Bancorp | $ | 5,888 | $ | 5,879 | $ | 5,851 | $ | 5,836 | $ | 5,647 | |||||||||||||
2. |
Applicable income taxes, including expense related to unrecognized tax positions | 2,161 | 2,097 | 2,087 | 2,032 | 2,236 | ||||||||||||||||||
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3. |
Net income attributable to U.S. Bancorp before income taxes (1 + 2) | $ | 8,049 | $ | 7,976 | $ | 7,938 | $ | 7,868 | $ | 7,883 | |||||||||||||
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Preferred stock dividends |
$ | 281 | 247 | $ | 243 | $ | 250 | $ | 238 | |||||||||||||||
4. |
Fixed charges: | |||||||||||||||||||||||
a. | Interest expense excluding interest on deposits* | $ | 1,017 | $ | 944 | $ | 988 | $ | 1,120 | $ | 1,447 | |||||||||||||
b. | Portion of rents representative of interest and amortization of debt expense | 109 | 109 | 112 | 108 | 103 | ||||||||||||||||||
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c. | Fixed charges excluding interest on deposits (4a + 4b) | 1,126 | 1,053 | 1,100 | 1,228 | 1,550 | ||||||||||||||||||
d. | Interest on deposits | 622 | 457 | 465 | 561 | 691 | ||||||||||||||||||
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e. | Fixed charges including interest on deposits (4c + 4d) | $ | 1,748 | $ | 1,510 | $ | 1,565 | $ | 1,789 | $ | 2,241 | |||||||||||||
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5. |
Amortization of interest capitalized | $ | | $ | | $ | | $ | | $ | | |||||||||||||
6. |
Earnings excluding interest on deposits (3 + 4c + 5) | 9,175 | 9,029 | 9,038 | 9,096 | 9,433 | ||||||||||||||||||
7. |
Earnings including interest on deposits (3 + 4e + 5) | 9,797 | 9,486 | 9,503 | 9,657 | 10,124 | ||||||||||||||||||
8. |
Fixed charges excluding interest on deposits (4c) and preferred dividends | 1,407 | 1,300 | 1,343 | 1,478 | 1,788 | ||||||||||||||||||
9. |
Fixed charges including interest on deposits (4e) and preferred dividends | 2,029 | 1,757 | 1,808 | 2,039 | 2,479 | ||||||||||||||||||
Ratio of Earnings to Fixed Charges and Preferred Dividends |
||||||||||||||||||||||||
10. |
Excluding interest on deposits (line 6/line 8) | 6.52 | 6.95 | 6.73 | 6.15 | 5.28 | ||||||||||||||||||
11. |
Including interest on deposits (line 7/line 9) | 4.83 | 5.40 | 5.26 | 4.74 | 4.08 |
* | Excludes interest expense related to unrecognized tax positions |
EXHIBIT 13
The following pages discuss in detail the financial results we achieved in 2016 results that reflect one U.S. Bank.
21
Managements Discussion and Analysis
Overview
22
TABLE 1 Selected Financial Data |
Year Ended December 31 (Dollars and Shares in Millions, Except Per Share Data) |
2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
Condensed Income Statement |
||||||||||||||||||||
Net interest income |
$ | 11,528 | $ | 11,001 | $ | 10,775 | $ | 10,604 | $ | 10,745 | ||||||||||
Taxable-equivalent adjustment(a) |
203 | 213 | 222 | 224 | 224 | |||||||||||||||
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|
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Net interest income (taxable-equivalent basis)(b) |
11,731 | 11,214 | 10,997 | 10,828 | 10,969 | |||||||||||||||
Noninterest income |
9,555 | 9,092 | 9,161 | 8,765 | 9,334 | |||||||||||||||
Securities gains (losses), net |
22 | | 3 | 9 | (15 | ) | ||||||||||||||
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Total net revenue |
21,308 | 20,306 | 20,161 | 19,602 | 20,288 | |||||||||||||||
Noninterest expense |
11,676 | 10,931 | 10,715 | 10,274 | 10,456 | |||||||||||||||
Provision for credit losses |
1,324 | 1,132 | 1,229 | 1,340 | 1,882 | |||||||||||||||
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Income before taxes |
8,308 | 8,243 | 8,217 | 7,988 | 7,950 | |||||||||||||||
Income taxes and taxable-equivalent adjustment |
2,364 | 2,310 | 2,309 | 2,256 | 2,460 | |||||||||||||||
|
|
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Net income |
5,944 | 5,933 | 5,908 | 5,732 | 5,490 | |||||||||||||||
Net (income) loss attributable to noncontrolling interests |
(56 | ) | (54 | ) | (57 | ) | 104 | 157 | ||||||||||||
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|
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Net income attributable to U.S. Bancorp |
$ | 5,888 | $ | 5,879 | $ | 5,851 | $ | 5,836 | $ | 5,647 | ||||||||||
|
|
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Net income applicable to U.S. Bancorp common shareholders |
$ | 5,589 | $ | 5,608 | $ | 5,583 | $ | 5,552 | $ | 5,383 | ||||||||||
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|
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Per Common Share |
||||||||||||||||||||
Earnings per share |
$ | 3.25 | $ | 3.18 | $ | 3.10 | $ | 3.02 | $ | 2.85 | ||||||||||
Diluted earnings per share |
3.24 | 3.16 | 3.08 | 3.00 | 2.84 | |||||||||||||||
Dividends declared per share |
1.070 | 1.010 | .965 | .885 | .780 | |||||||||||||||
Book value per share |
24.63 | 23.28 | 21.68 | 19.92 | 18.31 | |||||||||||||||
Market value per share |
51.37 | 42.67 | 44.95 | 40.40 | 31.94 | |||||||||||||||
Average common shares outstanding |
1,718 | 1,764 | 1,803 | 1,839 | 1,887 | |||||||||||||||
Average diluted common shares outstanding |
1,724 | 1,772 | 1,813 | 1,849 | 1,896 | |||||||||||||||
Financial Ratios |
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Return on average assets |
1.36 | % | 1.44 | % | 1.54 | % | 1.65 | % | 1.65 | % | ||||||||||
Return on average common equity |
13.4 | 14.0 | 14.7 | 15.8 | 16.2 | |||||||||||||||
Net interest margin (taxable-equivalent basis)(a) |
3.01 | 3.05 | 3.23 | 3.44 | 3.58 | |||||||||||||||
Efficiency ratio(b) |
54.9 | 53.8 | 53.2 | 52.4 | 51.5 | |||||||||||||||
Net charge-offs as a percent of average loans outstanding |
.47 | .47 | .55 | .64 | .97 | |||||||||||||||
Average Balances |
||||||||||||||||||||
Loans |
$ | 267,811 | $ | 250,459 | $ | 241,692 | $ | 227,474 | $ | 215,374 | ||||||||||
Loans held for sale |
4,181 | 5,784 | 3,148 | 5,723 | 7,847 | |||||||||||||||
Investment securities(c) |
107,922 | 103,161 | 90,327 | 75,046 | 72,501 | |||||||||||||||
Earning assets |
389,877 | 367,445 | 340,994 | 315,139 | 306,270 | |||||||||||||||
Assets |
433,313 | 408,865 | 380,004 | 352,680 | 342,849 | |||||||||||||||
Noninterest-bearing deposits |
81,176 | 79,203 | 73,455 | 69,020 | 67,241 | |||||||||||||||
Deposits |
312,810 | 287,151 | 266,640 | 250,457 | 235,710 | |||||||||||||||
Short-term borrowings |
19,906 | 27,960 | 30,252 | 27,683 | 28,549 | |||||||||||||||
Long-term debt |
36,220 | 33,566 | 26,535 | 21,280 | 28,448 | |||||||||||||||
Total U.S. Bancorp shareholders equity |
47,339 | 44,813 | 42,837 | 39,917 | 37,611 | |||||||||||||||
Period End Balances |
||||||||||||||||||||
Loans |
$ | 273,207 | $ | 260,849 | $ | 247,851 | $ | 235,235 | $ | 223,329 | ||||||||||
Investment securities |
109,275 | 105,587 | 101,043 | 79,855 | 74,528 | |||||||||||||||
Assets |
445,964 | 421,853 | 402,529 | 364,021 | 353,855 | |||||||||||||||
Deposits |
334,590 | 300,400 | 282,733 | 262,123 | 249,183 | |||||||||||||||
Long-term debt |
33,323 | 32,078 | 32,260 | 20,049 | 25,516 | |||||||||||||||
Total U.S. Bancorp shareholders equity |
47,298 | 46,131 | 43,479 | 41,113 | 38,998 | |||||||||||||||
Asset Quality |
||||||||||||||||||||
Nonperforming assets |
$ | 1,603 | $ | 1,523 | $ | 1,808 | $ | 2,037 | $ | 2,671 | ||||||||||
Allowance for credit losses |
4,357 | 4,306 | 4,375 | 4,537 | 4,733 | |||||||||||||||
Allowance for credit losses as a percentage of period-end loans |
1.59 | % | 1.65 | % | 1.77 | % | 1.93 | % | 2.12 | % | ||||||||||
Capital Ratios |
||||||||||||||||||||
Common equity tier 1 capital(d) |
9.4 | % | 9.6 | % | 9.7 | % | 9.4 | %(b) | 9.0 | %(b) | ||||||||||
Tier 1 capital(d) |
11.0 | 11.3 | 11.3 | 11.2 | 10.8 | |||||||||||||||
Total risk-based capital(d) |
13.2 | 13.3 | 13.6 | 13.2 | 13.1 | |||||||||||||||
Leverage(d) |
9.0 | 9.5 | 9.3 | 9.6 | 9.2 | |||||||||||||||
Common equity tier 1 capital to risk-weighted assets for the Basel III transitional advanced approaches |
12.2 | 12.5 | 12.4 | |||||||||||||||||
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach(b)(e) |
9.1 | 9.1 | 9.0 | 8.8 | 8.1 | |||||||||||||||
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches(b) |
11.7 | 11.9 | 11.8 | |||||||||||||||||
Tangible common equity to tangible assets(b) |
7.5 | 7.6 | 7.5 | 7.7 | 7.2 | |||||||||||||||
Tangible common equity to risk-weighted assets(b) |
9.2 | 9.2 | 9.3 | 9.1 | 8.6 |
(a) | Utilizes a tax rate of 35 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes. |
(b) | See Non-GAAP Financial Measures beginning on page 66. |
(c) | 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) | December 31, 2016, 2015 and 2014, calculated under the Basel III transitional standardized approach; all other periods calculated under Basel I. |
(e) | December 31, 2016, 2015, 2014 and 2013, calculated using final rules for the Basel III fully implemented standardized approach; December 31, 2012, calculated using proposed rules released June 2012. |
23
24
TABLE 2 Analysis of Net Interest Income (a) |
Year Ended December 31 (Dollars in Millions) | 2016 | 2015 | 2014 | 2016 v 2015 |
2015 v 2014 |
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Components of Net Interest Income |
||||||||||||||||||||
Income on earning assets (taxable-equivalent basis) |
$ | 13,375 | $ | 12,619 | $ | 12,454 | $ | 756 | $ | 165 | ||||||||||
Expense on interest-bearing liabilities (taxable-equivalent basis) |
1,644 | 1,405 | 1,457 | 239 | (52 | ) | ||||||||||||||
Net interest income (taxable-equivalent basis)(b) |
$ | 11,731 | $ | 11,214 | $ | 10,997 | $ | 517 | $ | 217 | ||||||||||
Net interest income, as reported |
$ | 11,528 | $ | 11,001 | $ | 10,775 | $ | 527 | $ | 226 | ||||||||||
Average Yields and Rates Paid |
||||||||||||||||||||
Earning assets yield (taxable-equivalent basis) |
3.43 | % | 3.43 | % | 3.65 | % | | % | (.22 | )% | ||||||||||
Rate paid on interest-bearing liabilities (taxable-equivalent basis) |
.57 | .52 | .58 | .05 | (.06 | ) | ||||||||||||||
Gross interest margin (taxable-equivalent basis) |
2.86 | % | 2.91 | % | 3.07 | % | (.05 | )% | (.16 | )% | ||||||||||
Net interest margin (taxable-equivalent basis) |
3.01 | % | 3.05 | % | 3.23 | % | (.04 | )% | (.18 | )% | ||||||||||
Average Balances |
||||||||||||||||||||
Investment securities(c) |
$ | 107,922 | $ | 103,161 | $ | 90,327 | $ | 4,761 | $ | 12,834 | ||||||||||
Loans |
267,811 | 250,459 | 241,692 | 17,352 | 8,767 | |||||||||||||||
Earning assets |
389,877 | 367,445 | 340,994 | 22,432 | 26,451 | |||||||||||||||
Interest-bearing liabilities |
287,760 | 269,474 | 249,972 | 18,286 | 19,502 |
(a) | Interest and rates are presented on a fully taxable-equivalent basis utilizing a tax rate of 35 percent. |
(b) | See Non-GAAP Financial Measures beginning on page 66. |
(c) | Excludes unrealized gains and losses on available-for-sale investment securities and any premiums or discounts recorded related to the transfer of investment securities at fair value from available-for-sale to held-to-maturity. |
25
TABLE 3 Net Interest Income Changes Due to Rate and Volume (a) |
2016 v 2015 | 2015 v 2014 | |||||||||||||||||||||||
Year Ended December 31 (Dollars in Millions) | Volume | Yield/Rate | Total | Volume | Yield/Rate | Total | ||||||||||||||||||
Increase (decrease) in |
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Interest Income |
||||||||||||||||||||||||
Investment securities |
$ | 98 | $ | (37 | ) | $ | 61 | $ | 282 | $ | (153 | ) | $ | 129 | ||||||||||
Loans held for sale |
(57 | ) | 5 | (52 | ) | 108 | (30 | ) | 78 | |||||||||||||||
Loans |
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Commercial |
216 | 99 | 315 | 245 | (192 | ) | 53 | |||||||||||||||||
Commercial real estate |
24 | 24 | 48 | 71 | 4 | 75 | ||||||||||||||||||
Residential mortgages |
146 | (42 | ) | 104 | 1 | (36 | ) | (35 | ) | |||||||||||||||
Credit card |
265 | 3 | 268 | 43 | 109 | 152 | ||||||||||||||||||
Other retail |
134 | (40 | ) | 94 | 32 | (153 | ) | (121 | ) | |||||||||||||||
Total loans, excluding covered loans |
785 | 44 | 829 | 392 | (268 | ) | 124 | |||||||||||||||||
Covered loans |
(41 | ) | (30 | ) | (71 | ) | (154 | ) | (27 | ) | (181 | ) | ||||||||||||
Total loans |
744 | 14 | 758 | 238 | (295 | ) | (57 | ) | ||||||||||||||||
Other earning assets |
32 | (43 | ) | (11 | ) | 46 | (31 | ) | 15 | |||||||||||||||
Total earning assets |
817 | (61 | ) | 756 | 674 | (509 | ) | 165 | ||||||||||||||||
Interest Expense |
||||||||||||||||||||||||
Interest-bearing deposits |
||||||||||||||||||||||||
Interest checking |
3 | 9 | 12 | 2 | (7 | ) | (5 | ) | ||||||||||||||||
Money market savings |
41 | 116 | 157 | 28 | 47 | 75 | ||||||||||||||||||
Savings accounts |
4 | (10 | ) | (6 | ) | 4 | (10 | ) | (6 | ) | ||||||||||||||
Time deposits |
(14 | ) | 16 | 2 | (40 | ) | (32 | ) | (72 | ) | ||||||||||||||
Total interest-bearing deposits |
34 | 131 | 165 | (6 | ) | (2 | ) | (8 | ) | |||||||||||||||
Short-term borrowings |
(72 | ) | 91 | 19 | (20 | ) | 2 | (18 | ) | |||||||||||||||
Long-term debt |
55 | | 55 | 192 | (218 | ) | (26 | ) | ||||||||||||||||
Total interest-bearing liabilities |
17 | 222 | 239 | 166 | (218 | ) | (52 | ) | ||||||||||||||||
Increase (decrease) in net interest income |
$ | 800 | $ | (283 | ) | $ | 517 | $ | 508 | $ | (291 | ) | $ | 217 |
(a) | This table shows the components of the change in net interest income by volume and rate on a taxable-equivalent basis utilizing a tax rate of 35 percent. This table does not take into account the level of noninterest-bearing funding, nor does it fully reflect changes in the mix of assets and liabilities. The change in interest not solely due to changes in volume or rates has been allocated on a pro-rata basis to volume and yield/rate. |
26
TABLE 4 Noninterest Income |
Year Ended December 31 (Dollars in Millions) | 2016 | 2015 | 2014 | 2016 v 2015 |
2015 v 2014 |
|||||||||||||||
Credit and debit card revenue |
$ | 1,177 | $ | 1,070 | $ | 1,021 | 10.0 | % | 4.8 | % | ||||||||||
Corporate payment products revenue |
712 | 708 | 724 | .6 | (2.2 | ) | ||||||||||||||
Merchant processing services |
1,592 | 1,547 | 1,511 | 2.9 | 2.4 | |||||||||||||||
ATM processing services |
338 | 318 | 321 | 6.3 | (.9 | ) | ||||||||||||||
Trust and investment management fees |
1,427 | 1,321 | 1,252 | 8.0 | 5.5 | |||||||||||||||
Deposit service charges |
725 | 702 | 693 | 3.3 | 1.3 | |||||||||||||||
Treasury management fees |
583 | 561 | 545 | 3.9 | 2.9 | |||||||||||||||
Commercial products revenue |
871 | 867 | 854 | .5 | 1.5 | |||||||||||||||
Mortgage banking revenue |
979 | 906 | 1,009 | 8.1 | (10.2 | ) | ||||||||||||||
Investment products fees |
158 | 185 | 191 | (14.6 | ) | (3.1 | ) | |||||||||||||
Securities gains (losses), net |
22 | | 3 | * | * | |||||||||||||||
Other |
993 | 907 | 1,040 | 9.5 | (12.8 | ) | ||||||||||||||
Total noninterest income |
$ | 9,577 | $ | 9,092 | $ | 9,164 | 5.3 | % | (.8 | )% |
* | Not meaningful. |
27
TABLE 5 Noninterest Expense |
Year Ended December 31 (Dollars in Millions) | 2016 | 2015 | 2014 | 2016 v 2015 |
2015 v 2014 |
|||||||||||||||
Compensation |
$ | 5,212 | $ | 4,812 | $ | 4,523 | 8.3 | % | 6.4 | % | ||||||||||
Employee benefits |
1,119 | 1,167 | 1,041 | (4.1 | ) | 12.1 | ||||||||||||||
Net occupancy and equipment |
988 | 991 | 987 | (.3 | ) | .4 | ||||||||||||||
Professional services |
502 | 423 | 414 | 18.7 | 2.2 | |||||||||||||||
Marketing and business development |
435 | 361 | 382 | 20.5 | (5.5 | ) | ||||||||||||||
Technology and communications |
955 | 887 | 863 | 7.7 | 2.8 | |||||||||||||||
Postage, printing and supplies |
311 | 297 | 328 | 4.7 | (9.5 | ) | ||||||||||||||
Other intangibles |
179 | 174 | 199 | 2.9 | (12.6 | ) | ||||||||||||||
Other |
1,975 | 1,819 | 1,978 | 8.6 | (8.0 | ) | ||||||||||||||
Total noninterest expense |
$ | 11,676 | $ | 10,931 | $ | 10,715 | 6.8 | % | 2.0 | % | ||||||||||
Efficiency ratio(a) |
54.9 | % | 53.8 | % | 53.2 | % |
(a) | See Non-GAAP Financial Measures beginning on page 66. |
28
29
TABLE 6 Loan Portfolio Distribution |
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
At December 31 (Dollars in Millions) | Amount | Percent of Total |
Amount | Percent of Total |
Amount | Percent of Total |
Amount | Percent of Total |
Amount | Percent of Total |
||||||||||||||||||||||||||||||||||||||||||||||
Commercial |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial |
$ | 87,928 | 32.2 | % | $ | 83,116 | 31.9 | % | $ | 74,996 | 30.2 | % | $ | 64,762 | 27.5 | % | $ | 60,742 | 27.2 | % | ||||||||||||||||||||||||||||||||||||
Lease financing |
5,458 | 2.0 | 5,286 | 2.0 | 5,381 | 2.2 | 5,271 | 2.3 | 5,481 | 2.5 | ||||||||||||||||||||||||||||||||||||||||||||||
Total commercial |
93,386 | 34.2 | 88,402 | 33.9 | 80,377 | 32.4 | 70,033 | 29.8 | 66,223 | 29.7 | ||||||||||||||||||||||||||||||||||||||||||||||
Commercial Real Estate |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial mortgages |
31,592 | 11.6 | 31,773 | 12.2 | 33,360 | 13.5 | 32,183 | 13.7 | 31,005 | 13.9 | ||||||||||||||||||||||||||||||||||||||||||||||
Construction and development |
11,506 | 4.2 | 10,364 | 3.9 | 9,435 | 3.8 | 7,702 | 3.3 | 5,948 | 2.6 | ||||||||||||||||||||||||||||||||||||||||||||||
Total commercial real estate |
43,098 | 15.8 | 42,137 | 16.1 | 42,795 | 17.3 | 39,885 | 17.0 | 36,953 | 16.5 | ||||||||||||||||||||||||||||||||||||||||||||||
Residential Mortgages |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgages |
43,632 | 16.0 | 40,425 | 15.5 | 38,598 | 15.6 | 37,545 | 15.9 | 32,648 | 14.6 | ||||||||||||||||||||||||||||||||||||||||||||||
Home equity loans, first liens |
13,642 | 5.0 | 13,071 | 5.0 | 13,021 | 5.2 | 13,611 | 5.8 | 11,370 | 5.1 | ||||||||||||||||||||||||||||||||||||||||||||||
Total residential mortgages |
57,274 | 21.0 | 53,496 | 20.5 | 51,619 | 20.8 | 51,156 | 21.7 | 44,018 | 19.7 | ||||||||||||||||||||||||||||||||||||||||||||||
Credit Card |
21,749 | 7.9 | 21,012 | 8.1 | 18,515 | 7.5 | 18,021 | 7.7 | 17,115 | 7.7 | ||||||||||||||||||||||||||||||||||||||||||||||
Other Retail |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retail leasing |
6,316 | 2.3 | 5,232 | 2.0 | 5,871 | 2.4 | 5,929 | 2.5 | 5,419 | 2.4 | ||||||||||||||||||||||||||||||||||||||||||||||
Home equity and second mortgages |
16,369 | 6.0 | 16,384 | 6.3 | 15,916 | 6.4 | 15,442 | 6.6 | 16,726 | 7.5 | ||||||||||||||||||||||||||||||||||||||||||||||
Revolving credit |
3,282 | 1.2 | 3,354 | 1.3 | 3,309 | 1.3 | 3,276 | 1.4 | 3,332 | 1.5 | ||||||||||||||||||||||||||||||||||||||||||||||
Installment |
8,087 | 3.0 | 7,030 | 2.7 | 6,242 | 2.5 | 5,709 | 2.4 | 5,463 | 2.4 | ||||||||||||||||||||||||||||||||||||||||||||||
Automobile |
17,571 | 6.4 | 16,587 | 6.3 | 14,822 | 6.0 | 13,743 | 5.8 | 12,593 | 5.6 | ||||||||||||||||||||||||||||||||||||||||||||||
Student |
2,239 | .8 | 2,619 | 1.0 | 3,104 | 1.3 | 3,579 | 1.5 | 4,179 | 1.9 | ||||||||||||||||||||||||||||||||||||||||||||||
Total other retail |
53,864 | 19.7 | 51,206 | 19.6 | 49,264 | 19.9 | 47,678 | 20.2 | 47,712 | 21.3 | ||||||||||||||||||||||||||||||||||||||||||||||
Total loans, excluding covered loans |
269,371 | 98.6 | 256,253 | 98.2 | 242,570 | 97.9 | 226,773 | 96.4 | 212,021 | 94.9 | ||||||||||||||||||||||||||||||||||||||||||||||
Covered Loans |
3,836 | 1.4 | 4,596 | 1.8 | 5,281 | 2.1 | 8,462 | 3.6 | 11,308 | 5.1 | ||||||||||||||||||||||||||||||||||||||||||||||
Total loans |
$ | 273,207 | 100.0 | % | $ | 260,849 | 100.0 | % | $ | 247,851 | 100.0 | % | $ | 235,235 | 100.0 | % | $ | 223,329 | 100.0 | % |
30
TABLE 7 Commercial Loans by Industry Group and Geography |
2016 | 2015 | |||||||||||||||
At December 31 (Dollars in Millions) | Loans | Percent | Loans | Percent | ||||||||||||
Industry Group |
||||||||||||||||
Manufacturing |
$ | 13,779 | 14.8 | % | $ | 13,404 | 15.2 | % | ||||||||
Real estate, rental and leasing |
10,553 | 11.3 | 9,514 | 10.8 | ||||||||||||
Finance and insurance |
8,728 | 9.3 | 8,288 | 9.4 | ||||||||||||
Retail trade |
7,573 | 8.1 | 6,846 | 7.7 | ||||||||||||
Wholesale trade |
7,552 | 8.1 | 8,069 | 9.1 | ||||||||||||
Healthcare and social assistance |
6,345 | 6.8 | 5,802 | 6.6 | ||||||||||||
Public administration |
4,546 | 4.9 | 4,190 | 4.7 | ||||||||||||
Professional, scientific and technical services |
3,744 | 4.0 | 3,493 | 4.0 | ||||||||||||
Information |
3,597 | 3.8 | 3,542 | 4.0 | ||||||||||||
Transport and storage |
3,561 | 3.8 | 3,262 | 3.7 | ||||||||||||
Arts, entertainment and recreation |
3,340 | 3.6 | 2,772 | 3.1 | ||||||||||||
Educational services |
3,167 | 3.4 | 2,791 | 3.2 | ||||||||||||
Utilities |
1,747 | 1.9 | 1,435 | 1.6 | ||||||||||||
Mining |
1,645 | 1.8 | 2,208 | 2.5 | ||||||||||||
Other services |
1,625 | 1.7 | 1,703 | 1.9 | ||||||||||||
Agriculture, forestry, fishing and hunting |
1,449 | 1.5 | 1,721 | 1.9 | ||||||||||||
Other |
10,435 | 11.2 | 9,362 | 10.6 | ||||||||||||
Total |
$ | 93,386 | 100.0 | % | $ | 88,402 | 100.0 | % | ||||||||
Geography |
||||||||||||||||
California |
$ | 12,677 | 13.6 | % | $ | 11,253 | 12.7 | % | ||||||||
Colorado |
4,362 | 4.7 | 3,930 | 4.5 | ||||||||||||
Illinois |
4,636 | 5.0 | 4,636 | 5.3 | ||||||||||||
Minnesota |
7,093 | 7.6 | 7,166 | 8.1 | ||||||||||||
Missouri |
3,536 | 3.8 | 3,309 | 3.8 | ||||||||||||
Ohio |
4,270 | 4.6 | 4,063 | 4.6 | ||||||||||||
Oregon |
2,090 | 2.2 | 1,938 | 2.2 | ||||||||||||
Washington |
3,447 | 3.7 | 3,219 | 3.6 | ||||||||||||
Wisconsin |
3,512 | 3.8 | 2,936 | 3.3 | ||||||||||||
Iowa, Kansas, Nebraska, North Dakota, South Dakota |
4,900 | 5.2 | 4,543 | 5.1 | ||||||||||||
Arkansas, Indiana, Kentucky, Tennessee |
5,168 | 5.5 | 5,106 | 5.8 | ||||||||||||
Idaho, Montana, Wyoming |
1,251 | 1.3 | 1,427 | 1.6 | ||||||||||||
Arizona, Nevada, New Mexico, Utah |
3,487 | 3.7 | 3,280 | 3.7 | ||||||||||||
Total banking region |
60,429 | 64.7 | 56,806 | 64.3 | ||||||||||||
Florida, Michigan, New York, Pennsylvania, Texas |
15,467 | 16.6 | 15,819 | 17.9 | ||||||||||||
All other states |
17,490 | 18.7 | 15,777 | 17.8 | ||||||||||||
Total outside Companys banking region |
32,957 | 35.3 | 31,596 | 35.7 | ||||||||||||
Total |
$ | 93,386 | 100.0 | % | $ | 88,402 | 100.0 | % |
31
TABLE 8 Commercial Real Estate Loans by Property Type and Geography |
2016 | 2015 | |||||||||||||||
At December 31 (Dollars in Millions) | Loans | Percent | Loans | Percent | ||||||||||||
Property Type |
||||||||||||||||
Business owner occupied |
$ | 10,899 | 25.3 | % | $ | 11,186 | 26.6 | % | ||||||||
Commercial property |
||||||||||||||||
Industrial |
1,631 | 3.8 | 1,530 | 3.6 | ||||||||||||
Office |
5,536 | 12.8 | 5,480 | 13.0 | ||||||||||||
Retail |
4,997 | 11.6 | 4,944 | 11.7 | ||||||||||||
Other commercial |
4,064 | 9.4 | 4,165 | 9.9 | ||||||||||||
Multi-family |
9,607 | 22.3 | 8,833 | 21.0 | ||||||||||||
Hotel/motel |
3,791 | 8.8 | 3,428 | 8.1 | ||||||||||||
Residential homebuilders |
2,311 | 5.4 | 2,319 | 5.5 | ||||||||||||
Healthcare facilities |
262 | .6 | 252 | .6 | ||||||||||||
Total |
$ | 43,098 | 100.0 | % | $ | 42,137 | 100.0 | % | ||||||||
Geography |
||||||||||||||||
California |
$ | 10,734 | 24.9 | % | $ | 10,456 | 24.8 | % | ||||||||
Colorado |
1,819 | 4.2 | 2,004 | 4.8 | ||||||||||||
Illinois |
1,678 | 3.9 | 1,810 | 4.3 | ||||||||||||
Minnesota |
2,177 | 5.0 | 2,022 | 4.8 | ||||||||||||
Missouri |
1,372 | 3.2 | 1,382 | 3.3 | ||||||||||||
Ohio |
1,462 | 3.4 | 1,260 | 3.0 | ||||||||||||
Oregon |
2,094 | 4.9 | 1,988 | 4.7 | ||||||||||||
Washington |
3,435 | 8.0 | 3,422 | 8.1 | ||||||||||||
Wisconsin |
2,161 | 5.0 | 2,323 | 5.5 | ||||||||||||
Iowa, Kansas, Nebraska, North Dakota, South Dakota |
2,312 | 5.4 | 2,227 | 5.3 | ||||||||||||
Arkansas, Indiana, Kentucky, Tennessee |
1,810 | 4.2 | 1,708 | 4.1 | ||||||||||||
Idaho, Montana, Wyoming |
1,271 | 2.9 | 1,275 | 3.0 | ||||||||||||
Arizona, Nevada, New Mexico, Utah |
3,257 | 7.6 | 3,259 | 7.7 | ||||||||||||
Total banking region |
35,582 | 82.6 | 35,136 | 83.4 | ||||||||||||
Florida, Michigan, New York, Pennsylvania, Texas |
3,829 | 8.9 | 3,793 | 9.0 | ||||||||||||
All other states |
3,687 | 8.5 | 3,208 | 7.6 | ||||||||||||
Total outside Companys banking region |
7,516 | 17.4 | 7,001 | 16.6 | ||||||||||||
Total |
$ | 43,098 | 100.0 | % | $ | 42,137 | 100.0 | % |
32
TABLE 9 Residential Mortgages by Geography |
2016 | 2015 | |||||||||||||||||||
At December 31 (Dollars in Millions) | Loans | Percent | Loans | Percent | ||||||||||||||||
California |
$ | 15,115 | 26.4 | % | $ | 11,994 | 22.4 | % | ||||||||||||
Colorado |
3,219 | 5.6 | 3,047 | 5.7 | ||||||||||||||||
Illinois |
3,071 | 5.4 | 2,991 | 5.6 | ||||||||||||||||
Minnesota |
4,200 | 7.3 | 4,035 | 7.6 | ||||||||||||||||
Missouri |
1,834 | 3.2 | 1,955 | 3.7 | ||||||||||||||||
Ohio |
2,230 | 3.9 | 2,322 | 4.3 | ||||||||||||||||
Oregon |
2,292 | 4.0 | 2,144 | 4.0 | ||||||||||||||||
Washington |
3,277 | 5.7 | 3,020 | 5.6 | ||||||||||||||||
Wisconsin |
1,546 | 2.7 | 1,556 | 2.9 | ||||||||||||||||
Iowa, Kansas, Nebraska, North Dakota, South Dakota |
2,146 | 3.8 | 2,188 | 4.1 | ||||||||||||||||
Arkansas, Indiana, Kentucky, Tennessee |
3,220 | 5.6 | 3,287 | 6.1 | ||||||||||||||||
Idaho, Montana, Wyoming |
1,276 | 2.2 | 1,209 | 2.3 | ||||||||||||||||
Arizona, Nevada, New Mexico, Utah |
4,203 | 7.4 | 3,773 | 7.1 | ||||||||||||||||
Total banking region |
47,629 | 83.2 | 43,521 | 81.4 | ||||||||||||||||
Florida, Michigan, New York, Pennsylvania, Texas |
4,191 | 7.3 | 4,321 | 8.1 | ||||||||||||||||
All other states |
5,454 | 9.5 | 5,654 | 10.5 | ||||||||||||||||
Total outside Companys banking region |
9,645 | 16.8 | 9,975 | 18.6 | ||||||||||||||||
Total |
$ | 57,274 | 100.0 | % | $ | 53,496 | 100.0 | % |
TABLE 10 Credit Card Loans by Geography |
2016 | 2015 | |||||||||||||||||||
At December 31 (Dollars in Millions) | Loans | Percent | Loans | Percent | ||||||||||||||||
California |
$ | 2,188 | 10.1 | % | $ | 2,161 | 10.3 | % | ||||||||||||
Colorado |
761 | 3.5 | 787 | 3.7 | ||||||||||||||||
Illinois |
1,072 | 4.9 | 1,046 | 5.0 | ||||||||||||||||
Minnesota |
1,287 | 5.9 | 1,350 | 6.4 | ||||||||||||||||
Missouri |
717 | 3.3 | 746 | 3.6 | ||||||||||||||||
Ohio |
1,179 | 5.4 | 1,238 | 5.9 | ||||||||||||||||
Oregon |
657 | 3.0 | 707 | 3.4 | ||||||||||||||||
Washington |
860 | 4.0 | 898 | 4.3 | ||||||||||||||||
Wisconsin |
1,007 | 4.6 | 1,050 | 5.0 | ||||||||||||||||
Iowa, Kansas, Nebraska, North Dakota, South Dakota |
1,036 | 4.8 | 996 | 4.7 | ||||||||||||||||
Arkansas, Indiana, Kentucky, Tennessee |
1,580 | 7.3 | 1,613 | 7.7 | ||||||||||||||||
Idaho, Montana, Wyoming |
376 | 1.7 | 406 | 1.9 | ||||||||||||||||
Arizona, Nevada, New Mexico, Utah |
1,044 | 4.8 | 1,031 | 4.9 | ||||||||||||||||
Total banking region |
13,764 | 63.3 | 14,029 | 66.8 | ||||||||||||||||
Florida, Michigan, New York, Pennsylvania, Texas |
4,076 | 18.7 | 3,600 | 17.1 | ||||||||||||||||
All other states |
3,909 | 18.0 | 3,383 | 16.1 | ||||||||||||||||
Total outside Companys banking region |
7,985 | 36.7 | 6,983 | 33.2 | ||||||||||||||||
Total |
$ | 21,749 | 100.0 | % | $ | 21,012 | 100.0 | % |
33
TABLE 11 Other Retail Loans by Geography |
2016 | 2015 | |||||||||||||||||||
At December 31 (Dollars in Millions) | Loans | Percent | Loans | Percent | ||||||||||||||||
California |
