e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2007
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
(State or other jurisdiction of
incorporation or organization) |
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41-0255900
(I.R.S. Employer
Identification Number) |
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 is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated
filer and large accelerated filer in
Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated
filer þ Accelerated
filer o Non-accelerated
filer o
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
Common Stock, $.01 Par Value
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Outstanding as of July 31, 2007
1,726,437,268 shares |
Table of Contents and
Form 10-Q Cross
Reference Index
Safe Harbor Statement under the Private
Securities Litigation Reform Act of 1995.
This Form 10-Q
contains forward-looking statements. Statements that are not
historical or current facts, including statements about beliefs
and expectations, are forward-looking statements. These
statements often include the words may,
could, would, should,
believes, expects,
anticipates, estimates,
intends, plans, targets,
potentially, probably,
projects, outlook or similar
expressions. 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, including changes in general
business and economic conditions, changes in interest rates,
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, market risk, operational risk, legal risk, and
regulatory and compliance risk. For discussion of these and
other risks that may cause actual results to differ from
expectations, refer to our Annual Report on
Form 10-K for the
year ended December 31, 2006, on file with the Securities
and Exchange Commission, including the sections entitled
Risk Factors and Corporate Risk Profile.
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.
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Table 1 |
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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 | |
(Dollars and Shares in Millions, Except Per Share Data) |
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2007 | |
|
2006 | |
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Change | |
|
2007 | |
|
2006 | |
|
Change | |
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Condensed Income Statement
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|
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Net interest income (taxable-equivalent basis) (a)
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$1,650 |
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$1,697 |
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(2.8 |
)% |
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$3,316 |
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|
$3,422 |
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|
(3.1 |
)% |
Noninterest income
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|
1,852 |
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|
|
1,752 |
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5.7 |
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|
3,547 |
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|
|
3,366 |
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5.4 |
|
Securities gains (losses), net
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3 |
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3 |
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4 |
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3 |
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33.3 |
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Total net revenue
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3,505 |
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|
3,452 |
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1.5 |
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|
6,867 |
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6,791 |
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1.1 |
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Noninterest expense
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|
1,640 |
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|
1,530 |
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7.2 |
|
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|
3,185 |
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3,030 |
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5.1 |
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Provision for credit losses
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|
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191 |
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|
125 |
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52.8 |
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368 |
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|
240 |
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53.3 |
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Income before taxes
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1,674 |
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1,797 |
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(6.8 |
) |
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3,314 |
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3,521 |
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(5.9 |
) |
Taxable-equivalent adjustment
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18 |
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11 |
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63.6 |
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35 |
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|
21 |
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66.7 |
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Applicable income taxes
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|
500 |
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|
|
585 |
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(14.5 |
) |
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993 |
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1,146 |
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(13.4 |
) |
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Net income
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$1,156 |
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$1,201 |
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(3.7 |
) |
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$2,286 |
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$2,354 |
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(2.9 |
) |
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Net income applicable to common equity
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$1,141 |
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$1,184 |
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(3.6 |
) |
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$2,256 |
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$2,337 |
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(3.5 |
) |
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Per Common Share
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Earnings per share
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$.66 |
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$.66 |
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% |
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$1.29 |
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$1.30 |
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(.8 |
)% |
Diluted earnings per share
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.65 |
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.66 |
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(1.5 |
) |
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1.27 |
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1.29 |
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(1.6 |
) |
Dividends declared per share
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.40 |
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.33 |
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21.2 |
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.80 |
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.66 |
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21.2 |
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Book value per share
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11.19 |
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10.89 |
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2.8 |
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Market value per share
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32.95 |
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30.88 |
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6.7 |
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Average common shares outstanding
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1,736 |
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1,781 |
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(2.5 |
) |
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1,744 |
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1,791 |
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(2.6 |
) |
Average diluted common shares outstanding
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1,760 |
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1,805 |
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(2.5 |
) |
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1,770 |
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1,816 |
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(2.5 |
) |
Financial Ratios
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Return on average assets
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2.09 |
% |
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2.27 |
% |
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2.09 |
% |
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2.25 |
% |
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Return on average common equity
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23.0 |
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24.3 |
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22.7 |
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23.8 |
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Net interest margin (taxable-equivalent basis) (a)
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3.44 |
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3.68 |
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3.47 |
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3.74 |
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Efficiency ratio (b)
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46.8 |
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44.4 |
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46.4 |
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44.6 |
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Average Balances
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Loans
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$145,653 |
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$ |
139,370 |
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4.5 |
% |
|
$ |
145,176 |
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$ |
138,579 |
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4.8 |
% |
Loans held for sale
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4,334 |
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3,555 |
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21.9 |
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4,090 |
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3,412 |
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19.9 |
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Investment securities
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40,704 |
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40,087 |
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1.5 |
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40,791 |
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|
39,885 |
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2.3 |
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Earning assets
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192,301 |
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|
184,890 |
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4.0 |
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|
191,721 |
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|
184,000 |
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4.2 |
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Assets
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222,022 |
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212,407 |
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4.5 |
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220,774 |
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211,222 |
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4.5 |
|
Noninterest-bearing deposits
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27,977 |
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28,949 |
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(3.4 |
) |
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27,828 |
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28,893 |
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(3.7 |
) |
Deposits
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118,975 |
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|
121,233 |
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(1.9 |
) |
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|
119,847 |
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120,701 |
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(.7 |
) |
Short-term borrowings
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29,524 |
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22,246 |
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32.7 |
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28,114 |
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23,295 |
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20.7 |
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Long-term debt
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44,655 |
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41,225 |
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8.3 |
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43,804 |
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|
39,735 |
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10.2 |
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Shareholders equity
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20,895 |
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|
20,556 |
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1.6 |
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21,052 |
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20,353 |
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3.4 |
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June 30, 2007 |
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December 31, 2006 |
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Period End Balances
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Loans
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$145,708 |
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$ |
143,597 |
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1.5 |
% |
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Allowance for credit losses
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2,260 |
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|
2,256 |
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.2 |
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Investment securities
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39,514 |
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|
40,117 |
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(1.5 |
) |
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Assets
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|
222,530 |
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|
219,232 |
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1.5 |
|
|
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|
|
|
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Deposits
|
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|
119,702 |
|
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|
124,882 |
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|
(4.1 |
) |
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|
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Long-term debt
|
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|
45,946 |
|
|
|
37,602 |
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|
22.2 |
|
|
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Shareholders equity
|
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|
20,330 |
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|
|
21,197 |
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(4.1 |
) |
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Regulatory capital ratios
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Tier 1 capital
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8.5 |
% |
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|
8.8 |
% |
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Total risk-based capital
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13.0 |
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12.6 |
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Leverage
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7.9 |
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8.2 |
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Tangible common equity
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5.2 |
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5.5 |
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(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 securities gains (losses), net. |
Managements Discussion and Analysis
OVERVIEW
Earnings Summary
U.S. Bancorp and its
subsidiaries (the Company) reported net income of
$1,156 million for the second quarter of 2007 or
$.65 per diluted share, compared with $1,201 million,
or $.66 per diluted share for the second quarter of 2006.
Return on average assets and return on average common equity
were 2.09 percent and 23.0 percent, respectively, for
the second quarter of 2007, compared with returns of
2.27 percent and 24.3 percent, respectively, for the
second quarter of 2006. The Companys results for the
second quarter of 2007 declined from the same period of 2006, as
strong fee-based revenue growth was more than offset by a
$35 million gain in the second quarter of 2006 from the
initial public offering of a cardholder association, as well as
an expected increase in credit costs due to the prior year
favorable impact on charge-offs as a result of changes in
bankruptcy laws, and lower net interest income.
Total net revenue, on a taxable-equivalent basis, for the second
quarter of 2007, was $53 million (1.5 percent) higher
than the second quarter of 2006, primarily reflecting a
5.7 percent increase in noninterest income, partially
offset by a 2.8 percent decline in net interest income from
a year ago. Noninterest income growth was driven primarily by
organic business growth, offset somewhat by the impact in the
second quarter of 2006 of a $35 million gain from the
initial public offering of a cardholder association.
Total noninterest expense in the second quarter of 2007 was
$110 million (7.2 percent) higher than in the second
quarter of 2006, principally due to investments in business
initiatives, higher operating and business integration costs
associated with recent acquisitions, costs related to
tax-advantaged investments and an increase in merchant airline
processing primarily due to sales volumes and recent business
expansion with a major airline. Growth in expenses from a year
ago was partially offset by a debt prepayment charge recorded in
the second quarter of 2006.
The provision for credit losses for the second quarter of 2007
increased $66 million (52.8 percent), compared with
the second quarter of 2006. The increase in the provision for
credit losses from a year ago reflected expected losses from
strong growth in credit card accounts. Also, the provision for
credit losses in the second quarter of 2006 partially reflected
the favorable residual impact on net charge-offs, principally
for credit cards and other retail charge-offs, due to changes in
bankruptcy laws in late 2005. Net charge-offs in the second
quarter of 2007 were $191 million, compared with
$125 million in the second quarter of 2006. 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 of $2,286 million for the
first six months of 2007 or $1.27 per diluted share,
compared with $2,354 million, or $1.29 per diluted
share for the first six months of 2006. Return on average assets
and return on average common equity were 2.09 percent and
22.7 percent, respectively, for the first six months of
2007, compared with returns of 2.25 percent and
23.8 percent, respectively, for the first six months of
2006. The Companys results for the first six months of
2007 declined from the same period of 2006, as growth in
fee-based revenue was more than offset by lower net interest
income, increased credit costs reflecting the prior year
favorable impact on charge-offs as a result of changes in
bankruptcy laws, and operating costs of acquired businesses and
other business initiatives.
Total net revenue, on a taxable-equivalent basis, for the first
six months of 2007, was $76 million (1.1 percent)
higher than the first six months of 2006, primarily reflecting a
5.4 percent increase in noninterest income, partially
offset by a 3.1 percent decline in net interest income from
a year ago. Noninterest income growth was driven by organic
business growth and expansion in payment processing and trust
businesses. Fee-based revenue growth was partially offset by the
net favorable impact in the first six months of 2006 of
$52 million from several previously reported items,
including a $44 million trading gain related to certain
derivatives, a $35 million gain from the initial public
offering of a cardholder association and a $10 million gain
related to a favorable settlement in the merchant processing
business, offset by a $37 million reduction in mortgage
banking revenue due principally to the adoption of fair value
accounting standards for mortgage servicing rights
(MSRs).
Total noninterest expense in the first six months of 2007 was
$155 million (5.1 percent) higher than in the first
six months of 2006, principally due to investments in business
initiatives, higher operating and business integration costs
associated with recent acquisitions,
costs related to tax-advantaged investments and an increase in
merchant airline processing primarily due to sales volumes and
recent business expansion with a major airline. Growth in
expenses from a year ago was partially offset by an
$11 million debt prepayment charge recorded in the first
six months of 2006.
The provision for credit losses for the first six months of 2007
increased $128 million (53.3 percent), compared with
the same period of 2006. The increase in the provision for
credit losses from a year ago reflected expected losses from
strong growth in credit card accounts. Also, the provision for
credit losses in the first six months of 2006 partially
reflected the favorable residual impact on net charge-offs of
changes in bankruptcy laws in late 2005. Net charge-offs in the
first six months of 2007 were $368 million, compared with
$240 million in the first six months of 2006. 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.
STATEMENT OF INCOME ANALYSIS
Net Interest Income Net
interest income, on a taxable-equivalent basis, was
$1,650 million in the second quarter of 2007, compared with
$1,697 million in the second quarter of 2006. Net interest
income, on a taxable-equivalent basis, was $3,316 million
in the first six months of 2007, compared with
$3,422 million in the first six months of 2006. Average
earning assets increased $7.4 billion (4.0 percent)
and $7.7 billion (4.2 percent) in the second quarter
and first six months of 2007, respectively, compared with the
same periods of 2006. The increases were primarily driven by
growth in total average loans of $6.3 billion
(4.5 percent) and $6.6 billion (4.8 percent) in
the second quarter and first six months of 2007, respectively,
compared with the same periods of 2006. The positive impact on
net interest income from the growth in earning assets was more
than offset by a lower net interest margin. The net interest
margin in the second quarter and first six months of 2007 was
3.44 percent and 3.47 percent, respectively, compared
with 3.68 percent and 3.74 percent, respectively, for
the same periods of 2006, reflecting the competitive environment
and the impact of the flat yield curve during the past several
quarters. Compared with the same periods of 2006, credit spreads
tightened by approximately 9 basis points in the second
quarter and 10 basis points in the first six months of 2007
across most lending products due to competitive loan pricing. In
addition, funding costs were higher as rates on interest-bearing
deposits increased and the funding mix continued to shift toward
higher cost deposits and other sources. An increase in loan fees
partially offset these factors.
The Company
anticipates the net interest margin to remain relatively stable
throughout the remainder of the year. Refer to the
Consolidated Daily Average Balance Sheet and Related
Yields and Rates table for further information on net
interest income.
Average loans for the second quarter and first six months of
2007 were $6.3 billion (4.5 percent) and
$6.6 billion (4.8 percent) higher, respectively, than
the same periods of 2006, reflecting growth in retail loans,
commercial loans and residential mortgages, partially offset by
a decline in total commercial real estate loans. Average credit
card balances for the second quarter and first six months of
2007 increased $1.8 billion (23.9 percent) and
$1.6 billion (22.6 percent), respectively, compared
with the same periods of 2006, as a result of growth in branch
originated, co-branded and financial institution partner
portfolios.
Average investment securities in the second quarter and first
six months of 2007 were $.6 billion (1.5 percent) and
$.9 billion (2.3 percent) higher, respectively, than
the same periods of 2006, driven primarily by an increase in the
municipal securities portfolio, partially offset by a reduction
in mortgage-backed assets.
Average noninterest-bearing deposits for the second quarter and
first six months of 2007 decreased $1.0 billion
(3.4 percent) and $1.1 billion (3.7 percent),
respectively, compared with the same periods of 2006, reflecting
a decline in business demand deposits within most lines of
business as customers reduced excess liquidity to fund business
growth and reinvested excess funds in interest-bearing deposit
and sweep products. The decline in business demand account
balances was partially offset by higher corporate trust
deposits, driven by acquisitions and business growth.
Average total savings deposits remained relatively flat in the
second quarter and first six months of 2007, compared with the
same periods of 2006, as increases in interest checking balances
were offset by declines in money market and savings balances,
primarily within Consumer Banking. Interest checking balances
for the second quarter and first six months of 2007 increased
$2.5 billion (10.8 percent) and $2.2 billion
(9.6 percent), respectively, compared with the same periods
of 2006, due to higher broker-dealer, government and
institutional trust balances. Average money market and savings
balances for the second quarter and first six months of 2007
decreased $2.7 billion (8.1 percent) and
$2.3 billion (7.0 percent), respectively, compared
with the same periods of 2006, as a result of the Companys
deposit pricing decisions
for money market products in relation to other fixed-rate
deposit products. A portion of branch-based money market savings
accounts migrated to fixed-rate time certificates, as customers
took advantage of higher interest rates for these products.
Average time certificates of deposit less than $100,000 were
higher in the second quarter and first six months of 2007 by
$1.0 billion (7.5 percent) and $1.1 billion
(8.4 percent), respectively, compared with the same periods
of 2006. The year-over-year growth in time certificates less
than $100,000 was primarily due to consumer-based time deposits,
reflecting customer migration to higher rate deposit products.
Average time deposits greater than $100,000 decreased
$2.2 billion (9.7 percent) and $.9 billion
(3.9 percent) in the second quarter and first six months of
2007, respectively, compared with the same periods of 2006. Time
deposits greater than $100,000 are largely viewed as purchased
funds and are managed at levels deemed appropriate, given
alternative funding sources.
Provision for Credit Losses
The provision for credit
losses for the second quarter and first six months of 2007
increased $66 million (52.8 percent) and
$128 million (53.3 percent), respectively, compared
with the same periods of 2006. The increases in the provision
for credit losses in the second quarter and first six months of
2007 from the same periods a year ago reflected expected losses
from strong growth in credit card accounts. Also, the provision
for credit losses in the second quarter and first six months of
2006 partially reflected the favorable residual impact on net
charge-offs of changes in bankruptcy laws in late 2005. Net
charge-offs were $191 million in the second quarter and
$368 million in the first six months of 2007, compared with
$125 million in the second quarter and $240 million in
the first six months of 2006. 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 2007 was
$1,855 million and $3,551 million, respectively,
compared with $1,755 million and $3,369 million in the
same periods of 2006. The $100 million (5.7 percent)
increase during the second quarter and $182 million
(5.4 percent) increase during the first six months of 2007,
compared with the same periods in 2006, were driven by organic
growth offset somewhat by a $35 million gain on the initial
public offering of a cardholder association recorded in the
second quarter of 2006. In addition, certain revenue categories
were impacted by accounting items in the first six months of
2006.
The growth in credit and debit card revenue was primarily driven
by an increase in customer accounts and higher customer
transaction volumes from a year ago. The corporate payment
products revenue growth reflected organic growth in sales
volumes and card usage, and an acquired business. Merchant
processing services revenue growth reflected an increase in
customers and sales volumes and business expansion. Trust and
investment management fees increased year-over-year due to core
account growth and favorable market conditions. Deposit service
charges grew year-over-year primarily due to increased
transaction-related fees and continued growth in net new
checking accounts. Treasury management fees increased over the
|
|
|
Table 2 |
|
Noninterest Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
Six Months Ended | |
|
|
June 30, | |
|
June 30, | |
|
|
| |
|
|
|
|
|
|
Percent | |
|
|
|
Percent | |
(Dollars in Millions) |
|
2007 | |
|
2006 | |
|
Change | |
|
2007 | |
|
2006 | |
|
Change | |
|
Credit and debit card revenue
|
|
|
$228 |
|
|
|
$202 |
|
|
|
12.9 |
% |
|
|
$433 |
|
|
|
$384 |
|
|
|
12.8 |
% |
Corporate payment products revenue
|
|
|
157 |
|
|
|
139 |
|
|
|
12.9 |
|
|
|
302 |
|
|
|
266 |
|
|
|
13.5 |
|
ATM processing services
|
|
|
62 |
|
|
|
61 |
|
|
|
1.6 |
|
|
|
121 |
|
|
|
120 |
|
|
|
.8 |
|
Merchant processing services
|
|
|
285 |
|
|
|
253 |
|
|
|
12.6 |
|
|
|
535 |
|
|
|
466 |
|
|
|
14.8 |
|
Trust and investment management fees
|
|
|
342 |
|
|
|
314 |
|
|
|
8.9 |
|
|
|
664 |
|
|
|
611 |
|
|
|
8.7 |
|
Deposit service charges
|
|
|
272 |
|
|
|
264 |
|
|
|
3.0 |
|
|
|
515 |
|
|
|
496 |
|
|
|
3.8 |
|
Treasury management fees
|
|
|
126 |
|
|
|
116 |
|
|
|
8.6 |
|
|
|
237 |
|
|
|
223 |
|
|
|
6.3 |
|
Commercial products revenue
|
|
|
105 |
|
|
|
107 |
|
|
|
(1.9 |
) |
|
|
205 |
|
|
|
211 |
|
|
|
(2.8 |
) |
Mortgage banking revenue
|
|
|
68 |
|
|
|
75 |
|
|
|
(9.3 |
) |
|
|
135 |
|
|
|
99 |
|
|
|
36.4 |
|
Investment products fees and commissions
|
|
|
38 |
|
|
|
42 |
|
|
|
(9.5 |
) |
|
|
72 |
|
|
|
80 |
|
|
|
(10.0 |
) |
Securities gains (losses), net
|
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
4 |
|
|
|
3 |
|
|
|
33.3 |
|
Other
|
|
|
169 |
|
|
|
179 |
|
|
|
(5.6 |
) |
|
|
328 |
|
|
|
410 |
|
|
|
(20.0 |
) |
|
|
|
|
Total noninterest income
|
|
|
$1,855 |
|
|
|
$1,755 |
|
|
|
5.7 |
% |
|
|
$3,551 |
|
|
|
$3,369 |
|
|
|
5.4 |
% |
|
prior year due to higher transaction volumes and customer growth.
Favorable changes in fee-based revenue were partially offset by
a decline in other income. The reduction in other income in the
second quarter of 2007, compared with the second quarter of
2006, reflected the $35 million gain recognized in the
second quarter of 2006 related to the initial public offering of
a cardholder association, partially offset by an increase in
revenue from incremental investment in a bank-owned life
insurance program and higher revenue from equity investments. In
addition, the reduction in other income in the first six months
of 2007, compared with the first six months of 2006, resulted
from a $44 million trading gain recognized in the first
quarter of 2006 related to terminating certain interest rate
swaps previously designated as cash flow hedges that did not
qualify as hedges in accordance with Statement of Financial
Accounting Standards 133, Accounting for Derivative
Instruments and Hedging Activities, as well as a
$10 million favorable settlement within the merchant
processing business recorded in the prior year. Mortgage banking
revenue declined in the second quarter of 2007, compared with
the same period of the prior year, as growth in both production
gains and servicing income was more than offset by an adverse
change in the valuation of MSRs and corresponding MSR economic
hedges due to changes in interest rates late in the second
quarter of 2007. Mortgage banking revenue increased in the first
six months of 2007 due to changes in accounting for MSRs and
mortgage banking revenue that resulted in a $37 million
reduction in revenue in the first quarter of 2006.
