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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 31, 2000
1-6880
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(Commission File Number)
U.S. BANCORP
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(Exact name of Registrant as specified in its charter)
DELAWARE 41-0255900
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(State of incorporation) (I.R.S. Employer
Identification Number)
U.S. Bank Place
601 Second Avenue South, Minneapolis, Minnesota 55402-4302
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(Address of Registrant's principal executive office)
(612) 973-1111
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(Registrant's telephone number)
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ITEM 5. OTHER EVENTS
The following consolidated financial statements of U.S. Bancorp, a
Delaware corporation, are included in this report:
Balance Sheet as of December 31, 2000 and 1999;
Statement of Income for the Years Ended December 31, 2000, 1999 and
1998;
Statement of Shareholders' Equity for the Years Ended December 31,
2000, 1999 and 1998;
Statement of Cash Flows for the Years Ended December 31, 2000, 1999 and
1998
Report of Independent Accountants
Supplemental Financial Data and Tables
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits. None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
U.S. BANCORP
By: /s/ Terrance R. Dolan
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Name: Terrance R. Dolan
Title: Senior Vice President and
Controller
Date: April 17, 2001
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2000
2000 FINANCIAL STATEMENTS
RESTATED 2000 FINANCIAL STATEMENTS REFLECTING THE
MERGER OF U.S. BANCORP AND FIRSTAR CORPORATION
[US BANCORP LOGO(R)]
5
[MAP]
CONTENTS
1 Selected Financial Data
2 Consolidated Financial Statements
6 Notes to Consolidated Financial Statements
37 Report of Independent Accountants
39 Five Year Consolidated Financial Statements
41 Quarterly Consolidated Financial Data
42 Three Year Average Balance Sheet and Related Yields and Rates
44 Supplemental Financial Data and Tables
60 Exhibit 12
Inside Managing Committee and
Back Cover Corporate Directors
Back Cover Shareholder Inquiries
CORPORATE PROFILE
THE MERGER OF FIRSTAR CORPORATION AND U.S. BANCORP
has been completed, and the new company is now called U.S. Bancorp. U.S. Bancorp
common stock is traded on the New York Stock Exchange under the ticker symbol
USB. U.S. Bancorp has the capacity, capability, resources and expertise to
deliver the products and services our customers want, when they want them and on
their terms.
U.S. Bancorp is a multi-state financial holding company with headquarters in
Minneapolis, Minnesota. Since its merger with Firstar Corporation, the new U.S.
Bancorp is now the eighth largest financial holding company in the United States
with total assets in excess of $160 billion.
Through U.S. Bank, Firstar Bank and other subsidiaries, we serve more than 10
million customers, principally in 24 states. We provide individuals, businesses,
institutions and government entities a comprehensive selection of top quality
financial products and services.
U.S. Bancorp, its full-service banks and its subsidiaries offer specialized
expertise and leadership in Consumer Banking, Commercial Banking, Trust and
Investment Services, Mortgage Banking, Payment Systems and Insurance Services.
Through U.S. Bancorp Piper Jaffray we offer full securities brokerage services,
asset management, equity capital, fixed income capital and individual investment
services.
We deliver these products and services through 2,239 U.S. Bank and Firstar
banking offices, loan and brokerage offices, hundreds of skilled relationship
managers, 5,143 ATMs, Internet Banking and Telephone Banking.
U.S. Bancorp ranks among the top performing U.S. financial holding companies in
terms of earnings per share growth, efficiency, return on assets, return on
equity and other key financial indicators.