$ | 8,468 | 15.7 | % | $ | 7,495 | 14.6 | % | ||||||||||||
Colorado |
2,058 | 3.8 | 1,995 | 3.9 | ||||||||||||||||
Illinois |
3,111 | 5.8 | 3,000 | 5.8 | ||||||||||||||||
Minnesota |
3,537 | 6.6 | 3,600 | 7.0 | ||||||||||||||||
Missouri |
2,171 | 4.0 | 2,191 | 4.3 | ||||||||||||||||
Ohio |
2,764 | 5.1 | 2,740 | 5.4 | ||||||||||||||||
Oregon |
1,555 | 2.9 | 1,601 | 3.1 | ||||||||||||||||
Washington |
1,696 | 3.1 | 1,724 | 3.4 | ||||||||||||||||
Wisconsin |
1,565 | 2.9 | 1,651 | 3.2 | ||||||||||||||||
Iowa, Kansas, Nebraska, North Dakota, South Dakota |
2,355 | 4.4 | 2,318 | 4.5 | ||||||||||||||||
Arkansas, Indiana, Kentucky, Tennessee |
3,001 | 5.6 | 2,925 | 5.7 | ||||||||||||||||
Idaho, Montana, Wyoming |
978 | 1.8 | 963 | 1.9 | ||||||||||||||||
Arizona, Nevada, New Mexico, Utah |
2,772 | 5.2 | 2,539 | 5.0 | ||||||||||||||||
Total banking region |
36,031 | 66.9 | 34,742 | 67.8 | ||||||||||||||||
Florida, Michigan, New York, Pennsylvania, Texas |
9,807 | 18.2 | 8,858 | 17.3 | ||||||||||||||||
All other states |
8,026 | 14.9 | 7,606 | 14.9 | ||||||||||||||||
Total outside Companys banking region |
17,833 | 33.1 | 16,464 | 32.2 | ||||||||||||||||
Total |
$ | 53,864 | 100.0 | % | $ | 51,206 | 100.0 | % |
34
TABLE 12 Selected Loan Maturity Distribution |
At December 31, 2016 (Dollars in Millions) | One Year or Less |
Over One Through |
Over Five Years |
Total | ||||||||||||
Commercial |
$ | 30,602 | $ | 57,876 | $ | 4,908 | $ | 93,386 | ||||||||
Commercial real estate |
11,847 | 24,318 | 6,933 | 43,098 | ||||||||||||
Residential mortgages |
2,703 | 8,474 | 46,097 | 57,274 | ||||||||||||
Credit card |
21,749 | | | 21,749 | ||||||||||||
Other retail |
10,189 | 29,461 | 14,214 | 53,864 | ||||||||||||
Covered loans |
475 | 623 | 2,738 | 3,836 | ||||||||||||
Total loans |
$ | 77,565 | $ | 120,752 | $ | 74,890 | $ | 273,207 | ||||||||
Total of loans due after one year with |
||||||||||||||||
Predetermined interest rates |
$ | 87,407 | ||||||||||||||
Floating interest rates |
$ | 108,235 |
35
TABLE 13 Investment Securities |
Available-for-Sale | Held-to-Maturity | |||||||||||||||||||||||||||||||||||
At December 31, 2016 (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 |
$ | 3,219 | $ | 3,218 | .6 | .74 | % | $ | 450 | $ | 450 | .5 | .98 | % | ||||||||||||||||||||||
Maturing after one year through five years |
9,509 | 9,414 | 2.7 | 1.10 | 709 | 715 | 2.7 | 1.78 | ||||||||||||||||||||||||||||
Maturing after five years through ten years |
4,285 | 4,203 | 6.2 | 1.91 | 4,087 | 3,961 | 6.7 | 1.77 | ||||||||||||||||||||||||||||
Maturing after ten years |
301 | 292 | 10.2 | 2.26 | | | | | ||||||||||||||||||||||||||||
Total |
$ | 17,314 | $ | 17,127 | 3.3 | 1.25 | % | $ | 5,246 | $ | 5,126 | 5.6 | 1.71 | % | ||||||||||||||||||||||
Mortgage-Backed Securities(a) |
||||||||||||||||||||||||||||||||||||
Maturing in one year or less |
$ | 161 | $ | 165 | .7 | 4.15 | % | $ | 271 | $ | 273 | .7 | 2.83 | % | ||||||||||||||||||||||
Maturing after one year through five years |
19,304 | 19,279 | 4.2 | 2.06 | 25,882 | 25,680 | 3.8 | 1.99 | ||||||||||||||||||||||||||||
Maturing after five years through ten years |
22,222 | 21,834 | 5.8 | 1.79 | 11,317 | 11,071 | 5.7 | 1.86 | ||||||||||||||||||||||||||||
Maturing after ten years |
2,304 | 2,312 | 12.2 | 1.70 | 237 | 239 | 11.1 | 1.62 | ||||||||||||||||||||||||||||
Total |
$ | 43,991 | $ | 43,590 | 5.4 | 1.91 | % | $ | 37,707 | $ | 37,263 | 4.4 | 1.96 | % | ||||||||||||||||||||||
Asset-Backed Securities(a) |
||||||||||||||||||||||||||||||||||||
Maturing in one year or less |
$ | | $ | | | | % | $ | | $ | | .1 | 1.38 | % | ||||||||||||||||||||||
Maturing after one year through five years |
252 | 256 | 3.9 | 3.18 | 5 | 8 | 3.1 | 1.39 | ||||||||||||||||||||||||||||
Maturing after five years through ten years |
223 | 227 | 5.4 | 3.49 | 2 | 2 | 5.8 | 1.53 | ||||||||||||||||||||||||||||
Maturing after ten years |
| | | | 1 | 6 | 11.5 | 1.52 | ||||||||||||||||||||||||||||
Total |
$ | 475 | $ | 483 | 4.6 | 3.32 | % | $ | 8 | $ | 16 | 5.0 | 1.45 | % | ||||||||||||||||||||||
Obligations of State and Political Subdivisions(b)(c) |
||||||||||||||||||||||||||||||||||||
Maturing in one year or less |
$ | 1,573 | $ | 1,593 | .4 | 7.09 | % | $ | | $ | | .3 | 8.20 | % | ||||||||||||||||||||||
Maturing after one year through five years |
517 | 530 | 2.6 | 6.15 | | | 2.5 | 8.15 | ||||||||||||||||||||||||||||
Maturing after five years through ten years |
1,771 | 1,732 | 8.1 | 5.30 | 6 | 7 | 8.8 | 3.30 | ||||||||||||||||||||||||||||
Maturing after ten years |
1,306 | 1,184 | 20.0 | 5.05 | | | | | ||||||||||||||||||||||||||||
Total |
$ | 5,167 | $ | 5,039 | 8.2 | 5.87 | % | $ | 6 | $ | 7 | 8.4 | 3.59 | % | ||||||||||||||||||||||
Other Debt Securities |
||||||||||||||||||||||||||||||||||||
Maturing in one year or less |
$ | | $ | | | | % | $ | 8 | $ | 8 | .3 | 2.15 | % | ||||||||||||||||||||||
Maturing after one year through five years |
| | | | 16 | 15 | 3.8 | 1.65 | ||||||||||||||||||||||||||||
Maturing after five years through ten years |
| | | | | | | | ||||||||||||||||||||||||||||
Maturing after ten years |
11 | 9 | 20.4 | 5.65 | | | | | ||||||||||||||||||||||||||||
Total |
$ | 11 | $ | 9 | 20.4 | 5.65 | % | $ | 24 | $ | 23 | 2.6 | 1.82 | % | ||||||||||||||||||||||
Other Investments |
$ | 27 | $ | 36 | | | % | $ | | $ | | | | % | ||||||||||||||||||||||
Total investment securities(d) |
$ | 66,985 | $ | 66,284 | 5.1 | 2.06 | % | $ | 42,991 | $ | 42,435 | 4.6 | 1.93 | % |
(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 4.7 years at December 31, 2015, with a corresponding weighted-average yield of 2.21 percent. The weighted-average maturity of the held-to-maturity investment securities was 4.2 years at December 31, 2015, with a corresponding weighted-average yield of 1.92 percent. |
(e) | Weighted-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. Weighted-average yield and maturity calculations exclude equity securities that have no stated yield or maturity. |
2016 | 2015 | |||||||||||||||||||
At December 31 (Dollars in Millions) | Amortized Cost |
Percent of Total |
Amortized Cost |
Percent of Total |
||||||||||||||||
U.S. Treasury and agencies |
$ | 22,560 | 20.5 | % | $ | 7,536 | 7.2 | % | ||||||||||||
Mortgage-backed securities |
81,698 | 74.3 | 91,265 | 86.6 | ||||||||||||||||
Asset-backed securities |
483 | .4 | 558 | .5 | ||||||||||||||||
Obligations of state and political subdivisions |
5,173 | 4.7 | 5,157 | 4.9 | ||||||||||||||||
Other debt securities and investments |
62 | .1 | 891 | .8 | ||||||||||||||||
Total investment securities |
$ | 109,976 | 100.0 | % | $ | 105,407 | 100.0 | % |
36
TABLE 14 Deposits |
The composition of deposits was as follows:
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
At December 31 (Dollars in Millions) | Amount | Percent of Total |
Amount | Percent of Total |
Amount | Percent of Total |
Amount | Percent of Total |
Amount | Percent of Total |
||||||||||||||||||||||||||||||||||||||||||||||
Noninterest-bearing deposits |
$ | 86,097 | 25.7 | % | $ | 83,766 | 27.9 | % | $ | 77,323 | 27.3 | % | $ | 76,941 | 29.4 | % | $ | 74,172 | 29.8 | % | ||||||||||||||||||||||||||||||||||||
Interest-bearing deposits |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest checking |
66,298 | 19.8 | 59,169 | 19.7 | 55,058 | 19.5 | 52,140 | 19.9 | 50,430 | 20.2 | ||||||||||||||||||||||||||||||||||||||||||||||
Money market savings |
109,947 | 32.9 | 86,159 | 28.7 | 76,536 | 27.1 | 59,772 | 22.8 | 50,987 | 20.5 | ||||||||||||||||||||||||||||||||||||||||||||||
Savings accounts |
41,783 | 12.5 | 38,468 | 12.8 | 35,249 | 12.4 | 32,469 | 12.4 | 30,811 | 12.4 | ||||||||||||||||||||||||||||||||||||||||||||||
Total savings deposits |
218,028 | 65.2 | 183,796 | 61.2 | 166,843 | 59.0 | 144,381 | 55.1 | 132,228 | 53.1 | ||||||||||||||||||||||||||||||||||||||||||||||
Time deposits less than $100,000 |
8,040 | 2.4 | 9,050 | 3.0 | 10,609 | 3.8 | 11,784 | 4.5 | 13,744 | 5.5 | ||||||||||||||||||||||||||||||||||||||||||||||
Time deposits greater than $100,000 |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic |
7,230 | 2.2 | 7,272 | 2.4 | 10,636 | 3.8 | 9,527 | 3.6 | 12,148 | 4.8 | ||||||||||||||||||||||||||||||||||||||||||||||
Foreign |
15,195 | 4.5 | 16,516 | 5.5 | 17,322 | 6.1 | 19,490 | 7.4 | 16,891 | 6.8 | ||||||||||||||||||||||||||||||||||||||||||||||
Total interest-bearing deposits |
248,493 | 74.3 | 216,634 | 72.1 | 205,410 | 72.7 | 185,182 | 70.6 | 175,011 | 70.2 | ||||||||||||||||||||||||||||||||||||||||||||||
Total deposits |
$ | 334,590 | 100.0 | % | $ | 300,400 | 100.0 | % | $ | 282,733 | 100.0 | % | $ | 262,123 | 100.0 | % | $ | 249,183 | 100.0 | % |
The maturity of time deposits was as follows:
Time Deposits Less Than $100,000 |
Time Deposits Greater Than $100,000 | |||||||||||||||
At December 31, 2016 (Dollars in Millions) | Domestic | Foreign | Total | |||||||||||||
Three months or less |
$ | 1,472 | $ | 1,641 | $ | 14,969 | $ | 18,082 | ||||||||
Three months through six months |
1,028 | 1,316 | 109 | 2,453 | ||||||||||||
Six months through one year |
1,439 | 1,337 | 117 | 2,893 | ||||||||||||
Thereafter |
4,101 | 2,936 | | 7,037 | ||||||||||||
Total |
$ | 8,040 | $ | 7,230 | $ | 15,195 | $ | 30,465 |
37
38
39
40
41
42
TABLE 15 Delinquent | Loan Ratios as a Percent of Ending Loan Balances |
At December 31 90 days or more past due excluding nonperforming loans |
2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
Commercial |
||||||||||||||||||||
Commercial |
.06 | % | .06 | % | .05 | % | .08 | % | .10 | % | ||||||||||
Lease financing |
| | | | | |||||||||||||||
|
|
|||||||||||||||||||
Total commercial |
.06 | .05 | .05 | .08 | .09 | |||||||||||||||
Commercial Real Estate |
||||||||||||||||||||
Commercial mortgages |
.01 | | .02 | .02 | .02 | |||||||||||||||
Construction and development |
.05 | .13 | .14 | .30 | .02 | |||||||||||||||
|
|
|||||||||||||||||||
Total commercial real estate |
.02 | .03 | .05 | .07 | .02 | |||||||||||||||
Residential Mortgages(a) |
.27 | .33 | .40 | .65 | .64 | |||||||||||||||
Credit Card |
1.16 | 1.09 | 1.13 | 1.17 | 1.27 | |||||||||||||||
Other Retail |
||||||||||||||||||||
Retail leasing |
.02 | .02 | .02 | | .02 | |||||||||||||||
Home equity and second mortgages |
.25 | .25 | .26 | .32 | .30 | |||||||||||||||
Other |
.13 | .11 | .12 | .14 | .17 | |||||||||||||||
|
|
|||||||||||||||||||
Total other retail(b) |
.15 | .15 | .15 | .18 | .20 | |||||||||||||||
|
|
|||||||||||||||||||
Total loans, excluding covered loans |
.20 | .21 | .23 | .31 | .31 | |||||||||||||||
Covered Loans |
5.53 | 6.31 | 7.48 | 5.63 | 5.86 | |||||||||||||||
|
|
|||||||||||||||||||
Total loans |
.28 | % | .32 | % | .38 | % | .51 | % | .59 | % |
At December 31 90 days or more past due including nonperforming loans |
2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
Commercial |
.57 | % | .25 | % | .19 | % | .27 | % | .27 | % | ||||||||||
Commercial real estate |
.31 | .33 | .65 | .83 | 1.50 | |||||||||||||||
Residential mortgages(a) |
1.31 | 1.66 | 2.07 | 2.16 | 2.14 | |||||||||||||||
Credit card |
1.18 | 1.13 | 1.30 | 1.60 | 2.12 | |||||||||||||||
Other retail(b) |
.45 | .46 | .53 | .58 | .66 | |||||||||||||||
|
|
|||||||||||||||||||
Total loans, excluding covered loans |
.71 | .67 | .83 | .97 | 1.11 | |||||||||||||||
Covered loans |
5.68 | 6.48 | 7.74 | 7.13 | 9.28 | |||||||||||||||
|
|
|||||||||||||||||||
Total loans |
.78 | % | .78 | % | .97 | % | 1.19 | % | 1.52 | % |
(a) | Delinquent loan ratios exclude $2.5 billion, $2.9 billion, $3.1 billion, $3.7 billion, and $3.2 billion at December 31, 2016, 2015, 2014, 2013, and 2012, respectively, of loans purchased from GNMA mortgage pools whose repayments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs. Including these loans, the ratio of residential mortgages 90 days or more past due including all nonperforming loans was 5.73 percent, 7.15 percent, 8.02 percent, 9.34 percent, and 9.45 percent at December 31, 2016, 2015, 2014, 2013, and 2012, respectively. |
(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 ..63 percent, .75 percent, .84 percent, .93 percent, and 1.08 percent at December 31, 2016, 2015, 2014, 2013, and 2012, respectively. |
43
44
The following table provides a summary of TDRs by loan class, including the delinquency status for TDRs that continue to accrue interest and TDRs included in nonperforming assets:
As a Percent of Performing TDRs | ||||||||||||||||||||
At December 31, 2016 (Dollars in Millions) |
Performing TDRs |
30-89 Days Past Due |
90 Days or More Past Due |
Nonperforming TDRs |
Total TDRs |
|||||||||||||||
Commercial |
$ | 366 | 1.4 | % | 1.3 | % | $ | 313 | (a) | $ | 679 | |||||||||
Commercial real estate |
169 | 2.1 | .1 | 22 | (b) | 191 | ||||||||||||||
Residential mortgages |
1,679 | 3.1 | 3.8 | 425 | 2,104 | (d) | ||||||||||||||
Credit card |
219 | 11.1 | 7.1 | 3 | (c) | 222 | ||||||||||||||
Other retail |
124 | 4.5 | 3.7 | 49 | (c) | 173 | (e) | |||||||||||||
TDRs, excluding GNMA and covered loans |
2,557 | 3.6 | 3.5 | 812 | 3,369 | |||||||||||||||
Loans purchased from GNMA mortgage pools(g) |
1,574 | | | | 1,574 | (f) | ||||||||||||||
Covered loans |
30 | 3.5 | 9.8 | 5 | 35 | |||||||||||||||
Total |
$ | 4,161 | 2.2 | % | 2.2 | % | $ | 817 | $ | 4,978 |
(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 $270 million of residential mortgage loans to borrowers that have had debt discharged through bankruptcy and $70 million in trial period arrangements or previously placed in trial period arrangements but not successfully completed. |
(e) | Includes $89 million of other retail loans to borrowers that have had debt discharged through bankruptcy and $7 million in trial period arrangements or previously placed in trial period arrangements but not successfully completed. |
(f) | Includes $346 million of Federal Housing Administration and United States Department of Veterans Affairs residential mortgage loans to borrowers that have had debt discharged through bankruptcy and $466 million in trial period arrangements or previously placed in trial period arrangements but not successfully completed. |
(g) | Approximately 4.9 percent and 68.7 percent of the total TDR loans purchased from GNMA mortgage pools are 30-89 days past due and 90 days or more past due, respectively, but are not classified as delinquent as their repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs. |
45
46
TABLE 16 Nonperforming Assets (a) |
At December 31 (Dollars in Millions) | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
Commercial |
||||||||||||||||||||
Commercial |
$ | 443 | $ | 160 | $ | 99 | $ | 122 | $ | 107 | ||||||||||
Lease financing |
40 | 14 | 13 | 12 | 16 | |||||||||||||||
Total commercial |
483 | 174 | 112 | 134 | 123 | |||||||||||||||
Commercial Real Estate |
||||||||||||||||||||
Commercial mortgages |
87 | 92 | 175 | 182 | 308 | |||||||||||||||
Construction and development |
37 | 35 | 84 | 121 | 238 | |||||||||||||||
Total commercial real estate |
124 | 127 | 259 | 303 | 546 | |||||||||||||||
Residential Mortgages(b) |
595 | 712 | 864 | 770 | 661 | |||||||||||||||
Credit Card |
3 | 9 | 30 | 78 | 146 | |||||||||||||||
Other Retail |
||||||||||||||||||||
Retail leasing |
2 | 3 | 1 | 1 | 1 | |||||||||||||||
Home equity and second mortgages |
128 | 136 | 170 | 167 | 189 | |||||||||||||||
Other |
27 | 23 | 16 | 23 | 27 | |||||||||||||||
Total other retail |
157 | 162 | 187 | 191 | 217 | |||||||||||||||
Total nonperforming loans, excluding covered loans |
1,362 | 1,184 | 1,452 | 1,476 | 1,693 | |||||||||||||||
Covered Loans |
6 | 8 | 14 | 127 | 386 | |||||||||||||||
Total nonperforming loans |
1,368 | 1,192 | 1,466 | 1,603 | 2,079 | |||||||||||||||
Other Real Estate(c)(d) |
186 | 280 | 288 | 327 | 381 | |||||||||||||||
Covered Other Real Estate(d) |
26 | 32 | 37 | 97 | 197 | |||||||||||||||
Other Assets |
23 | 19 | 17 | 10 | 14 | |||||||||||||||
Total nonperforming assets |
$ | 1,603 | $ | 1,523 | $ | 1,808 | $ | 2,037 | $ | 2,671 | ||||||||||
Total nonperforming assets, excluding covered assets |
$ | 1,571 | $ | 1,483 | $ | 1,757 | $ | 1,813 | $ | 2,088 | ||||||||||
Excluding covered assets |
||||||||||||||||||||
Accruing loans 90 days or more past due(b) |
$ | 552 | $ | 541 | $ | 550 | $ | 713 | $ | 660 | ||||||||||
Nonperforming loans to total loans |
.51 | % | .46 | % | .60 | % | .65 | % | .80 | % | ||||||||||
Nonperforming assets to total loans plus other real estate(c) |
.58 | % | .58 | % | .72 | % | .80 | % | .98 | % | ||||||||||
Including covered assets |
||||||||||||||||||||
Accruing loans 90 days or more past due(b) |
$ | 764 | $ | 831 | $ | 945 | $ | 1,189 | $ | 1,323 | ||||||||||
Nonperforming loans to total loans |
.50 | % | .46 | % | .59 | % | .68 | % | .93 | % | ||||||||||
Nonperforming assets to total loans plus other real estate(c) |
.59 | % | .58 | % | .73 | % | .86 | % | 1.19 | % |
Changes in Nonperforming Assets
(Dollars in Millions) | Commercial and Commercial Real Estate |
Residential Mortgages, Credit Card and Other Retail |
Covered Assets |
Total | ||||||||||||||||
Balance December 31, 2015 |
$ | 336 | $ | 1,147 | $ | 40 | $ | 1,523 | ||||||||||||
Additions to nonperforming assets |
||||||||||||||||||||
New nonaccrual loans and foreclosed properties |
1,051 | 431 | 22 | 1,504 | ||||||||||||||||
Advances on loans |
59 | | | 59 | ||||||||||||||||
Total additions |
1,110 | 431 | 22 | 1,563 | ||||||||||||||||
Reductions in nonperforming assets |
||||||||||||||||||||
Paydowns, payoffs |
(273 | ) | (256 | ) | (3 | ) | (532 | ) | ||||||||||||
Net sales |
(218 | ) | (184 | ) | (25 | ) | (427 | ) | ||||||||||||
Return to performing status |
(29 | ) | (119 | ) | (1 | ) | (149 | ) | ||||||||||||
Charge-offs(e) |
(303 | ) | (71 | ) | (1 | ) | (375 | ) | ||||||||||||
Total reductions |
(823 | ) | (630 | ) | (30 | ) | (1,483 | ) | ||||||||||||
Net additions to (reductions in) nonperforming assets |
287 | (199 | ) | (8 | ) | 80 | ||||||||||||||
Balance December 31, 2016 |
$ | 623 | $ | 948 | $ | 32 | $ | 1,603 |
(a) | Throughout this document, nonperforming assets and related ratios do not include accruing loans 90 days or more past due. |
(b) | Excludes $2.5 billion, $2.9 billion, $3.1 billion, $3.7 billion and $3.2 billion at December 31, 2016, 2015, 2014, 2013 and 2012, respectively, of loans purchased from GNMA mortgage pools that are 90 days or more past due that continue to accrue interest, as their repayments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs. |
(c) | Foreclosed GNMA loans of $373 million, $535 million, $641 million, $527 million and $548 million at December 31, 2016, 2015, 2014, 2013 and 2012, respectively, continue to accrue interest and are recorded as other assets and excluded from nonperforming assets because they are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs. |
(d) | 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. |
47
The following table provides an analysis of OREO, excluding covered assets, as a percent of their related loan balances, including geographical location detail for residential (residential mortgage, home equity and second mortgage) and commercial (commercial and commercial real estate) loan balances:
At December 31 (Dollars in Millions) |
Amount | As a Percent of Ending Loan Balances |
||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||
Residential |
||||||||||||||||||||
Illinios |
$ | 15 | $ | 18 | .35 | % | .42 | % | ||||||||||||
Minnesota |
12 | 23 | .19 | .37 | ||||||||||||||||
Wisconsin |
11 | 11 | .50 | .49 | ||||||||||||||||
New York |
9 | 9 | 1.16 | 1.13 | ||||||||||||||||
Ohio |
9 | 17 | .31 | .56 | ||||||||||||||||
All other states |
119 | 172 | .21 | .32 | ||||||||||||||||
Total residential |
175 | 250 | .24 | .36 | ||||||||||||||||
Commercial |
||||||||||||||||||||
California |
4 | 11 | .02 | .05 | ||||||||||||||||
Tennessee |
1 | 1 | .04 | .04 | ||||||||||||||||
Iowa |
1 | 1 | .03 | .04 | ||||||||||||||||
Illinois |
1 | 5 | .02 | .08 | ||||||||||||||||
New Jersey |
1 | 1 | .04 | .04 | ||||||||||||||||
All other states |
3 | 11 | | .01 | ||||||||||||||||
Total commercial |
11 | 30 | .01 | .02 | ||||||||||||||||
Total |
$ | 186 | $ | 280 | .07 | % | .11 | % |
TABLE 17 Net Charge-Offs as a Percent of Average Loans Outstanding |
Year Ended December 31 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
Commercial |
||||||||||||||||||||
Commercial |
.35 | % | .26 | % | .26 | % | .19 | % | .43 | % | ||||||||||
Lease financing |
.34 | .27 | .17 | .06 | .63 | |||||||||||||||
Total commercial |
.35 | .26 | .26 | .18 | .45 | |||||||||||||||
Commercial Real Estate |
||||||||||||||||||||
Commercial mortgages |
(.01 | ) | .02 | (.03 | ) | .08 | .37 | |||||||||||||
Construction and development |
(.08 | ) | (.33 | ) | (.05 | ) | (.87 | ) | .86 | |||||||||||
Total commercial real estate |
(.03 | ) | (.07 | ) | (.03 | ) | (.09 | ) | .45 | |||||||||||
Residential Mortgages |
.11 | .21 | .38 | .57 | 1.09 | |||||||||||||||
Credit Card |
3.30 | 3.61 | 3.73 | 3.90 | 4.01 | |||||||||||||||
Other Retail |
||||||||||||||||||||
Retail leasing |
.09 | .09 | .03 | .02 | .04 | |||||||||||||||
Home equity and second mortgages |
.01 | .24 | .61 | 1.33 | 1.72 | |||||||||||||||
Other |
.71 | .65 | .71 | .81 | .94 | |||||||||||||||
Total other retail |
.42 | .45 | .60 | .89 | 1.13 | |||||||||||||||
Total loans, excluding covered loans |
.48 | .48 | .57 | .66 | 1.03 | |||||||||||||||
Covered Loans |
| | .15 | .32 | .08 | |||||||||||||||
Total loans |
.47 | % | .47 | % | .55 | % | .64 | % | .97 | % |
48
49
50
TABLE 18 Summary of Allowance for Credit Losses |
(Dollars in Millions) | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
Balance at beginning of year |
$ | 4,306 | $ | 4,375 | $ | 4,537 | $ | 4,733 | $ | 5,014 | ||||||||||
Charge-Offs |
||||||||||||||||||||
Commercial |
||||||||||||||||||||
Commercial |
388 | 289 | 278 | 212 | 312 | |||||||||||||||
Lease financing |
29 | 25 | 27 | 34 | 66 | |||||||||||||||
|
|
|||||||||||||||||||
Total commercial |
417 | 314 | 305 | 246 | 378 | |||||||||||||||
Commercial real estate |
||||||||||||||||||||
Commercial mortgages |
12 | 20 | 21 | 71 | 145 | |||||||||||||||
Construction and development |
10 | 2 | 15 | 21 | 97 | |||||||||||||||
|
|
|||||||||||||||||||
Total commercial real estate |
22 | 22 | 36 | 92 | 242 | |||||||||||||||
Residential mortgages |
85 | 135 | 216 | 297 | 461 | |||||||||||||||
Credit card |
759 | 726 | 725 | 739 | 769 | |||||||||||||||
Other retail |
||||||||||||||||||||
Retail leasing |
9 | 8 | 6 | 5 | 9 | |||||||||||||||
Home equity and second mortgages |
40 | 73 | 121 | 237 | 327 | |||||||||||||||
Other |
283 | 238 | 257 | 281 | 330 | |||||||||||||||
|
|
|||||||||||||||||||
Total other retail |
332 | 319 | 384 | 523 | 666 | |||||||||||||||
Covered loans(a) |
| | 13 | 37 | 11 | |||||||||||||||
|
|
|||||||||||||||||||
Total charge-offs |
1,615 | 1,516 | 1,679 | 1,934 | 2,527 | |||||||||||||||
Recoveries |
||||||||||||||||||||
Commercial |
||||||||||||||||||||
Commercial |
81 | 84 | 92 | 95 | 72 | |||||||||||||||
Lease financing |
11 | 11 | 18 | 31 | 31 | |||||||||||||||
|
|
|||||||||||||||||||
Total commercial |
92 | 95 | 110 | 126 | 103 | |||||||||||||||
Commercial real estate |
||||||||||||||||||||
Commercial mortgages |
16 | 15 | 30 | 45 | 31 | |||||||||||||||
Construction and development |
19 | 35 | 19 | 80 | 45 | |||||||||||||||
|
|
|||||||||||||||||||
Total commercial real estate |
35 | 50 | 49 | 125 | 76 | |||||||||||||||
Residential mortgages |
25 | 26 | 21 | 25 | 23 | |||||||||||||||
Credit card |
83 | 75 | 67 | 83 | 102 | |||||||||||||||
Other retail |
||||||||||||||||||||
Retail leasing |
4 | 3 | 4 | 4 | 7 | |||||||||||||||
Home equity and second mortgages |
39 | 35 | 26 | 26 | 26 | |||||||||||||||
Other |
68 | 60 | 66 | 75 | 92 | |||||||||||||||
|
|
|||||||||||||||||||
Total other retail |
111 | 98 | 96 | 105 | 125 | |||||||||||||||
Covered loans(a) |
| | 2 | 5 | 1 | |||||||||||||||
|
|
|||||||||||||||||||
Total recoveries |
346 | 344 | 345 | 469 | 430 | |||||||||||||||
Net Charge-Offs |
||||||||||||||||||||
Commercial |
||||||||||||||||||||
Commercial |
307 | 205 | 186 | 117 | 240 | |||||||||||||||
Lease financing |
18 | 14 | 9 | 3 | 35 | |||||||||||||||
|
|
|||||||||||||||||||
Total commercial |
325 | 219 | 195 | 120 | 275 | |||||||||||||||
Commercial real estate |
||||||||||||||||||||
Commercial mortgages |
(4 | ) | 5 | (9 | ) | 26 | 114 | |||||||||||||
Construction and development |
(9 | ) | (33 | ) | (4 | ) | (59 | ) | 52 | |||||||||||
|
|
|||||||||||||||||||
Total commercial real estate |
(13 | ) | (28 | ) | (13 | ) | (33 | ) | 166 | |||||||||||
Residential mortgages |
60 | 109 | 195 | 272 | 438 | |||||||||||||||
Credit card |
676 | 651 | 658 | 656 | 667 | |||||||||||||||
Other retail |
||||||||||||||||||||
Retail leasing |
5 | 5 | 2 | 1 | 2 | |||||||||||||||
Home equity and second mortgages |
1 | 38 | 95 | 211 | 301 | |||||||||||||||
Other |
215 | 178 | 191 | 206 | 238 | |||||||||||||||
|
|
|||||||||||||||||||
Total other retail |
221 | 221 | 288 | 418 | 541 | |||||||||||||||
Covered loans(a) |
| | 11 | 32 | 10 | |||||||||||||||
|
|
|||||||||||||||||||
Total net charge-offs |
1,269 | 1,172 | 1,334 | 1,465 | 2,097 | |||||||||||||||
Provision for credit losses |
1,324 | 1,132 | 1,229 | 1,340 | 1,882 | |||||||||||||||
Other changes(b) |
(4 | ) | (29 | ) | (57 | ) | (71 | ) | (66 | ) | ||||||||||
|
|
|||||||||||||||||||
Balance at end of year |
$ | 4,357 | $ | 4,306 | $ | 4,375 | $ | 4,537 | $ | 4,733 | ||||||||||
|
|
|||||||||||||||||||
Components |
||||||||||||||||||||
Allowance for loan losses |
$ | 3,813 | $ | 3,863 | $ | 4,039 | $ | 4,250 | $ | 4,424 | ||||||||||
Liability for unfunded credit commitments |
544 | 443 | 336 | 287 | 309 | |||||||||||||||
|
|
|||||||||||||||||||
Total allowance for credit losses |
$ | 4,357 | $ | 4,306 | $ | 4,375 | $ | 4,537 | $ | 4,733 | ||||||||||
|
|
|||||||||||||||||||
Allowance for Credit Losses as a Percentage of |
||||||||||||||||||||
Period-end loans, excluding covered loans |
1.60 | % | 1.67 | % | 1.78 | % | 1.94 | % | 2.15 | % | ||||||||||
Nonperforming loans, excluding covered loans |
317 | 360 | 297 | 297 | 269 | |||||||||||||||
Nonperforming and accruing loans 90 days or more past due, excluding covered loans |
226 | 247 | 215 | 201 | 194 | |||||||||||||||
Nonperforming assets, excluding covered assets |
275 | 288 | 245 | 242 | 218 | |||||||||||||||
Net charge-offs, excluding covered loans |
341 | 364 | 326 | 306 | 218 | |||||||||||||||
Period-end loans |
1.59 | % | 1.65 | % | 1.77 | % | 1.93 | % | 2.12 | % | ||||||||||
Nonperforming loans |
318 | 361 | 298 | 283 | 228 | |||||||||||||||
Nonperforming and accruing loans 90 days or more past due |
204 | 213 | 181 | 163 | 139 | |||||||||||||||
Nonperforming assets |
272 | 283 | 242 | 223 | 177 | |||||||||||||||
Net charge-offs |
343 | 367 | 328 | 310 | 226 |
(a) | Relates to covered loan charge-offs and recoveries not reimbursable by the FDIC. |
(b) | Includes net changes in credit losses to be reimbursed by the FDIC and beginning in 2013, reductions in the allowance for covered loans where the reversal of a previously recorded allowance was offset by an associated decrease in the indemnification asset, and the impact of any loan sales. |
