e10vq
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
þ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF
1934
For the
quarterly period ended June 30, 2010
OR
o 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)
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Delaware
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41-0255900
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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800 Nicollet Mall
Minneapolis, Minnesota
55402
(Address of principal executive offices, including zip code)
651-466-3000
(Registrants telephone number, including area code)
(not applicable)
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the
registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days.
YES þ NO o
Indicate by check mark whether the
registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
YES þ NO o
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):
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Large accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
(Do not check if a smaller reporting company)
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Smaller reporting
company o
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Indicate by check mark whether the
registrant is a shell company (as defined in
Rule 12b-2
of the Exchange Act).
YES o NO þ
Indicate the number of shares
outstanding of each of the issuers classes of common
stock, as of the latest practicable date.
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Class
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Outstanding as of July 31, 2010
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Common Stock, $.01 Par Value
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1,917,160,774 shares
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Table of Contents
and
Form 10-Q
Cross Reference Index
Safe
Harbor Statement under the Private Securities Litigation
Reform Act of 1995.
This quarterly report on
Form 10-Q
contains forward-looking statements about U.S. Bancorp.
Statements that are not historical or current facts, including
statements about beliefs and expectations, are forward-looking
statements and are based on the information available to, and
assumptions and estimates made by, management as of the date
made. These forward-looking statements cover, among other
things, anticipated future revenue and expenses and the future
plans and prospects of U.S. Bancorp. Forward-looking
statements involve inherent risks and uncertainties, and
important factors could cause actual results to differ
materially from those anticipated. Global and domestic economies
could fail to recover from the recent economic downturn or could
experience another severe contraction, which could adversely
affect U.S. Bancorps revenues and the values of its
assets and liabilities. Global financial markets could
experience a recurrence of significant turbulence, which could
reduce the availability of funding to certain financial
institutions and lead to a tightening of credit, a reduction of
business activity, and increased market volatility. Stress in
the commercial real estate markets, as well as a delay or
failure of recovery in the residential real estate markets,
could cause additional credit losses and deterioration in asset
values. In addition, U.S. Bancorps business and
financial performance is likely to be impacted by effects of
recently enacted and future legislation and regulation.
U.S. Bancorps results could also be adversely
affected by continued deterioration in general business and
economic conditions; changes in interest rates; deterioration in
the credit quality of its loan portfolios or in the value of the
collateral securing those loans; deterioration in the value of
securities held in its investment securities portfolio; legal
and regulatory developments; increased competition from both
banks and non-banks; changes in customer behavior and
preferences; effects of mergers and acquisitions and related
integration; effects of critical accounting policies and
judgments; and managements ability to effectively manage
credit risk, residual value risk, market risk, operational risk,
interest rate risk and liquidity risk.
For discussion of these and other risks that may cause actual
results to differ from expectations, refer to
U.S. Bancorps Annual Report on
Form 10-K
for the year ended December 31, 2009, on file with the
Securities and Exchange Commission, including the sections
entitled Risk Factors and Corporate Risk
Profile contained in Exhibit 13, and all subsequent
filings with the Securities and Exchange Commission under
Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934. Forward-looking statements speak only as
of the date they are made, and U.S. Bancorp undertakes no
obligation to update them in light of new information or future
events.
Table
1 Selected
Financial Data
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Three Months
Ended
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Six Months Ended
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June 30,
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June 30,
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Percent
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Percent
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(Dollars and Shares
in Millions, Except Per Share Data)
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2010
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2009
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Change
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2010
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2009
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Change
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Condensed Income Statement
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Net interest income (taxable-equivalent basis) (a)
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$2,409
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$2,104
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14.5
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%
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$
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4,812
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$
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4,199
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14.6
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%
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Noninterest income
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2,131
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2,074
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2.7
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4,083
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4,060
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.6
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Securities gains (losses), net
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(21
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)
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(19
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)
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(10.5
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)
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(55
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)
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(217
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)
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74.7
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Total net revenue
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4,519
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4,159
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8.7
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8,840
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8,042
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9.9
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Noninterest expense
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2,377
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2,129
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11.6
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4,513
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4,000
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12.8
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Provision for credit losses
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1,139
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1,395
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(18.4
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)
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2,449
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2,713
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(9.7
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)
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Income before taxes
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1,003
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635
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58.0
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1,878
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1,329
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41.3
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Taxable-equivalent adjustment
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52
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50
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4.0
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103
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98
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5.1
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Applicable income taxes
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199
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100
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99.0
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360
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201
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79.1
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Net income
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752
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485
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55.1
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1,415
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1,030
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37.4
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Net (income) loss attributable to noncontrolling interests
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14
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(14
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)
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*
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20
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(30
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)
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*
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Net income attributable to U.S. Bancorp
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$766
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$471
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62.6
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$
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1,435
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$
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1,000
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43.5
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Net income applicable to U.S. Bancorp common shareholders
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$862
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$221
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*
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$
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1,510
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$
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640
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*
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Per Common Share
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Earnings per share
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$.45
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$.12
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*
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%
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$
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.79
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$
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.36
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*
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%
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Diluted earnings per share
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.45
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.12
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*
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.79
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.36
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*
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Dividends declared per share
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.05
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.05
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.10
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.10
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Book value per share
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13.69
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11.86
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15.4
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Market value per share
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22.35
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17.92
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24.7
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Average common shares outstanding
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1,912
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1,833
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4.3
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1,911
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1,794
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6.5
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Average diluted common shares outstanding
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1,921
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1,840
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4.4
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1,920
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1,801
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6.6
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Financial Ratios
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Return on average assets
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1.09
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%
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.71
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%
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1.03
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%
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.76
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%
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Return on average common equity
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13.4
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4.2
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12.0
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6.4
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Net interest margin (taxable-equivalent basis) (a)
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3.90
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3.60
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3.90
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3.59
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Efficiency ratio (b)
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52.4
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51.0
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50.7
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48.4
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Average Balances
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Loans
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$191,161
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$183,878
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4.0
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%
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$
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192,015
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$
|
184,786
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3.9
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%
|
Loans held for sale
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4,048
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6,092
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(33.6
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)
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3,990
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5,644
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(29.3
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)
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Investment securities
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|
47,140
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42,189
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11.7
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46,678
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42,255
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10.5
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Earning assets
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247,446
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234,265
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5.6
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|
248,133
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234,786
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5.7
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|
Assets
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|
281,340
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|
266,107
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5.7
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|
281,530
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|
266,171
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|
5.8
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|
Noninterest-bearing deposits
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|
39,917
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|
37,388
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6.8
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|
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|
38,964
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|
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|
36,707
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|
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|
6.1
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|
Deposits
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|
183,318
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|
163,220
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|
12.3
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|
|
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|
182,927
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|
|
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|
161,880
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|
|
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|
13.0
|
|
Short-term borrowings
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|
32,286
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|
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|
27,638
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|
16.8
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|
|
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|
32,418
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|
|
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|
29,915
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|
|
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|
8.4
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|
Long-term debt
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|
30,242
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|
|
|
38,768
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|
|
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|
(22.0
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)
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|
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|
31,343
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|
|
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|
38,279
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|
|
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|
(18.1
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)
|
Total U.S. Bancorp shareholders equity
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|
27,419
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|
|
|
28,202
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|
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|
(2.8
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)
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|
|
|
26,919
|
|
|
|
|
27,514
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|
|
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|
(2.2
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)
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|
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|
|
|
|
|
|
|
|
|
|
June 30,
2010
|
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|
December 31,
2009
|
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|
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|
|
|
|
|
|
|
|
|
|
|
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|
Period End Balances
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
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|
$191,584
|
|
|
|
$194,755
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|
|
|
|
(1.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses
|
|
|
5,536
|
|
|
|
5,264
|
|
|
|
|
5.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities
|
|
|
48,367
|
|
|
|
44,768
|
|
|
|
|
8.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
283,243
|
|
|
|
281,176
|
|
|
|
|
.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
183,123
|
|
|
|
183,242
|
|
|
|
|
(.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
29,137
|
|
|
|
32,580
|
|
|
|
|
(10.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. Bancorp shareholders equity
|
|
|
28,169
|
|
|
|
25,963
|
|
|
|
|
8.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital
|
|
|
10.1
|
%
|
|
|
9.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total risk-based capital
|
|
|
13.4
|
|
|
|
12.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leverage
|
|
|
8.8
|
|
|
|
8.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 common equity to risk-weighted assets (c)
|
|
|
7.4
|
|
|
|
6.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common equity to tangible assets (c)
|
|
|
6.0
|
|
|
|
5.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common equity to risk-weighted assets (c)
|
|
|
6.9
|
|
|
|
6.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Not
meaningful. |
(a)
|
|
Presented
on a fully taxable-equivalent basis utilizing a tax rate of
35 percent. |
(b)
|
|
Computed
as noninterest expense divided by the sum of net interest income
on a taxable-equivalent basis and noninterest income excluding
net securities gains (losses). |
(c)
|
|
See
Non-Regulatory Capital Ratios beginning on
page 26. |
OVERVIEW
Earnings
Summary U.S. Bancorp
and its subsidiaries (the Company) reported net
income attributable to U.S. Bancorp of $766 million
for the second quarter of 2010 or $.45 per diluted common share,
compared with $471 million, or $.12 per diluted common
share for the second quarter of 2009. Return on average assets
and return on average common equity were 1.09 percent and
13.4 percent, respectively, for the second quarter of 2010,
compared with .71 percent and 4.2 percent,
respectively, for the second quarter of 2009. Diluted earnings
per common share for the second quarter of 2010 included a
non-recurring $.05 benefit related to an exchange of newly
issued perpetual preferred stock for outstanding income trust
securities (ITS exchange), net of related debt
extinguishment costs. Also impacting the second quarter of 2010
were $25 million of provision for credit losses in excess
of net charge-offs, net securities losses of $21 million
and a $28 million gain related to the Companys
investment in Visa Inc. The second quarter of 2009 included
$466 million of provision for credit losses in excess of
net charge-offs, net securities losses of $19 million, a
$123 million accrual for a Federal Deposit Insurance
Corporation (FDIC) special assessment and a
reduction to earnings per share from recognition of
$154 million of unaccreted preferred stock discount as a
result of the redemption of preferred stock previously issued to
the U.S. Department of the Treasury.
Total net revenue, on a taxable-equivalent basis, for the second
quarter of 2010 was $360 million (8.7 percent) higher
than the second quarter of 2009, reflecting a 14.5 percent
increase in net interest income and a 2.7 percent increase
in total noninterest income. The increase in net interest income
over a year ago was largely the result of continued growth in
lower cost core deposit funding and an increase in average
earning assets, primarily related to acquisitions. Noninterest
income increased over a year ago as a result of higher
payments-related and commercial products revenue and other
income.
Total noninterest expense in the second quarter of 2010 was
$248 million (11.6 percent) higher than the second
quarter of 2009, primarily due to the impact of acquisitions,
higher compensation and employee benefits expense and costs
related to investments in affordable housing and other
tax-advantaged projects, partially offset by lower FDIC deposit
insurance expense due to the FDIC special assessment in the
second quarter of the prior year.
The provision for credit losses for the second quarter of 2010
was $1.1 billion, or $256 million (18.4 percent)
lower than the second quarter of 2009. The provision for credit
losses exceeded net charge-offs by $25 million in the
second quarter of 2010, compared with $466 million in the
second quarter of 2009. Net charge-offs in the second quarter of
2010 were $1.1 billion, compared with net charge-offs of
$929 million in the second quarter of 2009. Refer to
Corporate Risk Profile for further information on
the provision for credit losses, net charge-offs, nonperforming
assets and factors considered by the Company in assessing the
credit quality of the loan portfolio and establishing the
allowance for credit losses.
The Company reported net income attributable to
U.S. Bancorp of $1.4 billion for the first six months
of 2010 or $.79 per diluted common share, compared with
$1.0 billion, or $.36 per diluted common share for the
first six months of 2009. Return on average assets and return on
average common equity were 1.03 percent and
12.0 percent, respectively, for the first six months of
2010, compared with .76 percent and 6.4 percent,
respectively, for the first six months of 2009. The
Companys results for the first six months of 2010
reflected $200 million of provision for credit losses in
excess of net charge-offs, $55 million of net securities
losses and a $28 million gain related to the Companys
investment in Visa Inc. The first six months of 2009 included
$996 million of provision for credit losses in excess of
net charge-offs, $217 million of net securities losses, the
$123 million FDIC special assessment, the $154 million
preferred stock discount recognition and a $92 million gain
from a corporate real estate transaction.
Total net revenue, on a taxable-equivalent basis, for the first
six months of 2010 was $798 million (9.9 percent)
higher than the first six months of 2009, reflecting a
14.6 percent increase in net interest income and a
4.8 percent increase in total noninterest income. The
increase in net interest income over a year ago was largely the
result of continued growth in lower cost core deposit funding
and an increase in average earning assets. Noninterest income
increased over a year ago, principally due to higher
payments-related and commercial products revenue and a decrease
in net securities losses, partially offset by lower mortgage
banking revenue and other service charges.
Total noninterest expense in the first six months of 2010 was
$513 million (12.8 percent) higher than the first six
months of 2009, primarily due to the impact of acquisitions,
higher compensation and employee benefits expense and costs
related to investments in affordable housing and other
tax-advantaged projects, partially offset by lower FDIC deposit
insurance expense due to the special assessment in the second
quarter of 2009.
The provision for credit losses for the first six months of 2010
was $2.4 billion, or $264 million (9.7 percent)
lower than the first six months of 2009. The provision for
credit losses exceeded net charge-offs by $200 million in
the first six months of 2010, compared with $996 million in
the first six months of 2009. Net charge-offs in the first six
months of 2010 were $2.2 billion, compared with net
charge-offs of $1.7 billion in the first six months of
2009. Refer to Corporate Risk Profile for further
information on the provision for credit losses, net charge-offs,
nonperforming assets and factors considered by the Company in
assessing the credit quality of the loan portfolio and
establishing the allowance for credit losses.
Net Interest
Income Net
interest income, on a taxable-equivalent basis, was
$2.4 billion in the second quarter of 2010, compared with
$2.1 billion in the second quarter of 2009. Net interest
income, on a taxable-equivalent basis, was $4.8 billion in
the first six months of 2010, compared with $4.2 billion in
the first six months of 2009. The increases were primarily the
result of continued growth in lower cost core deposit funding,
increases in average earning assets and a higher net interest
margin. Average deposits increased $20.1 billion
(12.3 percent) in the second quarter and $21.0 billion
(13.0 percent) in the first six months of 2010, compared
with the same periods of 2009. Average earning assets were
$13.2 billion (5.6 percent) higher in the second
quarter and $13.3 billion (5.7 percent) higher in the
first six months of 2010, compared with the same periods of
2009, driven by increases in average loans and investment
securities. The net interest margin in the second quarter and
first six months of 2010 was 3.90 percent, compared with
3.60 percent in the second quarter of 2009 and
3.59 percent in the first six months of 2009. The increases
in net interest margin were principally due to the impact of
favorable funding rates as a result of the increase in deposits
and improved credit spreads. Refer to the Consolidated
Daily Average Balance Sheet and Related Yields and Rates
tables for further information on net interest income.
Total average loans for the second quarter and first six months
of 2010 were $7.3 billion (4.0 percent) and
$7.2 billion (3.9 percent) higher, respectively, than
the same periods of 2009, driven by growth in residential
mortgages, retail loans, commercial real estate loans and
acquired loans covered by loss sharing agreements with the FDIC,
partially offset by a decline in commercial loans which was
principally the result of lower utilization by customers of
available commitments. Residential mortgage growth reflected an
increase in activity throughout most of 2009 as a result of
market interest rate declines, including an increase in
government agency-guaranteed mortgages. Average retail loans
increased
year-over-year,
driven by increases in credit card, home equity and other retail
(primarily auto) loans. Average credit card balances for the
second quarter and first six months of 2010 were
$2.0 billion (14.0 percent) and $2.4 billion
(17.1 percent) higher, respectively, than the same periods
of 2009, reflecting growth in existing portfolios and portfolio
purchases of $1.6 billion during 2009 and $.5 billion
in the second quarter of 2010. Growth in average commercial real
estate balances reflected the impact of new business activity,
partially offset by customer debt deleveraging. Assets acquired
in
FDIC-assisted
transactions that are covered by loss sharing agreements with
the FDIC (covered assets or covered
loans) relate to the fourth quarter 2008 acquisitions of
the banking operations of Downey Savings and Loan Association,
F.A. and PFF Bank and Trust (Downey and
PFF, respectively) and the fourth quarter 2009
acquisition of the banking operations of First Bank of Oak Park
Corporation (FBOP). Average covered loans were
$20.5 billion and $20.9 billion in the second quarter
and first six months of 2010, respectively, compared with
$10.7 billion and $11.0 billion in the same periods of
2009, respectively.
Average investment securities in the second quarter and first
six months of 2010 were $5.0 billion (11.7 percent)
and $4.4 billion (10.5 percent) higher, respectively,
than the same periods of 2009, primarily due to purchases of
U.S. government agency-related securities and the
consolidation of $.6 billion of
held-to-maturity
securities held in a variable interest entity (VIE)
due to the adoption of new authoritative accounting guidance
effective January 1, 2010. As a result, the composition of
the Companys investment portfolio shifted to a larger
concentration in agency mortgage-backed securities, compared
with a year ago.
Average total deposits for the second quarter and first six
months of 2010 were $20.1 billion (12.3 percent) and
$21.0 billion (13.0 percent) higher, respectively,
than the same periods of 2009. Excluding deposits from
acquisitions, second quarter 2010 average total deposits
increased $6.7 billion (4.1 percent) over the second
quarter of 2009. Average noninterest-bearing
Table 2 Noninterest
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
June 30,
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
(Dollars in Millions)
|
|
2010
|
|
|
2009
|
|
|
|
Change
|
|
|
|
2010
|
|
|
|
2009
|
|
|
|
Change
|
|
Credit and debit card revenue
|
|
$
|
266
|
|
|
$
|
259
|
|
|
|
|
2.7
|
%
|
|
|
$
|
524
|
|
|
|
$
|
515
|
|
|
|
|
1.7
|
%
|
Corporate payment products revenue
|
|
|
178
|
|
|
|
168
|
|
|
|
|
6.0
|
|
|
|
|
346
|
|
|
|
|
322
|
|
|
|
|
7.5
|
|
Merchant processing services
|
|
|
320
|
|
|
|
278
|
|
|
|
|
15.1
|
|
|
|
|
612
|
|
|
|
|
536
|
|
|
|
|
14.2
|
|
ATM processing services
|
|
|
108
|
|
|
|
104
|
|
|
|
|
3.8
|
|
|
|
|
213
|
|
|
|
|
206
|
|
|
|
|
3.4
|
|
Trust and investment management fees
|
|
|
267
|
|
|
|
304
|
|
|
|
|
(12.2
|
)
|
|
|
|
531
|
|
|
|
|
598
|
|
|
|
|
(11.2
|
)
|
Deposit service charges
|
|
|
199
|
|
|
|
250
|
|
|
|
|
(20.4
|
)
|
|
|
|
406
|
|
|
|
|
476
|
|
|
|
|
(14.7
|
)
|
Treasury management fees
|
|
|
145
|
|
|
|
142
|
|
|
|
|
2.1
|
|
|
|
|
282
|
|
|
|
|
279
|
|
|
|
|
1.1
|
|
Commercial products revenue
|
|
|
205
|
|
|
|
144
|
|
|
|
|
42.4
|
|
|
|
|
366
|
|
|
|
|
273
|
|
|
|
|
34.1
|
|
Mortgage banking revenue
|
|
|
243
|
|
|
|
308
|
|
|
|
|
(21.1
|
)
|
|
|
|
443
|
|
|
|
|
541
|
|
|
|
|
(18.1
|
)
|
Investment products fees and commissions
|
|
|
30
|
|
|
|
27
|
|
|
|
|
11.1
|
|
|
|
|
55
|
|
|
|
|
55
|
|
|
|
|
|
|
Securities gains (losses), net
|
|
|
(21
|
)
|
|
|
(19
|
)
|
|
|
|
(10.5
|
)
|
|
|
|
(55
|
)
|
|
|
|
(217
|
)
|
|
|
|
74.7
|
|
Other
|
|
|
170
|
|
|
|
90
|
|
|
|
|
88.9
|
|
|
|
|
305
|
|
|
|
|
259
|
|
|
|
|
17.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
$
|
2,110
|
|
|
$
|
2,055
|
|
|
|
|
2.7
|
%
|
|
|
$
|
4,028
|
|
|
|
$
|
3,843
|
|
|
|
|
4.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
deposits for the second quarter and first six months of 2010
were $2.5 billion (6.8 percent) and $2.3 billion
(6.1 percent) higher, respectively, than the same periods
of 2009, primarily due to growth in corporate and institutional
trust balances, higher Consumer and Wholesale Banking business
line balances and the impact of acquisitions. Average total
savings deposits were $22.9 billion (29.7 percent)
higher in the second quarter and $25.7 billion
(34.9 percent) higher in the first six months of 2010,
compared with the same periods of 2009, the result of growth in
Consumer Banking, broker-dealer, institutional and corporate
trust balances, and the impact of acquisitions. Average time
certificates of deposit less than $100,000 were lower in the
second quarter and first six months of 2010 by $988 million
(5.5 percent) and $396 million (2.2 percent),
respectively, compared with the same periods in 2009, as
decreases in Consumer Banking balances, reflecting the
Companys funding and pricing decisions, were partially
offset by acquisition-related growth. Average time deposits
greater than $100,000 were $4.3 billion (13.9 percent)
and $6.5 billion (19.5 percent) lower in the second
quarter and first six months of 2010, respectively, compared
with the same periods of 2009, reflecting a decrease in overall
wholesale funding requirements, partially offset by the impact
of acquisitions.
Provision for
Credit Losses The
provision for credit losses for the second quarter and first six
months of 2010 decreased $256 million (18.4 percent)
and $264 million (9.7 percent), respectively, from the
same periods of 2009. Net charge-offs increased
$185 million (19.9 percent) and $532 million
(31.0 percent) in the second quarter and first six months
of 2010, respectively, compared with the same periods of 2009,
as borrowers impacted by weak economic conditions and real
estate markets defaulted on loans. Overall, however, the loan
portfolio experienced decreases in delinquencies in all major
loan categories in the second quarter of 2010, compared to the
first quarter of 2010. The Company recorded provision for credit
losses in excess of net charge-offs of $25 million in the
second quarter and $200 million in the first six months of
2010, compared with $466 million in the second quarter and
$996 million in the first six months of 2009. Refer to
Corporate Risk Profile for further information on
the provision for credit losses, net charge-offs, nonperforming
assets and factors considered by the Company in assessing the
credit quality of the loan portfolio and establishing the
allowance for credit losses.
Noninterest
Income Noninterest
income in the second quarter and first six months of 2010 was
$2.1 billion and $4.0 billion, respectively, compared
with $2.1 billion and $3.8 billion in the same periods
of 2009. The $55 million (2.7 percent) increase during
the second quarter and $185 million (4.8 percent)
increase during the first six months of 2010, compared with the
same periods of 2009, were due to higher payments-related
income, due to increased volumes, and increases in commercial
products revenue attributable to higher standby letters of
credit fees, commercial loan fees and syndication revenue. In
addition, noninterest income for the first six months of 2010
also increased over the same period of the prior year due to a
favorable variance in net securities losses of
$162 million. Trust and investment management fees declined
as low interest rates negatively impacted money market
investment fees and lower money market fund balances led to a
decline in account-level fees. Deposit service charges decreased
as a result of
Company-initiated
revisions to overdraft fee policies and lower overdraft
incidences. Mortgage banking revenue declined principally due to
lower loan
Table 3 Noninterest
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
June 30,
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
(Dollars in Millions)
|
|
2010
|
|
|
2009
|
|
|
|
Change
|
|
|
|
2010
|
|
|
|
2009
|
|
|
|
Change
|
|
Compensation
|
|
$
|
946
|
|
|
$
|
764
|
|
|
|
|
23.8
|
%
|
|
|
$
|
1,807
|
|
|
|
$
|
1,550
|
|
|
|
|
16.6
|
%
|
Employee benefits
|
|
|
172
|
|
|
|
140
|
|
|
|
|
22.9
|
|
|
|
|
352
|
|
|
|
|
295
|
|
|
|
|
19.3
|
|
Net occupancy and equipment
|
|
|
226
|
|
|
|
208
|
|
|
|
|
8.7
|
|
|
|
|
453
|
|
|
|
|
419
|
|
|
|
|
8.1
|
|
Professional services
|
|
|
73
|
|
|
|
59
|
|
|
|
|
23.7
|
|
|
|
|
131
|
|
|
|
|
111
|
|
|
|
|
18.0
|
|
Marketing and business development
|
|
|
86
|
|
|
|
80
|
|
|
|
|
7.5
|
|
|
|
|
146
|
|
|
|
|
136
|
|
|
|
|
7.4
|
|
Technology and communications
|
|
|
186
|
|
|
|
157
|
|
|
|
|
18.5
|
|
|
|
|
371
|
|
|
|
|
312
|
|
|
|
|
18.9
|
|
Postage, printing and supplies
|
|
|
75
|
|
|
|
72
|
|
|
|
|
4.2
|
|
|
|
|
149
|
|
|
|
|
146
|
|
|
|
|
2.1
|
|
Other intangibles
|
|
|
91
|
|
|
|
95
|
|
|
|
|
(4.2
|
)
|
|
|
|
188
|
|
|
|
|
186
|
|
|
|
|
1.1
|
|
Other
|
|
|
522
|
|
|
|
554
|
|
|
|
|
(5.8
|
)
|
|
|
|
916
|
|
|
|
|
845
|
|
|
|
|
8.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
$
|
2,377
|
|
|
$
|
2,129
|
|
|
|
|
11.6
|
%
|
|
|
$
|
4,513
|
|
|
|
$
|
4,000
|
|
|
|
|
12.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Efficiency ratio (a)
|
|
|
52.4
|
%
|
|
|
51.0
|
%
|
|
|
|
|
|
|
|
|
50.7
|
%
|
|
|
|
48.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Computed
as noninterest expense divided by the sum of net interest income
on a taxable-equivalent basis and noninterest income excluding
securities gains (losses), net. |
production, partially offset by higher servicing income and
favorable net changes in the valuation of mortgage servicing
rights (MSRs) and related economic hedging
activities. Other income increased in the second quarter and
first six months of 2010, compared with the same periods of
2009, primarily due to the $28 million gain related to the
Companys investment in Visa Inc., lower retail lease
residual valuation losses and improved equity investment income
over the prior year. The increases in other income for the first
six months of 2010, compared with the first six months of 2009,
were partially offset by the $92 million gain on a
corporate real estate transaction that occurred in the first
quarter of 2009.
Noninterest
Expense Noninterest
expense was $2.4 billion in the second quarter and
$4.5 billion in the first six months of 2010, compared with
$2.1 billion in the second quarter and $4.0 billion in
the first six months of 2009, or increases of $248 million
(11.6 percent) and $513 million (12.8 percent),
respectively. The increases in noninterest expense from a year
ago were principally due to acquisitions, increased compensation
and employee benefits expense, and higher costs related to
investments in affordable housing and other tax-advantaged
projects. Compensation and employee benefits expense increased
reflecting acquisitions, ending a five percent cost reduction
program that was in effect during the second quarter of 2009,
higher incentives costs related to improved financial results,
merit increases, and increased pension costs associated with
previous declines in the value of pension assets. Net occupancy
and equipment expense and professional services expense
increased principally due to acquisitions and other business
initiatives. Technology and communications expense increased as
a result of payments-related initiatives and acquisitions. Other
expense decreased in the second quarter and increased in the
first six months of 2010, compared with the same periods of
2009, reflecting the net effect of the $123 million FDIC
special assessment recorded in the second quarter of 2009,
offset by higher costs related to investments in affordable
housing and other tax-advantaged projects which benefit the
Companys income tax expense, higher merchant processing
expense, increased other real estate owned (OREO)
costs and debt extinguishment expense associated with the ITS
exchange.
Income Tax
Expense The
provision for income taxes was $199 million (an effective
rate of 20.9 percent) for the second quarter and
$360 million (an effective rate of 20.3 percent) for
the first six months of 2010, compared with $100 million
(an effective rate of 17.1 percent) and $201 million
(an effective rate of 16.3 percent) for the same periods of
2009. The increases in the effective tax rate for the second
quarter and first six months of 2010, compared with the same
periods of the prior year, primarily reflected the marginal
impact of higher pre-tax earnings
year-over-year.
For further information on income taxes, refer to Note 10
of the Notes to Consolidated Financial Statements.
BALANCE
SHEET ANALYSIS
Loans The
Companys total loan portfolio was $191.6 billion at
June 30, 2010, compared with $194.8 billion at
December 31, 2009, a decrease of $3.2 billion
(1.6 percent). The decrease was driven primarily by lower
commercial and covered loans, partially offset by higher
residential mortgages. The $2.0 billion (4.2 percent)
decrease in commercial loans was primarily driven by lower
capital spending and uncertain economic conditions decreasing
utilization of existing commitments by business customers. The
decrease was also due to the consolidation of a VIE and
the elimination of a related loan balance, the result of the
adoption of new authoritative accounting guidance effective
January 1, 2010.
Commercial real estate loans decreased $149 million
(.4 percent) at June 30, 2010, compared with
December 31, 2009, reflecting customer debt deleveraging,
partially offset by the impact of new business activity.
Residential mortgages held in the loan portfolio increased
$1.2 billion (4.6 percent) at June 30, 2010,
compared with December 31, 2009. Most loans retained in the
portfolio are to customers with prime or near-prime credit
characteristics at the date of origination.
Total retail loans outstanding, which include credit card,
retail leasing, home equity and second mortgages and other
retail loans, decreased $316 million (.5 percent) at
June 30, 2010, compared with December 31, 2009. The
decrease was primarily driven by lower student loans and retail
leasing balances, partially offset by higher installment loans.
Loans Held for
Sale Loans held
for sale, consisting primarily of residential mortgages, were
$4.9 billion at June 30, 2010, compared with
$4.8 billion at December 31, 2009, as residential
mortgage production volume was similar in the second quarter of
2010 to the fourth quarter of 2009.
Investment
Securities Investment
securities totaled $48.4 billion at June 30, 2010,
compared with $44.8 billion at December 31, 2009. The
$3.6 billion (8.0 percent) increase reflected
$2.1 billion of net investment purchases, the consolidation
of $.6 billion of
held-to-maturity
securities held in a VIE due to the adoption of new
authoritative accounting guidance effective January 1,
2010, and a $.9 billion favorable change in net unrealized
gains (losses) on
available-for-sale
securities.
The Company conducts a regular assessment of its investment
portfolio to determine whether any securities are
other-than-temporarily
impaired. At June 30, 2010, the Companys net
unrealized gain on
available-for-sale
securities was $226 million, compared with a net unrealized
loss of $635 million at December 31, 2009. The
favorable change in net unrealized gains (losses) was primarily
due to increases in the fair value of agency mortgage-backed
securities. Unrealized losses on securities in an unrealized
loss position totaled $948 million at June 30, 2010,
compared with $1.3 billion at December 31, 2009. When
assessing unrealized losses for
other-than-temporary
impairment, the Company considers the nature of the investment,
the financial condition of the issuer, the extent and duration
of unrealized loss, expected cash flows of underlying collateral
or assets and market conditions. At June 30, 2010, the
Company had no plans to sell securities with unrealized losses
and believes it is more likely than not it would not be required
to sell such securities before recovery of their amortized cost.
There is limited market activity for structured investment
related and non-agency mortgage-backed securities held by the
Company. As a result, the Company estimates the fair value of
these securities using estimates of expected cash flows,
discount rates and managements assessment of various other
market factors, which are judgmental in nature. The Company
recorded $21 million and $67 million of impairment
charges in earnings during the second quarter and first six
months of 2010, respectively, predominately on non-agency
mortgage-backed and structured investment related securities.
These impairment charges were due to changes in expected cash
flows resulting from increases in defaults in the underlying
mortgage pools and regulatory actions in the first quarter of
2010 related to an insurer of some of the securities. Further
adverse changes in market conditions may result in additional
impairment charges in future periods. Refer to Notes 3 and
12 in the Notes to Consolidated Financial Statements for further
information on investment securities.
Deposits Total
deposits were $183.1 billion at June 30, 2010,
compared with $183.2 billion at December 31, 2009, the
result of increases in savings accounts and noninterest-bearing
deposit balances, offset by decreases in time certificates of
deposit, money market savings and interest checking balances.
Savings account balances increased $4.1 billion
(24.2 percent) primarily due to continued strong
participation in a savings product offered by Consumer Banking
beginning in 2008. Noninterest-bearing deposits increased
$3.5 billion (9.1 percent) primarily due to increases
in corporate and commercial banking, and corporate trust
balances. Money market savings balances decreased
$2.8 billion (7.0 percent), reflecting the
Companys deposit pricing decisions in relation to other
funding sources. Interest checking balances decreased
$861 million (2.2 percent) due to lower Consumer
Banking balances. Time certificates of deposit less than
$100,000 decreased $2.5 billion (13.2 percent), and
time deposits greater than $100,000 decreased $1.5 billion
(5.0 percent), reflecting the Companys funding and
pricing decisions. Time deposits greater than $100,000 are
managed as an alternative to other funding sources, such as
wholesale borrowing, based largely on relative pricing.
Table 4 Investment
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-Sale
|
|
|
|
Held-to-Maturity
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted-
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
Maturity in
|
|
|
Average
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
Maturity in
|
|
|
Average
|
|
June 30, 2010
(Dollars in Millions)
|
|
Cost
|
|
|
Value
|
|
|
Years
|
|
|
Yield (d)
|
|
|
|
Cost
|
|
|
Value
|
|
|
Years
|
|
|
Yield (d)
|
|
U.S. Treasury and Agencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturing in one year or less
|
|
$
|
1,420
|
|
|
$
|
1,428
|
|
|
|
.1
|
|
|
|
2.29
|
%
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
%
|
Maturing after one year through five years
|
|
|
427
|
|
|
|
431
|
|
|
|
1.2
|
|
|
|
2.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturing after five years through ten years
|
|
|
35
|
|
|
|
37
|
|
|
|
7.3
|
|
|
|
4.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturing after ten years
|
|
|
651
|
|
|
|
651
|
|
|
|
13.7
|
|
|
|
2.16
|
|
|
|
|
63
|
|
|
|
63
|
|
|
|
11.5
|
|
|
|
1.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,533
|
|
|
$
|
2,547
|
|
|
|
3.9
|
|
|
|
2.31
|
%
|
|
|
$
|
63
|
|
|
$
|
63
|
|
|
|
11.5
|
|
|
|
1.78
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-Backed Securities (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturing in one year or less
|
|
$
|
2,465
|
|
|
$
|
2,461
|
|
|
|
.7
|
|
|
|
1.86
|
%
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
%
|
Maturing after one year through five years
|
|
|
26,879
|
|
|
|
27,700
|
|
|
|
3.3
|
|
|
|
3.47
|
|
|
|
|
14
|
|
|
|
9
|
|
|
|
2.6
|
|
|
|
2.02
|
|
Maturing after five years through ten years
|
|
|
4,855
|
|
|
|
4,687
|
|
|
|
6.1
|
|
|
|
2.94
|
|
|
|
|
4
|
|
|
|
3
|
|
|
|
6.1
|
|
|
|
.84
|
|
Maturing after ten years
|
|
|
848
|
|
|
|
706
|
|
|
|
11.7
|
|
|
|
2.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
35,047
|
|
|
$
|
35,554
|
|
|
|
3.7
|
|
|
|
3.25
|
%
|
|
|
$
|
18
|
|
|
$
|
12
|
|
|
|
3.3
|
|
|
|
1.78
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-Backed Securities (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturing in one year or less
|
|
$
|
|
|
|
$
|
3
|
|
|
|
.5
|
|
|
|
11.64
|
%
|
|
|
$
|
147
|
|
|
$
|
136
|
|
|
|
.6
|
|
|
|
.77
|
%
|
Maturing after one year through five years
|
|
|
367
|
|
|
|
366
|
|
|
|
2.8
|
|
|
|
8.76
|
|
|
|
|
97
|
|
|
|
95
|
|
|
|
2.9
|
|
|
|
.95
|
|
Maturing after five years through ten years
|
|
|
300
|
|
|
|
312
|
|
|
|
7.3
|
|
|
|
4.06
|
|
|
|
|
78
|
|
|
|
69
|
|
|
|
7.4
|
|
|
|
.99
|
|
Maturing after ten years
|
|
|
398
|
|
|
|
400
|
|
|
|
10.3
|
|
|
|
2.22
|
|
|
|
|
18
|
|
|
|
11
|
|
|
|
19.9
|
|
|
|
.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,065
|
|
|
$
|
1,081
|
|
|
|
6.9
|
|
|
|
5.00
|
%
|
|
|
$
|
340
|
|
|
$
|
311
|
|
|
|
3.8
|
|
|
|
.88
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of State and Political Subdivisions (b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturing in one year or less
|
|
$
|
128
|
|
|
$
|
129
|
|
|
|
.3
|
|
|
|
1.27
|
%
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
|
.4
|
|
|
|
7.88
|
%
|
Maturing after one year through five years
|
|
|
779
|
|
|
|
784
|
|
|
|
4.4
|
|
|
|
6.75
|
|
|
|
|
5
|
|
|
|
6
|
|
|
|
3.7
|
|
|
|
7.97
|
|
Maturing after five years through ten years
|
|
|
4,412
|
|
|
|
4,409
|
|
|
|
6.4
|
|
|
|
6.77
|
|
|
|
|
8
|
|
|
|
9
|
|
|
|
6.5
|
|
|
|
6.85
|
|
Maturing after ten years
|
|
|
1,542
|
|
|
|
1,462
|
|
|
|
21.5
|
|
|
|
6.91
|
|
|
|
|
15
|
|
|
|
14
|
|
|
|
16.6
|
|
|
|
5.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,861
|
|
|
$
|
6,784
|
|
|
|
9.4
|
|
|
|
6.70
|
%
|
|
|
$
|
30
|
|
|
$
|
30
|
|
|
|
10.9
|
|
|
|
6.43
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Debt Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturing in one year or less
|
|
$
|
6
|
|
|
$
|
6
|
|
|
|
.4
|
|
|
|
.89
|
%
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
|
.3
|
|
|
|
.84
|
%
|
Maturing after one year through five years
|
|
|
67
|
|
|
|
54
|
|
|
|
1.9
|
|
|
|
6.36
|
|
|
|
|
16
|
|
|
|
12
|
|
|
|
3.0
|
|
|
|
1.17
|
|
Maturing after five years through ten years
|
|
|
31
|
|
|
|
28
|
|
|
|
7.3
|
|
|
|
6.33
|
|
|
|
|
88
|
|
|
|
71
|
|
|
|
7.6
|
|
|
|
1.41
|
|
Maturing after ten years
|
|
|
1,402
|
|
|
|
1,129
|
|
|
|
32.1
|
|
|
|
4.36
|
|
|
|
|
33
|
|
|
|
18
|
|
|
|
10.3
|
|
|
|
1.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,506
|
|
|
$
|
1,217
|
|
|
|
30.1
|
|
|
|
4.48
|
%
|
|
|
$
|
139
|
|
|
$
|
103
|
|
|
|
7.6
|
|
|
|
1.31
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Investments
|
|
$
|
539
|
|
|
$
|
594
|
|
|
|
13.3
|
|
|
|
3.50
|
%
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment securities (c)
|
|
$
|
47,551
|
|
|
$
|
47,777
|
|
|
|
5.5
|
|
|
|
3.78
|
%
|
|
|
$
|
590
|
|
|
$
|
519
|
|
|
|
5.9
|
|
|
|
1.38
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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)
|
|
The
weighted-average maturity of the
available-for-sale
investment securities was 7.1 years at December 31,
2009, with a corresponding weighted-average yield of
4.00 percent. The weighted-average maturity of the
held-to-maturity
investment securities was 8.4 years at December 31,
2009, with a corresponding weighted-average yield of
5.10 percent. |
(d)
|
|
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
securities are computed based on historical cost balances.