Noninterest Expense
Noninterest expense was
$1,640 million in the second quarter and
$3,185 million in the first six months of 2007, reflecting
increases of $110 million (7.2 percent) and
$155 million (5.1 percent), respectively, from the
same periods of 2006. Compensation expense increased due to
ongoing bank operations and acquired businesses. Net occupancy
and equipment expense increased primarily due to acquisitions
and branch-based business initiatives. Professional services
expense increased due to revenue enhancing business initiatives
and higher legal costs associated with litigation and the
establishment of a bank charter in Ireland to support
pan-European payment processing. Marketing and business
development expense increased year-over-year due to the timing
of customer promotions, solicitations and advertising
activities. Postage, printing and supplies expense increased due
to changes in postal rates and increases in customer-related
operations. Other intangibles expense increased from the same
periods of 2006 due to recent acquisitions in Consumer Banking,
Wealth Management and Payment Services. Other expense increased
over the prior year due to an increase in the Companys
merchant airline processing, driven by volumes and the impact of
the recent signing of a contract with a major airline. Changes
in other expense also reflected an increase in the costs related
to tax-advantaged investments, integration expenses related to
recent acquisitions and higher credit-related costs for other
real estate owned and loan collection activities. These expense
increases were partially offset by an $11 million debt
prepayment charge recorded in the second quarter of 2006.
Income Tax Expense The
provision for income taxes was $500 million (an effective
rate of 30.2 percent) for the second quarter and
$993 million (an effective rate of 30.3 percent) for
the first six months of 2007,
|
|
|
Table 3 |
|
Noninterest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
Six Months Ended | |
|
|
June 30, | |
|
June 30, | |
|
|
| |
|
|
|
|
Percent | |
|
|
|
Percent | |
(Dollars in Millions) |
|
2007 | |
|
2006 | |
|
Change | |
|
2007 | |
|
2006 | |
|
Change | |
|
Compensation
|
|
|
$659 |
|
|
|
$627 |
|
|
|
5.1 |
% |
|
|
$1,294 |
|
|
|
$1,260 |
|
|
|
2.7 |
% |
Employee benefits
|
|
|
123 |
|
|
|
123 |
|
|
|
|
|
|
|
256 |
|
|
|
256 |
|
|
|
|
|
Net occupancy and equipment
|
|
|
171 |
|
|
|
161 |
|
|
|
6.2 |
|
|
|
336 |
|
|
|
326 |
|
|
|
3.1 |
|
Professional services
|
|
|
59 |
|
|
|
41 |
|
|
|
43.9 |
|
|
|
106 |
|
|
|
76 |
|
|
|
39.5 |
|
Marketing and business development
|
|
|
64 |
|
|
|
58 |
|
|
|
10.3 |
|
|
|
112 |
|
|
|
98 |
|
|
|
14.3 |
|
Technology and communications
|
|
|
126 |
|
|
|
127 |
|
|
|
(.8 |
) |
|
|
251 |
|
|
|
244 |
|
|
|
2.9 |
|
Postage, printing and supplies
|
|
|
71 |
|
|
|
66 |
|
|
|
7.6 |
|
|
|
140 |
|
|
|
132 |
|
|
|
6.1 |
|
Other intangibles
|
|
|
95 |
|
|
|
89 |
|
|
|
6.7 |
|
|
|
189 |
|
|
|
174 |
|
|
|
8.6 |
|
Debt prepayment
|
|
|
|
|
|
|
11 |
|
|
|
* |
|
|
|
|
|
|
|
11 |
|
|
|
* |
|
Other
|
|
|
272 |
|
|
|
227 |
|
|
|
19.8 |
|
|
|
501 |
|
|
|
453 |
|
|
|
10.6 |
|
|
|
|
|
Total noninterest expense
|
|
|
$1,640 |
|
|
|
$1,530 |
|
|
|
7.2 |
% |
|
|
$3,185 |
|
|
|
$3,030 |
|
|
|
5.1 |
% |
|
|
|
Efficiency ratio (a)
|
|
|
46.8 |
% |
|
|
44.4 |
% |
|
|
|
|
|
|
46.4 |
% |
|
|
44.6 |
% |
|
|
|
|
|
|
|
|
* |
|
Not meaningful |
(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. |
compared with $585 million (an effective rate of
32.8 percent) and $1,146 million (an effective rate of
32.7 percent) for the same periods of 2006. For further
information on income taxes, refer to Note 7 of the Notes
to Consolidated Financial Statements.
BALANCE SHEET ANALYSIS
Loans The Companys
total loan portfolio was $145.7 billion at June 30,
2007, compared with $143.6 billion at December 31,
2006, an increase of $2.1 billion (1.5 percent). The
increase was driven by growth in retail loans, residential
mortgages and commercial loans, partially offset by a decrease
in commercial real estate loans. The $.3 billion
(.6 percent) increase in commercial loans was primarily
driven by seasonal increases in corporate payment card balances.
Commercial real estate loans decreased slightly to
$28.4 billion at June 30, 2007, compared with
$28.6 billion at December 31, 2006. The decline in
commercial real estate balances reflected current unfavorable
real estate market conditions in certain industry sectors and
the excess liquidity in the capital markets.
Residential mortgages held in the loan portfolio increased
$.7 billion (3.3 percent) at June 30, 2007,
compared with December 31, 2006, reflecting an increase in
consumer finance originations.
Total retail loans outstanding, which include credit card,
retail leasing, home equity and second mortgages and other
retail loans, increased $1.4 billion (2.9 percent) at
June 30, 2007, compared with December 31, 2006. The
increase was primarily driven by growth in credit card,
installment and home equity loans, partially offset by decreases
in retail leasing and student loan balances.
At June 30, 2007, the residential and home equity and
second mortgage portfolios included approximately
$3.2 billion and $.9 billion, respectively, of loans
to customers that may be defined as sub-prime borrowers.
Together, these balances represented 2.8 percent of the
Companys total loans outstanding at June 30, 2007.
Loans Held for Sale At
June 30, 2007, loans held for sale, consisting of
residential mortgages, student loans and other selective loans
to be sold in the secondary market, were $4.6 billion,
compared with $3.3 billion at December 31, 2006. The
increase in loans held for sale was principally due to seasonal
loan originations and the timing of sales during the first six
months of 2007.
Investment Securities
Investment securities, both
available-for-sale and
held-to-maturity,
totaled $39.5 billion at June 30, 2007, compared with
$40.1 billion at December 31, 2006, reflecting
purchases of $3.0 billion of securities, which were more
than offset by sales, maturities, prepayments and a
$.7 billion increase in the unrealized loss on the
available-for-sale portfolio. As of June 30, 2007, and
December 31, 2006, approximately 37 percent of the
investment securities portfolio represented adjustable-rate
financial instruments. Adjustable-rate financial instruments
include variable-rate collateralized mortgage obligations,
mortgage-backed securities, agency securities, adjustable-rate
money market accounts and asset-backed securities.
Deposits Total deposits
were $119.7 billion at June 30, 2007, compared with
$124.9 billion at December 31, 2006, a decrease of
$5.2 billion (4.1 percent). The decrease in total
deposits was primarily the result of decreases in
noninterest-bearing deposits, money market savings accounts and
time deposits greater than $100,000, partially offset by an
increase in interest checking accounts. The $2.6 billion
(8.0 percent) decrease in noninterest-bearing deposits was
primarily due to a decline of business demand deposits. The
|
|
|
Table 4 |
|
Available-for-Sale Investment Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007 | |
|
December 31, 2006 | |
|
|
| |
|
|
|
|
Weighted- | |
|
|
|
Weighted- | |
|
|
|
|
|
|
Average | |
|
Weighted- | |
|
|
|
Average | |
|
Weighted- | |
|
|
Amortized | |
|
Fair | |
|
Maturity in | |
|
Average | |
|
Amortized | |
|
Fair | |
|
Maturity in | |
|
Average | |
(Dollars in Millions) |
|
Cost | |
|
Value | |
|
Years | |
|
Yield (c) | |
|
Cost | |
|
Value | |
|
Years | |
|
Yield (c) | |
| |
U.S. Treasury and agencies
|
|
|
$474 |
|
|
|
$469 |
|
|
|
9.9 |
|
|
|
5.93 |
% |
|
|
$472 |
|
|
|
$467 |
|
|
|
10.1 |
|
|
|
5.94 |
% |
Mortgage-backed securities (a)
|
|
|
32,597 |
|
|
|
31,439 |
|
|
|
7.5 |
|
|
|
5.12 |
|
|
|
34,465 |
|
|
|
33,787 |
|
|
|
5.6 |
|
|
|
5.10 |
|
Asset-backed securities (a)
|
|
|
6 |
|
|
|
6 |
|
|
|
.1 |
|
|
|
5.65 |
|
|
|
7 |
|
|
|
7 |
|
|
|
.1 |
|
|
|
5.32 |
|
Obligations of state and political subdivisions (b)
|
|
|
5,798 |
|
|
|
5,695 |
|
|
|
12.0 |
|
|
|
6.69 |
|
|
|
4,463 |
|
|
|
4,539 |
|
|
|
9.7 |
|
|
|
6.68 |
|
Other debt securities
|
|
|
1,546 |
|
|
|
1,510 |
|
|
|
28.1 |
|
|
|
6.20 |
|
|
|
994 |
|
|
|
993 |
|
|
|
23.8 |
|
|
|
6.08 |
|
Other investments
|
|
|
306 |
|
|
|
314 |
|
|
|
|
|
|
|
6.73 |
|
|
|
229 |
|
|
|
237 |
|
|
|
|
|
|
|
6.26 |
|
|
|
|
|
Total available-for-sale investment securities
|
|
|
$40,727 |
|
|
|
$39,433 |
|
|
|
9.0 |
|
|
|
5.41 |
% |
|
|
$40,630 |
|
|
|
$40,030 |
|
|
|
6.6 |
|
|
|
5.32 |
% |
|
|
|
|
(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) |
|
Average yields are presented on a fully-taxable equivalent
basis under a tax rate of 35 percent. Yields are computed
based on historical cost balances. Average yield and maturity
calculations exclude equity securities that have no stated yield
or maturity. |
$1.7 billion (6.3 percent) decrease in money market
savings account balances reflected the Companys deposit
pricing decisions for money market products in relation to other
fixed-rate deposit products. Time deposits greater than $100,000
decreased $2.5 billion (11.1 percent) at June 30,
2007, compared with December 31, 2006. Time deposits
greater than $100,000 are largely viewed as purchased funds and
are managed to levels deemed appropriate given alternative
funding sources. Interest checking account balances increased
$.9 billion (3.6 percent) due to higher trust and
custody balances and a migration from noninterest-bearing
accounts within government banking.
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,
securities sold under agreements to repurchase and other
short-term borrowings, were $27.2 billion at June 30,
2007, compared with $26.9 billion at December 31,
2006. Short-term funding is managed within approved liquidity
policies. Long-term debt was $45.9 billion at June 30,
2007, compared with $37.6 billion at December 31,
2006, reflecting the issuances of $3.0 billion of
convertible senior debentures, $1.3 billion of subordinated
notes, $1.3 billion of bank notes and $.5 billion of
junior subordinated debentures, and the net addition of
$4.4 billion of Federal Home Loan Bank (FHLB)
advances, partially offset by $1.7 billion of bank note
maturities. The $8.3 billion (22.2 percent) increase
in long-term debt reflected wholesale funding associated with
the Companys asset growth and asset/liability management
activities. 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 or investment when it is due.
Residual value risk is the potential reduction in the
end-of-term value of leased assets or the residual cash flows
related to asset securitization and other off-balance sheet
structures. 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 repricing of assets and
liabilities differently, as well as their market value. Market
risk arises from fluctuations in interest rates, foreign
exchange rates, and equity prices that may result in changes in
the values of financial instruments, such as trading and
available-for-sale securities 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 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. Refer to
Managements Discussion and Analysis
Credit Risk Management in the Companys Annual Report
on Form 10-K for
the year ended December 31, 2006, for a more detailed
discussion on credit risk management processes.
Loan Delinquencies
Trends in delinquency
ratios represent 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
$376 million at June 30, 2007, compared with
$349 million at December 31, 2006. These loans are not
included in nonperforming assets and continue to accrue interest
because they are adequately secured by collateral, and/or are in
the process of collection and are reasonably expected to result
in repayment or restoration to current status. The ratio of
accruing loans 90 days or more past due to total loans was
..26 percent at June 30, 2007, compared with
..24 percent at December 31, 2006.
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
|
|
|
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 |
|
2007 | |
|
2006 | |
|
Commercial
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
.08 |
% |
|
|
.06 |
% |
|
Lease financing
|
|
|
.02 |
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
.07 |
|
|
|
.05 |
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
Commercial mortgages
|
|
|
|
|
|
|
.01 |
|
|
Construction and development
|
|
|
|
|
|
|
.01 |
|
|
|
|
|
|
Total commercial real estate
|
|
|
|
|
|
|
.01 |
|
Residential mortgages
|
|
|
.50 |
|
|
|
.45 |
|
Retail
|
|
|
|
|
|
|
|
|
|
Credit card
|
|
|
1.63 |
|
|
|
1.75 |
|
|
Retail leasing
|
|
|
.05 |
|
|
|
.03 |
|
|
Other retail
|
|
|
.23 |
|
|
|
.23 |
|
|
|
|
|
|
Total retail
|
|
|
.48 |
|
|
|
.48 |
|
|
|
|
|
|
|
Total loans
|
|
|
.26 |
% |
|
|
.24 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, | |
|
December 31, | |
90 days or more past due including nonperforming loans |
|
2007 | |
|
2006 | |
|
Commercial
|
|
|
.44 |
% |
|
|
.57 |
% |
Commercial real estate
|
|
|
.69 |
|
|
|
.53 |
|
Residential mortgages (a)
|
|
|
.69 |
|
|
|
.62 |
|
Retail
|
|
|
.55 |
|
|
|
.58 |
|
|
|
|
|
Total loans
|
|
|
.57 |
% |
|
|
.57 |
% |
|
|
|
|
(a) |
|
Delinquent loan ratios exclude advances made pursuant to
servicing agreements to 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 was 2.90 percent at June 30, 2007, and
3.11 percent at December 31, 2006. |
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. To monitor credit risk associated with
retail loans, the Company monitors delinquency ratios in the
various stages of collection, including nonperforming status.
The following table provides summary delinquency information for
residential mortgages and retail loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a Percent of Ending | |
|
|
Amount | |
|
Loan Balances | |
|
|
| |
|
|
June 30, | |
|
December 31, | |
|
June 30, | |
|
December 31, | |
(Dollars in Millions) | |
|
2007 | |
|
2006 | |
|
2007 | |
|
2006 | |
|
Residential mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days
|
|
|
$171 |
|
|
|
$154 |
|
|
|
.78 |
% |
|
|
.72 |
% |
|
|
90 days or more
|
|
|
111 |
|
|
|
95 |
|
|
|
.50 |
|
|
|
.45 |
|
|
|
Nonperforming
|
|
|
41 |
|
|
|
36 |
|
|
|
.19 |
|
|
|
.17 |
|
|
|
|
|
|
|
Total
|
|
|
$323 |
|
|
|
$285 |
|
|
|
1.47 |
% |
|
|
1.34 |
% |
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days
|
|
|
$199 |
|
|
|
$204 |
|
|
|
2.12 |
% |
|
|
2.35 |
% |
|
|
90 days or more
|
|
|
154 |
|
|
|
152 |
|
|
|
1.63 |
|
|
|
1.75 |
|
|
|
Nonperforming
|
|
|
20 |
|
|
|
31 |
|
|
|
.21 |
|
|
|
.36 |
|
|
|
|
|
|
|
Total
|
|
|
$373 |
|
|
|
$387 |
|
|
|
3.96 |
% |
|
|
4.46 |
% |
|
Retail leasing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days
|
|
|
$27 |
|
|
|
$34 |
|
|
|
.41 |
% |
|
|
.49 |
% |
|
|
90 days or more
|
|
|
3 |
|
|
|
2 |
|
|
|
.05 |
|
|
|
.03 |
|
|
|
Nonperforming
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$30 |
|
|
|
$36 |
|
|
|
.46 |
% |
|
|
.52 |
% |
|
Home equity and second mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days
|
|
|
$61 |
|
|
|
$79 |
|
|
|
.38 |
% |
|
|
.51 |
% |
|
|
90 days or more
|
|
|
28 |
|
|
|
28 |
|
|
|
.18 |
|
|
|
.18 |
|
|
|
Nonperforming
|
|
|
15 |
|
|
|
14 |
|
|
|
.09 |
|
|
|
.09 |
|
|
|
|
|
|
|
Total
|
|
|
$104 |
|
|
|
$121 |
|
|
|
.65 |
% |
|
|
.78 |
% |
|
Other retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days
|
|
|
$133 |
|
|
|
$131 |
|
|
|
.79 |
% |
|
|
.80 |
% |
|
|
90 days or more
|
|
|
47 |
|
|
|
44 |
|
|
|
.28 |
|
|
|
.27 |
|
|
|
Nonperforming
|
|
|
4 |
|
|
|
3 |
|
|
|
.02 |
|
|
|
.02 |
|
|
|
|
|
|
|
Total
|
|
|
$184 |
|
|
|
$178 |
|
|
|
1.09 |
% |
|
|
1.09 |
% |
|
Within these product categories, the following table provides
information on delinquent and nonperforming loans as a percent
of ending loan balances, by channel:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Finance | |
|
Other Retail | |
|
|
| |
|
|
June 30, | |
|
December 31, | |
|
June 30, | |
|
December 31, | |
|
|
2007 | |
|
2006 | |
|
2007 | |
|
2006 | |
|
Residential mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days
|
|
|
.88 |
% |
|
|
.83 |
% |
|
|
.71 |
% |
|
|
.66 |
% |
|
|
90 days or more
|
|
|
.68 |
|
|
|
.64 |
|
|
|
.38 |
|
|
|
.32 |
|
|
|
Nonperforming
|
|
|
.27 |
|
|
|
.19 |
|
|
|
.13 |
|
|
|
.16 |
|
|
|
|
|
|
|
Total
|
|
|
1.83 |
% |
|
|
1.66 |
% |
|
|
1.22 |
% |
|
|
1.14 |
% |
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days
|
|
|
|
% |
|
|
|
% |
|
|
2.12 |
% |
|
|
2.35 |
% |
|
|
90 days or more
|
|
|
|
|
|
|
|
|
|
|
1.63 |
|
|
|
1.75 |
|
|
|
Nonperforming
|
|
|
|
|
|
|
|
|
|
|
.21 |
|
|
|
.36 |
|
|
|
|
|
|
|
Total
|
|
|
|
% |
|
|
|
% |
|
|
3.96 |
% |
|
|
4.46 |
% |
|
Retail leasing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days
|
|
|
|
% |
|
|
|
% |
|
|
.41 |
% |
|
|
.49 |
% |
|
|
90 days or more
|
|
|
|
|
|
|
|
|
|
|
.05 |
|
|
|
.03 |
|
|
|
Nonperforming
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
% |
|
|
|
% |
|
|
.46 |
% |
|
|
.52 |
% |
|
Home equity and second mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days
|
|
|
1.64 |
% |
|
|
1.64 |
% |
|
|
.22 |
% |
|
|
.35 |
% |
|
|
90 days or more
|
|
|
.98 |
|
|
|
.79 |
|
|
|
.07 |
|
|
|
.10 |
|
|
|
Nonperforming
|
|
|
.11 |
|
|
|
.11 |
|
|
|
.09 |
|
|
|
.09 |
|
|
|
|
|
|
|
Total
|
|
|
2.73 |
% |
|
|
2.54 |
% |
|
|
.38 |
% |
|
|
.54 |
% |
|
Other retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 days
|
|
|
4.33 |
% |
|
|
4.30 |
% |
|
|
.70 |
% |
|
|
.71 |
% |
|
|
90 days or more
|
|
|
.96 |
|
|
|
.76 |
|
|
|
.26 |
|
|
|
.26 |
|
|
|
Nonperforming
|
|
|
|
|
|
|
|
|
|
|
.02 |
|
|
|
.02 |
|
|
|
|
|
|
|
Total
|
|
|
5.29 |
% |
|
|
5.06 |
% |
|
|
.98 |
% |
|
|
.99 |
% |
|
Within the consumer finance division at June 30, 2007,
approximately $130 million and $54 million of these
delinquent and nonperforming residential mortgages and other
retail loans, respectively, were to customers that may be
defined as sub-prime borrowers, compared with
|
|
|
Table 6 |
|
Nonperforming Assets (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, | |
|
December 31, | |
(Dollars in Millions) |
|
2007 | |
|
2006 | |
|
Commercial
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$ |
128 |
|
|
$ |
196 |
|
|
Lease financing
|
|
|
44 |
|
|
|
40 |
|
|
|
|
|
|
Total commercial
|
|
|
172 |
|
|
|
236 |
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
Commercial mortgages
|
|
|
90 |
|
|
|
112 |
|
|
Construction and development
|
|
|
107 |
|
|
|
38 |
|
|
|
|
|
|
Total commercial real estate
|
|
|
197 |
|
|
|
150 |
|
Residential mortgages
|
|
|
41 |
|
|
|
36 |
|
Retail
|
|
|
|
|
|
|
|
|
|
Credit card
|
|
|
20 |
|
|
|
31 |
|
|
Retail leasing
|
|
|
|
|
|
|
|
|
|
Other retail
|
|
|
19 |
|
|
|
17 |
|
|
|
|
|
|
Total retail
|
|
|
39 |
|
|
|
48 |
|
|
|
|
|
|
|
Total nonperforming loans
|
|
|
449 |
|
|
|
470 |
|
Other real estate (b)
|
|
|
103 |
|
|
|
95 |
|
Other assets
|
|
|
13 |
|
|
|
22 |
|
|
|
|
|
|
|
Total nonperforming assets
|
|
$ |
565 |
|
|
$ |
587 |
|
|
|
|
Accruing loans 90 days or more past due
|
|
$ |
376 |
|
|
$ |
349 |
|
Nonperforming loans to total loans
|
|
|
.31 |
% |
|
|
.33 |
% |
Nonperforming assets to total loans plus other real estate (b)
|
|
|
.39 |
% |
|
|
.41 |
% |
|
Changes in Nonperforming Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and | |
|
Retail and | |
|
|
|
|
Commercial | |
|
Residential | |
|
|
(Dollars in Millions) |
|
Real Estate | |
|
Mortgages (d) | |
|
Total | |
|
Balance December 31, 2006
|
|
|
$406 |
|
|
|
$181 |
|
|
|
$587 |
|
|
Additions to nonperforming assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New nonaccrual loans and foreclosed properties
|
|
|
222 |
|
|
|
24 |
|
|
|
246 |
|
|
|
Advances on loans
|
|
|
6 |
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
Total additions
|
|
|
228 |
|
|
|
24 |
|
|
|
252 |
|
|
Reductions in nonperforming assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paydowns, payoffs
|
|
|
(78 |
) |
|
|
(12 |
) |
|
|
(90 |
) |
|
|
Net sales
|
|
|
(63 |
) |
|
|
|
|
|
|
(63 |
) |
|
|
Return to performing status
|
|
|
(20 |
) |
|
|
(1 |
) |
|
|
(21 |
) |
|
|
Charge-offs (c)
|
|
|
(94 |
) |
|
|
(6 |
) |
|
|
(100 |
) |
|
|
|
|
|
|
Total reductions
|
|
|
(255 |
) |
|
|
(19 |
) |
|
|
(274 |
) |
|
|
|
|
|
|
|
Net additions to (reductions in) nonperforming assets
|
|
|
(27 |
) |
|
|
5 |
|
|
|
(22 |
) |
|
|
|
Balance June 30, 2007
|
|
|
$379 |
|
|
|
$186 |
|
|
|
$565 |
|
|
|
|
|
(a) |
|
Throughout this document, nonperforming assets and related
ratios do not include accruing loans 90 days or more past
due. |
(b) |
|
Excludes $85 million and $83 million of foreclosed
GNMA loans which continue to accrue interest at June 30,
2007, and December 31, 2006, respectively. |
(c) |
|
Charge-offs exclude actions for certain card products and
loan sales that were not classified as nonperforming at the time
the charge-off occurred. |
(d) |
|
Residential mortgage information excludes changes related to
residential mortgages serviced by others. |
$105 million and $50 million, respectively, at
December 31, 2006.