51
TABLE 19 Elements of the Allowance for Credit Losses |
Allowance Amount | Allowance as a Percent of Loans | |||||||||||||||||||||||||||||||||||||||
At December 31 (Dollars in Millions) | 2016 | 2015 | 2014 | 2013 | 2012 | 2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||||||||
Commercial |
||||||||||||||||||||||||||||||||||||||||
Commercial |
$ | 1,376 | $ | 1,231 | $ | 1,094 | $ | 1,019 | $ | 979 | 1.56 | % | 1.48 | % | 1.46 | % | 1.57 | % | 1.61 | % | ||||||||||||||||||||
Lease financing |
74 | 56 | 52 | 56 | 72 | 1.36 | 1.06 | .97 | 1.06 | 1.31 | ||||||||||||||||||||||||||||||
Total commercial |
1,450 | 1,287 | 1,146 | 1,075 | 1,051 | 1.55 | 1.46 | 1.43 | 1.53 | 1.59 | ||||||||||||||||||||||||||||||
Commercial Real Estate |
||||||||||||||||||||||||||||||||||||||||
Commercial mortgages |
282 | 285 | 479 | 532 | 641 | .89 | .90 | 1.44 | 1.65 | 2.07 | ||||||||||||||||||||||||||||||
Construction and development |
530 | 439 | 247 | 244 | 216 | 4.61 | 4.24 | 2.62 | 3.17 | 3.63 | ||||||||||||||||||||||||||||||
Total commercial real estate |
812 | 724 | 726 | 776 | 857 | 1.88 | 1.72 | 1.70 | 1.95 | 2.32 | ||||||||||||||||||||||||||||||
Residential Mortgages |
510 | 631 | 787 | 875 | 935 | .89 | 1.18 | 1.52 | 1.71 | 2.12 | ||||||||||||||||||||||||||||||
Credit Card |
934 | 883 | 880 | 884 | 863 | 4.29 | 4.20 | 4.75 | 4.91 | 5.04 | ||||||||||||||||||||||||||||||
Other Retail |
||||||||||||||||||||||||||||||||||||||||
Retail leasing |
11 | 12 | 14 | 14 | 11 | .17 | .23 | .24 | .24 | .20 | ||||||||||||||||||||||||||||||
Home equity and second mortgages |
300 | 448 | 470 | 497 | 583 | 1.83 | 2.73 | 2.95 | 3.22 | 3.49 | ||||||||||||||||||||||||||||||
Other |
306 | 283 | 287 | 270 | 254 | .98 | .96 | 1.04 | 1.03 | .99 | ||||||||||||||||||||||||||||||
Total other retail |
617 | 743 | 771 | 781 | 848 | 1.15 | 1.45 | 1.57 | 1.64 | 1.78 | ||||||||||||||||||||||||||||||
Covered Loans |
34 | 38 | 65 | 146 | 179 | .89 | .83 | 1.23 | 1.73 | 1.58 | ||||||||||||||||||||||||||||||
Total allowance |
$ | 4,357 | $ | 4,306 | $ | 4,375 | $ | 4,537 | $ | 4,733 | 1.59 | % | 1.65 | % | 1.77 | % | 1.93 | % | 2.12 | % |
52
53
TABLE 20 Sensitivity of Net | Interest Income |
December 31, 2016 | December 31, 2015 | |||||||||||||||||||||||||||||||
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 |
(2.82 | )% | 1.52 | % | * | 1.82 | % | * | 1.78 | % | * | 2.69 | % |
* | Given the level of interest rates, downward rate scenario is not computed. |
54
55
56
TABLE 21 Debt Ratings |
Moodys | Standard & Poors |
Fitch | Dominion Bond Rating Service |
|||||||||||||
U.S. Bancorp |
||||||||||||||||
Long-term issuer rating |
A1 | A+ | AA | AA | ||||||||||||
Short-term issuer rating |
A-1 | F1+ | R-1 (middle) | |||||||||||||
Senior unsecured debt |
A1 | A+ | AA | AA | ||||||||||||
Subordinated debt |
A1 | A- | AA- | AA (low) | ||||||||||||
Junior subordinated debt |
A2 | BBB | AA (low) | |||||||||||||
Preferred stock |
A3 | BBB | BBB+ | A | ||||||||||||
Commercial paper |
P-1 | A-1 | F1+ | |||||||||||||
U.S. Bank National Association |
||||||||||||||||
Long-term issuer rating |
A1 | AA- | AA | |||||||||||||
Short-term issuer rating |
P-1 | A-1+ | F1+ | R-1 (high) | ||||||||||||
Long-term deposits |
Aa1 | AA+ | AA(high) | |||||||||||||
Short-term deposits |
P-1 | F1+ | ||||||||||||||
Senior unsecured debt |
A1 | AA- | AA | AA(high) | ||||||||||||
Subordinated debt |
A1 | A | AA- | AA | ||||||||||||
Commercial paper |
P-1 | A-1+ | F1+ | |||||||||||||
Counterparty risk assessment |
Aa2(cr)/P-1(cr) |
57
TABLE 22 Contractual Obligations |
Payments Due By Period | ||||||||||||||||||||
At December 31, 2016 (Dollars in Millions) | One Year or Less |
Over One Through Three Years |
Over Three Through Five Years |
Over Five Years |
Total | |||||||||||||||
Contractual Obligations(a) |
||||||||||||||||||||
Long-term debt(b) |
$ | 5,461 | $ | 13,301 | $ | 2,264 | $ | 12,297 | $ | 33,323 | ||||||||||
Operating leases |
270 | 450 | 306 | 490 | 1,516 | |||||||||||||||
Benefit obligations(c) |
22 | 48 | 53 | 170 | 293 | |||||||||||||||
Time deposits |
23,428 | 4,620 | 2,414 | 3 | 30,465 | |||||||||||||||
Contractual interest payments(d) |
1,004 | 1,130 | 836 | 1,186 | 4,156 | |||||||||||||||
Equity investment commitments |
1,763 | 663 | 23 | 53 | 2,502 | |||||||||||||||
Other(e) |
431 | 32 | 14 | 123 | 600 | |||||||||||||||
Total |
$ | 32,379 | $ | 20,244 | $ | 5,910 | $ | 14,322 | $ | 72,855 |
(a) | Unrecognized tax positions of $302 million at December 31, 2016, are excluded as the Company cannot make a reasonably reliable estimate of the period of cash settlement with the respective taxing authority. |
(b) | Includes obligations under capital leases. |
(c) | Amounts only include obligations related to the unfunded non-qualified pension plans. |
(d) | Includes accrued interest and future contractual interest obligations. |
(e) | Primarily includes purchase obligations for goods and services covered by noncancellable contracts including cancellation fees. |
58
59
TABLE 23 Regulatory Capital Ratios |
U.S. Bancorp | U.S. Bank National Association | |||||||||||||||
At December 31 (Dollars in Millions) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Basel III transitional standardized approach: |
||||||||||||||||
Common equity tier 1 capital |
$ | 33,720 | $ | 32,612 | $ | 36,914 | $ | 33,831 | ||||||||
Tier 1 capital |
39,421 | 38,431 | 37,114 | 34,148 | ||||||||||||
Total risk-based capital |
47,355 | 45,313 | 44,853 | 41,112 | ||||||||||||
Risk-weighted assets |
358,237 | 341,360 | 352,023 | 336,938 | ||||||||||||
Common equity tier 1 capital as a percent of risk-weighted assets |
9.4 | % | 9.6 | % | 10.5 | % | 10.0 | % | ||||||||
Tier 1 capital as a percent of risk-weighted assets |
11.0 | 11.3 | 10.5 | 10.1 | ||||||||||||
Total risk-based capital as a percent of risk-weighted assets |
13.2 | 13.3 | 12.7 | 12.2 | ||||||||||||
Tier 1 capital as a percent of adjusted quarterly average assets (leverage ratio) |
9.0 | 9.5 | 8.6 | 8.5 | ||||||||||||
Basel III transitional advanced approaches: |
||||||||||||||||
Common equity tier 1 capital |
$ | 33,720 | $ | 32,612 | $ | 36,914 | $ | 33,831 | ||||||||
Tier 1 capital |
39,421 | 38,431 | 37,114 | 34,148 | ||||||||||||
Total risk-based capital |
44,264 | 42,262 | 41,737 | 38,090 | ||||||||||||
Risk-weighted assets |
277,141 | 261,668 | 271,920 | 258,207 | ||||||||||||
Common equity tier 1 capital as a percent of risk-weighted assets |
12.2 | % | 12.5 | % | 13.6 | % | 13.1 | % | ||||||||
Tier 1 capital as a percent of risk-weighted assets |
14.2 | 14.7 | 13.6 | 13.2 | ||||||||||||
Total risk-based capital as a percent of risk-weighted assets |
16.0 | 16.2 | 15.3 | 14.8 |
Bank Regulatory Capital Requirements
Minimum | Well- Capitalized |
|||||||
2016 |
||||||||
Common equity tier 1 capital as a percent of risk-weighted assets |
5.125 | % | 6.500 | % | ||||
Tier 1 capital as a percent of risk-weighted assets |
6.625 | 8.000 | ||||||
Total risk-based capital as a percent of risk-weighted assets |
8.625 | 10.000 | ||||||
Tier 1 capital as a percent of adjusted quarterly average assets (leverage ratio) |
4.000 | 5.000 | ||||||
2015 |
||||||||
Common equity tier 1 capital as a percent of risk-weighted assets |
4.500 | % | 6.500 | % | ||||
Tier 1 capital as a percent of risk-weighted assets |
6.000 | 8.000 | ||||||
Total risk-based capital as a percent of risk-weighted assets |
8.000 | 10.000 | ||||||
Tier 1 capital as a percent of adjusted quarterly average assets (leverage ratio) |
4.000 | 5.000 |
60
TABLE 24 Fourth Quarter Results |
Three Months Ended December 31, |
||||||||
(Dollars and Shares in Millions, Except Per Share Data) | 2016 | 2015 | ||||||
Condensed Income Statement |
||||||||
Net interest income |
$ | 2,955 | $ | 2,819 | ||||
Taxable-equivalent adjustment(a) |
49 | 52 | ||||||
Net interest income (taxable-equivalent basis)(b) |
3,004 | 2,871 | ||||||
Noninterest income |
2,425 | 2,339 | ||||||
Securities gains (losses), net |
6 | 1 | ||||||
Total net revenue |
5,435 | 5,211 | ||||||
Noninterest expense |
3,004 | 2,809 | ||||||
Provision for credit losses |
342 | 305 | ||||||
Income before taxes |
2,089 | 2,097 | ||||||
Income taxes and taxable-equivalent adjustment |
598 | 608 | ||||||
Net income |
1,491 | 1,489 | ||||||
Net (income) loss attributable to noncontrolling interests |
(13 | ) | (13 | ) | ||||
Net income attributable to U.S. Bancorp |
$ | 1,478 | $ | 1,476 | ||||
Net income applicable to U.S. Bancorp common shareholders |
$ | 1,391 | $ | 1,404 | ||||
Per Common Share |
||||||||
Earnings per share |
$ | .82 | $ | .80 | ||||
Diluted earnings per share |
$ | .82 | $ | .80 | ||||
Dividends declared per share |
$ | .280 | $ | .255 | ||||
Average common shares outstanding |
1,700 | 1,747 | ||||||
Average diluted common shares outstanding |
1,705 | 1,754 | ||||||
Financial Ratios |
||||||||
Return on average assets |
1.32 | % | 1.41 | % | ||||
Return on average common equity |
13.1 | 13.7 | ||||||
Net interest margin (taxable-equivalent basis)(a) |
2.98 | 3.06 | ||||||
Efficiency ratio(b) |
55.3 | 53.9 |
(a) | Utilizes a tax rate of 35 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes. |
(b) | See Non-GAAP Financial Measures beginning on page 66. |
61
62
63
TABLE 25 Line of Business Financial Performance |
Wholesale Banking and Commercial Real Estate |
Consumer and Small Business Banking |
|||||||||||||||||||||||||||||||||||
Year Ended December 31 (Dollars in Millions) |
2016 | 2015 | Percent Change |
2016 | 2015 | Percent Change |
||||||||||||||||||||||||||||||
Condensed Income Statement |
||||||||||||||||||||||||||||||||||||
Net interest income (taxable-equivalent basis) |
$ | 2,240 | $ | 2,002 | 11.9 | % | $ | 4,752 | $ | 4,580 | 3.8 | % | ||||||||||||||||||||||||
Noninterest income |
897 | 892 | .6 | 2,527 | 2,485 | 1.7 | ||||||||||||||||||||||||||||||
Securities gains (losses), net |
2 | | * | | | | ||||||||||||||||||||||||||||||
Total net revenue |
3,139 | 2,894 | 8.5 | 7,279 | 7,065 | 3.0 | ||||||||||||||||||||||||||||||
Noninterest expense |
1,417 | 1,322 | 7.2 | 4,999 | 4,799 | 4.2 | ||||||||||||||||||||||||||||||
Other intangibles |
4 | 4 | | 32 | 40 | (20.0 | ) | |||||||||||||||||||||||||||||
Total noninterest expense |
1,421 | 1,326 | 7.2 | 5,031 | 4,839 | 4.0 | ||||||||||||||||||||||||||||||
Income before provision and income taxes |
1,718 | 1,568 | 9.6 | 2,248 | 2,226 | 1.0 | ||||||||||||||||||||||||||||||
Provision for credit losses |
365 | 214 | 70.6 | 93 | 148 | (37.2 | ) | |||||||||||||||||||||||||||||
Income before income taxes |
1,353 | 1,354 | (.1 | ) | 2,155 | 2,078 | 3.7 | |||||||||||||||||||||||||||||
Income taxes and taxable-equivalent adjustment |
492 | 493 | (.2 | ) | 785 | 755 | 4.0 | |||||||||||||||||||||||||||||
Net income |
861 | 861 | | 1,370 | 1,323 | 3.6 | ||||||||||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests |
| | | | | | ||||||||||||||||||||||||||||||
Net income attributable to U.S. Bancorp |
$ | 861 | $ | 861 | | $ | 1,370 | $ | 1,323 | 3.6 | ||||||||||||||||||||||||||
Average Balance Sheet |
||||||||||||||||||||||||||||||||||||
Commercial |
$ | 70,854 | $ | 64,569 | 9.7 | % | $ | 10,352 | $ | 9,848 | 5.1 | % | ||||||||||||||||||||||||
Commercial real estate |
21,193 | 20,506 | 3.4 | 18,224 | 17,917 | 1.7 | ||||||||||||||||||||||||||||||
Residential mortgages |
8 | 8 | | 53,402 | 50,007 | 6.8 | ||||||||||||||||||||||||||||||
Credit card |
| | | | | | ||||||||||||||||||||||||||||||
Other retail |
2 | 2 | | 50,251 | 46,964 | 7.0 | ||||||||||||||||||||||||||||||
Total loans, excluding covered loans |
92,057 | 85,085 | 8.2 | 132,229 | 124,736 | 6.0 | ||||||||||||||||||||||||||||||
Covered loans |
| | | 4,196 | 4,934 | (15.0 | ) | |||||||||||||||||||||||||||||
Total loans |
92,057 | 85,085 | 8.2 | 136,425 | 129,670 | 5.2 | ||||||||||||||||||||||||||||||
Goodwill |
1,647 | 1,647 | | 3,681 | 3,681 | | ||||||||||||||||||||||||||||||
Other intangible assets |
17 | 20 | (15.0 | ) | 2,421 | 2,594 | (6.7 | ) | ||||||||||||||||||||||||||||
Assets |
100,575 | 93,421 | 7.7 | 151,754 | 146,554 | 3.5 | ||||||||||||||||||||||||||||||
Noninterest-bearing deposits |
36,849 | 36,345 | 1.4 | 27,544 | 25,829 | 6.6 | ||||||||||||||||||||||||||||||
Interest checking |
8,615 | 7,445 | 15.7 | 43,587 | 39,930 | 9.2 | ||||||||||||||||||||||||||||||
Savings products |
42,284 | 28,095 | 50.5 | 57,465 | 53,753 | 6.9 | ||||||||||||||||||||||||||||||
Time deposits |
13,078 | 15,027 | (13.0 | ) | 14,273 | 15,828 | (9.8 | ) | ||||||||||||||||||||||||||||
Total deposits |
100,826 | 86,912 | 16.0 | 142,869 | 135,340 | 5.6 | ||||||||||||||||||||||||||||||
Total U.S. Bancorp shareholders equity |
8,996 | 8,309 | 8.3 | 11,192 | 10,892 | 2.8 |
* | Not meaningful |
64
Wealth Management and Securities Services |
Payment Services |
Treasury and Corporate Support |
Consolidated Company |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 | 2015 | Percent Change |
2016 | 2015 | Percent Change |
2016 | 2015 | Percent Change |
2016 | 2015 | Percent Change |
|||||||||||||||||||||||||||||||||||||||||||||||||
$ | 537 | $ | 355 | 51.3 | % | $ | 2,140 | $ | 1,930 | 10.9 | % | $ | 2,062 | $ | 2,347 | (12.1 | )% | $ | 11,731 | $ | 11,214 | 4.6 | % | |||||||||||||||||||||||||||||||||||||
1,589 | 1,475 | 7.7 | 3,562 | 3,371 | 5.7 | 980 | 869 | 12.8 | 9,555 | 9,092 | 5.1 | |||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | 20 | | * | 22 | | * | |||||||||||||||||||||||||||||||||||||||||||||||||
2,126 | 1,830 | 16.2 | 5,702 | 5,301 | 7.6 | 3,062 | 3,216 | (4.8 | ) | 21,308 | 20,306 | 4.9 | ||||||||||||||||||||||||||||||||||||||||||||||||
1,510 | 1,422 | 6.2 | 2,656 | 2,521 | 5.4 | 915 | 693 | 32.0 | 11,497 | 10,757 | 6.9 | |||||||||||||||||||||||||||||||||||||||||||||||||
24 | 28 | (14.3 | ) | 119 | 102 | 16.7 | | | | 179 | 174 | 2.9 | ||||||||||||||||||||||||||||||||||||||||||||||||
1,534 | 1,450 | 5.8 | 2,775 | 2,623 | 5.8 | 915 | 693 | 32.0 | 11,676 | 10,931 | 6.8 | |||||||||||||||||||||||||||||||||||||||||||||||||
592 | 380 | 55.8 | 2,927 | 2,678 | 9.3 | 2,147 | 2,523 | (14.9 | ) | 9,632 | 9,375 | 2.7 | ||||||||||||||||||||||||||||||||||||||||||||||||
(4 | ) | | * | 869 | 787 | 10.4 | 1 | (17 | ) | * | 1,324 | 1,132 | 17.0 | |||||||||||||||||||||||||||||||||||||||||||||||
596 | 380 | 56.8 | 2,058 | 1,891 | 8.8 | 2,146 | 2,540 | (15.5 | ) | 8,308 | 8,243 | .8 | ||||||||||||||||||||||||||||||||||||||||||||||||
217 | 138 | 57.2 | 750 | 687 | 9.2 | 120 | 237 | (49.4 | ) | 2,364 | 2,310 | 2.3 | ||||||||||||||||||||||||||||||||||||||||||||||||
379 | 242 | 56.6 | 1,308 | 1,204 | 8.6 | 2,026 | 2,303 | (12.0 | ) | 5,944 | 5,933 | .2 | ||||||||||||||||||||||||||||||||||||||||||||||||
| | | (32 | ) | (31 | ) | (3.2 | ) | (24 | ) | (23 | ) | (4.3 | ) | (56 | ) | (54 | ) | (3.7 | ) | ||||||||||||||||||||||||||||||||||||||||
$ | 379 | $ | 242 | 56.6 | $ | 1,276 | $ | 1,173 | 8.8 | $ | 2,002 | $ | 2,280 | (12.2 | ) | $ | 5,888 | $ | 5,879 | .2 | ||||||||||||||||||||||||||||||||||||||||
$ | 2,916 | $ | 2,322 | 25.6 | % | $ | 7,535 | $ | 7,059 | 6.7 | % | $ | 386 | $ | 285 | 35.4 | % | $ | 92,043 | $ | 84,083 | 9.5 | % | |||||||||||||||||||||||||||||||||||||
520 | 569 | (8.6 | ) | | | | 3,103 | 3,423 | (9.3 | ) | 43,040 | 42,415 | 1.5 | |||||||||||||||||||||||||||||||||||||||||||||||
2,272 | 1,816 | 25.1 | | | | | 9 | * | 55,682 | 51,840 | 7.4 | |||||||||||||||||||||||||||||||||||||||||||||||||
| | | 20,490 | 18,057 | 13.5 | | | | 20,490 | 18,057 | 13.5 | |||||||||||||||||||||||||||||||||||||||||||||||||
1,553 | 1,517 | 2.4 | 524 | 596 | (12.1 | ) | | | | 52,330 | 49,079 | 6.6 | ||||||||||||||||||||||||||||||||||||||||||||||||
7,261 | 6,224 | 16.7 | 28,549 | 25,712 | 11.0 | 3,489 | 3,717 | (6.1 | ) | 263,585 | 245,474 | 7.4 | ||||||||||||||||||||||||||||||||||||||||||||||||
| 1 | * | | | | 30 | 50 | (40.0 | ) | 4,226 | 4,985 | (15.2 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
7,261 | 6,225 | 16.6 | 28,549 | 25,712 | 11.0 | 3,519 | 3,767 | (6.6 | ) | 267,811 | 250,459 | 6.9 | ||||||||||||||||||||||||||||||||||||||||||||||||
1,566 | 1,567 | (.1 | ) | 2,465 | 2,475 | (.4 | ) | | | | 9,359 | 9,370 | (.1 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
101 | 126 | (19.8 | ) | 494 | 411 | 20.2 | | | | 3,033 | 3,151 | (3.7 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
10,352 | 9,238 | 12.1 | 34,409 | 31,796 | 8.2 | 136,223 | 127,856 | 6.5 | 433,313 | 408,865 | 6.0 | |||||||||||||||||||||||||||||||||||||||||||||||||
13,735 | 14,393 | (4.6 | ) | 951 | 879 | 8.2 | 2,097 | 1,757 | 19.4 | 81,176 | 79,203 | 2.5 | ||||||||||||||||||||||||||||||||||||||||||||||||
9,484 | 7,959 | 19.2 | | 605 | * | 40 | 35 | 14.3 | 61,726 | 55,974 | 10.3 | |||||||||||||||||||||||||||||||||||||||||||||||||
36,564 | 33,994 | 7.6 | 97 | 91 | 6.6 | 490 | 483 | 1.4 | 136,900 | 116,416 | 17.6 | |||||||||||||||||||||||||||||||||||||||||||||||||
3,876 | 3,343 | 15.9 | | | | 1,781 | 1,360 | 31.0 | 33,008 | 35,558 | (7.2 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
63,659 | 59,689 | 6.7 | 1,048 | 1,575 | (33.5 | ) | 4,408 | 3,635 | 21.3 | 312,810 | 287,151 | 8.9 | ||||||||||||||||||||||||||||||||||||||||||||||||
2,382 | 2,312 | 3.0 | 6,390 | 5,868 | 8.9 | 18,379 | 17,432 | 5.4 | 47,339 | 44,813 | 5.6 |
65
66
The following table shows the Companys calculation of these Non-GAAP financial measures:
At December 31 (Dollars in Millions) | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
Total equity |
$ | 47,933 | $ | 46,817 | $ | 44,168 | $ | 41,807 | $ | 40,267 | ||||||||||
Preferred stock |
(5,501 | ) | (5,501 | ) | (4,756 | ) | (4,756 | ) | (4,769 | ) | ||||||||||
Noncontrolling interests |
(635 | ) | (686 | ) | (689 | ) | (694 | ) | (1,269 | ) | ||||||||||
Goodwill (net of deferred tax liability)(1) |
(8,203 | ) | (8,295 | ) | (8,403 | ) | (8,343 | ) | (8,351 | ) | ||||||||||
Intangible assets, other than mortgage servicing rights |
(712 | ) | (838 | ) | (824 | ) | (849 | ) | (1,006 | ) | ||||||||||
|
|
|||||||||||||||||||
Tangible common equity(a) |
32,882 | 31,497 | 29,496 | 27,165 | 24,872 | |||||||||||||||
Tangible common equity (as calculated above) |
32,882 | 31,497 | 29,496 | 27,165 | 24,872 | |||||||||||||||
Adjustments(2) |
(55 | ) | 67 | 172 | 224 | 126 | ||||||||||||||
|
|
|||||||||||||||||||
Common equity tier 1 capital estimated for the Basel III fully implemented standardized and advanced approaches(3)(b) |
32,827 | 31,564 | 29,668 | 27,389 | 24,998 | |||||||||||||||
Tier 1 capital, determined in accordance with prescribed regulatory requirements using Basel I definition |
33,386 | 31,203 | ||||||||||||||||||
Preferred stock |
(4,756 | ) | (4,769 | ) | ||||||||||||||||
Noncontrolling interests, less preferred stock not eligible for Tier 1 capital |
(688 | ) | (685 | ) | ||||||||||||||||
|
|
|||||||||||||||||||
Tier 1 common equity using Basel 1 definition(c) |
27,942 | 25,749 | ||||||||||||||||||
Total assets |
445,964 | 421,853 | 402,529 | 364,021 | 353,855 | |||||||||||||||
Goodwill (net of deferred tax liability)(1) |
(8,203 | ) | (8,295 | ) | (8,403 | ) | (8,343 | ) | (8,351 | ) | ||||||||||
Intangible assets, other than mortgage servicing rights |
(712 | ) | (838 | ) | (824 | ) | (849 | ) | (1,006 | ) | ||||||||||
|
|
|||||||||||||||||||
Tangible assets(d) |
437,049 | 412,720 | 393,302 | 354,829 | 344,498 | |||||||||||||||
Risk-weighted assets, determined in accordance with prescribed transitional standardized approach regulatory requirements(4)(e) |
358,237 | 341,360 | 317,398 | 297,919 | 287,611 | |||||||||||||||
Adjustments(5) |
4,027 | 3,892 | 11,110 | 13,712 | 21,233 | |||||||||||||||
|
|
|||||||||||||||||||
Risk-weighted assets estimated for the Basel III fully implemented standardized approach(3)(f) |
362,264 | 345,252 | 328,508 | 311,631 | 308,844 | |||||||||||||||
Risk-weighted assets, determined in accordance with prescribed transitional advanced approaches regulatory requirements |
277,141 | 261,668 | 248,596 | |||||||||||||||||
Adjustments(6) |
4,295 | 4,099 | 3,270 | |||||||||||||||||
|
|
|||||||||||||||||||
Risk-weighted assets estimated for the Basel III fully implemented advanced approaches(g) |
281,436 | 265,767 | 251,866 | |||||||||||||||||
Ratios |
||||||||||||||||||||
Tangible common equity to tangible assets(a)/(d) |
7.5 | % | 7.6 | % | 7.5 | % | 7.7 | % | 7.2 | % | ||||||||||
Tangible common equity to risk-weighted assets(a)/(e) |
9.2 | 9.2 | 9.3 | 9.1 | 8.6 | |||||||||||||||
Tier 1 common equity to risk-weighted assets using Basel I definition(c)/(e) |
9.4 | 9.0 | ||||||||||||||||||
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach(b)/(f)(3) |
9.1 | 9.1 | 9.0 | 8.8 | 8.1 | |||||||||||||||
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches(b)/(g) |
11.7 | 11.9 | 11.8 |
Three Months Ended December 31 |
Year Ended December 31 | |||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||||||||
Net interest income |
$ | 2,955 | $ | 2,819 | $ | 11,528 | $ | 11,001 | $ | 10,775 | $ | 10,604 | $ | 10,745 | ||||||||||||||
Taxable-equivalent adjustment(7) |
49 | 52 | 203 | 213 | 222 | 224 | 224 | |||||||||||||||||||||
Net interest income, on a taxable-equivalent basis |
3,004 | 2,871 | 11,731 | 11,214 | 10,997 | 10,828 | 10,969 | |||||||||||||||||||||
Net interest income, on a taxable-equivalent basis (as calculated above) |
3,004 | 2,871 | 11,731 | 11,214 | 10,997 | 10,828 | 10,969 | |||||||||||||||||||||
Noninterest income |
2,431 | 2,340 | 9,577 | 9,092 | 9,164 | 8,774 | 9,319 | |||||||||||||||||||||
Less: Securities gains (losses), net |
6 | 1 | 22 | | 3 | 9 | (15 | ) | ||||||||||||||||||||
Total net revenue, excluding net securities gains (losses)(h) |
5,429 | 5,210 | 21,286 | 20,306 | 20,158 | 19,593 | 20,303 | |||||||||||||||||||||
Noninterest expense(i) |
3,004 | 2,809 | 11,676 | 10,931 | 10,715 | 10,274 | 10,456 | |||||||||||||||||||||
Efficiency ratio(i)/(h) |
55.3 | % | 53.9 | % | 54.9 | % | 53.8 | % | 53.2 | % | 52.4 | % | 51.5 | % |
(1) | Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements beginning March 31, 2014. |
(2) | Includes net losses on cash flow hedges included in accumulated other comprehensive income (loss) and other adjustments. |
(3) | December 31, 2016, 2015, 2014 and 2013, calculated using final rules for the Basel III fully implemented standardized approach; December 31, 2012, calculated using proposed rules for the Basel III fully implemented standardized approach released June 2012. |
(4) | December 31, 2016, 2015 and 2014, calculated under the Basel III transitional standardized approach; all other periods calculated under Basel I. |
(5) | Includes higher risk-weighting for unfunded loan commitments, investment securities, residential mortgages, MSRs and other adjustments. |
(6) | Primarily reflects higher risk-weighting for MSRs. |
(7) | Utilizes a tax rate of 35 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes. |
67
68
69
70
71
Report of Management
Responsibility for the financial statements and other information presented throughout this Annual Report rests with the management of U.S. Bancorp. The Company believes the consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States and present the substance of transactions based on the circumstances and managements best estimates and judgment.
In meeting its responsibilities for the reliability of the financial statements, management is responsible for establishing and maintaining an adequate system of internal control over financial reporting as defined by Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Companys system of internal control is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of publicly filed financial statements in accordance with accounting principles generally accepted in the United States.
To test compliance, the Company carries out an extensive audit program. This program includes a review for compliance with written policies and procedures and a comprehensive review of the adequacy and effectiveness of the system of internal control. Although control procedures are designed and tested, it must be recognized that there are limits inherent in all systems of internal control and, therefore, errors and irregularities may nevertheless occur. Also, estimates and judgments are required to assess and balance the relative cost and expected benefits of the controls. Projection of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Board of Directors of the Company has an Audit Committee composed of directors who are independent of U.S. Bancorp. The Audit Committee meets periodically with management, the internal auditors and the independent accountants to consider audit results and to discuss internal accounting control, auditing and financial reporting matters.
Management assessed the effectiveness of the Companys system of internal control over financial reporting as of December 31, 2016. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in its Internal Control-Integrated Framework (2013 framework). Based on our assessment and those criteria, management believes the Company designed and maintained effective internal control over financial reporting as of December 31, 2016.
The Companys independent accountants, Ernst & Young LLP, have been engaged to render an independent professional opinion on the financial statements and issue an attestation report on the Companys internal control over financial reporting. Their opinion on the financial statements appearing on page 73 and their attestation on internal control over financial reporting appearing on page 74 are based on procedures conducted in accordance with auditing standards of the Public Company Accounting Oversight Board (United States).
72
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of U.S. Bancorp:
We have audited the accompanying consolidated balance sheets of U.S. Bancorp as of December 31, 2016 and 2015, and the related consolidated statements of income, comprehensive income, shareholders equity, and cash flows for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of U.S. Bancorps management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of U.S. Bancorp at December 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), U.S. Bancorps internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 23, 2017 expressed an unqualified opinion thereon.
Minneapolis, Minnesota
February 23, 2017
73
Report of Independent Registered Public Accounting Firm
on Internal Control Over Financial Reporting
The Board of Directors and Shareholders of U.S. Bancorp:
We have audited U.S. Bancorps internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). U.S. Bancorps management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management. Our responsibility is to express an opinion on U.S. Bancorps internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, U.S. Bancorp maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of U.S. Bancorp as of December 31, 2016 and 2015, and the related consolidated statements of income, comprehensive income, shareholders equity, and cash flows for each of the three years in the period ended December 31, 2016 and our report dated February 23, 2017 expressed an unqualified opinion thereon.