6
SELECTED FINANCIAL DATA
(Dollars in Millions, Except Per Share Data) 2000 1999 1998 1997 1996
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CONDENSED INCOME STATEMENT
Net interest income (taxable-equivalent basis).............. $6,135.0 $5,932.7 $5,676.2 $5,532.0 $5,298.4
Merger and restructuring related gains...................... -- -- -- -- 235.8
Securities gains, net....................................... 8.1 13.2 29.1 7.3 18.7
Other noninterest income.................................... 4,875.1 4,231.7 3,620.9 2,711.3 2,513.5
Merger and restructuring related charges.................... 348.7 532.8 593.8 633.0 192.4
Other noninterest expense................................... 5,368.3 5,128.5 4,829.6 4,306.7 4,321.6
Provision for credit losses................................. 828.0 646.0 491.3 639.9 429.9
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Income before taxes........................................ 4,473.2 3,870.3 3,411.5 2,671.0 3,122.5
Taxable-equivalent adjustment............................... 85.4 96.3 111.2 121.1 121.0
Income taxes................................................ 1,512.2 1,392.2 1,167.4 950.6 1,082.9
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Net income................................................. $2,875.6 $2,381.8 $2,132.9 $1,599.3 $1,918.6
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FINANCIAL RATIOS
Return on average assets.................................... 1.81% 1.59% 1.49% 1.24% 1.57%
Return on average equity.................................... 20.0 18.0 17.2 14.7 18.0
Net interest margin (taxable-equivalent basis).............. 4.36 4.44 4.44 4.72 4.81
Efficiency ratio............................................ 51.9 55.7 58.3 59.9 56.1
Banking efficiency ratio*................................... 46.8 52.0 56.1 59.5 55.7
PER COMMON SHARE
Earnings per share.......................................... $ 1.51 $ 1.25 $ 1.12 $ 0.86 $ 1.02
Diluted earnings per share.................................. 1.50 1.23 1.10 .85 1.00
Dividends declared.......................................... .65 .4625 .33 .27 .21
SELECTED FINANCIAL RATIOS EXCLUDING MERGER AND RESTRUCTURING RELATED
ITEMS
Return on average assets.................................... 2.03% 1.94% 1.91% 1.72% 1.73%
Return on average equity.................................... 22.4 22.0 22.0 20.5 19.8
Efficiency ratio............................................ 48.8 50.5 51.9 52.2 55.3
Banking efficiency ratio*................................... 43.5 46.3 49.4 51.7 54.9
AVERAGE BALANCE SHEET DATA
Loans....................................................... $118,317 $109,638 $102,451 $ 95,149 $ 87,732
Loans held for sale......................................... 1,303 1,450 1,264 549 691
Investment securities....................................... 17,311 19,271 21,114 19,123 18,944
Earning assets.............................................. 140,606 133,757 127,738 117,173 110,172
Assets...................................................... 158,481 150,167 142,887 129,493 121,967
Noninterest bearing deposits................................ 23,820 23,556 23,011 20,984 19,881
Deposits.................................................... 103,426 99,920 98,940 93,322 89,786
Short-term borrowings....................................... 12,586 11,707 11,102 11,791 12,212
Long-term debt.............................................. 22,410 20,248 15,732 9,481 6,429
Total shareholders' equity.................................. 14,365 13,221 12,383 10,882 10,659
Average shares outstanding.................................. 1,906.0 1,907.8 1,898.8 1,841.0 1,861.6
Average diluted shares outstanding.......................... 1,918.5 1,930.0 1,930.5 1,872.2 1,898.2
YEAR-END BALANCE SHEET DATA
Loans....................................................... $122,365 $113,229 $106,958 $ 99,029 $ 91,242
Investment securities....................................... 17,642 17,449 20,965 20,442 18,671
Assets...................................................... 164,921 154,318 150,714 137,488 126,610
Deposits.................................................... 109,535 103,417 104,346 98,323 93,811
Long-term debt.............................................. 21,876 21,027 18,679 13,181 6,796
Total shareholders' equity.................................. 15,168 13,947 12,574 11,402 10,717
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*Without investment banking and brokerage activity.
U.S. Bancorp 1
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CONSOLIDATED BALANCE SHEET
At December 31 (Dollars in Millions) 2000 1999
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ASSETS
Cash and due from banks..................................... $ 8,475 $ 7,324
Money market investments.................................... 657 1,934
Trading account securities.................................. 753 617
Investment securities
Held-to-maturity (fair value $257 and $200,
respectively)........................................... 252 194
Available-for-sale....................................... 17,390 17,255
Loans held for sale......................................... 764 670
Loans
Commercial............................................... 52,817 45,856
Commercial real estate................................... 26,443 25,142
Residential mortgages.................................... 7,753 11,395
Retail................................................... 35,352 30,836
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Total loans........................................... 122,365 113,229
Less allowance for credit losses................... 1,787 1,710
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Net loans.......................................... 120,578 111,519
Premises and equipment...................................... 1,836 1,865
Customers' liability on acceptances......................... 183 167
Goodwill and other intangible assets........................ 5,309 4,825
Other assets................................................ 8,724 7,948
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Total assets.......................................... $164,921 $154,318
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LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing...................................... $ 26,633 $ 26,350
Interest-bearing......................................... 68,177 66,731
Time deposits greater than $100,000...................... 14,725 10,336
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Total deposits........................................ 109,535 103,417
Short-term borrowings....................................... 11,833 10,558
Long-term debt.............................................. 21,876 21,027
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely the junior
subordinated debentures of the parent company.............. 1,400 1,400
Acceptances outstanding..................................... 183 167
Other liabilities........................................... 4,926 3,802
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Total liabilities..................................... 149,753 140,371
Shareholders' equity
Common stock, par value $0.01 a share -- authorized
2,000,000,000 shares; issued: 2000 -- 1,943,541,593
shares; 1999 -- 1,938,856,001 shares................... 19 19
Capital surplus.......................................... 4,276 4,259
Retained earnings........................................ 11,658 10,050
Less cost of common stock in treasury: 2000 -- 41,458,159
shares; 1999 -- 10,346,823 shares....................... (880) (224)
Other comprehensive income............................... 95 (157)
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Total shareholders' equity............................ 15,168 13,947
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Total liabilities and shareholders' equity............ $164,921 $154,318
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See Notes to Consolidated Financial Statements.