Nonperforming Assets
The level of
nonperforming assets represents another indicator of the
potential for future credit losses. At June 30, 2007, total
nonperforming assets were $565 million, compared with
$587 million at December 31, 2006. The ratio of total
nonperforming assets to total loans and other real estate
decreased to .39 percent at June 30, 2007, compared
with .41 percent at December 31, 2006.
Included in nonperforming loans were restructured loans of
$34 million at June 30, 2007, compared with
$38 million at December 31, 2006. At June 30,
2007, the Company had $2 million of commitments to lend
additional funds under restructured loans, compared with no
commitments at December 31, 2006.
Other real estate included in nonperforming assets was
$103 million at June 30, 2007, compared with
$95 million at December 31, 2006, and was primarily
related to properties that the Company has taken ownership of
that once secured residential mortgages and home equity and
second mortgage loan balances.
The following table provides an analysis of other real estate as
a percent of their related loan balances, including further
detail for residential mortgages and home equity and second
mortgage loan balances by geographical location:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a Percent of Ending | |
|
|
Amount | |
|
Loan Balances | |
|
|
| |
|
|
June 30, | |
|
December 31, | |
|
June 30, | |
|
December 31, | |
(Dollars in Millions) |
|
2007 | |
|
2006 | |
|
2007 | |
|
2006 | |
|
Residential mortgages and home equity and second mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michigan
|
|
|
$20 |
|
|
|
$17 |
|
|
|
3.53 |
% |
|
|
2.90 |
% |
|
Ohio
|
|
|
11 |
|
|
|
12 |
|
|
|
.44 |
|
|
|
.48 |
|
|
Minnesota
|
|
|
11 |
|
|
|
11 |
|
|
|
.21 |
|
|
|
.21 |
|
|
Colorado
|
|
|
7 |
|
|
|
7 |
|
|
|
.25 |
|
|
|
.28 |
|
|
Missouri
|
|
|
6 |
|
|
|
6 |
|
|
|
.23 |
|
|
|
.25 |
|
|
All other states
|
|
|
46 |
|
|
|
38 |
|
|
|
.19 |
|
|
|
.16 |
|
|
|
|
|
|
Total residential mortgages and home equity and second mortgages
|
|
|
101 |
|
|
|
91 |
|
|
|
.27 |
|
|
|
.25 |
|
Commercial real estate and construction
|
|
|
2 |
|
|
|
4 |
|
|
|
.01 |
|
|
|
.01 |
|
|
|
|
Total
|
|
|
$103 |
|
|
|
$95 |
|
|
|
.07 |
% |
|
|
.07 |
% |
|
Within other real estate in the table above, approximately
$53 million at June 30, 2007, and $41 million at
December 31, 2006, were from portfolios that may be defined
as sub-prime.
Based on existing economic and market conditions, the Company
expects nonperforming assets to increase modestly over the next
several quarters.
Restructured Loans Accruing Interest
On a case-by-case basis,
management determines whether an account that experiences
financial difficulties should be modified as to its interest
rate or repayment terms to maximize the Companys
collection of its balance.
Loans restructured at a rate equal to or greater than that of a
new loan with comparable risk at the time the contract is
modified are excluded from restructured loans once repayment
performance, in accordance with the modified agreement, has been
demonstrated over several payment cycles. Loans that have
interest rates reduced below comparable market rates remain
classified as restructured loans; however, interest income is
accrued at the reduced rate as long as the customer complies
with the revised terms and conditions.
The following table provides a summary of restructured loans
that continue to accrue interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a Percent of Ending | |
|
|
Amount | |
|
Loan Balances | |
|
|
| |
|
|
June 30, | |
|
December 31, | |
|
June 30, | |
|
December 31, | |
(Dollars in Millions) | |
|
2007 | |
|
2006 | |
|
2007 | |
|
2006 | |
|
Commercial
|
|
|
$12 |
|
|
|
$18 |
|
|
|
.03 |
% |
|
|
.04 |
% |
Commercial real estate
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
Residential mortgages
|
|
|
87 |
|
|
|
80 |
|
|
|
.40 |
|
|
|
.38 |
|
Credit card
|
|
|
291 |
|
|
|
267 |
|
|
|
3.09 |
|
|
|
3.08 |
|
Other retail
|
|
|
45 |
|
|
|
39 |
|
|
|
.11 |
|
|
|
.10 |
|
|
|
|
|
Total
|
|
|
$435 |
|
|
|
$405 |
|
|
|
.30 |
% |
|
|
.28 |
% |
|
Analysis of Loan Net Charge-Offs
Total loan net
charge-offs were $191 million and $368 million during
the second quarter and first six months of 2007, respectively,
compared with net charge-offs of $125 million and
$240 million, respectively, for the same periods of 2006.
The ratio of total loan net charge-offs to average loans
outstanding on an annualized basis in the second quarter and
first six months of 2007 was .53 percent and
..51 percent, respectively, compared with .36 percent
and .35 percent, respectively, for the same periods of
2006. The expected year-over-year increases in total net
charge-offs were due primarily to an anticipated increase in
consumer charge-offs, specifically related to strong credit card
growth, lower credit card charge-offs in prior periods related
to the impact of changes in bankruptcy legislation that went
into effect in late 2005 and the impact of implementing minimum
balance payment programs for consumer loans.
Commercial and commercial real estate loan net charge-offs for
the second quarter of 2007 were $38 million
(.20 percent of average loans outstanding on an annualized
basis), compared with $20 million (.11 percent of
average loans outstanding on an annualized basis) for the second
quarter of 2006. Commercial and commercial real estate loan net
charge-offs for the first six months of 2007 were
$74 million (.20 percent of average loans outstanding
on an annualized basis), compared with $34 million
(.09 percent of average loans outstanding on an annualized
basis) for the first six months of 2006. The Company expects
commercial and commercial real estate net charge-offs to
continue to increase somewhat over the next several quarters,
due to higher gross charge-offs and lower loan recoveries.
|
|
|
Table 7 |
|
Net Charge-offs as a Percent of Average Loans Outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
Six Months Ended | |
|
|
June 30, | |
|
June 30, | |
|
|
| |
|
|
2007 | |
|
2006 | |
|
2007 | |
|
2006 | |
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
.20 |
% |
|
|
.13 |
% |
|
|
.26 |
% |
|
|
.09 |
% |
|
Lease financing
|
|
|
.57 |
|
|
|
.54 |
|
|
|
.40 |
|
|
|
.55 |
|
|
|
|
|
|
Total commercial
|
|
|
.25 |
|
|
|
.18 |
|
|
|
.27 |
|
|
|
.15 |
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgages
|
|
|
.14 |
|
|
|
(.02 |
) |
|
|
.08 |
|
|
|
.01 |
|
|
Construction and development
|
|
|
.09 |
|
|
|
.05 |
|
|
|
.05 |
|
|
|
.02 |
|
|
|
|
|
|
Total commercial real estate
|
|
|
.13 |
|
|
|
|
|
|
|
.07 |
|
|
|
.01 |
|
Residential mortgages
|
|
|
.28 |
|
|
|
.21 |
|
|
|
.25 |
|
|
|
.17 |
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card
|
|
|
3.56 |
|
|
|
2.72 |
|
|
|
3.52 |
|
|
|
2.67 |
|
|
Retail leasing
|
|
|
.24 |
|
|
|
.11 |
|
|
|
.21 |
|
|
|
.17 |
|
|
Home equity and second mortgages
|
|
|
.41 |
|
|
|
.35 |
|
|
|
.41 |
|
|
|
.34 |
|
|
Other retail
|
|
|
.89 |
|
|
|
.77 |
|
|
|
.89 |
|
|
|
.82 |
|
|
|
|
|
|
Total retail
|
|
|
1.15 |
|
|
|
.84 |
|
|
|
1.13 |
|
|
|
.85 |
|
|
|
|
|
|
|
Total loans
|
|
|
.53 |
% |
|
|
.36 |
% |
|
|
.51 |
% |
|
|
.35 |
% |
|
Retail loan net charge-offs for the second quarter of 2007 were
$138 million (1.15 percent of average loans
outstanding on an annualized basis), compared with
$94 million (.84 percent of average loans outstanding
on an annualized basis) for the second quarter of 2006. Retail
loan net charge-offs for the first six months of 2007 were
$267 million (1.13 percent of average loans
outstanding on an annualized basis), compared with
$188 million (.85 percent of average loans outstanding
on an annualized basis) for the first six months of 2006. The
increase in retail loan net charge-offs reflected the impact of
bankruptcy legislation changes that occurred in late 2005 and
the implementation of the minimum balance payment requirements
for credit cards. The Company anticipates slightly higher
delinquencies in the retail portfolios and that net charge-offs
will continue to increase modestly during the remainder of 2007.
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 related 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) |
|
2007 | |
|
2006 | |
|
2007 | |
|
2006 | |
|
2007 | |
|
2006 | |
|
2007 | |
|
2006 | |
|
Consumer Finance (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages
|
|
|
$8,969 |
|
|
|
$7,295 |
|
|
|
.58 |
% |
|
|
.49 |
% |
|
|
$8,731 |
|
|
|
$7,055 |
|
|
|
.55 |
% |
|
|
.46 |
% |
Home equity and second mortgages
|
|
|
1,836 |
|
|
|
1,984 |
|
|
|
2.40 |
|
|
|
1.62 |
|
|
|
1,853 |
|
|
|
2,021 |
|
|
|
2.29 |
|
|
|
1.50 |
|
Other retail
|
|
|
412 |
|
|
|
402 |
|
|
|
1.95 |
|
|
|
3.99 |
|
|
|
406 |
|
|
|
403 |
|
|
|
2.48 |
|
|
|
4.50 |
|
Other Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages
|
|
|
$12,862 |
|
|
|
$13,573 |
|
|
|
.06 |
% |
|
|
.06 |
% |
|
|
$12,969 |
|
|
|
$13,872 |
|
|
|
.05 |
% |
|
|
.03 |
% |
Home equity and second mortgages
|
|
|
13,899 |
|
|
|
13,051 |
|
|
|
.14 |
|
|
|
.15 |
|
|
|
13,793 |
|
|
|
12,964 |
|
|
|
.16 |
|
|
|
.16 |
|
Other retail
|
|
|
16,193 |
|
|
|
14,725 |
|
|
|
.87 |
|
|
|
.68 |
|
|
|
16,116 |
|
|
|
14,634 |
|
|
|
.85 |
|
|
|
.72 |
|
Total Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages
|
|
|
$21,831 |
|
|
|
$20,868 |
|
|
|
.28 |
% |
|
|
.21 |
% |
|
|
$21,700 |
|
|
|
$20,927 |
|
|
|
.25 |
% |
|
|
.17 |
% |
Home equity and second mortgages
|
|
|
15,735 |
|
|
|
15,035 |
|
|
|
.41 |
|
|
|
.35 |
|
|
|
15,646 |
|
|
|
14,985 |
|
|
|
.41 |
|
|
|
.34 |
|
Other retail
|
|
|
16,605 |
|
|
|
15,127 |
|
|
|
.89 |
|
|
|
.77 |
|
|
|
16,522 |
|
|
|
15,037 |
|
|
|
.89 |
|
|
|
.82 |
|
|
|
|
|
(a) |
|
Consumer finance category included credit originated and
managed by US Bank Consumer Finance as well as 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, the Company originates
loans to customers that may be defined as sub-prime borrowers.
The following table provides further information on net
charge-offs as a percent of average loans outstanding for this
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) | |
|
2007 | |
|
2006 | |
|
2007 | |
|
2006 | |
|
2007 | |
|
2006 | |
|
2007 | |
|
2006 | |
|
Residential mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-prime borrowers
|
|
|
$3,134 |
|
|
|
$2,558 |
|
|
|
1.15 |
% |
|
|
.94 |
% |
|
|
$3,070 |
|
|
|
$2,404 |
|
|
|
1.12 |
% |
|
|
.84 |
% |
Other borrowers
|
|
|
5,835 |
|
|
|
4,737 |
|
|
|
.27 |
|
|
|
.25 |
|
|
|
5,661 |
|
|
|
4,651 |
|
|
|
.25 |
|
|
|
.26 |
|
|
|
|
|
Total
|
|
|
$8,969 |
|
|
|
$7,295 |
|
|
|
.58 |
% |
|
|
.49 |
% |
|
|
$8,731 |
|
|
|
$7,055 |
|
|
|
.55 |
% |
|
|
.46 |
% |
Home equity and second mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-prime borrowers
|
|
|
$911 |
|
|
|
$827 |
|
|
|
3.08 |
% |
|
|
1.94 |
% |
|
|
$911 |
|
|
|
$813 |
|
|
|
2.88 |
% |
|
|
1.74 |
% |
Other borrowers
|
|
|
925 |
|
|
|
1,157 |
|
|
|
1.73 |
|
|
|
1.39 |
|
|
|
942 |
|
|
|
1,208 |
|
|
|
1.71 |
|
|
|
1.34 |
|
|
|
|
|
Total
|
|
|
$1,836 |
|
|
|
$1,984 |
|
|
|
2.40 |
% |
|
|
1.62 |
% |
|
|
$1,853 |
|
|
|
$2,021 |
|
|
|
2.29 |
% |
|
|
1.50 |
% |
|
Analysis and Determination of the Allowance for Credit
Losses The
allowance for loan losses provides coverage for probable and
estimable losses inherent in the Companys loan and lease
portfolio. Management evaluates the allowance each quarter to
determine that it is adequate to cover these inherent losses.
Several factors were taken into consideration in evaluating the
allowance for credit losses at June 30, 2007, including the
risk profile of the portfolios and 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
restructured loan balances compared with December 31, 2006.
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.
At June 30, 2007, the allowance for credit losses was
$2,260 million (1.55 percent of loans), compared with an
allowance of $2,256 million (1.57 percent of loans) at
December 31, 2006. The ratio of the allowance for credit
losses to nonperforming loans was 503 percent at
June 30, 2007, compared with 480 percent at
December 31, 2006. The ratio of the allowance for credit
losses to annualized loan net charge-offs was 295 percent
at June 30, 2007, compared with 415 percent at
December 31, 2006.
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,
2007, no significant change in the amount of residuals or
concentration of the portfolios has occurred since
December 31, 2006. 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, 2006, 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 Corporate
Risk Committee (Risk Committee) provides oversight
and assesses the most significant operational risks facing the
Company within its business lines. Under the guidance of the
Risk 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, 2006, 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 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 Policy Committee (ALPC) and
approved by the Board of Directors. ALPC has the responsibility
for approving and ensuring compliance with ALPC management
policies, including interest rate
|
|
|
Table 8 |
|
Summary of Allowance for Credit Losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
| |
(Dollars in Millions) |
|
2007 | |
|
2006 | |
|
2007 | |
|
2006 | |
|
Balance at beginning of period
|
|
|
$2,260 |
|
|
|
$2,251 |
|
|
|
$2,256 |
|
|
|
$2,251 |
|
Charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
34 |
|
|
|
24 |
|
|
|
79 |
|
|
|
52 |
|
|
|
Lease financing
|
|
|
15 |
|
|
|
13 |
|
|
|
29 |
|
|
|
25 |
|
|
|
|
|
|
|
Total commercial
|
|
|
49 |
|
|
|
37 |
|
|
|
108 |
|
|
|
77 |
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgages
|
|
|
8 |
|
|
|
3 |
|
|
|
10 |
|
|
|
6 |
|
|
|
Construction and development
|
|
|
2 |
|
|
|
1 |
|
|
|
2 |
|
|
|
1 |
|
|
|
|
|
|
|
Total commercial real estate
|
|
|
10 |
|
|
|
4 |
|
|
|
12 |
|
|
|
7 |
|
|
Residential mortgages
|
|
|
16 |
|
|
|
11 |
|
|
|
28 |
|
|
|
19 |
|
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card
|
|
|
98 |
|
|
|
59 |
|
|
|
187 |
|
|
|
113 |
|
|
|
Retail leasing
|
|
|
6 |
|
|
|
6 |
|
|
|
11 |
|
|
|
13 |
|
|
|
Home equity and second mortgages
|
|
|
18 |
|
|
|
16 |
|
|
|
36 |
|
|
|
32 |
|
|
|
Other retail
|
|
|
55 |
|
|
|
43 |
|
|
|
107 |
|
|
|
90 |
|
|
|
|
|
|
|
Total retail
|
|
|
177 |
|
|
|
124 |
|
|
|
341 |
|
|
|
248 |
|
|
|
|
|
|
|
|
Total charge-offs
|
|
|
252 |
|
|
|
176 |
|
|
|
489 |
|
|
|
351 |
|
Recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
13 |
|
|
|
11 |
|
|
|
26 |
|
|
|
34 |
|
|
|
Lease financing
|
|
|
7 |
|
|
|
6 |
|
|
|
18 |
|
|
|
11 |
|
|
|
|
|
|
|
Total commercial
|
|
|
20 |
|
|
|
17 |
|
|
|
44 |
|
|
|
45 |
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgages
|
|
|
1 |
|
|
|
4 |
|
|
|
2 |
|
|
|
5 |
|
|
|
Construction and development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate
|
|
|
1 |
|
|
|
4 |
|
|
|
2 |
|
|
|
5 |
|
|
Residential mortgages
|
|
|
1 |
|
|
|
|
|
|
|
1 |
|
|
|
1 |
|
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card
|
|
|
17 |
|
|
|
9 |
|
|
|
32 |
|
|
|
17 |
|
|
|
Retail leasing
|
|
|
2 |
|
|
|
4 |
|
|
|
4 |
|
|
|
7 |
|
|
|
Home equity and second mortgages
|
|
|
2 |
|
|
|
3 |
|
|
|
4 |
|
|
|
7 |
|
|
|
Other retail
|
|
|
18 |
|
|
|
14 |
|
|
|
34 |
|
|
|
29 |
|
|
|
|
|
|
|
Total retail
|
|
|
39 |
|
|
|
30 |
|
|
|
74 |
|
|
|
60 |
|
|
|
|
|
|
|
|
Total recoveries
|
|
|
61 |
|
|
|
51 |
|
|
|
121 |
|
|
|
111 |
|
Net Charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
21 |
|
|
|
13 |
|
|
|
53 |
|
|
|
18 |
|
|
|
Lease financing
|
|
|
8 |
|
|
|
7 |
|
|
|
11 |
|
|
|
14 |
|
|
|
|
|
|
|
Total commercial
|
|
|
29 |
|
|
|
20 |
|
|
|
64 |
|
|
|
32 |
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgages
|
|
|
7 |
|
|
|
(1 |
) |
|
|
8 |
|
|
|
1 |
|
|
|
Construction and development
|
|
|
2 |
|
|
|
1 |
|
|
|
2 |
|
|
|
1 |
|
|
|
|
|
|
|
Total commercial real estate
|
|
|
9 |
|
|
|
|
|
|
|
10 |
|
|
|
2 |
|
|
Residential mortgages
|
|
|
15 |
|
|
|
11 |
|
|
|
27 |
|
|
|
18 |
|
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card
|
|
|
81 |
|
|
|
50 |
|
|
|
155 |
|
|
|
96 |
|
|
|
Retail leasing
|
|
|
4 |
|
|
|
2 |
|
|
|
7 |
|
|
|
6 |
|
|
|
Home equity and second mortgages
|
|
|
16 |
|
|
|
13 |
|
|
|
32 |
|
|
|
25 |
|
|
|
Other retail
|
|
|
37 |
|
|
|
29 |
|
|
|
73 |
|
|
|
61 |
|
|
|
|
|
|
|
Total retail
|
|
|
138 |
|
|
|
94 |
|
|
|
267 |
|
|
|
188 |
|
|
|
|
|
|
|
|
Total net charge-offs
|
|
|
191 |
|
|
|
125 |
|
|
|
368 |
|
|
|
240 |
|
|
|
|
Provision for credit losses
|
|
|
191 |
|
|
|
125 |
|
|
|
368 |
|
|
|
240 |
|
Acquisitions and other changes
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
Balance at end of period
|
|
|
$2,260 |
|
|
|
$2,251 |
|
|
|
$2,260 |
|
|
|
$2,251 |
|
|
|
|
Components
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
|
$2,028 |
|
|
|
$2,039 |
|
|
|
|
|
|
|
|
|
|
Liability for unfunded credit commitments
|
|
|
232 |
|
|
|
212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance for credit losses
|
|
|
$2,260 |
|
|
|
$2,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses as a percentage of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-end loans
|
|
|
1.55 |
% |
|
|
1.61 |
% |
|
|
|
|
|
|
|
|
|
Nonperforming loans
|
|
|
503 |
|
|
|
500 |
|
|
|
|
|
|
|
|
|
|
Nonperforming assets
|
|
|
400 |
|
|
|
409 |
|
|
|
|
|
|
|
|
|
|
Annualized net charge-offs
|
|
|
295 |
|
|
|
449 |
|
|
|
|
|
|
|
|
|
|
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
Through this simulation,
management estimates the impact on net interest income of
gradual upward or downward changes of market interest rates over
a one-year period, the effect of immediate and sustained
parallel shifts in the yield curve and the effect of immediate
and sustained flattening or steepening of the yield curve. The
table below summarizes the interest rate risk of net interest
income based on forecasts over the succeeding 12 months. At
June 30, 2007, the Companys overall interest rate
risk position was liability sensitive to changes in interest
rates. ALPC policy guidelines limit the estimated change in net
interest income to 4.0 percent of forecasted net interest
income over the succeeding 12 months. At June 30,
2007, and December 31, 2006, the Company was within its
policy guidelines. 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, 2006, 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. ALPC
guidelines limit the change in market value of equity in a 200
basis point parallel rate shock to 15 percent of the market
value of equity assuming interest rates at June 30, 2007.