Average yield and maturity calculations exclude equity
securities that have no stated yield or maturity. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010
|
|
|
|
December 31,
2009
|
|
|
|
Amortized
|
|
|
Percent
|
|
|
|
Amortized
|
|
|
Percent
|
|
(Dollars in Millions)
|
|
Cost
|
|
|
of Total
|
|
|
|
Cost
|
|
|
of Total
|
|
U.S. Treasury and agencies
|
|
$
|
2,596
|
|
|
|
5.4
|
%
|
|
|
$
|
3,415
|
|
|
|
7.5
|
%
|
Mortgage-backed securities
|
|
|
35,065
|
|
|
|
72.9
|
|
|
|
|
32,289
|
|
|
|
71.1
|
|
Asset-backed securities
|
|
|
1,405
|
|
|
|
2.9
|
|
|
|
|
559
|
|
|
|
1.2
|
|
Obligations of state and political subdivisions
|
|
|
6,891
|
|
|
|
14.3
|
|
|
|
|
6,854
|
|
|
|
15.1
|
|
Other debt securities and investments
|
|
|
2,184
|
|
|
|
4.5
|
|
|
|
|
2,286
|
|
|
|
5.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment securities
|
|
$
|
48,141
|
|
|
|
100.0
|
%
|
|
|
$
|
45,403
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings The
Company utilizes both short-term and long-term borrowings to
fund growth of assets in excess of deposit growth. Short-term
borrowings, which include federal funds purchased, commercial
paper, repurchase agreements, borrowings secured by high-grade
assets and other short-term borrowings, were $33.8 billion
at June 30, 2010, compared with $31.3 billion at
December 31, 2009. The $2.5 billion (7.9 percent)
increase in short-term borrowings reflected wholesale funding
associated with the Companys asset growth and
asset/liability management activities.
Long-term debt was $29.1 billion at June 30, 2010,
compared with $32.6 billion at December 31, 2009,
reflecting a $2.6 billion net decrease in Federal Home Loan
Bank advances, $4.0 billion of medium-term note maturities
and repayments and the extinguishment of $.6 billion of
junior subordinated debentures in connection with the ITS
exchange, partially offset by $2.3 billion of medium-term
note and subordinated debt issuances and the consolidation of
$1.7 billion of long-term debt related to certain VIEs at
June 30, 2010. Refer to the Liquidity Risk
Management section for discussion of liquidity management
of the Company.
CORPORATE
RISK PROFILE
Overview Managing
risks is an essential part of successfully operating a financial
services company. The most prominent risk exposures are credit,
residual value, operational, interest rate, market and liquidity
risk. Credit risk is the risk of not collecting the interest
and/or the
principal balance of a loan, investment or derivative contract
when it is due. Residual value risk is the potential reduction
in the
end-of-term
value of leased assets. Operational risk includes risks related
to fraud, legal and compliance risk, processing errors,
technology, breaches of internal controls and business
continuation and disaster recovery risk. Interest rate risk is
the potential reduction of net interest income as a result of
changes in interest rates, which can affect the re-pricing of
assets and liabilities differently. Market risk arises from
fluctuations in interest rates, foreign exchange rates, and
security prices that may result in changes in the values of
financial instruments, such as trading and
available-for-sale
securities and derivatives that are accounted for on a
mark-to-market
basis. Liquidity risk is the possible inability to fund
obligations to depositors, investors or borrowers. In addition,
corporate strategic decisions, as well as the risks described
above, could give rise to reputation risk. Reputation risk is
the risk that negative publicity or press, whether true or not,
could result in costly litigation or cause a decline in the
Companys stock value, customer base, funding sources or
revenue.
Credit Risk
Management The
Companys strategy for credit risk management includes
well-defined, centralized credit policies, uniform underwriting
criteria, and ongoing risk monitoring and review processes for
all commercial and consumer credit exposures. In evaluating its
credit risk, the Company considers changes, if any, in
underwriting activities, the loan portfolio composition
(including product mix and geographic, industry or
customer-specific concentrations), trends in loan performance,
the level of allowance coverage relative to similar banking
institutions and macroeconomic factors, such as changes in
unemployment rates, gross domestic product and consumer
bankruptcy filings. Refer to Managements Discussion
and Analysis Credit Risk Management in the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2009, for a more detailed
discussion on credit risk management processes.
The Company manages its credit risk, in part, through
diversification of its loan portfolio and limit setting by
product type criteria and concentrations. As part of its normal
business activities, the Company offers a broad array of
commercial and retail lending products. The Companys
retail lending business utilizes several distinct business
processes and channels to originate retail credit, including
traditional branch lending, indirect lending, portfolio
acquisitions and a consumer finance division. Generally, loans
managed by the Companys consumer finance division exhibit
higher credit risk characteristics, but are priced commensurate
with the differing risk profile. With respect to residential
mortgages originated through these channels, the Company may
either retain the loans on its balance sheet or sell its
interest in the balances into the secondary market while
retaining the servicing rights and customer relationships. For
residential mortgages that are retained in the Companys
portfolio and for home equity and second mortgages, credit risk
is also diversified by geography and managed by adherence to
loan-to-value
and borrower credit criteria during the underwriting process.
The following tables provide summary information of the
loan-to-values
of residential mortgages and home equity and second mortgages by
distribution channel and type at June 30, 2010 (excluding
covered loans):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
mortgages
|
|
|
Interest
|
|
|
|
|
|
|
|
|
Percent
|
|
(Dollars in Millions)
|
|
|
Only
|
|
|
Amortizing
|
|
|
Total
|
|
|
of Total
|
|
Consumer Finance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than or equal to 80%
|
|
|
$
|
1,304
|
|
|
$
|
3,967
|
|
|
$
|
5,271
|
|
|
|
49.9
|
%
|
Over 80% through 90%
|
|
|
|
556
|
|
|
|
1,911
|
|
|
|
2,467
|
|
|
|
23.4
|
|
Over 90% through 100%
|
|
|
|
519
|
|
|
|
2,154
|
|
|
|
2,673
|
|
|
|
25.3
|
|
Over 100%
|
|
|
|
|
|
|
|
149
|
|
|
|
149
|
|
|
|
1.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
2,379
|
|
|
$
|
8,181
|
|
|
$
|
10,560
|
|
|
|
100.0
|
%
|
Other Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than or equal to 80%
|
|
|
$
|
1,986
|
|
|
$
|
13,335
|
|
|
$
|
15,321
|
|
|
|
91.8
|
%
|
Over 80% through 90%
|
|
|
|
65
|
|
|
|
590
|
|
|
|
655
|
|
|
|
3.9
|
|
Over 90% through 100%
|
|
|
|
85
|
|
|
|
631
|
|
|
|
716
|
|
|
|
4.3
|
|
Over 100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
2,136
|
|
|
$
|
14,556
|
|
|
$
|
16,692
|
|
|
|
100.0
|
%
|
Total Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than or equal to 80%
|
|
|
$
|
3,290
|
|
|
$
|
17,302
|
|
|
$
|
20,592
|
|
|
|
75.6
|
%
|
Over 80% through 90%
|
|
|
|
621
|
|
|
|
2,501
|
|
|
|
3,122
|
|
|
|
11.5
|
|
Over 90% through 100%
|
|
|
|
604
|
|
|
|
2,785
|
|
|
|
3,389
|
|
|
|
12.4
|
|
Over 100%
|
|
|
|
|
|
|
|
149
|
|
|
|
149
|
|
|
|
.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
4,515
|
|
|
$
|
22,737
|
|
|
$
|
27,252
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
Loan-to-values
determined as of the date of origination and adjusted for
cumulative principal payments, and consider mortgage insurance,
as applicable.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity and
second mortgages
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
(Dollars in Millions)
|
|
|
Lines
|
|
|
Loans
|
|
|
Total
|
|
|
of Total
|
|
Consumer Finance (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than or equal to 80%
|
|
|
$
|
911
|
|
|
$
|
206
|
|
|
$
|
1,117
|
|
|
|
45.5
|
%
|
Over 80% through 90%
|
|
|
|
415
|
|
|
|
163
|
|
|
|
578
|
|
|
|
23.6
|
|
Over 90% through 100%
|
|
|
|
348
|
|
|
|
274
|
|
|
|
622
|
|
|
|
25.4
|
|
Over 100%
|
|
|
|
56
|
|
|
|
80
|
|
|
|
136
|
|
|
|
5.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
1,730
|
|
|
$
|
723
|
|
|
$
|
2,453
|
|
|
|
100.0
|
%
|
Other Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than or equal to 80%
|
|
|
$
|
11,769
|
|
|
$
|
1,428
|
|
|
$
|
13,197
|
|
|
|
78.2
|
%
|
Over 80% through 90%
|
|
|
|
1,985
|
|
|
|
499
|
|
|
|
2,484
|
|
|
|
14.7
|
|
Over 90% through 100%
|
|
|
|
709
|
|
|
|
408
|
|
|
|
1,117
|
|
|
|
6.6
|
|
Over 100%
|
|
|
|
51
|
|
|
|
24
|
|
|
|
75
|
|
|
|
.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
14,514
|
|
|
$
|
2,359
|
|
|
$
|
16,873
|
|
|
|
100.0
|
%
|
Total Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than or equal to 80%
|
|
|
$
|
12,680
|
|
|
$
|
1,634
|
|
|
$
|
14,314
|
|
|
|
74.1
|
%
|
Over 80% through 90%
|
|
|
|
2,400
|
|
|
|
662
|
|
|
|
3,062
|
|
|
|
15.8
|
|
Over 90% through 100%
|
|
|
|
1,057
|
|
|
|
682
|
|
|
|
1,739
|
|
|
|
9.0
|
|
Over 100%
|
|
|
|
107
|
|
|
|
104
|
|
|
|
211
|
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
16,244
|
|
|
$
|
3,082
|
|
|
$
|
19,326
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Consumer
finance category includes credit originated and managed by the
consumer finance division, as well as the majority of home
equity and second mortgages with a
loan-to-value
greater than 100 percent that were originated in the
branches. |
|
|
Note: |
Loan-to-values
determined on original appraisal value of collateral and the
current amortized loan balance, or maximum of current commitment
or current balance on lines.
|
Within the consumer finance division, at June 30, 2010,
approximately $2.3 billion of residential mortgages were to
customers that may be defined as
sub-prime
borrowers based on credit scores from independent credit rating
agencies at loan origination, compared with $2.5 billion at
December 31, 2009.
The following table provides further information on the
loan-to-values
of residential mortgages specifically for the consumer finance
division at June 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
|
|
Percent of
|
|
(Dollars in Millions)
|
|
|
Only
|
|
|
Amortizing
|
|
|
Total
|
|
|
Division
|
|
Sub-Prime
Borrowers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than or equal to 80%
|
|
|
$
|
6
|
|
|
$
|
1,012
|
|
|
$
|
1,018
|
|
|
|
9.7
|
%
|
Over 80% through 90%
|
|
|
|
3
|
|
|
|
529
|
|
|
|
532
|
|
|
|
5.0
|
|
Over 90% through 100%
|
|
|
|
14
|
|
|
|
697
|
|
|
|
711
|
|
|
|
6.7
|
|
Over 100%
|
|
|
|
|
|
|
|
60
|
|
|
|
60
|
|
|
|
.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
23
|
|
|
$
|
2,298
|
|
|
$
|
2,321
|
|
|
|
22.0
|
%
|
Other Borrowers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than or equal to 80%
|
|
|
$
|
1,298
|
|
|
$
|
2,955
|
|
|
$
|
4,253
|
|
|
|
40.3
|
%
|
Over 80% through 90%
|
|
|
|
553
|
|
|
|
1,382
|
|
|
|
1,935
|
|
|
|
18.3
|
|
Over 90% through 100%
|
|
|
|
505
|
|
|
|
1,457
|
|
|
|
1,962
|
|
|
|
18.6
|
|
Over 100%
|
|
|
|
|
|
|
|
89
|
|
|
|
89
|
|
|
|
.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
2,356
|
|
|
$
|
5,883
|
|
|
$
|
8,239
|
|
|
|
78.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consumer Finance
|
|
|
$
|
2,379
|
|
|
$
|
8,181
|
|
|
$
|
10,560
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In addition to residential mortgages, at June 30, 2010, the
consumer finance division had $.6 billion of home equity
and second mortgage loans to customers that may be defined as
sub-prime
borrowers, unchanged from December 31, 2009.
The following table provides further information on the
loan-to-values
of home equity and second mortgages specifically for the
consumer finance division at June 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
(Dollars in Millions)
|
|
|
Lines
|
|
|
Loans
|
|
|
Total
|
|
|
of Total
|
|
Sub-Prime
Borrowers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than or equal to 80%
|
|
|
$
|
38
|
|
|
$
|
121
|
|
|
$
|
159
|
|
|
|
6.5
|
%
|
Over 80% through 90%
|
|
|
|
43
|
|
|
|
98
|
|
|
|
141
|
|
|
|
5.7
|
|
Over 90% through 100%
|
|
|
|
6
|
|
|
|
167
|
|
|
|
173
|
|
|
|
7.1
|
|
Over 100%
|
|
|
|
36
|
|
|
|
62
|
|
|
|
98
|
|
|
|
4.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
123
|
|
|
$
|
448
|
|
|
$
|
571
|
|
|
|
23.3
|
%
|
Other Borrowers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than or equal to 80%
|
|
|
$
|
873
|
|
|
$
|
85
|
|
|
$
|
958
|
|
|
|
39.1
|
%
|
Over 80% through 90%
|
|
|
|
372
|
|
|
|
65
|
|
|
|
437
|
|
|
|
17.8
|
|
Over 90% through 100%
|
|
|
|
342
|
|
|
|
107
|
|
|
|
449
|
|
|
|
18.3
|
|
Over 100%
|
|
|
|
20
|
|
|
|
18
|
|
|
|
38
|
|
|
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
1,607
|
|
|
$
|
275
|
|
|
$
|
1,882
|
|
|
|
76.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consumer Finance
|
|
|
$
|
1,730
|
|
|
$
|
723
|
|
|
$
|
2,453
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total amount of residential mortgage, home equity and second
mortgage loans, other than covered loans, to customers that may
be defined as
sub-prime
borrowers represented only 1.0 percent of total assets at
June 30, 2010, compared with 1.1 percent at
December 31, 2009. Covered loans include $1.8 billion
in loans with
negative-amortization
payment options at June 30, 2010, compared with
$2.2 billion at December 31, 2009. Other than covered
loans, the Company does not have any residential mortgages with
payment schedules that would cause balances to increase over
time.
Table
5 Delinquent
Loan Ratios as a Percent of Ending Loan Balances
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
90 days or more
past due excluding nonperforming loans
|
|
2010
|
|
|
2009
|
|
Commercial
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
.24
|
%
|
|
|
.25
|
%
|
Lease financing
|
|
|
.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
.21
|
|
|
|
.22
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate
|
|
|
|
|
|
|
|
|
Commercial mortgages
|
|
|
.11
|
|
|
|
|
|
Construction and development
|
|
|
.04
|
|
|
|
.07
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate
|
|
|
.09
|
|
|
|
.02
|
|
Residential Mortgages
|
|
|
1.85
|
|
|
|
2.80
|
|
Retail
|
|
|
|
|
|
|
|
|
Credit card
|
|
|
2.38
|
|
|
|
2.59
|
|
Retail leasing
|
|
|
.05
|
|
|
|
.11
|
|
Other retail
|
|
|
.48
|
|
|
|
.57
|
|
|
|
|
|
|
|
|
|
|
Total retail
|
|
|
.95
|
|
|
|
1.07
|
|
|
|
|
|
|
|
|
|
|
Total loans, excluding covered loans
|
|
|
.72
|
|
|
|
.88
|
|
|
|
|
|
|
|
|
|
|
Covered Loans
|
|
|
4.91
|
|
|
|
3.59
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
1.16
|
%
|
|
|
1.19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
90 days or more
past due including nonperforming loans
|
|
2010
|
|
|
2009
|
|
Commercial
|
|
|
1.89
|
%
|
|
|
2.25
|
%
|
Commercial real estate
|
|
|
4.84
|
|
|
|
5.22
|
|
Residential mortgages (a)
|
|
|
4.08
|
|
|
|
4.59
|
|
Retail (b)
|
|
|
1.32
|
|
|
|
1.39
|
|
|
|
|
|
|
|
|
|
|
Total loans, excluding covered loans
|
|
|
2.61
|
|
|
|
2.87
|
|
|
|
|
|
|
|
|
|
|
Covered loans
|
|
|
11.72
|
|
|
|
9.76
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
3.56
|
%
|
|
|
3.64
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Delinquent
loan ratios exclude loans purchased from Government National
Mortgage Association (GNMA) mortgage pools whose
repayments are insured by the Federal Housing Administration or
guaranteed by the Department of Veterans Affairs. Including the
guaranteed amounts, the ratio of residential mortgages
90 days or more past due including nonperforming loans was
12.67 percent at June 30, 2010, and 12.86 percent
at December 31, 2009. |
(b)
|
|
Delinquent
loan ratios exclude student loans that are guaranteed by the
federal government. Including the guaranteed amounts, the ratio
of retail loans 90 days or more past due including
nonperforming loans was 1.53 percent at June 30, 2010,
and 1.57 percent at December 31, 2009. |
Loan
Delinquencies Trends
in delinquency ratios are an indicator, among other
considerations, of credit risk within the Companys loan
portfolios. The Company measures delinquencies, both including
and excluding nonperforming loans, to enable comparability with
other companies. Accruing loans 90 days or more past due
totaled $2.2 billion ($1.2 billion excluding covered
loans) at June 30, 2010, compared with $2.3 billion
($1.5 billion excluding covered loans) at December 31,
2009. The $286 million decrease, excluding covered loans,
reflected a moderation in the level of stress in economic
conditions in the first six months of 2010. These loans are not
included in nonperforming assets and continue to accrue interest
because they are adequately secured by collateral, are in the
process of collection and are reasonably expected to result in
repayment or restoration to current status, or are managed in
homogeneous portfolios with specified charge-off timeframes
adhering to regulatory guidelines. The ratio of accruing loans
90 days or more past due to total loans was
1.16 percent (.72 percent excluding covered loans) at
June 30, 2010, compared with 1.19 percent
(.88 percent excluding covered loans) at December 31,
2009.
The following table provides summary delinquency information for
residential mortgages and retail loans, excluding covered loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a Percent of
Ending
|
|
|
|
Amount
|
|
|
|
Loan Balances
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
June 30,
|
|
|
December 31,
|
|
(Dollars in Millions)
|
|
2010
|
|
|
2009
|
|
|
|
2010
|
|
|
2009
|
|
Residential mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days
|
|
$
|
477
|
|
|
$
|
615
|
|
|
|
|
1.75
|
%
|
|
|
2.36
|
%
|
90 days or more
|
|
|
504
|
|
|
|
729
|
|
|
|
|
1.85
|
|
|
|
2.80
|
|
Nonperforming
|
|
|
607
|
|
|
|
467
|
|
|
|
|
2.23
|
|
|
|
1.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,588
|
|
|
$
|
1,811
|
|
|
|
|
5.83
|
%
|
|
|
6.95
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days
|
|
$
|
311
|
|
|
$
|
400
|
|
|
|
|
1.86
|
%
|
|
|
2.38
|
%
|
90 days or more
|
|
|
399
|
|
|
|
435
|
|
|
|
|
2.38
|
|
|
|
2.59
|
|
Nonperforming
|
|
|
175
|
|
|
|
142
|
|
|
|
|
1.04
|
|
|
|
.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
885
|
|
|
$
|
977
|
|
|
|
|
5.28
|
%
|
|
|
5.81
|
%
|
Retail leasing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days
|
|
$
|
20
|
|
|
$
|
34
|
|
|
|
|
.46
|
%
|
|
|
.74
|
%
|
90 days or more
|
|
|
2
|
|
|
|
5
|
|
|
|
|
.05
|
|
|
|
.11
|
|
Nonperforming
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
22
|
|
|
$
|
39
|
|
|
|
|
.51
|
%
|
|
|
.85
|
%
|
Home equity and second mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days
|
|
$
|
172
|
|
|
$
|
181
|
|
|
|
|
.89
|
%
|
|
|
.93
|
%
|
90 days or more
|
|
|
131
|
|
|
|
152
|
|
|
|
|
.68
|
|
|
|
.78
|
|
Nonperforming
|
|
|
31
|
|
|
|
32
|
|
|
|
|
.16
|
|
|
|
.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
334
|
|
|
$
|
365
|
|
|
|
|
1.73
|
%
|
|
|
1.88
|
%
|
Other retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days
|
|
$
|
198
|
|
|
$
|
256
|
|
|
|
|
.85
|
%
|
|
|
1.10
|
%
|
90 days or more
|
|
|
73
|
|
|
|
92
|
|
|
|
|
.32
|
|
|
|
.40
|
|
Nonperforming
|
|
|
31
|
|
|
|
30
|
|
|
|
|
.13
|
|
|
|
.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
302
|
|
|
$
|
378
|
|
|
|
|
1.30
|
%
|
|
|
1.63
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides information on delinquent and
nonperforming loans, excluding covered loans, as a percent of
ending loan balances, by channel:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Finance (a)
|
|
|
|
Other Retail
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
2010
|
|
|
2009
|
|
Residential mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days
|
|
|
2.63
|
%
|
|
|
3.99
|
%
|
|
|
|
1.19
|
%
|
|
|
1.30
|
%
|
90 days or more
|
|
|
2.48
|
|
|
|
4.00
|
|
|
|
|
1.45
|
|
|
|
2.02
|
|
Nonperforming
|
|
|
3.50
|
|
|
|
3.04
|
|
|
|
|
1.42
|
|
|
|
.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
8.61
|
%
|
|
|
11.03
|
%
|
|
|
|
4.06
|
%
|
|
|
4.30
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days
|
|
|
|
%
|
|
|
|
%
|
|
|
|
1.86
|
%
|
|
|
2.38
|
%
|
90 days or more
|
|
|
|
|
|
|
|
|
|
|
|
2.38
|
|
|
|
2.59
|
|
Nonperforming
|
|
|
|
|
|
|
|
|
|
|
|
1.04
|
|
|
|
.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
%
|
|
|
|
%
|
|
|
|
5.28
|
%
|
|
|
5.81
|
%
|
Retail leasing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days
|
|
|
|
%
|
|
|
|
%
|
|
|
|
.46
|
%
|
|
|
.74
|
%
|
90 days or more
|
|
|
|
|
|
|
|
|
|
|
|
.05
|
|
|
|
.11
|
|
Nonperforming
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
%
|
|
|
|
%
|
|
|
|
.51
|
%
|
|
|
.85
|
%
|
Home equity and second mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days
|
|
|
2.12
|
%
|
|
|
2.54
|
%
|
|
|
|
.71
|
%
|
|
|
.70
|
%
|
90 days or more
|
|
|
1.55
|
|
|
|
2.02
|
|
|
|
|
.55
|
|
|
|
.60
|
|
Nonperforming
|
|
|
.16
|
|
|
|
.20
|
|
|
|
|
.16
|
|
|
|
.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3.83
|
%
|
|
|
4.76
|
%
|
|
|
|
1.42
|
%
|
|
|
1.46
|
%
|
Other retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days
|
|
|
3.93
|
%
|
|
|
5.17
|
%
|
|
|
|
.77
|
%
|
|
|
1.00
|
%
|
90 days or more
|
|
|
.65
|
|
|
|
1.17
|
|
|
|
|
.30
|
|
|
|
.37
|
|
Nonperforming
|
|
|
|
|
|
|
.16
|
|
|
|
|
.14
|
|
|
|
.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4.58
|
%
|
|
|
6.50
|
%
|
|
|
|
1.21
|
%
|
|
|
1.50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Consumer
finance category includes credit originated and managed by the
consumer finance division, as well as the majority of home
equity and second mortgages with a
loan-to-value
greater than 100 percent that were originated in the
branches. |
Within the consumer finance division at June 30, 2010,
approximately $425 million and $73 million of these
delinquent and nonperforming residential mortgages and other
retail loans, respectively, were with customers that may be
defined as
sub-prime
borrowers, compared with $557 million and $98 million,
respectively, at December 31, 2009.
The following table provides summary delinquency information for
covered loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a Percent of
Ending
|
|
|
|
Amount
|
|
|
|
Loan Balances
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
June 30,
|
|
|
December 31,
|
|
(Dollars in Millions)
|
|
2010
|
|
|
2009
|
|
|
|
2010
|
|
|
2009
|
|
30-89 days
|
|
$
|
998
|
|
|
$
|
1,195
|
|
|
|
|
4.99
|
%
|
|
|
5.46
|
%
|
90 days or more
|
|
|
982
|
|
|
|
784
|
|
|
|
|
4.91
|
|
|
|
3.59
|
|
Nonperforming
|
|
|
1,360
|
|
|
|
1,350
|
|
|
|
|
6.81
|
|
|
|
6.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,340
|
|
|
$
|
3,329
|
|
|
|
|
16.71
|
%
|
|
|
15.23
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructured
Loans 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. In most cases the
modification is either a concessionary reduction in interest
rate, extension of the maturity date or reduction in the
principal balance that would otherwise not be considered.
Concessionary modifications are classified as troubled debt
restructurings (TDRs) unless the modification is
short-term, or results in only an insignificant delay or
shortfall in the payments to be received. TDRs accrue interest
as long as the borrower complies with the revised terms and
conditions and has demonstrated repayment performance at a level
commensurate with the modified terms over several payment cycles.
Short-Term
Modifications The
Company makes
short-term
modifications to assist borrowers experiencing temporary
hardships. Consumer programs include short-term interest rate
reductions (three months or less for residential mortgages and
twelve months or less for credit cards), deferrals of up to
three past due payments, and the ability to return to current
status if the borrower makes required payments during the
short-term modification period. At June 30, 2010, loans
modified under these programs represented less than
1.0 percent of total residential mortgage loan balances and
less than 2.5 percent of credit card receivable balances,
respectively. Because these changes have an insignificant impact
on the economic return on the loan, the Company does not
consider loans modified under these hardship programs to be
TDRs. The Company determines applicable allowances for loan
losses for these loans in a manner consistent with other
homogeneous loan portfolios.
The Company may also modify commercial loans on a short-term
basis, with the most common modification being an extension of
the maturity date of twelve months or less. Such extensions
generally are used when the maturity date is imminent and the
borrower is experiencing some level of financial stress but the
Company believes the borrower will ultimately pay all
contractual amounts owed. These extended loans represented
approximately 1.1 percent of total commercial and
commercial real estate loan balances at June 30, 2010.
Because interest is charged during the extension period (at the
original contractual rate or, in many cases, a higher rate), the
extension has an insignificant impact on the economic return on
the loan. Therefore, the Company does not consider such
extensions to be TDRs. The Company determines the applicable
allowance for loan loss on these loans in a manner consistent
with other commercial loans.
Troubled Debt
Restructurings Many
of the Companys TDRs are determined on a
case-by-case
basis in connection with ongoing loan collection processes.
However, the Company has also implemented certain restructuring
programs that may result in TDRs. The consumer finance division
has a mortgage loan restructuring program where certain
qualifying borrowers facing an interest rate reset who are
current in their repayment status, are allowed to retain the
lower of their existing interest rate or the market interest
rate as of their interest reset date. The Company also
participates in the U.S. Department of the Treasury Home
Affordable Modification Program (HAMP). HAMP gives
qualifying homeowners an opportunity to refinance into more
affordable monthly payments, with the U.S. Department of
the Treasury compensating the Company for a portion of the
reduction in monthly amounts due from borrowers participating in
this program. Both the consumer finance division modification
program and the HAMP program require the customer to complete a
trial period, where the loan modification is contingent on the
customer satisfactorily completing the trial period and the loan
documents are not modified until that time. The Company reports
loans that are modified following the satisfactory completion of
the trial period as TDRs. Loans in the
pre-modification
trial phase represented less than 1.0 percent of
residential mortgage loan balances at June 30, 2010.
In addition, the Company has also modified certain mortgage
loans according to provisions in FDIC-assisted transaction loss
sharing agreements. Losses associated with modifications on
these loans, including the
economic impact of interest rate reductions, are generally
eligible for reimbursement under the loss sharing agreements.
Acquired loans restructured after acquisition are not considered
TDRs for purposes of the Companys accounting and
disclosure if the loans evidenced credit deterioration as of the
acquisition date and are accounted for in pools.
The following table provides a summary of TDRs by loan type,
including the delinquency status for TDRs that continue to
accrue interest and TDRs included in nonperforming assets
(excluding covered loans):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a Percent of
Performing TDRs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2010
|
|
Performing
|
|
|
30-89 Days
|
|
|
90 Days or more
|
|
|
Nonperforming
|
|
|
Total
|
|
(Dollars in Millions)
|
|
TDRs
|
|
|
Past Due
|
|
|
Past Due
|
|
|
TDRs
|
|
|
TDRs
|
|
Commercial
|
|
$
|
51
|
|
|
|
8.9
|
%
|
|
|
5.4
|
%
|
|
$
|
77
|
(b)
|
|
$
|
128
|
|
Commercial real estate
|
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
104
|
(b)
|
|
|
173
|
|
Residential mortgages(a)
|
|
|
1,672
|
|
|
|
6.2
|
|
|
|
6.3
|
|
|
|
157
|
|
|
|
1,829
|
|
Credit card
|
|
|
234
|
|
|
|
12.5
|
|
|
|
10.3
|
|
|
|
175
|
(c)
|
|
|
409
|
|
Other retail
|
|
|
86
|
|
|
|
9.6
|
|
|
|
7.0
|
|
|
|
22
|
|
|
|
108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,112
|
|
|
|
6.9
|
%
|
|
|
6.6
|
%
|
|
$
|
535
|
|
|
$
|
2,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Excludes
loans purchased from GNMA mortgage pools whose repayments are
insured by the Federal Housing Administration or guaranteed by
the Department of Veterans Affairs, and loans in the trial
period under HAMP or the Companys program where a legal
modification of the loan is contingent on the customer
successfully completing the trial modification period. |
(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) and, for commercial, small
business credit cards with a modified rate equal to
0%. |
(c)
|
|
Represents
consumer credit cards with a modified rate equal to
0%. |
The following table provides a summary of TDRs, excluding
covered loans, that are performing in accordance with the
modified terms, and therefore continue to accrue interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a Percent of
Ending
|
|
|
|
Amount
|
|
|
|
Loan Balances
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
June 30,
|
|
|
December 31,
|
|
(Dollars in Millions)
|
|
2010
|
|
|
2009
|
|
|
|
2010
|
|
|
2009
|
|
Commercial
|
|
$
|
51
|
|
|
$
|
35
|
|
|
|
|
.11
|
%
|
|
|
.07
|
%
|
Commercial real estate
|
|
|
69
|
|
|
|
110
|
|
|
|
|
.20
|
|
|
|
.32
|
|
Residential mortgages (a)
|
|
|
1,672
|
|
|
|
1,354
|
|
|
|
|
6.14
|
|
|
|
5.20
|
|
Credit card
|
|
|
234
|
|
|
|
221
|
|
|
|
|
1.40
|
|
|
|
1.31
|
|
Other retail
|
|
|
86
|
|
|
|
74
|
|
|
|
|
.18
|
|
|
|
.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,112
|
|
|
$
|
1,794
|
|
|
|
|
1.10
|
%
|
|
|
.92
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Excludes
loans purchased from GNMA mortgage pools whose repayments are
insured by the Federal Housing Administration or guaranteed by
the Department of Veterans Affairs, and loans in the trial
period under HAMP or the Companys program where a legal
modification of the loan is contingent on the customer
successfully completing the trial modification period. |
TDRs, excluding covered loans, that are performing in accordance
with modified terms were $318 million higher at
June 30, 2010, than at December 31, 2009, primarily
reflecting loan modifications for certain residential mortgage
and consumer credit card customers in light of current economic
conditions. The Company continues to work with customers to
modify loans for borrowers who are having financial
difficulties, but expects increases in TDRs to moderate.
Nonperforming
Assets The
level of nonperforming assets represents another indicator of
the potential for future credit losses. At June 30, 2010,
total nonperforming assets were $5.9 billion, unchanged
from December 31, 2009. Excluding covered assets,
nonperforming assets were $3.7 billion at June 30,
2010, compared with $3.9 billion at December 31, 2009.
The $170 million (4.4 percent) decrease in
nonperforming assets, excluding covered assets, was principally
in the construction, land development and financial institution
portfolios, as the Company continued to reduce the exposure to
these assets. Nonperforming covered assets at June 30, 2010
were $2.2 billion, compared with $2.0 billion at
December 31, 2009. These assets are covered by loss sharing
agreements with the FDIC that substantially reduce the risk of
credit losses to the Company. In addition, the majority of the
nonperforming covered assets were considered credit-impaired at
acquisition and recorded at their estimated fair value at
acquisition. The ratio of total nonperforming assets to total
loans and other real estate was 3.05 percent
(2.17 percent excluding covered assets) at June 30,
2010, compared with 3.02 percent (2.25 percent
excluding covered assets) at December 31, 2009.
The Company expects nonperforming assets, excluding covered
assets, to trend lower in the third quarter of 2010.
Table
6 Nonperforming
Assets (a)
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
(Dollars in Millions)
|
|
2010
|
|
|
2009
|
|
Commercial
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
669
|
|
|
$
|
866
|
|
Lease financing
|
|
|
115
|
|
|
|
125
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
784
|
|
|
|
991
|
|
Commercial Real Estate
|
|
|
|
|
|
|
|
|
Commercial mortgages
|
|
|
601
|
|
|
|
581
|
|
Construction and development
|
|
|
1,013
|
|
|
|
1,192
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate
|
|
|
1,614
|
|
|
|
1,773
|
|
Residential Mortgages
|
|
|
607
|
|
|
|
467
|
|
Retail
|
|
|
|
|
|
|
|
|
Credit card
|
|
|
175
|
|
|
|
142
|
|
Retail leasing
|
|
|
|
|
|
|
|
|
Other retail
|
|
|
62
|
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
Total retail
|
|
|
237
|
|
|
|
204
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming loans, excluding covered loans
|
|
|
3,242
|
|
|
|
3,435
|
|
Covered Loans
|
|
|
1,360
|
|
|
|
1,350
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming loans
|
|
|
4,602
|
|
|
|
4,785
|
|
Other Real Estate (b)(c)
|
|
|
469
|
|
|
|
437
|
|
Covered Other Real Estate (c)
|
|
|
791
|
|
|
|
653
|
|
Other Assets
|
|
|
23
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming assets
|
|
$
|
5,885
|
|
|
$
|
5,907
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming assets, excluding covered assets
|
|
$
|
3,734
|
|
|
$
|
3,904
|
|
|
|
|
|
|
|
|
|
|
Excluding covered assets:
|
|
|
|
|
|
|
|
|
Accruing loans 90 days or more past due
|
|
$
|
1,239
|
|
|
$
|
1,525
|
|
Nonperforming loans to total loans
|
|
|
1.89
|
%
|
|
|
1.99
|
%
|
Nonperforming assets to total loans plus other real estate (b)
|
|
|
2.17
|
%
|
|
|
2.25
|
%
|
Including covered assets:
|
|
|
|
|
|
|
|
|
Accruing loans 90 days or more past due
|
|
$
|
2,221
|
|
|
$
|
2,309
|
|
Nonperforming loans to total loans
|
|
|
2.40
|
%
|
|
|
2.46
|
%
|
Nonperforming assets to total loans plus other real estate (b)
|
|
|
3.05
|
%
|
|
|
3.02
|
%
|
|
|
|
|
|
|
|
|
|
Changes
in Nonperforming Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and
|
|
|
Retail and
|
|
|
|
|
|
|
Commercial
|
|
|
Residential
|
|
|
|
|
(Dollars in Millions)
|
|
Real Estate
|
|
|
Mortgages (e)
|
|
|
Total
|
|
Balance December 31, 2009
|
|
$
|
4,727
|
|
|
$
|
1,180
|
|
|
$
|
5,907
|
|
Additions to nonperforming assets
|
|
|
|
|
|
|
|
|
|
|
|
|
New nonaccrual loans and foreclosed properties
|
|
|
2,201
|
|
|
|
679
|
|
|
|
2,880
|
|
Advances on loans
|
|
|
118
|
|
|
|
|
|
|
|
118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total additions
|
|
|
2,319
|
|
|
|
679
|
|
|
|
2,998
|
|
Reductions in nonperforming assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Paydowns, payoffs
|
|
|
(1,043
|
)
|
|
|
(108
|
)
|
|
|
(1,151
|
)
|
Net sales
|
|
|
(259
|
)
|
|
|
(232
|
)
|
|
|
(491
|
)
|
Return to performing status
|
|
|
(335
|
)
|
|
|
(14
|
)
|
|
|
(349
|
)
|
Charge-offs (d)
|
|
|
(902
|
)
|
|
|
(127
|
)
|
|
|
(1,029
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reductions
|
|
|
(2,539
|
)
|
|
|
(481
|
)
|
|
|
(3,020
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net additions to (reductions in) nonperforming assets
|
|
|
(220
|
)
|
|
|
198
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2010
|
|
$
|
4,507
|
|
|
$
|
1,378
|
|
|
$
|
5,885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Throughout
this document, nonperforming assets and related ratios do not
include accruing loans 90 days or more past due. |
(b)
|
|
Excludes
$475 million and $359 million at June 30, 2010,
and December 31, 2009, respectively, of foreclosed GNMA
loans which continue to accrue interest. |
(c)
|
|
Includes
equity investments whose only asset is other real estate
owned. |
(d)
|
|
Charge-offs
exclude actions for certain card products and loan sales that
were not classified as nonperforming at the time the charge-off
occurred. |
(e)
|
|
Residential
mortgage information excludes changes related to residential
mortgages serviced by others. |
Other real estate, excluding covered assets, was
$469 million at June 30, 2010, compared with
$437 million at December 31, 2009, and was primarily
related to foreclosed properties that previously secured loan
balances. The increase in other real estate assets reflected
continuing stress in residential construction and related
supplier industries.