2 U.S. Bancorp
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CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31 (Dollars and Shares in Millions, Except Per Share Data) 2000 1999 1998
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INTEREST INCOME
Loans................................................................ $10,562.5 $ 9,122.7 $ 8,818.3
Loans held for sale.................................................. 102.1 103.9 91.9
Investment securities
Taxable........................................................... 1,008.3 1,047.1 1,179.5
Non-taxable....................................................... 140.6 150.1 158.2
Money market investments............................................. 53.9 44.9 63.0
Trading securities................................................... 53.7 45.0 25.6
Other interest income................................................ 151.4 113.0 88.2
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Total interest income.......................................... 12,072.5 10,626.7 10,424.7
INTEREST EXPENSE
Deposits............................................................. 3,618.8 2,970.0 3,234.7
Short-term borrowings................................................ 781.7 582.4 594.7
Long-term debt....................................................... 1,510.4 1,126.9 926.5
Company-obligated mandatorily redeemable preferred securities of subsidiary
trusts holding solely the junior subordinated debentures of the parent
company............................................................. 112.0 111.0 103.8
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Total interest expense......................................... 6,022.9 4,790.3 4,859.7
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Net interest income.................................................. 6,049.6 5,836.4 5,565.0
Provision for credit losses.......................................... 828.0 646.0 491.3
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Net interest income after provision for credit losses................ 5,221.6 5,190.4 5,073.7
NONINTEREST INCOME
Credit card and payment processing revenue........................... 992.1 837.8 748.0
Trust and investment management fees................................. 926.2 887.1 788.3
Deposit service charges.............................................. 551.1 497.2 470.3
Cash management fees................................................. 292.4 280.6 242.0
Mortgage banking revenue............................................. 189.9 190.4 244.6
Trading account profits and commissions.............................. 258.4 222.4 130.3
Investment products fees and commissions............................. 466.6 450.8 306.9
Investment banking revenue........................................... 360.3 246.6 100.4
Commercial product revenue........................................... 304.4 215.7 121.9
Securities gains, net................................................ 8.1 13.2 29.1
Other................................................................ 533.7 403.1 468.2
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Total noninterest income....................................... 4,883.2 4,244.9 3,650.0
NONINTEREST EXPENSE
Salaries............................................................. 2,427.1 2,355.3 2,196.7
Employee benefits.................................................... 399.8 410.1 424.9
Net occupancy........................................................ 396.9 371.8 356.9
Furniture and equipment.............................................. 308.2 307.9 314.1
Postage.............................................................. 174.5 170.7 155.4
Goodwill............................................................. 242.8 177.7 177.2
Other intangible assets.............................................. 149.5 152.1 124.6
Merger and restructuring related charges............................. 348.7 532.8 593.8
Other................................................................ 1,269.5 1,182.9 1,079.8
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Total noninterest expense...................................... 5,717.0 5,661.3 5,423.4
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Income before income taxes........................................... 4,387.8 3,774.0 3,300.3
Applicable income taxes.............................................. 1,512.2 1,392.2 1,167.4
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Net income........................................................... $ 2,875.6 $ 2,381.8 $ 2,132.9
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Earnings per share................................................... $ 1.51 $ 1.25 $ 1.12
Diluted earnings per share........................................... $ 1.50 $ 1.23 $ 1.10
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Average common shares................................................ 1,906.0 1,907.8 1,898.8
Average diluted common shares........................................ 1,918.5 1,930.0 1,930.5
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See Notes to Consolidated Financial Statements.