Minneapolis, Minnesota
February 23, 2017
74
Consolidated Financial Statements and Notes Table of Contents
Consolidated Financial Statements |
||||
76 | ||||
77 | ||||
78 | ||||
79 | ||||
80 | ||||
81 | ||||
88 | ||||
88 | ||||
89 | ||||
92 | ||||
100 | ||||
Note 7 Accounting for Transfers and Servicing of Financial Assets and Variable Interest Entities |
101 | |||
102 | ||||
102 | ||||
104 | ||||
105 | ||||
105 | ||||
106 | ||||
106 | ||||
111 | ||||
111 | ||||
116 | ||||
118 | ||||
119 | ||||
Note 20 Netting Arrangements for Certain Financial Instruments and Securities Financing Activities |
124 | |||
126 | ||||
135 | ||||
140 | ||||
141 |
75
U.S. Bancorp
At December 31 (Dollars in Millions) | 2016 | 2015 | ||||||
Assets |
||||||||
Cash and due from banks |
$ | 15,705 | $ | 11,147 | ||||
Investment securities |
||||||||
Held-to-maturity (fair value $42,435 and $43,493, respectively) |
42,991 | 43,590 | ||||||
Available-for-sale ($755 and $1,018 pledged as collateral, respectively)(a) |
66,284 | 61,997 | ||||||
Loans held for sale (including $4,822 and $3,110 of mortgage loans carried at fair value, respectively) |
4,826 | 3,184 | ||||||
Loans |
||||||||
Commercial |
93,386 | 88,402 | ||||||
Commercial real estate |
43,098 | 42,137 | ||||||
Residential mortgages |
57,274 | 53,496 | ||||||
Credit card |
21,749 | 21,012 | ||||||
Other retail |
53,864 | 51,206 | ||||||
|
|
|||||||
Total loans, excluding covered loans |
269,371 | 256,253 | ||||||
Covered loans |
3,836 | 4,596 | ||||||
|
|
|||||||
Total loans |
273,207 | 260,849 | ||||||
Less allowance for loan losses |
(3,813 | ) | (3,863 | ) | ||||
|
|
|||||||
Net loans |
269,394 | 256,986 | ||||||
Premises and equipment |
2,443 | 2,513 | ||||||
Goodwill |
9,344 | 9,361 | ||||||
Other intangible assets |
3,303 | 3,350 | ||||||
Other assets (including $314 and $121 of trading securities at fair value pledged as collateral, respectively)(a) |
31,674 | 29,725 | ||||||
|
|
|||||||
Total assets |
$ | 445,964 | $ | 421,853 | ||||
|
|
|||||||
Liabilities and Shareholders Equity |
||||||||
Deposits |
||||||||
Noninterest-bearing |
$ | 86,097 | $ | 83,766 | ||||
Interest-bearing(b) |
248,493 | 216,634 | ||||||
|
|
|||||||
Total deposits |
334,590 | 300,400 | ||||||
Short-term borrowings |
13,963 | 27,877 | ||||||
Long-term debt |
33,323 | 32,078 | ||||||
Other liabilities |
16,155 | 14,681 | ||||||
|
|
|||||||
Total liabilities |
398,031 | 375,036 | ||||||
Shareholders equity |
||||||||
Preferred stock |
5,501 | 5,501 | ||||||
Common stock, par value $0.01 a share authorized: 4,000,000,000 shares; issued: 2016 and 2015 2,125,725,742 shares |
21 | 21 | ||||||
Capital surplus |
8,440 | 8,376 | ||||||
Retained earnings |
50,151 | 46,377 | ||||||
Less cost of common stock in treasury: 2016 428,813,585 shares; 2015 380,534,801 shares |
(15,280 | ) | (13,125 | ) | ||||
Accumulated other comprehensive income (loss) |
(1,535 | ) | (1,019 | ) | ||||
|
|
|||||||
Total U.S. Bancorp shareholders equity |
47,298 | 46,131 | ||||||
Noncontrolling interests |
635 | 686 | ||||||
|
|
|||||||
Total equity |
47,933 | 46,817 | ||||||
|
|
|||||||
Total liabilities and equity |
$ | 445,964 | $ | 421,853 |
(a) | Includes only collateral pledged by the Company where counterparties have the right to sell or pledge the collateral. |
(b) | lncludes time deposits greater than $250,000 balances of $3.0 billion and $2.6 billion at December 31, 2016 and 2015, respectively. |
See | Notes to Consolidated Financial Statements. |
76
U.S. Bancorp
Consolidated Statement of Income
Year Ended December 31 (Dollars and Shares in Millions, Except Per Share Data) | 2016 | 2015 | 2014 | |||||||||
Interest Income |
||||||||||||
Loans |
$ | 10,810 | $ | 10,059 | $ | 10,113 | ||||||
Loans held for sale |
154 | 206 | 128 | |||||||||
Investment securities |
2,078 | 2,001 | 1,866 | |||||||||
Other interest income |
125 | 136 | 121 | |||||||||
|
|
|||||||||||
Total interest income |
13,167 | 12,402 | 12,228 | |||||||||
Interest Expense |
||||||||||||
Deposits |
622 | 457 | 465 | |||||||||
Short-term borrowings |
263 | 245 | 263 | |||||||||
Long-term debt |
754 | 699 | 725 | |||||||||
|
|
|||||||||||
Total interest expense |
1,639 | 1,401 | 1,453 | |||||||||
|
|
|||||||||||
Net interest income |
11,528 | 11,001 | 10,775 | |||||||||
Provision for credit losses |
1,324 | 1,132 | 1,229 | |||||||||
|
|
|||||||||||
Net interest income after provision for credit losses |
10,204 | 9,869 | 9,546 | |||||||||
Noninterest Income |
||||||||||||
Credit and debit card revenue |
1,177 | 1,070 | 1,021 | |||||||||
Corporate payment products revenue |
712 | 708 | 724 | |||||||||
Merchant processing services |
1,592 | 1,547 | 1,511 | |||||||||
ATM processing services |
338 | 318 | 321 | |||||||||
Trust and investment management fees |
1,427 | 1,321 | 1,252 | |||||||||
Deposit service charges |
725 | 702 | 693 | |||||||||
Treasury management fees |
583 | 561 | 545 | |||||||||
Commercial products revenue |
871 | 867 | 854 | |||||||||
Mortgage banking revenue |
979 | 906 | 1,009 | |||||||||
Investment products fees |
158 | 185 | 191 | |||||||||
Securities gains (losses), net |
||||||||||||
Realized gains (losses), net |
27 | 1 | 11 | |||||||||
Total other-than-temporary impairment |
(6 | ) | (1 | ) | (7 | ) | ||||||
Portion of other-than-temporary impairment recognized in other comprehensive income |
1 | | (1 | ) | ||||||||
|
|
|||||||||||
Total securities gains (losses), net |
22 | | 3 | |||||||||
Other |
993 | 907 | 1,040 | |||||||||
|
|
|||||||||||
Total noninterest income |
9,577 | 9,092 | 9,164 | |||||||||
Noninterest Expense |
||||||||||||
Compensation |
5,212 | 4,812 | 4,523 | |||||||||
Employee benefits |
1,119 | 1,167 | 1,041 | |||||||||
Net occupancy and equipment |
988 | 991 | 987 | |||||||||
Professional services |
502 | 423 | 414 | |||||||||
Marketing and business development |
435 | 361 | 382 | |||||||||
Technology and communications |
955 | 887 | 863 | |||||||||
Postage, printing and supplies |
311 | 297 | 328 | |||||||||
Other intangibles |
179 | 174 | 199 | |||||||||
Other |
1,975 | 1,819 | 1,978 | |||||||||
|
|
|||||||||||
Total noninterest expense |
11,676 | 10,931 | 10,715 | |||||||||
|
|
|||||||||||
Income before income taxes |
8,105 | 8,030 | 7,995 | |||||||||
Applicable income taxes |
2,161 | 2,097 | 2,087 | |||||||||
|
|
|||||||||||
Net income |
5,944 | 5,933 | 5,908 | |||||||||
Net (income) loss attributable to noncontrolling interests |
(56 | ) | (54 | ) | (57 | ) | ||||||
|
|
|||||||||||
Net income attributable to U.S. Bancorp |
$ | 5,888 | $ | 5,879 | $ | 5,851 | ||||||
|
|
|||||||||||
Net income applicable to U.S. Bancorp common shareholders |
$ | 5,589 | $ | 5,608 | $ | 5,583 | ||||||
|
|
|||||||||||
Earnings per common share |
$ | 3.25 | $ | 3.18 | $ | 3.10 | ||||||
Diluted earnings per common share |
$ | 3.24 | $ | 3.16 | $ | 3.08 | ||||||
Dividends declared per common share |
$ | 1.070 | $ | 1.010 | $ | .965 | ||||||
Average common shares outstanding |
1,718 | 1,764 | 1,803 | |||||||||
Average diluted common shares outstanding |
1,724 | 1,772 | 1,813 |
See | Notes to Consolidated Financial Statements. |
77
U.S. Bancorp
Consolidated Statement of Comprehensive Income
Year Ended December 31 (Dollars in Millions) | 2016 | 2015 | 2014 | |||||||||
Net income |
$ | 5,944 | $ | 5,933 | $ | 5,908 | ||||||
Other Comprehensive Income (Loss) |
||||||||||||
Changes in unrealized gains and losses on securities available-for-sale |
(858 | ) | (457 | ) | 764 | |||||||
Other-than-temporary impairment not recognized in earnings on securities available-for-sale |
(1 | ) | | 1 | ||||||||
Changes in unrealized gains and losses on derivative hedges |
74 | (25 | ) | (41 | ) | |||||||
Foreign currency translation |
(28 | ) | 20 | (4 | ) | |||||||
Changes in unrealized gains and losses on retirement plans |
(255 | ) | (142 | ) | (733 | ) | ||||||
Reclassification to earnings of realized gains and losses |
247 | 393 | 297 | |||||||||
Income taxes related to other comprehensive income (loss) |
305 | 88 | (109 | ) | ||||||||
|
|
|||||||||||
Total other comprehensive income (loss) |
(516 | ) | (123 | ) | 175 | |||||||
|
|
|||||||||||
Comprehensive income |
5,428 | 5,810 | 6,083 | |||||||||
Comprehensive (income) loss attributable to noncontrolling interests |
(56 | ) | (54 | ) | (57 | ) | ||||||
|
|
|||||||||||
Comprehensive income attributable to U.S. Bancorp |
$ | 5,372 | $ | 5,756 | $ | 6,026 |
See | Notes to Consolidated Financial Statements. |
78
U.S. Bancorp
Consolidated Statement of Shareholders Equity
U.S. Bancorp Shareholders | ||||||||||||||||||||||||||||||||||||||||
(Dollars and Shares in Millions) | 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, 2013 |
1,825 | $ | 4,756 | $ | 21 | $ | 8,216 | $ | 38,667 | $ | (9,476 | ) | $ | (1,071 | ) | $ | 41,113 | $ | 694 | $ | 41,807 | |||||||||||||||||||
Net income (loss) |
5,851 | 5,851 | 57 | 5,908 | ||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) |
175 | 175 | 175 | |||||||||||||||||||||||||||||||||||||
Preferred stock dividends |
(243 | ) | (243 | ) | (243 | ) | ||||||||||||||||||||||||||||||||||
Common stock dividends |
(1,745 | ) | (1,745 | ) | (1,745 | ) | ||||||||||||||||||||||||||||||||||
Issuance of common and treasury stock |
15 | (13 | ) | 493 | 480 | 480 | ||||||||||||||||||||||||||||||||||
Purchase of treasury stock |
(54 | ) | (2,262 | ) | (2,262 | ) | (2,262 | ) | ||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests |
| (59 | ) | (59 | ) | |||||||||||||||||||||||||||||||||||
Net other changes in noncontrolling interests |
| (3 | ) | (3 | ) | |||||||||||||||||||||||||||||||||||
Stock option and restricted stock grants |
110 | 110 | 110 | |||||||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||
Balance December 31, 2014 |
1,786 | $ | 4,756 | $ | 21 | $ | 8,313 | $ | 42,530 | $ | (11,245 | ) | $ | (896 | ) | $ | 43,479 | $ | 689 | $ | 44,168 | |||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||
Net income (loss) |
5,879 | 5,879 | 54 | 5,933 | ||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) |
(123 | ) | (123 | ) | (123 | ) | ||||||||||||||||||||||||||||||||||
Preferred stock dividends |
(247 | ) | (247 | ) | (247 | ) | ||||||||||||||||||||||||||||||||||
Common stock dividends |
(1,785 | ) | (1,785 | ) | (1,785 | ) | ||||||||||||||||||||||||||||||||||
Issuance of preferred stock |
745 | 745 | 745 | |||||||||||||||||||||||||||||||||||||
Issuance of common and treasury stock |
11 | (55 | ) | 366 | 311 | 311 | ||||||||||||||||||||||||||||||||||
Purchase of treasury stock |
(52 | ) | (2,246 | ) | (2,246 | ) | (2,246 | ) | ||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests |
| (55 | ) | (55 | ) | |||||||||||||||||||||||||||||||||||
Net other changes in noncontrolling interests |
| (2 | ) | (2 | ) | |||||||||||||||||||||||||||||||||||
Stock option and restricted stock grants |
118 | 118 | 118 | |||||||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||
Balance December 31, 2015 |
1,745 | $ | 5,501 | $ | 21 | $ | 8,376 | $ | 46,377 | $ | (13,125 | ) | $ | (1,019 | ) | $ | 46,131 | $ | 686 | $ | 46,817 | |||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||
Net income (loss) |
5,888 | 5,888 | 56 | 5,944 | ||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) |
(516 | ) | (516 | ) | (516 | ) | ||||||||||||||||||||||||||||||||||
Preferred stock dividends |
(281 | ) | (281 | ) | (281 | ) | ||||||||||||||||||||||||||||||||||
Common stock dividends |
(1,842 | ) | (1,842 | ) | (1,842 | ) | ||||||||||||||||||||||||||||||||||
Issuance of common and treasury stock |
13 | (71 | ) | 445 | 374 | 374 | ||||||||||||||||||||||||||||||||||
Purchase of treasury stock |
(61 | ) | (2,600 | ) | (2,600 | ) | (2,600 | ) | ||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests |
| (56 | ) | (56 | ) | |||||||||||||||||||||||||||||||||||
Purchase of noncontrolling interests |
1 | 9 | 10 | (50 | ) | (40 | ) | |||||||||||||||||||||||||||||||||
Net other changes in noncontrolling interests |
| (1 | ) | (1 | ) | |||||||||||||||||||||||||||||||||||
Stock option and restricted stock grants |
134 | 134 | 134 | |||||||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||
Balance December 31, 2016 |
1,697 | $ | 5,501 | $ | 21 | $ | 8,440 | $ | 50,151 | $ | (15,280 | ) | $ | (1,535 | ) | $ | 47,298 | $ | 635 | $ | 47,933 |
See | Notes to Consolidated Financial Statements. |
79
U.S. Bancorp
Consolidated Statement of Cash Flows
Year Ended December 31 (Dollars in Millions) | 2016 | 2015 | 2014 | |||||||||
Operating Activities |
||||||||||||
Net income attributable to U.S. Bancorp |
$ | 5,888 | $ | 5,879 | $ | 5,851 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities |
||||||||||||
Provision for credit losses |
1,324 | 1,132 | 1,229 | |||||||||
Depreciation and amortization of premises and equipment |
291 | 307 | 302 | |||||||||
Amortization of intangibles |
179 | 174 | 199 | |||||||||
(Gain) loss on sale of loans held for sale |
(954 | ) | (993 | ) | (801 | ) | ||||||
(Gain) loss on sale of securities and other assets |
(617 | ) | (403 | ) | (595 | ) | ||||||
Loans originated for sale in the secondary market, net of repayments |
(42,867 | ) | (43,312 | ) | (30,858 | ) | ||||||
Proceeds from sales of loans held for sale |
41,605 | 45,211 | 29,962 | |||||||||
Other, net |
487 | 787 | 43 | |||||||||
|
|
|||||||||||
Net cash provided by operating activities |
5,336 | 8,782 | 5,332 | |||||||||
Investing Activities |
||||||||||||
Proceeds from sales of available-for-sale investment securities |
9,877 | 690 | 475 | |||||||||
Proceeds from maturities of held-to-maturity investment securities |
9,733 | 10,567 | 9,479 | |||||||||
Proceeds from maturities of available-for-sale investment securities |
14,625 | 13,395 | 7,212 | |||||||||
Purchases of held-to-maturity investment securities |
(9,171 | ) | (9,234 | ) | (15,597 | ) | ||||||
Purchases of available-for-sale investment securities |
(29,684 | ) | (20,502 | ) | (21,752 | ) | ||||||
Net increase in loans outstanding |
(13,383 | ) | (11,788 | ) | (12,873 | ) | ||||||
Proceeds from sales of loans |
2,604 | 1,723 | 1,657 | |||||||||
Purchases of loans |
(2,881 | ) | (4,475 | ) | (2,355 | ) | ||||||
Acquisitions, net of cash acquired |
| | 3,436 | |||||||||
Other, net |
322 | (1,526 | ) | 506 | ||||||||
|
|
|||||||||||
Net cash used in investing activities |
(17,958 | ) | (21,150 | ) | (29,812 | ) | ||||||
Financing Activities |
||||||||||||
Net increase in deposits |
34,192 | 18,290 | 15,822 | |||||||||
Net increase (decrease) in short-term borrowings |
(13,914 | ) | (2,016 | ) | 2,285 | |||||||
Proceeds from issuance of long-term debt |
10,715 | 5,067 | 16,394 | |||||||||
Principal payments or redemption of long-term debt |
(9,495 | ) | (5,311 | ) | (4,128 | ) | ||||||
Proceeds from issuance of preferred stock |
| 745 | | |||||||||
Proceeds from issuance of common stock |
355 | 295 | 453 | |||||||||
Repurchase of common stock |
(2,556 | ) | (2,190 | ) | (2,200 | ) | ||||||
Cash dividends paid on preferred stock |
(267 | ) | (242 | ) | (243 | ) | ||||||
Cash dividends paid on common stock |
(1,810 | ) | (1,777 | ) | (1,726 | ) | ||||||
Purchase of noncontrolling interests |
(40 | ) | | | ||||||||
|
|
|||||||||||
Net cash provided by financing activities |
17,180 | 12,861 | 26,657 | |||||||||
|
|
|||||||||||
Change in cash and due from banks |
4,558 | 493 | 2,177 | |||||||||
Cash and due from banks at beginning of year |
11,147 | 10,654 | 8,477 | |||||||||
|
|
|||||||||||
Cash and due from banks at end of year |
$ | 15,705 | $ | 11,147 | $ | 10,654 | ||||||
|
|
|||||||||||
Supplemental Cash Flow Disclosures |
||||||||||||
Cash paid for income taxes |
$ | 595 | $ | 742 | $ | 748 | ||||||
Cash paid for interest |
1,591 | 1,434 | 1,476 | |||||||||
Net noncash transfers to foreclosed property |
156 | 204 | 199 | |||||||||
Acquisitions |
||||||||||||
Assets (sold) acquired |
$ | | $ | | $ | 1,376 | ||||||
Liabilities sold (assumed) |
| | (4,797 | ) | ||||||||
|
|
|||||||||||
Net |
$ | | $ | | $ | (3,421 | ) |
See | Notes to Consolidated Financial Statements. |
80
Notes to Consolidated Financial Statements
NOTE 1 Significant Accounting Policies |
81
82
83
84
85
86
87
88
NOTE 4 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 at December 31 were as follows:
2016 | 2015 | |||||||||||||||||||||||||||||||||||||||
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 |
$ | 5,246 | $ | 12 | $ | | $ | (132 | ) | $ | 5,126 | $ | 2,925 | $ | 14 | $ | | $ | (20 | ) | $ | 2,919 | ||||||||||||||||||
Mortgage-backed securities |
||||||||||||||||||||||||||||||||||||||||
Residential |
||||||||||||||||||||||||||||||||||||||||
Agency |
37,706 | 85 | | (529 | ) | 37,262 | 40,619 | 175 | | (273 | ) | 40,521 | ||||||||||||||||||||||||||||
Non-agency non-prime(d) |
1 | | | | 1 | 1 | | | | 1 | ||||||||||||||||||||||||||||||
Asset-backed securities |
||||||||||||||||||||||||||||||||||||||||
Collateralized debt obligations/Collateralized loan obligations |
| 5 | | | 5 | | 6 | | | 6 | ||||||||||||||||||||||||||||||
Other |
8 | 3 | | | 11 | 10 | 3 | | | 13 | ||||||||||||||||||||||||||||||
Obligations of state and political subdivisions |
6 | 1 | | | 7 | 8 | 1 | | (1 | ) | 8 | |||||||||||||||||||||||||||||
Obligations of foreign governments |
9 | | | | 9 | 9 | | | | 9 | ||||||||||||||||||||||||||||||
Other debt securities |
15 | | | (1 | ) | 14 | 18 | | | (2 | ) | 16 | ||||||||||||||||||||||||||||
Total held-to-maturity |
$ | 42,991 | $ | 106 | $ | | $ | (662 | ) | $ | 42,435 | $ | 43,590 | $ | 199 | $ | | $ | (296 | ) | $ | 43,493 | ||||||||||||||||||
Available-for-sale(b) |
||||||||||||||||||||||||||||||||||||||||
U.S. Treasury and agencies |
$ | 17,314 | $ | 11 | $ | | $ | (198 | ) | $ | 17,127 | $ | 4,611 | $ | 12 | $ | | $ | (27 | ) | $ | 4,596 | ||||||||||||||||||
Mortgage-backed securities |
||||||||||||||||||||||||||||||||||||||||
Residential |
||||||||||||||||||||||||||||||||||||||||
Agency |
43,558 | 225 | | (645 | ) | 43,138 | 50,056 | 384 | | (364 | ) | 50,076 | ||||||||||||||||||||||||||||
Non-agency |
||||||||||||||||||||||||||||||||||||||||
Prime(c) |
240 | 6 | (3 | ) | (1 | ) | 242 | 316 | 6 | (3 | ) | (1 | ) | 318 | ||||||||||||||||||||||||||
Non-prime(d) |
178 | 20 | (3 | ) | | 195 | 221 | 20 | (1 | ) | | 240 | ||||||||||||||||||||||||||||
Commercial agency |
15 | | | | 15 | 52 | | | | 52 | ||||||||||||||||||||||||||||||
Asset-backed securities |
||||||||||||||||||||||||||||||||||||||||
Collateralized debt obligations/Collateralized loan obligations |
| | | | | 16 | 3 | | | 19 | ||||||||||||||||||||||||||||||
Other |
475 | 8 | | | 483 | 532 | 9 | | | 541 | ||||||||||||||||||||||||||||||
Obligations of state and political subdivisions |
5,167 | 55 | | (183 | ) | 5,039 | 5,149 | 169 | | (2 | ) | 5,316 | ||||||||||||||||||||||||||||
Corporate debt securities |
11 | | | (2 | ) | 9 | 677 | 3 | | (70 | ) | 610 | ||||||||||||||||||||||||||||
Perpetual preferred securities |
| | | | | 153 | 20 | | (12 | ) | 161 | |||||||||||||||||||||||||||||
Other investments |
27 | 9 | | | 36 | 34 | 34 | | | 68 | ||||||||||||||||||||||||||||||
Total available-for-sale |
$ | 66,985 | $ | 334 | $ | (6 | ) | $ | (1,029 | ) | $ | 66,284 | $ | 61,817 | $ | 660 | $ | (4 | ) | $ | (476 | ) | $ | 61,997 |
(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. |
89
The following table provides information about the amount of interest income from taxable and non-taxable investment securities:
Year Ended December 31 (Dollars in Millions) | 2016 | 2015 | 2014 | |||||||||
Taxable |
$ | 1,878 | $ | 1,778 | $ | 1,634 | ||||||
Non-taxable |
200 | 223 | 232 | |||||||||
Total interest income from investment securities |
$ | 2,078 | $ | 2,001 | $ | 1,866 |
The following table provides information about the amount of gross gains and losses realized through the sales of available-for-sale investment securities:
Year Ended December 31 (Dollars in Millions) | 2016 | 2015 | 2014 | |||||||||
Realized gains |
$ | 93 | $ | 7 | $ | 11 | ||||||
Realized losses |
(66 | ) | (6 | ) | | |||||||
Net realized gains (losses) |
$ | 27 | $ | 1 | $ | 11 | ||||||
Income tax (benefit) on net realized gains (losses) |
$ | 10 | $ | | $ | 4 |
Changes in the credit losses on debt securities are summarized as follows:
Year Ended December 31 (Dollars in Millions) | 2016 | 2015 | 2014 | |||||||||
Balance at beginning of period |
$ | 84 | $ | 101 | $ | 116 | ||||||
Additions to Credit Losses Due to Other-than-temporary Impairments |
||||||||||||
Decreases in expected cash flows on securities for which other-than-temporary impairment was previously recognized |
3 | 1 | 3 | |||||||||
Total other-than-temporary impairment on debt securities |
3 | 1 | 3 | |||||||||
Other Changes in Credit Losses |
||||||||||||
Increases in expected cash flows |
(2 | ) | (3 | ) | (5 | ) | ||||||
Realized losses(a) |
(10 | ) | (15 | ) | (13 | ) | ||||||
Balance at end of period |
$ | 75 | $ | 84 | $ | 101 |
(a) | Primarily represents principal losses allocated to mortgage and asset-backed securities in the Companys portfolio under the terms of the securitization transaction documents. |
90
At December 31, 2016, certain investment securities had a fair value below amortized cost. The following table shows the gross unrealized losses and fair value of the Companys investment securities with unrealized losses, aggregated by investment category and length of time the individual investment securities have been in continuous unrealized loss positions, at December 31, 2016:
Less Than 12 Months | 12 Months or Greater | Total | ||||||||||||||||||||||
(Dollars in Millions) | Fair Value | Unrealized Losses |
Fair Value | Unrealized Losses |
Fair Value | Unrealized Losses |
||||||||||||||||||
Held-to-maturity |
||||||||||||||||||||||||
U.S. Treasury and agencies |
$ | 3,662 | $ | (132 | ) | $ | | $ | | $ | 3,662 | $ | (132 | ) | ||||||||||
Residential agency mortgage-backed securities |
26,937 | (462 | ) | 2,132 | (67 | ) | 29,069 | (529 | ) | |||||||||||||||
Other asset-backed securities |
| | 5 | | 5 | | ||||||||||||||||||
Other debt securities |
15 | (1 | ) | | | 15 | (1 | ) | ||||||||||||||||
Total held-to-maturity |
$ | 30,614 | $ | (595 | ) | $ | 2,137 | $ | (67 | ) | $ | 32,751 | $ | (662 | ) | |||||||||
Available-for-sale |
||||||||||||||||||||||||
U.S. Treasury and agencies |
$ | 14,490 | $ | (198 | ) | $ | | $ | | $ | 14,490 | $ | (198 | ) | ||||||||||
Residential mortgage-backed securities |
||||||||||||||||||||||||
Agency |
30,601 | (552 | ) | 3,149 | (93 | ) | 33,750 | (645 | ) | |||||||||||||||
Non-agency(a) |
||||||||||||||||||||||||
Prime(b) |
11 | | 93 | (4 | ) | 104 | (4 | ) | ||||||||||||||||
Non-prime(c) |
18 | (1 | ) | 12 | (2 | ) | 30 | (3 | ) | |||||||||||||||
Commercial agency |
10 | | | | 10 | | ||||||||||||||||||
Other asset-backed securities |
| | 2 | | 2 | | ||||||||||||||||||
Obligations of state and political subdivisions |
2,272 | (183 | ) | 3 | | 2,275 | (183 | ) | ||||||||||||||||
Corporate debt securities |
| | 9 | (2 | ) | 9 | (2 | ) | ||||||||||||||||
Other investments |
1 | | | | 1 | | ||||||||||||||||||
Total available-for-sale |
$ | 47,403 | $ | (934 | ) | $ | 3,268 | $ | (101 | ) | $ | 50,671 | $ | (1,035 | ) |
(a) | The Company had $7 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 economic conditions worsen. Additionally, 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. |
91
NOTE 5 Loans and Allowance for Credit Losses |
The composition of the loan portfolio at December 31, disaggregated by class and underlying specific portfolio type, was as follows:
(Dollars in Millions) | 2016 | 2015 | ||||||
Commercial |
||||||||
Commercial |
$ | 87,928 | $ | 83,116 | ||||
Lease financing |
5,458 | 5,286 | ||||||
|
|
|||||||
Total commercial |
93,386 | 88,402 | ||||||
Commercial Real Estate |
||||||||
Commercial mortgages |
31,592 | 31,773 | ||||||
Construction and development |
11,506 | 10,364 | ||||||
|
|
|||||||
Total commercial real estate |
43,098 | 42,137 | ||||||
Residential Mortgages |
||||||||
Residential mortgages |
43,632 | 40,425 | ||||||
Home equity loans, first liens |
13,642 | 13,071 | ||||||
|
|
|||||||
Total residential mortgages |
57,274 | 53,496 | ||||||
Credit Card |
21,749 | 21,012 | ||||||
Other Retail |
||||||||
Retail leasing |
6,316 | 5,232 | ||||||
Home equity and second mortgages |
16,369 | 16,384 | ||||||
Revolving credit |
3,282 | 3,354 | ||||||
Installment |
8,087 | 7,030 | ||||||
Automobile |
17,571 | 16,587 | ||||||
Student |
2,239 | 2,619 | ||||||
|
|
|||||||
Total other retail |
53,864 | 51,206 | ||||||
|
|
|||||||
Total loans, excluding covered loans |
269,371 | 256,253 | ||||||
Covered Loans |
3,836 | 4,596 | ||||||
|
|
|||||||
Total loans |
$ | 273,207 | $ | 260,849 |
92
Changes in the accretable balance for purchased impaired loans for the years ended December 31, were as follows:
(Dollars in Millions) | 2016 | 2015 | 2014 | |||||||||
Balance at beginning of period |
$ | 957 | $ | 1,309 | $ | 1,655 | ||||||
Accretion |
(392 | ) | (382 | ) | (441 | ) | ||||||
Disposals |
(110 | ) | (132 | ) | (131 | ) | ||||||
Reclassifications from nonaccretable difference (a) |
244 | 163 | 229 | |||||||||
Other |
(1 | ) | (1 | ) | (3 | ) | ||||||
|
|
|||||||||||
Balance at end of period |
$ | 698 | $ | 957 | $ | 1,309 |
(a) | Primarily relates to changes in expected credit performance. |
Activity in the allowance for credit losses by portfolio class was as follows:
(Dollars in Millions) | Commercial | Commercial Real Estate |
Residential Mortgages |
Credit Card |
Other Retail |
Total Loans, Excluding Covered Loans |
Covered Loans |
Total Loans |
||||||||||||||||||||||||
Balance at December 31, 2015 |
$ | 1,287 | $ | 724 | $ | 631 | $ | 883 | $ | 743 | $ | 4,268 | $ | 38 | $ | 4,306 | ||||||||||||||||
Add |
||||||||||||||||||||||||||||||||
Provision for credit losses |
488 | 75 | (61 | ) | 728 | 95 | 1,325 | (1 | ) | 1,324 | ||||||||||||||||||||||
Deduct |
||||||||||||||||||||||||||||||||
Loans charged off |
417 | 22 | 85 | 759 | 332 | 1,615 | | 1,615 | ||||||||||||||||||||||||
Less recoveries of loans charged off |
(92 | ) | (35 | ) | (25 | ) | (83 | ) | (111 | ) | (346 | ) | | (346 | ) | |||||||||||||||||
|
|
|||||||||||||||||||||||||||||||
Net loans charged off |
325 | (13 | ) | 60 | 676 | 221 | 1,269 | | 1,269 | |||||||||||||||||||||||
Other changes(a) |
| | | (1 | ) | | (1 | ) | (3 | ) | (4 | ) | ||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||
Balance at December 31, 2016 |
$ | 1,450 | $ | 812 | $ | 510 | $ | 934 | $ | 617 | $ | 4,323 | $ | 34 | $ | 4,357 | ||||||||||||||||
|
|
|||||||||||||||||||||||||||||||
Balance at December 31, 2014 |
$ | 1,146 | $ | 726 | $ | 787 | $ | 880 | $ | 771 | $ | 4,310 | $ | 65 | $ | 4,375 | ||||||||||||||||
Add |
||||||||||||||||||||||||||||||||
Provision for credit losses |
361 | (30 | ) | (47 | ) | 654 | 193 | 1,131 | 1 | 1,132 | ||||||||||||||||||||||
Deduct |
||||||||||||||||||||||||||||||||
Loans charged off |
314 | 22 | 135 | 726 | 319 | 1,516 | | 1,516 | ||||||||||||||||||||||||
Less recoveries of loans charged off |
(95 | ) | (50 | ) | (26 | ) | (75 | ) | (98 | ) | (344 | ) | | (344 | ) | |||||||||||||||||
|
|
|||||||||||||||||||||||||||||||
Net loans charged off |
219 | (28 | ) | 109 | 651 | 221 | 1,172 | | 1,172 | |||||||||||||||||||||||
Other changes(a) |
(1 | ) | | | | | (1 | ) | (28 | ) | (29 | ) | ||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||
Balance at December 31, 2015 |
$ | 1,287 | $ | 724 | $ | 631 | $ | 883 | $ | 743 | $ | 4,268 | $ | 38 | $ | 4,306 | ||||||||||||||||
|
|
|||||||||||||||||||||||||||||||
Balance at December 31, 2013 |
$ | 1,075 | $ | 776 | $ | 875 | $ | 884 | $ | 781 | $ | 4,391 | $ | 146 | $ | 4,537 | ||||||||||||||||
Add |
||||||||||||||||||||||||||||||||
Provision for credit losses |
266 | (63 | ) | 107 | 657 | 278 | 1,245 | (16 | ) | 1,229 | ||||||||||||||||||||||
Deduct |
||||||||||||||||||||||||||||||||
Loans charged off |
305 | 36 | 216 | 725 | 384 | 1,666 | 13 | 1,679 | ||||||||||||||||||||||||
Less recoveries of loans charged off |
(110 | ) | (49 | ) | (21 | ) | (67 | ) | (96 | ) | (343 | ) | (2 | ) | (345 | ) | ||||||||||||||||
|
|
|||||||||||||||||||||||||||||||
Net loans charged off |
195 | (13 | ) | 195 | 658 | 288 | 1,323 | 11 | 1,334 | |||||||||||||||||||||||
Other changes(a) |
| | | (3 | ) | | (3 | ) | (54 | ) | (57 | ) | ||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||
Balance at December 31, 2014 |
$ | 1,146 | $ | 726 | $ | 787 | $ | 880 | $ | 771 | $ | 4,310 | $ | 65 | $ | 4,375 |
(a) | Includes net changes in credit losses to be reimbursed by the FDIC and reductions in the allowance for covered loans where the reversal of a previously recorded allowance was offset by an associated decrease in the indemnification asset, and the impact of any loan sales. |
93
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 December 31, 2016 Related to |
||||||||||||||||||||||||||||||||
Loans individually evaluated for impairment(a) |
$ | 50 | $ | 4 | $ | | $ | | $ | | $ | 54 | $ | | $ | 54 | ||||||||||||||||
TDRs collectively evaluated for impairment |
12 | 4 | 180 | 65 | 20 | 281 | 1 | 282 | ||||||||||||||||||||||||
Other loans collectively evaluated for impairment |
1,388 | 798 | 330 | 869 | 597 | 3,982 | | 3,982 | ||||||||||||||||||||||||
Loans acquired with deteriorated credit quality |
| 6 | | | | 6 | 33 | 39 | ||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||
Total allowance for credit losses |
$ | 1,450 | $ | 812 | $ | 510 | $ | 934 | $ | 617 | $ | 4,323 | $ | 34 | $ | 4,357 | ||||||||||||||||
|
|
|||||||||||||||||||||||||||||||
Allowance Balance at December 31, 2015 Related to |
||||||||||||||||||||||||||||||||
Loans individually evaluated for impairment(a) |
$ | 11 | $ | 2 | $ | | $ | | $ | | $ | 13 | $ | | $ | 13 | ||||||||||||||||
TDRs collectively evaluated for impairment |
10 | 7 | 236 | 57 | 33 | 343 | 2 | 345 | ||||||||||||||||||||||||
Other loans collectively evaluated for impairment |
1,266 | 703 | 395 | 826 | 710 | 3,900 | | 3,900 | ||||||||||||||||||||||||
Loans acquired with deteriorated credit quality |
| 12 | | | | 12 | 36 | 48 | ||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||
Total allowance for credit losses |
$ | 1,287 | $ | 724 | $ | 631 | $ | 883 | $ | 743 | $ | 4,268 | $ | 38 | $ | 4,306 |
(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 |
||||||||||||||||||||||||
December 31, 2016 |
||||||||||||||||||||||||||||||||
Loans individually evaluated for impairment(a) |
$ | 623 | $ | 70 | $ | | $ | | $ | | $ | 693 | $ | | $ | 693 | ||||||||||||||||
TDRs collectively evaluated for impairment |
145 | 146 | 3,678 | 222 | 173 | 4,364 | 35 | 4,399 | ||||||||||||||||||||||||
Other loans collectively evaluated for impairment |
92,611 | 42,751 | 53,595 | 21,527 | 53,691 | 264,175 | 1,553 | 265,728 | ||||||||||||||||||||||||
Loans acquired with deteriorated credit quality |
7 | 131 | 1 | | | 139 | 2,248 | 2,387 | ||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||
Total loans |
$ | 93,386 | $ | 43,098 | $ | 57,274 | $ | 21,749 | $ | 53,864 | $ | 269,371 | $ | 3,836 | $ | 273,207 | ||||||||||||||||
|
|
|||||||||||||||||||||||||||||||
December 31, 2015 |
||||||||||||||||||||||||||||||||
Loans individually evaluated for impairment(a) |
$ | 336 | $ | 41 | $ | 13 | $ | | $ | | $ | 390 | $ | | $ | 390 | ||||||||||||||||
TDRs collectively evaluated for impairment |