The up 200 basis point scenario resulted in a 9.2 percent
decrease in the market value of equity at June 30, 2007,
compared with a 6.7 percent decrease at December 31,
2006. The down 200 basis point scenario resulted in a
..6 percent decrease in the market value of equity at
June 30, 2007, compared with a 1.8 percent decrease at
December 31, 2006. At June 30, 2007, and
December 31, 2006, the Company was within its policy
guidelines.
The Company also uses duration of equity as a measure of
interest rate risk. The duration of equity is a measure of the
net market value sensitivity of the assets, liabilities and
derivative positions of the Company. At June 30, 2007, the
duration of assets, liabilities and equity was 2.0 years,
1.8 years and 2.7 years, respectively, compared with
1.8 years, 1.9 years and 1.6 years, respectively,
at December 31, 2006. The duration of equity measures shows
that sensitivity of the market value of equity of the Company
was liability sensitive to changes in interest rates. 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, 2006, for further discussion on
market value of equity modeling.
Use of Derivatives to Manage Interest Rate and Other
Risks In the ordinary
course of business, the Company enters into derivative
transactions to manage its interest rate, prepayment, credit,
price and foreign currency risks (asset and liability
management positions) and to accommodate the business
requirements of its customers (customer-related
positions). Refer to Managements Discussion
and Analysis Use of Derivatives to Manage Interest
Rate and Other Risks in the Companys Annual Report
on Form 10-K for
the year ended December 31, 2006, for further discussion on
the use of derivatives to manage interest rate and other
risks.
Sensitivity of Net Interest Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007 | |
|
December 31, 2006 | |
|
|
| |
|
|
Down 50 | |
|
Up 50 | |
|
Down 200 | |
|
Up 200 | |
|
Down 50 | |
|
Up 50 | |
|
Down 200 | |
|
Up 200 | |
|
|
Immediate | |
|
Immediate | |
|
Gradual | |
|
Gradual | |
|
Immediate | |
|
Immediate | |
|
Gradual | |
|
Gradual | |
| |
Net interest income
|
|
|
1.50% |
|
|
|
(1.82)% |
|
|
|
2.66% |
|
|
|
(3.46)% |
|
|
|
.42% |
|
|
|
(1.43)% |
|
|
|
.92% |
|
|
|
(2.95)% |
|
|
|
|
|
Table 9 |
|
Derivative Positions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007 | |
|
December 31, 2006 | |
|
|
| |
|
|
|
|
Weighted- | |
|
|
|
Weighted- | |
|
|
|
|
Average | |
|
|
|
Average | |
|
|
|
|
|
|
Remaining | |
|
|
|
Remaining | |
|
|
Notional | |
|
Fair | |
|
Maturity | |
|
Notional | |
|
Fair | |
|
Maturity | |
(Dollars in Millions) |
|
Amount | |
|
Value | |
|
In Years | |
|
Amount | |
|
Value | |
|
In Years | |
|
|
Asset and Liability Management Positions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receive fixed/pay floating swaps
|
|
|
$3,380 |
|
|
|
$(137 |
) |
|
|
42.79 |
|
|
|
$5,345 |
|
|
|
$27 |
|
|
|
22.97 |
|
|
|
Pay fixed/receive floating swaps
|
|
|
16,387 |
|
|
|
92 |
|
|
|
2.25 |
|
|
|
12,329 |
|
|
|
|
|
|
|
2.33 |
|
|
|
Futures and forwards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buy
|
|
|
5,318 |
|
|
|
(22 |
) |
|
|
.11 |
|
|
|
4,008 |
|
|
|
|
|
|
|
.22 |
|
|
|
|
Sell
|
|
|
6,814 |
|
|
|
42 |
|
|
|
.13 |
|
|
|
2,816 |
|
|
|
3 |
|
|
|
.09 |
|
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
|
|
|
8,103 |
|
|
|
(4 |
) |
|
|
.13 |
|
|
|
7,544 |
|
|
|
(1 |
) |
|
|
.13 |
|
|
Foreign exchange contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross-currency swaps
|
|
|
1,777 |
|
|
|
40 |
|
|
|
9.30 |
|
|
|
386 |
|
|
|
14 |
|
|
|
8.61 |
|
|
|
Forwards
|
|
|
115 |
|
|
|
(2 |
) |
|
|
.04 |
|
|
|
318 |
|
|
|
1 |
|
|
|
.02 |
|
|
Equity contracts
|
|
|
85 |
|
|
|
(2 |
) |
|
|
2.67 |
|
|
|
86 |
|
|
|
4 |
|
|
|
2.95 |
|
|
Credit default swaps
|
|
|
66 |
|
|
|
(1 |
) |
|
|
4.08 |
|
|
|
25 |
|
|
|
(1 |
) |
|
|
4.72 |
|
|
Customer-related Positions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receive fixed/pay floating swaps
|
|
|
$11,376 |
|
|
|
$(160 |
) |
|
|
5.34 |
|
|
|
$10,371 |
|
|
|
$(42 |
) |
|
|
5.42 |
|
|
|
Pay fixed/receive floating swaps
|
|
|
11,370 |
|
|
|
219 |
|
|
|
5.34 |
|
|
|
10,341 |
|
|
|
98 |
|
|
|
5.42 |
|
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
1,743 |
|
|
|
10 |
|
|
|
1.96 |
|
|
|
1,899 |
|
|
|
5 |
|
|
|
1.92 |
|
|
|
|
Written
|
|
|
1,736 |
|
|
|
(9 |
) |
|
|
1.96 |
|
|
|
1,899 |
|
|
|
(3 |
) |
|
|
1.92 |
|
|
Risk participation agreements (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
201 |
|
|
|
|
|
|
|
7.65 |
|
|
|
206 |
|
|
|
|
|
|
|
6.62 |
|
|
|
Written
|
|
|
532 |
|
|
|
|
|
|
|
5.93 |
|
|
|
356 |
|
|
|
|
|
|
|
6.05 |
|
|
Foreign exchange rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forwards and swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buy
|
|
|
2,321 |
|
|
|
71 |
|
|
|
.40 |
|
|
|
2,092 |
|
|
|
52 |
|
|
|
.46 |
|
|
|
Sell
|
|
|
2,430 |
|
|
|
(64 |
) |
|
|
.37 |
|
|
|
2,033 |
|
|
|
(43 |
) |
|
|
.47 |
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
328 |
|
|
|
(3 |
) |
|
|
.63 |
|
|
|
408 |
|
|
|
(3 |
) |
|
|
.44 |
|
|
|
Written
|
|
|
328 |
|
|
|
3 |
|
|
|
.62 |
|
|
|
408 |
|
|
|
3 |
|
|
|
.44 |
|
|
|
|
|
(a) |
|
At June 30, 2007, the credit equivalent amount was
$2 million and $68 million, compared with
$2 million and $50 million at December 31, 2006,
for purchased and written risk participation agreements,
respectively. |
By their nature, derivative instruments are subject to market
risk. The Company does not utilize derivative instruments for
speculative purposes. Of the Companys $42.0 billion
of total notional amount of asset and liability management
positions at June 30, 2007, $26.8 billion was
designated as either cash flow or fair value hedges or net
investment hedges of foreign operations. The cash flow hedge
derivative positions are interest rate swaps that hedge the
forecasted cash flows from the underlying variable-rate debt.
The fair value hedges are primarily interest rate swaps that
hedge the change in fair value related to interest rate changes
of underlying fixed-rate debt and subordinated obligations.
In addition, the Company uses forward commitments to sell
residential mortgage loans to hedge its interest rate risk
related to residential mortgage loans held for sale. In
connection with its mortgage banking operations, the Company
held $2.5 billion of forward commitments to sell mortgage
loans and $2.4 billion of unfunded mortgage loan
commitments at June 30, 2007, that were derivatives in
accordance with the provisions of the Statement of Financial
Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedge Activities. The unfunded
mortgage loan commitments are reported at fair value as options
in Table 9. The Company also utilizes 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 fair value of its residential
MSRs.
At June 30, 2007, the Company had less than $1 million
in accumulated other comprehensive income related to realized
and unrealized losses on derivatives classified as cash flow
hedges. Unrealized gains and
losses are reflected in earnings when the related cash flows or
hedged transactions occur and offset the related performance of
the hedged items. The estimated amount to be reclassified from
accumulated other comprehensive income into earnings during the
remainder of 2007 and the next 12 months is a loss of
$12 million and $16 million, respectively.
The change in the fair value of all other asset and liability
management positions attributed to hedge ineffectiveness
recorded in noninterest income was not material for the second
quarter and first six months of 2007. Gains or losses on
customer-related positions were not material for the second
quarter and first six months of 2007.
The Company enters into derivatives to protect its net
investment in certain foreign operations. The Company uses
forward commitments to sell specified amounts of certain foreign
currencies to hedge fluctuations in foreign currency exchange
rates. The net amount of gains or losses included in the
cumulative translation adjustment for the second quarter and
first six months of 2007 was not material.
Market Risk Management In
addition to interest rate risk, the Company is exposed to other
forms of market risk as a consequence of conducting normal
trading activities. These trading activities principally support
the risk management processes of the Companys customers
including their management of foreign currency and interest rate
risks. The Company also manages market risk of non-trading
business activities including its MSRs and loans held-for-sale.
Value at Risk (VaR) is a key measure of market risk
for the Company. Theoretically, VaR represents the maximum
amount that the Company has placed at risk of loss, with a
ninety-ninth percentile degree of confidence, to adverse market
movements in the course of its risk taking activities.
The Companys market valuation risk for trading and
non-trading positions, as estimated by the VaR analysis, was
$1 million and $13 million, respectively, at
June 30, 2007, compared with $1 million and
$30 million, respectively, at December 31, 2006. At
June 30, 2007, the Companys VaR limit was
$45 million. Refer to Managements Discussion
and Analysis Market Risk Management in the
Companys Annual Report on
Form 10-K for the
year ended December 31, 2006, for further discussion on
market risk management.
Liquidity Risk Management
ALPC establishes policies, as
well as analyzes and manages liquidity, to ensure that adequate
funds are available to meet normal operating requirements in
addition to unexpected customer demands for funds in a timely
and cost-effective manner. Liquidity management is viewed from
long-term and short-term perspectives, 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. Refer to
Managements Discussion and Analysis
Liquidity Risk Management in the Companys Annual
Report on
Form 10-K for the
year ended December 31, 2006, for further discussion on
liquidity risk management.
At June 30, 2007, parent company long-term debt outstanding
was $14.5 billion, compared with $11.4 billion at
December 31, 2006. The $3.1 billion increase was
primarily due to the issuances of $3.0 billion of
convertible senior debentures and $.5 billion of junior
subordinated debentures during the first six months of 2007. As
of June 30, 2007, there was $1.3 billion of parent
company debt scheduled to mature during the remainder of 2007.
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
$1.2 billion at June 30, 2007.
Capital Management The
Company is committed to managing capital for maximum shareholder
benefit and maintaining strong protection for depositors and
creditors. In the first six months of 2007, the Company returned
139 percent of earnings to its common shareholders through
a combination of dividends and net share repurchases. The
Company also manages its capital to exceed regulatory capital
requirements for well-capitalized bank holding companies.
Table 10 provides a summary of capital ratios as of
June 30, 2007, and December 31, 2006. All regulatory
ratios continue to be in excess of regulatory
well-capitalized requirements. Total
shareholders equity was $20.3 billion at
June 30, 2007, compared with $21.2 billion at
December 31, 2006. The decrease was the result of share
repurchases and dividends, partially offset by corporate
earnings.
On August 3, 2006, the Company announced that the Board of
Directors approved an authorization to repurchase
150 million shares of common stock through
December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
June 30, | |
|
December 31, | |
(Dollars in Millions) |
|
2007 | |
|
2006 | |
|
Tier 1 capital
|
|
|
$16,876 |
|
|
|
$17,036 |
|
|
As a percent of risk-weighted assets
|
|
|
8.5 |
% |
|
|
8.8 |
% |
|
As a percent of adjusted quarterly average assets (leverage
ratio)
|
|
|
7.9 |
% |
|
|
8.2 |
% |
Total risk-based capital
|
|
|
$25,709 |
|
|
|
$24,495 |
|
|
As a percent of risk-weighted assets
|
|
|
13.0 |
% |
|
|
12.6 |
% |
Tangible common equity
|
|
|
$11,194 |
|
|
|
$11,703 |
|
|
As a percent of tangible assets
|
|
|
5.2 |
% |
|
|
5.5 |
% |
|
The following table provides a detailed analysis of all shares
repurchased under this authorization during the second quarter
of 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum | |
|
|
Total Number | |
|
|
|
Number of | |
|
|
of Shares | |
|
|
|
Shares that May | |
|
|
Purchased as | |
|
Average | |
|
Yet Be Purchased | |
|
|
Part of the | |
|
Price Paid | |
|
Under the | |
Time Period |
|
Program | |
|
per Share | |
|
Program | |
|
April
|
|
|
5,052,241 |
|
|
|
$34.61 |
|
|
|
82,529,448 |
|
May
|
|
|
5,462,142 |
|
|
|
34.50 |
|
|
|
77,067,306 |
|
June
|
|
|
7,167,833 |
|
|
|
33.82 |
|
|
|
69,899,473 |
|
|
|
|
Total
|
|
|
17,682,216 |
|
|
|
$34.26 |
|
|
|
69,899,473 |
|
|
LINE OF BUSINESS FINANCIAL REVIEW
Within the Company, financial performance is measured by major
lines of business, which include Wholesale Banking, Consumer
Banking, Wealth Management, Payment Services, and Treasury and
Corporate Support. These operating segments are components of
the Company about which financial information is available and
is evaluated regularly 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, 2006, 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 2007, certain organization and methodology
changes were made and, accordingly, 2006 results were restated
and presented on a comparable basis.
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 and
public sector clients. Wholesale Banking contributed
$278 million of the Companys net income in the second
quarter and $553 million in the first six months of 2007,
or decreases of $27 million (8.9 percent) and
$59 million (9.6 percent), respectively, compared with
the same periods of 2006. The decreases were primarily driven by
lower total net revenue, higher total noninterest expense and an
increase in the provision for credit losses.
Total net revenue decreased $19 million (2.7 percent)
in the second quarter and $45 million (3.2 percent) in
the first six months of 2007, compared with the same periods of
2006. Net interest income, on a taxable-equivalent basis,
decreased $32 million (6.6 percent) in the second
quarter and $58 million (6.0 percent) in the first six
months of 2007, compared with the same periods of 2006. The
decreases were driven by tighter credit spreads and a decline in
average noninterest-bearing deposit balances as customers
utilized their liquidity to fund business growth and to generate
higher returns by investing excess funds in interest-bearing
deposit and sweep products. The decreases were partially offset
by growth in average loan balances and the margin benefit of
deposits. The increase in average loans was driven by commercial
loan growth during 2006 and the first six months of 2007.
Noninterest income increased $13 million (5.8 percent)
in the second quarter and $13 million (2.9 percent) in
the first six months of 2007, compared with the same periods of
2006, as an increase in treasury management revenue was offset
by lower capital markets revenue.