U.S. Bancorp 3
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CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Other Total
Preferred Common Capital Retained Treasury Comprehensive Shareholders'
(Dollars in Millions) Stock Stock Surplus Earnings Stock Income Equity
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BALANCE DECEMBER 31, 1997....... $ 5.3 $18.8 $3,970.8 $ 7,465.0 $ (175.0) $ 117.4 $11,402.3
Net income...................... 2,132.9 2,132.9
Unrealized gain on securities
available for sale............. 179.9 179.9
Reclassification adjustment for
gains realized in net income... (34.0) (34.0)
Income taxes.................... (52.6) (52.6)
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Total comprehensive
income................... 2,226.2
Cash dividends declared on
common stock................... (977.6) (977.6)
Cash dividends declared on
preferred stock................ (.1) (.1)
Conversion of preferred stock
into common stock.............. (5.3) 4.7 .5 .1
Issuance of common stock and
treasury shares................ .5 423.4 137.7 422.9 2.2 986.7
Purchase of treasury stock...... (1,104.0) (1,104.0)
Purchase and retirement of
common stock and treasury
stock.......................... (107.0) 106.7 (.3)
Shares reserved to meet deferred
compensation obligations....... 9.1 (7.9) 1.2
Amortization of restricted
stock.......................... 37.7 37.7
ESOP debt reduction, net........ 1.8 1.8
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BALANCE DECEMBER 31, 1998....... $ -- $19.3 $4,338.7 $ 8,758.4 $ (755.4) $ 212.9 $12,573.9
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Net income...................... 2,381.8 2,381.8
Unrealized loss on securities
available for sale............. (743.9) (743.9)
Reclassification adjustment for
losses realized in net
income......................... 163.9 163.9
Income taxes.................... 210.5 210.5
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Total comprehensive
income................... 2,012.3
Cash dividends declared on
common stock................... (1,090.8) (1,090.8)
Issuance of common stock and
treasury shares................ .2 213.8 1,377.0 1,591.0
Purchase of treasury stock...... (1,187.9) (1,187.9)
Retirement of treasury stock.... (.1) (343.8) 344.0 .1
Shares reserved to meet deferred
compensation obligations....... 2.1 (2.0) .1
Amortization of restricted
stock.......................... 47.8 47.8
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BALANCE DECEMBER 31, 1999....... $ -- $19.4 $4,258.6 $10,049.4 $ (224.3) $(156.6) $13,946.5
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Net income...................... 2,875.6 2,875.6
Unrealized gain on securities
available for sale............. 436.0 436.0
Foreign currency translation
adjustment..................... (.5) (.5)
Reclassification adjustment for
gains realized in net income... (41.6) (41.6)
Income taxes.................... (141.8) (141.8)
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Total comprehensive
income................... 3,127.7
Cash dividends declared on
common stock................... (1,267.0) (1,267.0)
Issuance of common stock and
treasury shares................ (35.0) 534.9 499.9
Purchase of treasury stock...... (1,182.2) (1,182.2)
Shares reserved to meet deferred
compensation obligations....... 8.5 (8.5) --
Amortization of restricted
stock.......................... 43.5 43.5
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BALANCE DECEMBER 31, 2000....... $ -- $19.4 $4,275.6 $11,658.0 $ (880.1) $ 95.5 $15,168.4
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See Notes to Consolidated Financial Statements.
4 U.S. Bancorp
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CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31 (Dollars in Millions) 2000 1999 1998
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OPERATING ACTIVITIES
Net income.................................................. $ 2,875.6 $ 2,381.8 $ 2,132.9
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for credit losses.............................. 828.0 646.0 491.3
Depreciation and amortization of capitalized assets...... 262.6 270.6 291.4
Amortization of goodwill and other intangibles........... 392.3 329.8 301.8
Provision for deferred income taxes...................... 357.1 252.9 86.4
Net (increase) decrease in trading securities............ (135.6) 65.6 (184.9)
(Gain)/loss on sale of securities and other assets,
net..................................................... (47.3) 149.9 4.3
Mortgage loans originated for sale in the secondary
market.................................................. (5,563.3) (6,117.1) (8,303.1)
Proceeds from sale of mortgage loans..................... 5,475.0 7,229.3 7,009.8
Other assets and liabilities, net........................ (1.8) (242.2) (354.2)
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Net cash provided by operating activities.......... 4,442.6 4,966.6 1,475.7
INVESTING ACTIVITIES
Securities
Sales.................................................... 10,194.0 6,819.7 2,806.9
Maturities............................................... 2,127.7 5,290.7 7,592.8
Purchases................................................ (12,161.3) (9,135.8) (8,967.8)
Loans
Sales.................................................... 6,655.8 4,136.0 919.3
Purchases................................................ (658.1) (254.6) (1,575.7)
Net increase in loans outstandings.......................... (13,541.3) (9,002.3) (4,492.2)
Proceeds from sales of premises and equipment............... 212.9 64.2 66.7
Purchase of premises and equipment.......................... (382.8) (289.0) (370.7)
Acquisitions, net of cash acquired.......................... 840.9 (220.5) (55.0)
Divestitures of branches.................................... (78.2) (469.0) 16.3
Cash and cash equivalents of acquired subsidiaries.......... 63.5 462.4 --
Other, net.................................................. (289.1) (961.3) (149.2)
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Net cash used in investing activities.............. (7,016.0) (3,559.5) (4,208.6)
FINANCING ACTIVITIES
Net change in
Deposits................................................. 3,403.7 (3,034.9) 1,200.0
Short-term borrowings.................................... 702.1 544.9 (1,674.7)
Principal payments on long-term debt........................ (5,277.5) (5,706.1) (4,127.0)
Proceeds from long-term debt................................ 5,862.7 8,067.5 9,213.6
Proceeds from issuance of common stock...................... 210.0 275.5 333.2
Issuance of Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts holding solely
the junior subordinated debentures of the parent company... -- -- 350.0
Repurchase of common stock.................................. (1,182.2) (1,187.9) (1,104.0)
Cash dividends paid......................................... (1,271.3) (1,029.7) (921.5)
Other, net.................................................. -- -- 1.2
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Net cash provided by (used in) financing
activities....................................... 2,447.5 (2,070.7) 3,270.8
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Change in cash and cash equivalents................ (125.9) (663.6) 537.9
Cash and cash equivalents at beginning of year.............. 9,257.5 9,921.1 9,383.2
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Cash and cash equivalents at end of year........... $ 9,131.6 $ 9,257.5 $ 9,921.1
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See Notes to Consolidated Financial Statements.