138 | 235 | 4,241 | 210 | 211 | 5,035 | 35 | 5,070 | ||||||||||||||||||||||||
Other loans collectively evaluated for impairment |
87,927 | 41,566 | 49,241 | 20,802 | 50,995 | 250,531 | 2,059 | 252,590 | ||||||||||||||||||||||||
Loans acquired with deteriorated credit quality |
1 | 295 | 1 | | | 297 | 2,502 | 2,799 | ||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||
Total loans |
$ | 88,402 | $ | 42,137 | $ | 53,496 | $ | 21,012 | $ | 51,206 | $ | 256,253 | $ | 4,596 | $ | 260,849 |
(a) | Represents loans greater than $5 million classified as nonperforming or TDRs. |
(b) | Includes expected reimbursements from the FDIC under loss sharing agreements. |
94
The following table provides a summary of loans by portfolio class, including the delinquency status of those that continue to accrue interest, and those that are nonperforming:
Accruing | ||||||||||||||||||||
(Dollars in Millions) | Current | 30-89 Days Past Due |
90 Days or More Past Due |
Nonperforming | Total | |||||||||||||||
December 31, 2016 |
||||||||||||||||||||
Commercial |
$ | 92,588 | $ | 263 | $ | 52 | $ | 483 | $ | 93,386 | ||||||||||
Commercial real estate |
42,922 | 44 | 8 | 124 | 43,098 | |||||||||||||||
Residential mortgages(a) |
56,372 | 151 | 156 | 595 | 57,274 | |||||||||||||||
Credit card |
21,209 | 284 | 253 | 3 | 21,749 | |||||||||||||||
Other retail |
53,340 | 284 | 83 | 157 | 53,864 | |||||||||||||||
|
|
|||||||||||||||||||
Total loans, excluding covered loans |
266,431 | 1,026 | 552 | 1,362 | 269,371 | |||||||||||||||
Covered loans |
3,563 | 55 | 212 | 6 | 3,836 | |||||||||||||||
|
|
|||||||||||||||||||
Total loans |
$ | 269,994 | $ | 1,081 | $ | 764 | $ | 1,368 | $ | 273,207 | ||||||||||
|
|
|||||||||||||||||||
December 31, 2015 |
||||||||||||||||||||
Commercial |
$ | 87,863 | $ | 317 | $ | 48 | $ | 174 | $ | 88,402 | ||||||||||
Commercial real estate |
41,907 | 89 | 14 | 127 | 42,137 | |||||||||||||||
Residential mortgages(a) |
52,438 | 170 | 176 | 712 | 53,496 | |||||||||||||||
Credit card |
20,532 | 243 | 228 | 9 | 21,012 | |||||||||||||||
Other retail |
50,745 | 224 | 75 | 162 | 51,206 | |||||||||||||||
|
|
|||||||||||||||||||
Total loans, excluding covered loans |
253,485 | 1,043 | 541 | 1,184 | 256,253 | |||||||||||||||
Covered loans |
4,236 | 62 | 290 | 8 | 4,596 | |||||||||||||||
|
|
|||||||||||||||||||
Total loans |
$ | 257,721 | $ | 1,105 | $ | 831 | $ | 1,192 | $ | 260,849 |
(a) | At December 31, 2016, $273 million of loans 3089 days past due and $2.5 billion of loans 90 days or more past due purchased from Government National Mortgage Association (GNMA) mortgage pools whose repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs, were classified as current, compared with $320 million and $2.9 billion at December 31, 2015, respectively. |
95
The following table provides a summary of loans by portfolio class and the Companys internal credit quality rating:
Criticized | ||||||||||||||||||||
(Dollars in Millions) | Pass | Special Mention |
Classified(a) | Total Criticized |
Total | |||||||||||||||
December 31, 2016 |
||||||||||||||||||||
Commercial(b) |
$ | 89,739 | $ | 1,721 | $ | 1,926 | $ | 3,647 | $ | 93,386 | ||||||||||
Commercial real estate |
41,634 | 663 | 801 | 1,464 | 43,098 | |||||||||||||||
Residential mortgages(c) |
56,457 | 10 | 807 | 817 | 57,274 | |||||||||||||||
Credit card |
21,493 | | 256 | 256 | 21,749 | |||||||||||||||
Other retail |
53,576 | 6 | 282 | 288 | 53,864 | |||||||||||||||
|
|
|||||||||||||||||||
Total loans, excluding covered loans |
262,899 | 2,400 | 4,072 | 6,472 | 269,371 | |||||||||||||||
Covered loans |
3,766 | | 70 | 70 | 3,836 | |||||||||||||||
|
|
|||||||||||||||||||
Total loans |
$ | 266,665 | $ | 2,400 | $ | 4,142 | $ | 6,542 | $ | 273,207 | ||||||||||
|
|
|||||||||||||||||||
Total outstanding commitments |
$ | 562,704 | $ | 4,920 | $ | 5,629 | $ | 10,549 | $ | 573,253 | ||||||||||
|
|
|||||||||||||||||||
December 31, 2015 |
||||||||||||||||||||
Commercial(b) |
$ | 85,206 | $ | 1,629 | $ | 1,567 | $ | 3,196 | $ | 88,402 | ||||||||||
Commercial real estate |
41,079 | 365 | 693 | 1,058 | 42,137 | |||||||||||||||
Residential mortgages(c) |
52,548 | 2 | 946 | 948 | 53,496 | |||||||||||||||
Credit card |
20,775 | | 237 | 237 | 21,012 | |||||||||||||||
Other retail |
50,899 | 6 | 301 | 307 | 51,206 | |||||||||||||||
|
|
|||||||||||||||||||
Total loans, excluding covered loans |
250,507 | 2,002 | 3,744 | 5,746 | 256,253 | |||||||||||||||
Covered loans |
4,507 | | 89 | 89 | 4,596 | |||||||||||||||
|
|
|||||||||||||||||||
Total loans |
$ | 255,014 | $ | 2,002 | $ | 3,833 | $ | 5,835 | $ | 260,849 | ||||||||||
|
|
|||||||||||||||||||
Total outstanding commitments |
$ | 539,614 | $ | 3,945 | $ | 4,845 | $ | 8,790 | $ | 548,404 |
(a) | Classified rating on consumer loans primarily based on delinquency status. |
(b) | At December 31, 2016, $1.2 billion of energy loans ($2.8 billion of total outstanding commitments) had a special mention or classified rating, compared with $1.1 billion of energy loans ($1.9 billion of total outstanding commitments) at December 31, 2015. |
(c) | At December 31, 2016, $2.5 billion of GNMA loans 90 days or more past due and $1.6 billion of restructured GNMA loans whose repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs were classified with a pass rating, compared with $2.9 billion and $1.9 billion at December 31, 2015, respectively. |
For all loan classes, a loan is considered to be impaired when, based on current events or information, it is probable the Company will be unable to collect all amounts due per the contractual terms of the loan agreement. A summary of impaired loans, which include all nonaccrual and TDR loans, by portfolio class was as follows:
(Dollars in Millions) | Period-end Recorded Investment(a) |
Unpaid Principal Balance |
Valuation Allowance |
Commitments to Lend Additional Funds |
||||||||||||
December 31, 2016 |
||||||||||||||||
Commercial |
$ | 849 | $ | 1,364 | $ | 68 | $ | 284 | ||||||||
Commercial real estate |
293 | 697 | 10 | | ||||||||||||
Residential mortgages |
2,274 | 2,847 | 153 | | ||||||||||||
Credit card |
222 | 222 | 64 | | ||||||||||||
Other retail |
281 | 456 | 22 | 4 | ||||||||||||
|
|
|||||||||||||||
Total loans, excluding GNMA and covered loans |
3,919 | 5,586 | 317 | 288 | ||||||||||||
Loans purchased from GNMA mortgage pools |
1,574 | 1,574 | 28 | | ||||||||||||
Covered loans |
36 | 42 | 1 | 1 | ||||||||||||
|
|
|||||||||||||||
Total |
$ | 5,529 | $ | 7,202 | $ | 346 | $ | 289 | ||||||||
|
|
|||||||||||||||
December 31, 2015 |
||||||||||||||||
Commercial |
$ | 520 | $ | 1,110 | $ | 25 | $ | 154 | ||||||||
Commercial real estate |
336 | 847 | 11 | 1 | ||||||||||||
Residential mortgages |
2,575 | 3,248 | 199 | | ||||||||||||
Credit card |
210 | 210 | 57 | | ||||||||||||
Other retail |
309 | 503 | 35 | 4 | ||||||||||||
|
|
|||||||||||||||
Total loans, excluding GNMA and covered loans |
3,950 | 5,918 | 327 | 159 | ||||||||||||
Loans purchased from GNMA mortgage pools |
1,913 | 1,913 | 40 | | ||||||||||||
Covered loans |
39 | 48 | 2 | 1 | ||||||||||||
|
|
|||||||||||||||
Total |
$ | 5,902 | $ | 7,879 | $ | 369 | $ | 160 |
(a) | Substantially all loans classified as impaired at December 31, 2016 and 2015, had an associated allowance for credit losses. The total amount of interest income recognized during 2016 on loans classified as impaired at December 31, 2016, excluding those acquired with deteriorated credit quality, was $237 million, compared to what would have been recognized at the original contractual terms of the loans of $308 million. |
96
Additional information on impaired loans for the years ended December 31 follows:
(Dollars in Millions) | Average Recorded Investment |
Interest Income Recognized |
||||||
2016 |
||||||||
Commercial |
$ | 799 | $ | 9 | ||||
Commercial real estate |
324 | 15 | ||||||
Residential mortgages |
2,422 | 124 | ||||||
Credit card |
214 | 4 | ||||||
Other retail |
293 | 13 | ||||||
|
|
|||||||
Total loans, excluding GNMA and covered loans |
4,052 | 165 | ||||||
Loans purchased from GNMA mortgage pools |
1,620 | 71 | ||||||
Covered loans |
38 | 1 | ||||||
|
|
|||||||
Total |
$ | 5,710 | $ | 237 | ||||
|
|
|||||||
2015 |
||||||||
Commercial |
$ | 383 | $ | 13 | ||||
Commercial real estate |
433 | 16 | ||||||
Residential mortgages |
2,666 | 131 | ||||||
Credit card |
221 | 4 | ||||||
Other retail |
336 | 14 | ||||||
|
|
|||||||
Total loans, excluding GNMA and covered loans |
4,039 | 178 | ||||||
Loans purchased from GNMA mortgage pools |
2,079 | 95 | ||||||
Covered loans |
42 | 1 | ||||||
|
|
|||||||
Total |
$ | 6,160 | $ | 274 | ||||
|
|
|||||||
2014 |
||||||||
Commercial |
$ | 414 | $ | 9 | ||||
Commercial real estate |
592 | 26 | ||||||
Residential mortgages |
2,742 | 140 | ||||||
Credit card |
273 | 9 | ||||||
Other retail |
377 | 17 | ||||||
|
|
|||||||
Total loans, excluding GNMA and covered loans |
4,398 | 201 | ||||||
Loans purchased from GNMA mortgage pools |
2,609 | 124 | ||||||
Covered loans |
334 | 15 | ||||||
|
|
|||||||
Total |
$ | 7,341 | $ | 340 |
97
Troubled Debt Restructurings In certain circumstances, the Company may modify the terms of a loan to maximize the collection of amounts due when a borrower is experiencing financial difficulties or is expected to experience difficulties in the near-term. The following table provides a summary of loans modified as TDRs for the years ended December 31, by portfolio class:
(Dollars in Millions) | Number of Loans |
Pre-Modification Balance |
Post-Modification Balance |
|||||||||
2016 |
||||||||||||
Commercial |
2,352 | $ | 844 | $ | 699 | |||||||
Commercial real estate |
102 | 259 | 256 | |||||||||
Residential mortgages |
1,576 | 168 | 178 | |||||||||
Credit card |
31,394 | 151 | 153 | |||||||||
Other retail |
2,235 | 41 | 40 | |||||||||
|
|
|||||||||||
Total loans, excluding GNMA and covered loans |
37,659 | 1,463 | 1,326 | |||||||||
Loans purchased from GNMA mortgage pools |
11,260 | 1,274 | 1,267 | |||||||||
Covered loans |
39 | 6 | 7 | |||||||||
|
|
|||||||||||
Total loans |
48,958 | $ | 2,743 | $ | 2,600 | |||||||
|
|
|||||||||||
2015 |
||||||||||||
Commercial |
1,607 | $ | 385 | $ | 396 | |||||||
Commercial real estate |
108 | 78 | 76 | |||||||||
Residential mortgages |
2,080 | 260 | 258 | |||||||||
Credit card |
26,772 | 133 | 134 | |||||||||
Other retail |
2,530 | 54 | 54 | |||||||||
|
|
|||||||||||
Total loans, excluding GNMA and covered loans |
33,097 | 910 | 918 | |||||||||
Loans purchased from GNMA mortgage pools |
8,199 | 864 | 862 | |||||||||
Covered loans |
16 | 5 | 5 | |||||||||
|
|
|||||||||||
Total loans |
41,312 | $ | 1,779 | $ | 1,785 | |||||||
|
|
|||||||||||
2014 |
||||||||||||
Commercial |
2,027 | $ | 238 | $ | 203 | |||||||
Commercial real estate |
78 | 80 | 71 | |||||||||
Residential mortgages |
2,089 | 271 | 274 | |||||||||
Credit card |
26,511 | 144 | 145 | |||||||||
Other retail |
2,833 | 61 | 61 | |||||||||
|
|
|||||||||||
Total loans, excluding GNMA and covered loans |
33,538 | 794 | 754 | |||||||||
Loans purchased from GNMA mortgage pools |
8,961 | 1,000 | 1,013 | |||||||||
Covered loans |
43 | 15 | 14 | |||||||||
|
|
|||||||||||
Total loans |
42,542 | $ | 1,809 | $ | 1,781 |
98
The following table provides a summary of TDR loans that defaulted (fully or partially charged-off or became 90 days or more past due) for the years ended December 31, that were modified as TDRs within 12 months previous to default:
(Dollars in Millions) | Number of Loans |
Amount Defaulted |
||||||
2016 |
||||||||
Commercial |
531 | $ | 24 | |||||
Commercial real estate |
27 | 12 | ||||||
Residential mortgages |
132 | 17 | ||||||
Credit card |
6,827 | 30 | ||||||
Other retail |
434 | 9 | ||||||
|
|
|||||||
Total loans, excluding GNMA and covered loans |
7,951 | 92 | ||||||
Loans purchased from GNMA mortgage pools |
202 | 25 | ||||||
Covered loans |
4 | 1 | ||||||
|
|
|||||||
Total loans |
8,157 | $ | 118 | |||||
|
|
|||||||
2015 |
||||||||
Commercial |
494 | $ | 21 | |||||
Commercial real estate |
18 | 8 | ||||||
Residential mortgages |
273 | 36 | ||||||
Credit card |
6,286 | 29 | ||||||
Other retail |
636 | 12 | ||||||
|
|
|||||||
Total loans, excluding GNMA and covered loans |
7,707 | 106 | ||||||
Loans purchased from GNMA mortgage pools |
598 | 75 | ||||||
Covered loans |
5 | 1 | ||||||
|
|
|||||||
Total loans |
8,310 | $ | 182 | |||||
|
|
|||||||
2014 |
||||||||
Commercial |
629 | $ | 44 | |||||
Commercial real estate |
22 | 12 | ||||||
Residential mortgages |
611 | 86 | ||||||
Credit card |
6,335 | 33 | ||||||
Other retail |
845 | 24 | ||||||
|
|
|||||||
Total loans, excluding GNMA and covered loans |
8,442 | 199 | ||||||
Loans purchased from GNMA mortgage pools |
876 | 102 | ||||||
Covered loans |
14 | 5 | ||||||
|
|
|||||||
Total loans |
9,332 | $ | 306 |
Covered Assets 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 at December 31, consisted of purchased impaired loans, purchased nonimpaired loans and other assets as shown in the following table:
2016 | 2015 | |||||||||||||||||||||||||||||||
(Dollars in Millions) | Purchased Impaired Loans |
Purchased Nonimpaired Loans |
Other | Total | Purchased Impaired Loans |
Purchased Nonimpaired Loans |
Other | Total | ||||||||||||||||||||||||
Residential mortgage loans |
$ | 2,248 | $ | 506 | $ | | $ | 2,754 | $ | 2,502 | $ | 615 | $ | | $ | 3,117 | ||||||||||||||||
Other retail loans |
| 278 | | 278 | | 447 | | 447 | ||||||||||||||||||||||||
Losses reimbursable by the FDIC(a) |
| | 381 | 381 | | | 517 | 517 | ||||||||||||||||||||||||
Unamortized changes in FDIC asset(b) |
| | 423 | 423 | | | 515 | 515 | ||||||||||||||||||||||||
Covered loans |
2,248 | 784 | 804 | 3,836 | 2,502 | 1,062 | 1,032 | 4,596 | ||||||||||||||||||||||||
Foreclosed real estate |
| | 26 | 26 | | | 32 | 32 | ||||||||||||||||||||||||
Total covered assets |
$ | 2,248 | $ | 784 | $ | 830 | $ | 3,862 | $ | 2,502 | $ | 1,062 | $ | 1,064 | $ | 4,628 |
(a) | Relates to loss sharing agreements with remaining terms up to three years. |
(b) | Represents decreases in expected reimbursements by the FDIC as a result of decreases in expected losses on the covered loans. These amounts are amortized as a reduction in interest income on covered loans over the shorter of the expected life of the respective covered loans or the remaining contractual term of the indemnification agreements. |
99
NOTE 6 Leases |
The components of the net investment in sales-type and direct financing leases at December 31 were as follows:
(Dollars in Millions) | 2016 | 2015 | ||||||
Aggregate future minimum lease payments to be received |
$ | 11,257 | $ | 10,257 | ||||
Unguaranteed residual values accruing to the lessors benefit |
1,175 | 766 | ||||||
Unearned income |
(1,023 | ) | (887 | ) | ||||
Initial direct costs |
237 | 204 | ||||||
|
|
|||||||
Total net investment in sales-type and direct financing leases(a) |
$ | 11,646 | $ | 10,340 |
(a) | The accumulated allowance for uncollectible minimum lease payments was $83 million and $66 million at December 31, 2016 and 2015, respectively. |
The minimum future lease payments to be received from sales-type and direct financing leases were as follows at December 31, 2016:
(Dollars in Millions) | ||||
2017 |
$ | 3,836 | ||
2018 |
2,884 | |||
2019 |
2,641 | |||
2020 |
1,116 | |||
2021 |
375 | |||
Thereafter |
405 |
100
NOTE 7 Accounting for Transfers and Servicing of Financial Assets and Variable Interest | Entities |
101
NOTE 8 Premises and Equipment |
Premises and equipment at December 31 consisted of the following:
(Dollars in Millions) | 2016 | 2015 | ||||||
Land |
$ | 516 | $ | 522 | ||||
Buildings and improvements |
3,383 | 3,348 | ||||||
Furniture, fixtures and equipment |
2,798 | 2,721 | ||||||
Capitalized building and equipment leases |
125 | 113 | ||||||
Construction in progress |
29 | 19 | ||||||
|
|
|||||||
6,851 | 6,723 | |||||||
Less accumulated depreciation and amortization |
(4,408 | ) | (4,210 | ) | ||||
|
|
|||||||
Total |
$ | 2,443 | $ | 2,513 |
NOTE 9 Mortgage Servicing Rights |
102
Changes in fair value of capitalized MSRs for the years ended December 31, are summarized as follows:
(Dollars in Millions) | 2016 | 2015 | 2014 | |||||||||
Balance at beginning of period |
$ | 2,512 | $ | 2,338 | $ | 2,680 | ||||||
Rights purchased |
43 | 29 | 5 | |||||||||
Rights capitalized |
524 | 632 | 382 | |||||||||
Rights sold |
| | (141 | ) | ||||||||
Changes in fair value of MSRs |
||||||||||||
Due to fluctuations in market interest rates(a) |
(55 | ) | (58 | ) | (276 | ) | ||||||
Due to revised assumptions or models(b) |
19 | 10 | 86 | |||||||||
Other changes in fair value(c) |
(452 | ) | (439 | ) | (398 | ) | ||||||
|
|
|||||||||||
Balance at end of period |
$ | 2,591 | $ | 2,512 | $ | 2,338 |
(a) | Includes changes in MSR value associated with changes in market interest rates, including estimated prepayment rates and anticipated earnings on escrow deposits. |
(b) | Includes changes in MSR value not caused by changes in market interest rates, such as changes in cost to service, ancillary income, and option adjusted spread or discount rate, as well as the impact of any model changes. 2014 includes a $44 million revaluation gain related to excess servicing rights sold. |
(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 as of December 31 follows:
2016 | 2015 | |||||||||||||||||||||||||||||||||||||||||||||||
(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 |
$ | (476 | ) | $ | (209 | ) | $ | (98 | ) | $ | 85 | $ | 159 | $ | 270 | $ | (598 | ) | $ | (250 | ) | $ | (114 | ) | $ | 96 | $ | 176 | $ | 344 | ||||||||||||||||||
Derivative instrument hedges |
375 | 180 | 88 | (84 | ) | (165 | ) | (314 | ) | 475 | 226 | 107 | (98 | ) | (192 | ) | (377 | ) | ||||||||||||||||||||||||||||||
Net sensitivity |
$ | (101 | ) | $ | (29 | ) | $ | (10 | ) | $ | 1 | $ | (6 | ) | $ | (44 | ) | $ | (123 | ) | $ | (24 | ) | $ | (7 | ) | $ | (2 | ) | $ | (16 | ) | $ | (33 | ) |
A summary of the Companys MSRs and related characteristics by portfolio as of December 31 follows:
2016 | 2015 | |||||||||||||||||||||||||||||||
(Dollars in Millions) | HFA | Government | Conventional(c) | Total | HFA | Government | Conventional(c) | Total | ||||||||||||||||||||||||
Servicing portfolio(a) |
$ | 34,746 | $ | 37,530 | $ | 157,771 | $ | 230,047 | $ | 26,492 | $ | 40,350 | $ | 162,533 | $ | 229,375 | ||||||||||||||||
Fair value |
$ | 398 | $ | 422 | $ | 1,771 | $ | 2,591 | $ | 297 | $ | 443 | $ | 1,772 | $ | 2,512 | ||||||||||||||||
Value (bps)(b) |
115 | 112 | 112 | 113 | 112 | 110 | 109 | 110 | ||||||||||||||||||||||||
Weighted-average servicing fees (bps) |
36 | 34 | 27 | 30 | 36 | 34 | 27 | 29 | ||||||||||||||||||||||||
Multiple (value/servicing fees) |
3.19 | 3.29 | 4.15 | 3.77 | 3.11 | 3.24 | 4.04 | 3.79 | ||||||||||||||||||||||||
Weighted-average note rate |
4.37 | % | 3.95 | % | 4.02 | % | 4.06 | % | 4.46 | % | 4.08 | % | 4.09 | % | 4.13 | % | ||||||||||||||||
Weighted-average age (in years) |
2.9 | 3.8 | 3.8 | 3.7 | 3.1 | 3.6 | 3.4 | 3.4 | ||||||||||||||||||||||||
Weighted-average expected prepayment (constant prepayment rate) |
9.4 | % | 11.3 | % | 9.8 | % | 10.0 | % | 12.8 | % | 13.9 | % | 10.4 | % | 11.3 | % | ||||||||||||||||
Weighted-average expected life (in years) |
8.0 | 6.8 | 6.9 | 7.0 | 6.1 | 5.7 | 6.6 | 6.4 | ||||||||||||||||||||||||
Weighted-average option adjusted spread or discount rate(d) |
9.9 | % | 9.2 | % | 7.2 | % | 8.0 | % | 11.8 | % | 11.2 | % | 9.4 | % | 10.0 | % |
(a) | Represents principal balance of mortgages having corresponding MSR asset. |
(b) | Value is calculated as fair value divided by the servicing portfolio. |
(c) | Represents loans sold primarily to GSEs. |
(d) | Option adjusted spread is the incremental spread added to the risk-free rate to reflect optionality and other risk inherent in the MSRs. Prior to December 31, 2016 the Company valued MSRs using a static discount rate. |
103
NOTE 10 Intangible | Assets |
Intangible assets consisted of the following:
At December 31 (Dollars in Millions) |
Estimated Life(a) |
Amortization Method(b) |
Balance | |||||||||||
2016 | 2015 | |||||||||||||
Goodwill |
(c | ) | $ | 9,344 | $ | 9,361 | ||||||||
Merchant processing contracts |
7 years/8 years | SL/AC | 108 | 135 | ||||||||||
Core deposit benefits |
22 years/5 years | SL/AC | 161 | 194 | ||||||||||
Mortgage servicing rights |
(c | ) | 2,591 | 2,512 | ||||||||||
Trust relationships |
10 years/6 years | SL/AC | 59 | 75 | ||||||||||
Other identified intangibles |
8 years/4 years | SL/AC | 384 | 434 | ||||||||||
Total |
$ | 12,647 | $ | 12,711 |
(a) | Estimated life represents the amortization period for assets subject to the straight line method and the weighted average or life of the underlying cash flows amortization period for intangibles subject to accelerated methods. If more than one amortization method is used for a category, the estimated life for each method is calculated and reported separately. |
(b) Amortization methods: |
SL = straight line method | |
AC = accelerated methods generally based on cash flows |
(c) | Goodwill is evaluated for impairment, but not amortized. Mortgage servicing rights are recorded at fair value, and are not amortized. |
Aggregate amortization expense consisted of the following:
Year Ended December 31 (Dollars in Millions) | 2016 | 2015 | 2014 | |||||||||
Merchant processing contracts |
$ | 28 | $ | 35 | $ | 50 | ||||||
Core deposit benefits |
34 | 40 | 38 | |||||||||
Trust relationships |
16 | 21 | 27 | |||||||||
Other identified intangibles |
101 | 78 | 84 | |||||||||
|
|
|||||||||||
Total |
$ | 179 | $ | 174 | $ | 199 |
The estimated amortization expense for the next five years is as follows:
(Dollars in Millions) | ||||
2017 |
$ | 171 | ||
2018 |
138 | |||
2019 |
109 | |||
2020 |
86 | |||
2021 |
65 |
The following table reflects the changes in the carrying value of goodwill for the years ended December 31, 2016, 2015 and 2014:
(Dollars in Millions) | Wholesale Banking and Commercial Real Estate |
Consumer and Small Business Banking |
Wealth Management and Securities Services |
Payment Services |
Treasury and Corporate Support |
Consolidated Company |
||||||||||||||||||
Balance at December 31, 2013 |
$ | 1,605 | $ | 3,514 | $ | 1,565 | $ | 2,521 | $ | | $ | 9,205 | ||||||||||||
Goodwill acquired |
43 | 166 | 8 | | | 217 | ||||||||||||||||||
Foreign exchange translation and other |
| | (3 | ) | (30 | ) | | (33 | ) | |||||||||||||||
|
|
|||||||||||||||||||||||
Balance at December 31, 2014 |
$ | 1,648 | $ | 3,680 | $ | 1,570 | $ | 2,491 | $ | | $ | 9,389 | ||||||||||||
Foreign exchange translation and other |
(1 | ) | 1 | (3 | ) | (25 | ) | | (28 | ) | ||||||||||||||
|
|
|||||||||||||||||||||||
Balance at December 31, 2015 |
$ | 1,647 | $ | 3,681 | $ | 1,567 | $ | 2,466 | $ | | $ | 9,361 | ||||||||||||
Foreign exchange translation and other |
| | (1 | ) | (16 | ) | | (17 | ) | |||||||||||||||
|
|
|||||||||||||||||||||||
Balance at December 31, 2016 |
$ | 1,647 | $ | 3,681 | $ | 1,566 | $ | 2,450 | $ | | $ | 9,344 |
104
NOTE 11 Deposits |
The composition of deposits at December 31 was as follows:
(Dollars in Millions) | 2016 | 2015 | ||||||
Noninterest-bearing deposits |
$ | 86,097 | $ | 83,766 | ||||
Interest-bearing deposits |
||||||||
Interest checking |
66,298 | 59,169 | ||||||
Money market savings |
109,947 | 86,159 | ||||||
Savings accounts |
41,783 | 38,468 | ||||||
Time deposits |
30,465 | 32,838 | ||||||
|
|
|||||||
Total interest-bearing deposits |
248,493 | 216,634 | ||||||
|
|
|||||||
Total deposits |
$ | 334,590 | $ | 300,400 |
The maturities of time deposits outstanding at December 31, 2016 were as follows:
(Dollars in Millions) | ||||
2017 |
$ | 23,428 | ||
2018 |
3,019 | |||
2019 |
1,601 | |||
2020 |
1,267 | |||
2021 |
1,147 | |||
Thereafter |
3 | |||
|
|
|||
Total |
$ | 30,465 |
NOTE 12 Short-Term Borrowings (a) |
The following table is a summary of short-term borrowings for the last three years:
2016 | 2015 | 2014 | ||||||||||||||||||||||
(Dollars in Millions) | Amount | Rate | Amount | Rate | Amount | Rate | ||||||||||||||||||
At year-end |
||||||||||||||||||||||||
Federal funds purchased |
$ | 447 | .30 | % | $ | 647 | .23 | % | $ | 886 | .12 | % | ||||||||||||
Securities sold under agreements to repurchase |
801 | .12 | 1,092 | .02 | 948 | .05 | ||||||||||||||||||
Commercial paper |
10,010 | .30 | 22,022 | .21 | 22,197 | .12 | ||||||||||||||||||
Other short-term borrowings |
2,705 | 1.00 | 4,116 | .69 | 5,862 | .51 | ||||||||||||||||||
Total |
$ | 13,963 | .43 | % | $ | 27,877 | .27 | % | $ | 29,893 | .19 | % | ||||||||||||
Average for the year |
||||||||||||||||||||||||
Federal funds purchased(b) |
$ | 1,015 | 17.17 | % | $ | 1,169 | 15.05 | % | $ | 2,366 | 7.94 | % | ||||||||||||
Securities sold under agreements to repurchase |
891 | .18 | 973 | .10 | 798 | 1.07 | ||||||||||||||||||
Commercial paper |
14,827 | .26 | 21,892 | .12 | 21,227 | .12 | ||||||||||||||||||
Other short-term borrowings |
3,173 | 1.67 | 3,926 | 1.13 | 5,861 | .78 | ||||||||||||||||||
Total(b) |
$ | 19,906 | 1.34 | % | $ | 27,960 | .89 | % | $ | 30,252 | .88 | % | ||||||||||||
Maximum month-end balance |
||||||||||||||||||||||||
Federal funds purchased |
$ | 2,487 | $ | 1,868 | $ | 3,258 | ||||||||||||||||||
Securities sold under agreements to repurchase |
1,177 | 1,124 | 948 | |||||||||||||||||||||
Commercial paper |
21,441 | 23,101 | 22,322 | |||||||||||||||||||||
Other short-term borrowings |
6,771 | 7,656 | 7,417 |
(a) | Interest and rates are presented on a fully taxable-equivalent basis utilizing a tax rate of 35 percent. |
(b) | Average federal funds purchased and total short-term borrowings rates include amounts paid by the Company to certain corporate card customers for paying outstanding noninterest-bearing corporate card balances within certain timeframes per specific agreements. These activities reduce the Companys short-term funding needs, and if they did not occur, the Company would use other funding alternatives, including the use of federal funds purchased. The amount of this compensation expense paid by the Company and included in federal funds purchased and total short-term borrowings rates for 2016, 2015 and 2014 was $171 million, $175 million and $186 million, respectively. |
105
NOTE 13 Long-Term Debt |
Long-term debt (debt with original maturities of more than one year) at December 31 consisted of the following:
(Dollars in Millions) | Rate Type | Rate(a) | Maturity Date | 2016 | 2015 | |||||||||||||||
U.S. Bancorp (Parent Company) |
||||||||||||||||||||
Subordinated notes |
Fixed | 2.950 | % | 2022 | $ | 1,300 | $ | 1,300 | ||||||||||||
Fixed | 3.600 | % | 2024 | 1,000 | 1,000 | |||||||||||||||
Fixed | 7.500 | % | 2026 | 199 | 199 | |||||||||||||||
Fixed | 3.100 | % | 2026 | 1,000 | | |||||||||||||||
Medium-term notes |
Fixed | 1.650% - 4.125 | % | 2017 - 2026 | 8,800 | 7,500 | ||||||||||||||
Floating | 1.282% - 1.396 | % | 2018 - 2019 | 750 | 750 | |||||||||||||||
Junior subordinated debentures |
Fixed | 3.442 | % | 2016 | | 500 | ||||||||||||||
Other(b) |
(4 | ) | 204 | |||||||||||||||||
|
|
|||||||||||||||||||
Subtotal |
13,045 | 11,453 | ||||||||||||||||||
Subsidiaries |
||||||||||||||||||||
Federal Home Loan Bank advances |
Fixed | 1.250% - 8.250 | % | 2017 - 2026 | 10 | 11 | ||||||||||||||
Floating | .866% - 1.447 | % | 2017 - 2026 | 8,559 | 9,081 | |||||||||||||||
Bank notes |
Fixed | 1.350% - 2.800 | % | 2017 - 2025 | 6,800 | 5,850 | ||||||||||||||
Floating | .582% - 1.467 | % | 2017 - 2056 | 3,898 | 4,928 | |||||||||||||||
Other(c) |
1,011 | 755 | ||||||||||||||||||
|
|
|||||||||||||||||||
Subtotal |
20,278 | 20,625 | ||||||||||||||||||
|
|
|||||||||||||||||||
Total |
$ | 33,323 | $ | 32,078 |
(a) | Weighted-average interest rates of medium-term notes, Federal Home Loan Bank advances and bank notes were 2.48 percent, 1.17 percent and 1.57 percent, respectively. |
(b) | Includes debt issuance fees and unrealized gains and losses and deferred amounts relating to derivative instruments. |
(c) | Includes consolidated community development and tax-advantaged investment VIEs, capitalized lease obligations, debt issuance fees, and unrealized gains and losses and deferred amounts relating to derivative instruments. |
NOTE 14 Shareholders Equity |
The number of shares issued and outstanding and the carrying amount of each outstanding series of the Companys preferred stock was as follows:
2016 | 2015 | |||||||||||||||||||||||||||||||
At December 31 (Dollars in Millions) |
Shares Issued and Outstanding |
Liquidation Preference |
Discount | Carrying Amount |
Shares Issued and Outstanding |
Liquidation Preference |
Discount | Carrying Amount |
||||||||||||||||||||||||
Series A |
12,510 | $ | 1,251 | $ | 145 | $ | 1,106 | 12,510 | $ | 1,251 | $ | 145 | $ | 1,106 | ||||||||||||||||||
Series B |
40,000 | 1,000 | | 1,000 | 40,000 | 1,000 | | 1,000 | ||||||||||||||||||||||||
Series F |
44,000 | 1,100 | 12 | 1,088 | 44,000 | 1,100 | 12 | 1,088 | ||||||||||||||||||||||||
Series G |
43,400 | 1,085 | 10 | 1,075 | 43,400 | 1,085 | 10 | 1,075 | ||||||||||||||||||||||||
Series H |
20,000 | 500 | 13 | 487 | 20,000 | 500 | 13 | 487 | ||||||||||||||||||||||||
Series I |
30,000 | 750 | 5 | 745 | 30,000 | 750 | 5 | 745 | ||||||||||||||||||||||||
Total preferred stock(a) |
189,910 | $ | 5,686 | $ | 185 | $ | 5,501 | 189,910 | $ | 5,686 | $ | 185 | $ | 5,501 |
(a) | The par value of all shares issued and outstanding at December 31, 2016 and 2015, was $1.00 per share. |
106
107
Shareholders equity is affected by transactions and valuations of asset and liability positions that require adjustments to accumulated other comprehensive income (loss). The reconciliation of the transactions affecting accumulated other comprehensive income (loss) included in shareholders equity for the years ended December 31, is as follows:
(Dollars in Millions) | Unrealized Gains (Losses) on Securities Available-For- Sale |
Unrealized Gains (Losses) on Securities Transferred From Available-For-Sale to Held-To-Maturity |
Unrealized Gains (Losses) on Derivative Hedges |
Unrealized Gains (Losses) on Retirement Plans |
Foreign Currency Translation |
Total | ||||||||||||||||||
2016 |
||||||||||||||||||||||||
Balance at beginning of period |
$ | 111 | $ | 36 | $ | (67 | ) | $ | (1,056 | ) | $ | (43 | ) | $ | (1,019 | ) | ||||||||
Changes in unrealized gains and losses |
(858 | ) | | 74 | (255 | ) | | (1,039 | ) | |||||||||||||||
Other-than-temporary impairment not recognized in earnings on securities available-for-sale |
(1 | ) | | | | | (1 | ) | ||||||||||||||||
Foreign currency translation adjustment(a) |
| | | | (28 | ) | (28 | ) | ||||||||||||||||
Reclassification to earnings of realized gains and losses |
(22 | ) | (18 | ) | 124 | 163 | | 247 | ||||||||||||||||
Applicable income taxes |
339 | 7 | (76 | ) | 35 | | 305 | |||||||||||||||||
|
|
|||||||||||||||||||||||
Balance at end of period |
$ | (431 | ) | $ | 25 | $ | 55 | $ | (1,113 | ) | $ | (71 | ) | $ | (1,535 | ) | ||||||||
|
|
|||||||||||||||||||||||
2015 |
||||||||||||||||||||||||
Balance at beginning of period |
$ | 392 | $ | 52 | $ | (172 | ) | $ | (1,106 | ) | $ | (62 | ) | $ | (896 | ) | ||||||||
Changes in unrealized gains and losses |
(457 | ) | | (25 | ) | (142 | ) | | (624 | ) | ||||||||||||||
Foreign currency translation adjustment(a) |