Table
7 Net
Charge-offs as a Percent of Average Loans Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
Six Months Ended
|
|
|
June 30,
|
|
|
June 30,
|
|
|
2010
|
|
2009
|
|
|
2010
|
|
2009
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
2.23
|
%
|
|
|
1.50
|
%
|
|
|
|
2.32
|
%
|
|
|
1.21
|
%
|
Lease financing
|
|
|
1.41
|
|
|
|
3.29
|
|
|
|
|
1.78
|
|
|
|
3.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
2.12
|
|
|
|
1.72
|
|
|
|
|
2.25
|
|
|
|
1.46
|
|
Commercial Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgages
|
|
|
1.11
|
|
|
|
.47
|
|
|
|
|
.92
|
|
|
|
.35
|
|
Construction and development
|
|
|
7.31
|
|
|
|
3.79
|
|
|
|
|
7.06
|
|
|
|
4.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate
|
|
|
2.67
|
|
|
|
1.44
|
|
|
|
|
2.47
|
|
|
|
1.51
|
|
Residential Mortgages
|
|
|
2.06
|
|
|
|
1.94
|
|
|
|
|
2.14
|
|
|
|
1.74
|
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card (a)
|
|
|
7.79
|
|
|
|
7.36
|
|
|
|
|
7.76
|
|
|
|
6.86
|
|
Retail leasing
|
|
|
.37
|
|
|
|
.80
|
|
|
|
|
.41
|
|
|
|
.91
|
|
Home equity and second mortgages
|
|
|
1.64
|
|
|
|
1.72
|
|
|
|
|
1.76
|
|
|
|
1.60
|
|
Other retail
|
|
|
1.70
|
|
|
|
1.80
|
|
|
|
|
1.81
|
|
|
|
1.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total retail
|
|
|
3.16
|
|
|
|
2.99
|
|
|
|
|
3.23
|
|
|
|
2.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, excluding covered loans
|
|
|
2.61
|
|
|
|
2.15
|
|
|
|
|
2.64
|
|
|
|
1.98
|
|
Covered Loans
|
|
|
.10
|
|
|
|
.07
|
|
|
|
|
.08
|
|
|
|
.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
2.34
|
%
|
|
|
2.03
|
%
|
|
|
|
2.36
|
%
|
|
|
1.87
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Net
charge-offs as a percent of average loans outstanding, excluding
portfolio purchases where the acquired loans were recorded at
fair value at the purchase date, were 8.53 percent and
8.47 percent for the three months and six months ended
June 30, 2010, respectively. |
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a Percent of
Ending
|
|
|
|
Amount
|
|
|
|
Loan Balances
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
June 30,
|
|
|
December 31,
|
|
(Dollars in Millions)
|
|
2010
|
|
|
2009
|
|
|
|
2010
|
|
|
2009
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minnesota
|
|
$
|
26
|
|
|
$
|
27
|
|
|
|
|
.47
|
%
|
|
|
.49
|
%
|
California
|
|
|
17
|
|
|
|
15
|
|
|
|
|
.29
|
|
|
|
.27
|
|
Arizona
|
|
|
13
|
|
|
|
6
|
|
|
|
|
1.23
|
|
|
|
.58
|
|
Illinois
|
|
|
10
|
|
|
|
8
|
|
|
|
|
.36
|
|
|
|
.29
|
|
Missouri
|
|
|
8
|
|
|
|
7
|
|
|
|
|
.30
|
|
|
|
.26
|
|
All other states
|
|
|
134
|
|
|
|
110
|
|
|
|
|
.47
|
|
|
|
.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total residential
|
|
|
208
|
|
|
|
173
|
|
|
|
|
.45
|
|
|
|
.38
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nevada
|
|
|
48
|
|
|
|
73
|
|
|
|
|
3.52
|
|
|
|
3.57
|
|
Oregon
|
|
|
33
|
|
|
|
28
|
|
|
|
|
.98
|
|
|
|
.81
|
|
California
|
|
|
25
|
|
|
|
43
|
|
|
|
|
.18
|
|
|
|
.30
|
|
Texas
|
|
|
21
|
|
|
|
3
|
|
|
|
|
.52
|
|
|
|
.07
|
|
Virginia
|
|
|
19
|
|
|
|
8
|
|
|
|
|
3.97
|
|
|
|
1.21
|
|
All other states
|
|
|
115
|
|
|
|
109
|
|
|
|
|
.20
|
|
|
|
.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
261
|
|
|
|
264
|
|
|
|
|
.32
|
|
|
|
.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total OREO
|
|
$
|
469
|
|
|
$
|
437
|
|
|
|
|
.27
|
%
|
|
|
.25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis of
Loan Net
Charge-Offs Total
net charge-offs were $1.1 billion and $2.2 billion for
the second quarter and first six months of 2010, respectively,
compared with net charge-offs of $929 million and
$1.7 billion for the same periods of 2009. The ratio of
total loan net charge-offs to average loans outstanding on an
annualized basis for the second quarter and first six months of
2010 was 2.34 percent and 2.36 percent, respectively,
compared with 2.03 percent and 1.87 percent, for the
same periods of 2009. The
year-over-year
increases in total net charge-offs were driven by the weakening
economy and rising unemployment throughout most of 2009
affecting the residential housing markets, including
homebuilding and related industries, commercial real estate
properties and credit costs associated with credit card and
other consumer and commercial loans. The Company expects the
level of net charge-offs to trend lower in the third quarter of
2010.
Commercial and commercial real estate loan net charge-offs for
the second quarter of 2010 were $472 million
(2.35 percent of average loans outstanding on an annualized
basis), compared with $353 million (1.61 percent of
average loans outstanding on an annualized basis) for the second
quarter of 2009. Commercial and commercial real estate loan net
charge-offs for the first six months of 2010 were
$941 million (2.34 percent of average loans
outstanding on an annualized basis), compared with
$650 million (1.48 percent of average loans
outstanding on an annualized basis) for the first six months of
2009. The
year-over-year
increases in net charge-offs reflected stress in commercial real
estate and residential housing, especially homebuilding and
related industry sectors, along with the impact of current
uncertain economic conditions on the Companys commercial
loan portfolios.
Residential mortgage loan net charge-offs for the second quarter
of 2010 were $138 million (2.06 percent of average
loans outstanding on an annualized basis), compared with
$116 million (1.94 percent of average loans
outstanding on an annualized basis) for the second quarter of
2009. Residential mortgage loan net charge-offs for the first
six months of 2010 were $283 million (2.14 percent of
average loans outstanding on an annualized basis), compared with
$207 million
(1.74 percent of average loans outstanding on an annualized
basis) for the first six months of 2009. Retail loan net
charge-offs for the second quarter of 2010 were
$499 million (3.16 percent of average loans
outstanding on an annualized basis), compared with
$458 million (2.99 percent of average loans
outstanding on an annualized basis) for the second quarter of
2009. Retail loan net charge-offs for the first six months of
2010 were $1.0 billion (3.23 percent of average loans
outstanding on an annualized basis), compared with
$852 million (2.81 percent of average loans
outstanding on an annualized basis) for the first six months of
2009. The retail loan net charge-offs percentage was impacted by
credit card portfolio purchases recorded at fair value beginning
in the second quarter of 2009. The
year-over-year
increases in residential mortgage and retail loan net
charge-offs reflected the continuing adverse impact of economic
conditions on consumers, as rising unemployment levels increased
losses in the prime-based residential mortgage and credit card
portfolios.
The following table provides an analysis of net charge-offs as a
percent of average loans outstanding managed by the consumer
finance division, compared with other retail loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
|
|
Percent of
|
|
|
|
Average Loans
|
|
|
|
Average Loans
|
|
|
|
Average Loans
|
|
|
|
Average Loans
|
|
|
|
|
|
(Dollars in Millions)
|
|
2010
|
|
|
|
2009
|
|
|
|
2010
|
|
|
|
2009
|
|
|
|
2010
|
|
|
|
2009
|
|
|
|
2010
|
|
|
|
2009
|
|
Consumer Finance (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages
|
|
$
|
10,487
|
|
|
|
$
|
9,751
|
|
|
|
|
3.71
|
%
|
|
|
|
3.87
|
%
|
|
|
$
|
10,415
|
|
|
|
$
|
9,824
|
|
|
|
|
3.93
|
%
|
|
|
|
3.43
|
%
|
Home equity and second mortgages
|
|
|
2,462
|
|
|
|
|
2,457
|
|
|
|
|
5.38
|
|
|
|
|
7.02
|
|
|
|
|
2,468
|
|
|
|
|
2,437
|
|
|
|
|
5.80
|
|
|
|
|
6.62
|
|
Other retail
|
|
|
610
|
|
|
|
|
565
|
|
|
|
|
1.97
|
|
|
|
|
5.68
|
|
|
|
|
606
|
|
|
|
|
546
|
|
|
|
|
3.33
|
|
|
|
|
6.65
|
|
Other Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages
|
|
$
|
16,334
|
|
|
|
$
|
14,213
|
|
|
|
|
1.01
|
%
|
|
|
|
.62
|
%
|
|
|
$
|
16,201
|
|
|
|
$
|
14,116
|
|
|
|
|
1.00
|
%
|
|
|
|
.57
|
%
|
Home equity and second mortgages
|
|
|
16,870
|
|
|
|
|
16,857
|
|
|
|
|
1.09
|
|
|
|
|
.95
|
|
|
|
|
16,899
|
|
|
|
|
16,826
|
|
|
|
|
1.17
|
|
|
|
|
.87
|
|
Other retail
|
|
|
22,747
|
|
|
|
|
22,188
|
|
|
|
|
1.69
|
|
|
|
|
1.70
|
|
|
|
|
22,744
|
|
|
|
|
22,323
|
|
|
|
|
1.77
|
|
|
|
|
1.65
|
|
Total Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages
|
|
$
|
26,821
|
|
|
|
$
|
23,964
|
|
|
|
|
2.06
|
%
|
|
|
|
1.94
|
%
|
|
|
$
|
26,616
|
|
|
|
$
|
23,940
|
|
|
|
|
2.14
|
%
|
|
|
|
1.74
|
%
|
Home equity and second mortgages
|
|
|
19,332
|
|
|
|
|
19,314
|
|
|
|
|
1.64
|
|
|
|
|
1.72
|
|
|
|
|
19,367
|
|
|
|
|
19,263
|
|
|
|
|
1.76
|
|
|
|
|
1.60
|
|
Other retail
|
|
|
23,357
|
|
|
|
|
22,753
|
|
|
|
|
1.70
|
|
|
|
|
1.80
|
|
|
|
|
23,350
|
|
|
|
|
22,869
|
|
|
|
|
1.81
|
|
|
|
|
1.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Consumer
finance category includes credit originated and managed by the
consumer finance division, as well as the majority of home
equity and second mortgages with a
loan-to-value
greater than 100 percent that were originated in the
branches. |
The following table provides further information on net
charge-offs as a percent of average loans outstanding for the
consumer finance division:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
|
|
Percent of
|
|
|
|
Average Loans
|
|
|
|
Average Loans
|
|
|
|
Average Loans
|
|
|
|
Average Loans
|
|
|
|
|
|
(Dollars in Millions)
|
|
2010
|
|
|
|
2009
|
|
|
|
2010
|
|
|
|
2009
|
|
|
|
2010
|
|
|
|
2009
|
|
|
|
2010
|
|
|
|
2009
|
|
Residential mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-prime
borrowers
|
|
$
|
2,347
|
|
|
|
$
|
2,721
|
|
|
|
|
6.15
|
%
|
|
|
|
6.34
|
%
|
|
|
$
|
2,390
|
|
|
|
$
|
2,779
|
|
|
|
|
6.41
|
%
|
|
|
|
5.66
|
%
|
Other borrowers
|
|
|
8,140
|
|
|
|
|
7,030
|
|
|
|
|
3.01
|
|
|
|
|
2.91
|
|
|
|
|
8,025
|
|
|
|
|
7,045
|
|
|
|
|
3.19
|
|
|
|
|
2.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,487
|
|
|
|
$
|
9,751
|
|
|
|
|
3.71
|
%
|
|
|
|
3.87
|
%
|
|
|
$
|
10,415
|
|
|
|
$
|
9,824
|
|
|
|
|
3.93
|
%
|
|
|
|
3.43
|
%
|
Home equity and second mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-prime
borrowers
|
|
$
|
581
|
|
|
|
$
|
687
|
|
|
|
|
10.36
|
%
|
|
|
|
12.84
|
%
|
|
|
$
|
595
|
|
|
|
$
|
700
|
|
|
|
|
10.85
|
%
|
|
|
|
11.81
|
%
|
Other borrowers
|
|
|
1,881
|
|
|
|
|
1,770
|
|
|
|
|
3.84
|
|
|
|
|
4.76
|
|
|
|
|
1,873
|
|
|
|
|
1,737
|
|
|
|
|
4.20
|
|
|
|
|
4.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,462
|
|
|
|
$
|
2,457
|
|
|
|
|
5.38
|
%
|
|
|
|
7.02
|
%
|
|
|
$
|
2,468
|
|
|
|
$
|
2,437
|
|
|
|
|
5.80
|
%
|
|
|
|
6.62
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis and
Determination of the Allowance for Credit
Losses The
allowance for loan losses reserves for probable and estimable
losses incurred in the Companys loan and lease portfolio
and includes certain amounts that do not represent loss exposure
to the Company because those losses are recoverable under loss
sharing agreements with the FDIC. Management evaluates the
allowance each quarter to ensure it appropriately reserves for
incurred losses. Several factors were taken into consideration
in evaluating the allowance for credit losses at June 30,
2010, including the risk profile of the portfolios, loan net
charge-offs during the period, the level of nonperforming
assets, accruing loans 90 days or more past due,
delinquency ratios and changes in TDR loan balances. Management
also considered the uncertainty related to certain industry
sectors, and the extent of credit exposure to specific borrowers
within the portfolio. In addition, concentration risks
associated with commercial real estate and the mix of loans,
including credit cards, loans originated through the consumer
finance division and residential mortgage balances, and their
relative credit risks, were evaluated. Finally, the Company
considered current economic conditions that might impact the
portfolio.
Table
8 Summary
of Allowance for Credit Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
(Dollars in Millions)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Balance at beginning of period
|
|
$
|
5,439
|
|
|
$
|
4,105
|
|
|
$
|
5,264
|
|
|
$
|
3,639
|
|
Charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
232
|
|
|
|
183
|
|
|
|
483
|
|
|
|
300
|
|
Lease financing
|
|
|
35
|
|
|
|
66
|
|
|
|
80
|
|
|
|
129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
267
|
|
|
|
249
|
|
|
|
563
|
|
|
|
429
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgages
|
|
|
71
|
|
|
|
28
|
|
|
|
118
|
|
|
|
42
|
|
Construction and development
|
|
|
159
|
|
|
|
94
|
|
|
|
310
|
|
|
|
211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate
|
|
|
230
|
|
|
|
122
|
|
|
|
428
|
|
|
|
253
|
|
Residential mortgages
|
|
|
141
|
|
|
|
116
|
|
|
|
287
|
|
|
|
209
|
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card
|
|
|
333
|
|
|
|
279
|
|
|
|
661
|
|
|
|
504
|
|
Retail leasing
|
|
|
7
|
|
|
|
13
|
|
|
|
16
|
|
|
|
28
|
|
Home equity and second mortgages
|
|
|
83
|
|
|
|
85
|
|
|
|
177
|
|
|
|
157
|
|
Other retail
|
|
|
119
|
|
|
|
126
|
|
|
|
251
|
|
|
|
244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total retail
|
|
|
542
|
|
|
|
503
|
|
|
|
1,105
|
|
|
|
933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Covered loans (a)
|
|
|
6
|
|
|
|
2
|
|
|
|
9
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total charge-offs
|
|
|
1,186
|
|
|
|
992
|
|
|
|
2,392
|
|
|
|
1,832
|
|
Recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
9
|
|
|
|
6
|
|
|
|
17
|
|
|
|
11
|
|
Lease financing
|
|
|
13
|
|
|
|
11
|
|
|
|
24
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
22
|
|
|
|
17
|
|
|
|
41
|
|
|
|
30
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgages
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
Construction and development
|
|
|
3
|
|
|
|
1
|
|
|
|
8
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate
|
|
|
3
|
|
|
|
1
|
|
|
|
9
|
|
|
|
2
|
|
Residential mortgages
|
|
|
3
|
|
|
|
|
|
|
|
4
|
|
|
|
2
|
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card
|
|
|
16
|
|
|
|
16
|
|
|
|
32
|
|
|
|
29
|
|
Retail leasing
|
|
|
3
|
|
|
|
3
|
|
|
|
7
|
|
|
|
5
|
|
Home equity and second mortgages
|
|
|
4
|
|
|
|
2
|
|
|
|
8
|
|
|
|
4
|
|
Other retail
|
|
|
20
|
|
|
|
24
|
|
|
|
41
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total retail
|
|
|
43
|
|
|
|
45
|
|
|
|
88
|
|
|
|
81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Covered loans (a)
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recoveries
|
|
|
72
|
|
|
|
63
|
|
|
|
143
|
|
|
|
115
|
|
Net Charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
223
|
|
|
|
177
|
|
|
|
466
|
|
|
|
289
|
|
Lease financing
|
|
|
22
|
|
|
|
55
|
|
|
|
56
|
|
|
|
110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
245
|
|
|
|
232
|
|
|
|
522
|
|
|
|
399
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgages
|
|
|
71
|
|
|
|
28
|
|
|
|
117
|
|
|
|
41
|
|
Construction and development
|
|
|
156
|
|
|
|
93
|
|
|
|
302
|
|
|
|
210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate
|
|
|
227
|
|
|
|
121
|
|
|
|
419
|
|
|
|
251
|
|
Residential mortgages
|
|
|
138
|
|
|
|
116
|
|
|
|
283
|
|
|
|
207
|
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card
|
|
|
317
|
|
|
|
263
|
|
|
|
629
|
|
|
|
475
|
|
Retail leasing
|
|
|
4
|
|
|
|
10
|
|
|
|
9
|
|
|
|
23
|
|
Home equity and second mortgages
|
|
|
79
|
|
|
|
83
|
|
|
|
169
|
|
|
|
153
|
|
Other retail
|
|
|
99
|
|
|
|
102
|
|
|
|
210
|
|
|
|
201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total retail
|
|
|
499
|
|
|
|
458
|
|
|
|
1,017
|
|
|
|
852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Covered loans (a)
|
|
|
5
|
|
|
|
2
|
|
|
|
8
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net charge-offs
|
|
|
1,114
|
|
|
|
929
|
|
|
|
2,249
|
|
|
|
1,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses
|
|
|
1,139
|
|
|
|
1,395
|
|
|
|
2,449
|
|
|
|
2,713
|
|
Net change for credit losses to be reimbursed by the FDIC
|
|
|
72
|
|
|
|
|
|
|
|
72
|
|
|
|
|
|
Acquisitions and other changes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(64
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
5,536
|
|
|
$
|
4,571
|
|
|
$
|
5,536
|
|
|
$
|
4,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses, excluding losses to be reimbursed by
the FDIC
|
|
$
|
5,248
|
|
|
$
|
4,377
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses to be reimbursed by the FDIC
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability for unfunded credit commitments
|
|
|
216
|
|
|
|
194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance for credit losses
|
|
$
|
5,536
|
|
|
$
|
4,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses as a percentage of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-end loans, excluding covered loans
|
|
|
3.18
|
%
|
|
|
2.66
|
%
|
|
|
|
|
|
|
|
|
Nonperforming loans, excluding covered loans
|
|
|
168
|
|
|
|
152
|
|
|
|
|
|
|
|
|
|
Nonperforming assets, excluding covered assets
|
|
|
146
|
|
|
|
137
|
|
|
|
|
|
|
|
|
|
Annualized net charge-offs, excluding covered loans
|
|
|
122
|
|
|
|
123
|
|
|
|
|
|
|
|
|
|
Period-end loans
|
|
|
2.89
|
|
|
|
2.51
|
|
|
|
|
|
|
|
|
|
Nonperforming loans
|
|
|
120
|
|
|
|
135
|
|
|
|
|
|
|
|
|
|
Nonperforming assets
|
|
|
94
|
|
|
|
114
|
|
|
|
|
|
|
|
|
|
Annualized net charge-offs
|
|
|
124
|
|
|
|
123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
At June 30, 2010, $2.4 billion of the total allowance
for credit losses related to incurred losses on retail
loans.
|
|
|
(a)
|
|
Relates
to covered loan charge-offs and recoveries not reimbursable by
the FDIC. |
At June 30, 2010, the allowance for credit losses was
$5.5 billion (2.89 percent of total loans and
3.18 percent of loans excluding covered loans), compared
with an allowance of $5.3 billion (2.70 percent of
total loans and 3.04 percent of loans excluding covered
loans) at December 31, 2009. During the second quarter of
2010, the Company increased the allowance for credit losses by
$72 million to reflect covered loan losses reimbursable by
the FDIC. The ratio of the allowance for credit losses to
nonperforming loans was 120 percent (168 percent
excluding covered loans) at June 30, 2010, compared with
110 percent (153 percent excluding covered loans) at
December 31, 2009. The ratio of the allowance for credit
losses to annualized loan net charge-offs was 124 percent
at June 30, 2010, compared with 136 percent of full
year 2009 net charge-offs at December 31, 2009.
Residual Value
Risk
Management The
Company manages its risk to changes in the residual value of
leased assets through disciplined residual valuation setting at
the inception of a lease, diversification of its leased assets,
regular residual asset valuation reviews and monitoring of
residual value gains or losses upon the disposition of assets.
As of June 30, 2010, no significant change in the amount of
residual values or concentration of the portfolios had occurred
since December 31, 2009. Refer to Managements
Discussion and Analysis Residual Value Risk
Management in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2009, for further
discussion on residual value risk management.
Operational Risk
Management The
Company manages operational risk through a risk management
framework and its internal control processes. Within this
framework, the Risk Management Committee of the Companys
Board of Directors provides oversight and assesses the most
significant operational risks facing the Company within its
business lines. Under the guidance of the Risk Management
Committee, enterprise risk management personnel establish
policies and interact with business lines to monitor significant
operating risks on a regular basis. Business lines have direct
and primary responsibility and accountability for identifying,
controlling, and monitoring operational risks embedded in their
business activities. Refer to Managements Discussion
and Analysis Operational Risk Management in
the Companys Annual Report on
Form 10-K
for the year ended December 31, 2009, for further
discussion on operational risk management.
Interest Rate
Risk Management
In the
banking industry, changes in interest rates are a significant
risk that can impact earnings, market valuations and the safety
and soundness of an entity. To minimize the volatility of net
interest income and the market value of assets and liabilities,
the Company manages its exposure to changes in interest rates
through asset and liability management activities within
guidelines established by its Asset Liability Committee
(ALCO) and approved by the Board of Directors. The
ALCO has the responsibility for approving and ensuring
compliance with the ALCO management policies, including interest
rate risk exposure. The Company uses net interest income
simulation analysis and market value of equity modeling for
measuring and analyzing consolidated interest rate risk.
Net Interest
Income Simulation
Analysis
Management estimates the impact on net interest income of
changes in market interest rates under a number of scenarios,
including gradual shifts, immediate and sustained parallel
shifts, and flattening or steepening of the yield curve. The
following table summarizes the projected impact to net interest
income over the next 12 months of various potential
interest rate changes. The ALCO policy limits the estimated
change in net interest income in a gradual 200 basis point
(bps) rate change scenario to a 4.0 percent
decline of forecasted net interest income over the next
12 months. At June 30, 2010, and December 31,
2009, the Company was within policy. Refer to
Managements Discussion and Analysis Net
Interest Income Simulation Analysis in the Companys
Annual Report on
Form 10-K
for the year ended December 31, 2009, for further
discussion on net interest income simulation analysis.
Market Value
of Equity
Modeling The
Company also manages interest rate sensitivity by utilizing
market value of equity modeling, which measures the degree to
which the market values of the Companys assets and
liabilities and off-balance sheet instruments will change given
a change in interest rates. Management measures the impact of
changes in market interest rates under a number of scenarios,
including immediate and sustained parallel shifts and flattening
or steepening of the yield
Sensitivity
of Net Interest Income
|
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|
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|
|
June 30, 2010
|
|
|
|
December 31,
2009
|
|
|
|
Down 50 bps
|
|
|
Up 50 bps
|
|
|
Down 200 bps
|
|
|
Up 200 bps
|
|
|
|
Down 50 bps
|
|
|
Up 50 bps
|
|
|
Down 200 bps
|
|
|
Up 200 bps
|
|
|
|
Immediate
|
|
|
Immediate
|
|
|
Gradual*
|
|
|
Gradual
|
|
|
|
Immediate
|
|
|
Immediate
|
|
|
Gradual*
|
|
|
Gradual
|
|
|
|
|
|
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|
|
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|
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Net interest income
|
|
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|
*
|
|
|
1.00
|
%
|
|
|
|
*
|
|
|
1.65
|
%
|
|
|
|
|
*
|
|
|
.43
|
%
|
|
|
|
*
|
|
|
1.00
|
%
|
|
|
|
|
|
|
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|
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|
*
|
|
Given
the current level of interest rates, a downward rate scenario
cannot be computed. |
curve. The ALCO policy limits the change in market value of
equity in a 200 bps parallel rate shock to a
15.0 percent decline. A 200 bps increase would have
resulted in a 3.4 percent decrease in the market value of
equity at June 30, 2010, compared with a 4.3 percent
decrease at December 31, 2009. A 200 bps decrease,
where possible given current rates, would have resulted in a
6.7 percent decrease in the market value of equity at
June 30, 2010, compared with a 2.8 percent decrease at
December 31, 2009. Refer to Managements
Discussion and Analysis Market Value of Equity
Modeling in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2009, for further
discussion on market value of equity modeling.
Use of
Derivatives to Manage Interest Rate and Other
Risks To
reduce the sensitivity of earnings to interest rate, prepayment,
credit, price and foreign currency fluctuations (asset and
liability management positions), the Company enters into
derivative transactions. The Company uses derivatives for asset
and liability management purposes primarily in the following
ways:
|
|
|
To convert fixed-rate debt, issued to finance the Company, from
fixed-rate payments to floating-rate payments;
|
|
|
|
To convert the cash flows associated with floating-rate debt,
issued to finance the Company, from floating-rate payments to
fixed-rate payments; and
|
|
|
|
To mitigate changes in value of the Companys mortgage
origination pipeline, funded mortgage loans held for sale and
MSRs.
|
To manage these risks, the Company may enter into
exchange-traded and
over-the-counter
derivative contracts including interest rate swaps, swaptions,
futures, forwards and options. In addition, the Company enters
into interest rate and foreign exchange derivative contracts to
accommodate the business requirements of its customers
(customer-related positions). The Company minimizes
the market and liquidity risks of customer-related positions by
entering into similar offsetting positions with broker-dealers.
The Company does not utilize derivatives for speculative
purposes.
The Company does not designate all of the derivatives that it
enters into for risk management purposes as accounting hedges
because of the inefficiency of applying the accounting
requirements. In particular, the Company enters into
U.S. Treasury futures, options on U.S. Treasury
futures contracts and forward commitments to buy residential
mortgage loans to mitigate fluctuations in the value of its
MSRs, but does not designate those derivatives as accounting
hedges.
Additionally, the Company uses forward commitments to sell
residential mortgage loans at specified prices to economically
hedge the interest rate risk in its residential mortgage loan
production activities. At June 30, 2010, the Company had
$10.3 billion of forward commitments to sell mortgage loans
hedging $4.7 billion of mortgage loans held for sale and
$10.6 billion of unfunded mortgage loan commitments. The
forward commitments to sell and the unfunded mortgage loan
commitments are considered derivatives under the accounting
guidance related to accounting for derivative instruments and
hedge activities, and the Company has elected the fair value
option for the mortgage loans held for sale.
Derivatives are subject to credit risk associated with
counterparties to the contracts. Credit risk associated with
derivatives is measured by the Company based on the probability
of counterparty default. The Company manages the credit risk of
its derivative positions by diversifying its positions among
various counterparties, entering into master netting agreements
with its counterparties, requiring collateral agreements with
credit-rating thresholds and, in certain cases, though
insignificant, transferring the counterparty credit risk related
to interest rate swaps to third-parties through the use of risk
participation agreements.
For additional information on derivatives and hedging
activities, refer to Note 11 in the Notes to Consolidated
Financial Statements.
Market Risk
Management In
addition to interest rate risk, the Company is exposed to other
forms of market risk related to its trading activities, which
are principally customer-based, supporting their management of
foreign currency, interest rate risks and funding activities.
The ALCO established the Market Risk Committee
(MRC), which oversees market risk management. The
MRC monitors and reviews the Companys trading positions
and establishes policies for market risk management, including
exposure limits for each portfolio. The Company also manages
market risk of non-trading business activities, including its
MSRs and loans
held-for-sale.
The Company uses a Value at Risk (VaR) approach to
measure general market risk. Theoretically, VaR represents the
amount the Company has at risk of loss to adverse market
movements over a specified time horizon. The Company measures
VaR at the ninety-ninth percentile using distributions derived
from past market data. On average, the Company expects the one
day VaR to be exceeded two to three times per year. The Company
monitors the effectiveness of its risk program by back-testing
the performance of its VaR models, regularly updating the
historical data used by the VaR models and stress testing. The
Table 9 Regulatory
Capital Ratios
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
(Dollars in Millions)
|
|
2010
|
|
|
2009
|
|
Tier 1 capital
|
|
$
|
24,021
|
|
|
$
|
22,610
|
|
As a percent of risk-weighted assets
|
|
|
10.1
|
%
|
|
|
9.6
|
%
|
As a percent of adjusted quarterly average assets (leverage
ratio)
|
|
|
8.8
|
%
|
|
|
8.5
|
%
|
Total risk-based capital
|
|
$
|
31,890
|
|
|
$
|
30,458
|
|
As a percent of risk-weighted assets
|
|
|
13.4
|
%
|
|
|
12.9
|
%
|
|
|
|
|
|
|
|
|
|
Companys trading VaR did not exceed $5 million during
the first six months of 2010 and $2 million during the
first six months of 2009.
Liquidity Risk
Management The
ALCO establishes policies and guidelines, as well as analyzes
and manages liquidity, to ensure adequate funds are available to
meet normal operating requirements, and unexpected customer
demands for funds in a timely and cost-effective manner.
Liquidity management is viewed from long-term and short-term
perspectives, including various stress scenarios, as well as
from an asset and liability perspective. Management monitors
liquidity through a regular review of maturity profiles, funding
sources, and loan and deposit forecasts to minimize funding risk.
Since 2008, the financial markets have been challenging for many
financial institutions. As a result of these financial market
conditions, many banks experienced liquidity constraints,
substantially increased pricing to retain deposits or utilized
the Federal Reserve System discount window to secure adequate
funding. The Companys profitable operations, sound credit
quality and strong capital position have enabled it to develop a
large and reliable base of core deposit funding within its
market areas and in domestic and global capital markets. This
has allowed the Company to maintain a strong liquidity position,
as depositors and investors in the wholesale funding markets
seek stable financial institutions. Refer to
Managements Discussion and Analysis
Liquidity Risk Management in the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2009, for further
discussion on liquidity risk management.
At June 30, 2010, parent company long-term debt outstanding
was $11.9 billion, compared with $14.5 billion at
December 31, 2009. The $2.6 billion decrease was
primarily due to repayments and maturities of $3.9 billion
of medium-term notes and the extinguishment of $.6 billion
of junior subordinated debentures in connection with the ITS
exchange, partially offset by $1.8 billion of medium-term
note issuances. As of June 30, 2010, total parent company
debt scheduled to mature in the remainder of 2010 was
$.9 billion.
Federal banking laws regulate the amount of dividends that may
be paid by banking subsidiaries without prior approval. The
amount of dividends available to the parent company from its
banking subsidiaries after meeting the regulatory capital
requirements for well-capitalized banks was approximately
$4.1 billion at June 30, 2010.
Capital
Management The
Company is committed to managing capital to maintain strong
protection for depositors and creditors and for maximum
shareholder benefit. The Company also manages its capital to
exceed regulatory capital requirements for well-capitalized bank
holding companies. Table 9 provides a summary of regulatory
capital ratios as of June 30, 2010, and December 31,
2009. All regulatory ratios exceeded regulatory
well-capitalized requirements. Total
U.S. Bancorp shareholders equity was
$28.2 billion at June 30, 2010, compared with
$26.0 billion at December 31, 2009. The increase was
primarily the result of corporate earnings, the issuance of
$.4 billion of perpetual preferred stock in connection with
the ITS exchange, and changes in unrealized gains and losses on
available-for-sale
investment securities included in other comprehensive income,
partially offset by dividends.
The Company believes certain capital ratios in addition to
regulatory capital ratios are useful in evaluating its capital
adequacy. The Companys Tier 1 common and tangible
common equity, as a percent of risk-weighted assets, were
7.4 percent and 6.9 percent, respectively, at
June 30, 2010, compared with 6.8 percent and
6.1 percent, respectively, at December 31, 2009. The
Companys tangible common equity divided by tangible assets
was 6.0 percent at June 30, 2010, compared with
5.3 percent at December 31, 2009. Refer to
Non-Regulatory Capital Ratios for further
information regarding the calculation of these measures.
On December 9, 2008, the Company announced its Board of
Directors had approved an authorization to repurchase
20 million shares of common stock through December 31,
2010. All shares repurchased during the second quarter of 2010
were repurchased under this authorization in connection with the
administration of
the Companys employee benefit plans in the ordinary course
of business.
The following table provides a detailed analysis of all shares
repurchased during the second quarter of 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number
|
|
|
|
|
|
Maximum Number
|
|
|
|
of Shares
|
|
|
|
|
|
of Shares that
May
|
|
|
|
Purchased as
|
|
|
Average
|
|
|
Yet Be Purchased
|
|
|
|
Part of the
|
|
|
Price Paid
|
|
|
Under the
|
|
Time Period
|
|
Program
|
|
|
per Share
|
|
|
Program
|
|
April
|
|
|
26,509
|
|
|
$
|
27.55
|
|
|
|
19,049,008
|
|
May
|
|
|
3,415
|
|
|
|
24.16
|
|
|
|
19,045,593
|
|
June
|
|
|
1,855
|
|
|
|
24.21
|
|
|
|
19,043,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
31,779
|
|
|
$
|
26.99
|
|
|
|
19,043,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LINE OF
BUSINESS FINANCIAL REVIEW
The Companys major lines of business are Wholesale
Banking, Consumer Banking, Wealth Management &
Securities Services, Payment Services, and Treasury and
Corporate Support. These operating segments are components of
the Company about which financial information is prepared and is
evaluated regularly by management in deciding how to allocate
resources and assess performance.
Basis for
Financial
Presentation Business
line results are derived from the Companys business unit
profitability reporting systems by specifically attributing
managed balance sheet assets, deposits and other liabilities and
their related income or expense. Refer to
Managements Discussion and Analysis Line
of Business Financial Review in the Companys Annual
Report on
Form 10-K
for the year ended December 31, 2009, for further
discussion on the business lines basis for financial
presentation.
Designations, assignments and allocations change from time to
time as management systems are enhanced, methods of evaluating
performance or product lines change or business segments are
realigned to better respond to the Companys diverse
customer base. During 2010, certain organization and methodology
changes were made and, accordingly, 2009 results were restated
and presented on a comparable basis.
Wholesale
Banking Wholesale
Banking offers lending, equipment finance and small-ticket
leasing, depository, treasury management, capital markets,
foreign exchange, international trade services and other
financial services to middle market, large corporate, commercial
real estate, financial institution and public sector clients.
Wholesale Banking contributed $82 million of the
Companys net income in the second quarter and
$84 million in the first six months of 2010, or increases
of $14 million (20.6 percent) and $27 million
(47.4 percent), respectively, compared with the same
periods of 2009. The increases were primarily driven by higher
net revenue, partially offset by higher noninterest expense.
Total net revenue increased $50 million (6.7 percent)
in the second quarter and $86 million (5.9 percent) in
the first six months of 2010, compared with the same periods of
2009. Net interest income, on a taxable-equivalent basis,
increased $5 million (1.0 percent) in the second
quarter and decreased $24 million (2.4 percent) in the
first six months of 2010, compared with the same periods of
2009. The decrease in the first six months of 2010, compared
with the same period of 2009, was driven by a reduction in
average loans as a result of lower utilization of existing
commitments and reduced demand for new loans, as well as the
impact of declining rates on the margin benefit from deposits,
which were partially offset by improved spreads on loans and
higher average deposit balances. Total noninterest income
increased $45 million (18.4 percent) in the second
quarter and $110 million (24.2 percent) in the first
six months of 2010, compared with the same periods of 2009, due
to strong growth in commercial products revenue, including
standby letters of credit, syndication, commercial loan and
capital markets fees and a favorable variance in income from
equity investments relative to the prior year.
Total noninterest expense increased $38 million
(13.4 percent) in the second quarter and $53 million
(9.6 percent) in the first six months of 2010, compared
with the same periods of 2009, primarily due to higher
compensation and employee benefits expense and increased costs
related to OREO. The provision for credit losses decreased
$9 million (2.6 percent) in the second quarter and
$5 million (.6 percent) in the first six months of
2010, compared with the same periods of 2009. The favorable
changes were primarily due to decreases in the reserve
allocation, partially offset by higher net charge-offs.
Nonperforming assets were $2.2 billion at June 30,
2010, $2.5 billion at March 31, 2010, and
$2.2 billion at June 30, 2009. Nonperforming assets as
a percentage of period-end loans were 3.90 percent at
June 30, 2010, 4.43 percent at March 31, 2010,
and 3.60 percent at June 30, 2009. Refer to the
Corporate Risk Profile section for further
information on factors impacting the credit quality of the loan
portfolios.
Consumer
Banking Consumer
Banking delivers products and services through banking offices,
telephone servicing and sales, on-line services, direct mail and
ATM processing. It encompasses community banking, metropolitan
banking, in-store banking, small business banking, consumer
lending, mortgage banking, consumer finance, workplace banking,
student banking and
24-hour
banking. Consumer Banking contributed $178 million of the
Companys net income in the second
quarter and $374 million in the first six months of 2010,
or decreases of $33 million (15.6 percent) and
$53 million (12.4 percent), respectively, compared
with the same periods of 2009.
Within Consumer Banking, the retail banking division contributed
$42 million of the total net income in the second quarter
and $137 million in the first six months of 2010, or
decreases of $9 million (17.6 percent) and
$9 million (6.2 percent) over the same periods of
2009. Mortgage banking contributed $136 million of the
business lines net income in the second quarter and
$237 million in the first six months of 2010, or decreases
of $24 million (15.0 percent) and $44 million
(15.7 percent) from the same periods of 2009, reflecting
lower mortgage loan production, including lower interest income
on average mortgage loans held for sale.