U.S. Bancorp 5
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES
U.S. Bancorp (the "Company"), formerly known as Firstar Corporation, is the
organization created by the acquisition by Firstar Corporation ("Firstar") of
the former U.S. Bancorp ("USBM"). The new Company retained the U.S. Bancorp
name. The Company is a multi-state financial services holding company
headquartered in Minneapolis, Minnesota. The Company provides a full range of
financial services including lending and depository services through banking
offices principally in 24 states. The Company also engages in credit card,
merchant, and ATM processing, mortgage banking, insurance, trust and investment
management, brokerage, leasing and investment banking activities principally in
domestic markets.
BASIS OF PRESENTATION The consolidated financial statements include the accounts
of the Company and its subsidiaries. The consolidation eliminates all
significant intercompany accounts and transactions. Certain items in prior
periods have been reclassified to conform to the current presentation.
USES OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual experience could differ from those estimates.
BUSINESS SEGMENTS
Within the Company, financial performance is measured by major lines of business
based on the products and services provided to customers through its
distribution channels. The Company has seven reportable operating segments:
Consumer Banking delivers products and services to the broad consumer market
and small businesses through banking offices, telemarketing, on-line services,
direct mail and automated teller machines ('ATM'). It encompasses community
banking, metropolitan banking, small business banking, consumer lending,
mortgage banking, ATM banking, workplace banking, student banking, 24-hour phone
banking, and investment sales.
Payment Systems includes consumer and business credit cards, corporate and
purchasing card services, consumer lines of credit, ATM processing and merchant
processing.
Wholesale Banking offers lending, depository, treasury management and other
financial services to middle market, large corporate and public sector clients.
Private Client, Trust and Asset Management provides mutual fund processing
services and trust, private banking and financial advisory services through four
primary businesses including: the Private Client Group, Corporate Trust,
Institutional Trust and Custody and its Mutual Fund Services, LLC. The business
segment also offers investment management services to several client segments
including mutual funds, institutional customers, and private asset management.
Capital Markets engages in equity and fixed income trading activities,
offers investment banking and underwriting services for corporate and public
sector customers and provides financial advisory services and securities, mutual
funds, annuities and insurance products to consumers and regionally based
businesses through a network of brokerage offices.
Treasury manages the Company's investment and residential mortgage
portfolios, funding, capital management and asset securitization activities and
the interest rate risk position. It also includes the net effect of transfer
pricing related to loan and deposit balances.
Corporate Support primarily represents business activities managed on a
corporate basis including income and expenses of enterprise-wide operations and
administrative support functions.
SEGMENT RESULTS Accounting policies for the lines of business are 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. For detail of theses methodologies
see "Basis of Presentation" on page 6. Table 1 "Line of Business
6 U.S. Bancorp
12
Financial Performance" on page 46 provides details of segment results. This
information is incorporated by reference into these Notes to the Consolidated
Financial Statements.
SECURITIES
TRADING ACCOUNT SECURITIES Debt and equity securities held for resale are
classified as trading account securities and reported at fair value. Realized
and unrealized gains or losses are recognized currently in noninterest income.
AVAILABLE-FOR-SALE SECURITIES These securities are not trading account
securities but may be sold before maturity in response to changes in the
Company's interest rate risk profile or demand for collateralized deposits by
public entities. They are carried at fair value with unrealized net gains or
losses reported within comprehensive income in shareholders' equity. When sold,
the amortized cost of the specific securities is used to compute the gain or
loss.
HELD-TO-MATURITY SECURITIES Debt securities for which the Company has the
positive intent and ability to hold to maturity are reported at historical cost
adjusted for amortization of premiums and accretion of discounts.
LOANS
Loans are reported net of unearned income. Interest income is accrued on the
unpaid principal balances as earned. Loan and commitment fees are deferred and
recognized over the life of the loan and/or commitment period as yield
adjustments.