| | | | 20 | 20 | ||||||||||||||||||
Reclassification to earnings of realized gains and losses |
| (25 | ) | 195 | 223 | | 393 | |||||||||||||||||
Applicable income taxes |
176 | 9 | (65 | ) | (31 | ) | (1 | ) | 88 | |||||||||||||||
|
|
|||||||||||||||||||||||
Balance at end of period |
$ | 111 | $ | 36 | $ | (67 | ) | $ | (1,056 | ) | $ | (43 | ) | $ | (1,019 | ) | ||||||||
|
|
|||||||||||||||||||||||
2014 |
||||||||||||||||||||||||
Balance at beginning of period |
$ | (77 | ) | $ | 70 | $ | (261 | ) | $ | (743 | ) | $ | (60 | ) | $ | (1,071 | ) | |||||||
Changes in unrealized gains and losses |
764 | | (41 | ) | (733 | ) | | (10 | ) | |||||||||||||||
Other-than-temporary impairment not recognized in earnings on securities available-for-sale |
1 | | | | | 1 | ||||||||||||||||||
Foreign currency translation adjustment(a) |
| | | | (4 | ) | (4 | ) | ||||||||||||||||
Reclassification to earnings of realized gains and losses |
(3 | ) | (30 | ) | 186 | 144 | | 297 | ||||||||||||||||
Applicable income taxes |
(293 | ) | 12 | (56 | ) | 226 | 2 | (109 | ) | |||||||||||||||
|
|
|||||||||||||||||||||||
Balance at end of period |
$ | 392 | $ | 52 | $ | (172 | ) | $ | (1,106 | ) | $ | (62 | ) | $ | (896 | ) |
(a) | Represents the impact of changes in foreign currency exchange rates on the Companys net investment in foreign operations and related hedges. |
108
Additional detail about the impact to net income for items reclassified out of accumulated other comprehensive income (loss) and into earnings for the years ended December 31, is as follows:
Impact to Net Income | Affected Line Item in
the | |||||||||||||
(Dollars in Millions) | 2016 | 2015 | 2014 | |||||||||||
Unrealized gains (losses) on securities available-for-sale |
||||||||||||||
Realized gains (losses) on sale of securities |
$ | 27 | $ | 1 | $ | 11 | Total securities gains (losses), net | |||||||
Other-than-temporary impairment recognized in earnings |
(5 | ) | (1 | ) | (8 | ) | ||||||||
|
|
|||||||||||||
22 | | 3 | Total before tax | |||||||||||
(9 | ) | | (1 | ) | Applicable income taxes | |||||||||
|
|
|||||||||||||
13 | | 2 | Net-of-tax | |||||||||||
Unrealized gains (losses) on securities transferred from available-for-sale to held-to-maturity |
||||||||||||||
Amortization of unrealized gains |
18 | 25 | 30 | Interest income | ||||||||||
(7 | ) | (9 | ) | (12 | ) | Applicable income taxes | ||||||||
|
|
|||||||||||||
11 | 16 | 18 | Net-of-tax | |||||||||||
Unrealized gains (losses) on derivative hedges |
||||||||||||||
Realized gains (losses) on derivative hedges |
(124 | ) | (195 | ) | (186 | ) | Net interest income | |||||||
48 | 75 | 71 | Applicable income taxes | |||||||||||
|
|
|||||||||||||
(76 | ) | (120 | ) | (115 | ) | Net-of-tax | ||||||||
Unrealized gains (losses) on retirement plans |
||||||||||||||
Actuarial gains (losses), prior service cost (credit) and transition obligation (asset) amortization |
(163 | ) | (223 | ) | (144 | ) | Employee benefits expense | |||||||
63 | 85 | 56 | Applicable income taxes | |||||||||||
|
|
|||||||||||||
(100 | ) | (138 | ) | (88 | ) | Net-of-tax | ||||||||
Total impact to net income |
$ | (152 | ) | $ | (242 | ) | $ | (183 | ) |
109
The following table provides the components of the Companys regulatory capital at December 31:
(Dollars in Millions) | 2016 | 2015 | ||||||
Basel III transitional standardized approach: |
||||||||
Common shareholders equity |
$ | 41,797 | $ | 40,630 | ||||
Less intangible assets |
||||||||
Goodwill (net of deferred tax liability) |
(8,203 | ) | (8,295 | ) | ||||
Other disallowed intangible assets |
(427 | ) | (335 | ) | ||||
Other(a) |
553 | 612 | ||||||
|
|
|||||||
Total common equity tier 1 capital |
33,720 | 32,612 | ||||||
Qualifying preferred stock |
5,501 | 5,501 | ||||||
Noncontrolling interests eligible for tier 1 capital |
203 | 318 | ||||||
Other |
(3 | ) | | |||||
|
|
|||||||
Total tier 1 capital |
39,421 | 38,431 | ||||||
Eligible portion of allowance for credit losses |
4,357 | 4,255 | ||||||
Subordinated debt and noncontrolling interests eligible for tier 2 capital |
3,576 | 2,616 | ||||||
Other |
1 | 11 | ||||||
|
|
|||||||
Total tier 2 capital |
7,934 | 6,882 | ||||||
|
|
|||||||
Total risk-based capital |
$ | 47,355 | $ | 45,313 | ||||
|
|
|||||||
Risk-weighted assets |
$ | 358,237 | $ | 341,360 | ||||
Basel III transitional advanced approaches: |
||||||||
Common shareholders equity |
$ | 41,797 | $ | 40,630 | ||||
Less intangible assets |
||||||||
Goodwill (net of deferred tax liability) |
(8,203 | ) | (8,295 | ) | ||||
Other disallowed intangible assets |
(427 | ) | (335 | ) | ||||
Other(a) |
553 | 612 | ||||||
|
|
|||||||
Total common equity tier 1 capital |
33,720 | 32,612 | ||||||
Qualifying preferred stock |
5,501 | 5,501 | ||||||
Noncontrolling interests eligible for tier 1 capital |
203 | 318 | ||||||
Other |
(3 | ) | | |||||
|
|
|||||||
Total tier 1 capital |
39,421 | 38,431 | ||||||
Eligible portion of allowance for credit losses |
1,266 | 1,204 | ||||||
Subordinated debt and noncontrolling interests eligible for tier 2 capital |
3,576 | 2,616 | ||||||
Other |
1 | 11 | ||||||
|
|
|||||||
Total tier 2 capital |
4,843 | 3,831 | ||||||
|
|
|||||||
Total risk-based capital |
$ | 44,264 | $ | 42,262 | ||||
|
|
|||||||
Risk-weighted assets |
$ | 277,141 | $ | 261,668 |
(a) | Includes the impact of items included in other comprehensive income (loss), such as unrealized gains (losses) on available-for-sale securities, accumulated net gains on cash flow hedges, pension liability adjustments, etc. |
110
NOTE 15 Earnings Per Share |
The components of earnings per share were:
Year Ended December 31 (Dollars and Shares in Millions, Except Per Share Data) |
2016 | 2015 | 2014 | |||||||||
Net income attributable to U.S. Bancorp |
$ | 5,888 | $ | 5,879 | $ | 5,851 | ||||||
Preferred dividends |
(281 | ) | (247 | ) | (243 | ) | ||||||
Impact of the purchase of noncontrolling interests(a) |
9 | | | |||||||||
Earnings allocated to participating stock awards |
(27 | ) | (24 | ) | (25 | ) | ||||||
|
|
|||||||||||
Net income applicable to U.S. Bancorp common shareholders |
$ | 5,589 | $ | 5,608 | $ | 5,583 | ||||||
|
|
|||||||||||
Average common shares outstanding |
1,718 | 1,764 | 1,803 | |||||||||
Net effect of the exercise and assumed purchase of stock awards |
6 | 8 | 10 | |||||||||
|
|
|||||||||||
Average diluted common shares outstanding |
1,724 | 1,772 | 1,813 | |||||||||
|
|
|||||||||||
Earnings per common share |
$ | 3.25 | $ | 3.18 | $ | 3.10 | ||||||
Diluted earnings per common share |
$ | 3.24 | $ | 3.16 | $ | 3.08 |
(a) | Represents the difference between the carrying amount and amount paid by the Company to purchase third party investor holdings of the preferred stock of USB Realty Corp, a consolidated subsidiary of the Company. |
NOTE 16 Employee Benefits |
111
The following table summarizes the changes in benefit obligations and plan assets for the years ended December 31, and the funded status and amounts recognized in the Consolidated Balance Sheet at December 31 for the retirement plans:
Pension Plans | Postretirement Welfare Plan |
|||||||||||||||
(Dollars in Millions) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Change In Projected Benefit Obligation |
||||||||||||||||
Benefit obligation at beginning of measurement period |
$ | 4,650 | $ | 4,612 | $ | 93 | $ | 104 | ||||||||
Service cost |
177 | 188 | | | ||||||||||||
Interest cost |
211 | 195 | 3 | 3 | ||||||||||||
Participants contributions |
| | 10 | 10 | ||||||||||||
Actuarial loss (gain) |
234 | (176 | ) | (14 | ) | (5 | ) | |||||||||
Lump sum settlements |
(61 | ) | (37 | ) | | | ||||||||||
Benefit payments |
(138 | ) | (132 | ) | (19 | ) | (21 | ) | ||||||||
Federal subsidy on benefits paid |
| | 2 | 2 | ||||||||||||
Benefit obligation at end of measurement period(a) |
$ | 5,073 | $ | 4,650 | $ | 75 | $ | 93 | ||||||||
Change In Fair Value Of Plan Assets |
||||||||||||||||
Fair value at beginning of measurement period |
$ | 3,355 | $ | 3,187 | $ | 82 | $ | 85 | ||||||||
Actual return on plan assets |
230 | (99 | ) | 2 | | |||||||||||
Employer contributions |
383 | 436 | 7 | 8 | ||||||||||||
Participants contributions |
| | 10 | 10 | ||||||||||||
Lump sum settlements |
(61 | ) | (37 | ) | | | ||||||||||
Benefit payments |
(138 | ) | (132 | ) | (19 | ) | (21 | ) | ||||||||
Fair value at end of measurement period |
$ | 3,769 | $ | 3,355 | $ | 82 | $ | 82 | ||||||||
Funded (Unfunded) Status |
$ | (1,304 | ) | $ | (1,295 | ) | $ | 7 | $ | (11 | ) | |||||
Components Of The Consolidated Balance Sheet |
||||||||||||||||
Noncurrent benefit asset |
$ | | $ | | $ | 7 | $ | | ||||||||
Current benefit liability |
(22 | ) | (21 | ) | | | ||||||||||
Noncurrent benefit liability |
(1,282 | ) | (1,274 | ) | | (11 | ) | |||||||||
Recognized amount |
$ | (1,304 | ) | $ | (1,295 | ) | $ | 7 | $ | (11 | ) | |||||
Accumulated Other Comprehensive Income (Loss), Pretax |
||||||||||||||||
Net actuarial gain (loss) |
$ | (1,901 | ) | $ | (1,806 | ) | $ | 66 | $ | 55 | ||||||
Net prior service credit (cost) |
2 | 7 | 25 | 28 | ||||||||||||
Recognized amount |
$ | (1,899 | ) | $ | (1,799 | ) | $ | 91 | $ | 83 |
(a) | At December 31, 2016 and 2015, the accumulated benefit obligation for all pension plans was $4.6 billion and $4.3 billion. |
The following table provides information for pension plans with benefit obligations in excess of plan assets at December 31:
(Dollars in Millions) | 2016 | 2015 | ||||||
Pension Plans with Projected Benefit Obligations in Excess of Plan Assets |
||||||||
Projected benefit obligation |
$ | 5,073 | $ | 4,650 | ||||
Fair value of plan assets |
3,769 | 3,355 | ||||||
Pension Plans with Accumulated Benefit Obligations in Excess of Plan Assets |
||||||||
Projected benefit obligation |
$ | 5,073 | $ | 4,650 | ||||
Accumulated benefit obligation |
4,625 | 4,310 | ||||||
Fair value of plan assets |
3,769 | 3,355 |
112
The following table sets forth the components of net periodic benefit cost and other amounts recognized in accumulated other comprehensive income (loss) for the years ended December 31 for the retirement plans:
Pension Plans | Postretirement Welfare Plan | |||||||||||||||||||||||
(Dollars in Millions) | 2016 | 2015 | 2014 | 2016 | 2015 | 2014 | ||||||||||||||||||
Components Of Net Periodic Benefit Cost |
||||||||||||||||||||||||
Service cost |
$ | 177 | $ | 188 | $ | 152 | $ | | $ | | $ | | ||||||||||||
Interest cost |
211 | 195 | 197 | 3 | 3 | 3 | ||||||||||||||||||
Expected return on plan assets |
(266 | ) | (223 | ) | (208 | ) | (1 | ) | (1 | ) | (1 | ) | ||||||||||||
Prior service cost (credit) and transition obligation (asset) amortization |
(5 | ) | (4 | ) | (5 | ) | (3 | ) | (3 | ) | (3 | ) | ||||||||||||
Actuarial loss (gain) amortization |
175 | 234 | 158 | (4 | ) | (4 | ) | (6 | ) | |||||||||||||||
Net periodic benefit cost |
$ | 292 | $ | 390 | $ | 294 | $ | (5 | ) | $ | (5 | ) | $ | (7 | ) | |||||||||
Other Changes In Plan Assets And Benefit Obligations |
||||||||||||||||||||||||
Recognized In Other Comprehensive Income (Loss) |
||||||||||||||||||||||||
Net actuarial gain (loss) arising during the year |
$ | (270 | ) | $ | (146 | ) | $ | (719 | ) | $ | 15 | $ | 4 | $ | (14 | ) | ||||||||
Net actuarial loss (gain) amortized during the year |
175 | 234 | 158 | (4 | ) | (4 | ) | (6 | ) | |||||||||||||||
Net prior service cost (credit) and transition obligation (asset) amortized during the year |
(5 | ) | (4 | ) | (5 | ) | (3 | ) | (3 | ) | (3 | ) | ||||||||||||
Total recognized in other comprehensive income (loss) |
$ | (100 | ) | $ | 84 | $ | (566 | ) | $ | 8 | $ | (3 | ) | $ | (23 | ) | ||||||||
Total recognized in net periodic benefit cost and other comprehensive income (loss)(a)(b) |
$ | (392 | ) | $ | (306 | ) | $ | (860 | ) | $ | 13 | $ | 2 | $ | (16 | ) |
(a) | The pretax estimated actuarial loss (gain) and prior service cost (credit) for the pension plans that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost in 2017 are $127 million and $(2) million, respectively. |
(b) | The pretax estimated actuarial loss (gain) and prior service cost (credit) for the postretirement welfare plan that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost in 2017 are $(6) million and $(3) million, respectively. |
The following table sets forth weighted average assumptions used to determine the projected benefit obligations at December 31:
Pension Plans | Postretirement Welfare Plan |
|||||||||||||||
(Dollars in Millions) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Discount rate(a) |
4.27 | % | 4.45 | % | 3.57 | % | 3.59 | % | ||||||||
Rate of compensation increase(b) |
3.58 | 4.06 | * | * | ||||||||||||
Health care cost trend rate for the next year(c) |
7.00 | % | 6.50 | % | ||||||||||||
Effect on accumulated postretirement benefit obligation |
||||||||||||||||
One percent increase |
$ | 4 | $ | 5 | ||||||||||||
One percent decrease |
(4 | ) | (5 | ) |
(a) | The discount rates were developed using a cash flow matching bond model with a modified duration for the qualified pension plan, non-qualified pension plan and postretirement welfare plan of 15.5, 12.1, and 6.2 years, respectively, for 2016, and 15.0, 11.9 and 6.3 years, respectively, for 2015. |
(b) | Determined on an active liability-weighted basis. |
(c) | The 2016 and 2015 rates are assumed to decrease gradually to 5.00 percent by 2025 and 2019, respectively, and remain at this level thereafter. |
* | Not applicable |
113
The following table sets forth weighted average assumptions used to determine net periodic benefit cost for the years ended December 31:
Pension Plans | Postretirement Welfare Plan | |||||||||||||||||||||||
(Dollars in Millions) | 2016 | 2015 | 2014 | 2016 | 2015 | 2014 | ||||||||||||||||||
Discount rate (a) |
4.45 | % | 4.13 | % | 4.97 | % | 3.59 | % | 3.46 | % | 3.93 | % | ||||||||||||
Expected return on plan assets (b) |
7.50 | 7.50 | 7.50 | 1.50 | 1.50 | 1.50 | ||||||||||||||||||
Rate of compensation increase(c) |
4.06 | 4.07 | 4.02 | * | * | * | ||||||||||||||||||
Health care cost trend rate(d) |
||||||||||||||||||||||||
Prior to age 65 |
6.50 | % | 7.00 | % | 7.50 | % | ||||||||||||||||||
After age 65 |
6.50 | 7.00 | 7.50 | |||||||||||||||||||||
Effect on total of service cost and interest cost |
||||||||||||||||||||||||
One percent increase |
$ | | $ | | $ | | ||||||||||||||||||
One percent decrease |
| | |
(a) | The discount rates were developed using a cash flow matching bond model with a modified duration for the qualified pension plan, non-qualified pension plan and postretirement welfare plan of 15.0, 11.9, and 6.3 years, respectively, for 2016, and 15.9, 12.4 and 6.8 years, respectively, for 2015. |
(b) | With the help of an independent pension consultant, the Company considers several sources when developing its expected long-term rates of return on plan assets assumptions, including, but not limited to, past returns and estimates of future returns given the plans asset allocation, economic conditions, and peer group LTROR information. The Company determines its expected long-term rates of return reflecting current economic conditions and plan assets. |
(c) | Determined on an active liability weighted basis. |
(d) | The pre-65 and post-65 rates are both assumed to decrease gradually to 5.00 percent by 2019 and remain at that level thereafter. |
* | Not applicable |
114
The following table summarizes plan investment assets measured at fair value at December 31:
Qualified Pension Plan | Postretirement Welfare Plan |
|||||||||||||||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||||||||||||||||||
(Dollars in Millions) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 1 | ||||||||||||||||||||||||||||||
Cash and cash equivalents |
$ | 49 | $ | | $ | | $ | 49 | $ | 64 | $ | | $ | | $ | 64 | $ | 82 | $ | 82 | ||||||||||||||||||||
Debt securities |
362 | 577 | | 939 | 361 | 465 | | 826 | | | ||||||||||||||||||||||||||||||
Corporate stock |
||||||||||||||||||||||||||||||||||||||||
Domestic equity securities |
| | | | 178 | | | 178 | | | ||||||||||||||||||||||||||||||
Mid-small cap equity securities(a) |
| | | | 146 | | | 146 | | | ||||||||||||||||||||||||||||||
International equity securities |
| | | | 123 | | | 123 | | | ||||||||||||||||||||||||||||||
Real estate equity securities(b) |
169 | | | 169 | 163 | | | 163 | | | ||||||||||||||||||||||||||||||
Mutual funds |
||||||||||||||||||||||||||||||||||||||||
Debt securities |
| 164 | | 164 | | 197 | | 197 | | | ||||||||||||||||||||||||||||||
Emerging markets equity securities |
| 155 | | 155 | | 81 | | 81 | | | ||||||||||||||||||||||||||||||
Other |
| | 1 | 1 | | | 1 | 1 | | | ||||||||||||||||||||||||||||||
$ | 580 | $ | 896 | $ | 1 | 1,477 | $ | 1,035 | $ | 743 | $ | 1 | 1,779 | 82 | 82 | |||||||||||||||||||||||||
Plan investment assets not classified in fair value hierarchy(e): |
||||||||||||||||||||||||||||||||||||||||
Collective investment funds |
||||||||||||||||||||||||||||||||||||||||
Domestic equity securities |
977 | 679 | ||||||||||||||||||||||||||||||||||||||
Mid-small cap equity securities(c) |
303 | 68 | ||||||||||||||||||||||||||||||||||||||
Emerging markets equity securities |
| 75 | ||||||||||||||||||||||||||||||||||||||
International equity securities |
725 | 533 | ||||||||||||||||||||||||||||||||||||||
Hedge funds(d) |
188 | 171 | ||||||||||||||||||||||||||||||||||||||
Private equity funds |
99 | 50 | ||||||||||||||||||||||||||||||||||||||
Total plan investment assets at fair value |
$ | 3,769 | $ | 3,355 | $ | 82 | $ | 82 |
(a) | At December 31, 2015, securities included $139 million in domestic equities and $7 million in international equities. |
(b) | At December 31, 2016 and 2015, securities included $98 million and $90 million in domestic equities, respectively, and $71 million and $73 million in international equities, respectively. |
(c) | At December 31, 2016, securities included $303 million in domestic equities. At December 31, 2015, securities included $30 million in domestic equities, $20 million in international equities and $18 million in cash and cash equivalents. |
(d) | This category consists of several investment strategies diversified across several hedge fund managers. |
(e) | These investments are valued based on net asset value per share as a practical expedient; fair values are provided to reconcile to total investment assets of the plans at fair value. |
The following table summarizes the changes in fair value for qualified pension plan investment assets measured at fair value using significant unobservable inputs (Level 3) for the years ended December 31:
(Dollars in Millions) | 2016 | 2015 | 2014 | |||||||||
Balance at beginning of period |
$ | 1 | $ | 2 | $ | 4 | ||||||
Unrealized gains (losses) relating to assets still held at end of year |
| (1 | ) | (2 | ) | |||||||
Balance at end of period |
$ | 1 | $ | 1 | $ | 2 |
The following benefit payments are expected to be paid from the retirement plans for the years ended December 31:
(Dollars in Millions) | Pension Plans |
Postretirement Welfare Plan(a) |
Medicare Part D Subsidy Receipts |
|||||||||
2017 |
$ | 191 | $ | 10 | $ | 2 | ||||||
2018 |
202 | 10 | 2 | |||||||||
2019 |
215 | 10 | 2 | |||||||||
2020 |
230 | 9 | 2 | |||||||||
2021 |
244 | 9 | 2 | |||||||||
2022 2026 |
1,448 | 33 | 5 |
(a) | Net of expected retiree contributions and before Medicare Part D subsidy. |
115
NOTE 17 Stock-Based Compensation |
Stock Option Awards
The following is a summary of stock options outstanding and exercised under prior and existing stock incentive plans of the Company:
Year Ended December 31 | Stock Options/Shares |
Weighted- Average Exercise Price |
Weighted-Average Remaining Contractual Term |
Aggregate Intrinsic Value (in millions) |
||||||||||||
2016 |
||||||||||||||||
Number outstanding at beginning of period |
25,725,708 | $ | 29.82 | |||||||||||||
Granted |
1,644,288 | 39.50 | ||||||||||||||
Exercised |
(10,163,668 | ) | 31.09 | |||||||||||||
Cancelled(a) |
(147,087 | ) | 35.18 | |||||||||||||
|
|
|||||||||||||||
Number outstanding at end of period(b) |
17,059,241 | $ | 29.95 | 4.1 | $ | 365 | ||||||||||
Exercisable at end of period |
13,856,142 | $ | 27.53 | 3.1 | $ | 330 | ||||||||||
2015 |
||||||||||||||||
Number outstanding at beginning of period |
33,649,198 | $ | 29.31 | |||||||||||||
Granted |
1,122,697 | 44.28 | ||||||||||||||
Exercised |
(8,721,834 | ) | 29.59 | |||||||||||||
Cancelled(a) |
(324,353 | ) | 32.93 | |||||||||||||
|
|
|||||||||||||||
Number outstanding at end of period(b) |
25,725,708 | $ | 29.82 | 3.6 | $ | 331 | ||||||||||
Exercisable at end of period |
22,446,095 | $ | 28.68 | 3.0 | $ | 314 | ||||||||||
2014 |
||||||||||||||||
Number outstanding at beginning of period |
46,724,765 | $ | 29.12 | |||||||||||||
Granted |
1,246,451 | 40.32 | ||||||||||||||
Exercised |
(13,851,590 | ) | 29.59 | |||||||||||||
Cancelled(a) |
(470,428 | ) | 31.12 | |||||||||||||
|
|
|||||||||||||||
Number outstanding at end of period(b) |
33,649,198 | $ | 29.31 | 4.0 | $ | 526 | ||||||||||
Exercisable at end of period |
28,923,260 | $ | 28.79 | 3.4 | $ | 467 |
(a) | Options cancelled include both non-vested (i.e., forfeitures) and vested options. |
(b) | Outstanding options include stock-based awards that may be forfeited in future periods. The impact of the estimated forfeitures is reflected in compensation expense. |
Year Ended December 31 | 2016 | 2015 | 2014 | |||||||||
Estimated fair value |
$ | 10.28 | $ | 12.23 | $ | 11.38 | ||||||
Risk-free interest rates |
1.3 | % | 1.7 | % | 1.7 | % | ||||||
Dividend yield |
2.6 | % | 2.6 | % | 2.6 | % | ||||||
Stock volatility factor |
.36 | .37 | .38 | |||||||||
Expected life of options (in years) |
5.5 | 5.5 | 5.5 |
116
The following summarizes certain stock option activity of the Company:
Year Ended December 31 (Dollars in Millions) | 2016 | 2015 | 2014 | |||||||||
Fair value of options vested |
$ | 18 | $ | 25 | $ | 33 | ||||||
Intrinsic value of options exercised |
138 | 130 | 171 | |||||||||
Cash received from options exercised |
316 | 257 | 408 | |||||||||
Tax benefit realized from options exercised |
53 | 50 | 66 |
To satisfy option exercises, the Company predominantly uses treasury stock.
Additional information regarding stock options outstanding as of December 31, 2016, is as follows:
Outstanding Options | Exercisable Options | |||||||||||||||||||
Range of Exercise Prices | Shares | Weighted- Average Remaining Contractual Life (Years) |
Weighted- Average Exercise Price |
Shares | Weighted- Average Exercise Price |
|||||||||||||||
$11.02 $15.00 |
1,997,288 | 2.1 | $ | 11.14 | 1,997,288 | $ | 11.14 | |||||||||||||
$15.01 $20.00 |
156,573 | .9 | 19.63 | 156,573 | 19.63 | |||||||||||||||
$20.01 $25.00 |
1,611,033 | 3.1 | 23.85 | 1,611,033 | 23.85 | |||||||||||||||
$25.01 $30.00 |
4,282,283 | 4.4 | 28.28 | 4,282,283 | 28.28 | |||||||||||||||
$30.01 $35.00 |
4,929,704 | 2.0 | 32.45 | 4,688,105 | 32.37 | |||||||||||||||
$35.01 $40.00 |
1,956,643 | 7.6 | 38.93 | 340,870 | 36.25 | |||||||||||||||
$40.01 $44.32 |
2,125,717 | 7.6 | 42.32 | 779,990 | 41.67 | |||||||||||||||
Total |
17,059,241 | 4.1 | $ | 29.95 | 13,856,142 | $ | 27.53 |
Restricted Stock and Unit Awards
A summary of the status of the Companys restricted shares of stock and unit awards is presented below:
2016 | 2015 | 2014 | ||||||||||||||||||||||
Year Ended December 31 | Shares | Weighted- Value |
Shares | Weighted- Value |
Shares | Weighted- Value |
||||||||||||||||||
Outstanding at beginning of period |
6,894,831 | $ | 38.44 | 7,921,571 | $ | 34.09 | 8,653,859 | $ | 29.96 | |||||||||||||||
Granted |
4,879,421 | 39.65 | 2,897,396 | 44.24 | 3,133,168 | 40.37 | ||||||||||||||||||
Vested |
(3,069,035 | ) | 37.25 | (3,428,736 | ) | 33.27 | (3,409,650 | ) | 29.38 | |||||||||||||||
Cancelled |
(439,710 | ) | 40.18 | (495,400 | ) | 38.66 | (455,806 | ) | 34.05 | |||||||||||||||
Outstanding at end of period |
8,265,507 | $ | 39.50 | 6,894,831 | $ | 38.44 | 7,921,571 | $ | 34.09 |
117
NOTE 18 Income Taxes |
The components of income tax expense were:
Year Ended December 31 (Dollars in Millions) | 2016 | 2015 | 2014 | |||||||||
Federal |
||||||||||||
Current |
$ | 2,585 | $ | 1,956 | $ | 1,888 | ||||||
Deferred |
(711 | ) | (223 | ) | (126 | ) | ||||||
|
|
|||||||||||
Federal income tax |
1,874 | 1,733 | 1,762 | |||||||||
State |
||||||||||||
Current |
337 | 346 | 331 | |||||||||
Deferred |
(50 | ) | 18 | (6 | ) | |||||||
|
|
|||||||||||
State income tax |
287 | 364 | 325 | |||||||||
|
|
|||||||||||
Total income tax provision |
$ | 2,161 | $ | 2,097 | $ | 2,087 |
A reconciliation of expected income tax expense at the federal statutory rate of 35 percent to the Companys applicable income tax expense follows:
Year Ended December 31 (Dollars in Millions) | 2016 | 2015 | 2014 | |||||||||
Tax at statutory rate |
$ | 2,837 | $ | 2,810 | $ | 2,798 | ||||||
State income tax, at statutory rates, net of federal tax benefit |
244 | 237 | 211 | |||||||||
Tax effect of |
||||||||||||
Tax credits and benefits, net of related expenses |
(710 | ) | (700 | ) | (701 | ) | ||||||
Tax-exempt income |
(196 | ) | (201 | ) | (205 | ) | ||||||
Noncontrolling interests |
(20 | ) | (19 | ) | (20 | ) | ||||||
Other items |
6 | (30 | )(a) | 4 | ||||||||
|
|
|||||||||||
Applicable income taxes |
$ | 2,161 | $ | 2,097 | $ | 2,087 |
(a) | Includes the resolution of certain tax matters with taxing authorities in the first quarter of 2015. |
A reconciliation of the changes in the federal, state and foreign unrecognized tax position balances are summarized as follows
Year Ended December 31 (Dollars in Millions) | 2016 | 2015 | 2014 | |||||||||
Balance at beginning of period |
$ | 243 | $ | 267 | $ | 264 | ||||||
Additions (reductions) for tax positions taken in prior years |
57 | (17 | ) | 31 | ||||||||
Additions for tax positions taken in the current year |
12 | 13 | 4 | |||||||||
Exam resolutions |
(6 | ) | (17 | ) | (22 | ) | ||||||
Statute expirations |
(4 | ) | (3 | ) | (10 | ) | ||||||
|
|
|||||||||||
Balance at end of period |
$ | 302 | $ | 243 | $ | 267 |
118
The significant components of the Companys net deferred tax asset (liability) follows:
At December 31 (Dollars in Millions) | 2016 | 2015 | ||||||
Deferred Tax Assets |
||||||||
Allowance for credit losses |
$ | 1,667 | $ | 1,615 | ||||
Federal, state and foreign net operating loss and credit carryforwards |
971 | 464 | ||||||
Accrued expenses |
806 | 764 | ||||||
Partnerships and other investment assets |
521 | 380 | ||||||
Pension and postretirement benefits |
394 | 247 | ||||||
Securities available-for-sale and financial instruments |
220 | | ||||||
Stock compensation |
120 | 131 | ||||||
Other deferred tax assets, net |
291 | 219 | ||||||
|
|
|||||||
Gross deferred tax assets |
4,990 | 3,820 | ||||||
Deferred Tax Liabilities |
||||||||
Leasing activities |
(3,096 | ) | (3,026 | ) | ||||
Goodwill and other intangible assets |
(962 | ) | (859 | ) | ||||
Mortgage servicing rights |
(883 | ) | (859 | ) | ||||
Loans |
(234 | ) | (204 | ) | ||||
Fixed assets |
(60 | ) | (111 | ) | ||||
Securities available-for-sale and financial instruments |
| (47 | ) | |||||
Other deferred tax liabilities, net |
(113 | ) | (55 | ) | ||||
|
|
|||||||
Gross deferred tax liabilities |
(5,348 | ) | (5,161 | ) | ||||
Valuation allowance |
(121 | ) | (137 | ) | ||||
|
|
|||||||
Net Deferred Tax Asset (Liability) |
$ | (479 | ) | $ | (1,478 | ) | ||
|
NOTE 19 Derivative | Instruments |
119
120
The following table summarizes the asset and liability management derivative positions of the Company:
Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||
(Dollars in Millions) | Notional Value |
Fair Value |
Weighted-Average In Years |
Notional Value |
Fair Value |
Weighted-Average In Years |
||||||||||||||||||
December 31, 2016 |
||||||||||||||||||||||||
Fair value hedges |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Receive fixed/pay floating swaps |
$ | 2,550 | $ | 49 | 4.28 | $ | 1,250 | $ | 12 | 2.32 | ||||||||||||||
Cash flow hedges |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Pay fixed/receive floating swaps |
3,272 | 108 | 8.63 | 2,787 | 35 | .83 | ||||||||||||||||||
Net investment hedges |
||||||||||||||||||||||||
Foreign exchange forward contracts |
1,347 | 15 | .04 | | | | ||||||||||||||||||
Other economic hedges |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Futures and forwards |
||||||||||||||||||||||||
Buy |
1,748 | 13 | .09 | 1,722 | 18 | .05 | ||||||||||||||||||
Sell |
2,278 | 129 | .08 | 4,214 | 43 | .09 | ||||||||||||||||||
Options |
||||||||||||||||||||||||
Purchased |
1,565 | 43 | 8.60 | | | | ||||||||||||||||||
Written |
1,073 | 25 | .07 | 12 | 1 | .06 | ||||||||||||||||||
Receive fixed/pay floating swaps |
6,452 | 26 | 11.48 | 1,561 | 16 | 6.54 | ||||||||||||||||||
Pay fixed/receive floating swaps |
4,705 | 13 | 6.51 | 2,320 | 9 | 7.80 | ||||||||||||||||||
Foreign exchange forward contracts |
849 | 6 | .02 | 867 | 6 | .02 | ||||||||||||||||||
Equity contracts |
11 | | .40 | 102 | 1 | .57 | ||||||||||||||||||
Credit contracts |
1,397 | | 3.38 | 3,674 | 2 | 3.57 | ||||||||||||||||||
Other(a) |
19 | | .03 | 830 | 106 | 3.42 | ||||||||||||||||||
Total |
$ | 27,266 | $ | 427 | $ | 19,339 | $ | 249 | ||||||||||||||||
December 31, 2015 |
||||||||||||||||||||||||
Fair value hedges |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Receive fixed/pay floating swaps |
$ | 3,050 | $ | 73 | 4.43 | $ | | $ | | | ||||||||||||||
Cash flow hedges |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Pay fixed/receive floating swaps |
1,772 | 7 | 9.22 | 5,009 | 146 | 1.13 | ||||||||||||||||||
Net investment hedges |
||||||||||||||||||||||||
Foreign exchange forward contracts |
1,140 | 4 | .04 | | | | ||||||||||||||||||
Other economic hedges |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Futures and forwards |
||||||||||||||||||||||||
Buy |
3,812 | 17 | .07 | 452 | 1 | .06 | ||||||||||||||||||
Sell |
3,201 | 12 | .09 | 2,559 | 7 | .12 | ||||||||||||||||||
Options |
||||||||||||||||||||||||
Purchased |
2,935 | | .06 | | | | ||||||||||||||||||
Written |
3,199 | 29 | .10 | 5 | 1 | .08 | ||||||||||||||||||
Receive fixed/pay floating swaps |
3,733 | 42 | 9.98 | 4,748 | 18 | 10.18 | ||||||||||||||||||
Pay fixed/receive floating swaps |
287 | 2 | 9.82 | 4,158 | 35 | 9.97 | ||||||||||||||||||
Foreign exchange forward contracts |
3,023 | 13 | .01 | 2,380 | 10 | .03 | ||||||||||||||||||
Equity contracts |
62 | | .47 | 24 | 1 | .82 | ||||||||||||||||||
Credit contracts |
1,192 | 2 | 2.58 | 2,821 | 3 | 2.99 | ||||||||||||||||||
Other(a) |
36 | | .04 | 662 | 64 | 2.60 | ||||||||||||||||||
Total |
$ | 27,442 | $ | 201 | $ | 22,818 | $ | 286 |
(a) | Includes short-term underwriting purchase and sale commitments with total asset and liability notional values of $19 million and $36 million at December 31, 2016 and 2015, respectively, and derivative liability swap agreements related to the sale of a portion of the Companys Class B common shares of Visa Inc. The Visa swap agreements had a total notional value, fair value and weighted average remaining maturity of $811 million, $106 million and 3.50 years at December 31, 2016, respectively, compared to $626 million, $64 million and 2.75 years at December 31, 2015, respectively. |
121