Total noninterest expense increased $11 million
(4.8 percent) in the second quarter and $13 million
(2.8 percent) in the first six months of 2007, compared
with the same periods of 2006, primarily as a result of
increases in personnel expenses related to investments in select
business units. The provision for credit losses increased
$12 million in the second quarter and $33 million in
the first six months of 2007, compared with the same periods of
2006. The unfavorable
|
|
|
Table 11 |
|
Line of Business Financial Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale | |
|
Consumer | |
|
|
Banking | |
|
Banking | |
|
|
| |
|
|
|
|
|
|
Percent | |
|
|
|
Percent | |
Three Months Ended June 30 (Dollars in Millions) |
|
2007 | |
|
2006 | |
|
Change | |
|
2007 | |
|
2006 | |
|
Change | |
|
Condensed Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (taxable-equivalent basis)
|
|
|
$453 |
|
|
|
$485 |
|
|
|
(6.6 |
)% |
|
|
$968 |
|
|
|
$967 |
|
|
|
.1 |
% |
Noninterest income
|
|
|
238 |
|
|
|
223 |
|
|
|
6.7 |
|
|
|
472 |
|
|
|
466 |
|
|
|
1.3 |
|
Securities gains (losses), net
|
|
|
|
|
|
|
2 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue
|
|
|
691 |
|
|
|
710 |
|
|
|
(2.7 |
) |
|
|
1,440 |
|
|
|
1,433 |
|
|
|
.5 |
|
Noninterest expense
|
|
|
238 |
|
|
|
227 |
|
|
|
4.8 |
|
|
|
633 |
|
|
|
599 |
|
|
|
5.7 |
|
Other intangibles
|
|
|
4 |
|
|
|
4 |
|
|
|
|
|
|
|
13 |
|
|
|
12 |
|
|
|
8.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
242 |
|
|
|
231 |
|
|
|
4.8 |
|
|
|
646 |
|
|
|
611 |
|
|
|
5.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision and income taxes
|
|
|
449 |
|
|
|
479 |
|
|
|
(6.3 |
) |
|
|
794 |
|
|
|
822 |
|
|
|
(3.4 |
) |
Provision for credit losses
|
|
|
12 |
|
|
|
|
|
|
|
* |
|
|
|
77 |
|
|
|
55 |
|
|
|
40.0 |
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
437 |
|
|
|
479 |
|
|
|
(8.8 |
) |
|
|
717 |
|
|
|
767 |
|
|
|
(6.5 |
) |
Income taxes and taxable-equivalent adjustment
|
|
|
159 |
|
|
|
174 |
|
|
|
(8.6 |
) |
|
|
261 |
|
|
|
279 |
|
|
|
(6.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$278 |
|
|
|
$305 |
|
|
|
(8.9 |
) |
|
|
$456 |
|
|
|
$488 |
|
|
|
(6.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
Average Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
$34,410 |
|
|
|
$33,266 |
|
|
|
3.4 |
% |
|
|
$6,492 |
|
|
|
$6,386 |
|
|
|
1.7 |
% |
Commercial real estate
|
|
|
16,687 |
|
|
|
17,344 |
|
|
|
(3.8 |
) |
|
|
11,079 |
|
|
|
10,686 |
|
|
|
3.7 |
|
Residential mortgages
|
|
|
70 |
|
|
|
54 |
|
|
|
29.6 |
|
|
|
21,300 |
|
|
|
20,363 |
|
|
|
4.6 |
|
Retail
|
|
|
66 |
|
|
|
38 |
|
|
|
73.7 |
|
|
|
35,514 |
|
|
|
33,618 |
|
|
|
5.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
51,233 |
|
|
|
50,702 |
|
|
|
1.0 |
|
|
|
74,385 |
|
|
|
71,053 |
|
|
|
4.7 |
|
Goodwill
|
|
|
1,329 |
|
|
|
1,329 |
|
|
|
|
|
|
|
2,218 |
|
|
|
2,108 |
|
|
|
5.2 |
|
Other intangible assets
|
|
|
40 |
|
|
|
55 |
|
|
|
(27.3 |
) |
|
|
1,682 |
|
|
|
1,453 |
|
|
|
15.8 |
|
Assets
|
|
|
56,869 |
|
|
|
56,494 |
|
|
|
.7 |
|
|
|
85,170 |
|
|
|
80,777 |
|
|
|
5.4 |
|
Noninterest-bearing deposits
|
|
|
11,112 |
|
|
|
12,127 |
|
|
|
(8.4 |
) |
|
|
12,175 |
|
|
|
12,672 |
|
|
|
(3.9 |
) |
Interest checking
|
|
|
4,819 |
|
|
|
3,175 |
|
|
|
51.8 |
|
|
|
17,988 |
|
|
|
17,768 |
|
|
|
1.2 |
|
Savings products
|
|
|
5,054 |
|
|
|
5,572 |
|
|
|
(9.3 |
) |
|
|
19,671 |
|
|
|
21,365 |
|
|
|
(7.9 |
) |
Time deposits
|
|
|
9,392 |
|
|
|
13,254 |
|
|
|
(29.1 |
) |
|
|
20,094 |
|
|
|
18,483 |
|
|
|
8.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
30,377 |
|
|
|
34,128 |
|
|
|
(11.0 |
) |
|
|
69,928 |
|
|
|
70,288 |
|
|
|
(.5 |
) |
Shareholders equity
|
|
|
5,720 |
|
|
|
5,729 |
|
|
|
(.2 |
) |
|
|
6,353 |
|
|
|
6,393 |
|
|
|
(.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale | |
|
Consumer | |
|
|
Banking | |
|
Banking | |
|
|
| |
|
|
|
|
Percent | |
|
|
|
Percent | |
Six Months Ended June 30 (Dollars in Millions) |
|
2007 | |
|
2006 | |
|
Change | |
|
2007 | |
|
2006 | |
|
Change | |
|
Condensed Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (taxable-equivalent basis)
|
|
|
$906 |
|
|
|
$964 |
|
|
|
(6.0 |
)% |
|
|
$1,930 |
|
|
|
$1,914 |
|
|
|
.8 |
% |
Noninterest income
|
|
|
463 |
|
|
|
448 |
|
|
|
3.3 |
|
|
|
902 |
|
|
|
849 |
|
|
|
6.2 |
|
Securities gains (losses), net
|
|
|
|
|
|
|
2 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue
|
|
|
1,369 |
|
|
|
1,414 |
|
|
|
(3.2 |
) |
|
|
2,832 |
|
|
|
2,763 |
|
|
|
2.5 |
|
Noninterest expense
|
|
|
465 |
|
|
|
452 |
|
|
|
2.9 |
|
|
|
1,258 |
|
|
|
1,204 |
|
|
|
4.5 |
|
Other intangibles
|
|
|
8 |
|
|
|
8 |
|
|
|
|
|
|
|
27 |
|
|
|
25 |
|
|
|
8.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
473 |
|
|
|
460 |
|
|
|
2.8 |
|
|
|
1,285 |
|
|
|
1,229 |
|
|
|
4.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision and income taxes
|
|
|
896 |
|
|
|
954 |
|
|
|
(6.1 |
) |
|
|
1,547 |
|
|
|
1,534 |
|
|
|
.8 |
|
Provision for credit losses
|
|
|
26 |
|
|
|
(7 |
) |
|
|
* |
|
|
|
146 |
|
|
|
117 |
|
|
|
24.8 |
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
870 |
|
|
|
961 |
|
|
|
(9.5 |
) |
|
|
1,401 |
|
|
|
1,417 |
|
|
|
(1.1 |
) |
Income taxes and taxable-equivalent adjustment
|
|
|
317 |
|
|
|
349 |
|
|
|
(9.2 |
) |
|
|
510 |
|
|
|
516 |
|
|
|
(1.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$553 |
|
|
|
$612 |
|
|
|
(9.6 |
) |
|
|
$891 |
|
|
|
$901 |
|
|
|
(1.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
Average Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
$34,546 |
|
|
|
$32,840 |
|
|
|
5.2 |
% |
|
|
$6,439 |
|
|
|
$6,351 |
|
|
|
1.4 |
% |
Commercial real estate
|
|
|
16,759 |
|
|
|
17,309 |
|
|
|
(3.2 |
) |
|
|
11,074 |
|
|
|
10,639 |
|
|
|
4.1 |
|
Residential mortgages
|
|
|
65 |
|
|
|
56 |
|
|
|
16.1 |
|
|
|
21,171 |
|
|
|
20,418 |
|
|
|
3.7 |
|
Retail
|
|
|
66 |
|
|
|
40 |
|
|
|
65.0 |
|
|
|
35,413 |
|
|
|
33,528 |
|
|
|
5.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
51,436 |
|
|
|
50,245 |
|
|
|
2.4 |
|
|
|
74,097 |
|
|
|
70,936 |
|
|
|
4.5 |
|
Goodwill
|
|
|
1,329 |
|
|
|
1,329 |
|
|
|
|
|
|
|
2,212 |
|
|
|
2,106 |
|
|
|
5.0 |
|
Other intangible assets
|
|
|
42 |
|
|
|
57 |
|
|
|
(26.3 |
) |
|
|
1,640 |
|
|
|
1,393 |
|
|
|
17.7 |
|
Assets
|
|
|
56,803 |
|
|
|
55,837 |
|
|
|
1.7 |
|
|
|
84,571 |
|
|
|
80,408 |
|
|
|
5.2 |
|
Noninterest-bearing deposits
|
|
|
10,963 |
|
|
|
12,063 |
|
|
|
(9.1 |
) |
|
|
12,145 |
|
|
|
12,673 |
|
|
|
(4.2 |
) |
Interest checking
|
|
|
4,662 |
|
|
|
3,149 |
|
|
|
48.0 |
|
|
|
17,896 |
|
|
|
17,702 |
|
|
|
1.1 |
|
Savings products
|
|
|
5,391 |
|
|
|
5,431 |
|
|
|
(.7 |
) |
|
|
19,736 |
|
|
|
21,848 |
|
|
|
(9.7 |
) |
Time deposits
|
|
|
10,567 |
|
|
|
12,750 |
|
|
|
(17.1 |
) |
|
|
19,997 |
|
|
|
18,252 |
|
|
|
9.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
31,583 |
|
|
|
33,393 |
|
|
|
(5.4 |
) |
|
|
69,774 |
|
|
|
70,475 |
|
|
|
(1.0 |
) |
Shareholders equity
|
|
|
5,756 |
|
|
|
5,653 |
|
|
|
1.8 |
|
|
|
6,391 |
|
|
|
6,323 |
|
|
|
1.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wealth | |
|
Payment | |
|
Treasury and | |
|
Consolidated | |
|
|
Management | |
|
Services | |
|
Corporate Support | |
|
Company | |
|
|
|
|
|
Percent | |
|
|
|
Percent | |
|
|
|
Percent | |
|
|
|
Percent | |
|
|
2007 | |
|
2006 | |
|
Change | |
|
2007 | |
|
2006 | |
|
Change | |
|
2007 | |
|
2006 | |
|
Change | |
|
2007 | |
|
2006 | |
|
Change | |
|
|
|
|
|
$120 |
|
|
|
$128 |
|
|
|
(6.3 |
)% |
|
|
$166 |
|
|
|
$156 |
|
|
|
6.4 |
% |
|
|
$(57 |
) |
|
|
$(39 |
) |
|
|
(46.2 |
)% |
|
|
$1,650 |
|
|
|
$1,697 |
|
|
|
(2.8 |
)% |
|
|
|
403 |
|
|
|
369 |
|
|
|
9.2 |
|
|
|
733 |
|
|
|
654 |
|
|
|
12.1 |
|
|
|
6 |
|
|
|
40 |
|
|
|
(85.0 |
) |
|
|
1,852 |
|
|
|
1,752 |
|
|
|
5.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
1 |
|
|
|
* |
|
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
523 |
|
|
|
497 |
|
|
|
5.2 |
|
|
|
899 |
|
|
|
810 |
|
|
|
11.0 |
|
|
|
(48 |
) |
|
|
2 |
|
|
|
* |
|
|
|
3,505 |
|
|
|
3,452 |
|
|
|
1.5 |
|
|
|
|
234 |
|
|
|
238 |
|
|
|
(1.7 |
) |
|
|
336 |
|
|
|
297 |
|
|
|
13.1 |
|
|
|
104 |
|
|
|
80 |
|
|
|
30.0 |
|
|
|
1,545 |
|
|
|
1,441 |
|
|
|
7.2 |
|
|
|
|
23 |
|
|
|
22 |
|
|
|
4.5 |
|
|
|
55 |
|
|
|
51 |
|
|
|
7.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95 |
|
|
|
89 |
|
|
|
6.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
257 |
|
|
|
260 |
|
|
|
(1.2 |
) |
|
|
391 |
|
|
|
348 |
|
|
|
12.4 |
|
|
|
104 |
|
|
|
80 |
|
|
|
30.0 |
|
|
|
1,640 |
|
|
|
1,530 |
|
|
|
7.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
266 |
|
|
|
237 |
|
|
|
12.2 |
|
|
|
508 |
|
|
|
462 |
|
|
|
10.0 |
|
|
|
(152 |
) |
|
|
(78 |
) |
|
|
(94.9 |
) |
|
|
1,865 |
|
|
|
1,922 |
|
|
|
(3.0 |
) |
|
|
|
|
|
|
|
2 |
|
|
|
* |
|
|
|
101 |
|
|
|
65 |
|
|
|
55.4 |
|
|
|
1 |
|
|
|
3 |
|
|
|
(66.7 |
) |
|
|
191 |
|
|
|
125 |
|
|
|
52.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
266 |
|
|
|
235 |
|
|
|
13.2 |
|
|
|
407 |
|
|
|
397 |
|
|
|
2.5 |
|
|
|
(153 |
) |
|
|
(81 |
) |
|
|
(88.9 |
) |
|
|
1,674 |
|
|
|
1,797 |
|
|
|
(6.8 |
) |
|
|
|
97 |
|
|
|
86 |
|
|
|
12.8 |
|
|
|
148 |
|
|
|
144 |
|
|
|
2.8 |
|
|
|
(147 |
) |
|
|
(87 |
) |
|
|
(69.0 |
) |
|
|
518 |
|
|
|
596 |
|
|
|
(13.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$169 |
|
|
|
$149 |
|
|
|
13.4 |
|
|
|
$259 |
|
|
|
$253 |
|
|
|
2.4 |
|
|
|
$(6 |
) |
|
|
$6 |
|
|
|
* |
|
|
|
$1,156 |
|
|
|
$1,201 |
|
|
|
(3.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1,991 |
|
|
|
$1,539 |
|
|
|
29.4 |
% |
|
|
$4,160 |
|
|
|
$3,759 |
|
|
|
10.7 |
% |
|
|
$144 |
|
|
|
$120 |
|
|
|
20.0 |
% |
|
|
$47,197 |
|
|
|
$45,070 |
|
|
|
4.7 |
% |
|
|
|
672 |
|
|
|
702 |
|
|
|
(4.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65 |
|
|
|
63 |
|
|
|
3.2 |
|
|
|
28,503 |
|
|
|
28,795 |
|
|
|
(1.0 |
) |
|
|
|
457 |
|
|
|
447 |
|
|
|
2.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
4 |
|
|
|
|
|
|
|
21,831 |
|
|
|
20,868 |
|
|
|
4.6 |
|
|
|
|
2,335 |
|
|
|
2,425 |
|
|
|
(3.7 |
) |
|
|
10,167 |
|
|
|
8,512 |
|
|
|
19.4 |
|
|
|
40 |
|
|
|
44 |
|
|
|
(9.1 |
) |
|
|
48,122 |
|
|
|
44,637 |
|
|
|
7.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,455 |
|
|
|
5,113 |
|
|
|
6.7 |
|
|
|
14,327 |
|
|
|
12,271 |
|
|
|
16.8 |
|
|
|
253 |
|
|
|
231 |
|
|
|
9.5 |
|
|
|
145,653 |
|
|
|
139,370 |
|
|
|
4.5 |
|
|
|
|
1,553 |
|
|
|
1,378 |
|
|
|
12.7 |
|
|
|
2,489 |
|
|
|
2,463 |
|
|
|
1.1 |
|
|
|
|
|
|
|
1 |
|
|
|
* |
|
|
|
7,589 |
|
|
|
7,279 |
|
|
|
4.3 |
|
|
|
|
425 |
|
|
|
473 |
|
|
|
(10.1 |
) |
|
|
1,122 |
|
|
|
1,165 |
|
|
|
(3.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,269 |
|
|
|
3,146 |
|
|
|
3.9 |
|
|
|
|
8,027 |
|
|
|
7,533 |
|
|
|
6.6 |
|
|
|
19,805 |
|
|
|
17,295 |
|
|
|
14.5 |
|
|
|
52,151 |
|
|
|
50,308 |
|
|
|
3.7 |
|
|
|
222,022 |
|
|
|
212,407 |
|
|
|
4.5 |
|
|
|
|
4,270 |
|
|
|
3,682 |
|
|
|
16.0 |
|
|
|
367 |
|
|
|
298 |
|
|
|
23.2 |
|
|
|
53 |
|
|
|
170 |
|
|
|
(68.8 |
) |
|
|
27,977 |
|
|
|
28,949 |
|
|
|
(3.4 |
) |
|
|
|
3,047 |
|
|
|
2,387 |
|
|
|
27.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
3 |
|
|
|
33.3 |
|
|
|
25,858 |
|
|
|
23,333 |
|
|
|
10.8 |
|
|
|
|
5,251 |
|
|
|
5,702 |
|
|
|
(7.9 |
) |
|
|
21 |
|
|
|
19 |
|
|
|
10.5 |
|
|
|
49 |
|
|
|
43 |
|
|
|
14.0 |
|
|
|
30,046 |
|
|
|
32,701 |
|
|
|
(8.1 |
) |
|
|
|
3,703 |
|
|
|
2,859 |
|
|
|
29.5 |
|
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
1,902 |
|
|
|
1,651 |
|
|
|
15.2 |
|
|
|
35,094 |
|
|
|
36,250 |
|
|
|
(3.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,271 |
|
|
|
14,630 |
|
|
|
11.2 |
|
|
|
391 |
|
|
|
320 |
|
|
|
22.2 |
|
|
|
2,008 |
|
|
|
1,867 |
|
|
|
7.6 |
|
|
|
118,975 |
|
|
|
121,233 |
|
|
|
(1.9 |
) |
|
|
|
2,475 |
|
|
|
2,339 |
|
|
|
5.8 |
|
|
|
4,842 |
|
|
|
4,744 |
|
|
|
2.1 |
|
|
|
1,505 |
|
|
|
1,351 |
|
|
|
11.4 |
|
|
|
20,895 |
|
|
|
20,556 |
|
|
|
1.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wealth | |
|
Payment | |
|
Treasury and | |
|
Consolidated | |
|
|
Management | |
|
Services | |
|
Corporate Support | |
|
Company | |
|
|
|
|
|
Percent | |
|
|
|
Percent | |
|
|
|
Percent | |
|
|
|
Percent | |
|
|
2007 | |
|
2006 | |
|
Change | |
|
2007 | |
|
2006 | |
|
Change | |
|
2007 | |
|
2006 | |
|
Change | |
|
2007 | |
|
2006 | |
|
Change | |
|
|
|
|
|
$241 |
|
|
|
$253 |
|
|
|
(4.7 |
)% |
|
|
$335 |
|
|
|
$319 |
|
|
|
5.0 |
% |
|
|
$(96 |
) |
|
|
$(28 |
) |
|
|
* |
% |
|
|
$3,316 |
|
|
|
$3,422 |
|
|
|
(3.1 |
)% |
|
|
|
777 |
|
|
|
719 |
|
|
|
8.1 |
|
|
|
1,391 |
|
|
|
1,244 |
|
|
|
11.8 |
|
|
|
14 |
|
|
|
106 |
|
|
|
(86.8 |
) |
|
|
3,547 |
|
|
|
3,366 |
|
|
|
5.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
1 |
|
|
|
* |
|
|
|
4 |
|
|
|
3 |
|
|
|
33.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,018 |
|
|
|
972 |
|
|
|
4.7 |
|
|
|
1,726 |
|
|
|
1,563 |
|
|
|
10.4 |
|
|
|
(78 |
) |
|
|
79 |
|
|
|
* |
|
|
|
6,867 |
|
|
|
6,791 |
|
|
|
1.1 |
|
|
|
|
466 |
|
|
|
475 |
|
|
|
(1.9 |
) |
|
|
656 |
|
|
|
591 |
|
|
|
11.0 |
|
|
|
151 |
|
|
|
134 |
|
|
|
12.7 |
|
|
|
2,996 |
|
|
|
2,856 |
|
|
|
4.9 |
|
|
|
|
46 |
|
|
|
44 |
|
|
|
4.5 |
|
|
|
108 |
|
|
|
97 |
|
|
|
11.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
189 |
|
|
|
174 |
|
|
|
8.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
512 |
|
|
|
519 |
|
|
|
(1.3 |
) |
|
|
764 |
|
|
|
688 |
|
|
|
11.0 |
|
|
|
151 |
|
|
|
134 |
|
|
|
12.7 |
|
|
|
3,185 |
|
|
|
3,030 |
|
|
|
5.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
506 |
|
|
|
453 |
|
|
|
11.7 |
|
|
|
962 |
|
|
|
875 |
|
|
|
9.9 |
|
|
|
(229 |
) |
|
|
(55 |
) |
|
|
* |
|
|
|
3,682 |
|
|
|
3,761 |
|
|
|
(2.1 |
) |
|
|
|
|
|
|
|
2 |
|
|
|
* |
|
|
|
194 |
|
|
|
125 |
|
|
|
55.2 |
|
|
|
2 |
|
|
|
3 |
|
|
|
(33.3 |
) |
|
|
368 |
|
|
|
240 |
|
|
|
53.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
506 |
|
|
|
451 |
|
|
|
12.2 |
|
|
|
768 |
|
|
|
750 |
|
|
|
2.4 |
|
|
|
(231 |
) |
|
|
(58 |
) |
|
|
* |
|
|
|
3,314 |
|
|
|
3,521 |
|
|
|
(5.9 |
) |
|
|
|
184 |
|
|
|
165 |
|
|
|
11.5 |
|
|
|
279 |
|
|
|
272 |
|
|
|
2.6 |
|
|
|
(262 |
) |
|
|
(135 |
) |
|
|
(94.1 |
) |
|
|
1,028 |
|
|
|
1,167 |
|
|
|
(11.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$322 |
|
|
|
$286 |
|
|
|
12.6 |
|
|
|
$489 |
|
|
|
$478 |
|
|
|
2.3 |
|
|
|
$31 |
|
|
|
$77 |
|
|
|
(59.7 |
) |
|
|
$2,286 |
|
|
|
$2,354 |
|
|
|
(2.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1,979 |
|
|
|
$1,528 |
|
|
|
29.5 |
% |
|
|
$3,998 |
|
|
|
$3,647 |
|
|
|
9.6 |
% |
|
|
$141 |
|
|
|
$135 |
|
|
|
4.4 |
% |
|
|
$47,103 |
|
|
|
$44,501 |
|
|
|
5.8 |
% |
|
|
|
675 |
|
|
|
694 |
|
|
|
(2.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65 |
|
|
|
64 |
|
|
|
1.6 |
|
|
|
28,573 |
|
|
|
28,706 |
|
|
|
(.5 |
) |
|
|
|
460 |
|
|
|
449 |
|
|
|
2.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
4 |
|
|
|
|
|
|
|
21,700 |
|
|
|
20,927 |
|
|
|
3.7 |
|
|
|
|
2,340 |
|
|
|
2,415 |
|
|
|
(3.1 |
) |
|
|
9,941 |
|
|
|
8,417 |
|
|
|
18.1 |
|
|
|
40 |
|
|
|
45 |
|
|
|
(11.1 |
) |
|
|
47,800 |
|
|
|
44,445 |
|
|
|
7.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,454 |
|
|
|
5,086 |
|
|
|
7.2 |
|
|
|
13,939 |
|
|
|
12,064 |
|
|
|
15.5 |
|
|
|
250 |
|
|
|
248 |
|
|
|
.8 |
|
|
|
145,176 |
|
|
|
138,579 |
|
|
|
4.8 |
|
|
|
|
1,551 |
|
|
|
1,376 |
|
|
|
12.7 |
|
|
|
2,473 |
|
|
|
2,376 |
|
|
|
4.1 |
|
|
|
14 |
|
|
|
1 |
|
|
|
* |
|
|
|
7,579 |
|
|
|
7,188 |
|
|
|
5.4 |
|
|
|
|
437 |
|
|
|
484 |
|
|
|
(9.7 |
) |
|
|
1,105 |
|
|
|
1,110 |
|
|
|
(.5 |
) |
|
|
21 |
|
|
|
|
|
|
|
* |
|
|
|
3,245 |
|
|
|
3,044 |
|
|
|
6.6 |
|
|
|
|
8,023 |
|
|
|
7,512 |
|
|
|
6.8 |
|
|
|
19,301 |
|
|
|
16,884 |
|
|
|
14.3 |
|
|
|
52,076 |
|
|
|
50,581 |
|
|
|
3.0 |
|
|
|
220,774 |
|
|
|
211,222 |
|
|
|
4.5 |
|
|
|
|
4,262 |
|
|
|
3,662 |
|
|
|
16.4 |
|
|
|
410 |
|
|
|
296 |
|
|
|
38.5 |
|
|
|
48 |
|
|
|
199 |
|
|
|
(75.9 |
) |
|
|
27,828 |
|
|
|
28,893 |
|
|
|
(3.7 |
) |
|
|
|
2,908 |
|
|
|
2,384 |
|
|
|
22.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
3 |
|
|
|
33.3 |
|
|
|
25,470 |
|
|
|
23,238 |
|
|
|
9.6 |
|
|
|
|
5,370 |
|
|
|
5,552 |
|
|
|
(3.3 |
) |
|
|
21 |
|
|
|
19 |
|
|
|
10.5 |
|
|
|
58 |
|
|
|
33 |
|
|
|
75.8 |
|
|
|
30,576 |
|
|
|
32,883 |
|
|
|
(7.0 |
) |
|
|
|
3,784 |
|
|
|
2,449 |
|
|
|
54.5 |
|
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
1,622 |
|
|
|
2,233 |
|
|
|
(27.4 |
) |
|
|
35,973 |
|
|
|
35,687 |
|
|
|
.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,324 |
|
|
|
14,047 |
|
|
|
16.2 |
|
|
|
434 |
|
|
|
318 |
|
|
|
36.5 |
|
|
|
1,732 |
|
|
|
2,468 |
|
|
|
(29.8 |
) |
|
|
119,847 |
|
|
|
120,701 |
|
|
|
(.7 |
) |
|
|
|
2,486 |
|
|
|
2,342 |
|
|
|
6.1 |
|
|
|
4,793 |
|
|
|
4,555 |
|
|
|
5.2 |
|
|
|
1,626 |
|
|
|
1,480 |
|
|
|
9.9 |
|
|
|
21,052 |
|
|
|
20,353 |
|
|
|
3.4 |
|
|
|
|
changes were primarily due to an increase in gross charge-offs.