ALLOWANCE FOR CREDIT LOSSES Management determines the adequacy of the allowance
based on evaluations of the loan portfolio and related off-balance sheet
commitments, recent loss experience, and other pertinent factors, including
economic conditions. This evaluation is inherently subjective as it requires
estimates, including amounts of future cash collections expected on nonaccrual
loans that may be susceptible to significant change. The allowance for credit
losses relating to impaired loans is based on the loan's observable market
price, the collateral for certain collateral-dependent loans, or the discounted
cash flows using the loan's effective interest rate.
The Company determines the amount of the allowance required for certain
sectors based on relative risk characteristics of the loan portfolio and other
financial instruments with credit exposure. The allowance recorded for
commercial loans is based on quarterly reviews of individual loans outstanding
and binding commitments to lend and an analysis of the migration of commercial
loans and actual loss experience. The allowance recorded for homogeneous
consumer loans is based on an analysis of product mix, risk characteristics of
the portfolio, fraud loss and bankruptcy experiences, and historical losses,
adjusted for current trends, for each homogenous category or group of loans. The
allowance is increased through provisions charged to operating earnings and
reduced by net charge-offs.
NONACCRUAL LOANS Generally commercial loans (including impaired loans) are
placed on nonaccrual status when the collection of interest or principal has
become 90 days past due or is otherwise considered doubtful. When a loan is
placed on nonaccrual status, unpaid interest is reversed. Future interest
payments are generally applied against principal. Revolving consumer lines and
credit cards are charged-off by 180 days and closed-end consumer loans other
than residential mortgages are charged-off at 120 days past due and are,
therefore, not placed on non-accrual status.
LEASES The Company engages in both direct and leveraged lease financing. The net
investment in direct financing leases is the sum of all minimum lease payments
and estimated residual values less unearned income. Unearned income is added to
interest income over the terms of the leases to produce a level yield.
The investment in leveraged leases is the sum of all lease payments (less
nonrecourse debt payments) plus estimated residual values, less unearned income.
Income from leveraged leases is recognized over the term of the leases based on
the unrecovered equity investment.
LOANS HELD FOR SALE These loans are carried at the lower of cost or market value
as determined on an aggregate basis by type of loan.
OTHER REAL ESTATE Other real estate ("ORE"), which is included in other assets,
is property acquired through foreclosure or other proceedings. ORE is initially
recorded at fair value and carried at the lower of cost or fair value, less
estimated selling costs. The property is evaluated regularly and any decreases
in the carrying amount are included in noninterest expense.
U.S. Bancorp 7
13
DERIVATIVE FINANCIAL INSTRUMENTS
INTEREST RATE SWAPS AND CONTRACTS The Company uses interest rate swaps and
contracts (forwards, options, caps and floors) to manage its interest rate risk
and as a financial intermediary. The Company does not enter into these contracts
for speculative purposes. The Company utilizes simulation modeling and analysis
of repricing mismatches to identify exposure to changes in interest rates and
assess the effectiveness of interest rate swaps and contracts in reducing that
risk. Interest rate swaps and contracts are designated as hedges of assets or
liabilities and the Company evaluates the hedge effectiveness of the derivative
instruments relative to the underlying hedged item on a regular basis. Income or
expense on swaps and contracts designated as hedges of assets or liabilities is
recorded as an adjustment to interest income or expense. If the swap or contract
is terminated, the gain or loss is deferred and amortized over the shorter of
the remaining life of the swap or the underlying asset or liability. If the
hedged instrument is disposed of, the swap or contract agreement is marked to
market with any resulting gain or loss included with the gain or loss from the
disposition.
The initial bid/offer spread on intermediated swaps is deferred and
recognized in trading account profits and commissions over the life of the
agreement. Intermediated swaps and all other interest rate contracts are marked
to market and resulting gains or losses are recorded in trading account profits
and commissions. The Company's derivative trading activities are not material to
the consolidated financial statements; the cash flows from these activities are
included in operating activities.
OTHER SIGNIFICANT POLICIES
PREMISES AND EQUIPMENT Premises and equipment are stated at cost less
accumulated depreciation and amortized primarily on a straight-line method.
Capital leases, less accumulated amortization, are included in premises and
equipment. The lease obligations are included in long-term debt. Capitalized
leases are amortized on a straight-line basis over the lease term and the
amortization is included in depreciation expense.
CAPITALIZED SOFTWARE Certain costs incurred in connection with developing or
obtaining software for internal use are capitalized and amortized on a straight-
line basis over the estimated life of the software.