Total net revenue decreased $60 million (3.4 percent)
in the second quarter and $55 million (1.6 percent) in
the first six months of 2010, compared with the same periods of
2009. Net interest income, on a taxable-equivalent basis,
increased $34 million (3.4 percent) in the second
quarter and $40 million (2.0 percent) in the first six
months of 2010, compared with the same periods of 2009. The
year-over-year
increases in net interest income were due to increases in
deposit balances and loan spreads, partially offset by a decline
in the margin benefit of deposits. The
year-over-year
increases in average deposits primarily reflected increases in
savings accounts. Total noninterest income decreased
$94 million (12.0 percent) in the second quarter and
$95 million (6.6 percent) in the first six months of
2010, compared with the same periods of 2009. The
year-over-year
decreases in noninterest income were driven by lower mortgage
banking revenue, principally due to lower production, and lower
deposit service charges due to the impact of Company-initiated
revisions to overdraft fee policies and lower overdraft
incidences, partially offset by improvement in retail lease
residual valuation losses and higher ATM processing servicing
fees.
Total noninterest expense increased $84 million
(9.0 percent) in the second quarter and $160 million
(8.8 percent) in the first six months of 2010, compared
with the same periods of 2009. The increases reflected higher
compensation and employee benefits expense, higher processing
costs and net occupancy and equipment expenses related to
business expansion, and higher servicing costs associated with
OREO and foreclosures.
The provision for credit losses decreased $93 million
(18.1 percent) in the second quarter and $133 million
(14.4 percent) in the first six months of 2010, compared
with the same periods of 2009, as stress within the residential
mortgage, home equity, installment and other consumer loan
portfolios moderated. As a percentage of average loans
outstanding on an annualized basis, net charge-offs increased to
1.55 percent in the second quarter of 2010, compared with
1.46 percent in the second quarter of 2009. Nonperforming
assets were $1.5 billion at June 30, 2010,
$1.5 billion at March 31, 2010, and $1.2 billion
at June 30, 2009. Nonperforming assets as a percentage of
period-end loans were 1.51 percent at June 30, 2010,
1.52 percent at March 31, 2010, and 1.23 percent
at June 30, 2009. Refer to the Corporate Risk
Profile section for further information on factors
impacting the credit quality of the loan portfolios.
Wealth
Management & Securities
Services Wealth
Management & Securities Services provides trust,
private banking, financial advisory, investment management,
retail brokerage services, insurance, custody and fund servicing
through five businesses: Wealth Management, Corporate Trust, FAF
Advisors, Institutional Trust & Custody and
Fund Services.
In July 2010, the Company announced a strategic alliance
with a third party under which it will receive an ownership
interest in the third party in exchange for the long-term asset
management business of FAF Advisors, primarily representing the
equity and fixed income mutual funds. U.S. Bancorp Asset
Management will retain the Companys money market fund
business.
Wealth Management & Securities Services contributed
$60 million of the Companys net income in the second
quarter and $113 million in the first six months of 2010,
or decreases of $25 million (29.4 percent) and
$69 million (37.9 percent), respectively, compared
with the same periods of 2009. The decreases were primarily
attributable to lower net revenue and higher total noninterest
expense.
Total net revenue decreased $10 million (2.7 percent)
in the second quarter and $74 million (9.5 percent) in
the first six months of 2010, compared with the same periods of
2009. Net interest income, on a taxable-equivalent basis,
increased $11 million (15.5 percent) in the second
quarter and decreased $13 million (8.0 percent) in the
first six months of 2010, compared with the same periods of
2009. The increase in net interest income in the second quarter,
compared with the same period of 2009, was primarily due to
higher deposit volumes, partially offset by a decline in the
related margin benefit. The decrease in net interest income in
the first six months of 2010, compared with the same period of
2009, was primarily due to a decline in the margin benefit from
deposits, partially offset by higher deposit volumes.
Noninterest income decreased $21 million (6.9 percent)
in the second quarter and $61 million (9.9 percent) in
the first six months of 2010, compared with the same periods of
2009, as low interest rates negatively impacted money market
investment fees and lower money market fund balances led to a
decline in account-level fees.
Table
10 Line
of Business Financial Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale
|
|
|
|
Consumer
|
|
|
|
Banking
|
|
|
|
Banking
|
|
Three Months Ended
June 30
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
Percent
|
|
(Dollars in Millions)
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
Condensed Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (taxable-equivalent basis)
|
|
$
|
503
|
|
|
$
|
498
|
|
|
|
1.0
|
%
|
|
|
$
|
1,028
|
|
|
$
|
994
|
|
|
|
3.4
|
%
|
Noninterest income
|
|
|
290
|
|
|
|
245
|
|
|
|
18.4
|
|
|
|
|
692
|
|
|
|
786
|
|
|
|
(12.0
|
)
|
Securities gains (losses), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue
|
|
|
793
|
|
|
|
743
|
|
|
|
6.7
|
|
|
|
|
1,720
|
|
|
|
1,780
|
|
|
|
(3.4
|
)
|
Noninterest expense
|
|
|
317
|
|
|
|
277
|
|
|
|
14.4
|
|
|
|
|
1,002
|
|
|
|
911
|
|
|
|
10.0
|
|
Other intangibles
|
|
|
4
|
|
|
|
6
|
|
|
|
(33.3
|
)
|
|
|
|
17
|
|
|
|
24
|
|
|
|
(29.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
321
|
|
|
|
283
|
|
|
|
13.4
|
|
|
|
|
1,019
|
|
|
|
935
|
|
|
|
9.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision and income taxes
|
|
|
472
|
|
|
|
460
|
|
|
|
2.6
|
|
|
|
|
701
|
|
|
|
845
|
|
|
|
(17.0
|
)
|
Provision for credit losses
|
|
|
343
|
|
|
|
352
|
|
|
|
(2.6
|
)
|
|
|
|
420
|
|
|
|
513
|
|
|
|
(18.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
129
|
|
|
|
108
|
|
|
|
19.4
|
|
|
|
|
281
|
|
|
|
332
|
|
|
|
(15.4
|
)
|
Income taxes and taxable-equivalent adjustment
|
|
|
47
|
|
|
|
39
|
|
|
|
20.5
|
|
|
|
|
102
|
|
|
|
121
|
|
|
|
(15.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
82
|
|
|
|
69
|
|
|
|
18.8
|
|
|
|
|
179
|
|
|
|
211
|
|
|
|
(15.2
|
)
|
Net (income) loss attributable to noncontrolling interests
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
*
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to U.S. Bancorp
|
|
$
|
82
|
|
|
$
|
68
|
|
|
|
20.6
|
|
|
|
$
|
178
|
|
|
$
|
211
|
|
|
|
(15.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
34,002
|
|
|
$
|
41,080
|
|
|
|
(17.2
|
)%
|
|
|
$
|
5,987
|
|
|
$
|
6,306
|
|
|
|
(5.1
|
)%
|
Commercial real estate
|
|
|
21,561
|
|
|
|
21,499
|
|
|
|
.3
|
|
|
|
|
11,748
|
|
|
|
11,498
|
|
|
|
2.2
|
|
Residential mortgages
|
|
|
77
|
|
|
|
80
|
|
|
|
(3.8
|
)
|
|
|
|
26,363
|
|
|
|
23,494
|
|
|
|
12.2
|
|
Retail
|
|
|
45
|
|
|
|
58
|
|
|
|
(22.4
|
)
|
|
|
|
44,322
|
|
|
|
44,392
|
|
|
|
(.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, excluding covered loans
|
|
|
55,685
|
|
|
|
62,717
|
|
|
|
(11.2
|
)
|
|
|
|
88,420
|
|
|
|
85,690
|
|
|
|
3.2
|
|
Covered loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,494
|
|
|
|
9,906
|
|
|
|
(24.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
55,685
|
|
|
|
62,717
|
|
|
|
(11.2
|
)
|
|
|
|
95,914
|
|
|
|
95,596
|
|
|
|
.3
|
|
Goodwill
|
|
|
1,475
|
|
|
|
1,475
|
|
|
|
|
|
|
|
|
3,254
|
|
|
|
3,108
|
|
|
|
4.7
|
|
Other intangible assets
|
|
|
71
|
|
|
|
93
|
|
|
|
(23.7
|
)
|
|
|
|
1,880
|
|
|
|
1,570
|
|
|
|
19.7
|
|
Assets
|
|
|
61,081
|
|
|
|
67,528
|
|
|
|
(9.5
|
)
|
|
|
|
108,397
|
|
|
|
109,212
|
|
|
|
(.7
|
)
|
Noninterest-bearing deposits
|
|
|
18,159
|
|
|
|
17,343
|
|
|
|
4.7
|
|
|
|
|
14,604
|
|
|
|
14,296
|
|
|
|
2.2
|
|
Interest checking
|
|
|
10,687
|
|
|
|
12,369
|
|
|
|
(13.6
|
)
|
|
|
|
22,724
|
|
|
|
20,868
|
|
|
|
8.9
|
|
Savings products
|
|
|
10,036
|
|
|
|
7,076
|
|
|
|
41.8
|
|
|
|
|
32,073
|
|
|
|
25,672
|
|
|
|
24.9
|
|
Time deposits
|
|
|
10,890
|
|
|
|
12,630
|
|
|
|
(13.8
|
)
|
|
|
|
19,233
|
|
|
|
26,576
|
|
|
|
(27.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
49,772
|
|
|
|
49,418
|
|
|
|
.7
|
|
|
|
|
88,634
|
|
|
|
87,412
|
|
|
|
1.4
|
|
Total U.S. Bancorp shareholders equity
|
|
|
5,455
|
|
|
|
5,003
|
|
|
|
9.0
|
|
|
|
|
8,230
|
|
|
|
7,349
|
|
|
|
12.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale
|
|
|
|
Consumer
|
|
|
|
Banking
|
|
|
|
Banking
|
|
Six Months Ended
June 30
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
Percent
|
|
(Dollars in Millions)
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
Condensed Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (taxable-equivalent basis)
|
|
$
|
985
|
|
|
$
|
1,009
|
|
|
|
(2.4
|
)%
|
|
|
$
|
2,017
|
|
|
$
|
1,977
|
|
|
|
2.0
|
%
|
Noninterest income
|
|
|
564
|
|
|
|
457
|
|
|
|
23.4
|
|
|
|
|
1,345
|
|
|
|
1,440
|
|
|
|
(6.6
|
)
|
Securities gains (losses), net
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue
|
|
|
1,549
|
|
|
|
1,463
|
|
|
|
5.9
|
|
|
|
|
3,362
|
|
|
|
3,417
|
|
|
|
(1.6
|
)
|
Noninterest expense
|
|
|
597
|
|
|
|
539
|
|
|
|
10.8
|
|
|
|
|
1,948
|
|
|
|
1,775
|
|
|
|
9.7
|
|
Other intangibles
|
|
|
8
|
|
|
|
13
|
|
|
|
(38.5
|
)
|
|
|
|
34
|
|
|
|
47
|
|
|
|
(27.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
605
|
|
|
|
552
|
|
|
|
9.6
|
|
|
|
|
1,982
|
|
|
|
1,822
|
|
|
|
8.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision and income taxes
|
|
|
944
|
|
|
|
911
|
|
|
|
3.6
|
|
|
|
|
1,380
|
|
|
|
1,595
|
|
|
|
(13.5
|
)
|
Provision for credit losses
|
|
|
813
|
|
|
|
818
|
|
|
|
(.6
|
)
|
|
|
|
791
|
|
|
|
924
|
|
|
|
(14.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
131
|
|
|
|
93
|
|
|
|
40.9
|
|
|
|
|
589
|
|
|
|
671
|
|
|
|
(12.2
|
)
|
Income taxes and taxable-equivalent adjustment
|
|
|
48
|
|
|
|
36
|
|
|
|
33.3
|
|
|
|
|
214
|
|
|
|
244
|
|
|
|
(12.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
83
|
|
|
|
57
|
|
|
|
45.6
|
|
|
|
|
375
|
|
|
|
427
|
|
|
|
(12.2
|
)
|
Net (income) loss attributable to noncontrolling interests
|
|
|
1
|
|
|
|
|
|
|
|
|
*
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to U.S. Bancorp
|
|
$
|
84
|
|
|
$
|
57
|
|
|
|
47.4
|
|
|
|
$
|
374
|
|
|
$
|
427
|
|
|
|
(12.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
34,604
|
|
|
$
|
42,021
|
|
|
|
(17.7
|
)%
|
|
|
$
|
6,006
|
|
|
$
|
6,380
|
|
|
|
(5.9
|
)%
|
Commercial real estate
|
|
|
21,584
|
|
|
|
21,352
|
|
|
|
1.1
|
|
|
|
|
11,711
|
|
|
|
11,542
|
|
|
|
1.5
|
|
Residential mortgages
|
|
|
77
|
|
|
|
84
|
|
|
|
(8.3
|
)
|
|
|
|
26,156
|
|
|
|
23,461
|
|
|
|
11.5
|
|
Retail
|
|
|
45
|
|
|
|
65
|
|
|
|
(30.8
|
)
|
|
|
|
44,440
|
|
|
|
44,519
|
|
|
|
(.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, excluding covered loans
|
|
|
56,310
|
|
|
|
63,522
|
|
|
|
(11.4
|
)
|
|
|
|
88,313
|
|
|
|
85,902
|
|
|
|
2.8
|
|
Covered loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,702
|
|
|
|
9,970
|
|
|
|
(22.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
56,310
|
|
|
|
63,522
|
|
|
|
(11.4
|
)
|
|
|
|
96,015
|
|
|
|
95,872
|
|
|
|
.1
|
|
Goodwill
|
|
|
1,474
|
|
|
|
1,475
|
|
|
|
(.1
|
)
|
|
|
|
3,252
|
|
|
|
3,171
|
|
|
|
2.6
|
|
Other intangible assets
|
|
|
73
|
|
|
|
96
|
|
|
|
(24.0
|
)
|
|
|
|
1,896
|
|
|
|
1,527
|
|
|
|
24.2
|
|
Assets
|
|
|
61,419
|
|
|
|
68,647
|
|
|
|
(10.5
|
)
|
|
|
|
108,326
|
|
|
|
109,182
|
|
|
|
(.8
|
)
|
Noninterest-bearing deposits
|
|
|
17,568
|
|
|
|
16,773
|
|
|
|
4.7
|
|
|
|
|
14,340
|
|
|
|
14,098
|
|
|
|
1.7
|
|
Interest checking
|
|
|
11,247
|
|
|
|
10,449
|
|
|
|
7.6
|
|
|
|
|
22,438
|
|
|
|
20,387
|
|
|
|
10.1
|
|
Savings products
|
|
|
10,746
|
|
|
|
7,362
|
|
|
|
46.0
|
|
|
|
|
31,303
|
|
|
|
24,931
|
|
|
|
25.6
|
|
Time deposits
|
|
|
10,991
|
|
|
|
14,047
|
|
|
|
(21.8
|
)
|
|
|
|
19,645
|
|
|
|
26,714
|
|
|
|
(26.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
50,552
|
|
|
|
48,631
|
|
|
|
4.0
|
|
|
|
|
87,726
|
|
|
|
86,130
|
|
|
|
1.9
|
|
Total U.S. Bancorp shareholders equity
|
|
|
5,493
|
|
|
|
4,982
|
|
|
|
10.3
|
|
|
|
|
8,250
|
|
|
|
7,438
|
|
|
|
10.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Not
meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wealth Management
&
|
|
|
Payment
|
|
|
Treasury and
|
|
|
Consolidated
|
|
|
|
Securities Services
|
|
|
Services
|
|
|
Corporate Support
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
|
|
$
|
82
|
|
|
$
|
71
|
|
|
|
15.5
|
%
|
|
$
|
332
|
|
|
$
|
276
|
|
|
|
20.3
|
%
|
|
$
|
464
|
|
|
$
|
265
|
|
|
|
75.1
|
%
|
|
$
|
2,409
|
|
|
$
|
2,104
|
|
|
|
14.5
|
%
|
|
|
|
283
|
|
|
|
304
|
|
|
|
(6.9
|
)
|
|
|
788
|
|
|
|
723
|
|
|
|
9.0
|
|
|
|
78
|
|
|
|
16
|
|
|
|
|
*
|
|
|
2,131
|
|
|
|
2,074
|
|
|
|
2.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21
|
)
|
|
|
(19
|
)
|
|
|
(10.5
|
)
|
|
|
(21
|
)
|
|
|
(19
|
)
|
|
|
(10.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
365
|
|
|
|
375
|
|
|
|
(2.7
|
)
|
|
|
1,120
|
|
|
|
999
|
|
|
|
12.1
|
|
|
|
521
|
|
|
|
262
|
|
|
|
98.9
|
|
|
|
4,519
|
|
|
|
4,159
|
|
|
|
8.7
|
|
|
|
|
255
|
|
|
|
218
|
|
|
|
17.0
|
|
|
|
415
|
|
|
|
352
|
|
|
|
17.9
|
|
|
|
297
|
|
|
|
276
|
|
|
|
7.6
|
|
|
|
2,286
|
|
|
|
2,034
|
|
|
|
12.4
|
|
|
|
|
13
|
|
|
|
17
|
|
|
|
(23.5
|
)
|
|
|
49
|
|
|
|
46
|
|
|
|
6.5
|
|
|
|
8
|
|
|
|
2
|
|
|
|
|
*
|
|
|
91
|
|
|
|
95
|
|
|
|
(4.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
268
|
|
|
|
235
|
|
|
|
14.0
|
|
|
|
464
|
|
|
|
398
|
|
|
|
16.6
|
|
|
|
305
|
|
|
|
278
|
|
|
|
9.7
|
|
|
|
2,377
|
|
|
|
2,129
|
|
|
|
11.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97
|
|
|
|
140
|
|
|
|
(30.7
|
)
|
|
|
656
|
|
|
|
601
|
|
|
|
9.2
|
|
|
|
216
|
|
|
|
(16
|
)
|
|
|
|
*
|
|
|
2,142
|
|
|
|
2,030
|
|
|
|
5.5
|
|
|
|
|
2
|
|
|
|
6
|
|
|
|
(66.7
|
)
|
|
|
359
|
|
|
|
509
|
|
|
|
(29.5
|
)
|
|
|
15
|
|
|
|
15
|
|
|
|
|
|
|
|
1,139
|
|
|
|
1,395
|
|
|
|
(18.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95
|
|
|
|
134
|
|
|
|
(29.1
|
)
|
|
|
297
|
|
|
|
92
|
|
|
|
|
*
|
|
|
201
|
|
|
|
(31
|
)
|
|
|
|
*
|
|
|
1,003
|
|
|
|
635
|
|
|
|
58.0
|
|
|
|
|
35
|
|
|
|
49
|
|
|
|
(28.6
|
)
|
|
|
108
|
|
|
|
33
|
|
|
|
|
*
|
|
|
(41
|
)
|
|
|
(92
|
)
|
|
|
55.4
|
|
|
|
251
|
|
|
|
150
|
|
|
|
67.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
|
|
|
|
85
|
|
|
|
(29.4
|
)
|
|
|
189
|
|
|
|
59
|
|
|
|
|
*
|
|
|
242
|
|
|
|
61
|
|
|
|
|
*
|
|
|
752
|
|
|
|
485
|
|
|
|
55.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
(5
|
)
|
|
|
(80.0
|
)
|
|
|
24
|
|
|
|
(8
|
)
|
|
|
|
*
|
|
|
14
|
|
|
|
(14
|
)
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
60
|
|
|
$
|
85
|
|
|
|
(29.4
|
)
|
|
$
|
180
|
|
|
$
|
54
|
|
|
|
|
*
|
|
$
|
266
|
|
|
$
|
53
|
|
|
|
|
*
|
|
$
|
766
|
|
|
$
|
471
|
|
|
|
62.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,091
|
|
|
$
|
1,199
|
|
|
|
(9.0
|
)%
|
|
$
|
5,162
|
|
|
$
|
4,500
|
|
|
|
14.7
|
%
|
|
$
|
98
|
|
|
$
|
974
|
|
|
|
(89.9
|
)%
|
|
$
|
46,340
|
|
|
$
|
54,059
|
|
|
|
(14.3
|
)%
|
|
|
|
580
|
|
|
|
569
|
|
|
|
1.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
275
|
|
|
|
161
|
|
|
|
70.8
|
|
|
|
34,164
|
|
|
|
33,727
|
|
|
|
1.3
|
|
|
|
|
372
|
|
|
|
387
|
|
|
|
(3.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
3
|
|
|
|
|
*
|
|
|
26,821
|
|
|
|
23,964
|
|
|
|
11.9
|
|
|
|
|
1,661
|
|
|
|
1,560
|
|
|
|
6.5
|
|
|
|
17,338
|
|
|
|
15,414
|
|
|
|
12.5
|
|
|
|
16
|
|
|
|
3
|
|
|
|
|
*
|
|
|
63,382
|
|
|
|
61,427
|
|
|
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,704
|
|
|
|
3,715
|
|
|
|
(.3
|
)
|
|
|
22,500
|
|
|
|
19,914
|
|
|
|
13.0
|
|
|
|
398
|
|
|
|
1,141
|
|
|
|
(65.1
|
)
|
|
|
170,707
|
|
|
|
173,177
|
|
|
|
(1.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,960
|
|
|
|
795
|
|
|
|
|
*
|
|
|
20,454
|
|
|
|
10,701
|
|
|
|
91.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,704
|
|
|
|
3,715
|
|
|
|
(.3
|
)
|
|
|
22,500
|
|
|
|
19,914
|
|
|
|
13.0
|
|
|
|
13,358
|
|
|
|
1,936
|
|
|
|
|
*
|
|
|
191,161
|
|
|
|
183,878
|
|
|
|
4.0
|
|
|
|
|
1,522
|
|
|
|
1,512
|
|
|
|
.7
|
|
|
|
2,335
|
|
|
|
2,348
|
|
|
|
(.6
|
)
|
|
|
413
|
|
|
|
|
|
|
|
|
*
|
|
|
8,999
|
|
|
|
8,443
|
|
|
|
6.6
|
|
|
|
|
208
|
|
|
|
265
|
|
|
|
(21.5
|
)
|
|
|
971
|
|
|
|
873
|
|
|
|
11.2
|
|
|
|
132
|
|
|
|
8
|
|
|
|
|
*
|
|
|
3,262
|
|
|
|
2,809
|
|
|
|
16.1
|
|
|
|
|
5,886
|
|
|
|
6,006
|
|
|
|
(2.0
|
)
|
|
|
27,231
|
|
|
|
24,093
|
|
|
|
13.0
|
|
|
|
78,745
|
|
|
|
59,268
|
|
|
|
32.9
|
|
|
|
281,340
|
|
|
|
266,107
|
|
|
|
5.7
|
|
|
|
|
5,740
|
|
|
|
4,925
|
|
|
|
16.5
|
|
|
|
611
|
|
|
|
491
|
|
|
|
24.4
|
|
|
|
803
|
|
|
|
333
|
|
|
|
|
*
|
|
|
39,917
|
|
|
|
37,388
|
|
|
|
6.8
|
|
|
|
|
4,817
|
|
|
|
4,071
|
|
|
|
18.3
|
|
|
|
115
|
|
|
|
83
|
|
|
|
38.6
|
|
|
|
1,160
|
|
|
|
2
|
|
|
|
|
*
|
|
|
39,503
|
|
|
|
37,393
|
|
|
|
5.6
|
|
|
|
|
14,546
|
|
|
|
6,623
|
|
|
|
|
*
|
|
|
23
|
|
|
|
18
|
|
|
|
27.8
|
|
|
|
3,613
|
|
|
|
139
|
|
|
|
|
*
|
|
|
60,291
|
|
|
|
39,528
|
|
|
|
52.5
|
|
|
|
|
5,880
|
|
|
|
6,575
|
|
|
|
(10.6
|
)
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
7,603
|
|
|
|
3,129
|
|
|
|
|
*
|
|
|
43,607
|
|
|
|
48,911
|
|
|
|
(10.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,983
|
|
|
|
22,194
|
|
|
|
39.6
|
|
|
|
750
|
|
|
|
593
|
|
|
|
26.5
|
|
|
|
13,179
|
|
|
|
3,603
|
|
|
|
|
*
|
|
|
183,318
|
|
|
|
163,220
|
|
|
|
12.3
|
|
|
|
|
2,121
|
|
|
|
2,067
|
|
|
|
2.6
|
|
|
|
5,286
|
|
|
|
4,717
|
|
|
|
12.1
|
|
|
|
6,327
|
|
|
|
9,066
|
|
|
|
(30.2
|
)
|
|
|
27,419
|
|
|
|
28,202
|
|
|
|
(2.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wealth Management
&
|
|
|
Payment
|
|
|
Treasury and
|
|
|
Consolidated
|
|
|
|
Securities Services
|
|
|
Services
|
|
|
Corporate Support
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
|
|
$
|
150
|
|
|
$
|
163
|
|
|
|
(8.0
|
)%
|
|
$
|
677
|
|
|
$
|
546
|
|
|
|
24.0
|
%
|
|
$
|
983
|
|
|
$
|
504
|
|
|
|
95.0
|
%
|
|
$
|
4,812
|
|
|
$
|
4,199
|
|
|
|
14.6
|
%
|
|
|
|
556
|
|
|
|
617
|
|
|
|
(9.9
|
)
|
|
|
1,529
|
|
|
|
1,414
|
|
|
|
8.1
|
|
|
|
89
|
|
|
|
132
|
|
|
|
(32.6
|
)
|
|
|
4,083
|
|
|
|
4,060
|
|
|
|
.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(55
|
)
|
|
|
(214
|
)
|
|
|
74.3
|
|
|
|
(55
|
)
|
|
|
(217
|
)
|
|
|
74.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
706
|
|
|
|
780
|
|
|
|
(9.5
|
)
|
|
|
2,206
|
|
|
|
1,960
|
|
|
|
12.6
|
|
|
|
1,017
|
|
|
|
422
|
|
|
|
|
*
|
|
|
8,840
|
|
|
|
8,042
|
|
|
|
9.9
|
|
|
|
|
494
|
|
|
|
449
|
|
|
|
10.0
|
|
|
|
795
|
|
|
|
682
|
|
|
|
16.6
|
|
|
|
491
|
|
|
|
369
|
|
|
|
33.1
|
|
|
|
4,325
|
|
|
|
3,814
|
|
|
|
13.4
|
|
|
|
|
27
|
|
|
|
33
|
|
|
|
(18.2
|
)
|
|
|
101
|
|
|
|
91
|
|
|
|
11.0
|
|
|
|
18
|
|
|
|
2
|
|
|
|
|
*
|
|
|
188
|
|
|
|
186
|
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
521
|
|
|
|
482
|
|
|
|
8.1
|
|
|
|
896
|
|
|
|
773
|
|
|
|
15.9
|
|
|
|
509
|
|
|
|
371
|
|
|
|
37.2
|
|
|
|
4,513
|
|
|
|
4,000
|
|
|
|
12.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
185
|
|
|
|
298
|
|
|
|
(37.9
|
)
|
|
|
1,310
|
|
|
|
1,187
|
|
|
|
10.4
|
|
|
|
508
|
|
|
|
51
|
|
|
|
|
*
|
|
|
4,327
|
|
|
|
4,042
|
|
|
|
7.1
|
|
|
|
|
6
|
|
|
|
14
|
|
|
|
(57.1
|
)
|
|
|
815
|
|
|
|
942
|
|
|
|
(13.5
|
)
|
|
|
24
|
|
|
|
15
|
|
|
|
60.0
|
|
|
|
2,449
|
|
|
|
2,713
|
|
|
|
(9.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
179
|
|
|
|
284
|
|
|
|
(37.0
|
)
|
|
|
495
|
|
|
|
245
|
|
|
|
|
*
|
|
|
484
|
|
|
|
36
|
|
|
|
|
*
|
|
|
1,878
|
|
|
|
1,329
|
|
|
|
41.3
|
|
|
|
|
66
|
|
|
|
102
|
|
|
|
(35.3
|
)
|
|
|
180
|
|
|
|
88
|
|
|
|
|
*
|
|
|
(45
|
)
|
|
|
(171
|
)
|
|
|
73.7
|
|
|
|
463
|
|
|
|
299
|
|
|
|
54.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113
|
|
|
|
182
|
|
|
|
(37.9
|
)
|
|
|
315
|
|
|
|
157
|
|
|
|
|
*
|
|
|
529
|
|
|
|
207
|
|
|
|
|
*
|
|
|
1,415
|
|
|
|
1,030
|
|
|
|
37.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16
|
)
|
|
|
(12
|
)
|
|
|
(33.3
|
)
|
|
|
36
|
|
|
|
(18
|
)
|
|
|
|
*
|
|
|
20
|
|
|
|
(30
|
)
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
113
|
|
|
$
|
182
|
|
|
|
(37.9
|
)
|
|
$
|
299
|
|
|
$
|
145
|
|
|
|
|
*
|
|
$
|
565
|
|
|
$
|
189
|
|
|
|
|
*
|
|
$
|
1,435
|
|
|
$
|
1,000
|
|
|
|
43.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,065
|
|
|
$
|
1,289
|
|
|
|
(17.4
|
)%
|
|
$
|
5,023
|
|
|
$
|
4,394
|
|
|
|
14.3
|
%
|
|
$
|
107
|
|
|
$
|
1,007
|
|
|
|
(89.4
|
)%
|
|
$
|
46,805
|
|
|
$
|
55,091
|
|
|
|
(15.0
|
)%
|
|
|
|
578
|
|
|
|
571
|
|
|
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
280
|
|
|
|
98
|
|
|
|
|
*
|
|
|
34,153
|
|
|
|
33,563
|
|
|
|
1.8
|
|
|
|
|
374
|
|
|
|
392
|
|
|
|
(4.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
3
|
|
|
|
|
*
|
|
|
26,616
|
|
|
|
23,940
|
|
|
|
11.2
|
|
|
|
|
1,630
|
|
|
|
1,536
|
|
|
|
6.1
|
|
|
|
17,375
|
|
|
|
15,045
|
|
|
|
15.5
|
|
|
|
12
|
|
|
|
5
|
|
|
|
|
*
|
|
|
63,502
|
|
|
|
61,170
|
|
|
|
3.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,647
|
|
|
|
3,788
|
|
|
|
(3.7
|
)
|
|
|
22,398
|
|
|
|
19,439
|
|
|
|
15.2
|
|
|
|
408
|
|
|
|
1,113
|
|
|
|
(63.3
|
)
|
|
|
171,076
|
|
|
|
173,764
|
|
|
|
(1.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,237
|
|
|
|
1,052
|
|
|
|
|
*
|
|
|
20,939
|
|
|
|
11,022
|
|
|
|
90.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,647
|
|
|
|
3,788
|
|
|
|
(3.7
|
)
|
|
|
22,398
|
|
|
|
19,439
|
|
|
|
15.2
|
|
|
|
13,645
|
|
|
|
2,165
|
|
|
|
|
*
|
|
|
192,015
|
|
|
|
184,786
|
|
|
|
3.9
|
|
|
|
|
1,518
|
|
|
|
1,512
|
|
|
|
.4
|
|
|
|
2,348
|
|
|
|
2,342
|
|
|
|
.3
|
|
|
|
413
|
|
|
|
|
|
|
|
|
*
|
|
|
9,005
|
|
|
|
8,500
|
|
|
|
5.9
|
|
|
|
|
214
|
|
|
|
273
|
|
|
|
(21.6
|
)
|
|
|
987
|
|
|
|
886
|
|
|
|
11.4
|
|
|
|
140
|
|
|
|
4
|
|
|
|
|
*
|
|
|
3,310
|
|
|
|
2,786
|
|
|
|
18.8
|
|
|
|
|
5,850
|
|
|
|
6,106
|
|
|
|
(4.2
|
)
|
|
|
27,113
|
|
|
|
23,724
|
|
|
|
14.3
|
|
|
|
78,822
|
|
|
|
58,512
|
|
|
|
34.7
|
|
|
|
281,530
|
|
|
|
266,171
|
|
|
|
5.8
|
|
|
|
|
5,557
|
|
|
|
4,950
|
|
|
|
12.3
|
|
|
|
610
|
|
|
|
532
|
|
|
|
14.7
|
|
|
|
889
|
|
|
|
354
|
|
|
|
|
*
|
|
|
38,964
|
|
|
|
36,707
|
|
|
|
6.1
|
|
|
|
|
4,825
|
|
|
|
3,812
|
|
|
|
26.6
|
|
|
|
110
|
|
|
|
80
|
|
|
|
37.5
|
|
|
|
1,127
|
|
|
|
2
|
|
|
|
|
*
|
|
|
39,747
|
|
|
|
34,730
|
|
|
|
14.4
|
|
|
|
|
13,990
|
|
|
|
6,466
|
|
|
|
|
*
|
|
|
22
|
|
|
|
18
|
|
|
|
22.2
|
|
|
|
3,554
|
|
|
|
123
|
|
|
|
|
*
|
|
|
59,615
|
|
|
|
38,900
|
|
|
|
53.3
|
|
|
|
|
5,642
|
|
|
|
6,496
|
|
|
|
(13.1
|
)
|
|
|
1
|
|
|
|
|
|
|
|
|
*
|
|
|
8,322
|
|
|
|
4,286
|
|
|
|
94.2
|
|
|
|
44,601
|
|
|
|
51,543
|
|
|
|
(13.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,014
|
|
|
|
21,724
|
|
|
|
38.2
|
|
|
|
743
|
|
|
|
630
|
|
|
|
17.9
|
|
|
|
13,892
|
|
|
|
4,765
|
|
|
|
|
*
|
|
|
182,927
|
|
|
|
161,880
|
|
|
|
13.0
|
|
|
|
|
2,120
|
|
|
|
2,081
|
|
|
|
1.9
|
|
|
|
5,318
|
|
|
|
4,706
|
|
|
|
13.0
|
|
|
|
5,738
|
|
|
|
8,307
|
|
|
|
(30.9
|
)
|
|
|
26,919
|
|
|
|
27,514
|
|
|
|
(2.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense increased $33 million
(14.0 percent) in the second quarter and $39 million
(8.1 percent) in the first six months of 2010, compared
with the same periods of 2009. The increases in noninterest
expense were primarily due to higher compensation and employee
benefits expense.
Payment
Services Payment
Services includes consumer and business credit cards,
stored-value cards, debit cards, corporate and purchasing card
services, consumer lines of credit and merchant processing.
Payment Services contributed $180 million of the
Companys net income in the second quarter and
$299 million in the first six months of 2010, or increases
of $126 million and $154 million, respectively,
compared with the same periods of 2009. The increases were
primarily due to increases in total net revenue and decreases in
the provision for credit losses, partially offset by higher
noninterest expense.
Total net revenue increased $121 million
(12.1 percent) in the second quarter and $246 million
(12.6 percent) in the first six months of 2010, compared
with the same periods of 2009. Net interest income, on a
taxable-equivalent basis, increased $56 million
(20.3 percent) in the second quarter and $131 million
(24.0 percent) in the first six months of 2010, compared
with the same periods of 2009, primarily due to strong growth in
credit card loan balances and improved loan spreads, partially
offset by the cost of rebates on the government card program.
Noninterest income increased $65 million (9.0 percent)
in the second quarter and $115 million (8.1 percent)
in the first six months of 2010, compared with the same periods
of 2009, driven by higher volumes across all products.
Total noninterest expense increased $66 million
(16.6 percent) in the second quarter and $123 million
(15.9 percent) in the first six months of 2010, compared
with the same periods of 2009, due to higher compensation and
employee benefits expense, higher technology and communications
expense, the result of increased volume, and higher intangibles
expense.
The provision for credit losses decreased $150 million
(29.5 percent) in the second quarter and $127 million
(13.5 percent) in the first six months of 2010, compared
with the same periods of 2009, due to a favorable change in the
reserve allocation due to lower delinquencies, partially offset
by higher net charge-offs. As a percentage of average loans
outstanding, net charge-offs were 6.72 percent in the
second quarter of 2010, compared with 6.55 percent in the
second quarter of 2009.
Treasury and
Corporate
Support Treasury
and Corporate Support includes the Companys investment
portfolios, funding, recently acquired assets and assumed
liabilities prior to assignment to business lines, capital
management, asset securitization, interest rate risk management,
the net effect of transfer pricing related to average balances
and the residual aggregate of those expenses associated with
corporate activities that are managed on a consolidated basis.
Treasury and Corporate Support recorded net income of
$266 million in the second quarter and $565 million in
the first six months of 2010, compared with $53 million in
the second quarter and $189 million in the first six months
of 2009.
Total net revenue increased $259 million
(98.9 percent) in the second quarter and $595 million
in the first six months of 2010, compared with the same periods
of 2009. Net interest income, on a taxable-equivalent basis,
increased $199 million (75.1 percent) in the second
quarter and $479 million (95.0 percent) in the first
six months of 2010, compared with the same periods of 2009,
reflecting the impact of the FBOP acquisition, the current
interest rate environment, wholesale funding decisions and the
Companys asset/liability position. Total noninterest
income increased $60 million in the second quarter of 2010,
compared with the second quarter of 2009, primarily due to the
$28 million gain related to the Companys investment
in Visa Inc. and higher syndication revenue on tax-advantaged
transactions. Total noninterest income increased
$116 million in the first six months of 2010, compared with
the same period of 2009, primarily due to lower net securities
losses in the current year and the $28 million gain on the
Companys investment in Visa Inc., partially offset by a
gain on a corporate real estate transaction recognized in the
first quarter of 2009.
Total noninterest expense increased $27 million
(9.7 percent) in the second quarter and $138 million
(37.2 percent) in the first six months of 2010, compared
with the same periods of 2009. The increases in noninterest
expense were driven by the FBOP acquisition, debt extinguishment
costs and higher costs related to affordable housing and other
tax advantaged projects, partially offset by the FDIC special
assessment recognized in the second quarter of 2009.
Income taxes are assessed to each line of business at a
managerial tax rate of 36.4 percent with the residual tax
expense or benefit to arrive at the consolidated effective tax
rate included in Treasury and Corporate Support. The
consolidated effective tax rate of the Company was
20.9 percent in the second quarter and 20.3 percent in
the first six months of 2010, compared with 17.1 percent in
the second quarter and 16.3 percent in the first six months
of 2009. The
year-over-year
increases in the effective tax rate reflected the marginal
impact of higher pre-tax earnings.
In addition to capital ratios defined by banking regulators, the
Company considers various other
measures when evaluating capital utilization and adequacy,
including:
|
|
|
|
|
Tangible common equity to tangible assets,
|
|
|
Tier 1 common equity to risk-weighted assets, and
|
|
|
Tangible common equity to risk-weighted assets.
|
These non-regulatory capital ratios are viewed by management as
useful additional methods of reflecting the level of capital
available to withstand unexpected market conditions.