Credit quality continued to be strong within this business
segment. Nonperforming assets were $230 million at
June 30, 2007, $226 million at March 31, 2007,
and $218 million at June 30, 2006. Nonperforming
assets as a percentage of period-end loans were .46 percent
at June 30, 2007, .44 percent at March 31, 2007,
and .43 percent at June 30, 2006. Refer to the
Corporate Risk Profile section for further
information on factors impacting the credit quality of the loan
portfolios.
Consumer Banking delivers
products and services through banking offices, telephone
servicing and sales, on-line services, direct mail and ATMs. 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
$456 million of the Companys net income in the second
quarter and $891 million in the first six months of 2007,
or decreases of $32 million (6.6 percent) and
$10 million (1.1 percent), respectively, compared with
the same periods of 2006. The retail banking division
contributed $428 million of the total contribution in the
second quarter and $838 million in the first six months of
2007, or decreases of 5.9 percent and 3.0 percent,
respectively, compared with the same periods in the prior year.
Total net revenue increased $7 million (.5 percent) in
the second quarter and $69 million (2.5 percent) in
the first six months of 2007, compared with the same periods of
2006. Net interest income, on a taxable-equivalent basis,
increased $1 million (.1 percent) in the second
quarter and $16 million (.8 percent) in the first six
months of 2007, compared with the same periods of 2006. The
year-over-year increases in net interest income were due to
growth in average loans, higher loan fees and the funding
benefit of deposits. Partially offsetting these increases were
reduced spreads on commercial and retail loans due to
competitive pricing within the Companys markets. The
increases in average loan balances reflected growth in all loan
categories, with the largest increase in retail loans. The
growth in retail loans was principally driven by an increase in
installment and home equity loans, partially offset by a
reduction in retail leasing balances due to customer demand for
installment loan products and pricing competition. The
year-over-year decreases in average deposits reflected a
reduction in savings and noninterest-bearing deposit products,
partially offset by growth in time deposits and interest
checking. Average time deposit balances grew $1.6 billion
(8.7 percent) in the second quarter and $1.7 billion
(9.6 percent) in the first six months of 2007, compared
with the same periods of 2006, as a portion of
noninterest-bearing and money market balances migrated to
fixed-rate time deposit products. Average savings balances
declined $1.7 billion (7.9 percent), in the second
quarter and $2.1 billion (9.7 percent) in the first
six months of 2007, compared with the same periods of 2006,
primarily related to a decrease in money market account
balances. Fee-based noninterest income increased $6 million
(1.3 percent) in the second quarter and $53 million
(6.2 percent) in the first six months of 2007, compared
with the same periods of 2006. The increase in fee-based revenue
in the second quarter of 2007, compared to the same period of
2006 was driven primarily by an increase in deposit service
charges. The increase in fee-based revenue in the first six
months of 2007, compared to the same period of 2006, was driven
by an increase in mortgage banking revenue, principally related
to the adoption of fair value accounting for MSRs, as well as an
increase in deposit service charges. These increases were
partially offset by lower revenue related to student loan sales.
Total noninterest expense increased $35 million
(5.7 percent) in the second quarter and $56 million
(4.6 percent) in the first six months of 2007, compared
with the same periods of 2006. The increases were primarily
attributable to increases in compensation and employee benefit
expenses which reflected the net addition, including the impact
of recent acquisitions, of 25 in-store and 40 traditional
branches at June 30, 2007, compared with June 30, 2006.
The provision for credit losses increased $22 million
(40.0 percent) in the second quarter and $29 million
(24.8 percent) in the first six months of 2007, compared
with the same periods of 2006. The increases were attributable
to higher net charge-offs. As a percentage of average loans
outstanding on an annualized basis, net charge-offs increased to
..42 percent in the second quarter of 2007, compared with
..31 percent in the second quarter of 2006. Commercial and
commercial real estate loan net charge-offs increased
$4 million (40.0 percent) in the second quarter of
2007, compared with the second quarter of 2006. Retail loan and
residential mortgage net charge-offs increased $18 million
(40.0 percent) in the second quarter of 2007, compared with
the second quarter of 2006, reflecting higher levels of
bankruptcy-related losses. Nonperforming assets were
$300 million at June 30, 2007, $312 million at
March 31, 2007, and $275 million at June 30,
2006. Nonperforming assets as a percentage of period-end loans
were .42 percent at
June 30, 2007, .44 percent at March 31, 2007, and
..40 percent at June 30, 2006. Refer to the
Corporate Risk Profile section for further
information on factors impacting the credit quality of the loan
portfolios.
Wealth Management provides
trust, private banking, financial advisory, investment
management, retail brokerage services, insurance, custody and
mutual fund servicing through six businesses: Private Client
Group, Corporate Trust, U.S. Bancorp Investments &
Insurance, FAF Advisors, Institutional Trust & Custody
and Fund Services. Wealth Management contributed
$169 million of the Companys net income in the second
quarter and $322 million in the first six months of 2007,
or increases of $20 million (13.4 percent) and
$36 million (12.6 percent), respectively, compared
with the same periods of 2006. The growth was primarily
attributable to core account fee growth and improved equity
market conditions relative to a year ago.
Total net revenue increased $26 million (5.2 percent)
in the second quarter and $46 million (4.7 percent) in
the first six months of 2007, compared with the same periods of
2006. Net interest income, on a taxable-equivalent basis,
decreased $8 million (6.3 percent) in the second
quarter and $12 million (4.7 percent) in the first six
months of 2007, compared with the same periods of 2006. The
decreases in net interest income were due to the unfavorable
impacts from deposit pricing and tightening credit spreads,
partially offset by earnings from deposit growth. The increases
in total deposits were attributable to growth in
noninterest-bearing deposits, interest checking and time
deposits, principally due to acquired businesses. Noninterest
income increased $34 million (9.2 percent) in the
second quarter and $58 million (8.1 percent) in the
first six months of 2007, compared with the same periods of
2006, primarily driven by core account fee growth and favorable
equity market conditions.
Total noninterest expense decreased $3 million
(1.2 percent) in the second quarter and $7 million
(1.3 percent) in the first six months of 2007, compared
with the same periods of 2006. The decreases were primarily due
to the completion of certain acquisition integration activities.
Payment Services includes
consumer and business credit cards, stored-value cards, debit
cards, corporate and purchasing card services, consumer lines of
credit, ATM processing and merchant processing. Payment Services
contributed $259 million of the Companys net income
in the second quarter and $489 million in the first six
months of 2007, or increases of $6 million
(2.4 percent) and $11 million (2.3 percent),
respectively, compared with the same periods of 2006. The
increases were due to growth in total net revenue driven by loan
growth and higher transaction volumes, partially offset by an
increase in total noninterest expense and a higher provision for
credit losses.
Total net revenue increased $89 million (11.0 percent)
in the second quarter and $163 million (10.4 percent)
in the first six months of 2007, compared with the same periods
of 2006. Net interest income, on a taxable-equivalent basis,
increased $10 million (6.4 percent) in the second
quarter and $16 million (5.0 percent) in the first six
months of 2007, compared with the same periods of 2006. The
increases were primarily due to growth in higher yielding retail
credit card loan balances, partially offset by declining spreads
on retail credit cards. Noninterest income increased
$79 million (12.1 percent) in the second quarter and
$147 million (11.8 percent) in the first six months of
2007, compared with the same periods of 2006. The increases in
fee-based revenue were driven by higher transaction volumes,
rate changes, and business expansion initiatives. The increase
in noninterest income for the first six months of 2007, compared
with the same period of the prior year, was partially offset by
a merchant processing settlement recorded in the first quarter
of 2006.
Total noninterest expense increased $43 million
(12.4 percent) in the second quarter and $76 million
(11.0 percent) in the first six months of 2007, compared
with the same periods of 2006. The increases were primarily
attributable to the acquisition of merchant acquiring and
corporate payments businesses, and growth in personnel expense,
marketing, and consulting expense related to other new business
initiatives.
The provision for credit losses increased $36 million
(55.4 percent) in the second quarter and $69 million
(55.2 percent) in the first six months 2007, compared with
the same periods of 2006, due to higher net charge-offs,
reflecting portfolio growth, the impact of implementing minimum
balance repayment requirements for credit cards and other
consumer lines and a higher level of losses due to changes in
bankruptcy legislation that went into effect in late 2005. As a
percentage of average loans outstanding on an annualized basis,
net charge-offs were 2.83 percent in the second quarter of
2007, compared with 2.12 percent in the second quarter of 2006.
Treasury and Corporate Support
includes the Companys
investment portfolios, funding, capital management and asset
securitization activities, 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 a net loss of $6 million in the second quarter and
net income of $31 million in the first six months of 2007,
compared with net income of $6 million and $77 million
in the same periods of 2006, respectively.
Total net revenue decreased $50 million in the second
quarter and $157 million in the first six months of 2007,
compared with the same periods of 2006. The year-over-year
decreases in total net revenue were due to unfavorable variances
in both net interest income and noninterest income. The declines
in net interest income reflected the impact of a flatter yield
curve and the impact of issuing higher cost wholesale funding to
support earning asset growth. Noninterest income decreased
$32 million (78.0 percent) in the second quarter and
$89 million (83.2 percent) in the first six months of
2007, compared with the same periods of 2006. The decreases were
primarily due to a gain recognized in second quarter of 2006
related to the initial public offering of a cardholder
association. In addition, the decrease for the first six months
of 2007, compared with the same period of the prior year, was
due to trading gains realized in the first quarter of 2006
related to terminating certain interest rate derivatives.
Total noninterest expense increased $24 million
(30.0 percent) in the second quarter and $17 million
(12.7 percent) in the first six months of 2007, compared
with the same periods of 2006. The increases were driven by
increases in compensation and benefits primarily in the
technology development areas, higher costs related to
tax-advantaged investments, and higher expenses associated with
systems conversions for recent acquisitions.
The provision for credit losses for this business unit
represents the residual aggregate of the net credit losses
allocated to the reportable business units and the
Companys recorded provision determined in accordance with
accounting principles generally accepted in the United States.
Refer to the Corporate Risk Profile section for
further information on the provision for credit losses,
nonperforming assets and factors considered by the Company in
assessing the credit quality of the loan portfolio and
establishing the allowance for credit losses.
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
30.2 percent in the second quarter and 30.3 percent in
the first six months of 2007, compared with 32.8 percent and
32.7 percent in the same periods of 2006, respectively. The
decreases in the effective tax rate primarily reflected higher
tax exempt income from municipal securities, incremental tax
credits generated from investments in affordable housing and
similar tax-advantaged projects, and expansion of a bank-owned
life insurance program.
CRITICAL ACCOUNTING POLICIES
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
generally accepted accounting principles requires management to
make estimates and assumptions. The 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 that 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,
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, 2006.
CONTROLS AND PROCEDURES
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 controls 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) |
|
2007 | |
|
2006 | |
| |
|
|
(Unaudited) | |
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
|
$6,534 |
|
|
|
$8,639 |
|
Investment securities
|
|
|
|
|
|
|
|
|
|
Held-to-maturity (fair value $83 and $92, respectively)
|
|
|
81 |
|
|
|
87 |
|
|
Available-for-sale
|
|
|
39,433 |
|
|
|
40,030 |
|
Loans held for sale
|
|
|
4,552 |
|
|
|
3,256 |
|
Loans
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
46,459 |
|
|
|
46,190 |
|
|
Commercial real estate
|
|
|
28,421 |
|
|
|
28,645 |
|
|
Residential mortgages
|
|
|
21,992 |
|
|
|
21,285 |
|
|
Retail
|
|
|
48,836 |
|
|
|
47,477 |
|
|
|
|
|
|
Total loans
|
|
|
145,708 |
|
|
|
143,597 |
|
|
|
|
Less allowance for loan losses
|
|
|
(2,028 |
) |
|
|
(2,022 |
) |
|
|
|
|
|
|
Net loans
|
|
|
143,680 |
|
|
|
141,575 |
|
Premises and equipment
|
|
|
1,798 |
|
|
|
1,835 |
|
Goodwill
|
|
|
7,593 |
|
|
|
7,538 |
|
Other intangible assets
|
|
|
3,352 |
|
|
|
3,227 |
|
Other assets
|
|
|
15,507 |
|
|
|
13,045 |
|
|
|
|
|
|
Total assets
|
|
|
$222,530 |
|
|
|
$219,232 |
|
|
|
|
Liabilities and Shareholders Equity
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing
|
|
|
$29,545 |
|
|
|
$32,128 |
|
|
Interest-bearing
|
|
|
70,216 |
|
|
|
70,330 |
|
|
Time deposits greater than $100,000
|
|
|
19,941 |
|
|
|
22,424 |
|
|
|
|
|
|
Total deposits
|
|
|
119,702 |
|
|
|
124,882 |
|
Short-term borrowings
|
|
|
27,160 |
|
|
|
26,933 |
|
Long-term debt
|
|
|
45,946 |
|
|
|
37,602 |
|
Other liabilities
|
|
|
9,392 |
|
|
|
8,618 |
|
|
|
|
|
|
Total liabilities
|
|
|
202,200 |
|
|
|
198,035 |
|
Shareholders equity
|
|
|
|
|
|
|
|
|
|
Preferred stock, par value $1.00 a share (liquidation preference
of $25,000 per share) authorized: 50,000,000 shares; issued and
outstanding: 40,000 shares
|
|
|
1,000 |
|
|
|
1,000 |
|
|
Common stock, par value $0.01 a share authorized:
4,000,000,000 shares;
issued: 6/30/07 and 12/31/06 1,972,643,007 shares
|
|
|
20 |
|
|
|
20 |
|
|
Capital surplus
|
|
|
5,748 |
|
|
|
5,762 |
|
|
Retained earnings
|
|
|
22,110 |
|
|
|
21,242 |
|
|
Less cost of common stock in treasury: 6/30/07
244,766,681 shares; 12/31/06
207,928,756 shares
|
|
|
(7,476 |
) |
|
|
(6,091 |
) |
|
Other comprehensive income
|
|
|
(1,072 |
) |
|
|
(736 |
) |
|
|
|
|
|
Total shareholders equity
|
|
|
20,330 |
|
|
|
21,197 |
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
|
$222,530 |
|
|
|
$219,232 |
|
|
See Notes to Consolidated Financial Statements.
U.S. Bancorp
Consolidated Statement of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
Six Months Ended | |
|
|
June 30, | |
|
June 30, | |
(Dollars and Shares in Millions, Except Per Share Data) |
|
| |
(Unaudited) | |
|
2007 | |
|
2006 | |
|
2007 | |
|
2006 | |
|
Interest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
|
$2,616 |
|
|
|
$2,425 |
|
|
|
$5,194 |
|
|
|
$4,732 |
|
Loans held for sale
|
|
|
70 |
|
|
|
57 |
|
|
|
129 |
|
|
|
108 |
|
Investment securities
|
|
|
516 |
|
|
|
500 |
|
|
|
1,032 |
|
|
|
990 |
|
Other interest income
|
|
|
34 |
|
|
|
36 |
|
|
|
68 |
|
|
|
79 |
|
|
|
|
|
Total interest income
|
|
|
3,236 |
|
|
|
3,018 |
|
|
|
6,423 |
|
|
|
5,909 |
|
Interest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
663 |
|
|
|
578 |
|
|
|
1,338 |
|
|
|
1,081 |
|
Short-term borrowings
|
|
|
379 |
|
|
|
270 |
|
|
|
707 |
|
|
|
540 |
|
Long-term debt
|
|
|
562 |
|
|
|
484 |
|
|
|
1,097 |
|
|
|
887 |
|
|
|
|
|
Total interest expense
|
|
|
1,604 |
|
|
|
1,332 |
|
|
|
3,142 |
|
|
|
2,508 |
|
|
|
|
Net interest income
|
|
|
1,632 |
|
|
|
1,686 |
|
|
|
3,281 |
|
|
|
3,401 |
|
Provision for credit losses
|
|
|
191 |
|
|
|
125 |
|
|
|
368 |
|
|
|
240 |
|
|
|
|
Net interest income after provision for credit losses
|
|
|
1,441 |
|
|
|
1,561 |
|
|
|
2,913 |
|
|
|
3,161 |
|
Noninterest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit and debit card revenue
|
|
|
228 |
|
|
|
202 |
|
|
|
433 |
|
|
|
384 |
|
Corporate payment products revenue
|
|
|
157 |
|
|
|
139 |
|
|
|
302 |
|
|
|
266 |
|
ATM processing services
|
|
|
62 |
|
|
|
61 |
|
|
|
121 |
|
|
|
120 |
|
Merchant processing services
|
|
|
285 |
|
|
|
253 |
|
|
|
535 |
|
|
|
466 |
|
Trust and investment management fees
|
|
|
342 |
|
|
|
314 |
|
|
|
664 |
|
|
|
611 |
|
Deposit service charges
|
|
|
272 |
|
|
|
264 |
|
|
|
515 |
|
|
|
496 |
|
Treasury management fees
|
|
|
126 |
|
|
|
116 |
|
|
|
237 |
|
|
|
223 |
|
Commercial products revenue
|
|
|
105 |
|
|
|
107 |
|
|
|
205 |
|
|
|
211 |
|
Mortgage banking revenue
|
|
|
68 |
|
|
|
75 |
|
|
|
135 |
|
|
|
99 |
|
Investment products fees and commissions
|
|
|
38 |
|
|
|
42 |
|
|
|
72 |
|
|
|
80 |
|
Securities gains (losses), net
|
|
|
3 |
|
|
|
3 |
|
|
|
4 |
|
|
|
3 |
|
Other
|
|
|
169 |
|
|
|
179 |
|
|
|
328 |
|
|
|
410 |
|
|
|
|
|
Total noninterest income
|
|
|
1,855 |
|
|
|
1,755 |
|
|
|
3,551 |
|
|
|
3,369 |
|
Noninterest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
659 |
|
|
|
627 |
|
|
|
1,294 |
|
|
|
1,260 |
|
Employee benefits
|
|
|
123 |
|
|
|
123 |
|
|
|
256 |
|
|
|
256 |
|
Net occupancy and equipment
|
|
|
171 |
|
|
|
161 |
|
|
|
336 |
|
|
|
326 |
|
Professional services
|
|
|
59 |
|
|
|
41 |
|
|
|
106 |
|
|
|
76 |
|
Marketing and business development
|
|
|
64 |
|
|
|
58 |
|
|
|
112 |
|
|
|
98 |
|
Technology and communications
|
|
|
126 |
|
|
|
127 |
|
|
|
251 |
|
|
|
244 |
|
Postage, printing and supplies
|
|
|
71 |
|
|
|
66 |
|
|
|
140 |
|
|
|
132 |
|
Other intangibles
|
|
|
95 |
|
|
|
89 |
|
|
|
189 |
|
|
|
174 |
|
Debt prepayment
|
|
|
|
|
|
|
11 |
|
|
|
|
|
|
|
11 |
|
Other
|
|
|
272 |
|
|
|
227 |
|
|
|
501 |
|
|
|
453 |
|
|
|
|
|
Total noninterest expense
|
|
|
1,640 |
|
|
|
1,530 |
|
|
|
3,185 |
|
|
|
3,030 |
|
|
|
|
Income before income taxes
|
|
|
1,656 |
|
|
|
1,786 |
|
|
|
3,279 |
|
|
|
3,500 |
|
Applicable income taxes
|
|
|
500 |
|
|
|
585 |
|
|
|
993 |
|
|
|
1,146 |
|
|
|
|
Net income
|
|
|
$1,156 |
|
|
|
$1,201 |
|
|
|
$2,286 |
|
|
|
$2,354 |
|
|
|
|
Net income applicable to common equity
|
|
|
$1,141 |
|
|
|
$1,184 |
|
|
|
$2,256 |
|
|
|
$2,337 |
|
|
|
|
Earnings per common share
|
|
|
$.66 |
|
|
|
$.66 |
|
|
|
$1.29 |
|
|
|
$1.30 |
|
Diluted earnings per common share
|
|
|
$.65 |
|
|
|
$.66 |
|
|
|
$1.27 |
|
|
|
$1.29 |
|
Dividends declared per common share
|
|
|
$.40 |
|
|
|
$.33 |
|
|
|
$.80 |
|
|
|
$.66 |
|
Average common shares outstanding
|
|
|
1,736 |
|
|
|
1,781 |
|
|
|
1,744 |
|
|
|
1,791 |
|
Average diluted common shares outstanding
|
|
|
1,760 |
|
|
|
1,805 |
|
|
|
1,770 |
|
|
|
1,816 |
|
|
See Notes to Consolidated Financial Statements.