MORTGAGE SERVICING RIGHTS Mortgage servicing rights associated with loans
originated and sold, where servicing is retained, are capitalized and included
in goodwill and other intangible assets in the consolidated balance sheet. The
value of these capitalized servicing rights is amortized in proportion to, and
over the period of, estimated net servicing revenue and recorded in noninterest
expenses as amortization of intangible assets. The carrying value of these
rights is periodically reviewed for impairment based on fair value. For purposes
of measuring impairment, the servicing rights are stratified based on the
underlying loan type and note rate and compared to a valuation prepared based on
a discounted cash flow methodology, current prepayment speeds and discount rate.
Impairment is recognized through a valuation allowance for each impaired stratum
and charged against amortization of intangible assets.
INTANGIBLE ASSETS Goodwill, the price paid over the net fair value of acquired
businesses, is included in other assets and is amortized over periods ranging up
to 25 years. Other intangible assets, including core deposit intangibles, are
amortized over their estimated useful lives, which range from seven to fifteen
years, using straight-line and accelerated methods. The recoverability of
goodwill and other intangible assets is evaluated if events or circumstances
indicate a possible inability to realize the carrying amount. Such evaluation is
based on various analyses, including undiscounted cash flow projections.
INCOME TAXES Deferred taxes are recorded to reflect the tax consequences on
future years of differences between the tax bases of assets and liabilities and
the financial reporting amounts at each year-end.
STATEMENT OF CASH FLOWS For purposes of reporting cash flows, cash and cash
equivalents include cash and money market investments defined as interest
bearing amounts due from banks, federal funds sold and securities purchased
under agreements to resell.
STOCK-BASED COMPENSATION The Company grants stock options for a fixed number of
shares to employees and directors with an exercise price equal to the fair value
of the shares at the date of grant. The Company accounts for stock option grants
in accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and accordingly recognizes no compensation expense for the stock
option grants.
PER SHARE CALCULATIONS Earnings per share is calculated by dividing net income
(less preferred stock dividends) by the weighted average number of common shares
outstanding during the year. Diluted earnings per share is calculated by
adjusting income and outstanding shares, assuming conversion of all potentially
dilutive securities, using the treasury stock method. All per share amounts have
been restated for stock splits.
8 U.S. Bancorp
14
NOTE 2 ACCOUNTING CHANGES
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities," and SFAS 138,
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities -- an Amendment to FASB Statement No. 133," establish accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. SFAS 133
requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
The changes in the fair value of the derivative are recognized currently in
earnings unless specific hedge accounting criteria are met. If the derivative
qualifies as a hedge, the accounting treatment varies based on the type of risk
being hedged. The Company adopted SFAS 133 as of January 1, 2001. Transition
adjustments related to adoption resulted in an after-tax loss of approximately
$4.1 million to net income and an after tax increase of $5.2 million to other
comprehensive income.
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS
OF LIABILITIES SFAS 140, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities," established accounting and reporting
standards for sales and servicing of financial assets, securitization
transactions and the extinguishment of liabilities. The statement replaced SFAS
125 and provided clarification of issues related to qualified special purpose
entities and additional disclosures about securitizations and residual interests
retained. SFAS 140 is effective for transfers and servicing of financial assets
and extinguishments of liabilities occurring after March 31, 2001. Disclosures
required for financial statements were effective for fiscal years ending after
December 15, 2000.
NOTE 3 BUSINESS COMBINATIONS
On February 27, 2001, Firstar and USBM merged in a pooling-of-interests
transaction and accordingly all financial information has been restated to
include the historical information of both companies. Each share of Firstar
stock was converted into and exchanged for one share of the Company's common
stock while each share of USBM stock was converted into and exchanged for 1.265
shares of the Company's common stock. The new Company retained the U.S. Bancorp
name.
On September 20, 1999, Firstar and Mercantile Bancorporation, Inc., merged
in a pooling-of-interests transaction and accordingly all financial information
has been restated to include the historical information of both companies. Each
share of Mercantile Bancorporation stock was converted into and exchanged for
2.091 shares of Firstar common stock.
On November 20, 1998, Firstar Corporation and Star Banc Corporation merged
in a pooling-of-interests transaction and accordingly all financial information
has been restated to include the historical information of both companies. Each
share of Star Banc Corporation stock was converted into and exchanged for one
share of new Firstar common stock while each share of old Firstar Corporation
stock was converted into and exchanged for .76 of a share of new Firstar common
stock.