Additionally, presentation of these ratios allows readers to
compare the Companys capitalization to other financial
services companies. These ratios differ from capital ratios
defined by banking regulators principally in that the numerator
excludes shareholders equity associated with preferred
securities, the nature and extent of which varies among
different financial services companies. These ratios are not
defined in generally accepted accounting principles
(GAAP) or federal banking regulations. As a result,
these non-regulatory capital ratios disclosed by the Company may
be considered non-GAAP financial measures.
Because there are no standardized definitions for these
non-regulatory capital ratios, the Companys calculation
methods may differ from those used by other financial services
companies. Also, there may be limits in the usefulness of these
measures to investors. As a result, the Company encourages
readers to consider the consolidated financial statements and
other financial information contained in this report in their
entirety, and not to rely on any single financial measure.
The following table shows the Companys calculation of
these measures.
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
(Dollars in Millions)
|
|
2010
|
|
|
2009
|
|
Total equity
|
|
$
|
28,940
|
|
|
$
|
26,661
|
|
Preferred stock
|
|
|
(1,930)
|
|
|
|
(1,500)
|
|
Noncontrolling interests
|
|
|
(771)
|
|
|
|
(698)
|
|
Goodwill (net of deferred tax liability)
|
|
|
(8,425)
|
|
|
|
(8,482)
|
|
Intangible assets, other than mortgage servicing rights
|
|
|
(1,525)
|
|
|
|
(1,657)
|
|
|
|
|
|
|
|
Tangible common equity (a)
|
|
|
16,289
|
|
|
|
14,324
|
|
Tier 1 capital, determined in accordance with prescribed
regulatory requirements
|
|
|
24,021
|
|
|
|
22,610
|
|
Trust preferred securities
|
|
|
(3,949)
|
|
|
|
(4,524)
|
|
Preferred stock
|
|
|
(1,930)
|
|
|
|
(1,500)
|
|
Noncontrolling interests, less preferred stock not eligible for
Tier 1 capital
|
|
|
(694)
|
|
|
|
(692)
|
|
|
|
|
|
|
|
Tier 1 common equity (b)
|
|
|
17,448
|
|
|
|
15,894
|
|
Total assets
|
|
|
283,243
|
|
|
|
281,176
|
|
Goodwill (net of deferred tax liability)
|
|
|
(8,425)
|
|
|
|
(8,482)
|
|
Intangible assets, other than mortgage servicing rights
|
|
|
(1,525)
|
|
|
|
(1,657)
|
|
|
|
|
|
|
|
Tangible assets (c)
|
|
|
273,293
|
|
|
|
271,037
|
|
Risk-weighted assets, determined in accordance with prescribed
regulatory requirements (d)
|
|
|
237,145
|
|
|
|
235,233
|
|
Ratios
|
|
|
|
|
|
|
|
|
Tangible common equity to tangible assets (a)/(c)
|
|
|
6.0
|
%
|
|
|
5.3
|
%
|
Tier 1 common equity to risk-weighted assets (b)/(d)
|
|
|
7.4
|
|
|
|
6.8
|
|
Tangible common equity to risk-weighted assets (a)/(d)
|
|
|
6.9
|
|
|
|
6.1
|
|
|
|
|
|
|
|
|
|
|
The accounting and reporting policies of the Company comply with
accounting principles generally accepted in the United States
and conform to general practices within the banking industry.
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions. The
Companys financial position and results of operations can
be affected by these estimates and assumptions, which are
integral to understanding the Companys financial
statements. Critical accounting policies are those policies
management believes are the most important to the portrayal of
the Companys financial condition and results, and require
management to make estimates that are difficult, subjective or
complex. Most accounting policies are not considered by
management to be critical accounting policies. Those policies
considered to be critical accounting policies relate to the
allowance for credit losses, fair value estimates, purchased
loans and related indemnification assets, MSRs, goodwill and
other intangibles and income taxes. Management has discussed the
development and the selection of critical accounting policies
with the Companys Audit Committee. These accounting
policies are discussed in detail in Managements
Discussion and Analysis Critical Accounting
Policies and the Notes to Consolidated Financial
Statements in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2009.
Under the supervision and with the participation of the
Companys management, including its principal executive
officer and principal financial officer, the Company has
evaluated the effectiveness of the design and operation of its
disclosure controls and procedures (as defined in
Rules 13a-15(e)
and
15d-15(e)
under the Securities Exchange Act of 1934 (the Exchange
Act)). Based upon this evaluation, the principal executive
officer and principal financial officer have concluded that, as
of the end of the period covered by this report, the
Companys disclosure controls and procedures were effective.
During the most recently completed fiscal quarter, there was no
change made in the Companys internal control over
financial reporting (as defined in
Rules 13a-15(f)
and
15d-15(f)
under the Exchange Act) that has materially affected, or is
reasonably likely to materially affect, the Companys
internal control over financial reporting.
U.S.
Bancorp
Consolidated
Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
(Dollars in Millions)
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
5,033
|
|
|
$
|
6,206
|
|
Investment securities
|
|
|
|
|
|
|
|
|
Held-to-maturity
(fair value $519 and $48, respectively)
|
|
|
590
|
|
|
|
47
|
|
Available-for-sale
|
|
|
47,777
|
|
|
|
44,721
|
|
Loans held for sale (included $4,650 and $4,327 of mortgage
loans carried at fair value, respectively)
|
|
|
4,912
|
|
|
|
4,772
|
|
Loans
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
46,766
|
|
|
|
48,792
|
|
Commercial real estate
|
|
|
33,944
|
|
|
|
34,093
|
|
Residential mortgages
|
|
|
27,252
|
|
|
|
26,056
|
|
Retail
|
|
|
63,639
|
|
|
|
63,955
|
|
|
|
|
|
|
|
|
|
|
Total loans, excluding covered loans
|
|
|
171,601
|
|
|
|
172,896
|
|
Covered loans
|
|
|
19,983
|
|
|
|
21,859
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
191,584
|
|
|
|
194,755
|
|
Less allowance for loan losses
|
|
|
(5,320
|
)
|
|
|
(5,079
|
)
|
|
|
|
|
|
|
|
|
|
Net loans
|
|
|
186,264
|
|
|
|
189,676
|
|
Premises and equipment
|
|
|
2,257
|
|
|
|
2,263
|
|
Goodwill
|
|
|
9,002
|
|
|
|
9,011
|
|
Other intangible assets
|
|
|
3,068
|
|
|
|
3,406
|
|
Other assets
|
|
|
24,340
|
|
|
|
21,074
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
283,243
|
|
|
$
|
281,176
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
|
|
|
Noninterest-bearing
|
|
$
|
41,673
|
|
|
$
|
38,186
|
|
Interest-bearing
|
|
|
113,024
|
|
|
|
115,135
|
|
Time deposits greater than $100,000
|
|
|
28,426
|
|
|
|
29,921
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
183,123
|
|
|
|
183,242
|
|
Short-term borrowings
|
|
|
33,797
|
|
|
|
31,312
|
|
Long-term debt
|
|
|
29,137
|
|
|
|
32,580
|
|
Other liabilities
|
|
|
8,246
|
|
|
|
7,381
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
254,303
|
|
|
|
254,515
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
1,930
|
|
|
|
1,500
|
|
Common stock, par value $0.01 a share authorized:
4,000,000,000 shares;
issued: 6/30/10 and 12/31/09
2,125,725,742 shares
|
|
|
21
|
|
|
|
21
|
|
Capital surplus
|
|
|
8,292
|
|
|
|
8,319
|
|
Retained earnings
|
|
|
25,367
|
|
|
|
24,116
|
|
Less cost of common stock in treasury: 6/30/10
208,740,074 shares; 12/31/09
212,786,937 shares
|
|
|
(6,381
|
)
|
|
|
(6,509
|
)
|
Accumulated other comprehensive income (loss)
|
|
|
(1,060
|
)
|
|
|
(1,484
|
)
|
|
|
|
|
|
|
|
|
|
Total U.S. Bancorp shareholders equity
|
|
|
28,169
|
|
|
|
25,963
|
|
Noncontrolling interests
|
|
|
771
|
|
|
|
698
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
28,940
|
|
|
|
26,661
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
283,243
|
|
|
$
|
281,176
|
|
|
|
|
|
|
|
|
|
|
See
Notes to Consolidated Financial Statements.
U.S.
Bancorp
Consolidated
Statement of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
Six Months Ended
|
|
(Dollars and Shares
in Millions, Except Per Share Data)
|
|
June 30,
|
|
|
June 30,
|
|
(Unaudited)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Interest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
2,515
|
|
|
$
|
2,345
|
|
|
$
|
5,020
|
|
|
$
|
4,695
|
|
Loans held for sale
|
|
|
47
|
|
|
|
71
|
|
|
|
91
|
|
|
|
134
|
|
Investment securities
|
|
|
394
|
|
|
|
402
|
|
|
|
804
|
|
|
|
836
|
|
Other interest income
|
|
|
39
|
|
|
|
22
|
|
|
|
73
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
2,995
|
|
|
|
2,840
|
|
|
|
5,988
|
|
|
|
5,707
|
|
Interest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
229
|
|
|
|
314
|
|
|
|
465
|
|
|
|
638
|
|
Short-term borrowings
|
|
|
137
|
|
|
|
131
|
|
|
|
265
|
|
|
|
274
|
|
Long-term debt
|
|
|
272
|
|
|
|
341
|
|
|
|
549
|
|
|
|
694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
638
|
|
|
|
786
|
|
|
|
1,279
|
|
|
|
1,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
2,357
|
|
|
|
2,054
|
|
|
|
4,709
|
|
|
|
4,101
|
|
Provision for credit losses
|
|
|
1,139
|
|
|
|
1,395
|
|
|
|
2,449
|
|
|
|
2,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for credit losses
|
|
|
1,218
|
|
|
|
659
|
|
|
|
2,260
|
|
|
|
1,388
|
|
Noninterest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit and debit card revenue
|
|
|
266
|
|
|
|
259
|
|
|
|
524
|
|
|
|
515
|
|
Corporate payment products revenue
|
|
|
178
|
|
|
|
168
|
|
|
|
346
|
|
|
|
322
|
|
Merchant processing services
|
|
|
320
|
|
|
|
278
|
|
|
|
612
|
|
|
|
536
|
|
ATM processing services
|
|
|
108
|
|
|
|
104
|
|
|
|
213
|
|
|
|
206
|
|
Trust and investment management fees
|
|
|
267
|
|
|
|
304
|
|
|
|
531
|
|
|
|
598
|
|
Deposit service charges
|
|
|
199
|
|
|
|
250
|
|
|
|
406
|
|
|
|
476
|
|
Treasury management fees
|
|
|
145
|
|
|
|
142
|
|
|
|
282
|
|
|
|
279
|
|
Commercial products revenue
|
|
|
205
|
|
|
|
144
|
|
|
|
366
|
|
|
|
273
|
|
Mortgage banking revenue
|
|
|
243
|
|
|
|
308
|
|
|
|
443
|
|
|
|
541
|
|
Investment products fees and commissions
|
|
|
30
|
|
|
|
27
|
|
|
|
55
|
|
|
|
55
|
|
Securities gains (losses), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gains (losses), net
|
|
|
|
|
|
|
69
|
|
|
|
12
|
|
|
|
125
|
|
Total
other-than-temporary
impairment
|
|
|
(30
|
)
|
|
|
(331
|
)
|
|
|
(117
|
)
|
|
|
(712
|
)
|
Portion of
other-than-temporary
impairment recognized in other comprehensive income
|
|
|
9
|
|
|
|
243
|
|
|
|
50
|
|
|
|
370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities gains (losses), net
|
|
|
(21
|
)
|
|
|
(19
|
)
|
|
|
(55
|
)
|
|
|
(217
|
)
|
Other
|
|
|
170
|
|
|
|
90
|
|
|
|
305
|
|
|
|
259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
2,110
|
|
|
|
2,055
|
|
|
|
4,028
|
|
|
|
3,843
|
|
Noninterest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
946
|
|
|
|
764
|
|
|
|
1,807
|
|
|
|
1,550
|
|
Employee benefits
|
|
|
172
|
|
|
|
140
|
|
|
|
352
|
|
|
|
295
|
|
Net occupancy and equipment
|
|
|
226
|
|
|
|
208
|
|
|
|
453
|
|
|
|
419
|
|
Professional services
|
|
|
73
|
|
|
|
59
|
|
|
|
131
|
|
|
|
111
|
|
Marketing and business development
|
|
|
86
|
|
|
|
80
|
|
|
|
146
|
|
|
|
136
|
|
Technology and communications
|
|
|
186
|
|
|
|
157
|
|
|
|
371
|
|
|
|
312
|
|
Postage, printing and supplies
|
|
|
75
|
|
|
|
72
|
|
|
|
149
|
|
|
|
146
|
|
Other intangibles
|
|
|
91
|
|
|
|
95
|
|
|
|
188
|
|
|
|
186
|
|
Other
|
|
|
522
|
|
|
|
554
|
|
|
|
916
|
|
|
|
845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
2,377
|
|
|
|
2,129
|
|
|
|
4,513
|
|
|
|
4,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
951
|
|
|
|
585
|
|
|
|
1,775
|
|
|
|
1,231
|
|
Applicable income taxes
|
|
|
199
|
|
|
|
100
|
|
|
|
360
|
|
|
|
201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
752
|
|
|
|
485
|
|
|
|
1,415
|
|
|
|
1,030
|
|
Net (income) loss attributable to noncontrolling interests
|
|
|
14
|
|
|
|
(14
|
)
|
|
|
20
|
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to U.S. Bancorp
|
|
$
|
766
|
|
|
$
|
471
|
|
|
$
|
1,435
|
|
|
$
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income applicable to U.S. Bancorp common shareholders
|
|
$
|
862
|
|
|
$
|
221
|
|
|
$
|
1,510
|
|
|
$
|
640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share
|
|
$
|
.45
|
|
|
$
|
.12
|
|
|
$
|
.79
|
|
|
$
|
.36
|
|
Diluted earnings per common share
|
|
$
|
.45
|
|
|
$
|
.12
|
|
|
$
|
.79
|
|
|
$
|
.36
|
|
Dividends declared per common share
|
|
$
|
.05
|
|
|
$
|
.05
|
|
|
$
|
.10
|
|
|
$
|
.10
|
|
Average common shares outstanding
|
|
|
1,912
|
|
|
|
1,833
|
|
|
|
1,911
|
|
|
|
1,794
|
|
Average diluted common shares outstanding
|
|
|
1,921
|
|
|
|
1,840
|
|
|
|
1,920
|
|
|
|
1,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
Notes to Consolidated Financial Statements.
U.S.
Bancorp
Consolidated
Statement of Shareholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Bancorp
Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
|
(Dollars and Shares
in Millions)
|
|
Common Shares
|
|
|
Preferred
|
|
|
Common
|
|
|
Capital
|
|
|
Retained
|
|
|
Treasury
|
|
|
Comprehensive
|
|
|
Shareholders
|
|
|
Noncontrolling
|
|
|
Total
|
|
(Unaudited)
|
|
Outstanding
|
|
|
Stock
|
|
|
Stock
|
|
|
Surplus
|
|
|
Earnings
|
|
|
Stock
|
|
|
Income
|
|
|
Equity
|
|
|
Interests
|
|
|
Equity
|
|
Balance December 31, 2008
|
|
|
1,755
|
|
|
$
|
7,931
|
|
|
$
|
20
|
|
|
$
|
5,830
|
|
|
$
|
22,541
|
|
|
$
|
(6,659
|
)
|
|
$
|
(3,363
|
)
|
|
$
|
26,300
|
|
|
$
|
733
|
|
|
$
|
27,033
|
|
Change in accounting principle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141
|
|
|
|
|
|
|
|
(141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
30
|
|
|
|
1,030
|
|
Changes in unrealized gains and losses on securities
available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,520
|
|
|
|
1,520
|
|
|
|
|
|
|
|
1,520
|
|
Other-than-temporary
impairment not recognized in earnings on securities
available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(370
|
)
|
|
|
(370
|
)
|
|
|
|
|
|
|
(370
|
)
|
Unrealized gain on derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
394
|
|
|
|
394
|
|
|
|
|
|
|
|
394
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
|
|
|
|
40
|
|
|
|
|
|
|
|
40
|
|
Reclassification for realized losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
222
|
|
|
|
222
|
|
|
|
|
|
|
|
222
|
|
Income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(686
|
)
|
|
|
(686
|
)
|
|
|
|
|
|
|
(686
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,120
|
|
|
|
30
|
|
|
|
2,150
|
|
Redemption of preferred stock
|
|
|
|
|
|
|
(6,599
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,599
|
)
|
|
|
|
|
|
|
(6,599
|
)
|
Preferred stock dividends and discount accretion
|
|
|
|
|
|
|
168
|
|
|
|
|
|
|
|
|
|
|
|
(358
|
)
|
|
|
|
|
|
|
|
|
|
|
(190
|
)
|
|
|
|
|
|
|
(190
|
)
|
Common stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(184
|
)
|
|
|
|
|
|
|
|
|
|
|
(184
|
)
|
|
|
|
|
|
|
(184
|
)
|
Issuance of common and treasury stock
|
|
|
157
|
|
|
|
|
|
|
|
1
|
|
|
|
2,562
|
|
|
|
|
|
|
|
123
|
|
|
|
|
|
|
|
2,686
|
|
|
|
|
|
|
|
2,686
|
|
Purchase of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
(4
|
)
|
Net other changes in noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18
|
)
|
|
|
(18
|
)
|
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30
|
)
|
|
|
(30
|
)
|
Stock option and restricted stock grants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2009
|
|
|
1,912
|
|
|
$
|
1,500
|
|
|
$
|
21
|
|
|
$
|
8,434
|
|
|
$
|
23,140
|
|
|
$
|
(6,540
|
)
|
|
$
|
(2,384
|
)
|
|
$
|
24,171
|
|
|
$
|
715
|
|
|
$
|
24,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2009
|
|
|
1,913
|
|
|
$
|
1,500
|
|
|
$
|
21
|
|
|
$
|
8,319
|
|
|
$
|
24,116
|
|
|
$
|
(6,509
|
)
|
|
$
|
(1,484
|
)
|
|
$
|
25,963
|
|
|
$
|
698
|
|
|
$
|
26,661
|
|
Change in accounting principle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(73
|
)
|
|
|
|
|
|
|
|
|
|
|
(73
|
)
|
|
|
(16
|
)
|
|
|
(89
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,435
|
|
|
|
|
|
|
|
|
|
|
|
1,435
|
|
|
|
(20
|
)
|
|
|
1,415
|
|
Changes in unrealized gains and losses on securities
available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
855
|
|
|
|
855
|
|
|
|
|
|
|
|
855
|
|
Other-than-temporary
impairment not recognized in earnings on securities
available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(50
|
)
|
|
|
(50
|
)
|
|
|
|
|
|
|
(50
|
)
|
Unrealized loss on derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(206
|
)
|
|
|
(206
|
)
|
|
|
|
|
|
|
(206
|
)
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
|
|
|
|
30
|
|
|
|
|
|
|
|
30
|
|
Reclassification for realized losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56
|
|
|
|
56
|
|
|
|
|
|
|
|
56
|
|
Income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(261
|
)
|
|
|
(261
|
)
|
|
|
|
|
|
|
(261
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,859
|
|
|
|
(20
|
)
|
|
|
1,839
|
|
Preferred stock dividends and discount accretion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37
|
)
|
|
|
|
|
|
|
|
|
|
|
(37
|
)
|
|
|
|
|
|
|
(37
|
)
|
Common stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(192
|
)
|
|
|
|
|
|
|
|
|
|
|
(192
|
)
|
|
|
|
|
|
|
(192
|
)
|
Issuance of preferred stock
|
|
|
|
|
|
|
430
|
|
|
|
|
|
|
|
10
|
|
|
|
118
|
|
|
|
|
|
|
|
|
|
|
|
558
|
|
|
|
|
|
|
|
558
|
|
Issuance of common and treasury stock
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
(97
|
)
|
|
|
|
|
|
|
143
|
|
|
|
|
|
|
|
46
|
|
|
|
|
|
|
|
46
|
|
Purchase of treasury stock
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
(15
|
)
|
Net other changes in noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
145
|
|
|
|
145
|
|
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36
|
)
|
|
|
(36
|
)
|
Stock option and restricted stock grants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
|
|
|
|
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2010
|
|
|
1,917
|
|
|
$
|
1,930
|
|
|
$
|
21
|
|
|
$
|
8,292
|
|
|
$
|
25,367
|
|
|
$
|
(6,381
|
)
|
|
$
|
(1,060
|
)
|
|
$
|
28,169
|
|
|
$
|
771
|
|
|
$
|
28,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
Notes to Consolidated Financial Statements.
U.S.
Bancorp
Consolidated
Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
(Dollars in
Millions)
|
|
June 30,
|
|
(Unaudited)
|
|
2010
|
|
|
2009
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
$3,960
|
|
|
|
$774
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
Proceeds from sales of
available-for-sale
investment securities
|
|
|
1,060
|
|
|
|
3,810
|
|
Proceeds from maturities of investment securities
|
|
|
6,714
|
|
|
|
3,658
|
|
Purchases of investment securities
|
|
|
(9,968
|
)
|
|
|
(6,727
|
)
|
Net decrease in loans outstanding
|
|
|
507
|
|
|
|
366
|
|
Proceeds from sales of loans
|
|
|
1,030
|
|
|
|
1,881
|
|
Purchases of loans
|
|
|
(1,807
|
)
|
|
|
(1,277
|
)
|
Acquisitions, net of cash acquired
|
|
|
832
|
|
|
|
222
|
|
Other, net
|
|
|
(779
|
)
|
|
|
838
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(2,411
|
)
|
|
|
2,771
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
Net increase (decrease) in deposits
|
|
|
(602
|
)
|
|
|
4,307
|
|
Net increase (decrease) in short-term borrowings
|
|
|
1,832
|
|
|
|
(4,285
|
)
|
Proceeds from issuance of long-term debt
|
|
|
2,923
|
|
|
|
4,682
|
|
Principal payments or redemption of long-term debt
|
|
|
(6,684
|
)
|
|
|
(3,741
|
)
|
Fees paid on exchange of income trust securities for perpetual
preferred stock
|
|
|
(4
|
)
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
43
|
|
|
|
2,684
|
|
Redemption of preferred stock
|
|
|
|
|
|
|
(6,599
|
)
|
Cash dividends paid on preferred stock
|
|
|
(38
|
)
|
|
|
(237
|
)
|
Cash dividends paid on common stock
|
|
|
(192
|
)
|
|
|
(834
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(2,722
|
)
|
|
|
(4,023
|
)
|
|
|
|
|
|
|
|
|
|
Change in cash and due from banks
|
|
|
(1,173
|
)
|
|
|
(478
|
)
|
Cash and due from banks at beginning of period
|
|
|
6,206
|
|
|
|
6,859
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks at end of period
|
|
|
$5,033
|
|
|
|
$6,381
|
|
|
|
|
|
|
|
|
|
|
See
Notes to Consolidated Financial Statements.
Notes
to Consolidated Financial Statements
(Unaudited)
Note 1 Basis
of Presentation
The accompanying consolidated financial statements have been
prepared in accordance with the instructions to
Form 10-Q
and, therefore, do not include all information and notes
necessary for a complete presentation of financial position,
results of operations and cash flow activity required in
accordance with accounting principles generally accepted in the
United States. In the opinion of management of U.S. Bancorp
(the Company), all adjustments (consisting only of
normal recurring adjustments) necessary for a fair statement of
results for the interim periods have been made. These financial
statements and notes should be read in conjunction with the
consolidated financial statements and notes included in the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2009. Certain amounts in
prior periods have been reclassified to conform to the current
presentation.
Accounting policies for the lines of business are generally the
same as those used in preparation of the consolidated financial
statements with respect to activities specifically attributable
to each business line. However, the preparation of business line
results requires management to establish methodologies to
allocate funding costs, expenses and other financial elements to
each line of business. Table 10 Line of Business Financial
Performance included in Managements Discussion and
Analysis provides details of segment results. This information
is incorporated by reference into these Notes to Consolidated
Financial Statements.
Note 2 Accounting
Changes
Accounting for
Transfers of Financial
Assets Effective
January 1, 2010, the Company adopted accounting guidance
issued by the Financial Accounting Standards Board
(FASB) related to transfers of financial assets.
This guidance removes the concept of qualifying special-purpose
entities and the exception for guaranteed mortgage
securitizations when a transferor had not surrendered control
over the transferred financial assets. In addition, the guidance
provides clarification of the requirements for isolation and
limitations on sale accounting for portions of financial assets.
The guidance also requires additional disclosure about transfers
of financial assets and a transferors continuing
involvement with transferred assets. The adoption of this
guidance was not significant to the Companys financial
statements.
Variable Interest
Entities Effective
January 1, 2010, the Company adopted accounting guidance
issued by the FASB related to variable interest entities
(VIEs). Generally, a VIE is an entity with
insufficient equity at risk requiring additional subordinated
financial support, or an entity in which equity investors as a
group, either (i) lack the power through voting or other
similar rights, to direct the activities of the entity that most
significantly impact its performance, (ii) lack the
obligation to absorb the expected losses of the entity or
(iii) lack the right to receive the expected residual
returns of the entity. The new guidance replaces the previous
quantitative-based risks and rewards calculation for determining
whether an entity must consolidate a VIE with an assessment of
whether the entity has both (i) the power to direct the
activities of the VIE that most significantly impact the
VIEs economic performance and (ii) the obligation to
absorb losses of the VIE or the right to receive benefits from
the VIE that could potentially be significant to the VIE. This
guidance requires reconsideration of whether an entity is a VIE
upon occurrence of certain events, as well as ongoing
assessments of whether a variable interest holder is the primary
beneficiary of a VIE. The Company consolidated approximately
$1.6 billion of assets of previously unconsolidated
entities, and deconsolidated approximately $84 million of
assets of previously consolidated entities upon adoption of this
guidance. Additionally, the adoption of this guidance reduced
total equity by $89 million.
Note 3 Investment
Securities
The amortized cost,
other-than-temporary
impairment recorded in other comprehensive income, gross
unrealized holding gains and losses, and fair value of
held-to-maturity
and
available-for-sale
securities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010
|
|
|
|
December 31,
2009
|
|
|
|
|
|
|
|
|
|
Unrealized Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Losses
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Other-than-
|
|
|
|
|
Fair
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Other-than-
|
|
|
|
|
Fair
|
|
(Dollars in Millions)
|
|
Cost
|
|
|
Gains
|
|
|
Temporary
|
|
Other
|
|
|
Value
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Temporary
|
|
Other
|
|
|
Value
|
|
Held-to-maturity (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agencies
|
|
$
|
63
|
|
|
$
|
|
|
|
$
|
|
|
$
|
|
|
|
$
|
63
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
$
|
|
|
|
$
|
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Non-agency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-prime
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized debt obligations/Collaterized loan obligations
|
|
|
208
|
|
|
|
9
|
|
|
|
|
|
|
(29
|
)
|
|
|
188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
132
|
|
|
|
|
|
|
|
(2)
|
|
|
(7
|
)
|
|
|
123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of state and political subdivisions
|
|
|
30
|
|
|
|
2
|
|
|
|
|
|
|
(2
|
)
|
|
|
30
|
|
|
|
|
32
|
|
|
|
2
|
|
|
|
|
|
|
(1
|
)
|
|
|
33
|
|
Other debt securities
|
|
|
139
|
|
|
|
|
|
|
|
|
|
|
(36
|
)
|
|
|
103
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
held-to-maturity
|
|
$
|
590
|
|
|
$
|
11
|
|
|
$
|
(2)
|
|
$
|
(80
|
)
|
|
$
|
519
|
|
|
|
$
|
47
|
|
|
$
|
2
|
|
|
$
|
|
|
$
|
(1
|
)
|
|
$
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale (b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agencies
|
|
$
|
2,533
|
|
|
$
|
14
|
|
|
$
|
|
|
$
|
|
|
|
$
|
2,547
|
|
|
|
$
|
3,415
|
|
|
$
|
10
|
|
|
$
|
|
|
$
|
(21
|
)
|
|
$
|
3,404
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
32,461
|
|
|
|
993
|
|
|
|
|
|
|
(19
|
)
|
|
|
33,435
|
|
|
|
|
29,288
|
|
|
|
501
|
|
|
|
|
|
|
(47
|
)
|
|
|
29,742
|
|
Non-agency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime (c)
|
|
|
1,342
|
|
|
|
10
|
|
|
|
(104)
|
|
|
(51
|
)
|
|
|
1,197
|
|
|
|
|
1,624
|
|
|
|
8
|
|
|
|
(110)
|
|
|
(93
|
)
|
|
|
1,429
|
|
Non-prime
|
|
|
1,230
|
|
|
|
7
|
|
|
|
(294)
|
|
|
(36
|
)
|
|
|
907
|
|
|
|
|
1,359
|
|
|
|
11
|
|
|
|
(297)
|
|
|
(105
|
)
|
|
|
968
|
|
Commercial
|
|
|
14
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
|
14
|
|
|
|
|
|
|
|
(1)
|
|
|
|
|
|
|
13
|
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized debt obligations/Collaterized loan obligations
|
|
|
147
|
|
|
|
24
|
|
|
|
(6)
|
|
|
|
|
|
|
165
|
|
|
|
|
199
|
|
|
|
11
|
|
|
|
(5)
|
|
|
|
|
|
|
205
|
|
Other
|
|
|
918
|
|
|
|
13
|
|
|
|
(6)
|
|
|
(9
|
)
|
|
|
916
|
|
|
|
|
360
|
|
|
|
12
|
|
|
|
(5)
|
|
|
(10
|
)
|
|
|
357
|
|
Obligations of state and political subdivisions
|
|
|
6,861
|
|
|
|
38
|
|
|
|
|
|
|
(115
|
)
|
|
|
6,784
|
|
|
|
|
6,822
|
|
|
|
30
|
|
|
|
|
|
|
(159
|
)
|
|
|
6,693
|
|
Obligations of foreign governments
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
Corporate debt securities
|
|
|
1,154
|
|
|
|
|
|
|
|
|
|
|
(227
|
)
|
|
|
927
|
|
|
|
|
1,179
|
|
|
|
|
|
|
|
|
|
|
(301
|
)
|
|
|
878
|
|
Perpetual preferred securities
|
|
|
482
|
|
|
|
29
|
|
|
|
|
|
|
(80
|
)
|
|
|
431
|
|
|
|
|
483
|
|
|
|
30
|
|
|
|
|
|
|
(90
|
)
|
|
|
423
|
|
Other investments (d)
|
|
|
403
|
|
|
|
45
|
|
|
|
|
|
|
(1
|
)
|
|
|
447
|
|
|
|
|
607
|
|
|
|
9
|
|
|
|
|
|
|
(13
|
)
|
|
|
603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
|
|
$
|
47,551
|
|
|
$
|
1,174
|
|
|
$
|
(410)
|
|
$
|
(538
|
)
|
|
$
|
47,777
|
|
|
|
$
|
45,356
|
|
|
$
|
622
|
|
|
$
|
(418)
|
|
$
|
(839
|
)
|
|
$
|
44,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Held-to-maturity
securities are carried at historical cost adjusted for
amortization of premiums and accretion of discounts and
credit-related
other-than-temporary
impairment. |
(b)
|
|
Available-for-sale
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 or those
with underlying asset characteristics and/or credit enhancements
consistent with securities designated as prime. |
(d)
|
|
Includes
securities covered under loss shaing agreements with the Federal
Deposit Insurance Corporation (FDIC) with a fair
value of $266 million and $231 million at June 30,
2010 and December 31, 2009, respectively. |
The weighted-average maturity of the
available-for-sale
investment securities was 5.5 years at June 30, 2010,
compared with 7.1 years at December 31, 2009. The
corresponding weighted-average yields were 3.78 percent and
4.00 percent, respectively. The weighted-average maturity
of the
held-to-maturity
investment securities was 5.9 years at June 30, 2010,
and 8.4 years at December 31, 2009. The corresponding
weighted-average yields were 1.38 percent and
5.10 percent, respectively.
For amortized cost, fair value and yield by maturity date of
held-to-maturity
and
available-for-sale
securities outstanding at June 30, 2010, refer to Table 4
included in Managements Discussion and Analysis, which is
incorporated by reference into these Notes to Consolidated
Financial Statements.
Securities carried at $31.5 billion at June 30, 2010,
and $37.4 billion at December 31, 2009, were pledged
to secure public, private and trust deposits, repurchase
agreements and for other purposes required by law. Included in
these amounts were securities sold under agreements to
repurchase where the buyer/lender has the right to sell or
pledge the securities and which were collateralized by
securities with a carrying amount of $8.7 billion at
June 30, 2010, and $8.9 billion at December 31,
2009.
The following table provides information about the amount of
interest income from taxable and non-taxable investment
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
June 30,
|
|
(Dollars in Millions)
|
|
2010
|
|
|
2009
|
|
|
|
2010
|
|
|
2009
|
|
Taxable
|
|
$
|
317
|
|
|
$
|
328
|
|
|
|
$
|
650
|
|
|
$
|
684
|
|
Non-taxable
|
|
|
77
|
|
|
|
74
|
|
|
|
|
154
|
|
|
|
152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income from investment securities
|
|
$
|
394
|
|
|
$
|
402
|
|
|
|
$
|
804
|
|
|
$
|
836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides information about the amount of
gross gains and losses realized through the sales of
available-for-sale
investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
June 30,
|
|
(Dollars in Millions)
|
|
2010
|
|
|
2009
|
|
|
|
2010
|
|
|
2009
|
|
Realized gains
|
|
$
|
|
|
|
$
|
70
|
|
|
|
$
|
12
|
|
|
$
|
127
|
|
Realized losses
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gains (losses)
|
|
$
|
|
|
|
$
|
69
|
|
|
|
$
|
12
|
|
|
$
|
125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit) on realized gains (losses)
|
|
$
|
|
|
|
$
|
27
|
|
|
|
$
|
4
|
|
|
$
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the fourth quarter of 2007, the Company purchased certain
structured investment securities (SIVs) from certain
money market funds managed by FAF Advisors, Inc., an affiliate
of the Company. Subsequent to the initial purchase, the Company
exchanged its interests in certain SIVs for a pro-rata portion
of the underlying investment securities according to the
applicable restructuring agreements. The SIVs and the investment
securities received are collectively referred to as
SIV-related securities.
Some of the SIV-related securities, as well as certain acquired
securities covered under loss sharing agreements with the FDIC,
evidenced credit deterioration at the time of acquisition by the
Company. Investment securities with evidence of credit
deterioration at acquisition had an unpaid principal balance and
fair value of $1.1 billion and $466 million,
respectively, at June 30, 2010 and $1.2 billion and
$483 million, respectively, at December 31, 2009.
Changes in the accretable balance for these securities, were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
Six Months Ended
|
|
|
|
June, 30,
|
|
|
|
June 30,
|
|
(Dollars in Millions)
|
|
2010
|
|
|
2009
|
|
|
|
2010
|
|
|
2009
|
|
Balance at beginning of period
|
|
$
|
319
|
|
|
$
|
224
|
|
|
|
$
|
292
|
|
|
$
|
349
|
|
Impact of
other-than-temporary
impairment accounting change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(124
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted balance at beginning of period
|
|
|
319
|
|
|
|
224
|
|
|
|
|
292
|
|
|
|
225
|
|
Accretion
|
|
|
(8
|
)
|
|
|
(1
|
)
|
|
|
|
(15
|
)
|
|
|
(2
|
)
|
Other (a)
|
|
|
(9
|
)
|
|
|
(49
|
)
|
|
|
|
25
|
|
|
|
(49
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
302
|
|
|
$
|
174
|
|
|
|
$
|
302
|
|
|
$
|
174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Represents
changes in projected future cash flows on certain investment
securities. |
The Company conducts a regular assessment of its investment
securities with unrealized losses to determine whether
securities are
other-than-temporarily
impaired considering, among other factors, the nature of the
securities, credit ratings or financial condition of the issuer,
the extent and duration of the unrealized loss, expected cash
flows of underlying collateral, market conditions and whether
the Company intends to sell or it is more likely than not the
Company will be required to sell the securities. To determine
whether perpetual preferred securities are
other-than-temporarily
impaired, the Company considers the issuers credit
ratings, historical financial performance and strength, the
ability to sustain earnings, and other factors such as market
presence and management experience.
The following table summarizes
other-than-temporary
impairment by investment category:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
2009
|
|
|
|
Losses
|
|
|
|
|
|
|
|
|
|
Losses
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Recorded in
|
|
|
Other Gains
|
|
|
|
|
|
|
Recorded in
|
|
|
Other Gains
|
|
|
|
|
(Dollars in Millions)
|
|
Earnings
|
|
|
(Losses)
|
|
|
Total
|
|
|
|
Earnings
|
|
|
(Losses)
|
|
|
Total
|
|
Available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-agency residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime (a)
|
|
$
|
(1
|
)
|
|
$
|
(1
|
)
|
|
$
|
(2
|
)
|
|
|
$
|
(1
|
)
|
|
$
|
(10
|
)
|
|
$
|
(11
|
)
|
Non-prime
|
|
|
(11
|
)
|
|
|
(11
|
)
|
|
|
(22
|
)
|
|
|
|
(49
|
)
|
|
|
(96
|
)
|
|
|
(145
|
)
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized debt obligations/Collaterized loan obligations
|
|
|
(4
|
)
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Other
|
|
|
(5
|
)
|
|
|
3
|
|
|
|
(2
|
)
|
|
|
|
(26
|
)
|
|
|
(136
|
)
|
|
|
(162
|
)
|
Perpetual preferred securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
|
|
$
|
(21
|
)
|
|
$
|
(9
|
)
|
|
$
|
(30
|
)
|
|
|
$
|
(88
|
)
|
|
$
|
(243
|
)
|
|
$
|
(331
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
2009
|
|
|
|
Losses
|
|
|
|
|
|
|
|
|
|
Losses
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
Recorded in
|
|
|
Other Gains
|
|
|
|
|
|
|
Recorded in
|
|
|
Other Gains
|
|
|
|
|
(Dollars in Millions)
|
|
Earnings
|
|
|
(Losses)
|
|
|
Total
|
|
|
|
Earnings
|
|
|
(Losses)
|
|
|
Total
|
|
Held-to-maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
$
|
(2
|
)
|
|
$
|
|
|
|
$
|
(2
|
)
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
held-to-maturity
|
|
$
|
(2
|
)
|
|
$
|
|
|
|
$
|
(2
|
)
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-agency residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime (a)
|
|
$
|
(3
|
)
|
|
$
|
(10
|
)
|
|
$
|
(13
|
)
|
|
|
$
|
(8
|
)
|
|
$
|
(129
|
)
|
|
$
|
(137
|
)
|
Non-prime
|
|
|
(46
|
)
|
|
|
(43
|
)
|
|
|
(89
|
)
|
|
|
|
(77
|
)
|
|
|
(199
|
)
|
|
|
(276
|
)
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(2
|
)
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized debt obligations/Collaterized loan obligations
|
|
|
(5
|
)
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
(5
|
)
|
Other
|
|
|
(10
|
)
|
|
|
2
|
|
|
|
(8
|
)
|
|
|
|
(41
|
)
|
|
|
(41
|
)
|
|
|
(82
|
)
|
Perpetual preferred securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(207
|
)
|
|
|
|
|
|
|
(207
|
)
|
Corporate debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
(3
|
)
|
Other debt securities
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
|
|
$
|
(65
|
)
|
|
$
|
(50
|
)
|
|
$
|
(115
|
)
|
|
|
$
|
(342
|
)
|
|
$
|
(370
|
)
|
|
$
|
(712
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Prime
securities are those designated as such by the issuer or those
with underlying asset characteristics and/or credit enhancements
consistent with securities designated as prime. |
The Company determined the
other-than-temporary
impairment recorded in earnings for securities other than
perpetual preferred securities by estimating the future cash
flows of each individual security, using market information
where available, and discounting the cash flows at the original
effective rate of the security.