The following table summarizes the customer-related derivative positions of the Company:
Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||
(Dollars in Millions) | Notional Value |
Fair Value |
Weighted-Average Remaining Maturity In Years |
Notional Value |
Fair Value |
Weighted-Average Remaining Maturity In Years |
||||||||||||||||||
December 31, 2016 |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Receive fixed/pay floating swaps |
$ | 38,501 | $ | 930 | 4.07 | $ | 39,403 | $ | 632 | 4.89 | ||||||||||||||
Pay fixed/receive floating swaps |
36,671 | 612 | 4.99 | 40,324 | 996 | 4.07 | ||||||||||||||||||
Options |
||||||||||||||||||||||||
Purchased |
14,545 | 51 | 1.85 | 125 | 2 | 1.37 | ||||||||||||||||||
Written |
125 | 3 | 1.37 | 13,518 | 50 | 1.70 | ||||||||||||||||||
Futures |
||||||||||||||||||||||||
Buy |
306 | | 1.96 | 7,111 | 7 | .90 | ||||||||||||||||||
Foreign exchange rate contracts |
||||||||||||||||||||||||
Forwards, spots and swaps |
20,664 | 849 | .58 | 19,640 | 825 | .60 | ||||||||||||||||||
Options |
||||||||||||||||||||||||
Purchased |
2,376 | 98 | 1.67 | | | | ||||||||||||||||||
Written |
| | | 2,376 | 98 | 1.67 | ||||||||||||||||||
Total |
$ | 113,188 | $ | 2,543 | $ | 122,497 | $ | 2,610 | ||||||||||||||||
December 31, 2015 |
||||||||||||||||||||||||
Interest rate contracts |
||||||||||||||||||||||||
Receive fixed/pay floating swaps |
$ | 32,647 | $ | 1,097 | 5.69 | $ | 14,068 | $ | 54 | 4.71 | ||||||||||||||
Pay fixed/receive floating swaps |
10,685 | 43 | 4.55 | 35,045 | 1,160 | 5.74 | ||||||||||||||||||
Options |
||||||||||||||||||||||||
Purchased |
8,705 | 10 | 2.61 | 146 | 1 | 2.23 | ||||||||||||||||||
Written |
146 | 2 | 2.23 | 8,482 | 9 | 2.57 | ||||||||||||||||||
Futures |
||||||||||||||||||||||||
Buy |
| | | 2,859 | 2 | .84 | ||||||||||||||||||
Sell |
45 | | .97 | | | | ||||||||||||||||||
Foreign exchange rate contracts |
||||||||||||||||||||||||
Forwards, spots and swaps |
18,399 | 851 | .59 | 17,959 | 830 | .58 | ||||||||||||||||||
Options |
||||||||||||||||||||||||
Purchased |
1,485 | 43 | 1.19 | | | | ||||||||||||||||||
Written |
| | | 1,485 | 43 | 1.19 | ||||||||||||||||||
Total |
$ | 72,112 | $ | 2,046 | $ | 80,044 | $ | 2,099 |
122
The table below shows the effective portion of the gains (losses) recognized in other comprehensive income (loss) and the gains (losses) reclassified from other comprehensive income (loss) into earnings (net-of-tax) for the years ended December 31:
Gains (Losses) Recognized in Other Comprehensive Income (Loss) |
Gains (Losses) Reclassified from Other Comprehensive Income (Loss) into Earnings |
|||||||||||||||||||||||
(Dollars in Millions) | 2016 | 2015 | 2014 | 2016 | 2015 | 2014 | ||||||||||||||||||
Asset and Liability Management Positions |
||||||||||||||||||||||||
Cash flow hedges |
||||||||||||||||||||||||
Interest rate contracts(a) |
$ | 46 | $ | (15 | ) | $ | (26 | ) | $ | (76 | ) | $ | (120 | ) | $ | (115 | ) | |||||||
Net investment hedges |
||||||||||||||||||||||||
Foreign exchange forward contracts |
33 | 101 | 130 | | | |
Note: | Ineffectiveness on cash flow and net investment hedges was not material for the years ended December 31, 2016, 2015 and 2014. |
(a) | Gains (Losses) reclassified from other comprehensive income (loss) into interest income on loans and interest expense on long-term debt. |
The table below shows the gains (losses) recognized in earnings for fair value hedges, other economic hedges and the customer-related positions for the years ended December 31:
(Dollars in Millions) | Location of Gains (Losses) Recognized in Earnings |
2016 | 2015 | 2014 | ||||||||||||
Asset and Liability Management Positions |
||||||||||||||||
Fair value hedges(a) |
||||||||||||||||
Interest rate contracts |
Other noninterest income | $ | (31 | ) | $ | 7 | $ | 29 | ||||||||
Other economic hedges |
||||||||||||||||
Interest rate contracts |
||||||||||||||||
Futures and forwards |
Mortgage banking revenue | 101 | 186 | (122 | ) | |||||||||||
Purchased and written options |
Mortgage banking revenue | 331 | 191 | 287 | ||||||||||||
Receive fixed/pay floating swaps |
Mortgage banking revenue | 226 | 139 | 384 | ||||||||||||
Pay fixed/receive floating swaps |
Mortgage banking revenue | (140 | ) | (33 | ) | | ||||||||||
Foreign exchange forward contracts |
Commercial products revenue | (14 | ) | 108 | (29 | ) | ||||||||||
Equity contracts |
Compensation expense | 1 | (1 | ) | 2 | |||||||||||
Credit contracts |
Other noninterest income | 1 | 2 | | ||||||||||||
Other |
Other noninterest income | (39 | ) | | (43 | ) | ||||||||||
Customer-Related Positions |
||||||||||||||||
Interest rate contracts |
||||||||||||||||
Receive fixed/pay floating swaps |
Other noninterest income | (708 | ) | 360 | 686 | |||||||||||
Pay fixed/receive floating swaps |
Other noninterest income | 769 | (320 | ) | (652 | ) | ||||||||||
Purchased and written options |
Other noninterest income | (5 | ) | 3 | | |||||||||||
Futures |
Other noninterest income | (6 | ) | 1 | | |||||||||||
Foreign exchange rate contracts |
||||||||||||||||
Forwards, spots and swaps |
Commercial products revenue | 88 | 74 | 66 | ||||||||||||
Purchased and written options |
Commercial products revenue | (1 | ) | 2 | 1 |
(a) | Gains (Losses) on items hedged by interest rate contracts included in noninterest income (expense), were $31 million, $(7) million and $(27) million for the years ended December 31, 2016, 2015 and 2014, respectively. The ineffective portion was immaterial for the years ended December 31, 2016, 2015 and 2014. |
123
NOTE 20 Netting Arrangements for Certain Financial Instruments and Securities Financing | Activities |
124
The following table summarizes the maturities by category of collateral pledged for repurchase agreements and securities loaned transactions:
(Dollars in Millions) | Overnight and Continuous |
Less Than 30 Days |
Total | |||||||||
December 31, 2016 |
||||||||||||
Repurchase agreements |
||||||||||||
U.S. Treasury and agencies |
$ | 60 | $ | | $ | 60 | ||||||
Residential agency mortgage-backed securities |
681 | 30 | 711 | |||||||||
Corporate debt securities |
30 | | 30 | |||||||||
|
|
|||||||||||
Total repurchase agreements |
771 | 30 | 801 | |||||||||
Securities loaned |
||||||||||||
Corporate debt securities |
223 | | 223 | |||||||||
|
|
|||||||||||
Total securities loaned |
223 | | 223 | |||||||||
|
|
|||||||||||
Gross amount of recognized liabilities |
$ | 994 | $ | 30 | $ | 1,024 | ||||||
|
|
|||||||||||
December 31, 2015 |
||||||||||||
Repurchase agreements |
||||||||||||
U.S. Treasury and agencies |
$ | 122 | $ | | $ | 122 | ||||||
Residential agency mortgage-backed securities |
802 | 168 | 970 | |||||||||
|
|
|||||||||||
Gross amount of recognized liabilities |
$ | 924 | $ | 168 | $ | 1,092 |
The following tables provide information on the Companys netting adjustments, and items not offset on the Consolidated Balance Sheet but available for offset in the event of default:
Gross Recognized |
Gross Amounts Consolidated |
Net Amounts Consolidated |
Gross Amounts Not Offset on the Consolidated Balance Sheet |
|||||||||||||||||||||
(Dollars in Millions) | Financial Instruments(b) |
Collateral Received(c) |
Net Amount |
|||||||||||||||||||||
December 31, 2016 |
||||||||||||||||||||||||
Derivative assets(d) |
$ | 2,122 | $ | (984 | ) | $ | 1,138 | $ | (78 | ) | $ | (10 | ) | $ | 1,050 | |||||||||
Reverse repurchase agreements |
77 | | 77 | (60 | ) | (17 | ) | | ||||||||||||||||
Securities borrowed |
944 | | 944 | (10 | ) | (909 | ) | 25 | ||||||||||||||||
|
|
|||||||||||||||||||||||
Total |
$ | 3,143 | $ | (984 | ) | $ | 2,159 | $ | (148 | ) | $ | (936 | ) | $ | 1,075 | |||||||||
|
|
|||||||||||||||||||||||
December 31, 2015 |
||||||||||||||||||||||||
Derivative assets(d) |
$ | 1,879 | $ | (807 | ) | $ | 1,072 | $ | (82 | ) | $ | | $ | 990 | ||||||||||
Reverse repurchase agreements |
106 | | 106 | (102 | ) | (4 | ) | | ||||||||||||||||
Securities borrowed |
772 | | 772 | | (753 | ) | 19 | |||||||||||||||||
|
|
|||||||||||||||||||||||
Total |
$ | 2,757 | $ | (807 | ) | $ | 1,950 | $ | (184 | ) | $ | (757 | ) | $ | 1,009 |
(a) | Includes $210 million and $165 million of cash collateral related payables that were netted against derivative assets at December 31, 2016 and 2015, respectively. |
(b) | For derivative assets this includes any derivative liability fair values that could be offset in the event of counterparty default; for reverse repurchase agreements this includes any repurchase agreement payables that could be offset in the event of counterparty default; for securities borrowed this includes any securities loaned payables that could be offset in the event of counterparty default. |
(c) | Includes the fair value of securities received by the Company from the counterparty. These securities are not included on the Consolidated Balance Sheet unless the counterparty defaults. |
(d) | Excludes $848 million and $368 million of derivative assets centrally cleared or otherwise not subject to netting arrangements at December 31, 2016 and 2015, respectively. |
125
Gross Recognized |
Gross Amounts Consolidated |
Net Amounts Consolidated |
Gross Amounts Not Offset on the Consolidated Balance Sheet |
Net |
||||||||||||||||||||
(Dollars in Millions) | Financial Instruments(b) |
Collateral Pledged(c) |
||||||||||||||||||||||
December 31, 2016 |
||||||||||||||||||||||||
Derivative liabilities(d) |
$ | 1,951 | $ | (1,185 | ) | $ | 766 | $ | (78 | ) | $ | | $ | 688 | ||||||||||
Repurchase agreements |
801 | | 801 | (60 | ) | (741 | ) | | ||||||||||||||||
Securities loaned |
223 | | 223 | (10 | ) | (211 | ) | 2 | ||||||||||||||||
|
|
|||||||||||||||||||||||
Total |
$ | 2,975 | $ | (1,185 | ) | $ | 1,790 | $ | (148 | ) | $ | (952 | ) | $ | 690 | |||||||||
|
|
|||||||||||||||||||||||
December 31, 2015 |
||||||||||||||||||||||||
Derivative liabilities(d) |
$ | 1,809 | $ | (1,283 | ) | $ | 526 | $ | (82 | ) | $ | | $ | 444 | ||||||||||
Repurchase agreements |
1,092 | | 1,092 | (102 | ) | (990 | ) | | ||||||||||||||||
|
|
|||||||||||||||||||||||
Total |
$ | 2,901 | $ | (1,283 | ) | $ | 1,618 | $ | (184 | ) | $ | (990 | ) | $ | 444 |
(a) | Includes $411 million and $641 million of cash collateral related receivables that were netted against derivative liabilities at December 31, 2016 and 2015, respectively. |
(b) | For derivative liabilities this includes any derivative asset fair values that could be offset in the event of counterparty default; for repurchase agreements this includes any reverse repurchase agreement receivables that could be offset in the event of counterparty default; for securities loaned this includes any securities borrowed receivables that could be offset in the event of counterparty default. |
(c) | Includes the fair value of securities pledged by the Company to the counterparty. These securities are included on the Consolidated Balance Sheet unless the Company defaults. |
(d) | Excludes $908 million and $576 million of derivative liabilities centrally cleared or otherwise not subject to netting arrangements at December 31, 2016 and 2015, respectively. |
NOTE 21 Fair Values of Assets and Liabilities |
126
127
128
129
The following table shows the significant valuation assumption ranges for Level 3 available-for-sale investment securities at December 31, 2016:
Minimum | Maximum | Average | ||||||||||
Residential Prime Non-Agency Mortgage-Backed Securities(a) |
||||||||||||
Estimated lifetime prepayment rates |
6 | % | 19 | % | 14 | % | ||||||
Lifetime probability of default rates |
| 6 | 4 | |||||||||
Lifetime loss severity rates |
15 | 65 | 35 | |||||||||
Discount margin |
2 | 7 | 3 | |||||||||
Residential Non-Prime Non-Agency Mortgage-Backed Securities(b) |
||||||||||||
Estimated lifetime prepayment rates |
3 | % | 16 | % | 9 | % | ||||||
Lifetime probability of default rates |
4 | 12 | 7 | |||||||||
Lifetime loss severity rates |
15 | 80 | 49 | |||||||||
Discount margin |
1 | 10 | 4 |
(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. |
The following table shows the significant valuation assumption ranges for MSRs at December 31, 2016:
Minimum | Maximum | Average | ||||||||||
Expected prepayment |
6 | % | 18 | % | 10 | % | ||||||
Option adjusted spread |
7 | 10 | 8 |
130
The following table shows the significant valuation assumption ranges for the Companys derivative commitments to purchase and originate mortgage loans at December 31, 2016:
Minimum | Maximum | Average | ||||||||||
Expected loan close rate |
33 | % | 100 | % | 80 | % | ||||||
Inherent MSR value (basis points per loan) |
(34 | ) | 203 | 113 |
131
The following table summarizes the balances of assets and liabilities measured at fair value on a recurring basis:
(Dollars in Millions) | Level 1 | Level 2 | Level 3 | Netting | Total | |||||||||||||||
December 31, 2016 |
||||||||||||||||||||
Available-for-sale securities |
||||||||||||||||||||
U.S. Treasury and agencies |
$ | 16,355 | $ | 772 | $ | | $ | | $ | 17,127 | ||||||||||
Mortgage-backed securities |
||||||||||||||||||||
Residential |
||||||||||||||||||||
Agency |
| 43,138 | | | 43,138 | |||||||||||||||
Non-agency |
||||||||||||||||||||
Prime(a) |
| | 242 | | 242 | |||||||||||||||
Non-prime(b) |
| | 195 | | 195 | |||||||||||||||
Commercial |
||||||||||||||||||||
Agency |
| 15 | | | 15 | |||||||||||||||
Asset-backed securities |
||||||||||||||||||||
Other |
| 481 | 2 | | 483 | |||||||||||||||
Obligations of state and political subdivisions |
| 5,039 | | | 5,039 | |||||||||||||||
Corporate debt securities |
| | 9 | | 9 | |||||||||||||||
Other investments |
36 | | | | 36 | |||||||||||||||
Total available-for-sale |
16,391 | 49,445 | 448 | | 66,284 | |||||||||||||||
Mortgage loans held for sale |
| 4,822 | | | 4,822 | |||||||||||||||
Mortgage servicing rights |
| | 2,591 | | 2,591 | |||||||||||||||
Derivative assets |
| 2,416 | 554 | (984 | ) | 1,986 | ||||||||||||||
Other assets |
183 | 1,137 | | | 1,320 | |||||||||||||||
Total |
$ | 16,574 | $ | 57,820 | $ | 3,593 | $ | (984 | ) | $ | 77,003 | |||||||||
Derivative liabilities |
$ | 7 | $ | 2,469 | $ | 383 | $ | (1,185 | ) | $ | 1,674 | |||||||||
Short-term borrowings and other liabilities(c) |
142 | 938 | | | 1,080 | |||||||||||||||
Total |
$ | 149 | $ | 3,407 | $ | 383 | $ | (1,185 | ) | $ | 2,754 | |||||||||
December 31, 2015 |
||||||||||||||||||||
Available-for-sale securities |
||||||||||||||||||||
U.S. Treasury and agencies |
$ | 3,708 | $ | 888 | $ | | $ | | $ | 4,596 | ||||||||||
Mortgage-backed securities |
||||||||||||||||||||
Residential |
||||||||||||||||||||
Agency |
| 50,076 | | | 50,076 | |||||||||||||||
Non-agency |
||||||||||||||||||||
Prime(a) |
| | 318 | | 318 | |||||||||||||||
Non-prime(b) |
| | 240 | | 240 | |||||||||||||||
Commercial |
||||||||||||||||||||
Agency |
| 52 | | | 52 | |||||||||||||||
Asset-backed securities |
||||||||||||||||||||
Collateralized debt obligations/Collateralized loan obligations |
| 19 | | | 19 | |||||||||||||||
Other |
| 539 | 2 | | 541 | |||||||||||||||
Obligations of state and political subdivisions |
| 5,316 | | | 5,316 | |||||||||||||||
Corporate debt securities |
102 | 499 | 9 | | 610 | |||||||||||||||
Perpetual preferred securities |
48 | 113 | | | 161 | |||||||||||||||
Other investments |
40 | 28 | | | 68 | |||||||||||||||
Total available-for-sale |
3,898 | 57,530 | 569 | | 61,997 | |||||||||||||||
Mortgage loans held for sale |
| 3,110 | | | 3,110 | |||||||||||||||
Mortgage servicing rights |
| | 2,512 | | 2,512 | |||||||||||||||
Derivative assets |
| 1,632 | 615 | (807 | ) | 1,440 | ||||||||||||||
Other assets |
202 | 589 | | | 791 | |||||||||||||||
Total |
$ | 4,100 | $ | 62,861 | $ | 3,696 | $ | (807 | ) | $ | 69,850 | |||||||||
Derivative liabilities |
$ | 2 | $ | 2,266 | $ | 117 | $ | (1,283 | ) | $ | 1,102 | |||||||||
Short-term borrowings(c) |
122 | 645 | | | 767 | |||||||||||||||
Total |
$ | 124 | $ | 2,911 | $ | 117 | $ | (1,283 | ) | $ | 1,869 |
(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) | Primarily represents the Companys obligation on securities sold short required to be accounted for at fair value per applicable accounting guidance. |
132
The following table presents the changes in fair value for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31:
(Dollars in Millions) | Beginning of Period Balance |
Net Gains (Losses) Included in Net Income |
Net Gains (Losses) Included in Other Comprehensive Income (Loss) |
Purchases | Sales | Principal Payments |
Issuances | Settlements | End of Period Balance |
Net Change in Unrealized Gains (Losses) Relating to Assets and Liabilities Held at End of Period |
||||||||||||||||||||||||||||||
2016 |
||||||||||||||||||||||||||||||||||||||||
Available-for-sale securities |
||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities |
||||||||||||||||||||||||||||||||||||||||
Residential non-agency |
||||||||||||||||||||||||||||||||||||||||
Prime(a) |
$ | 318 | $ | (1 | ) | $ | | $ | | $ | | $ | (75 | ) | $ | | $ | | $ | 242 | $ | | ||||||||||||||||||
Non-prime(b) |
240 | (1 | ) | (2 | ) | | | (42 | ) | | | 195 | (2 | ) | ||||||||||||||||||||||||||
Asset-backed securities |
||||||||||||||||||||||||||||||||||||||||
Other |
2 | | | | | | | | 2 | | ||||||||||||||||||||||||||||||
Corporate debt securities |
9 | | | | | | | | 9 | | ||||||||||||||||||||||||||||||
Total available-for-sale |
569 | (2 | )(c) | (2 | )(f) | | | (117 | ) | | | 448 | (2 | ) | ||||||||||||||||||||||||||
Mortgage servicing rights |
2,512 | (488 | )(d) | | 43 | | | 524 | (g) | | 2,591 | (488 | )(d) | |||||||||||||||||||||||||||
Net derivative assets and liabilities |
498 | 332 | (e) | | 2 | (14 | ) | | | (647 | ) | 171 | (257 | )(h) | ||||||||||||||||||||||||||
2015 |
||||||||||||||||||||||||||||||||||||||||
Available-for-sale securities |
||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities |
||||||||||||||||||||||||||||||||||||||||
Residential non-agency |
||||||||||||||||||||||||||||||||||||||||
Prime(a) |
$ | 405 | $ | | $ | (4 | ) | $ | | $ | | $ | (83 | ) | $ | | $ | | $ | 318 | $ | (4 | ) | |||||||||||||||||
Non-prime(b) |
280 | (1 | ) | (1 | ) | | | (38 | ) | | | 240 | (1 | ) | ||||||||||||||||||||||||||
Asset-backed securities |
||||||||||||||||||||||||||||||||||||||||
Other |
62 | 4 | (2 | ) | | (51 | ) | (11 | ) | | | 2 | | |||||||||||||||||||||||||||
Corporate debt securities |
9 | | | | | | | | 9 | | ||||||||||||||||||||||||||||||
Total available-for-sale |
756 | 3 | (i) | (7 | )(f) | | (51 | ) | (132 | ) | | | 569 | (5 | ) | |||||||||||||||||||||||||
Mortgage servicing rights |
2,338 | (487 | )(d) | | 29 | | | 632 | (g) | | 2,512 | (487 | )(d) | |||||||||||||||||||||||||||
Net derivative assets and liabilities |
574 | 707 | (j) | | 1 | (13 | ) | | | (771 | ) | 498 | 135 | (k) | ||||||||||||||||||||||||||
2014 |
||||||||||||||||||||||||||||||||||||||||
Available-for-sale securities |
||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities |
||||||||||||||||||||||||||||||||||||||||
Residential non-agency |
||||||||||||||||||||||||||||||||||||||||
Prime(a) |
$ | 478 | $ | | $ | 15 | $ | | $ | | $ | (88 | ) | $ | | $ | | $ | 405 | $ | 14 | |||||||||||||||||||
Non-prime(b) |
297 | (6 | ) | 19 | | | (30 | ) | | | 280 | 19 | ||||||||||||||||||||||||||||
Asset-backed securities |
||||||||||||||||||||||||||||||||||||||||
Other |
63 | 4 | | 5 | | (10 | ) | | | 62 | | |||||||||||||||||||||||||||||
Corporate debt securities |
9 | | | | | | | | 9 | | ||||||||||||||||||||||||||||||
Total available-for-sale |
847 | (2 | )(l) | 34 | (f) | 5 | | (128 | ) | | | 756 | 33 | |||||||||||||||||||||||||||
Mortgage servicing rights |
2,680 | (588 | )(d) | | 5 | (141 | ) | | 382 | (g) | | 2,338 | (588 | )(d) | ||||||||||||||||||||||||||
Net derivative assets and liabilities |
445 | 904 | (m) | | 1 | (4 | ) | | | (772 | ) | 574 | 188 | (n) |
(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 $(3) million included in securities gains (losses) and $1 million included in interest income. |
(d) | Included in mortgage banking revenue. |
(e) | Approximately $(77) million included in other noninterest income and $409 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 $(276) million included in other noninterest income and $19 million included in mortgage banking revenue. |
(i) | Included in interest income. |
(j) | Approximately $289 million included in other noninterest income and $418 million included in mortgage banking revenue. |
(k) | Approximately $92 million included in other noninterest income and $43 million included in mortgage banking revenue. |
(l) | Approximately $(3) million included in securities gains (losses) and $1 million included in interest income. |
(m) | Approximately $404 million included in other noninterest income and $500 million included in mortgage banking revenue. |
(n) | Approximately $128 million included in other noninterest income and $60 million included in mortgage banking revenue. |
133
The Company is also required periodically to measure certain other financial assets at fair value on a nonrecurring basis. These measurements of fair value usually result from the application of lower-of-cost-or-fair value accounting or write-downs of individual assets.
The following table summarizes the balances as of the measurement date of assets measured at fair value on a nonrecurring basis, and still held as of the reporting date as of December 31:
2016 | 2015 | |||||||||||||||||||||||||||||||
(Dollars in Millions) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Loans(a) |
$ | | $ | | $ | 59 | $ | 59 | $ | | $ | | $ | 87 | $ | 87 | ||||||||||||||||
Other assets(b) |
| | 60 | 60 | | | 66 | 66 |
(a) | Represents the carrying value of loans for which adjustments were based on the fair value of the collateral, excluding loans fully charged-off. |
(b) | Primarily represents the fair value of foreclosed properties that were measured at fair value based on an appraisal or broker price opinion of the collateral subsequent to their initial acquisition. |
The following table summarizes losses recognized related to nonrecurring fair value measurements of individual assets or portfolios for the years ended December 31:
(Dollars in Millions) | 2016 | 2015 | 2014 | |||||||||
Loans(a) |
$ | 192 | $ | 175 | $ | 108 | ||||||
Other assets(b) |
32 | 42 | 70 |
(a) | Represents write-downs of student loans held for sale based on non-binding quoted prices received for the portfolio, that were subsequently transferred to loans, and write-downs of loans which were based on the fair value of the collateral, excluding loans fully charged-off. |
(b) | Primarily represents related losses of foreclosed properties that were measured at fair value subsequent to their initial acquisition. |
Fair Value Option
The following table summarizes the differences between the aggregate fair value carrying amount of MLHFS for which the fair value option has been elected and the aggregate unpaid principal amount that the Company is contractually obligated to receive at maturity as of December 31:
2016 | 2015 | |||||||||||||||||||||||
(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 |
$ | 4,822 | $ | 4,763 | $ | 59 | $ | 3,110 | $ | 3,032 | $ | 78 | ||||||||||||
Nonaccrual loans |
2 | 3 | (1 | ) | 5 | 7 | (2 | ) | ||||||||||||||||
Loans 90 days or more past due |
1 | 1 | | | | |
134
The estimated fair values of the Companys financial instruments as of December 31, are shown in the table below:
2016 | 2015 | |||||||||||||||||||||||||||||||||||||||
Carrying Amount |
Fair Value | Carrying Amount |
Fair Value | |||||||||||||||||||||||||||||||||||||
(Dollars in Millions) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||
Financial Assets |
||||||||||||||||||||||||||||||||||||||||
Cash and due from banks |
$ | 15,705 | $ | 15,705 | $ | | $ | | $ | 15,705 | $ | 11,147 | $ | 11,147 | $ | | $ | | $ | 11,147 | ||||||||||||||||||||
Federal funds sold and securities purchased under resale agreements |
138 | | 138 | | 138 | 169 | | 169 | | 169 | ||||||||||||||||||||||||||||||
Investment securities held-to-maturity |
42,991 | 4,605 | 37,810 | 20 | 42,435 | 43,590 | 2,275 | 41,138 | 80 | 43,493 | ||||||||||||||||||||||||||||||
Loans held for sale(a) |
4 | | | 4 | 4 | 74 | | | 74 | 74 | ||||||||||||||||||||||||||||||
Loans |
269,394 | | | 273,422 | 273,422 | 256,986 | | | 259,823 | 259,823 | ||||||||||||||||||||||||||||||
Other financial instruments |
2,362 | | 920 | 1,449 | 2,369 | 2,311 | | 921 | 1,398 | 2,319 | ||||||||||||||||||||||||||||||
Financial Liabilities |
||||||||||||||||||||||||||||||||||||||||
Deposits |
334,590 | | 334,361 | | 334,361 | 300,400 | | 300,225 | | 300,225 | ||||||||||||||||||||||||||||||
Short-term borrowings(b) |
12,891 | | 12,706 | | 12,706 | 27,110 | | 26,782 | | 26,782 | ||||||||||||||||||||||||||||||
Long-term debt |
33,323 | | 33,678 | | 33,678 | 32,078 | | 32,412 | | 32,412 | ||||||||||||||||||||||||||||||
Other liabilities |
1,702 | | | 1,702 | 1,702 | 1,353 | | | 1,353 | 1,353 |
(a) | Excludes mortgages held for sale for which the fair value option under applicable accounting guidance was elected. |
(b) | Excludes the Companys obligation on securities sold short required to be accounted for at fair value per applicable accounting guidance. |
NOTE 22 Guarantees and Contingent Liabilities |
135
136
137
138
139
NOTE 23 U.S. Bancorp (Parent Company) |
Condensed Balance Sheet
At December 31 (Dollars in Millions) | 2016 | 2015 | ||||||
Assets |
||||||||
Due from banks, principally interest-bearing |
$ | 7,800 | $ | 9,426 | ||||
Available-for-sale securities |
225 | 352 | ||||||
Investments in bank subsidiaries |
44,955 | 41,708 | ||||||
Investments in nonbank subsidiaries |
2,326 | 2,060 | ||||||
Advances to bank subsidiaries |
3,800 | 3,150 | ||||||
Advances to nonbank subsidiaries |
1,265 | 823 | ||||||
Other assets |
1,052 | 983 | ||||||
|
|
|||||||
Total assets |
$ | 61,423 | $ | 58,502 | ||||
|
|
|||||||
Liabilities and Shareholders Equity |
||||||||
Short-term funds borrowed |
$ | 22 | $ | 25 | ||||
Long-term debt |
13,045 | 11,453 | ||||||
Other liabilities |
1,058 | 893 | ||||||
Shareholders equity |
47,298 | 46,131 | ||||||
|
|
|||||||
Total liabilities and shareholders equity |
$ | 61,423 | $ | 58,502 |
Condensed Statement of Income
Year Ended December 31 (Dollars in Millions) | 2016 | 2015 | 2014 | |||||||||
Income |
||||||||||||
Dividends from bank subsidiaries |
$ | 2,100 | $ | 3,900 | $ | 3,850 | ||||||
Dividends from nonbank subsidiaries |
4 | 3 | 38 | |||||||||
Interest from subsidiaries |
140 | 120 | 123 | |||||||||
Other income |
57 | 55 | 64 | |||||||||
|
|
|||||||||||
Total income |
2,301 | 4,078 | 4,075 | |||||||||
Expense |
||||||||||||
Interest expense |
327 | 292 | 335 | |||||||||
Other expense |
123 | 105 | 90 | |||||||||
|
|
|||||||||||
Total expense |
450 | 397 | 425 | |||||||||
|
|
|||||||||||
Income before income taxes and equity in undistributed income of subsidiaries |
1,851 | 3,681 | 3,650 | |||||||||
Applicable income taxes |
(97 | ) | (207 | ) | (94 | ) | ||||||
|
|
|||||||||||
Income of parent company |
1,948 | 3,888 | 3,744 | |||||||||
Equity in undistributed income of subsidiaries |
3,940 | 1,991 | 2,107 | |||||||||
|
|
|||||||||||
Net income attributable to U.S. Bancorp |
$ | 5,888 | $ | 5,879 | $ | 5,851 |
140
Condensed Statement of Cash Flows
Year Ended December 31 (Dollars in Millions) | 2016 | 2015 | 2014 | |||||||||
Operating Activities |
||||||||||||
Net income attributable to U.S. Bancorp |
$ | 5,888 | $ | 5,879 | $ | 5,851 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities |
||||||||||||
Equity in undistributed income of subsidiaries |
(3,940 | ) | (1,991 | ) | (2,107 | ) | ||||||
Other, net |
75 | 507 | 48 | |||||||||
|
|
|||||||||||
Net cash provided by operating activities |
2,023 | 4,395 | 3,792 | |||||||||
Investing Activities |
||||||||||||
Proceeds from sales and maturities of investment securities |
232 | 153 | 46 | |||||||||
Purchases of investment securities |
(120 | ) | (47 | ) | (39 | ) | ||||||
Net (increase) decrease in short-term advances to subsidiaries |
(442 | ) | (273 | ) | 984 | |||||||
Long-term advances to subsidiaries |
(750 | ) | (500 | ) | (1,800 | ) | ||||||
Principal collected on long-term advances to subsidiaries |
100 | | 1,400 | |||||||||
Other, net |
(12 | ) | (6 | ) | (52 | ) | ||||||
|
|
|||||||||||
Net cash (used in) provided by investing activities |
(992 | ) | (673 | ) | 539 | |||||||
Financing Activities |
||||||||||||
Net (decrease) increase in short-term borrowings |
(3 | ) | (152 | ) | 39 | |||||||
Proceeds from issuance of long-term debt |
3,550 | | 3,250 | |||||||||
Principal payments or redemption of long-term debt |
(1,926 | ) | (1,750 | ) | (1,500 | ) | ||||||
Proceeds from issuance of preferred stock |
| 745 | | |||||||||
Proceeds from issuance of common stock |
355 | 295 | 453 | |||||||||
Repurchase of common stock |
(2,556 | ) | (2,190 | ) | (2,200 | ) | ||||||
Cash dividends paid on preferred stock |
(267 | ) | (242 | ) | (243 | ) | ||||||
Cash dividends paid on common stock |
(1,810 | ) | (1,777 | ) | (1,726 | ) | ||||||
|
|
|||||||||||
Net cash used in financing activities |
(2,657 | ) | (5,071 | ) | (1,927 | ) | ||||||
|
|
|||||||||||
Change in cash and due from banks |
(1,626 | ) | (1,349 | ) | 2,404 | |||||||
Cash and due from banks at beginning of year |
9,426 | 10,775 | 8,371 | |||||||||
|
|
|||||||||||
Cash and due from banks at end of year |
$ | 7,800 | $ | 9,426 | $ | 10,775 |
NOTE 24 Subsequent Events |
141
U.S. Bancorp
Consolidated Balance Sheet Five Year Summary (Unaudited)
At December 31 (Dollars in Millions) | 2016 | 2015 | 2014 | 2013 | 2012 | % Change 2016 v 2015 |
||||||||||||||||||
Assets |
||||||||||||||||||||||||
Cash and due from banks |
$ | 15,705 | $ | 11,147 | $ | 10,654 | $ | 8,477 | $ | 8,252 | 40.9 | % | ||||||||||||
Held-to-maturity securities |
42,991 | 43,590 | 44,974 | 38,920 | 34,389 | (1.4 | ) | |||||||||||||||||
Available-for-sale securities |
66,284 | 61,997 | 56,069 | 40,935 | 40,139 | 6.9 | ||||||||||||||||||
Loans held for sale |
4,826 | 3,184 | 4,792 | 3,268 | 7,976 | 51.6 | ||||||||||||||||||
Loans |
273,207 | 260,849 | 247,851 | 235,235 | 223,329 | 4.7 | ||||||||||||||||||
Less allowance for loan losses |
(3,813 | ) | (3,863 | ) | (4,039 | ) | (4,250 | ) | (4,424 | ) | 1.3 | |||||||||||||
Net loans |
269,394 | 256,986 | 243,812 | 230,985 | 218,905 | 4.8 | ||||||||||||||||||
Other assets |
46,764 | 44,949 | 42,228 | 41,436 | 44,194 | 4.0 | ||||||||||||||||||
Total assets |
$ | 445,964 | $ | 421,853 | $ | 402,529 | $ | 364,021 | $ | 353,855 | 5.7 | |||||||||||||
Liabilities and Shareholders Equity |
||||||||||||||||||||||||
Deposits |
||||||||||||||||||||||||
Noninterest-bearing |
$ | 86,097 | $ | 83,766 | $ | 77,323 | $ | 76,941 | $ | 74,172 | 2.8 | % | ||||||||||||
Interest-bearing |
248,493 | 216,634 | 205,410 | 185,182 | 175,011 | 14.7 | ||||||||||||||||||
Total deposits |
334,590 | 300,400 | 282,733 | 262,123 | 249,183 | 11.4 | ||||||||||||||||||
Short-term borrowings |
13,963 | 27,877 | 29,893 | 27,608 | 26,302 | (49.9 | ) | |||||||||||||||||
Long-term debt |
33,323 | 32,078 | 32,260 | 20,049 | 25,516 | 3.9 | ||||||||||||||||||
Other liabilities |
16,155 | 14,681 | 13,475 | 12,434 | 12,587 | 10.0 | ||||||||||||||||||
Total liabilities |
398,031 | 375,036 | 358,361 | 322,214 | 313,588 | 6.1 | ||||||||||||||||||