U.S. Bancorp
Consolidated Statement of Shareholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other | |
|
Total | |
(Dollars and Shares in Millions) |
|
Common Shares | |
|
Preferred | |
|
Common | |
|
Capital | |
|
Retained | |
|
Treasury | |
|
Comprehensive | |
|
Shareholders | |
(Unaudited) |
|
Outstanding | |
|
Stock | |
|
Stock | |
|
Surplus | |
|
Earnings | |
|
Stock | |
|
Income | |
|
Equity | |
| |
Balance December 31, 2005
|
|
|
1,815 |
|
|
|
$ |
|
|
|
$20 |
|
|
|
$5,907 |
|
|
|
$19,001 |
|
|
|
$(4,413 |
) |
|
|
$(429 |
) |
|
|
$20,086 |
|
Change in accounting principle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
4 |
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,354 |
|
|
|
|
|
|
|
|
|
|
|
2,354 |
|
Unrealized loss on securities available for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,105 |
) |
|
|
(1,105 |
) |
Unrealized gain on derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153 |
|
|
|
153 |
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
4 |
|
Realized loss on derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(199 |
) |
|
|
(199 |
) |
Reclassification for realized losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
6 |
|
Income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
433 |
|
|
|
433 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,646 |
|
Cash dividends declared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
|
(17 |
) |
|
Common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,178 |
) |
|
|
|
|
|
|
|
|
|
|
(1,178 |
) |
Issuance of common and treasury stock
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
(79 |
) |
|
|
|
|
|
|
533 |
|
|
|
|
|
|
|
454 |
|
Purchase of treasury stock
|
|
|
(50 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,538 |
) |
|
|
|
|
|
|
(1,538 |
) |
Stock option and restricted stock grants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 |
|
Shares reserved to meet deferred compensation obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
(2 |
) |
Issuance of preferred stock
|
|
|
|
|
|
|
1,000 |
|
|
|
|
|
|
|
(52 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
948 |
|
|
|
|
Balance June 30, 2006
|
|
|
1,783 |
|
|
|
$1,000 |
|
|
|
$20 |
|
|
|
$5,789 |
|
|
|
$20,164 |
|
|
|
$(5,421 |
) |
|
|
$(1,137 |
) |
|
|
$20,415 |
|
|
Balance December 31, 2006
|
|
|
1,765 |
|
|
|
$1,000 |
|
|
|
$20 |
|
|
|
$5,762 |
|
|
|
$21,242 |
|
|
|
$(6,091 |
) |
|
|
$(736 |
) |
|
|
$21,197 |
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,286 |
|
|
|
|
|
|
|
|
|
|
|
2,286 |
|
Unrealized loss on securities available for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(701 |
) |
|
|
(701 |
) |
Unrealized gain on derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94 |
|
|
|
94 |
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19 |
|
|
|
19 |
|
Reclassification for realized losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46 |
|
|
|
46 |
|
Change in retirement obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
1 |
|
Income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
205 |
|
|
|
205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,950 |
|
Cash dividends declared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30 |
) |
|
|
|
|
|
|
|
|
|
|
(30 |
) |
|
Common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,388 |
) |
|
|
|
|
|
|
|
|
|
|
(1,388 |
) |
Issuance of common and treasury stock
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
(23 |
) |
|
|
|
|
|
|
453 |
|
|
|
|
|
|
|
430 |
|
Purchase of treasury stock
|
|
|
(52 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,836 |
) |
|
|
|
|
|
|
(1,836 |
) |
Stock option and restricted stock grants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 |
|
Shares reserved to meet deferred compensation obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
(2 |
) |
|
|
|
Balance June 30, 2007
|
|
|
1,728 |
|
|
|
$1,000 |
|
|
|
$20 |
|
|
|
$5,748 |
|
|
|
$22,110 |
|
|
|
$(7,476 |
) |
|
|
$(1,072 |
) |
|
|
$20,330 |
|
|
See Notes to Consolidated Financial Statements.
U.S. Bancorp
Consolidated Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended | |
|
|
June 30, | |
(Dollars in Millions) |
|
| |
(Unaudited) |
|
2007 | |
|
2006 | |
| |
Operating Activities
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
$975 |
|
|
|
$2,124 |
|
Investing Activities
|
|
|
|
|
|
|
|
|
Proceeds from sales of available-for-sale investment securities
|
|
|
788 |
|
|
|
859 |
|
Proceeds from maturities of investment securities
|
|
|
2,204 |
|
|
|
2,573 |
|
Purchases of investment securities
|
|
|
(3,117 |
) |
|
|
(3,649 |
) |
Net increase in loans outstanding
|
|
|
(1,187 |
) |
|
|
(2,760 |
) |
Proceeds from sales of loans
|
|
|
340 |
|
|
|
369 |
|
Purchases of loans
|
|
|
(1,073 |
) |
|
|
(1,563 |
) |
Acquisitions, net of cash acquired
|
|
|
(73 |
) |
|
|
(446 |
) |
Other, net
|
|
|
(1,215 |
) |
|
|
(290 |
) |
|
|
|
|
Net cash used in investing activities
|
|
|
(3,333 |
) |
|
|
(4,907 |
) |
Financing Activities
|
|
|
|
|
|
|
|
|
Net decrease in deposits
|
|
|
(5,488 |
) |
|
|
(1,990 |
) |
Net increase in short-term borrowings
|
|
|
220 |
|
|
|
370 |
|
Proceeds from issuance of long-term debt
|
|
|
12,634 |
|
|
|
7,538 |
|
Principal payments or redemption of long-term debt
|
|
|
(4,242 |
) |
|
|
(2,384 |
) |
Proceeds from issuance of preferred stock
|
|
|
|
|
|
|
948 |
|
Proceeds from issuance of common stock
|
|
|
305 |
|
|
|
383 |
|
Repurchase of common stock
|
|
|
(1,781 |
) |
|
|
(1,528 |
) |
Cash dividends paid on preferred stock
|
|
|
(30 |
) |
|
|
|
|
Cash dividends paid on common stock
|
|
|
(1,403 |
) |
|
|
(1,188 |
) |
|
|
|
|
Net cash provided by financing activities
|
|
|
215 |
|
|
|
2,149 |
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
(2,143 |
) |
|
|
(634 |
) |
Cash and cash equivalents at beginning of period
|
|
|
8,805 |
|
|
|
8,202 |
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
|
$6,662 |
|
|
|
$7,568 |
|
|
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. For further information,
refer to the consolidated financial statements and notes
included in the Companys Annual Report on
Form 10-K for the
year ended December 31, 2006. 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 and benefits, expenses and other
financial elements to each line of business. Table 11 Line
of Business Financial Performance provides details of
segment results. This information is incorporated by reference
into these Notes to Consolidated Financial Statements.
|
|
|
Note 2 |
|
Accounting Changes |
Fair Value Option for Financial Assets and Financial
Liabilities In February
2007, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards No. 159 (SFAS 159), The
Fair Value Option for Financial Assets and Financial
Liabilities, effective for the Company beginning on
January 1, 2008. This Statement provides entities with an
option to report selected financial assets and liabilities at
fair value, with the objective to reduce both the complexity in
accounting for financial instruments and the volatility in
earnings caused by measuring related assets and liabilities
differently. The Company is currently assessing the impact of
this guidance on its financial statements.
Fair Value Measurements
In September 2006, the FASB issued Statement of Financial
Accounting Standards No. 157 (SFAS 157),
Fair Value Measurements, effective for the Company
beginning on January 1, 2008. This Statement defines fair
value, establishes a framework for measuring fair value, and
expands disclosures about fair value measurements. This
statement establishes a fair value hierarchy that distinguishes
between valuations obtained from sources independent of the
entity and those from the entitys own unobservable inputs
that are not corroborated by observable market data.
SFAS 157 expands disclosures about the use of fair value to
measure assets and liabilities in interim and annual periods
subsequent to initial recognition. The disclosures focus on the
inputs used to measure fair value, and for recurring fair value
measurements using significant unobservable inputs, the effect
of the measurements on earnings or changes in net assets for the
period. The Company is currently assessing the impact of this
guidance on its financial statements.
Accounting for Uncertainty in Income Taxes
In June 2006, the FASB
issued Interpretation No. 48 (FIN 48),
Accounting for Uncertainty in Income Taxes, an
interpretation of FASB Statement No. 109, Accounting for
Income Taxes, effective for the Company beginning on
January 1, 2007. FIN 48 clarifies the recognition
threshold a tax position is required to meet before being
recognized in the financial statements. FIN 48 also
provides guidance on disclosure and other matters. The adoption
of FIN 48 did not have a material impact on the
Companys financial statements.
The composition of the loan portfolio was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007 | |
|
December 31, 2006 | |
|
|
| |
|
|
|
|
Percent | |
|
|
|
Percent | |
(Dollars in Millions) |
|
Amount | |
|
of Total | |
|
Amount | |
|
of Total | |
| |
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
$40,746 |
|
|
|
28.0 |
% |
|
|
$40,640 |
|
|
|
28.3 |
% |
|
Lease financing
|
|
|
5,713 |
|
|
|
3.9 |
|
|
|
5,550 |
|
|
|
3.9 |
|
|
|
|
|
|
Total commercial
|
|
|
46,459 |
|
|
|
31.9 |
|
|
|
46,190 |
|
|
|
32.2 |
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgages
|
|
|
19,455 |
|
|
|
13.3 |
|
|
|
19,711 |
|
|
|
13.7 |
|
|
Construction and development
|
|
|
8,966 |
|
|
|
6.2 |
|
|
|
8,934 |
|
|
|
6.2 |
|
|
|
|
|
|
Total commercial real estate
|
|
|
28,421 |
|
|
|
19.5 |
|
|
|
28,645 |
|
|
|
19.9 |
|
Residential mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages
|
|
|
16,116 |
|
|
|
11.1 |
|
|
|
15,316 |
|
|
|
10.7 |
|
|
Home equity loans, first liens
|
|
|
5,876 |
|
|
|
4.0 |
|
|
|
5,969 |
|
|
|
4.1 |
|
|
|
|
|
|
Total residential mortgages
|
|
|
21,992 |
|
|
|
15.1 |
|
|
|
21,285 |
|
|
|
14.8 |
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card
|
|
|
9,429 |
|
|
|
6.5 |
|
|
|
8,670 |
|
|
|
6.0 |
|
|
Retail leasing
|
|
|
6,572 |
|
|
|
4.5 |
|
|
|
6,960 |
|
|
|
4.9 |
|
|
Home equity and second mortgages
|
|
|
15,907 |
|
|
|
10.9 |
|
|
|
15,523 |
|
|
|
10.8 |
|
|
Other retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving credit
|
|
|
2,579 |
|
|
|
1.8 |
|
|
|
2,563 |
|
|
|
1.8 |
|
|
|
Installment
|
|
|
5,022 |
|
|
|
3.4 |
|
|
|
4,478 |
|
|
|
3.1 |
|
|
|
Automobile
|
|
|
8,901 |
|
|
|
6.1 |
|
|
|
8,693 |
|
|
|
6.1 |
|
|
|
Student
|
|
|
426 |
|
|
|
.3 |
|
|
|
590 |
|
|
|
.4 |
|
|
|
|
|
|
|
Total other retail
|
|
|
16,928 |
|
|
|
11.6 |
|
|
|
16,324 |
|
|
|
11.4 |
|
|
|
|
|
|
Total retail
|
|
|
48,836 |
|
|
|
33.5 |
|
|
|
47,477 |
|
|
|
33.1 |
|
|
|
|
|
|
|
Total loans
|
|
|
$145,708 |
|
|
|
100.0 |
% |
|
|
$143,597 |
|
|
|
100.0 |
% |
|
Loans are presented net of unearned interest and deferred fees
and costs, which amounted to $1.3 billion at June 30,
2007, and December 31, 2006.
|
|
|
Note 4 |
|
Mortgage Servicing Rights |
The Companys portfolio of residential mortgages serviced
for others was $89.7 billion and $82.9 billion at
June 30, 2007, and December 31, 2006, respectively.
The Company records mortgage servicing rights (MSRs)
initially at fair value and at each subsequent reporting date,
and records changes in fair value in noninterest income in the
period in which they occur. In conjunction with its MSRs, the
Company may utilize derivatives, including futures and option
contracts to manage the volatility of changes in the fair value
of MSRs. The net impact of assumption changes on the fair value
of MSRs, excluding decay, and the related derivatives included
in mortgage banking revenue was a net loss of $6 million
and a net gain of $10 million for the three months ended
June 30, 2007, and 2006, respectively, and a net loss of
$5 million and $9 million for the six months ended
June 30, 2007 and 2006, respectively. Loan servicing fees,
not including valuation changes, included in mortgage banking
revenue were $87 million and $80 million for the three
months ended June 30, 2007, and 2006, respectively, and
$173 million and $156 million for the six months ended
June 30, 2007, and 2006, 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) |
|
2007 | |
|
2006 | |
|
2007 | |
|
2006 | |
| |
Balance at beginning of period
|
|
|
$1,447 |
|
|
|
$1,228 |
|
|
|
$1,427 |
|
|
|
$1,123 |
|
|
Rights purchased
|
|
|
3 |
|
|
|
1 |
|
|
|
6 |
|
|
|
47 |
|
|
Rights capitalized
|
|
|
104 |
|
|
|
99 |
|
|
|
186 |
|
|
|
170 |
|
|
Changes in fair value of MSRs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due to change in valuation assumptions (a)
|
|
|
147 |
|
|
|
38 |
|
|
|
124 |
|
|
|
71 |
|
|
|
Other changes in fair value (b)
|
|
|
(52 |
) |
|
|
(43 |
) |
|
|
(94 |
) |
|
|
(88 |
) |
|
|
|
Balance at end of period
|
|
|
$1,649 |
|
|
|
$1,323 |
|
|
|
$1,649 |
|
|
|
$1,323 |
|
|
|
|
|
(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 Company determines fair value by estimating the present
value of the assets future cash flows utilizing
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 the valuation of MSRs include higher than expected
prepayment rates and/or delayed receipt of cash flows. The
estimated sensitivity to changes in interest rates of the fair
value of the MSRs portfolio and the related derivative
instruments at June 30, 2007, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Down Scenario | |
|
Up Scenario | |
|
|
| |
(Dollars in Millions) |
|
50 bps | |
|
25 bps | |
|
25 bps | |
|
50 bps | |
| |
Net fair value
|
|
|
$(49 |
) |
|
|
$(17 |
) |
|
|
$(9 |
) |
|
|
$(47 |
) |
|
|
|
|
Note 5 |
|
Earnings Per Common Share |
The components of earnings per common share were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
| |
(Dollars and Shares in Millions, Except Per Share Data) |
|
2007 | |
|
2006 | |
|
2007 | |
|
2006 | |
| |
Net income
|
|
|
$1,156 |
|
|
|
$1,201 |
|
|
|
$2,286 |
|
|
|
$2,354 |
|
Preferred dividends
|
|
|
(15 |
) |
|
|
(17 |
) |
|
|
(30 |
) |
|
|
(17 |
) |
|
|
|
Net income applicable to common equity
|
|
|
$1,141 |
|
|
|
$1,184 |
|
|
|
$2,256 |
|
|
|
$2,337 |
|
|
|
|
Average common shares outstanding
|
|
|
1,736 |
|
|
|
1,781 |
|
|
|
1,744 |
|
|
|
1,791 |
|
Net effect of the exercise and assumed purchase of stock awards
and
conversion of outstanding convertible notes
|
|
|
24 |
|
|
|
24 |
|
|
|
26 |
|
|
|
25 |
|
|
|
|
Average diluted common shares outstanding
|
|
|
1,760 |
|
|
|
1,805 |
|
|
|
1,770 |
|
|
|
1,816 |
|
|
|
|
Earnings per common share
|
|
|
$.66 |
|
|
|
$.66 |
|
|
|
$1.29 |
|
|
|
$1.30 |
|
Diluted earnings per common share
|
|
|
$.65 |
|
|
|
$.66 |
|
|
|
$1.27 |
|
|
|
$1.29 |
|
|
Options to purchase 13 million and 4 million common
shares for the three months ended June 30, 2007 and 2006,
respectively, and 12 million and 4 million common
shares for the six months ended June 30, 2007 and 2006,
respectively, were outstanding but not included in the
computation of diluted earnings per common share because they
were antidilutive.
The components of net periodic benefit cost (income) for
the Companys retirement plans were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
Six Months Ended | |
|
|
June 30, | |
|
June 30, | |
|
|
| |
|
|
|
|
Postretirement | |
|
|
|
Postretirement | |
|
|
Pension Plans | |
|
Medical Plan | |
|
Pension Plans | |
|
Medical Plan | |
|
|
| |
(Dollars in Millions) |
|
2007 | |
|
2006 | |
|
2007 | |
|
2006 | |
|
2007 | |
|
2006 | |
|
2007 | |
|
2006 | |
| |
Service cost
|
|
|
$17 |
|
|
|
$18 |
|
|
|
$2 |
|
|
|
$1 |
|
|
|
$35 |
|
|
|
$36 |
|
|
|
$3 |
|
|
|
$2 |
|
Interest cost
|
|
|
32 |
|
|
|
29 |
|
|
|
3 |
|
|
|
4 |
|
|
|
63 |
|
|
|
59 |
|
|
|
7 |
|
|
|
7 |
|
Expected return on plan assets
|
|
|
(49 |
) |
|
|
(47 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
(99 |
) |
|
|
(95 |
) |
|
|
(3 |
) |
|
|
|
|
Prior service (credit) cost and transition
(asset) obligation amortization
|
|
|
(2 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
|
|
Actuarial (gain) loss amortization
|
|
|
15 |
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
31 |
|
|
|
45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost (income)
|
|
|
$13 |
|
|
|
$21 |
|
|
|
$4 |
|
|
|
$5 |
|
|
|
$27 |
|
|
|
$42 |
|
|
|
$7 |
|
|
|
$9 |
|
|
The components of income tax expense were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
Six Months Ended | |
|
|
June 30, | |
|
June 30, | |
|
|
| |
(Dollars in Millions) |
|
2007 | |
|
2006 | |
|
2007 | |
|
2006 | |
| |
Federal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
$488 |
|
|
|
$631 |
|
|
|
$937 |
|
|
|
$1,212 |
|
Deferred
|
|
|
(46 |
) |
|
|
(154 |
) |
|
|
(68 |
) |
|
|
(236 |
) |
|
|
|
|
Federal income tax
|
|
|
442 |
|
|
|
477 |
|
|
|
869 |
|
|
|
976 |
|
State
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
62 |
|
|
|
120 |
|
|
|
131 |
|
|
|
188 |
|
Deferred
|
|
|
(4 |
) |
|
|
(12 |
) |
|
|
(7 |
) |
|
|
(18 |
) |
|
|
|
|
State income tax
|
|
|
58 |
|
|
|
108 |
|
|
|
124 |
|
|
|
170 |
|
|
|
|
|
Total income tax provision
|
|
|
$500 |
|
|
|
$585 |
|
|
|
$993 |
|
|
|
$1,146 |
|
|
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) |
|
2007 | |
|
2006 | |
|
2007 | |
|
2006 | |
| |
Tax at statutory rate (35 percent)
|
|
|
$579 |
|
|
|
$625 |
|
|
|
$1,147 |
|
|
|
$1,225 |
|
State income tax, at statutory rates, net of federal tax benefit
|
|
|
38 |
|
|
|
70 |
|
|
|
81 |
|
|
|
110 |
|
Tax effect of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax credits
|
|
|
(71 |
) |
|
|
(61 |
) |
|
|
(140 |
) |
|
|
(119 |
) |
|
Tax-exempt income
|
|
|
(31 |
) |
|
|
(23 |
) |
|
|
(58 |
) |
|
|
(43 |
) |
|
Other items
|
|
|
(15 |
) |
|
|
(26 |
) |
|
|
(37 |
) |
|
|
(27 |
) |
|
|
|
Applicable income taxes
|
|
|
$500 |
|
|
|
$585 |
|
|
|
$993 |
|
|
|
$1,146 |
|
|
Effective January 1, 2007, the Company adopted the
provisions of FIN 48. The adoption of FIN 48 did not
result in a cumulative-effect accounting adjustment for the
Company. The Company elected to classify interest and penalties
related to unrecognized tax positions as components of income
tax expense. At January 1, 2007, the Companys total
amount of unrecognized tax positions were $364 million, of
which $237 million related to unrecognized tax positions
that if recognized, would affect the effective tax rate. In
addition, the amount accrued for the payment of interest on
unrecognized tax positions was $22 million.
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, 2007, the federal taxing authority
has completed its examination of the Company through the fiscal
year ended December 31, 2004. The years open to examination by
foreign, state and local government authorities vary by
jurisdiction.
The Companys net deferred tax liability was
$1,218 million at June 30, 2007, and
$1,483 million at December 31, 2006.
|
|
|
Note 8 |
|
Guarantees and Contingent Liabilities |
The following table is a summary of the guarantees and
contingent liabilities of the Company at June 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum | |
|
|
|
|
Potential | |
|
|
Carrying | |
|
Future | |
(Dollars in Millions) |
|
Amount | |
|
Payments | |
| |
Standby letters of credit
|
|
|
$71 |
|
|
|
$11,934 |
|
Third-party borrowing arrangements
|
|
|
3 |
|
|
|
386 |
|
Securities lending indemnifications
|
|
|
|
|
|
|
18,239 |
|
Asset sales (a)
|
|
|
7 |
|
|
|
512 |
|
Merchant processing
|
|
|
50 |
|
|
|
78,358 |
|
Other guarantees
|
|
|
34 |
|
|
|
1,674 |
|
Other contingent liabilities
|
|
|
|
|
|
|
1,981 |
|
|
|
|
|
(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 airlines, cruise lines and large
tour operators. 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, 2007, the value of airline, cruise
line and large tour operator tickets purchased to be delivered
at a future date was $5.1 billion, with airline tickets
representing 92 percent of that amount. The Company held
collateral of $1.1 billion 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, please refer to
Note 21 in the Companys Annual Report on
Form 10-K for the
year ended December 31, 2006.