Other-than-temporary
impairment recorded in other comprehensive income was measured
as the difference between that discounted amount and the fair
value of each security. The following table includes the ranges
for principal assumptions used at June 30, 2010 for those
available-for-sale
non-agency mortgage-backed securities determined to be
other-than-temporarily
impaired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
|
|
Non-Prime
|
|
|
|
Minimum
|
|
|
Maximum
|
|
|
Average
|
|
|
|
Minimum
|
|
|
Maximum
|
|
|
Average
|
|
Estimated lifetime prepayment rates
|
|
|
4
|
%
|
|
|
15
|
%
|
|
|
13
|
%
|
|
|
|
1
|
%
|
|
|
13
|
%
|
|
|
6
|
%
|
Lifetime probability of default rates
|
|
|
3
|
|
|
|
10
|
|
|
|
4
|
|
|
|
|
2
|
|
|
|
20
|
|
|
|
8
|
|
Lifetime loss severity rates
|
|
|
38
|
|
|
|
69
|
|
|
|
43
|
|
|
|
|
37
|
|
|
|
70
|
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in the credit losses on non-agency mortgage-backed
securities, including SIV-related investments, and other debt
securities attributed to credit loss are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
June 30,
|
|
(Dollars in Millions)
|
|
2010
|
|
|
2009
|
|
|
|
2010
|
|
|
2009
|
|
Balance at beginning of period
|
|
$
|
391
|
|
|
$
|
358
|
|
|
|
$
|
335
|
|
|
$
|
299
|
|
Credit losses on securities not previously considered
other-than-temporarily
impaired
|
|
|
2
|
|
|
|
21
|
|
|
|
|
15
|
|
|
|
75
|
|
Decreases in expected cash flows on securities for which
other-than-temporary
impairment was previously recognized
|
|
|
19
|
|
|
|
55
|
|
|
|
|
52
|
|
|
|
60
|
|
Increases in expected cash flows
|
|
|
(12
|
)
|
|
|
(27
|
)
|
|
|
|
(13
|
)
|
|
|
(27
|
)
|
Realized losses
|
|
|
(18
|
)
|
|
|
(7
|
)
|
|
|
|
(25
|
)
|
|
|
(7
|
)
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
382
|
|
|
$
|
400
|
|
|
|
$
|
382
|
|
|
$
|
400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2010, certain investment securities had a fair
value below amortized cost. The following table shows the gross
unrealized losses and fair value of the Companys
investments with unrealized losses, aggregated by investment
category and length of time the individual securities have been
in continuous unrealized loss positions, at June 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 12 Months
|
|
|
|
12 Months or
Greater
|
|
|
|
Total
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Fair
|
|
|
Unrealized
|
|
(Dollars in Millions)
|
|
Value
|
|
|
Losses
|
|
|
|
Value
|
|
|
Losses
|
|
|
|
Value
|
|
|
Losses
|
|
Held-to-maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-agency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-prime
|
|
$
|
|
|
|
$
|
|
|
|
|
$
|
3
|
|
|
$
|
|
|
|
|
$
|
3
|
|
|
$
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
(6
|
)
|
|
|
|
4
|
|
|
|
(6
|
)
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized debt obligations/Collaterized loan obligations
|
|
|
|
|
|
|
|
|
|
|
|
119
|
|
|
|
(29
|
)
|
|
|
|
119
|
|
|
|
(29
|
)
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
(9
|
)
|
|
|
|
22
|
|
|
|
(9
|
)
|
Obligations of state and political subdivisions
|
|
|
1
|
|
|
|
|
|
|
|
|
9
|
|
|
|
(2
|
)
|
|
|
|
10
|
|
|
|
(2
|
)
|
Other debt securities
|
|
|
|
|
|
|
|
|
|
|
|
94
|
|
|
|
(36
|
)
|
|
|
|
94
|
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
held-to-maturity
|
|
$
|
1
|
|
|
$
|
|
|
|
|
$
|
251
|
|
|
$
|
(82
|
)
|
|
|
$
|
252
|
|
|
$
|
(82
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agencies
|
|
$
|
401
|
|
|
$
|
|
|
|
|
$
|
51
|
|
|
$
|
|
|
|
|
$
|
452
|
|
|
$
|
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
3,351
|
|
|
|
(18
|
)
|
|
|
|
100
|
|
|
|
(1
|
)
|
|
|
|
3,451
|
|
|
|
(19
|
)
|
Non-agency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime (a)
|
|
|
|
|
|
|
|
|
|
|
|
1,129
|
|
|
|
(155
|
)
|
|
|
|
1,129
|
|
|
|
(155
|
)
|
Non-prime
|
|
|
71
|
|
|
|
(10
|
)
|
|
|
|
779
|
|
|
|
(320
|
)
|
|
|
|
850
|
|
|
|
(330
|
)
|
Commercial
|
|
|
2
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized debt obligations/Collaterized loan obligations
|
|
|
23
|
|
|
|
(3
|
)
|
|
|
|
8
|
|
|
|
(3
|
)
|
|
|
|
31
|
|
|
|
(6
|
)
|
Other
|
|
|
226
|
|
|
|
(2
|
)
|
|
|
|
27
|
|
|
|
(13
|
)
|
|
|
|
253
|
|
|
|
(15
|
)
|
Obligations of state and political subdivisions
|
|
|
1,582
|
|
|
|
(18
|
)
|
|
|
|
2,261
|
|
|
|
(97
|
)
|
|
|
|
3,843
|
|
|
|
(115
|
)
|
Obligations of foreign governments
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
Corporate debt securities
|
|
|
|
|
|
|
|
|
|
|
|
927
|
|
|
|
(227
|
)
|
|
|
|
927
|
|
|
|
(227
|
)
|
Perpetual preferred securities
|
|
|
|
|
|
|
|
|
|
|
|
317
|
|
|
|
(80
|
)
|
|
|
|
317
|
|
|
|
(80
|
)
|
Other investments
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
(1
|
)
|
|
|
|
3
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
|
|
$
|
5,662
|
|
|
$
|
(51
|
)
|
|
|
$
|
5,604
|
|
|
$
|
(897
|
)
|
|
|
$
|
11,266
|
|
|
$
|
(948
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Prime
securities are those designated as such by the issuer or those
with underlying asset characteristics and/or credit enhancements
consistent with securities designated as prime. |
The Company does not consider these unrealized losses to be
credit-related. These unrealized losses primarily relate to
changes in interest rates and market spreads subsequent to
purchase. A substantial portion of securities that have
unrealized losses are either corporate debt or non-agency
mortgage-backed securities issued with high investment
grade credit ratings. In general, the issuers of the investment
securities are contractually prohibited from prepayment at less
than par, and the Company did not pay significant purchase
premiums for these securities. At June 30, 2010, the
Company had no plans to sell securities with unrealized losses
and believes it is more likely than not it would not be required
to sell such securities before recovery of their amortized cost.
Note 4 Loans
The composition of the loan portfolio was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010
|
|
|
|
|
December 31,
2009
|
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
Percent
|
|
|
(Dollars in Millions)
|
|
Amount
|
|
|
of Total
|
|
|
|
|
Amount
|
|
|
of Total
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
40,621
|
|
|
|
21.2
|
|
%
|
|
|
$
|
42,255
|
|
|
|
21.7
|
|
%
|
Lease financing
|
|
|
6,145
|
|
|
|
3.2
|
|
|
|
|
|
6,537
|
|
|
|
3.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
46,766
|
|
|
|
24.4
|
|
|
|
|
|
48,792
|
|
|
|
25.1
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgages
|
|
|
25,573
|
|
|
|
13.3
|
|
|
|
|
|
25,306
|
|
|
|
13.0
|
|
|
Construction and development
|
|
|
8,371
|
|
|
|
4.4
|
|
|
|
|
|
8,787
|
|
|
|
4.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate
|
|
|
33,944
|
|
|
|
17.7
|
|
|
|
|
|
34,093
|
|
|
|
17.5
|
|
|
Residential mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages
|
|
|
21,771
|
|
|
|
11.4
|
|
|
|
|
|
20,581
|
|
|
|
10.6
|
|
|
Home equity loans, first liens
|
|
|
5,481
|
|
|
|
2.9
|
|
|
|
|
|
5,475
|
|
|
|
2.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total residential mortgages
|
|
|
27,252
|
|
|
|
14.3
|
|
|
|
|
|
26,056
|
|
|
|
13.4
|
|
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card
|
|
|
16,762
|
|
|
|
8.7
|
|
|
|
|
|
16,814
|
|
|
|
8.6
|
|
|
Retail leasing
|
|
|
4,303
|
|
|
|
2.3
|
|
|
|
|
|
4,568
|
|
|
|
2.3
|
|
|
Home equity and second mortgages
|
|
|
19,326
|
|
|
|
10.1
|
|
|
|
|
|
19,439
|
|
|
|
10.0
|
|
|
Other retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving credit
|
|
|
3,467
|
|
|
|
1.8
|
|
|
|
|
|
3,506
|
|
|
|
1.8
|
|
|
Installment
|
|
|
5,588
|
|
|
|
2.9
|
|
|
|
|
|
5,455
|
|
|
|
2.8
|
|
|
Automobile
|
|
|
10,017
|
|
|
|
5.2
|
|
|
|
|
|
9,544
|
|
|
|
4.9
|
|
|
Student
|
|
|
4,176
|
|
|
|
2.2
|
|
|
|
|
|
4,629
|
|
|
|
2.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other retail
|
|
|
23,248
|
|
|
|
12.1
|
|
|
|
|
|
23,134
|
|
|
|
11.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total retail
|
|
|
63,639
|
|
|
|
33.2
|
|
|
|
|
|
63,955
|
|
|
|
32.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, excluding covered loans
|
|
|
171,601
|
|
|
|
89.6
|
|
|
|
|
|
172,896
|
|
|
|
88.8
|
|
|
Covered loans
|
|
|
19,983
|
|
|
|
10.4
|
|
|
|
|
|
21,859
|
|
|
|
11.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
191,584
|
|
|
|
100.0
|
|
%
|
|
|
$
|
194,755
|
|
|
|
100.0
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company had loans of $54.6 billion at June 30,
2010, and $55.6 billion at December 31, 2009, pledged
at the Federal Home Loan Bank (FHLB), and loans of
$43.8 billion at June 30, 2010, and $44.2 billion
at December 31, 2009, pledged at the Federal Reserve Bank.
Originated loans are presented net of unearned interest and
deferred fees and costs, which amounted to $1.3 billion at
June 30, 2010, and December 31, 2009. In accordance
with applicable authoritative accounting guidance effective for
the Company January 1, 2009, all purchased loans and
related indemnification assets are recorded at fair value at the
date of purchase. The Company evaluates purchased loans for
impairment in accordance with applicable authoritative
accounting guidance. Purchased loans with evidence of credit
deterioration since origination for which it is probable that
all contractually required payments will not be collected are
considered impaired (purchased impaired loans). All
other purchased loans are considered nonimpaired
(purchased nonimpaired loans).
Covered assets represent loans and other assets acquired from
the FDIC subject to loss sharing agreements and included
expected reimbursements from the FDIC of approximately
$3.8 billion at June 30, 2010 and $3.9 billion at
December 31, 2009. The carrying amount of the covered
assets consisted of purchased impaired loans, purchased
nonimpaired loans, and other assets as shown in the following
table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010
|
|
|
|
|
December 31,
2009
|
|
|
|
|
Purchased
|
|
|
Purchased
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
Purchased
|
|
|
|
|
|
|
|
|
|
|
|
impaired
|
|
|
nonimpaired
|
|
|
|
Other
|
|
|
|
|
|
|
|
impaired
|
|
|
nonimpaired
|
|
|
|
Other
|
|
|
|
|
|
(Dollars in Millions)
|
|
loans
|
|
|
loans
|
|
|
|
assets
|
|
|
Total
|
|
|
|
|
loans
|
|
|
loans
|
|
|
|
assets
|
|
|
Total
|
|
|
Commercial loans
|
|
$
|
76
|
|
|
$
|
410
|
|
|
|
$
|
|
|
|
$
|
486
|
|
|
|
|
$
|
86
|
|
|
$
|
443
|
|
|
|
$
|
|
|
|
$
|
529
|
|
|
Commercial real estate loans
|
|
|
2,383
|
|
|
|
6,448
|
|
|
|
|
|
|
|
|
8,831
|
|
|
|
|
|
3,035
|
|
|
|
6,724
|
|
|
|
|
|
|
|
|
9,759
|
|
|
Residential mortgage loans
|
|
|
4,061
|
|
|
|
1,797
|
|
|
|
|
|
|
|
|
5,858
|
|
|
|
|
|
4,712
|
|
|
|
1,918
|
|
|
|
|
|
|
|
|
6,630
|
|
|
Retail loans
|
|
|
|
|
|
|
974
|
|
|
|
|
|
|
|
|
974
|
|
|
|
|
|
30
|
|
|
|
978
|
|
|
|
|
|
|
|
|
1,008
|
|
|
Losses reimbursable by the FDIC
|
|
|
|
|
|
|
|
|
|
|
|
3,834
|
|
|
|
3,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,933
|
|
|
|
3,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Covered loans
|
|
|
6,520
|
|
|
|
9,629
|
|
|
|
|
3,834
|
|
|
|
19,983
|
|
|
|
|
|
7,863
|
|
|
|
10,063
|
|
|
|
|
3,933
|
|
|
|
21,859
|
|
|
Foreclosed real estate
|
|
|
|
|
|
|
|
|
|
|
|
791
|
|
|
|
791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
653
|
|
|
|
653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total covered assets
|
|
$
|
6,520
|
|
|
$
|
9,629
|
|
|
|
$
|
4,625
|
|
|
$
|
20,774
|
|
|
|
|
$
|
7,863
|
|
|
$
|
10,063
|
|
|
|
$
|
4,586
|
|
|
$
|
22,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2010, $.9 billion of the purchased
impaired loans included in covered loans were classified as
nonperforming assets, compared with $1.1 billion at
December 31, 2009, because the expected cash flows are
primarily based on the liquidation of underlying collateral and
the timing and amount of the cash flows could not be reasonably
estimated. Interest income is recognized on other purchased
impaired loans in covered loans through accretion of the
difference between the carrying amount of those loans and their
expected cash flows. The initial determination of the fair value
of the purchased loans includes the impact of expected credit
losses and, therefore, no allowance for credit losses is
recorded at the purchase date. To the extent credit
deterioration occurs after the date of acquisition, the Company
records an allowance for loan losses. There has not been any
significant credit deterioration since the respective
acquisition dates.
Changes in the accretable balance for purchased impaired loans
for the Downey Savings and Loan Association, F.A., PFF Bank and
Trust, and First Bank of Oak Park Corporation transactions were
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
Six Months Ended
|
|
|
|
|
June 30,
|
|
|
|
|
June 30,
|
|
|
(Dollars in Millions)
|
|
2010
|
|
|
2009
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Balance at beginning of period
|
|
$
|
2,825
|
|
|
$
|
2,405
|
|
|
|
|
$
|
2,845
|
|
|
$
|
2,719
|
|
|
Accretion
|
|
|
(104
|
)
|
|
|
(87
|
)
|
|
|
|
|
(205
|
)
|
|
|
(183
|
)
|
|
Disposals
|
|
|
(11
|
)
|
|
|
(36
|
)
|
|
|
|
|
(18
|
)
|
|
|
(47
|
)
|
|
Reclassifications (to) from nonaccretable difference
|
|
|
68
|
|
|
|
(212
|
)
|
|
|
|
|
160
|
|
|
|
(233
|
)
|
|
Other
|
|
|
(29
|
)
|
|
|
4
|
|
|
|
|
|
(33
|
)
|
|
|
(182
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
2,749
|
|
|
$
|
2,074
|
|
|
|
|
$
|
2,749
|
|
|
$
|
2,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains on the sale of loans of $92 million and
$253 million for the three months ended June 30, 2010
and 2009, respectively, and $203 million and $369 million for
the six months ended June 30, 2010 and 2009, respectively,
were included in noninterest income, primarily in mortgage
banking revenue.
Note 5 Accounting
for Transfers and Servicing of Financial Assets and Variable
Interest Entities
The Company sells financial assets in the normal course of
business. The majority of the Companys financial asset
sales are residential mortgage loan sales primarily to
government-sponsored enterprises through established programs,
the sale or syndication of tax-advantaged investments,
commercial loan sales through participation agreements, and
other individual or portfolio loan and securities sales. In
accordance with the accounting guidance for asset transfers, the
Company considers any ongoing involvement with transferred
assets in determining whether the assets can be derecognized
from the balance sheet. For loans sold under participation
agreements, the Company also considers the terms of the loan
participation agreement and whether they meet the definition of
a participating interest and thus qualify for derecognition.
With the exception of servicing and certain performance-based
guarantees, the Companys continuing involvement with
financial assets sold is minimal and generally limited to market
customary representation and warranty clauses. The guarantees
provided to certain third parties in connection with the sale or
syndication of certain assets, primarily loan portfolios and
tax-advantaged investments, is further discussed in Note 22
in the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2009. When the Company
sells financial assets, it may retain servicing rights
and/or other
interests in the transferred financial assets. The gain or loss
on sale depends on the previous carrying amount of the
transferred financial assets and the consideration received and
any liabilities incurred in exchange for the transferred assets.
Upon transfer, any servicing assets and other interests that
continue to be held by the Company are initially recognized at
fair value. For further information on mortgage servicing
rights, refer to Note 6. The Company has no asset
securitizations or similar asset-backed financing arrangements
that are off-balance sheet.
The Company is involved in various entities that are considered
to be VIEs. The Companys investments in VIEs primarily
represent private investment funds or partnerships that make
equity investments, provide debt financing or support
community-based investments in affordable housing, development
entities that provide capital for communities located in
low-income districts and for historic rehabilitation projects
that may enable the Company to ensure regulatory compliance with
the Community Reinvestment Act. In addition, the Company
sponsors entities to which it transfers tax-advantaged
investments.
As a result of adopting new accounting guidance, the Company
consolidated certain community development and tax-advantaged
investment entities on January 1, 2010 that it had not
previously consolidated. The consolidation of these VIEs
increased assets and liabilities by approximately
$1.0 billion. The equity impact of consolidating these VIEs
was a $9 million decrease, which represents the recognition
of noncontrolling interests in the consolidated VIEs. At
June 30, 2010, approximately $2.5 billion of the
Companys assets and liabilities related to community
development and tax-advantaged investment entities VIEs. The
majority of the assets of these consolidated VIEs are reported
in other assets, and the liabilities are reported in long-term
debt on the consolidated balance sheet. The assets of a
particular VIE are the primary source of funds to settle its
obligations. The creditors of the VIEs do not have recourse to
the general credit of the Company. The Companys exposure
to the consolidated VIEs is generally limited to the carrying
value of its variable interests plus any related tax credits
previously recognized.
The Company also deconsolidated certain community development
and tax-advantaged investment entities as a result of adopting
the new accounting guidance, principally because the Company did
not have power to direct the activities that most significantly
impact the VIEs. The deconsolidation of these VIEs resulted in
an $84 million decrease in assets and $77 million
decrease in liabilities. The deconsolidation also resulted in a
$7 million decrease to equity, which was principally the
removal of the noncontrolling interests in these VIEs.
In addition, the Company sponsors a conduit to which it
previously transferred high-grade investment securities. Under
accounting rules effective prior to January 1, 2010, the
Company was not the primary beneficiary of the conduit as it did
not absorb the majority of the conduits expected losses or
residual returns. Under the new accounting guidance, the Company
consolidated the conduit on January 1, 2010, because of its
ability to manage the activities of the conduit. Consolidation
of the conduit increased held-to-maturity investment securities
$.6 billion, decreased loans $.7 billion, and reduced
retained earnings $73 million. At June 30, 2010, $.5
billion of the
held-to-maturity
investment securities on the Companys consolidated balance
sheet were related to the conduit.
The Company is not required to consolidate other VIEs in which
it is not the primary beneficiary. In such cases, the Company
does not control the entities most significant activities
or does not have the obligation to absorb losses or right to
receive benefits that are significant to the VIE. The
Companys investments in unconsolidated VIEs ranged from
less than $1 million to $107 million, with an aggregate
amount of approximately $2.2 billion at June 30, 2010, and
from less than $1 million to $63 million, with an
aggregate amount of $2.4 billion at December 31, 2009.
The Companys investments in these unconsolidated VIEs
generally are carried in other assets on the balance sheet.
While the Company believes potential losses from these
investments is remote, the Companys maximum exposure to
these unconsolidated VIEs, including any tax implications, was
approximately $5.0 billion at June 30, 2010, compared with
$4.7 billion at December 31, 2009. This maximum
exposure is determined by assuming a scenario where the separate
investments within the individual private funds were to become
worthless, and the community-based business and housing projects
and related tax credits completely failed and did not meet
certain government compliance requirements.
Note 6 Mortgage
Servicing Rights
The Company serviced $163.2 billion of residential mortgage
loans for others at June 30, 2010, and $150.8 billion
at December 31, 2009. The net impact included in mortgage
banking revenue of assumption changes on the fair value of
mortgage servicing rights (MSRs) and fair value
changes of derivatives used to offset MSR value changes was a
net gain of $55 million and $45 million for the three
months ended June 30, 2010, and 2009, respectively, and a
net gain of $97 million and $47 million for the six
months ended June 30, 2010 and 2009, respectively. Loan
servicing fees, not including valuation changes included in
mortgage banking revenue, were $143 million and
$126 million for the three months ended June 30, 2010
and 2009, respectively, and $285 million and
$243 million for the six months ended June 30, 2010
and 2009, respectively.
Changes in fair value of capitalized MSRs are summarized as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
Six Months Ended
|
|
|
|
|
June 30,
|
|
|
|
|
June 30,
|
|
|
(Dollars in Millions)
|
|
2010
|
|
|
2009
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Balance at beginning of period
|
|
$
|
1,778
|
|
|
$
|
1,182
|
|
|
|
|
$
|
1,749
|
|
|
$
|
1,194
|
|
|
Rights purchased
|
|
|
33
|
|
|
|
42
|
|
|
|
|
|
38
|
|
|
|
75
|
|
|
Rights capitalized
|
|
|
117
|
|
|
|
239
|
|
|
|
|
|
249
|
|
|
|
432
|
|
|
Changes in fair value of MSRs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due to change in valuation assumptions (a)
|
|
|
(314
|
)
|
|
|
131
|
|
|
|
|
|
(350
|
)
|
|
|
(4
|
)
|
|
Other changes in fair value (b)
|
|
|
(71
|
)
|
|
|
(112
|
)
|
|
|
|
|
(143
|
)
|
|
|
(215
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
1,543
|
|
|
$
|
1,482
|
|
|
|
|
$
|
1,543
|
|
|
$
|
1,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Principally
reflects changes in discount rates and prepayment speed
assumptions, primarily arising from interest rate
changes. |
(b)
|
|
Primarily
represents changes due to collection/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 at June 30, 2010, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Down Scenario
|
|
|
|
|
Up Scenario
|
|
|
(Dollars in Millions)
|
|
50 bps
|
|
|
25 bps
|
|
|
|
|
25 bps
|
|
|
50 bps
|
|
|
Net fair value
|
|
$
|
10
|
|
|
$
|
4
|
|
|
|
|
$
|
8
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of MSRs and their sensitivity to changes in
interest rates is influenced by the mix of the servicing
portfolio and characteristics of each segment of the portfolio.
The Companys servicing portfolio consists of the distinct
portfolios of government-insured mortgages, conventional
mortgages, and Mortgage Revenue Bond Programs
(MRBP). The servicing portfolios are predominantly
comprised of fixed-rate agency loans with limited
adjustable-rate
or jumbo mortgage loans. The MRBP division specializes in
servicing loans made under state and local housing authority
programs. These programs provide mortgages to low-income and
moderate-income borrowers and are generally government-insured
programs with a favorable rate subsidy, down payment
and/or
closing cost assistance. Mortgage loans originated as part of
government agency and state loans programs tend to experience
slower prepayment rates and better cash flows than conventional
mortgage loans.
A summary of the Companys MSRs and related characteristics
by portfolio at June 30, 2010 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
MRBP
|
|
|
Government
|
|
|
|
|
Conventional
|
|
|
Total
|
|
|
Servicing portfolio
|
|
$
|
12,068
|
|
|
$
|
24,454
|
|
|
|
|
$
|
126,709
|
|
|
$
|
163,231
|
|
|
Fair value
|
|
$
|
160
|
|
|
$
|
281
|
|
|
|
|
$
|
1,102
|
|
|
$
|
1,543
|
|
|
Value (bps) (a)
|
|
|
133
|
|
|
|
115
|
|
|
|
|
|
87
|
|
|
|
95
|
|
|
Weighted-average servicing fees (bps)
|
|
|
40
|
|
|
|
39
|
|
|
|
|
|
31
|
|
|
|
33
|
|
|
Multiple (fair value/weighted-average servicing fees)
|
|
|
3.33
|
|
|
|
2.95
|
|
|
|
|
|
2.81
|
|
|
|
2.88
|
|
|
Weighted-average note rate
|
|
|
5.88%
|
|
|
|
5.54
|
|
%
|
|
|
|
5.44%
|
|
|
|
5.49
|
|
%
|
Age (in years)
|
|
|
4.1
|
|
|
|
2.2
|
|
|
|
|
|
2.6
|
|
|
|
2.7
|
|
|
Expected life (in years)
|
|
|
6.4
|
|
|
|
4.2
|
|
|
|
|
|
4.2
|
|
|
|
4.4
|
|
|
Discount rate
|
|
|
11.9%
|
|
|
|
11.4
|
|
%
|
|
|
|
10.6%
|
|
|
|
10.8
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Value
is calculated as fair value divided by the servicing
portfolio. |
Note 7 Preferred
Stock
At June 30, 2010 and December 31, 2009, the Company
had authority to issue 50 million shares of preferred
stock. The number of shares issued and outstanding and the
carrying amount of each outstanding series of the Companys
preferred stock was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010
|
|
|
|
|
December 31,
2009
|
|
|
|
|
Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued and
|
|
|
Liquidation
|
|
|
|
|
|
|
Carrying
|
|
|
|
|
Issued and
|
|
|
Liquidation
|
|
|
|
|
|
|
Carrying
|
|
|
(Dollars in Millions)
|
|
Outstanding
|
|
|
Preference
|
|
|
|
Discount
|
|
|
Amount
|
|
|
|
|
Outstanding
|
|
|
Preference
|
|
|
|
Discount
|
|
|
Amount
|
|
|
Series A
|
|
|
5,746
|
|
|
$
|
575
|
|
|
|
$
|
145
|
|
|
$
|
430
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
Series B
|
|
|
40,000
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
40,000
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
1,000
|
|
|
Series D
|
|
|
20,000
|
|
|
|
500
|
|
|
|
|
|
|
|
|
500
|
|
|
|
|
|
20,000
|
|
|
|
500
|
|
|
|
|
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total preferred stock (a)
|
|
|
65,746
|
|
|
$
|
2,075
|
|
|
|
$
|
145
|
|
|
$
|
1,930
|
|
|
|
|
|
60,000
|
|
|
$
|
1,500
|
|
|
|
$
|
|
|
|
$
|
1,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
The
par value of all shares issued and outstanding at June 30,
2010 and December 31, 2009, was $1.00 a share. |
On June 10, 2010, the Company exchanged depositary shares
representing an ownership interest in 5,746 shares of
Series A Non-Cumulative Perpetual Preferred Stock with a
liquidation preference of $100,000 per share (the
Series A Preferred Stock) for approximately
46 percent of the outstanding Income Trust Securities
(ITS) issued by USB Capital IX to third party
investors, retired a pro-rata portion of the related junior
subordinated debentures and cancelled a pro-rata portion of the
related stock purchase contracts. The Series A Preferred
Stock has no stated maturity and will not be subject to any
sinking fund or other obligation of the Company. Dividends, if
declared, will accrue and be payable semi-annually, in arrears,
at a rate per annum equal to 7.189 percent through a
specified stock purchase date for the remaining untendered ITS
expected to be April 15, 2011, and thereafter, payable
quarterly, at a rate per annum equal to the greater of
three-month LIBOR plus 1.02 percent or 3.50 percent.
The Series A Preferred Stock is redeemable at the
Companys option subsequent to the stock purchase date,
subject to prior approval by the Federal Reserve Board.
For further information on junior subordinated debentures and
preferred stock, refer to Notes 14 and 15, respectively, in
the Companys Annual Report on
Form 10-K
for the year ended December 31, 2009.
Note 8 Earnings
Per Share
The components of earnings per share were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
Six Months Ended
|
|
|
|
|
June 30,
|
|
|
|
|
June 30,
|
|
|
(Dollars and Shares
in Millions, Except Per Share Data)
|
|
2010
|
|
|
2009
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Net income attributable to U.S. Bancorp
|
|
$
|
766
|
|
|
$
|
471
|
|
|
|
|
$
|
1,435
|
|
|
$
|
1,000
|
|
|
Preferred dividends
|
|
|
(18
|
)
|
|
|
(90
|
)
|
|
|
|
|
(37
|
)
|
|
|
(190
|
)
|
|
Equity portion of gain on ITS exchange transaction, net of tax
|
|
|
118
|
|
|
|
|
|
|
|
|
|
118
|
|
|
|
|
|
|
Accretion of preferred stock discount
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
(14
|
)
|
|
Deemed dividend on preferred stock redemption
|
|
|
|
|
|
|
(154
|
)
|
|
|
|
|
|
|
|
|
(154
|
)
|
|
Earnings allocated to participating stock awards
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income applicable to U.S. Bancorp common shareholders
|
|
$
|
862
|
|
|
$
|
221
|
|
|
|
|
$
|
1,510
|
|
|
$
|
640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding
|
|
|
1,912
|
|
|
|
1,833
|
|
|
|
|
|
1,911
|
|
|
|
1,794
|
|
|
Net effect of the exercise and assumed purchase of stock awards
and conversion of outstanding convertible notes
|
|
|
9
|
|
|
|
7
|
|
|
|
|
|
9
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average diluted common shares outstanding
|
|
|
1,921
|
|
|
|
1,840
|
|
|
|
|
|
1,920
|
|
|
|
1,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share
|
|
$
|
.45
|
|
|
$
|
.12
|
|
|
|
|
$
|
.79
|
|
|
$
|
.36
|
|
|
Diluted earnings per common share
|
|
$
|
.45
|
|
|
$
|
.12
|
|
|
|
|
$
|
.79
|
|
|
$
|
.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options and warrants to purchase 56 million and
109 million common shares for the three months ended
June 30, 2010 and 2009, respectively, and 56 million
and 109 million common shares for the six months ended
June 30, 2010 and 2009, respectively, were outstanding but
not included in the computation of diluted earnings per share
because they were antidilutive.
Note 9 Employee
Benefits
The components of net periodic benefit cost for the
Companys retirement plans were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
|
|
|
Postretirement
|
|
|
|
|
|
|
|
|
Postretirement
|
|
|
|
|
Pension Plans
|
|
|
|
Welfare Plan
|
|
|
|
|
Pension Plans
|
|
|
|
Welfare Plan
|
|
|
(Dollars in Millions)
|
|
2010
|
|
|
2009
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
2010
|
|
|
2009
|
|
|
Service cost
|
|
$
|
23
|
|
|
$
|
20
|
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
|
|
$
|
46
|
|
|
$
|
40
|
|
|
|
$
|
4
|
|
|
$
|
3
|
|
|
Interest cost
|
|
|
39
|
|
|
|
38
|
|
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
78
|
|
|
|
76
|
|
|
|
|
5
|
|
|
|
6
|
|
|
Expected return on plan assets
|
|
|
(53
|
)
|
|
|
(53
|
)
|
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
|
|
(107
|
)
|
|
|
(107
|
)
|
|
|
|
(2
|
)
|
|
|
(3
|
)
|
|
Prior service (credit) cost and transition (asset) obligation
amortization
|
|
|
(3
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
Actuarial (gain) loss amortization
|
|
|
16
|
|
|
|
12
|
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
|
|
32
|
|
|
|
24
|
|
|
|
|
(3
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
22
|
|
|
$
|
15
|
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
|
|
$
|
43
|
|
|
$
|
30
|
|
|
|
$
|
4
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 10 Income
Taxes
The components of income tax expense were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
Six Months Ended
|
|
|
|
|
June 30,
|
|
|
|
|
June 30,
|
|
|
(Dollars in Millions)
|
|
2010
|
|
|
2009
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Federal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
301
|
|
|
$
|
310
|
|
|
|
|
$
|
455
|
|
|
$
|
684
|
|
|
Deferred
|
|
|
(123
|
)
|
|
|
(225
|
)
|
|
|
|
|
(143
|
)
|
|
|
(520
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal income tax
|
|
|
178
|
|
|
|
85
|
|
|
|
|
|
312
|
|
|
|
164
|
|
|
State
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
32
|
|
|
|
36
|
|
|
|
|
|
61
|
|
|
|
85
|
|
|
Deferred
|
|
|
(11
|
)
|
|
|
(21
|
)
|
|
|
|
|
(13
|
)
|
|
|
(48
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State income tax
|
|
|
21
|
|
|
|
15
|
|
|
|
|
|
48
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax provision
|
|
$
|
199
|
|
|
$
|
100
|
|
|
|
|
$
|
360
|
|
|
$
|
201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of expected income tax expense at the federal
statutory rate of 35 percent to the Companys
applicable income tax expense follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
Six Months Ended
|
|
|
|
|
June 30,
|
|
|
|
|
June 30,
|
|
|
(Dollars in Millions)
|
|
2010
|
|
|
2009
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Tax at statutory rate
|
|
$
|
333
|
|
|
$
|
205
|
|
|
|
|
$
|
622
|
|
|
$
|
431
|
|
|
State income tax, at statutory rates, net of federal tax benefit
|
|
|
14
|
|
|
|
10
|
|
|
|
|
|
31
|
|
|
|
24
|
|
|
Tax effect of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax credits
|
|
|
(110
|
)
|
|
|
(76
|
)
|
|
|
|
|
(210
|
)
|
|
|
(151
|
)
|
|
Tax-exempt income
|
|
|
(53
|
)
|
|
|
(49
|
)
|
|
|
|
|
(105
|
)
|
|
|
(98
|
)
|
|
Noncontrolling interests
|
|
|
5
|
|
|
|
(4
|
)
|
|
|
|
|
7
|
|
|
|
(10
|
)
|
|
Other items
|
|
|
10
|
|
|
|
14
|
|
|
|
|
|
15
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Applicable income taxes
|
|
$
|
199
|
|
|
$
|
100
|
|
|
|
|
$
|
360
|
|
|
$
|
201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys income tax returns are subject to review and
examination by federal, state, local and foreign government
authorities. On an ongoing basis, numerous federal, state, local
and foreign examinations are in progress and cover multiple tax
years. As of June 30, 2010, the federal taxing authority
has completed its examination of the Company through the fiscal
year ended December 31, 2006. The years open to examination
by foreign, state and local government authorities vary by
jurisdication.
The Companys net deferred tax liability was
$309 million at June 30, 2010, and $190 million
at December 31, 2009.
Note 11 Derivative
Instruments
The Company recognizes all derivatives in the consolidated
balance sheet at fair value as other assets or liabilities. On
the date the Company enters into a derivative contract, the
derivative is designated as either a hedge of the fair value of
a recognized asset or liability (fair value hedge);
a hedge of a forecasted transaction or the variability of cash
flows to be paid related to a recognized asset or liability
(cash flow hedge); or a customer accommodation or an
economic hedge for asset/liability risk management purposes
(free-standing derivative).
Of the Companys $46.9 billion of total notional
amount of asset and liability management positions at
June 30, 2010, $9.5 billion was designated as a fair
value, cash flow or net investment hedge. When a derivative is
designated as either a fair value, cash flow or net investment
hedge, the Company performs an assessment, at inception and
quarterly thereafter, to determine the effectiveness of the
derivative in offsetting changes in the value or cash flows of
the hedged item(s).
Fair Value
Hedges These
derivatives are primarily interest rate swaps that hedge the
change in fair value related to interest rate changes of
underlying fixed-rate debt and junior subordinated debentures.
Changes in the fair value of derivatives designated as fair
value hedges, and changes in the fair value of the hedged items,
are recorded in earnings. All fair value hedges were highly
effective for the six months ended June 30, 2010, and the
change in fair value attributed to hedge ineffectiveness was not
material.
Cash Flow
Hedges These
derivatives are interest rate swaps that are hedges of the
forecasted cash flows from the underlying variable-rate debt.
Changes in the fair value of derivatives designated as cash flow
hedges are recorded in other comprehensive income (loss) until
expense from the cash flows of the hedged items is realized. If
a derivative designated as a cash flow hedge is terminated or
ceases to be highly effective, the gain or loss in other
comprehensive income (loss) is amortized to earnings over the
period the forecasted hedged transactions impact earnings. If a
hedged forecasted transaction is no longer probable, hedge
accounting is ceased and any gain or loss included in other
comprehensive income (loss) is reported in earnings immediately.
At June 30, 2010, the Company had $454 million of
realized and unrealized losses on derivatives classified as cash
flow hedges recorded in other comprehensive income (loss). The
estimated amount to be reclassified from other comprehensive
income (loss) into earnings during the remainder of 2010 and the
next 12 months is a loss of $64 million and
$124 million, respectively. This includes gains and losses
related to hedges that were terminated early for which the
forecasted transactions are still probable. All cash flow hedges
were highly effective for the six months ended June 30,
2010, and the change in fair value attributed to hedge
ineffectiveness was not material.
Net Investment
Hedges The Company
uses forward commitments to sell specified amounts of certain
foreign currencies to hedge the volatility of its investment in
foreign operations driven by fluctuations in foreign currency
exchange rates. The net amount of related gains or losses
included in the cumulative translation adjustment for the first
six months of 2010 was not material.