Total U.S. Bancorp shareholders equity |
47,298 | 46,131 | 43,479 | 41,113 | 38,998 | 2.5 | ||||||||||||||||||
Noncontrolling interests |
635 | 686 | 689 | 694 | 1,269 | (7.4 | ) | |||||||||||||||||
Total equity |
47,933 | 46,817 | 44,168 | 41,807 | 40,267 | 2.4 | ||||||||||||||||||
Total liabilities and equity |
$ | 445,964 | $ | 421,853 | $ | 402,529 | $ | 364,021 | $ | 353,855 | 5.7 |
142
U.S. Bancorp
Consolidated Statement of Income Five-Year Summary (Unaudited)
Year Ended December 31 (Dollars in Millions) | 2016 | 2015 | 2014 | 2013 | 2012 | % Change 2016 v 2015 |
||||||||||||||||||
Interest Income |
||||||||||||||||||||||||
Loans |
$ | 10,810 | $ | 10,059 | $ | 10,113 | $ | 10,277 | $ | 10,558 | 7.5 | % | ||||||||||||
Loans held for sale |
154 | 206 | 128 | 203 | 282 | (25.2 | ) | |||||||||||||||||
Investment securities |
2,078 | 2,001 | 1,866 | 1,631 | 1,792 | 3.8 | ||||||||||||||||||
Other interest income |
125 | 136 | 121 | 174 | 251 | (8.1 | ) | |||||||||||||||||
|
|
|||||||||||||||||||||||
Total interest income |
13,167 | 12,402 | 12,228 | 12,285 | 12,883 | 6.2 | ||||||||||||||||||
Interest Expense |
||||||||||||||||||||||||
Deposits |
622 | 457 | 465 | 561 | 691 | 36.1 | ||||||||||||||||||
Short-term borrowings |
263 | 245 | 263 | 353 | 442 | 7.3 | ||||||||||||||||||
Long-term debt |
754 | 699 | 725 | 767 | 1,005 | 7.9 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Total interest expense |
1,639 | 1,401 | 1,453 | 1,681 | 2,138 | 17.0 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Net interest income |
11,528 | 11,001 | 10,775 | 10,604 | 10,745 | 4.8 | ||||||||||||||||||
Provision for credit losses |
1,324 | 1,132 | 1,229 | 1,340 | 1,882 | 17.0 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Net interest income after provision for credit losses |
10,204 | 9,869 | 9,546 | 9,264 | 8,863 | 3.4 | ||||||||||||||||||
Noninterest Income |
||||||||||||||||||||||||
Credit and debit card revenue |
1,177 | 1,070 | 1,021 | 965 | 892 | 10.0 | ||||||||||||||||||
Corporate payment products revenue |
712 | 708 | 724 | 706 | 744 | .6 | ||||||||||||||||||
Merchant processing services |
1,592 | 1,547 | 1,511 | 1,458 | 1,395 | 2.9 | ||||||||||||||||||
ATM processing services |
338 | 318 | 321 | 327 | 346 | 6.3 | ||||||||||||||||||
Trust and investment management fees |
1,427 | 1,321 | 1,252 | 1,139 | 1,055 | 8.0 | ||||||||||||||||||
Deposit service charges |
725 | 702 | 693 | 670 | 653 | 3.3 | ||||||||||||||||||
Treasury management fees |
583 | 561 | 545 | 538 | 541 | 3.9 | ||||||||||||||||||
Commercial products revenue |
871 | 867 | 854 | 859 | 878 | .5 | ||||||||||||||||||
Mortgage banking revenue |
979 | 906 | 1,009 | 1,356 | 1,937 | 8.1 | ||||||||||||||||||
Investment products fees |
158 | 185 | 191 | 178 | 150 | (14.6 | ) | |||||||||||||||||
Securities gains (losses), net |
22 | | 3 | 9 | (15 | ) | * | |||||||||||||||||
Other |
993 | 907 | 1,040 | 569 | 743 | 9.5 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Total noninterest income |
9,577 | 9,092 | 9,164 | 8,774 | 9,319 | 5.3 | ||||||||||||||||||
Noninterest Expense |
||||||||||||||||||||||||
Compensation |
5,212 | 4,812 | 4,523 | 4,371 | 4,320 | 8.3 | ||||||||||||||||||
Employee benefits |
1,119 | 1,167 | 1,041 | 1,140 | 945 | (4.1 | ) | |||||||||||||||||
Net occupancy and equipment |
988 | 991 | 987 | 949 | 917 | (.3 | ) | |||||||||||||||||
Professional services |
502 | 423 | 414 | 381 | 530 | 18.7 | ||||||||||||||||||
Marketing and business development |
435 | 361 | 382 | 357 | 388 | 20.5 | ||||||||||||||||||
Technology and communications |
955 | 887 | 863 | 848 | 821 | 7.7 | ||||||||||||||||||
Postage, printing and supplies |
311 | 297 | 328 | 310 | 304 | 4.7 | ||||||||||||||||||
Other intangibles |
179 | 174 | 199 | 223 | 274 | 2.9 | ||||||||||||||||||
Other |
1,975 | 1,819 | 1,978 | 1,695 | 1,957 | 8.6 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Total noninterest expense |
11,676 | 10,931 | 10,715 | 10,274 | 10,456 | 6.8 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Income before income taxes |
8,105 | 8,030 | 7,995 | 7,764 | 7,726 | .9 | ||||||||||||||||||
Applicable income taxes |
2,161 | 2,097 | 2,087 | 2,032 | 2,236 | 3.1 | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Net income |
5,944 | 5,933 | 5,908 | 5,732 | 5,490 | .2 | ||||||||||||||||||
Net (income) loss attributable to noncontrolling interests |
(56 | ) | (54 | ) | (57 | ) | 104 | 157 | (3.7 | ) | ||||||||||||||
|
|
|||||||||||||||||||||||
Net income attributable to U.S. Bancorp |
$ | 5,888 | $ | 5,879 | $ | 5,851 | $ | 5,836 | $ | 5,647 | .2 | |||||||||||||
|
|
|||||||||||||||||||||||
Net income applicable to U.S. Bancorp common shareholders |
$ | 5,589 | $ | 5,608 | $ | 5,583 | $ | 5,552 | $ | 5,383 | (.3 | ) |
* | Not meaningful |
143
U.S. Bancorp
Quarterly Consolidated Financial Data (Unaudited)
2016 | 2015 | |||||||||||||||||||||||||||||||||||
(Dollars in Millions, Except Per Share Data) | First Quarter |
Second Quarter |
Third Quarter |
Fourth Quarter |
First Quarter |
Second Quarter |
Third Quarter |
Fourth Quarter |
||||||||||||||||||||||||||||
Interest Income |
||||||||||||||||||||||||||||||||||||
Loans |
$ | 2,644 | $ | 2,664 | $ | 2,731 | $ | 2,771 | $ | 2,493 | $ | 2,463 | $ | 2,520 | $ | 2,583 | ||||||||||||||||||||
Loans held for sale |
31 | 36 | 43 | 44 | 41 | 65 | 60 | 40 | ||||||||||||||||||||||||||||
Investment securities |
517 | 523 | 515 | 523 | 495 | 505 | 502 | 499 | ||||||||||||||||||||||||||||
Other interest income |
29 | 29 | 31 | 36 | 32 | 35 | 35 | 34 | ||||||||||||||||||||||||||||
Total interest income |
3,221 | 3,252 | 3,320 | 3,374 | 3,061 | 3,068 | 3,117 | 3,156 | ||||||||||||||||||||||||||||
Interest Expense |
||||||||||||||||||||||||||||||||||||
Deposits |
139 | 152 | 161 | 170 | 118 | 113 | 113 | 113 | ||||||||||||||||||||||||||||
Short-term borrowings |
65 | 66 | 70 | 62 | 61 | 62 | 66 | 56 | ||||||||||||||||||||||||||||
Long-term debt |
182 | 189 | 196 | 187 | 184 | 177 | 170 | 168 | ||||||||||||||||||||||||||||
Total interest expense |
386 | 407 | 427 | 419 | 363 | 352 | 349 | 337 | ||||||||||||||||||||||||||||
Net interest income |
2,835 | 2,845 | 2,893 | 2,955 | 2,698 | 2,716 | 2,768 | 2,819 | ||||||||||||||||||||||||||||
Provision for credit losses |
330 | 327 | 325 | 342 | 264 | 281 | 282 | 305 | ||||||||||||||||||||||||||||
Net interest income after provision for credit losses |
2,505 | 2,518 | 2,568 | 2,613 | 2,434 | 2,435 | 2,486 | 2,514 | ||||||||||||||||||||||||||||
Noninterest Income |
||||||||||||||||||||||||||||||||||||
Credit and debit card revenue |
266 | 296 | 299 | 316 | 241 | 266 | 269 | 294 | ||||||||||||||||||||||||||||
Corporate payment products revenue |
170 | 181 | 190 | 171 | 170 | 178 | 190 | 170 | ||||||||||||||||||||||||||||
Merchant processing services |
373 | 403 | 412 | 404 | 359 | 395 | 400 | 393 | ||||||||||||||||||||||||||||
ATM processing services |
80 | 84 | 87 | 87 | 78 | 80 | 81 | 79 | ||||||||||||||||||||||||||||
Trust and investment management fees |
339 | 358 | 362 | 368 | 322 | 334 | 329 | 336 | ||||||||||||||||||||||||||||
Deposit service charges |
168 | 179 | 192 | 186 | 161 | 174 | 185 | 182 | ||||||||||||||||||||||||||||
Treasury management fees |
142 | 147 | 147 | 147 | 137 | 142 | 143 | 139 | ||||||||||||||||||||||||||||
Commercial products revenue |
197 | 238 | 219 | 217 | 200 | 214 | 231 | 222 | ||||||||||||||||||||||||||||
Mortgage banking revenue |
187 | 238 | 314 | 240 | 240 | 231 | 224 | 211 | ||||||||||||||||||||||||||||
Investment products fees |
40 | 39 | 41 | 38 | 47 | 48 | 46 | 44 | ||||||||||||||||||||||||||||
Securities gains (losses), net |
3 | 3 | 10 | 6 | | | (1 | ) | 1 | |||||||||||||||||||||||||||
Other |
184 | 386 | 172 | 251 | 199 | 210 | 229 | 269 | ||||||||||||||||||||||||||||
Total noninterest income |
2,149 | 2,552 | 2,445 | 2,431 | 2,154 | 2,272 | 2,326 | 2,340 | ||||||||||||||||||||||||||||
Noninterest Expense |
||||||||||||||||||||||||||||||||||||
Compensation |
1,249 | 1,277 | 1,329 | 1,357 | 1,179 | 1,196 | 1,225 | 1,212 | ||||||||||||||||||||||||||||
Employee benefits |
300 | 278 | 280 | 261 | 317 | 293 | 285 | 272 | ||||||||||||||||||||||||||||
Net occupancy and equipment |
248 | 243 | 250 | 247 | 247 | 247 | 251 | 246 | ||||||||||||||||||||||||||||
Professional services |
98 | 121 | 127 | 156 | 77 | 106 | 115 | 125 | ||||||||||||||||||||||||||||
Marketing and business development |
77 | 149 | 102 | 107 | 70 | 96 | 99 | 96 | ||||||||||||||||||||||||||||
Technology and communications |
233 | 241 | 243 | 238 | 214 | 221 | 222 | 230 | ||||||||||||||||||||||||||||
Postage, printing and supplies |
79 | 77 | 80 | 75 | 82 | 64 | 77 | 74 | ||||||||||||||||||||||||||||
Other intangibles |
45 | 44 | 45 | 45 | 43 | 43 | 42 | 46 | ||||||||||||||||||||||||||||
Other |
420 | 562 | 475 | 518 | 436 | 416 | 459 | 508 | ||||||||||||||||||||||||||||
Total noninterest expense |
2,749 | 2,992 | 2,931 | 3,004 | 2,665 | 2,682 | 2,775 | 2,809 | ||||||||||||||||||||||||||||
Income before income taxes |
1,905 | 2,078 | 2,082 | 2,040 | 1,923 | 2,025 | 2,037 | 2,045 | ||||||||||||||||||||||||||||
Applicable income taxes |
504 | 542 | 566 | 549 | 479 | 528 | 534 | 556 | ||||||||||||||||||||||||||||
Net income |
1,401 | 1,536 | 1,516 | 1,491 | 1,444 | 1,497 | 1,503 | 1,489 | ||||||||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests |
(15 | ) | (14 | ) | (14 | ) | (13 | ) | (13 | ) | (14 | ) | (14 | ) | (13 | ) | ||||||||||||||||||||
Net income attributable to U.S. Bancorp |
$ | 1,386 | $ | 1,522 | $ | 1,502 | $ | 1,478 | $ | 1,431 | $ | 1,483 | $ | 1,489 | $ | 1,476 | ||||||||||||||||||||
Net income applicable to U.S. Bancorp common shareholders |
$ | 1,329 | $ | 1,435 | $ | 1,434 | $ | 1,391 | $ | 1,365 | $ | 1,417 | $ | 1,422 | $ | 1,404 | ||||||||||||||||||||
Earnings per common share |
$ | .77 | $ | .83 | $ | .84 | $ | .82 | $ | .77 | $ | .80 | $ | .81 | $ | .80 | ||||||||||||||||||||
Diluted earnings per common share |
$ | .76 | $ | .83 | $ | .84 | $ | .82 | $ | .76 | $ | .80 | $ | .81 | $ | .80 |
144
U.S. Bancorp
Supplemental Financial Data (Unaudited)
Earnings Per Common Share Summary | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
Earnings per common share |
$ | 3.25 | $ | 3.18 | $ | 3.10 | $ | 3.02 | $ | 2.85 | ||||||||||
Diluted earnings per common share |
3.24 | 3.16 | 3.08 | 3.00 | 2.84 | |||||||||||||||
Dividends declared per common share |
1.070 | 1.010 | .965 | .885 | .780 | |||||||||||||||
Ratios | ||||||||||||||||||||
Return on average assets |
1.36 | % | 1.44 | % | 1.54 | % | 1.65 | % | 1.65 | % | ||||||||||
Return on average common equity |
13.4 | 14.0 | 14.7 | 15.8 | 16.2 | |||||||||||||||
Average total U.S. Bancorp shareholders equity to average assets |
10.9 | 11.0 | 11.3 | 11.3 | 11.0 | |||||||||||||||
Dividends per common share to net income per common share |
32.9 | 31.8 | 31.1 | 29.3 | 27.4 | |||||||||||||||
Other Statistics (Dollars and Shares in Millions) | ||||||||||||||||||||
Common shares outstanding(a) |
1,697 | 1,745 | 1,786 | 1,825 | 1,869 | |||||||||||||||
Average common shares outstanding and common stock equivalents |
||||||||||||||||||||
Earnings per common share |
1,718 | 1,764 | 1,803 | 1,839 | 1,887 | |||||||||||||||
Diluted earnings per common share |
1,724 | 1,772 | 1,813 | 1,849 | 1,896 | |||||||||||||||
Number of shareholders(b) |
38,794 | 40,666 | 44,114 | 46,632 | 49,430 | |||||||||||||||
Common dividends declared |
$ | 1,842 | $ | 1,785 | $ | 1,745 | $ | 1,631 | $ | 1,474 |
(a) | Defined as total common shares less common stock held in treasury at December 31. |
(b) | Based on number of common stock shareholders of record at December 31. |
Stock Price Range and Dividends
2016 | 2015 | |||||||||||||||||||||||||||||||
Sales Price | Sales Price | |||||||||||||||||||||||||||||||
High | Low | Closing Price |
Dividends Declared |
High | Low | Closing Price |
Dividends Declared |
|||||||||||||||||||||||||
First quarter |
$ | 41.82 | $ | 37.07 | $ | 40.59 | $ | .255 | $ | 45.49 | $ | 40.70 | $ | 43.67 | $ | .245 | ||||||||||||||||
Second quarter |
43.94 | 38.48 | 40.33 | .255 | 45.29 | 42.12 | 43.40 | .255 | ||||||||||||||||||||||||
Third quarter |
44.26 | 38.63 | 42.89 | .280 | 46.26 | 38.81 | 41.01 | .255 | ||||||||||||||||||||||||
Fourth quarter |
52.68 | 42.37 | 51.37 | .280 | 44.58 | 39.28 | 42.67 | .255 |
The common stock of U.S. Bancorp is traded on the New York Stock Exchange, under the ticker symbol USB. At January 31, 2017, there were 38,703 holders of record of the Companys common stock.
Stock Performance Chart
The following chart compares the cumulative total shareholder return on the Companys common stock during the five years ended December 31, 2016, with the cumulative total return on the Standard & Poors 500 Index and the KBW Bank Index. The comparison assumes $100 was invested on December 31, 2011, in the Companys common stock and in each of the foregoing indices and assumes the reinvestment of all dividends. The comparisons in the graph are based upon historical data and are not indicative of, nor intended to forecast, future performance of the Companys common stock.
145
U.S. Bancorp
Consolidated Daily Average Balance Sheet and Related Yields and Rates (a) (Unaudited)
2016 | 2015 | |||||||||||||||||||||||||||||||
Year Ended December 31 (Dollars in Millions) |
Average |
Interest | Yields and Rates |
Average Balances |
Interest | Yields and Rates |
||||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||
Investment securities |
$ | 107,922 | $ | 2,181 | 2.02 | % | $ | 103,161 | $ | 2,120 | 2.05 | % | ||||||||||||||||||||
Loans held for sale |
4,181 | 154 | 3.70 | 5,784 | 206 | 3.56 | ||||||||||||||||||||||||||
Loans(b) |
||||||||||||||||||||||||||||||||
Commercial |
92,043 | 2,596 | 2.82 | 84,083 | 2,281 | 2.71 | ||||||||||||||||||||||||||
Commercial real estate |
43,040 | 1,698 | 3.94 | 42,415 | 1,650 | 3.89 | ||||||||||||||||||||||||||
Residential mortgages |
55,682 | 2,070 | 3.72 | 51,840 | 1,966 | 3.79 | ||||||||||||||||||||||||||
Credit card |
20,490 | 2,237 | 10.92 | 18,057 | 1,969 | 10.90 | ||||||||||||||||||||||||||
Other retail |
52,330 | 2,114 | 4.04 | 49,079 | 2,020 | 4.12 | ||||||||||||||||||||||||||
Total loans, excluding covered loans |
263,585 | 10,715 | 4.06 | 245,474 | 9,886 | 4.03 | ||||||||||||||||||||||||||
Covered loans |
4,226 | 200 | 4.73 | 4,985 | 271 | 5.42 | ||||||||||||||||||||||||||
Total loans |
267,811 | 10,915 | 4.08 | 250,459 | 10,157 | 4.06 | ||||||||||||||||||||||||||
Other earning assets |
9,963 | 125 | 1.26 | 8,041 | 136 | 1.69 | ||||||||||||||||||||||||||
Total earning assets |
389,877 | 13,375 | 3.43 | 367,445 | 12,619 | 3.43 | ||||||||||||||||||||||||||
Allowance for loan losses |
(3,837 | ) | (4,035 | ) | ||||||||||||||||||||||||||||
Unrealized gain (loss) on investment securities |
593 | 710 | ||||||||||||||||||||||||||||||
Other assets |
46,680 | 44,745 | ||||||||||||||||||||||||||||||
Total assets |
$ | 433,313 | $ | 408,865 | ||||||||||||||||||||||||||||
Liabilities and Shareholders Equity |
||||||||||||||||||||||||||||||||
Noninterest-bearing deposits |
$ | 81,176 | $ | 79,203 | ||||||||||||||||||||||||||||
Interest-bearing deposits |
||||||||||||||||||||||||||||||||
Interest checking |
61,726 | 42 | .07 | 55,974 | 30 | .05 | ||||||||||||||||||||||||||
Money market savings |
96,518 | 349 | .36 | 79,266 | 192 | .24 | ||||||||||||||||||||||||||
Savings accounts |
40,382 | 34 | .09 | 37,150 | 40 | .11 | ||||||||||||||||||||||||||
Time deposits |
33,008 | 197 | .60 | 35,558 | 195 | .55 | ||||||||||||||||||||||||||
Total interest-bearing deposits |
231,634 | 622 | .27 | 207,948 | 457 | .22 | ||||||||||||||||||||||||||
Short-term borrowings |
19,906 | 268 | 1.34 | 27,960 | 249 | .89 | ||||||||||||||||||||||||||
Long-term debt |
36,220 | 754 | 2.08 | 33,566 | 699 | 2.08 | ||||||||||||||||||||||||||
Total interest-bearing liabilities |
287,760 | 1,644 | .57 | 269,474 | 1,405 | .52 | ||||||||||||||||||||||||||
Other liabilities |
16,389 | 14,686 | ||||||||||||||||||||||||||||||
Shareholders equity |
||||||||||||||||||||||||||||||||
Preferred equity |
5,501 | 4,836 | ||||||||||||||||||||||||||||||
Common equity |
41,838 | 39,977 | ||||||||||||||||||||||||||||||
Total U.S. Bancorp shareholders equity |
47,339 | 44,813 | ||||||||||||||||||||||||||||||
Noncontrolling interests |
649 | 689 | ||||||||||||||||||||||||||||||
Total equity |
47,988 | 45,502 | ||||||||||||||||||||||||||||||
Total liabilities and equity |
$ | 433,313 | $ | 408,865 | ||||||||||||||||||||||||||||
Net interest income |
$ | 11,731 | $ | 11,214 | ||||||||||||||||||||||||||||
Gross interest margin |
2.86 | % | 2.91 | % | ||||||||||||||||||||||||||||
Gross interest margin without taxable-equivalent increments |
2.81 | % | 2.85 | % | ||||||||||||||||||||||||||||
Percent of Earning Assets |
||||||||||||||||||||||||||||||||
Interest income |
3.43 | % | 3.43 | % | ||||||||||||||||||||||||||||
Interest expense |
.42 | .38 | ||||||||||||||||||||||||||||||
Net interest margin |
3.01 | % | 3.05 | % | ||||||||||||||||||||||||||||
Net interest margin without taxable-equivalent increments |
2.96 | % | 2.99 | % |
(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. |
146
2014 | 2013 | 2012 | 2016 v 2015 | |||||||||||||||||||||||||||||||||||||||||||||||
Average Balances |
Interest | Yields and Rates |
Average Balances |
Interest | Yields and Rates |
Average Balances |
Interest | Yields and Rates |
% Change Average Balances |
|||||||||||||||||||||||||||||||||||||||||
$ | 90,327 | $ | 1,991 | 2.20 | % | $ | 75,046 | $ | 1,767 | 2.35 | % | $ | 72,501 | $ | 1,939 | 2.67 | % | 4.6 | % | |||||||||||||||||||||||||||||||
3,148 | 128 | 4.08 | 5,723 | 203 | 3.56 | 7,847 | 282 | 3.60 | (27.7 | ) | ||||||||||||||||||||||||||||||||||||||||
75,734 | 2,228 | 2.94 | 67,274 | 2,168 | 3.22 | 60,830 | 2,168 | 3.56 | 9.5 | |||||||||||||||||||||||||||||||||||||||||
40,592 | 1,575 | 3.88 | 38,237 | 1,589 | 4.16 | 36,505 | 1,638 | 4.49 | 1.5 | |||||||||||||||||||||||||||||||||||||||||
51,818 | 2,001 | 3.86 | 47,982 | 1,959 | 4.08 | 40,290 | 1,827 | 4.53 | 7.4 | |||||||||||||||||||||||||||||||||||||||||
17,635 | 1,817 | 10.30 | 16,813 | 1,691 | 10.06 | 16,653 | 1,693 | 10.16 | 13.5 | |||||||||||||||||||||||||||||||||||||||||
48,353 | 2,141 | 4.43 | 47,125 | 2,318 | 4.92 | 47,938 | 2,488 | 5.19 | 6.6 | |||||||||||||||||||||||||||||||||||||||||
234,132 | 9,762 | 4.17 | 217,431 | 9,725 | 4.47 | 202,216 | 9,814 | 4.85 | 7.4 | |||||||||||||||||||||||||||||||||||||||||
7,560 | 452 | 5.97 | 10,043 | 643 | 6.41 | 13,158 | 826 | 6.28 | (15.2 | ) | ||||||||||||||||||||||||||||||||||||||||
241,692 | 10,214 | 4.23 | 227,474 | 10,368 | 4.56 | 215,374 | 10,640 | 4.94 | 6.9 | |||||||||||||||||||||||||||||||||||||||||
5,827 | 121 | 2.08 | 6,896 | 175 | 2.53 | 10,548 | 251 | 2.38 | 23.9 | |||||||||||||||||||||||||||||||||||||||||
340,994 | 12,454 | 3.65 | 315,139 | 12,513 | 3.97 | 306,270 | 13,112 | 4.28 | 6.1 | |||||||||||||||||||||||||||||||||||||||||
(4,187 | ) | (4,373 | ) | (4,642 | ) | 4.9 | ||||||||||||||||||||||||||||||||||||||||||||
466 | 633 | 1,077 | (16.5 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
42,731 | 41,281 | 40,144 | 4.3 | |||||||||||||||||||||||||||||||||||||||||||||||
$ | 380,004 | $ | 352,680 | $ | 342,849 | 6.0 | ||||||||||||||||||||||||||||||||||||||||||||
$ | 73,455 | $ | 69,020 | $ | 67,241 | 2.5 | % | |||||||||||||||||||||||||||||||||||||||||||
53,248 | 35 | .07 | 48,792 | 36 | .07 | 45,433 | 46 | .10 | 10.3 | |||||||||||||||||||||||||||||||||||||||||
63,977 | 117 | .18 | 55,512 | 76 | .14 | 46,874 | 62 | .13 | 21.8 | |||||||||||||||||||||||||||||||||||||||||
34,196 | 46 | .14 | 31,916 | 49 | .15 | 29,596 | 66 | .22 | 8.7 | |||||||||||||||||||||||||||||||||||||||||
41,764 | 267 | .64 | 45,217 | 400 | .88 | 46,566 | 517 | 1.11 | (7.2 | ) | ||||||||||||||||||||||||||||||||||||||||
193,185 | 465 | .24 | 181,437 | 561 | .31 | 168,469 | 691 | .41 | 11.4 | |||||||||||||||||||||||||||||||||||||||||
30,252 | 267 | .88 | 27,683 | 357 | 1.29 | 28,549 | 447 | 1.57 | (28.8 | ) | ||||||||||||||||||||||||||||||||||||||||
26,535 | 725 | 2.73 | 21,280 | 767 | 3.60 | 28,448 | 1,005 | 3.53 | 7.9 | |||||||||||||||||||||||||||||||||||||||||
249,972 | 1,457 | .58 | 230,400 | 1,685 | .73 | 225,466 | 2,143 | .95 | 6.8 | |||||||||||||||||||||||||||||||||||||||||
13,053 | 11,973 | 11,406 | 11.6 | |||||||||||||||||||||||||||||||||||||||||||||||
4,756 | 4,804 | 4,381 | 13.8 | |||||||||||||||||||||||||||||||||||||||||||||||
38,081 | 35,113 | 33,230 | 4.7 | |||||||||||||||||||||||||||||||||||||||||||||||
42,837 | 39,917 | 37,611 | 5.6 | |||||||||||||||||||||||||||||||||||||||||||||||
687 | 1,370 | 1,125 | (5.8 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
43,524 | 41,287 | 38,736 | 5.5 | |||||||||||||||||||||||||||||||||||||||||||||||
$ | 380,004 | $ | 352,680 | $ | 342,849 | 6.0 | ||||||||||||||||||||||||||||||||||||||||||||
$ | 10,997 | $ | 10,828 | $ | 10,969 | |||||||||||||||||||||||||||||||||||||||||||||
3.07 | % | 3.24 | % | 3.33 | % | |||||||||||||||||||||||||||||||||||||||||||||
3.00 | % | 3.17 | % | 3.26 | % | |||||||||||||||||||||||||||||||||||||||||||||
3.65 | % | 3.97 | % | 4.28 | % | |||||||||||||||||||||||||||||||||||||||||||||
.42 | .53 | .70 | ||||||||||||||||||||||||||||||||||||||||||||||||
3.23 | % | 3.44 | % | 3.58 | % | |||||||||||||||||||||||||||||||||||||||||||||
3.16 | % | 3.37 | % | 3.51 | % |
147
Company Information
148
149
150
151
152
153
154
155
156
157
Executive Officers
158
159
Directors
1. | Executive Committee |
2. | Audit Committee |
3. | Capital Planning Committee |
4. | Community Reinvestment and Public Policy Committee |
5. | Compensation and Human Resources Committee |
6. | Governance Committee |
7. | Risk Management Committee |
160
EXHIBIT 21
SUBSIDIARIES OF U.S. BANCORP
(JURISDICTIONS OF ORGANIZATION SHOWN IN PARENTHESES)
111 Tower Investors, Inc. (Minnesota)
Daimler Title Co. (Delaware)
DSL Service Company (California)
Eclipse Funding LLC (Delaware)
Elavon Canada Company (Canada)
Elavon European Holdings B.V. (Netherlands)
Elavon European Holdings C.V. (Netherlands)
Elavon Financial Services DAC (Ireland)
Elavon Latin American Holdings, LLC (Delaware)
Elavon Merchant Services Mexico, S. de R.L. de C.V. (Mexico)
Elavon Mexico Holding Company, S.A. de C.V. (Mexico)
Elavon Operations Company, S. de R.I. de C.V. (Mexico)
Elavon Puerto Rico, Inc. (Puerto Rico)
Elavon Services Company, S. de R.I. de C.V. (Mexico)
Elavon, Inc. (Georgia)
EuroConex Technologies Limited (Ireland)
Fairfield Financial Group, Inc. (Illinois)
First Bank LaCrosse Building Corp. (Wisconsin)
First LaCrosse Properties (Wisconsin)
Firstar Capital Corporation (Ohio)
Firstar Development, LLC (Delaware)
Firstar Realty, L.L.C. (Illinois)
Fixed Income Client Solutions LLC (Delaware)
FSV Payment Systems, Inc. (Delaware)
Galaxy Funding, Inc. (Delaware)
GTLT, Inc. (Delaware)
HTD Leasing LLC (Delaware)
HVT, Inc. (Delaware)
InternetSecure Corp. (Delaware)
Key Merchant Services, LLC (Delaware)
MBS-UI Sub-CDE XVI, LLC (Delaware)
Mercantile Mortgage Financial Company (Illinois)
Midwest Indemnity Inc. (Vermont)
Mississippi Valley Company (Arizona)
MMCA Lease Services, Inc. (Delaware)
NILT, Inc. (Delaware)
NuMaMe, LLC (Delaware)
One Eleven Investors LLC (Delaware)
P.I.B., Inc. (Minnesota)
Park Bank Initiatives, Inc. (Illinois)
Plaza Towers Holdings, LLC (Minnesota)
Pomona Financial Services, Inc. (California)
Pullman Park Development, LLC (Illinois)
Pullman Park Investment Fund I, LLC (Missouri)
Pullman Transformation, Inc. (Delaware)
Quasar Distributors, LLC (Delaware)
Quintillion Holding Company Limited (Ireland)
Quintillion Limited (Ireland)
Quintillion Services Limited (Ireland)
RBC Community Development Sub 3, LLC (Delaware)
Red Sky Risk Services, LLC (Delaware)
RTRT, Inc. (Delaware)
SCBD, LLC (Delaware)
SCDA, LLC (Delaware)
SCFD LLC (Delaware)
Syncada Asia Pacific Private Limited (Singapore)
Syncada Canada ULC (Canada)
Syncada Europe BVBA (Belgium)
Syncada India Operations Private Limited (India)
Syncada LLC (Delaware)
Tarquad Corporation (Missouri)
The Miami Valley Insurance Company (Arizona)
TMTT, Inc. (Delaware)
U.S. Bancorp Asset Management, Inc. (Delaware)
U.S. Bancorp Community Development Corporation (Minnesota)
U.S. Bancorp Community Investment Corporation (Delaware)
U.S. Bancorp Fund Services (Guernsey), Limited (Guernsey)
U.S. Bancorp Fund Services, Limited (United Kingdom)
U.S. Bancorp Fund Services, LLC (Wisconsin)
U.S. Bancorp Fund Services, Ltd. (Cayman Islands)
U.S. Bancorp Government Leasing and Finance, Inc. (Minnesota)
U.S. Bancorp Insurance and Investments, Inc. (Wyoming)
U.S. Bancorp Insurance Company, Inc. (Vermont)
U.S. Bancorp Insurance Services of Montana, Inc. (Montana)
U.S. Bancorp Insurance Services, LLC (Wisconsin)
U.S. Bancorp Investments, Inc. (Delaware)
U.S. Bancorp Missouri Low-Income Housing Tax Credit Fund, L.L.C. (Missouri)
U.S. Bancorp Municipal Lending and Finance, Inc. (Minnesota)
U.S. Bancorp Service Providers LLC (Delaware)
U.S. Bank National Association (a nationally chartered banking association)
U.S. Bank Trust Company, National Association (a nationally chartered banking association)
U.S. Bank Trust National Association (a nationally chartered banking association)
U.S. Bank Trust National Association SD (a nationally chartered banking association)
U.S. Bank Trustees Limited (United Kingdom)
USB Americas Holdings Company (Delaware)
USB Capital Resources, Inc. (Delaware)
USB Capital IX (Delaware)
USB European Holdings Company (Delaware)
USB Global Investments, LLC (Delaware)
USB Leasing LLC (Delaware)
USB Leasing LT (Delaware)
USB Nominees (UK) Limited (United Kingdom)
USB Realty Corp. (Delaware)
USB Trade Services Limited (Hong Kong)
USBCDE, LLC (Delaware)
VT Inc. (Alabama)
EXHIBIT 23
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in this Annual Report (Form 10-K) of U.S. Bancorp of our reports dated February 23, 2017, with respect to the consolidated financial statements of U.S. Bancorp and the effectiveness of internal control over financial reporting of U.S. Bancorp, included in the 2016 Annual Report to Shareholders of U.S. Bancorp.
We consent to the incorporation by reference in the following Registration Statements:
Form |
Registration Statement No. |
Purpose | ||
S-3 | 333-195373 | Shelf Registration Statement | ||
S-8 | 333-74036 | U.S. Bancorp 2001 Stock Incentive Plan | ||
S-8 | 333-100671 | U.S. Bancorp 401(k) Savings Plan | ||
S-8 | 333-142194 | Various benefit plans of U.S. Bancorp | ||
S-8 | 333-166193 | Various benefit plans of U.S. Bancorp | ||
S-8 | 333-189506 | Various benefit plans of U.S. Bancorp | ||
S-8 | 333-195375 | Various benefit plans of U.S. Bancorp | ||
S-8 | 333-203620 | U.S. Bancorp 2015 Stock Incentive Plan |
of our reports dated February 23, 2017, with respect to the consolidated financial statements of U.S. Bancorp and the effectiveness of internal control over financial reporting of U.S. Bancorp, included in the 2016 Annual Report to Shareholders of U.S. Bancorp, which is incorporated by reference in this Annual Report (Form 10-K) of U.S. Bancorp for the year ended December 31, 2016.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
February 23, 2017
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors of U.S. Bancorp, a Delaware corporation, hereby constitutes and appoints Richard K. Davis, Andrew Cecere and James L. Chosy, and each of them, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead in any and all capacities, to sign one or more Annual Reports for the Companys fiscal year ended December 31, 2016 on Form 10-K under the Securities Exchange Act of 1934, as amended, or such other form as any such attorney-in-fact may deem necessary or desirable, any amendments thereto, and all additional amendments thereto, each in such form as they or any one of them may approve, and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done so that such Annual Report shall comply with the Securities Exchange Act of 1934, as amended, and the applicable Rules and Regulations adopted or issued pursuant thereto, as fully and to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitute or resubstitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has set his or her hand this 17th day of January, 2017.
/s/ Olivia F. Kirtley | ||||
Douglas M. Baker, Jr. | Olivia F. Kirtley | |||
/s/ Warner L. Baxter | /s/ Karen S. Lynch | |||
Warner L. Baxter | Karen S. Lynch | |||
/s/ Marc N. Casper | /s/ David B. OMaley | |||
Marc N. Casper | David B. OMaley | |||
/s/ Arthur D. Collins, Jr. | /s/ Odell M. Owens, M.D., M.P.H. | |||
Arthur D. Collins, Jr. | Odell M. Owens, M.D., M.P.H. | |||
/s/ Kimberly J. Harris | /s/ Craig D. Schnuck | |||
Kimberly J. Harris | Craig D. Schnuck | |||
/s/ Roland A. Hernandez | /s/ Scott W. Wine | |||
Roland A. Hernandez | Scott W. Wine | |||
/s/ Doreen Woo Ho | ||||
Doreen Woo Ho |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors of U.S. Bancorp, a Delaware corporation, hereby constitutes and appoints Richard K. Davis, Andrew Cecere and James L. Chosy, and each of them, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead in any and all capacities, to sign one or more Annual Reports for the Companys fiscal year ended December 31, 2016 on Form 10-K under the Securities Exchange Act of 1934, as amended, or such other form as any such attorney-in-fact may deem necessary or desirable, any amendments thereto, and all additional amendments thereto, each in such form as they or any one of them may approve, and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done so that such Annual Report shall comply with the Securities Exchange Act of 1934, as amended, and the applicable Rules and Regulations adopted or issued pursuant thereto, as fully and to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their substitute or resubstitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has set his hand this 1st day of February, 2017.
/s/ Douglas M. Baker, Jr. |
Douglas M. Baker, Jr. |
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 Annual Report on Form 10-K of U.S. Bancorp; |
(2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
(4) | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
(5) | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
/s/ RICHARD K. DAVIS | ||||
Richard K. Davis | ||||
Dated: February 23, 2017 | Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934
I, Terrance R. Dolan, certify that:
(1) | I have reviewed this Annual Report on Form 10-K of U.S. Bancorp; |
(2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
(4) | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
(5) | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
/s/ TERRANCE R. DOLAN | ||||
Terrance R. Dolan | ||||
Dated: February 23, 2017 | Chief Financial Officer |
EXHIBIT 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, Chief Executive Officer and Chief Financial Officer of U.S. Bancorp, a Delaware corporation (the Company), do hereby certify that:
(1) The Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (the Form 10-K) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ RICHARD K. DAVIS | /s/ TERRANCE R. DOLAN | |||
Richard K. Davis | Terrance R. Dolan | |||
Chief Executive Officer | Chief Financial Officer |
Dated: February 23, 2017