U.S. Bancorp
Consolidated Daily Average Balance Sheet and Related Yields and
Rates (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, | |
|
|
|
|
|
|
2007 | |
|
2006 | |
|
|
|
|
|
|
|
|
|
|
|
Yields | |
|
|
|
Yields | |
|
% Change | |
|
|
(Dollars in Millions) |
|
Average | |
|
|
|
and | |
|
Average | |
|
|
|
and | |
|
Average | |
|
|
(Unaudited) |
|
Balances | |
|
Interest | |
|
Rates | |
|
Balances | |
|
Interest | |
|
Rates | |
|
Balances | |
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities
|
|
|
$40,704 |
|
|
|
$548 |
|
|
|
5.39 |
% |
|
|
$40,087 |
|
|
|
$513 |
|
|
|
5.12 |
% |
|
|
1.5 |
% |
|
|
Loans held for sale
|
|
|
4,334 |
|
|
|
70 |
|
|
|
6.43 |
|
|
|
3,555 |
|
|
|
57 |
|
|
|
6.34 |
|
|
|
21.9 |
|
|
|
Loans (b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
47,197 |
|
|
|
781 |
|
|
|
6.64 |
|
|
|
45,070 |
|
|
|
734 |
|
|
|
6.53 |
|
|
|
4.7 |
|
|
|
|
Commercial real estate
|
|
|
28,503 |
|
|
|
524 |
|
|
|
7.37 |
|
|
|
28,795 |
|
|
|
528 |
|
|
|
7.36 |
|
|
|
(1.0 |
) |
|
|
|
Residential mortgages
|
|
|
21,831 |
|
|
|
331 |
|
|
|
6.06 |
|
|
|
20,868 |
|
|
|
302 |
|
|
|
5.80 |
|
|
|
4.6 |
|
|
|
|
Retail
|
|
|
48,122 |
|
|
|
988 |
|
|
|
8.23 |
|
|
|
44,637 |
|
|
|
867 |
|
|
|
7.79 |
|
|
|
7.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
145,653 |
|
|
|
2,624 |
|
|
|
7.22 |
|
|
|
139,370 |
|
|
|
2,431 |
|
|
|
7.00 |
|
|
|
4.5 |
|
|
|
Other earning assets
|
|
|
1,610 |
|
|
|
34 |
|
|
|
8.36 |
|
|
|
1,878 |
|
|
|
36 |
|
|
|
7.60 |
|
|
|
(14.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earning assets
|
|
|
192,301 |
|
|
|
3,276 |
|
|
|
6.83 |
|
|
|
184,890 |
|
|
|
3,037 |
|
|
|
6.58 |
|
|
|
4.0 |
|
|
|
Allowance for loan losses
|
|
|
(2,039 |
) |
|
|
|
|
|
|
|
|
|
|
(2,051 |
) |
|
|
|
|
|
|
|
|
|
|
.6 |
|
|
|
Unrealized gain (loss) on available-for-sale securities
|
|
|
(771 |
) |
|
|
|
|
|
|
|
|
|
|
(1,431 |
) |
|
|
|
|
|
|
|
|
|
|
(46.1 |
) |
|
|
Other assets
|
|
|
32,531 |
|
|
|
|
|
|
|
|
|
|
|
30,999 |
|
|
|
|
|
|
|
|
|
|
|
4.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
$222,022 |
|
|
|
|
|
|
|
|
|
|
|
$212,407 |
|
|
|
|
|
|
|
|
|
|
|
4.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits
|
|
|
$27,977 |
|
|
|
|
|
|
|
|
|
|
|
$28,949 |
|
|
|
|
|
|
|
|
|
|
|
(3.4 |
) |
|
|
Interest-bearing deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest checking
|
|
|
25,858 |
|
|
|
84 |
|
|
|
1.32 |
|
|
|
23,333 |
|
|
|
50 |
|
|
|
.87 |
|
|
|
10.8 |
|
|
|
|
Money market savings
|
|
|
24,603 |
|
|
|
159 |
|
|
|
2.59 |
|
|
|
26,981 |
|
|
|
138 |
|
|
|
2.05 |
|
|
|
(8.8 |
) |
|
|
|
Savings accounts
|
|
|
5,443 |
|
|
|
5 |
|
|
|
.38 |
|
|
|
5,720 |
|
|
|
5 |
|
|
|
.33 |
|
|
|
(4.8 |
) |
|
|
|
Time certificates of deposit less than $100,000
|
|
|
14,716 |
|
|
|
162 |
|
|
|
4.40 |
|
|
|
13,689 |
|
|
|
126 |
|
|
|
3.68 |
|
|
|
7.5 |
|
|
|
|
Time deposits greater than $100,000
|
|
|
20,378 |
|
|
|
253 |
|
|
|
4.98 |
|
|
|
22,561 |
|
|
|
259 |
|
|
|
4.61 |
|
|
|
(9.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits
|
|
|
90,998 |
|
|
|
663 |
|
|
|
2.92 |
|
|
|
92,284 |
|
|
|
578 |
|
|
|
2.51 |
|
|
|
(1.4 |
) |
|
|
Short-term borrowings
|
|
|
29,524 |
|
|
|
401 |
|
|
|
5.44 |
|
|
|
22,246 |
|
|
|
278 |
|
|
|
5.01 |
|
|
|
32.7 |
|
|
|
Long-term debt
|
|
|
44,655 |
|
|
|
562 |
|
|
|
5.05 |
|
|
|
41,225 |
|
|
|
484 |
|
|
|
4.71 |
|
|
|
8.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
165,177 |
|
|
|
1,626 |
|
|
|
3.95 |
|
|
|
155,755 |
|
|
|
1,340 |
|
|
|
3.45 |
|
|
|
6.0 |
|
|
|
Other liabilities
|
|
|
7,973 |
|
|
|
|
|
|
|
|
|
|
|
7,147 |
|
|
|
|
|
|
|
|
|
|
|
11.6 |
|
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred equity
|
|
|
1,000 |
|
|
|
|
|
|
|
|
|
|
|
1,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common equity
|
|
|
19,895 |
|
|
|
|
|
|
|
|
|
|
|
19,556 |
|
|
|
|
|
|
|
|
|
|
|
1.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
20,895 |
|
|
|
|
|
|
|
|
|
|
|
20,556 |
|
|
|
|
|
|
|
|
|
|
|
1.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
|
$222,022 |
|
|
|
|
|
|
|
|
|
|
|
$212,407 |
|
|
|
|
|
|
|
|
|
|
|
4.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
|
$1,650 |
|
|
|
|
|
|
|
|
|
|
|
$1,697 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross interest margin
|
|
|
|
|
|
|
|
|
|
|
2.88 |
% |
|
|
|
|
|
|
|
|
|
|
3.13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross interest margin without taxable-equivalent increments
|
|
|
|
|
|
|
|
|
|
|
2.84 |
|
|
|
|
|
|
|
|
|
|
|
3.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of Earning Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
6.83 |
% |
|
|
|
|
|
|
|
|
|
|
6.58 |
% |
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
3.39 |
|
|
|
|
|
|
|
|
|
|
|
2.90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin
|
|
|
|
|
|
|
|
|
|
|
3.44 |
% |
|
|
|
|
|
|
|
|
|
|
3.68 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin without taxable-equivalent increments
|
|
|
|
|
|
|
|
|
|
|
3.40 |
% |
|
|
|
|
|
|
|
|
|
|
3.66 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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, | |
|
|
|
|
|
|
2007 | |
|
2006 | |
|
|
|
|
|
|
|
|
|
|
|
Yields | |
|
|
|
Yields | |
|
% Change | |
|
|
(Dollars in Millions) |
|
Average | |
|
|
|
and | |
|
Average | |
|
|
|
and | |
|
Average | |
|
|
(Unaudited) |
|
Balances | |
|
Interest | |
|
Rates | |
|
Balances | |
|
Interest | |
|
Rates | |
|
Balances | |
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities
|
|
|
$40,791 |
|
|
|
$1,094 |
|
|
|
5.36 |
% |
|
|
$39,885 |
|
|
|
$1,009 |
|
|
|
5.06 |
% |
|
|
2.3 |
% |
|
|
Loans held for sale
|
|
|
4,090 |
|
|
|
129 |
|
|
|
6.33 |
|
|
|
3,412 |
|
|
|
108 |
|
|
|
6.28 |
|
|
|
19.9 |
|
|
|
Loans (b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
47,103 |
|
|
|
1,555 |
|
|
|
6.65 |
|
|
|
44,501 |
|
|
|
1,424 |
|
|
|
6.44 |
|
|
|
5.8 |
|
|
|
|
Commercial real estate
|
|
|
28,573 |
|
|
|
1,044 |
|
|
|
7.37 |
|
|
|
28,706 |
|
|
|
1,025 |
|
|
|
7.20 |
|
|
|
(.5 |
) |
|
|
|
Residential mortgages
|
|
|
21,700 |
|
|
|
654 |
|
|
|
6.04 |
|
|
|
20,927 |
|
|
|
596 |
|
|
|
5.71 |
|
|
|
3.7 |
|
|
|
|
Retail
|
|
|
47,800 |
|
|
|
1,955 |
|
|
|
8.25 |
|
|
|
44,445 |
|
|
|
1,699 |
|
|
|
7.71 |
|
|
|
7.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
145,176 |
|
|
|
5,208 |
|
|
|
7.23 |
|
|
|
138,579 |
|
|
|
4,744 |
|
|
|
6.90 |
|
|
|
4.8 |
|
|
|
Other earning assets
|
|
|
1,664 |
|
|
|
68 |
|
|
|
8.18 |
|
|
|
2,124 |
|
|
|
79 |
|
|
|
7.46 |
|
|
|
(21.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earning assets
|
|
|
191,721 |
|
|
|
6,499 |
|
|
|
6.82 |
|
|
|
184,000 |
|
|
|
5,940 |
|
|
|
6.49 |
|
|
|
4.2 |
|
|
|
Allowance for loan losses
|
|
|
(2,038 |
) |
|
|
|
|
|
|
|
|
|
|
(2,055 |
) |
|
|
|
|
|
|
|
|
|
|
.8 |
|
|
|
Unrealized gain (loss) on available-for-sale securities
|
|
|
(695 |
) |
|
|
|
|
|
|
|
|
|
|
(1,117 |
) |
|
|
|
|
|
|
|
|
|
|
37.8 |
|
|
|
Other assets
|
|
|
31,786 |
|
|
|
|
|
|
|
|
|
|
|
30,394 |
|
|
|
|
|
|
|
|
|
|
|
4.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
$220,774 |
|
|
|
|
|
|
|
|
|
|
|
$211,222 |
|
|
|
|
|
|
|
|
|
|
|
4.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits
|
|
|
$27,828 |
|
|
|
|
|
|
|
|
|
|
|
$28,893 |
|
|
|
|
|
|
|
|
|
|
|
(3.7 |
) |
|
|
Interest-bearing deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest checking
|
|
|
25,470 |
|
|
|
160 |
|
|
|
1.27 |
|
|
|
23,238 |
|
|
|
95 |
|
|
|
.82 |
|
|
|
9.6 |
|
|
|
|
Money market savings
|
|
|
25,154 |
|
|
|
322 |
|
|
|
2.58 |
|
|
|
27,178 |
|
|
|
254 |
|
|
|
1.88 |
|
|
|
(7.4 |
) |
|
|
|
Savings accounts
|
|
|
5,422 |
|
|
|
10 |
|
|
|
.38 |
|
|
|
5,705 |
|
|
|
9 |
|
|
|
.31 |
|
|
|
(5.0 |
) |
|
|
|
Time certificates of deposit less than $100,000
|
|
|
14,745 |
|
|
|
320 |
|
|
|
4.37 |
|
|
|
13,598 |
|
|
|
240 |
|
|
|
3.55 |
|
|
|
8.4 |
|
|
|
|
Time deposits greater than $100,000
|
|
|
21,228 |
|
|
|
526 |
|
|
|
4.99 |
|
|
|
22,089 |
|
|
|
483 |
|
|
|
4.41 |
|
|
|
(3.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits
|
|
|
92,019 |
|
|
|
1,338 |
|
|
|
2.93 |
|
|
|
91,808 |
|
|
|
1,081 |
|
|
|
2.37 |
|
|
|
.2 |
|
|
|
Short-term borrowings
|
|
|
28,114 |
|
|
|
748 |
|
|
|
5.37 |
|
|
|
23,295 |
|
|
|
550 |
|
|
|
4.77 |
|
|
|
20.7 |
|
|
|
Long-term debt
|
|
|
43,804 |
|
|
|
1,097 |
|
|
|
5.04 |
|
|
|
39,735 |
|
|
|
887 |
|
|
|
4.49 |
|
|
|
10.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
163,937 |
|
|
|
3,183 |
|
|
|
3.91 |
|
|
|
154,838 |
|
|
|
2,518 |
|
|
|
3.28 |
|
|
|
5.9 |
|
|
|
Other liabilities
|
|
|
7,957 |
|
|
|
|
|
|
|
|
|
|
|
7,138 |
|
|
|
|
|
|
|
|
|
|
|
11.5 |
|
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred equity
|
|
|
1,000 |
|
|
|
|
|
|
|
|
|
|
|
530 |
|
|
|
|
|
|
|
|
|
|
|
88.7 |
|
|
|
|
Common equity
|
|
|
20,052 |
|
|
|
|
|
|
|
|
|
|
|
19,823 |
|
|
|
|
|
|
|
|
|
|
|
1.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
21,052 |
|
|
|
|
|
|
|
|
|
|
|
20,353 |
|
|
|
|
|
|
|
|
|
|
|
3.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
|
$220,774 |
|
|
|
|
|
|
|
|
|
|
|
$211,222 |
|
|
|
|
|
|
|
|
|
|
|
4.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
|
$3,316 |
|
|
|
|
|
|
|
|
|
|
|
$3,422 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross interest margin
|
|
|
|
|
|
|
|
|
|
|
2.91 |
% |
|
|
|
|
|
|
|
|
|
|
3.21 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross interest margin without taxable-equivalent increments
|
|
|
|
|
|
|
|
|
|
|
2.87 |
|
|
|
|
|
|
|
|
|
|
|
3.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of Earning Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
6.82 |
% |
|
|
|
|
|
|
|
|
|
|
6.49 |
% |
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
3.35 |
|
|
|
|
|
|
|
|
|
|
|
2.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin
|
|
|
|
|
|
|
|
|
|
|
3.47 |
% |
|
|
|
|
|
|
|
|
|
|
3.74 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin without taxable-equivalent increments
|
|
|
|
|
|
|
|
|
|
|
3.43 |
% |
|
|
|
|
|
|
|
|
|
|
3.72 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 There are a
number of factors that may adversely affect the Companys
business, financial results or stock price. Refer to Risk
Factors in the Companys Annual Report on
Form 10-K for the
year ended December 31, 2006, for discussion of these
risks. The risks described in the Companys Annual Report
on Form 10-K are
not the only risks facing the Company. Additional risks that the
Company currently does not know about or currently views as
immaterial may also impair the Companys business or
adversely impact its financial results or stock price.
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 2007.
Item 4. Submission of Matters to a Vote of Security
Holders The information contained in
Part II, Item 4 of the Companys
Form 10-Q for the
quarterly period ended March 31, 2007, is incorporated
herein by reference.
Item 6. Exhibits
|
|
|
12
|
|
Computation of Ratio of Earnings to Fixed Charges |
31.1
|
|
Certification of Chief Executive Officer pursuant to
Rule 13a-14(a) under the Securities Exchange Act of 1934 |
31.2
|
|
Certification of Chief Financial Officer pursuant to
Rule 13a-14(a) under the Securities Exchange Act of 1934 |
32
|
|
Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. section 1350 as adopted pursuant
to section 906 of the Sarbanes-Oxley Act of 2002 |
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.
|
|
|
|
By: |
/s/ Terrance R. Dolan
|
|
|
|
|
|
Terrance R. Dolan |
|
Executive Vice President and Controller |
|
(Chief Accounting Officer and Duly Authorized Officer) |
DATE: August 9, 2007
EXHIBIT 12
Computation of Ratio of Earnings to Fixed Charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
Six Months Ended | |
(Dollars in Millions) |
|
June 30, 2007 | |
|
June 30, 2007 | |
| |
Earnings |
1.
|
|
Net income |
|
|
$1,156 |
|
|
|
$2,286 |
|
2.
|
|
Applicable income taxes, including interest expense related to
unrecognized tax positions |
|
|
500 |
|
|
|
993 |
|
|
|
|
|
|
|
|
3.
|
|
Income before income taxes (1 + 2) |
|
|
$1,656 |
|
|
|
$3,279 |
|
|
|
|
|
|
|
|
4.
|
|
Fixed charges: |
|
|
|
|
|
|
|
|
|
|
a. |
|
Interest expense excluding interest on deposits* |
|
|
$941 |
|
|
|
$1,804 |
|
|
|
b. |
|
Portion of rents representative of interest and amortization of
debt expense |
|
|
19 |
|
|
|
38 |
|
|
|
|
|
|
|
|
|
|
c. |
|
Fixed charges excluding interest on deposits (4a + 4b) |
|
|
960 |
|
|
|
1,842 |
|
|
|
d. |
|
Interest on deposits |
|
|
663 |
|
|
|
1,338 |
|
|
|
|
|
|
|
|
|
|
e. |
|
Fixed charges including interest on deposits (4c + 4d) |
|
|
$1,623 |
|
|
|
$3,180 |
|
|
|
|
|
|
|
|
5.
|
|
Amortization of interest capitalized |
|
|
$ |
|
|
|
$ |
|
6.
|
|
Earnings excluding interest on deposits (3 + 4c + 5) |
|
|
2,616 |
|
|
|
5,121 |
|
7.
|
|
Earnings including interest on deposits (3 + 4e + 5) |
|
|
3,279 |
|
|
|
6,459 |
|
8.
|
|
Fixed charges excluding interest on deposits (4c) |
|
|
960 |
|
|
|
1,842 |
|
9.
|
|
Fixed charges including interest on deposits (4e) |
|
|
1,623 |
|
|
|
3,180 |
|
|
Ratio of Earnings to Fixed Charges |
10.
|
|
Excluding interest on deposits (line 6/line 8) |
|
|
2.73 |
|
|
|
2.78 |
|
11.
|
|
Including interest on deposits (line 7/line 9) |
|
|
2.02 |
|
|
|
2.03 |
|
|
|
|
|
* |
|
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:
|
|
(1) |
I have reviewed this Quarterly Report on
Form 10-Q of U.S.
Bancorp; |
|
(2) |
Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report; |
|
(3) |
Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this report; |
|
(4) |
The registrants other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act
Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have: |
|
|
|
|
(a) |
designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared; |
|
(b) |
designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles; |
|
|
|
|
(c) |
evaluated the effectiveness of the registrants disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and |
|
|
|
|
(d) |
disclosed in this report any change in the registrants
internal control over financial reporting that occurred during
the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrants internal control over
financial reporting; and |
|
|
(5) |
The registrants other certifying officers and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrants
auditors and the audit committee of the registrants board
of directors (or persons performing the equivalent functions): |
|
|
|
|
(a) |
all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and
report financial information; and |
|
(b) |
any fraud, whether or not material, that involves management or
other employees who have a significant role in the
registrants internal control over financial reporting. |
|
|
|
/s/ Richard K. Davis
|
|
|
|
Richard K. Davis |
|
Chief Executive Officer |
Dated: August 9, 2007
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
RULE 13a-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
I, Andrew Cecere, certify that:
|
|
(1) |
I have reviewed this Quarterly Report on
Form 10-Q of U.S.
Bancorp; |
|
(2) |
Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report; |
|
(3) |
Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this report; |
|
(4) |
The registrants other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act
Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have: |
|
|
|
|
(a) |
designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared; |
|
(b) |
designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles; |
|
|
|
|
(c) |
evaluated the effectiveness of the registrants disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and |
|
|
|
|
(d) |
disclosed in this report any change in the registrants
internal control over financial reporting that occurred during
the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrants internal control over
financial reporting; and |
|
|
(5) |
The registrants other certifying officers and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrants
auditors and the audit committee of the registrants board
of directors (or persons performing the equivalent functions): |
|
|
|
|
(a) |
all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and
report financial information; and |
|
(b) |
any fraud, whether or not material, that involves management or
other employees who have a significant role in the
registrants internal control over financial reporting. |
|
|
|
/s/ Andrew Cecere
|
|
|
|
Andrew Cecere |
|
Chief Financial Officer |
Dated: August 9, 2007
EXHIBIT 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, the
undersigned, Chief Executive Officer and Chief Financial Officer
of U.S. Bancorp, a Delaware corporation (the
Company), do hereby certify that:
|
|
(1) |
The Quarterly Report on
Form 10-Q for the
quarter ended June 30, 2007 (the
Form 10-Q)
of the Company fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and |
|
(2) |
The information contained in the
Form 10-Q fairly
presents, in all material respects, the financial condition and
results of operations of the Company. |
|
|
|
/s/ Richard K. Davis
Richard K. Davis
Chief Executive Officer |
|
/s/ Andrew Cecere
Andrew
Cecere
Chief Financial Officer |
Dated: August 9, 2007
|
|
|
|
|
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
Mellon Investor 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:
Mellon Investor Services
P.O. Box 3315
South Hackensack, NJ 07606-1915
Phone: 888-778-1311 or 201-680-4000
Internet: melloninvestor.com
For Registered or Certified Mail:
Mellon Investor Services
480 Washington Boulevard
Jersey City, NJ 07310
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
Mellons internet site by clicking on For Investors and
then 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, Mellon Investor Services.
Investor Relations Contacts
Judith T. Murphy
Senior Vice President, Investor 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, click on About U.S. Bancorp, then
Investor/Shareholder Information.
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. Bancorp,
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.