Other Derivative
Positions The
Company enters into free-standing derivatives to mitigate
interest rate risk and for other risk management purposes. These
derivatives include forward commitments to sell residential
mortgage loans, which are used to economically hedge the
interest rate risk related to residential mortgage loans held
for sale. The Company also enters into U.S. Treasury
futures, options on U.S. Treasury futures contracts and
forward commitments to buy residential mortgage loans to
economically hedge the change in the fair value of the
Companys residential MSRs. In addition, the Company acts
as a seller and buyer of interest rate derivatives and foreign
exchange contracts to accommodate its customers. To mitigate the
market and liquidity risk associated with these customer
accommodation derivatives, the Company enters into similar
offsetting positions.
For additional information on the Companys purpose for
entering into derivative transactions and its overall risk
management strategies, refer to Management Discussion and
Analysis Use of Derivatives to Manage Interest Rate
and Other Risks which is incorporated by reference into
these Notes to Consolidated Financial Statements.
The following table provides information on the fair value of
the Companys derivative positions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010
|
|
|
|
|
December 31,
2009
|
|
|
|
|
Asset
|
|
|
Liability
|
|
|
|
|
Asset
|
|
|
Liability
|
|
|
(Dollars in millions)
|
|
Derivatives
|
|
|
Derivatives
|
|
|
|
|
Derivatives
|
|
|
Derivatives
|
|
|
Total fair value of derivative positions
|
|
$
|
1,960
|
|
|
$
|
2,440
|
|
|
|
|
$
|
1,582
|
|
|
$
|
1,854
|
|
|
Netting (a)
|
|
|
(244
|
)
|
|
|
(1,375
|
)
|
|
|
|
|
(421
|
)
|
|
|
(995
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,716
|
|
|
$
|
1,065
|
|
|
|
|
$
|
1,161
|
|
|
$
|
859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
The fair value of asset and liability derivatives are included
in Other assets and Other liabilities on the Consolidated
Balance Sheet, respectively.
|
|
|
(a)
|
|
Represents
netting of derivative asset and liability balances, and related
collateral, with the same counterparty subject to master netting
agreements. Authoritative accounting guidance permits the
netting of derivative receivables and payables when a legally
enforceable master netting agreement exists between the Company
and a derivative counterparty. A master netting agreement is an
agreement between two counterparties who have multiple
derivative contracts with each other that provide for the net
settlement of contracts through a single payment, in a single
currency, in the event of default on or termination of any one
contract. At June 30, 2010, the amount of cash and money
market investments collateral posted by counterparties that was
netted against derivative assets was $92 million and the amount
of cash collateral posted by the Company that was netted against
derivative liabilities was $1.2 billion. At December 31,
2009, the amount of cash collateral posted by counterparties
that was netted against derivative assets was $116 million
and the amount of cash collateral posted by the Company that was
netted against derivative liabilities was
$691 million. |
The following table summarizes the asset and liability
management derivative positions of the Company:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
|
|
Liability Derivatives
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
Notional
|
|
|
Fair
|
|
|
|
Maturity
|
|
|
|
Notional
|
|
|
|
Fair
|
|
|
Maturity
|
|
|
(Dollars in Millions)
|
|
Value
|
|
|
Value
|
|
|
|
In Years
|
|
|
|
Value
|
|
|
|
Value
|
|
|
In Years
|
|
|
June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receive fixed/pay floating swaps
|
|
$
|
2,575
|
|
|
$
|
128
|
|
|
|
|
51.30
|
|
|
|
$
|
|
|
|
|
$
|
|
|
|
|
|
|
|
Foreign exchange cross-currency swaps
|
|
|
424
|
|
|
|
61
|
|
|
|
|
5.12
|
|
|
|
|
1,224
|
|
|
|
|
51
|
|
|
|
6.67
|
|
|
Cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pay fixed/receive floating swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,788
|
|
|
|
|
748
|
|
|
|
5.53
|
|
|
Net investment hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
462
|
|
|
|
|
|
|
|
|
.04
|
|
|
Other economic hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures and forwards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buy
|
|
|
16,810
|
|
|
|
185
|
|
|
|
|
.08
|
|
|
|
|
27
|
|
|
|
|
|
|
|
|
.13
|
|
|
Sell
|
|
|
765
|
|
|
|
|
|
|
|
|
.17
|
|
|
|
|
9,520
|
|
|
|
|
173
|
|
|
|
.11
|
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
3,500
|
|
|
|
|
|
|
|
|
.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
|
|
|
3,928
|
|
|
|
56
|
|
|
|
|
.10
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
.13
|
|
|
Foreign exchange forward contracts
|
|
|
505
|
|
|
|
8
|
|
|
|
|
.06
|
|
|
|
|
145
|
|
|
|
|
|
|
|
|
.09
|
|
|
Equity contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58
|
|
|
|
|
6
|
|
|
|
2.05
|
|
|
Credit contracts
|
|
|
830
|
|
|
|
5
|
|
|
|
|
3.27
|
|
|
|
|
1,353
|
|
|
|
|
1
|
|
|
|
2.88
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receive fixed/pay floating swaps
|
|
|
3,235
|
|
|
|
70
|
|
|
|
|
32.71
|
|
|
|
|
1,950
|
|
|
|
|
32
|
|
|
|
20.52
|
|
|
Foreign exchange cross-currency swaps
|
|
|
1,864
|
|
|
|
272
|
|
|
|
|
6.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pay fixed/receive floating swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,363
|
|
|
|
|
556
|
|
|
|
3.58
|
|
|
Net investment hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts
|
|
|
536
|
|
|
|
15
|
|
|
|
|
.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other economic hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures and forwards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buy
|
|
|
1,250
|
|
|
|
6
|
|
|
|
|
.07
|
|
|
|
|
9,862
|
|
|
|
|
190
|
|
|
|
.05
|
|
|
Sell
|
|
|
7,533
|
|
|
|
91
|
|
|
|
|
.11
|
|
|
|
|
1,260
|
|
|
|
|
3
|
|
|
|
.06
|
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
5,250
|
|
|
|
|
|
|
|
|
.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
|
|
|
2,546
|
|
|
|
9
|
|
|
|
|
.08
|
|
|
|
|
594
|
|
|
|
|
2
|
|
|
|
.09
|
|
|
Foreign exchange forward contracts
|
|
|
113
|
|
|
|
1
|
|
|
|
|
.08
|
|
|
|
|
293
|
|
|
|
|
2
|
|
|
|
.08
|
|
|
Equity contracts
|
|
|
27
|
|
|
|
2
|
|
|
|
|
1.58
|
|
|
|
|
29
|
|
|
|
|
1
|
|
|
|
.29
|
|
|
Credit contracts
|
|
|
863
|
|
|
|
2
|
|
|
|
|
3.68
|
|
|
|
|
1,261
|
|
|
|
|
1
|
|
|
|
3.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the customer-related derivative
positions of the Company:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
|
|
Liability Derivatives
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
Notional
|
|
|
Fair
|
|
|
Maturity
|
|
|
|
Notional
|
|
|
Fair
|
|
|
Maturity
|
|
(Dollars in Millions)
|
|
Value
|
|
|
Value
|
|
|
In Years
|
|
|
|
Value
|
|
|
Value
|
|
|
In Years
|
|
June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receive fixed/pay floating swaps
|
|
$
|
18,702
|
|
|
$
|
1,178
|
|
|
|
4.60
|
|
|
|
$
|
129
|
|
|
$
|
2
|
|
|
|
5.93
|
|
Pay fixed/receive floating swaps
|
|
|
221
|
|
|
|
2
|
|
|
|
6.00
|
|
|
|
|
18,570
|
|
|
|
1,136
|
|
|
|
4.64
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
1,959
|
|
|
|
13
|
|
|
|
1.83
|
|
|
|
|
294
|
|
|
|
36
|
|
|
|
.39
|
|
Written
|
|
|
495
|
|
|
|
36
|
|
|
|
.43
|
|
|
|
|
1,745
|
|
|
|
13
|
|
|
|
2.00
|
|
Foreign exchange rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forwards, spots and swaps (a)
|
|
|
5,758
|
|
|
|
280
|
|
|
|
.47
|
|
|
|
|
5,670
|
|
|
|
266
|
|
|
|
.47
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
234
|
|
|
|
8
|
|
|
|
.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
234
|
|
|
|
8
|
|
|
|
.38
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receive fixed/pay floating swaps
|
|
|
18,700
|
|
|
|
854
|
|
|
|
4.46
|
|
|
|
|
1,083
|
|
|
|
19
|
|
|
|
7.00
|
|
Pay fixed/receive floating swaps
|
|
|
1,299
|
|
|
|
24
|
|
|
|
7.36
|
|
|
|
|
18,490
|
|
|
|
821
|
|
|
|
4.45
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
1,841
|
|
|
|
20
|
|
|
|
1.68
|
|
|
|
|
231
|
|
|
|
12
|
|
|
|
.85
|
|
Written
|
|
|
477
|
|
|
|
12
|
|
|
|
.56
|
|
|
|
|
1,596
|
|
|
|
20
|
|
|
|
1.90
|
|
Foreign exchange rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forwards, spots and swaps (a)
|
|
|
5,607
|
|
|
|
193
|
|
|
|
.46
|
|
|
|
|
5,563
|
|
|
|
184
|
|
|
|
.45
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
311
|
|
|
|
11
|
|
|
|
.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
311
|
|
|
|
11
|
|
|
|
.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Reflects
the net of long and short positions. |
The table below shows the effective portion of the gains
(losses) recognized in other comprehensive income (loss) and the
gains (losses) reclassified from other comprehensive income
(loss) into earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
Six Months Ended
June 30
|
|
|
|
|
Gains (Losses)
|
|
|
Gains (Losses)
|
|
|
|
Gains (Losses)
|
|
|
Gains (Losses)
|
|
|
|
|
Recognized in
Other
|
|
|
Reclassified from
Other Comprehensive
|
|
|
|
Recognized in
Other
|
|
|
Reclassified from
Other Comprehensive
|
|
|
|
|
Comprehensive
|
|
|
Income (Loss)
|
|
|
|
Comprehensive
|
|
|
Income (Loss)
|
|
|
|
|
Income (Loss)
|
|
|
into Earnings
|
|
|
|
Income (Loss)
|
|
|
into Earnings
|
|
(Dollars in Millions)
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Asset and Liability Management Positions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pay fixed/receive floating swaps (a)
|
|
|
$
|
(103
|
)
|
|
$
|
172
|
|
|
$
|
(36
|
)
|
|
$
|
(2
|
)
|
|
|
$
|
(127
|
)
|
|
$
|
248
|
|
|
$
|
(79
|
)
|
|
$
|
(5
|
)
|
Net investment hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts
|
|
|
|
48
|
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
Ineffectiveness on cash flow and net investment hedges was not
material for the three months and six months ended June 30,
2010 and 2009.
|
|
|
(a)
|
|
Gains
(Losses) reclassified from other comprehensive income (loss)
into interest income (expense) on long-term debt. |
The table below shows the gains (losses) recognized in earnings
for fair value hedges, other economic hedges and
customer-related positions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (Losses)
Recognized in Earnings
|
|
|
|
Location of
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
Gains (Losses)
|
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
Recognized in
Earnings
|
|
|
|
2010
|
|
|
|
2009
|
|
|
|
2010
|
|
|
2009
|
|
Asset and Liability Management Positions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
Other noninterest income
|
|
|
|
$
|
12
|
|
|
|
$
|
(75
|
)
|
|
|
$
|
(84
|
)
|
|
$
|
(105
|
)
|
Foreign exchange cross-currency swaps
|
|
|
Other noninterest income
|
|
|
|
|
(161
|
)
|
|
|
|
104
|
|
|
|
|
(231
|
)
|
|
|
51
|
|
Other economic hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures and forwards
|
|
|
Mortgage banking revenue
|
|
|
|
|
249
|
|
|
|
|
116
|
|
|
|
|
269
|
|
|
|
273
|
|
Purchased and written options
|
|
|
Mortgage banking revenue
|
|
|
|
|
121
|
|
|
|
|
48
|
|
|
|
|
191
|
|
|
|
157
|
|
Foreign exchange forward contracts
|
|
|
Commercial products revenue
|
|
|
|
|
20
|
|
|
|
|
(31
|
)
|
|
|
|
9
|
|
|
|
(20
|
)
|
Equity contracts
|
|
|
Compensation expense
|
|
|
|
|
2
|
|
|
|
|
5
|
|
|
|
|
2
|
|
|
|
(14
|
)
|
Credit contracts
|
|
|
Other noninterest income/expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
|
|
Customer-Related Positions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receive fixed/pay floating swaps
|
|
|
Other noninterest income
|
|
|
|
|
285
|
|
|
|
|
(440
|
)
|
|
|
|
354
|
|
|
|
(571
|
)
|
Pay fixed/receive floating swaps
|
|
|
Other noninterest income
|
|
|
|
|
(282
|
)
|
|
|
|
451
|
|
|
|
|
(349
|
)
|
|
|
601
|
|
Purchased and written options
|
|
|
Other noninterest income
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
(1
|
)
|
Foreign exchange rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forwards, spots and swaps
|
|
|
Commercial products revenue
|
|
|
|
|
11
|
|
|
|
|
13
|
|
|
|
|
21
|
|
|
|
28
|
|
Purchased and written options
|
|
|
Commercial products revenue
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Gains
(Losses) on items hedged by interest rate contracts and foreign
exchange forward contracts, included in noninterest income
(expense), were $(11) million and $161 million for the
three months ended June 30, 2010, respectively, and
$73 million and $(104) million for the three months
ended June 30, 2009, respectively. Gains (Losses) on items
hedged by interest rate contracts and foreign exchange forward
contracts, included in noninterest income (expense), were
$83 million and $230 million for the six months ended
June 30, 2010, respectively, and $103 million and
$(50) million for the six months ended June 30, 2009,
respectively. The ineffective portion was immaterial for the
three months and six months ended June 30, 2010 and
2009. |
Derivatives are subject to credit risk associated with
counterparties to the derivative contracts. The Company measures
that credit risk based on its assessment of the probability of
counterparty default and includes that within the fair value of
the derivative. The Company manages counterparty credit risk
through diversification of its derivative positions among
various counterparties, by entering into master netting
agreements and by requiring collateral agreements which allow
the Company to call for immediate, full collateral coverage when
credit-rating thresholds are triggered by counterparties.
The Companys collateral agreements are bilateral and,
therefore, contain provisions that require collateralization of
the Companys net liability derivative positions. Required
collateral coverage is based on certain net liability thresholds
and contingent upon the Companys credit rating from two of
the nationally recognized statistical rating organizations. If
the Companys credit rating were to fall below credit
ratings thresholds established in the collateral agreements, the
counterparties to the derivatives could request immediate full
collateral coverage for derivatives in net liability positions.
The aggregate fair value of all derivatives under collateral
agreements that were in a net liability position at
June 30, 2010, was $1.8 billion. At June 30, 2010, the
Company had $1.2 billion of cash posted as collateral against
this net liability position.
Note
12 Fair
Values of Assets and Liabilities
The Company uses fair value measurements for the initial
recording of certain assets and liabilities, periodic
remeasurement of certain assets and liabilities, and
disclosures. Derivatives,
available-for-sale
investment securities, certain mortgage loans held for sale
(MLHFS) and MSRs are recorded at fair value on a
recurring basis. Additionally, from time to time, the Company
may be required to record at fair value other assets on a
nonrecurring basis, such as loans held for sale, loans held for
investment and certain other assets. These nonrecurring fair
value adjustments typically involve application of
lower-of-cost-or-fair-value
accounting or impairment write-downs of individual assets.
Fair value is defined as the exchange price that would be
received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market
participants on the measurement date. A fair value measurement
reflects all of the assumptions that market participants would
use in pricing the asset or liability, including assumptions
about the risk inherent in a particular valuation technique, the
effect of a restriction on the sale or use of an asset, and the
risk of nonperformance.
The Company groups its assets and liabilities measured at fair
value into a three-level hierarchy for valuation techniques used
to measure financial assets and financial liabilities at fair
value. This hierarchy is based on whether the valuation inputs
are observable or unobservable. These levels are:
|
|
|
|
|
Level 1 Quoted prices in active markets for
identical assets or liabilities. Level 1 includes U.S. Treasury
and exchange-traded instruments.
|
|
|
Level 2 Observable inputs other than Level 1
prices, such as quoted prices for similar assets or liabilities;
quoted prices in markets that are not active; or other inputs
that are observable or can be corroborated by observable market
data for substantially the full term of the assets or
liabilities. Level 2 includes debt securities that are traded
less frequently than exchange-traded instruments and which are
valued using third party pricing services; derivative contracts
whose value is determined using a pricing model with inputs that
are observable in the market or can be derived principally from
or corroborated by observable market data; and MLHFS whose
values are determined using quoted prices for similar assets or
pricing models with inputs that are observable in the market or
can be corroborated by observable market data.
|
|
|
Level 3 Unobservable inputs that are supported
by little or no market activity and that are significant to the
fair value of the assets or liabilities. Level 3 assets and
liabilities include financial instruments whose values are
determined using pricing models, discounted cash flow
methodologies, or similar techniques, as well as instruments for
which the determination of fair value requires significant
management judgment or estimation. This category includes
residential MSRs, certain debt securities, including the
Companys SIV-related investments and non-agency
mortgage-backed securities, and certain derivative contracts.
|
When the Company changes its valuation inputs for measuring
financial assets and financial liabilities at fair value, either
due to changes in current market conditions or other factors, it
may need to transfer those assets or liabilities to another
level in the hierarchy based on the new inputs used. The Company
recognizes these transfers at the end of the reporting period
that the transfers occur. For the second quarter and first six
months of 2010 and 2009, there were no significant transfers of
financial assets or financial liabilities between the hierarchy
levels, except for the transfer of non-agency mortgage-backed
securities from Level 2 to Level 3 in the first
quarter of 2009, as discussed below.
The following section describes the valuation methodologies used
by the Company to measure financial assets and liabilities at
fair value and for estimating fair value for financial
instruments not recorded at fair value as required under
disclosure guidance related to the fair value of financial
instruments. In addition, for financial assets and liabilities
measured at fair value, the following section includes an
indication of the level of the fair value hierarchy in which the
assets or liabilities are classified. Where appropriate, the
description includes information about the valuation models and
key inputs to those models.
Cash and Cash
Equivalents The
carrying value of cash, amounts due from banks, federal funds
sold and securities purchased under resale agreements was
assumed to approximate fair value.
Investment
Securities When
available, quoted market prices are used to determine the fair
value of investment securities and such items are classified
within Level 1 of the fair value hierarchy.
For other securities, the Company determines fair value based on
various sources and may apply matrix pricing with observable
prices for similar securities where a price for the identical
security is not observable. Prices are
verified, where possible, to prices of observable market trades
as obtained from independent sources. Securities measured at
fair value by such methods are classified as Level 2.
The fair value of securities for which there are no market
trades, or where trading is inactive as compared to normal
market activity, are categorized as Level 3. Securities
classified as Level 3 include non-agency mortgage-backed
securities, SIV-related, commercial mortgage-backed and
asset-backed securities, collateralized debt obligations and
collateralized loan obligations, and certain corporate debt
securities. Beginning in the first quarter of 2009, due to the
limited number of trades of non-agency mortgage-backed
securities and lack of reliable evidence about transaction
prices, the Company determines the fair value of these
securities using a cash flow methodology and incorporating
observable market information, where available. The use of a
cash flow methodology resulted in the Company transferring some
non-agency mortgage-backed securities to Level 3 in the
first quarter of 2009. This transfer did not impact earnings and
was not significant to shareholders equity of the Company
or the carrying amount of the securities.
Cash flow methodologies and other market valuation techniques
involving management judgment use assumptions regarding housing
prices, interest rates and borrower performance. Inputs are
refined and updated to reflect market developments. The primary
valuation drivers of these securities are the prepayment rates,
default rates and default severities associated with the
underlying collateral, as well as the discount rate used to
calculate the present value of the projected cash flows.
The following table shows the valuation assumption ranges for
Level 3
available-for-sale
non-agency mortgage-backed securities at June 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime (a)
|
|
|
|
Non-prime
|
|
|
|
Minimum
|
|
|
Maximum
|
|
|
Average
|
|
|
|
Minimum
|
|
|
|
Maximum
|
|
|
Average
|
|
Estimated lifetime prepayment rates
|
|
|
4
|
%
|
|
|
28
|
%
|
|
|
13
|
%
|
|
|
|
1
|
%
|
|
|
|
13
|
%
|
|
|
6
|
%
|
Lifetime probability of default rates
|
|
|
|
|
|
|
10
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
7
|
|
Lifetime loss severity rates
|
|
|
|
|
|
|
100
|
|
|
|
45
|
|
|
|
|
10
|
|
|
|
|
79
|
|
|
|
55
|
|
Discount margin
|
|
|
3
|
|
|
|
26
|
|
|
|
6
|
|
|
|
|
2
|
|
|
|
|
27
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Prime
securities are those designated as such by the issuer or those
with underlying asset characteristics and/or credit enhancements
consistent with securities designated as prime. |
Certain mortgage
loans held for
sale MLHFS
measured at fair value, for which an active secondary market and
readily available market prices exist, are initially valued at
the transaction price and are subsequently valued by comparison
to instruments with similar collateral and risk profiles.
Included in mortgage banking revenue was a $84 million net
gain and a $67 million net loss for the second quarter of
2010 and 2009, respectively, and a $126 million net gain
and a $35 million net loss for the first six months of 2010
and 2009, respectively, from the changes to fair value of these
MLHFS under fair value option accounting guidance. Changes in
fair value due to instrument specific credit risk were
immaterial. The fair value of MLHFS was $4.7 billion as of
June 30, 2010, which exceeded the unpaid principal balance
by $198 million as of that date. MLHFS are Level 2.
Related interest income for MLHFS is measured based on
contractual interest rates and reported as interest income in
the Consolidated Statement of Income. Electing to measure MLHFS
at fair value reduces certain timing differences and better
matches changes in fair value of these assets with changes in
the value of the derivative instruments used to economically
hedge them without the burden of complying with the requirements
for hedge accounting.
Loans The
loan portfolio includes adjustable and fixed-rate loans, the
fair value of which was estimated using discounted cash flow
analyses and other valuation techniques. The expected cash flows
of loans considered historical prepayment experiences and
estimated credit losses for nonperforming loans and were
discounted using current rates offered to borrowers of similar
credit characteristics. Generally, loan fair values reflect
Level 3 information.
Mortgage
servicing
rights MSRs are
valued using a cash flow methodology and third party prices, if
available. Accordingly, MSRs are classified in Level 3. The
Company determines fair value by estimating the present value of
the assets future cash flows using market-based prepayment
rates, discount rates, and other assumptions validated through
comparison to trade information, industry surveys, and
independent third party appraisals. Risks inherent in MSRs
valuation include higher than expected prepayment rates
and/or
delayed receipt of cash flows.
Derivatives Exchange-traded
derivatives are measured at fair value based on quoted market
(i.e. exchange) prices. Because prices are available for the
identical instrument in an active market, these fair values are
classified within Level 1 of the fair value hierarchy.
The majority of derivatives held by the Company are executed
over-the-counter
and are valued using standard cash flow, Black-Scholes and Monte
Carlo valuation techniques. The models incorporate inputs,
depending on the type of derivative, including interest rate
curves, foreign exchange rates and volatility. In addition, all
derivative values incorporate an assessment of the risk of
counterparty nonperformance, measured based on the
Companys evaluation of credit risk as well as external
assessments of credit risk, where available. In its assessment
of nonperformance risk, the Company considers its ability to net
derivative positions under master netting agreements, as well as
collateral received or provided under collateral support
agreements. The majority of these derivatives are classified
within Level 2 of the fair value hierarchy as the
significant inputs to the models are observable. An exception to
the Level 2 classification is certain derivative
transactions for which the risk of nonperformance cannot be
observed in the market. These derivatives are classified within
Level 3 of the fair value hierarchy. In addition,
commitments to sell, purchase and originate mortgage loans that
meet the requirements of a derivative, are valued by pricing
models that include market observable and unobservable inputs.
Due to the significant unobservable inputs, these commitments
are classified within Level 3 of the fair value hierarchy.
Deposit
Liabilities The
fair value of demand deposits, savings accounts and certain
money market deposits is equal to the amount payable on demand.
The fair value of fixed-rate certificates of deposit was
estimated by discounting the contractual cash flow using current
market rates.
Short-term
Borrowings Federal
funds purchased, securities sold under agreements to repurchase,
commercial paper and other short-term funds borrowed have
floating rates or short-term maturities. The fair value of
short-term borrowings was determined by discounting contractual
cash flows using current market rates.
Long-term
Debt The fair
value for most long-term debt was determined by discounting
contractual cash flows using current market rates. Junior
subordinated debt instruments were valued using market quotes.
Loan Commitments,
Letters of Credit and
Guarantees The
fair value of commitments, letters of credit and guarantees
represents the estimated costs to terminate or otherwise settle
the obligations with a third-party. The fair value of
residential mortgage commitments is estimated based on
observable inputs. Other loan commitments, letters of credit and
guarantees are not actively traded, and the Company estimates
their fair value based on the related amount of unamortized
deferred commitment fees adjusted for the probable losses for
these arrangements.
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
|
|
June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agencies
|
|
$
|
9
|
|
|
$
|
2,538
|
|
|
|
$
|
|
|
|
|
$
|
|
|
|
$
|
2,547
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
|
|
|
$
|
33,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,435
|
|
Non-agency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
|
|
|
|
|
|
|
|
|
|
1,197
|
|
|
|
|
|
|
|
|
1,197
|
|
Non-prime
|
|
|
|
|
|
|
|
|
|
|
|
907
|
|
|
|
|
|
|
|
|
907
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
|
15
|
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized debt obligations/Collateralized loan obligations
|
|
|
|
|
|
|
90
|
|
|
|
|
75
|
|
|
|
|
|
|
|
|
165
|
|
Other
|
|
|
|
|
|
|
588
|
|
|
|
|
328
|
|
|
|
|
|
|
|
|
916
|
|
Obligations of state and political subdivisions
|
|
|
|
|
|
|
6,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,784
|
|
Obligations of foreign governments
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
Corporate debt securities
|
|
|
|
|
|
|
917
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
927
|
|
Perpetual preferred securities
|
|
|
|
|
|
|
431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
431
|
|
Other investments
|
|
|
177
|
|
|
|
4
|
|
|
|
|
266
|
|
|
|
|
|
|
|
|
447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
|
|
|
186
|
|
|
|
44,793
|
|
|
|
|
2,798
|
|
|
|
|
|
|
|
|
47,777
|
|
Mortgage loans held for sale
|
|
|
|
|
|
|
4,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,650
|
|
Mortgage servicing rights
|
|
|
|
|
|
|
|
|
|
|
|
1,543
|
|
|
|
|
|
|
|
|
1,543
|
|
Derivative assets
|
|
|
|
|
|
|
632
|
|
|
|
|
1,328
|
|
|
|
|
(244
|
)
|
|
|
1,716
|
|
Other assets
|
|
|
|
|
|
|
432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
186
|
|
|
$
|
50,507
|
|
|
|
$
|
5,669
|
|
|
|
$
|
(244
|
)
|
|
$
|
56,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
$
|
|
|
|
$
|
2,406
|
|
|
|
$
|
34
|
|
|
|
$
|
(1,375
|
)
|
|
$
|
1,065
|
|
Other liabilities
|
|
|
|
|
|
|
434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
2,840
|
|
|
|
$
|
34
|
|
|
|
$
|
(1,375
|
)
|
|
$
|
1,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agencies
|
|
$
|
9
|
|
|
$
|
3,395
|
|
|
|
$
|
|
|
|
|
$
|
|
|
|
$
|
3,404
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
|
|
|
$
|
29,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,742
|
|
Non-agency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
|
|
|
|
|
|
|
|
|
|
1,429
|
|
|
|
|
|
|
|
|
1,429
|
|
Non-prime
|
|
|
|
|
|
|
|
|
|
|
|
968
|
|
|
|
|
|
|
|
|
968
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
13
|
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized debt obligations/Collateralized loan obligations
|
|
|
|
|
|
|
107
|
|
|
|
|
98
|
|
|
|
|
|
|
|
|
205
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
357
|
|
|
|
|
|
|
|
|
357
|
|
Obligations of state and political subdivisions
|
|
|
|
|
|
|
6,693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,693
|
|
Obligations of foreign governments
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
Corporate debt securities
|
|
|
|
|
|
|
868
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
878
|
|
Perpetual preferred securities
|
|
|
|
|
|
|
423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
423
|
|
Other investments
|
|
|
372
|
|
|
|
|
|
|
|
|
231
|
|
|
|
|
|
|
|
|
603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
|
|
|
381
|
|
|
|
41,234
|
|
|
|
|
3,106
|
|
|
|
|
|
|
|
|
44,721
|
|
Mortgage loans held for sale
|
|
|
|
|
|
|
4,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,327
|
|
Mortgage servicing rights
|
|
|
|
|
|
|
|
|
|
|
|
1,749
|
|
|
|
|
|
|
|
|
1,749
|
|
Derivative assets
|
|
|
|
|
|
|
713
|
|
|
|
|
869
|
|
|
|
|
(421
|
)
|
|
|
1,161
|
|
Other assets
|
|
|
|
|
|
|
247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
381
|
|
|
$
|
46,521
|
|
|
|
$
|
5,724
|
|
|
|
$
|
(421
|
)
|
|
$
|
52,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
$
|
|
|
|
$
|
1,800
|
|
|
|
$
|
54
|
|
|
|
$
|
(995
|
)
|
|
$
|
859
|
|
Other liabilities
|
|
|
|
|
|
|
256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
2,056
|
|
|
|
$
|
54
|
|
|
|
$
|
(995
|
)
|
|
$
|
1,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables below present the changes in fair value for
all assets and liabilities measured at fair value on a recurring
basis using significant unobservable inputs (Level 3).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Gains
|
|
|
|
|
|
|
|
|
|
|
|
Net Change in
|
|
|
|
|
|
|
|
|
|
(Losses)
|
|
|
Purchases,
|
|
|
|
|
|
|
|
|
Unrealized Gains
|
|
|
|
|
|
|
Net Gains
|
|
|
Included in
|
|
|
Sales, Principal
|
|
|
|
|
|
|
|
|
(Losses) Relating
|
|
|
|
Beginning
|
|
|
(Losses)
|
|
|
Other
|
|
|
Payments,
|
|
|
|
|
|
End
|
|
|
to Assets
|
|
Three Months Ended
June 30,
|
|
of Period
|
|
|
Included in
|
|
|
Comprehensive
|
|
|
Issuances and
|
|
|
Transfers into
|
|
|
of Period
|
|
|
Still Held at
|
|
(Dollars in Millions)
|
|
Balance
|
|
|
Net Income
|
|
|
Income (Loss)
|
|
|
Settlements
|
|
|
Level 3
|
|
|
Balance
|
|
|
End of Period
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential non-agency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
1,304
|
|
|
$
|
|
|
|
$
|
21
|
|
|
$
|
(128
|
)
|
|
$
|
|
|
|
$
|
1,197
|
|
|
$
|
19
|
|
Non-prime
|
|
|
900
|
|
|
|
(6
|
)
|
|
|
52
|
|
|
|
(39
|
)
|
|
|
|
|
|
|
907
|
|
|
|
52
|
|
Commercial
|
|
|
14
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
1
|
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized debt obligations/Collateralized loan obligations
|
|
|
79
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
75
|
|
|
|
(1
|
)
|
Other
|
|
|
335
|
|
|
|
(3
|
)
|
|
|
4
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
328
|
|
|
|
5
|
|
Corporate debt securities
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
Other securities and investments
|
|
|
237
|
|
|
|
4
|
|
|
|
34
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
266
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
|
|
|
2,879
|
|
|
|
(7
|
)(a)
|
|
|
110
|
|
|
|
(184
|
)
|
|
|
|
|
|
|
2,798
|
|
|
|
110
|
|
Mortgage servicing rights
|
|
|
1,778
|
|
|
|
(385
|
)(b)
|
|
|
|
|
|
|
150
|
|
|
|
|
|
|
|
1,543
|
|
|
|
(385
|
)(b)
|
Net derivative assets and liabilities
|
|
|
905
|
|
|
|
472
|
(c)
|
|
|
|
|
|
|
(83
|
)
|
|
|
|
|
|
|
1,294
|
|
|
|
68
|
(d)
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential non-agency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
2,560
|
|
|
$
|
1
|
|
|
$
|
100
|
|
|
$
|
(230
|
)
|
|
$
|
|
|
|
$
|
2,431
|
|
|
$
|
100
|
|
Non-prime
|
|
|
1,060
|
|
|
|
(49
|
)
|
|
|
103
|
|
|
|
(56
|
)
|
|
|
|
|
|
|
1,058
|
|
|
|
103
|
|
Commercial
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized debt obligations/Collateralized loan obligations
|
|
|
82
|
|
|
|
|
|
|
|
3
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
84
|
|
|
|
3
|
|
Other
|
|
|
502
|
|
|
|
(25
|
)
|
|
|
(41
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
435
|
|
|
|
(42
|
)
|
Corporate debt securities
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
|
|
|
4,229
|
|
|
|
(73
|
)(a)
|
|
|
165
|
|
|
|
(288
|
)
|
|
|
|
|
|
|
4,033
|
|
|
|
164
|
|
Mortgage servicing rights
|
|
|
1,182
|
|
|
|
19
|
(b)
|
|
|
|
|
|
|
281
|
|
|
|
|
|
|
|
1,482
|
|
|
|
19
|
(b)
|
Net derivative assets and liabilities
|
|
|
1,556
|
|
|
|
(602
|
)(b)
|
|
|
|
|
|
|
13
|
|
|
|
1
|
|
|
|
968
|
|
|
|
(595
|
)(e)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Included
in securities gains (losses). |
(b)
|
|
Included
in mortgage banking revenue. |
(c)
|
|
Approximately
$158 million included in other noninterest income and
$314 million included in mortgage banking
revenue. |
(d)
|
|
Approximately
$260 million included in other noninterest income and
$(192) million included in mortgage banking
revenue. |
(e)
|
|
Approximately
$(478) million included in other noninterest income and
$(117) million included in mortgage banking
revenue. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Gains
|
|
|
|
|
|
|
|
|
|
|
|
Net Change in
|
|
|
|
|
|
|
|
|
|
(Losses)
|
|
|
Purchases,
|
|
|
|
|
|
|
|
|
Unrealized Gains
|
|
|
|
|
|
|
Net Gains
|
|
|
Included in
|
|
|
Sales, Principal
|
|
|
|
|
|
|
|
|
(Losses) Relating
|
|
|
|
Beginning
|
|
|
(Losses)
|
|
|
Other
|
|
|
Payments,
|
|
|
|
|
|
End
|
|
|
to Assets
|
|
Six Months Ended
June 30,
|
|
of Period
|
|
|
Included in
|
|
|
Comprehensive
|
|
|
Issuances and
|
|
|
Transfers into
|
|
|
of Period
|
|
|
Still Held at
|
|
(Dollars in Millions)
|
|
Balance
|
|
|
Net Income
|
|
|
Income (Loss)
|
|
|
Settlements
|
|
|
Level 3
|
|
|
Balance
|
|
|
End of Period
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential non-agency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
1,429
|
|
|
$
|
|
|
|
$
|
50
|
|
|
$
|
(282
|
)
|
|
$
|
|
|
|
$
|
1,197
|
|
|
$
|
44
|
|
Non-prime
|
|
|
968
|
|
|
|
(37
|
)
|
|
|
68
|
|
|
|
(92
|
)
|
|
|
|
|
|
|
907
|
|
|
|
68
|
|
Commercial
|
|
|
13
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
1
|
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized debt obligations/Collateralized loan obligations
|
|
|
98
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
(21
|
)
|
|
|
|
|
|
|
75
|
|
|
|
|
|
Other
|
|
|
357
|
|
|
|
(5
|
)
|
|
|
(2
|
)
|
|
|
(22
|
)
|
|
|
|
|
|
|
328
|
|
|
|
(1
|
)
|
Corporate debt securities
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
Other securities and investments
|
|
|
231
|
|
|
|
2
|
|
|
|
47
|
|
|
|
(14
|
)
|
|
|
|
|
|
|
266
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
|
|
|
3,106
|
|
|
|
(40
|
)(a)
|
|
|
163
|
|
|
|
(431
|
)
|
|
|
|
|
|
|
2,798
|
|
|
|
159
|
|
Mortgage servicing rights
|
|
|
1,749
|
|
|
|
(493
|
)(b)
|
|
|
|
|
|
|
287
|
|
|
|
|
|
|
|
1,543
|
|
|
|
(493
|
)(b)
|
Net derivative assets and liabilities
|
|
|
815
|
|
|
|
492
|
(c)
|
|
|
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
1,294
|
|
|
|
42
|
(d)
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential non-agency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
183
|
|
|
$
|
(5
|
)
|
|
$
|
368
|
|
|
$
|
(363
|
)
|
|
$
|
2,248
|
|
|
$
|
2,431
|
|
|
$
|
360
|
|
Non-prime
|
|
|
1,022
|
|
|
|
(75
|
)
|
|
|
81
|
|
|
|
(103
|
)
|
|
|
133
|
|
|
|
1,058
|
|
|
|
(42
|
)
|
Commercial
|
|
|
17
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
(1
|
)
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized debt obligations/Collateralized loan obligations
|
|
|
86
|
|
|
|
(5
|
)
|
|
|
5
|
|
|
|
(6
|
)
|
|
|
4
|
|
|
|
84
|
|
|
|
4
|
|
Other
|
|
|
523
|
|
|
|
(40
|
)
|
|
|
(37
|
)
|
|
|
(14
|
)
|
|
|
3
|
|
|
|
435
|
|
|
|
(134
|
)
|
Corporate debt securities
|
|
|
13
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
|
|
|
1,844
|
|
|
|
(129
|
)(a)
|
|
|
416
|
|
|
|
(486
|
)
|
|
|
2,388
|
|
|
|
4,033
|
|
|
|
187
|
|
Mortgage servicing rights
|
|
|
1,194
|
|
|
|
(219
|
)(b)
|
|
|
|
|
|
|
507
|
|
|
|
|
|
|
|
1,482
|
|
|
|
(219
|
)(b)
|
Net derivative assets and liabilities
|
|
|
1,698
|
|
|
|
(639
|
)(e)
|
|
|
|
|
|
|
(92
|
)
|
|
|
1
|
|
|
|
968
|
|
|
|
(1,002
|
)(f)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Included
in securities gains (losses). |
(b)
|
|
Included
in mortgage banking revenue. |
(c)
|
|
Approximately
$46 million included in other noninterest income and
$446 million included in mortgage banking
revenue. |
(d)
|
|
Approximately
$339 million included in other noninterest income and
$(297) million included in mortgage banking
revenue. |
(e)
|
|
Approximately
$(921) million included in other noninterest income and
$282 million included in mortgage banking
revenue. |
(f)
|
|
Approximately
$(663) million included in other noninterest income and
$(339) million included in mortgage banking
revenue. |
The Company is also required periodically to measure certain
other financial assets at fair value on a nonrecurring basis.
These measurements of fair value usually result from the
application of
lower-of-cost-or-fair-value
accounting or write-downs of individual assets. The following
table summarizes the adjusted carrying values and the level of
valuation assumptions for assets measured at fair value on a
nonrecurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010
|
|
|
|
December 31,
2009
|
|
(Dollars in Millions)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Loans held for sale (a)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
$
|
|
|
|
$
|
276
|
|
|
$
|
|
|
|
$
|
276
|
|
Loans (b)
|
|
|
|
|
|
|
165
|
|
|
|
31
|
|
|
|
196
|
|
|
|
|
|
|
|
|
235
|
|
|
|
5
|
|
|
|
240
|
|
Other real estate owned (c)
|
|
|
|
|
|
|
164
|
|
|
|
|
|
|
|
164
|
|
|
|
|
|
|
|
|
183
|
|
|
|
|
|
|
|
183
|
|
Other intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Represents
carrying value of loans held for sale for which adjustments are
based on what secondary markets are currently offering for
portfolios with similar characteristics. |
(b)
|
|
Represents
carrying value of loans for which adjustments are based on the
appraised value of the collateral, excluding loans fully
charged-off. |
(c)
|
|
Represents
the fair value of foreclosed properties that were measured at
fair value based on the appraisal value of the collateral
subsequent to their initial acquisition. |
The following table summarizes losses recognized related to
nonrecurring fair value measurements of individual assets or
portfolios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Six Months
|
|
|
|
Ended June 30,
|
|
|
|
Ended June 30,
|
|
(Dollars in Millions)
|
|
2010
|
|
|
2009
|
|
|
|
2010
|
|
|
2009
|
|
Loans held for sale
|
|
$
|
|
|
|
$
|
|
|
|
|
$
|
|
|
|
$
|
1
|
|
Loans (a)
|
|
|
92
|
|
|
|
59
|
|
|
|
|
213
|
|
|
|
145
|
|
Other real estate owned (b)
|
|
|
65
|
|
|
|
42
|
|
|
|
|
115
|
|
|
|
64
|
|
Other intangible assets
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Represents
write-downs of loans which are based on the appraised value of
the collateral, excluding loans fully charged-off. |
(b)
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010
|
|
|
|
December 31,
2009
|
|
|
|
|
|
|
|
|
|
Excess of
|
|
|
|
|
|
|
|
|
|
Excess of
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
|
Fair Value
|
|
|
Aggregate
|
|
|
Amount Over
|
|
|
|
Fair Value
|
|
|
Aggregate
|
|
|
Amount Over
|
|
|
|
Carrying
|
|
|
Unpaid
|
|
|
(Under) Unpaid
|
|
|
|
Carrying
|
|
|
Unpaid
|
|
|
(Under) Unpaid
|
|
(Dollars in Millions)
|
|
Amount
|
|
|
Principal
|
|
|
Principal
|
|
|
|
Amount
|
|
|
Principal
|
|
|
Principal
|
|
Total loans
|
|
$
|
4,650
|
|
|
$
|
4,452
|
|
|
$
|
198
|
|
|
|
$
|
4,327
|
|
|
$
|
4,264
|
|
|
$
|
63
|
|
Loans 90 days or more past due
|
|
|
19
|
|
|
|
27
|
|
|
|
(8
|
)
|
|
|
|
23
|
|
|
|
30
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disclosures about
Fair Value of Financial
Instruments The
following table summarizes the estimated fair value for
financial instruments as of June 30, 2010 and
December 31, 2009, and includes financial instruments that
are not accounted for at fair value. In accordance with
disclosure guidance related to fair values of financial
instruments, the Company did not include assets and liabilities
that are not financial instruments, such as the value of
goodwill, long-term relationships with deposit, credit card,
merchant processing and trust customers, other purchased
intangibles, premises and equipment, deferred taxes and other
liabilities.
The estimated fair values of the Companys financial
instruments are shown in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010
|
|
|
|
December 31,
2009
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
Carrying
|
|
|
Fair
|
|
(Dollars in Millions)
|
|
Amount
|
|
|
Value
|
|
|
|
Amount
|
|
|
Value
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
5,033
|
|
|
$
|
5,033
|
|
|
|
$
|
6,206
|
|
|
$
|
6,206
|
|
Investment securities
held-to-maturity
|
|
|
590
|
|
|
|
519
|
|
|
|
|
47
|
|
|
|
48
|
|
Mortgages held for sale (a)
|
|
|
5
|
|
|
|
5
|
|
|
|
|
29
|
|
|
|
29
|
|
Other loans held for sale
|
|
|
257
|
|
|
|
257
|
|
|
|
|
416
|
|
|
|
416
|
|
Loans
|
|
|
186,264
|
|
|
|
186,568
|
|
|
|
|
189,676
|
|
|
|
184,157
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
183,123
|
|
|
|
183,666
|
|
|
|
|
183,242
|
|
|
|
183,504
|
|
Short-term borrowings
|
|
|
33,797
|
|
|
|
34,204
|
|
|
|
|
31,312
|
|
|
|
31,674
|
|
Long-term debt
|
|
|
29,137
|
|
|
|
29,784
|
|
|
|
|
32,580
|
|
|
|
32,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Balance
excludes mortgages held for sale for which the fair value option
under applicable accounting guidance was elected. |
The fair value of unfunded commitments, standby letters of
credit and other guarantees is approximately equal to their
carrying value. The carrying value of unfunded commitments and
standby letters of credit was $358 million and
$356 million at June 30, 2010 and December 31,
2009, respectively. The carrying value of other guarantees was
$279 million and $285 million at June 30, 2010
and December 31, 2009, respectively.
Note 13 Guarantees
and Contingent Liabilities
Visa
Restructuring and Card Association
Litigation The
Companys payment services business issues and acquires
credit and debit card transactions through the Visa U.S.A. Inc.
card association or its affiliates (collectively
Visa). In 2007, Visa completed a restructuring and
issued shares of Visa Inc. common stock to its financial
institution members in contemplation of its initial public
offering (IPO) completed in the first quarter of
2008 (the Visa Reorganization). As a part of the
Visa Reorganization, the Company received its proportionate
number of shares of Visa Inc. common stock, which were
subsequently converted to Class B shares of Visa Inc.
(Class B shares). In addition, the Company and
certain of its subsidiaries have been named as defendants along
with Visa U.S.A. Inc. (Visa U.S.A.) and MasterCard
International (collectively, the Card Associations),
as well as several other banks, in antitrust lawsuits
challenging the practices of the Card Associations (the
Visa Litigation). Visa U.S.A. member banks have a
contingent obligation to indemnify Visa, Inc. under the Visa
U.S.A. bylaws (which were modified at the time of the
restructuring in October 2007) for potential losses arising
from the Visa Litigation. The indemnification by the Visa U.S.A.
member banks has no specific maximum amount. The Company has
also entered into judgment and loss sharing agreements with Visa
U.S.A. and certain other banks in order to apportion financial
responsibilities arising from any potential adverse judgment or
negotiated settlements related to the Visa Litigation.
In 2007 and 2008, Visa announced settlement agreements relating
to certain of the Visa Litigation matters. Visa U.S.A. member
banks remain obligated to indemnify Visa Inc. for potential
losses arising from the remaining Visa Litigation. Using
proceeds from its initial IPO and through subsequent reductions
to the conversion ratio applicable to the Class B shares
held by Visa U.S.A. member banks, Visa Inc. has established an
escrow account for the benefit of member financial institutions
to fund the expenses of the Visa Litigation, as well as the
members proportionate share of any judgments or
settlements that may arise out of the Visa Litigation. The
receivable related to the escrow account is classified in other
liabilities as a direct offset to the related Visa Litigation
contingent liability, and will decline as amounts are paid out
of the escrow account. During the third quarter of 2009 and the
second quarter of 2010, Visa deposited additional funds into the
escrow account and further reduced the conversion ratio
applicable to the Class B shares. As a result, the Company
recognized gains of $39 million and $28 million during
the third quarter of 2009 and second quarter of 2010,
respectively, related to the effective repurchase of a portion
of its Class B shares.
At June 30, 2010, the carrying amount of the Companys
liability related to the remaining Visa Litigation matters was
$91 million. Class B shares are non-transferable,
except for transfers to other Visa U.S.A. member banks. The
remaining Class B shares held by the Company will be
eligible for conversion to Class A shares in 2011 or upon
resolution of the Visa Litigation, whichever is later.
The following table is a summary of other guarantees and
contingent liabilities of the Company at June 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum
|
|
|
|
|
|
|
Potential
|
|
|
|
Carrying
|
|
|
Future
|
|
(Dollars in Millions)
|
|
Amount
|
|
|
Payments
|
|
Standby letters of credit
|
|
$
|
111
|
|
|
$
|
18,498
|
|
Third-party borrowing arrangements
|
|
|
|
|
|
|
133
|
|
Securities lending indemnifications
|
|
|
|
|
|
|
7,139
|
|
Asset sales (a)
|
|
|
96
|
|
|
|
1,216
|
|
Merchant processing
|
|
|
68
|
|
|
|
72,058
|
|
Other guarantees
|
|
|
3
|
|
|
|
5,794
|
|
Other contingent liabilities
|
|
|
21
|
|
|
|
2,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
The
maximum potential future payments does not include loan sales
where the Company provides standard representations and
warranties to the buyer against losses related to loan
underwriting documentation. For these types of loan sales, the
maximum potential future payments are not readily determinable
because the Companys obligation under these agreements
depends upon the occurrence of future events. |
The Company, through its subsidiaries, provides merchant
processing services. Under the rules of credit card
associations, a merchant processor retains a contingent
liability for credit card transactions processed. This
contingent liability arises in the event of a billing dispute
between the merchant and a cardholder that is ultimately
resolved in the cardholders favor. In this situation, the
transaction is charged-back to the merchant and the
disputed amount is credited or otherwise refunded to the
cardholder. If the Company is unable to collect this amount from
the merchant, it bears the loss for the amount of the refund
paid to the cardholder.
The Company currently processes card transactions in the United
States, Canada and Europe for airline companies. In the event of
liquidation of these merchants, the Company could become
financially liable for refunding tickets purchased through the
credit card associations under the charge-back provisions.
Charge-back risk related to these merchants is evaluated in a
manner similar to credit risk assessments and, as such, merchant
processing contracts contain various provisions to protect the
Company in the event of default. At June 30, 2010, the
value of airline tickets purchased to be delivered at a future
date was $5.6 billion. The Company held collateral of
$551 million in escrow deposits, letters of credit and
indemnities from financial institutions, and liens on various
assets.
The Company is subject to various other litigation,
investigations and legal and administrative cases and
proceedings that arise in the ordinary course of its businesses.
Due to their complex nature, it may be years before some matters
are resolved. While it is impossible to ascertain the ultimate
resolution or range of financial liability with respect to these
contingent matters, the Company believes that the aggregate
amount of such liabilities will not have a material adverse
effect on the financial condition, results of operations or cash
flows of the Company.
For additional information on the nature of the Companys
guarantees and contingent liabilities, refer to Note 22 in
the Companys Annual Report on
Form 10-K
for the year ended December 31, 2009.
Note 14 Subsequent
Events
The Company has evaluated the impact of events that have
occurred subsequent to June 30, 2010 through the date the
consolidated financial statements were filed with the United
States Securities and Exchange Commission. Based on this
evaluation, the Company has determined none of these events were
required to be recognized in the consolidated financial
statements.
U.S.
Bancorp
Consolidated
Daily Average Balance Sheet and Related Yields and Rates (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended June 30,
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yields
|
|
|
|
|
|
|
|
|
|
Yields
|
|
|
|
% Change
|
|
|
|
(Dollars in
Millions)
|
|
Average
|
|
|
|
|
|
and
|
|
|
|
Average
|
|
|
|
|
|
and
|
|
|
|
Average
|
|
|
|
(Unaudited)
|
|
Balances
|
|
|
Interest
|
|
|
Rates
|
|
|
|
Balances
|
|
|
Interest
|
|
|
Rates
|
|
|
|
Balances
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities
|
|
$
|
47,140
|
|
|
$
|
434
|
|
|
|
3.69
|
%
|
|
|
$
|
42,189
|
|
|
$
|
443
|
|
|
|
4.20
|
%
|
|
|
|
11.7
|
%
|
|
|
Loans held for sale
|
|
|
4,048
|
|
|
|
47
|
|
|
|
4.61
|
|
|
|
|
6,092
|
|
|
|
71
|
|
|
|
4.65
|
|
|
|
|
(33.6
|
)
|
|
|
Loans (b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
46,340
|
|
|
|
488
|
|
|
|
4.22
|
|
|
|
|
54,059
|
|
|
|
523
|
|
|
|
3.89
|
|
|
|
|
(14.3
|
)
|
|
|
Commercial real estate
|
|
|
34,164
|
|
|
|
377
|
|
|
|
4.43
|
|
|
|
|
33,727
|
|
|
|
361
|
|
|
|
4.29
|
|
|
|
|
1.3
|
|
|
|
Residential mortgages
|
|
|
26,821
|
|
|
|
351
|
|
|
|
5.24
|
|
|
|
|
23,964
|
|
|
|
338
|
|
|
|
5.64
|
|
|
|
|
11.9
|
|
|
|
Retail
|
|
|
63,382
|
|
|
|
1,061
|
|
|
|
6.71
|
|
|
|
|
61,427
|
|
|
|
1,011
|
|
|
|
6.60
|
|
|
|
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, excluding covered loans
|
|
|
170,707
|
|
|
|
2,277
|
|
|
|
5.35
|
|
|
|
|
173,177
|
|
|
|
2,233
|
|
|
|
5.17
|
|
|
|
|
(1.4
|
)
|
|
|
Covered loans
|
|
|
20,454
|
|
|
|
252
|
|
|
|
4.93
|
|
|
|
|
10,701
|
|
|
|
124
|
|
|
|
4.66
|
|
|
|
|
91.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
191,161
|
|
|
|
2,529
|
|
|
|
5.30
|
|
|
|
|
183,878
|
|
|
|
2,357
|
|
|
|
5.14
|
|
|
|
|
4.0
|
|
|
|
Other earning assets
|
|
|
5,097
|
|
|
|
39
|
|
|
|
3.03
|
|
|
|
|
2,106
|
|
|
|
22
|
|
|
|
4.16
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earning assets
|
|
|
247,446
|
|
|
|
3,049
|
|
|
|
4.94
|
|
|
|
|
234,265
|
|
|
|
2,893
|
|
|
|
4.95
|
|
|
|
|
5.6
|
|
|
|
Allowance for loan losses
|
|
|
(5,443
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(4,260
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(27.8
|
)
|
|
|
Unrealized gain (loss) on
available-for-sale
securities
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(1,857
|
)
|
|
|
|
|
|
|
|
|
|
|
|
99.0
|
|
|
|
Other assets
|
|
|
39,356
|
|
|
|
|
|
|
|
|
|
|
|
|
37,959
|
|
|
|
|
|
|
|
|
|
|
|
|
3.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
281,340
|
|
|
|
|
|
|
|
|
|
|
|
$
|
266,107
|
|
|
|
|
|
|
|
|
|
|
|
|
5.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits
|
|
$
|
39,917
|
|
|
|
|
|
|
|
|
|
|
|
$
|
37,388
|
|
|
|
|
|
|
|
|
|
|
|
|
6.8
|
|
|
|
Interest-bearing deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest checking
|
|
|
39,503
|
|
|
|
18
|
|
|
|
.19
|
|
|
|
|
37,393
|
|
|
|
21
|
|
|
|
.23
|
|
|
|
|
5.6
|
|
|
|
Money market savings
|
|
|
40,256
|
|
|
|
33
|
|
|
|
.34
|
|
|
|
|
27,250
|
|
|
|
34
|
|
|
|
.50
|
|
|
|
|
47.7
|
|
|
|
Savings accounts
|
|
|
20,035
|
|
|
|
30
|
|
|
|
.59
|
|
|
|
|
12,278
|
|
|
|
16
|
|
|
|
.52
|
|
|
|
|
63.2
|
|
|
|
Time certificates of deposit less than $100,000
|
|
|
16,980
|
|
|
|
75
|
|
|
|
1.77
|
|
|
|
|
17,968
|
|
|
|
123
|
|
|
|
2.73
|
|
|
|
|
(5.5
|
)
|
|
|
Time deposits greater than $100,000
|
|
|
26,627
|
|
|
|
73
|
|
|
|
1.09
|
|
|
|
|
30,943
|
|
|
|
120
|
|
|
|
1.56
|
|
|
|
|
(13.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits
|
|
|
143,401
|
|
|
|
229
|
|
|
|
.64
|
|
|
|
|
125,832
|
|
|
|
314
|
|
|
|
1.00
|
|
|
|
|
14.0
|
|
|
|
Short-term borrowings
|
|
|
32,286
|
|
|
|
139
|
|
|
|
1.72
|
|
|
|
|
27,638
|
|
|
|
134
|
|
|
|
1.96
|
|
|
|
|
16.8
|
|
|
|
Long-term debt
|
|
|
30,242
|
|
|
|
272
|
|
|
|
3.60
|
|
|
|
|
38,768
|
|
|
|
341
|
|
|
|
3.53
|
|
|
|
|
(22.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
205,929
|
|
|
|
640
|
|
|
|
1.25
|
|
|
|
|
192,238
|
|
|
|
789
|
|
|
|
1.65
|
|
|
|
|
7.1
|
|
|
|
Other liabilities
|
|
|
7,328
|
|
|
|
|
|
|
|
|
|
|
|
|
7,565
|
|
|
|
|
|
|
|
|
|
|
|
|
(3.1
|
)
|
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred equity
|
|
|
1,599
|
|
|
|
|
|
|
|
|
|
|
|
|
6,951
|
|
|
|
|
|
|
|
|
|
|
|
|
(77.0
|
)
|
|
|
Common equity
|
|
|
25,820
|
|
|
|
|
|
|
|
|
|
|
|
|
21,251
|
|
|
|
|
|
|
|
|
|
|
|
|
21.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. Bancorp shareholders equity
|
|
|
27,419
|
|
|
|
|
|
|
|
|
|
|
|
|
28,202
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.8
|
)
|
|
|
Noncontrolling interests
|
|
|
747
|
|
|
|
|
|
|
|
|
|
|
|
|
714
|
|
|
|
|
|
|
|
|
|
|
|
|
4.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
28,166
|
|
|
|
|
|
|
|
|
|
|
|
|
28,916
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
281,340
|
|
|
|
|
|
|
|
|
|
|
|
$
|
266,107
|
|
|
|
|
|
|
|
|
|
|
|
|
5.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
$
|
2,409
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross interest margin
|
|
|
|
|
|
|
|
|
|
|
3.69
|
%
|
|
|
|
|
|
|
|
|
|
|
|
3.30
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross interest margin without taxable-equivalent increments
|
|
|
|
|
|
|
|
|
|
|
3.61
|
|
|
|
|
|
|
|
|
|
|
|
|
3.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of Earning Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
4.94
|
%
|
|
|
|
|
|
|
|
|
|
|
|
4.95
|
%
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
1.04
|
|
|
|
|
|
|
|
|
|
|
|
|
1.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin
|
|
|
|
|
|
|
|
|
|
|
3.90
|
%
|
|
|
|
|
|
|
|
|
|
|
|
3.60
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin without taxable-equivalent increments
|
|
|
|
|
|
|
|
|
|
|
3.82
|
%
|
|
|
|
|
|
|
|
|
|
|
|
3.51
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Not
meaningful |
(a)
|
|
Interest
and rates are presented on a fully taxable-equivalent basis
utilizing a tax rate of 35 percent. |
(b)
|
|
Interest
income and rates on loans include loan fees. Nonaccrual loans
are included in average loan balances. |
U.S.
Bancorp
Consolidated
Daily Average Balance Sheet and Related Yields and Rates (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months
Ended June 30,
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yields
|
|
|
|
|
|
|
|
|
|
Yields
|
|
|
|
% Change
|
|
|
|
(Dollars in
Millions)
|
|
Average
|
|
|
|
|
|
and
|
|
|
|
Average
|
|
|
|
|
|
and
|
|
|
|
Average
|
|
|
|
(Unaudited)
|
|
Balances
|
|
|
Interest
|
|
|
Rates
|
|
|
|
Balances
|
|
|
Interest
|
|
|
Rates
|
|
|
|
Balances
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities
|
|
$
|
46,678
|
|
|
$
|
885
|
|
|
|
3.79
|
%
|
|
|
$
|
42,255
|
|
|
$
|
920
|
|
|
|
4.35
|
%
|
|
|
|
10.5
|
%
|
|
|
Loans held for sale
|
|
|
3,990
|
|
|
|
91
|
|
|
|
4.56
|
|
|
|
|
5,644
|
|
|
|
134
|
|
|
|
4.75
|
|
|
|
|
(29.3
|
)
|
|
|
Loans (b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
46,805
|
|
|
|
971
|
|
|
|
4.17
|
|
|
|
|
55,091
|
|
|
|
1,057
|
|
|
|
3.86
|
|
|
|
|
(15.0
|
)
|
|
|
Commercial real estate
|
|
|
34,153
|
|
|
|
747
|
|
|
|
4.41
|
|
|
|
|
33,563
|
|
|
|
718
|
|
|
|
4.31
|
|
|
|
|
1.8
|
|
|
|
Residential mortgages
|
|
|
26,616
|
|
|
|
698
|
|
|
|
5.25
|
|
|
|
|
23,940
|
|
|
|
684
|
|
|
|
5.73
|
|
|
|
|
11.2
|
|
|
|
Retail
|
|
|
63,502
|
|
|
|
2,125
|
|
|
|
6.75
|
|
|
|
|
61,170
|
|
|
|
2,003
|
|
|
|
6.60
|
|
|
|
|
3.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, excluding covered loans
|
|
|
171,076
|
|
|
|
4,541
|
|
|
|
5.34
|
|
|
|
|
173,764
|
|
|
|
4,462
|
|
|
|
5.17
|
|
|
|
|
(1.5
|
)
|
|
|
Covered loans
|
|
|
20,939
|
|
|
|
505
|
|
|
|
4.85
|
|
|
|
|
11,022
|
|
|
|
255
|
|
|
|
4.66
|
|
|
|
|
90.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
192,015
|
|
|
|
5,046
|
|
|
|
5.29
|
|
|
|
|
184,786
|
|
|
|
4,717
|
|
|
|
5.14
|
|
|
|
|
3.9
|
|
|
|
Other earning assets
|
|
|
5,450
|
|
|
|
73
|
|
|
|
2.69
|
|
|
|
|
2,101
|
|
|
|
42
|
|
|
|
4.00
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earning assets
|
|
|
248,133
|
|
|
|
6,095
|
|
|
|
4.94
|
|
|
|
|
234,786
|
|
|
|
5,813
|
|
|
|
4.98
|
|
|
|
|
5.7
|
|
|
|
Allowance for loan losses
|
|
|
(5,378
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(4,009
|
)
|
|
|
|
|
|
|
|
|
|
|
|
34.1
|
|
|
|
Unrealized gain (loss) on
available-for-sale
securities
|
|
|
(212
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(2,215
|
)
|
|
|
|
|
|
|
|
|
|
|
|
90.4
|
|
|
|
Other assets
|
|
|
38,987
|
|
|
|
|
|
|
|
|
|
|
|
|
37,609
|
|
|
|
|
|
|
|
|
|
|
|
|
3.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
281,530
|
|
|
|
|
|
|
|
|
|
|
|
$
|
266,171
|
|
|
|
|
|
|
|
|
|
|
|
|
5.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits
|
|
$
|
38,964
|
|
|
|
|
|
|
|
|
|
|
|
$
|
36,707
|
|
|
|
|
|
|
|
|
|
|
|
|
6.1
|
|
|
|
Interest-bearing deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest checking
|
|
|
39,747
|
|
|
|
37
|
|
|
|
.19
|
|
|
|
|
34,730
|
|
|
|
36
|
|
|
|
.21
|
|
|
|
|
14.4
|
|
|
|
Money market savings
|
|
|
40,577
|
|
|
|
70
|
|
|
|
.35
|
|
|
|
|
27,586
|
|
|
|
71
|
|
|
|
.52
|
|
|
|
|
47.1
|
|
|
|
Savings accounts
|
|
|
19,038
|
|
|
|
55
|
|
|
|
.58
|
|
|
|
|
11,314
|
|
|
|
30
|
|
|
|
.54
|
|
|
|
|
68.3
|
|
|
|
Time certificates of deposit less than $100,000
|
|
|
17,654
|
|
|
|
155
|
|
|
|
1.77
|
|
|
|
|
18,050
|
|
|
|
251
|
|
|
|
2.80
|
|
|
|
|
(2.2
|
)
|
|
|
Time deposits greater than $100,000
|
|
|
26,947
|
|
|
|
148
|
|
|
|
1.11
|
|
|
|
|
33,493
|
|
|
|
250
|
|
|
|
1.50
|
|
|
|
|
(19.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits
|
|
|
143,963
|
|
|
|
465
|
|
|
|
.65
|
|
|
|
|
125,173
|
|
|
|
638
|
|
|
|
1.03
|
|
|
|
|
15.0
|
|
|
|
Short-term borrowings
|
|
|
32,418
|
|
|
|
269
|
|
|
|
1.67
|
|
|
|
|
29,915
|
|
|
|
282
|
|
|
|
1.90
|
|
|
|
|
8.4
|
|
|
|
Long-term debt
|
|
|
31,343
|
|
|
|
549
|
|
|
|
3.52
|
|
|
|
|
38,279
|
|
|
|
694
|
|
|
|
3.65
|
|
|
|
|
(18.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
207,724
|
|
|
|
1,283
|
|
|
|
1.24
|
|
|
|
|
193,367
|
|
|
|
1,614
|
|
|
|
1.68
|
|
|
|
|
7.4
|
|
|
|
Other liabilities
|
|
|
7,210
|
|
|
|
|
|
|
|
|
|
|
|
|
7,863
|
|
|
|
|
|
|
|
|
|
|
|
|
(8.3
|
)
|
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred equity
|
|
|
1,550
|
|
|
|
|
|
|
|
|
|
|
|
|
7,440
|
|
|
|
|
|
|
|
|
|
|
|
|
(79.2
|
)
|
|
|
Common equity
|
|
|
25,369
|
|
|
|
|
|
|
|
|
|
|
|
|
20,074
|
|
|
|
|
|
|
|
|
|
|
|
|
26.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. Bancorp shareholders equity
|
|
|
26,919
|
|
|
|
|
|
|
|
|
|
|
|
|
27,514
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.2
|
)
|
|
|
Noncontrolling interests
|
|
|
713
|
|
|
|
|
|
|
|
|
|
|
|
|
720
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
27,632
|
|
|
|
|
|
|
|
|
|
|
|
|
28,234
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
281,530
|
|
|
|
|
|
|
|
|
|
|
|
$
|
266,171
|
|
|
|
|
|
|
|
|
|
|
|
|
5.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
$
|
4,812
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross interest margin
|
|
|
|
|
|
|
|
|
|
|
3.70
|
%
|
|
|
|
|
|
|
|
|
|
|
|
3.30
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross interest margin without taxable-equivalent increments
|
|
|
|
|
|
|
|
|
|
|
3.62
|
|
|
|
|
|
|
|
|
|
|
|
|
3.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of Earning Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
4.94
|
%
|
|
|
|
|
|
|
|
|
|
|
|
4.98
|
%
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
1.04
|
|
|
|
|
|
|
|
|
|
|
|
|
1.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin
|
|
|
|
|
|
|
|
|
|
|
3.90
|
%
|
|
|
|
|
|
|
|
|
|
|
|
3.59
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin without taxable-equivalent increments
|
|
|
|
|
|
|
|
|
|
|
3.82
|
%
|
|
|
|
|
|
|
|
|
|
|
|
3.51
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Not
meaningful |
(a)
|
|
Interest
and rates are presented on a fully taxable-equivalent basis
utilizing a tax rate of 35 percent. |
(b)
|
|
Interest
income and rates on loans include loan fees. Nonaccrual loans
are included in average loan balances. |
Part II
Other Information
Item 1A. Risk Factors The
Dodd-Frank Wall Street Reform and Consumer Protection Act was
signed into law on July 21, 2010. This legislation will
have an adverse impact on the Companys financial results
upon full implementation. Among other impacts, this legislation
establishes a Consumer Financial Protection Bureau, changes the
base for deposit insurance assessments, introduces regulatory
rate-setting for interchange fees charged to merchants for debit
card transactions, and excludes certain instruments currently
included in determining the Tier 1 regulatory capital ratio. The
capital instrument exclusion will be phased-in over a three-year
period beginning in 2013. Currently the instruments subject to
that exclusion increase the Companys Tier 1 capital ratio
by 1.4 percent. Using currently approved deposit insurance
assessment rates, the change in assessment base would increase
the assessments the Company pays by approximately
$200 million annually. Most of the legislations other
provisions require rulemaking by various regulatory agencies.
The Company cannot currently quantify the future impact of this
legislation and the related future rulemaking, but expects them
to have a detrimental impact on revenues and expenses once fully
implemented.
There are a number of other factors that may adversely affect
the Companys business, financial results or stock price.
Refer to Risk Factors in the Companys Annual
Report on
Form 10-K
for the year ended December 31, 2009, for discussion of
these risks.
Item 2. Unregistered Sales of Equity Securities and
Use of Proceeds Refer to the Capital
Management section within Managements Discussion and
Analysis in Part I for information regarding shares
repurchased by the Company during the second quarter of 2010.
Capital Covenants In December 2005, the
Company entered into a Replacement Capital Covenant in
connection with the issuance of USB Capital VIIIs
6.35 percent Income Capital Obligation Notes due 2035.
There has been a redesignation of the series of covered debt
benefiting from such Replacement Capital Covenant. Effective
July 29, 2008, the Companys 4.50 percent
Medium-Term Notes, Series P ceased being the covered debt
and the Companys 5.875 percent junior subordinated
debentures due 2035 became the covered debt benefiting from the
Replacement Capital Covenant.
Item 6. Exhibits
|
|
|
|
|
|
|
3
|
.1
|
|
|
Restated Certificate of Incorporation, as amended
|
|
12
|
|
|
|
Computation of Ratio of Earnings to Fixed Charges
|
|
31
|
.1
|
|
|
Certification of Chief Executive Officer pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934
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31
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.2
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Certification of Chief Financial Officer pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934
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32
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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
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101
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Financial statements from the Quarterly Report on
Form 10-Q
of the Company for the quarter ended June 30, 2010,
formatted in Extensible Business Reporting Language:
(i) the Consolidated Balance Sheet, (ii) the
Consolidated Statement of Income, (iii) the Consolidated
Statement of Shareholders Equity, (iv) the
Consolidated Statement of Cash Flows and (v) the Notes to
Consolidated Financial Statements.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
U.S. BANCORP
Craig E. Gifford
Executive Vice President and Controller
(Principal Accounting Officer and Duly Authorized Officer)
DATE: August 6, 2010
EXHIBIT 12
Computation
of Ratio of Earnings to Fixed Charges
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Three Months
Ended
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Six Months Ended
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(Dollars in Millions)
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June 30, 2010
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June 30, 2010
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Earnings
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1.
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Net income attributable to U.S. Bancorp
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$
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766
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$
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1,435
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2.
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Applicable income taxes, including interest expense related to
unrecognized tax positions
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199
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360
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3.
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Net income attributable to U.S Bancorp before income taxes (1 +
2)
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$
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965
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$
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1,795
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4.
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Fixed charges:
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a.
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Interest expense excluding interest on deposits*
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$
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409
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$
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814
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b.
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Portion of rents representative of interest and amortization of
debt expense
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26
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52
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c.
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Fixed charges excluding interest on deposits (4a + 4b)
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435
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866
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d.
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Interest on deposits
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229
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465
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e.
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Fixed charges including interest on deposits (4c + 4d)
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$
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664
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$
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1,331
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5.
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Amortization of interest capitalized
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$
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$
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6.
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Earnings excluding interest on deposits (3 + 4c + 5)
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1,400
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2,661
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7.
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Earnings including interest on deposits (3 + 4e + 5)
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1,629
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3,126
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8.
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Fixed charges excluding interest on deposits (4c)
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435
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866
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9.
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Fixed charges including interest on deposits (4e)
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664
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1,331
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Ratio of Earnings to Fixed Charges
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10.
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Excluding interest on deposits (line 6/line 8)
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3.22
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3.07
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11.
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Including interest on deposits (line 7/line 9)
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2.45
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2.35
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*
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Excludes
interest expense related to unrecognized tax
positions. |
EXHIBIT 31.1
CERTIFICATION
PURSUANT TO
RULE 13a-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
I, Richard K. Davis, certify that:
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(1)
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I have reviewed this Quarterly Report on
Form 10-Q
of U.S. Bancorp;
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(2)
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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;
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(3)
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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;
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(4)
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The registrants other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act
Rules 13a-15(e)
and
15d-15(e))
and internal control over financial reporting (as defined in
Exchange Act Rules
13a-15(f)
and
15d-15(f))
for the registrant and have:
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(a)
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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;
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(b)
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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;
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(c)
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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
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(d)
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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
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(5) |
The registrants other certifying officers and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrants
auditors and the audit committee of the registrants board
of directors (or persons performing the equivalent functions):
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(a)
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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
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(b)
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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.
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Richard K. Davis
Chief Executive Officer
Dated: August 6, 2010
EXHIBIT 31.2
CERTIFICATION
PURSUANT TO
RULE 13a-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
I, Andrew Cecere, certify that:
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(1)
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I have reviewed this Quarterly Report on
Form 10-Q
of U.S. Bancorp;
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(2)
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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;
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(3)
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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;
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(4)
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The registrants other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act
Rules 13a-15(e)
and
15d-15(e))
and internal control over financial reporting (as defined in
Exchange Act Rules
13a-15(f)
and
15d-15(f))
for the registrant and have:
|
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|
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(a)
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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;
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(b)
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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;
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(c)
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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
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(d)
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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
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(5) |
The registrants other certifying officers and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrants
auditors and the audit committee of the registrants board
of directors (or persons performing the equivalent functions):
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(a)
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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
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(b)
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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.
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Andrew Cecere
Chief Financial Officer
Dated: August 6, 2010
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:
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(1)
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The Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2010 (the
Form 10-Q)
of the Company fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
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(2)
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The information contained in the
Form 10-Q
fairly presents, in all material respects, the financial
condition and results of operations of the Company.
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/s/ Richard
K. Davis
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/s/ Andrew
Cecere
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Richard K. Davis
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Andrew Cecere
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Chief Executive Officer
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Chief Financial Officer
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Dated: August 6, 2010
First Class
U.S. Postage
PAID
Permit No. 2440
Minneapolis, MN
Corporate Information
Executive
Offices
U.S. Bancorp
800 Nicollet Mall
Minneapolis, MN 55402
Common
Stock Transfer Agent and Registrar
BNY Mellon Shareowner Services acts
as our transfer agent and registrar, dividend paying agent and
dividend reinvestment plan administrator, and maintains all
shareholder records for the corporation. Inquiries related to
shareholder records, stock transfers, changes of ownership, lost
stock certificates, changes of address and dividend payment
should be directed to the transfer agent at:
BNY Mellon Shareowner Services
P.O. Box 358015
Pittsburgh, PA 15252-8015
Phone: 888-778-1311 or 201-680-6578
(international calls)
Internet: bnymellon.com/shareowner
For Registered or Certified Mail:
BNY Mellon Shareowner Services
500 Ross St., 6th Floor
Pittsburgh, PA 15219
Telephone representatives are
available weekdays from 8:00 a.m. to 6:00 p.m. Central
Time, and automated support is available 24 hours a day,
7 days a week. Specific information about your account is
available on BNY Mellons internet site by clicking on the
Investor
ServiceDirect®
link.
Independent
Auditor
Ernst & Young LLP serves
as the independent auditor for U.S. Bancorps
financial statements.
Common
Stock Listing and Trading
U.S. Bancorp common stock is listed
and traded on the New York Stock Exchange under the ticker
symbol USB.
Dividends
and Reinvestment Plan
U.S. Bancorp currently pays
quarterly dividends on our common stock on or about the
15th day of January, April, July and October, subject to
approval by our Board of Directors. U.S. Bancorp
shareholders can choose to participate in a plan that provides
automatic reinvestment of dividends and/or optional cash
purchase of additional shares of U.S. Bancorp common stock.
For more information, please contact our transfer agent, BNY
Mellon Shareowner Services.
Investor
Relations Contacts
Judith T. Murphy
Executive Vice President, Corporate
Investor and Public Relations
Phone: 612-303-0783 or
866-775-9668
Financial
Information
U.S. Bancorp news and financial
results are available through our website and by mail.
Website For
information about U.S. Bancorp, including news, financial
results, annual reports and other documents filed with the
Securities and Exchange Commission, access our home page on the
internet at usbank.com, then click on About U.S. Bank.
Mail At
your request, we will mail to you our quarterly earnings, news
releases, quarterly financial data reported on
Form 10-Q
and additional copies of our annual reports. Please contact:
U.S. Bancorp Investor Relations
800 Nicollet Mall
Minneapolis, MN 55402
Phone:
866-775-9668
Media
Requests
Steven W. Dale
Senior Vice President, Media
Relations
Phone: 612-303-0784
Privacy
U.S. Bancorp is committed to
respecting the privacy of our customers and safeguarding the
financial and personal information provided to us. To learn more
about the U.S. Bancorp commitment to protecting privacy,
visit usbank.com and click on Privacy Pledge.
Code of
Ethics
U.S. Bancorp places the
highest importance on honesty and integrity. Each year, every
U.S. Bancorp employee certifies compliance with the letter and
spirit of our Code of Ethics and Business Conduct, the guiding
ethical standards of our organization. For details about our
Code of Ethics and Business Conduct, visit usbank.com and click
on About U.S. Bank, then Ethics at U.S. Bank.
Diversity
U.S. Bancorp and our
subsidiaries are committed to developing and maintaining a
workplace that reflects the diversity of the communities we
serve. We support a work environment where individual
differences are valued and respected and where each individual
who shares the fundamental values of the Company has an
opportunity to contribute and grow based on individual merit.
Equal Employment
Opportunity/Affirmative Action
U.S. Bancorp and our
subsidiaries are committed to providing Equal Employment
Opportunity to all employees and applicants for employment. In
keeping with this commitment, employment decisions are made
based upon performance, skill and abilities, not race, color,
religion, national origin or ancestry, gender, age, disability,
veteran status, sexual orientation or any other factors
protected by law. The corporation complies with municipal, state
and federal fair employment laws, including regulations applying
to federal contractors.
U.S. Bancorp, including each of our
subsidiaries, is an Equal Opportunity Employer committed to
creating a diverse workforce.
U.S. Bancorp
Member FDIC
This report has been produced on
recycled paper.