U.S. Bancorp 9
15
Separate results of operations as originally reported on a condensed basis of
Firstar, Star Banc Corporation, Mercantile Bancorporation, Inc. and USBM, for
the periods prior to the mergers were as follows:
Nine-Month
Year Ended December 31 Six-Month Period Period Ended
----------------------------- Ended June 30, September 30,
(Dollars in Millions) 2000 1999 1998 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME
Firstar................................................. $ 2,699 $ 2,643 $ 1,413 $ 739 $ 561
USBM.................................................... 3,471 3,261 3,061 1,595 2,286
Mercantile Bancorporation, Inc.......................... -- -- 1,123 580 821
Star Banc Corporation................................... -- -- -- -- 483
------------------------------------------------------------------
Total................................................ $ 6,170 $ 5,904 $ 5,597 $ 2,914 $ 4,151
------------------------------------------------------------------
NET INCOME
Firstar................................................. $ 1,284 $ 875 $ 430 $ 340 $ 231
USBM.................................................... 1,592 1,507 1,328 741 978
Mercantile Bancorporation, Inc.......................... -- -- 375 239 285
Star Banc Corporation................................... -- -- -- -- 186
------------------------------------------------------------------
Total................................................ $ 2,876 $ 2,382 $ 2,133 $ 1,320 $ 1,680
------------------------------------------------------------------
TOTAL ASSETS AT PERIOD END
Firstar................................................. $77,585 $72,788 $38,476 $ 38,137 $ 20,666
USBM.................................................... 87,336 81,530 76,438 77,390 73,884
Mercantile Bancorporation, Inc.......................... -- -- 35,800 35,520 34,597
Star Banc Corporation................................... -- -- -- -- 17,291
------------------------------------------------------------------
Total................................................ $164,921 $154,318 $150,714 $151,047 $146,438
---------------------------------------------------------------------------------------------------------------------------------
During the past three years, the Company has completed several strategic
acquisitions to enhance its presence in certain growth markets and businesses.
The following table summarizes acquisitions by the Company and its acquirees
completed during the past three years, treating Star Banc Corporation as the
original acquiring company:
Goodwill &
Other
(Dollars in Millions) Date Assets Deposits Intangibles Cash Paid
-----------------------------------------------------------------------------------------------------------------
Scripps Financial Corporation........ October 2000 $ 650 $ 618 $ 113 $ --
Lyon Financial Services, Inc......... September 2000 1,289 -- 124 307
Oliver-Allen Corporation............. April 2000 280 -- 34 --
Peninsula Bank....................... January 2000 491 452 71 --
Western Bancorp...................... November 1999 2,508 2,105 773 --
Mercantile Bancorporation............ September 1999 35,520 24,334 -- --
Voyager Fleet Systems, Inc........... September 1999 43 -- 25 27
Bank of Commerce..................... July 1999 638 529 269 --
Mellon Network Services' Electronic
Funds Transfer Processing Unit.... June 1999 -- -- 78 170
Libra Investments, Inc............... January 1999 33 -- 4 --
Northwest Bancshares, Inc............ December 1998 377 344 90 140
Firstar Corporation.................. November 1998 20,688 14,560 -- --
First Financial Bancorporation....... September 1998 558 478 -- --
Financial Services Corporation of the
Midwest............................. August 1998 514 414 -- --
Trans Financial, Inc................. August 1998 2,409 1,620 -- --
Cargill Leasing Corporation.......... July 1998 613 -- 64 220
CBT Corporation...................... July 1998 1,006 696 -- --
Firstbank of Illinois Co............. July 1998 2,285 1,970 -- --
Piper Jaffray Companies, Inc......... May 1998 1,272 -- 555 719
HomeCorp, Inc........................ March 1998 335 309 -- --
Horizon Bancorp, Inc................. February 1998 537 454 -- --
Great Financial Corporation.......... February 1998 2,809 2,001 363 135
Branches of:
First Union.......................... December 2000 424 1,779 359 342
Bank One............................. June/August 1998 193 1,198 137 137
-----------------------------------------------------------------------------------------------------------------
Accounting
(Dollars in Millions) Shares Issued Method
------------------------------------- -----------------------------
Scripps Financial Corporation........ 9,406,023 Purchase
Lyon Financial Services, Inc......... -- Purchase
Oliver-Allen Corporation............. 3,343,026 Purchase
Peninsula Bank....................... 5,112,584 Purchase
Western Bancorp...................... 35,127,108 Purchase
Mercantile Bancorporation............ 331,772,028 Pooling
Voyager Fleet Systems, Inc........... -- Purchase
Bank of Commerce..................... 11,749,269 Purchase
Mellon Network Services' Electronic
Funds Transfer Processing Unit.... -- Purchase
Libra Investments, Inc............... 1,299,504 Purchase
Northwest Bancshares, Inc............ -- Purchase
Firstar Corporation.................. 331,737,543 Pooling
First Financial Bancorporation....... 6,563,279 Pooling
Financial Services Corporation of the
Midwest............................. 4,331,398 Pooling
Trans Financial, Inc................. 32,100,000 Pooling
Cargill Leasing Corporation.......... -- Purchase
CBT Corporation...................... 10,712,640 Pooling
Firstbank of Illinois Co............. 27,920,372 Pooling
Piper Jaffray Companies, Inc......... -- Purchase
HomeCorp, Inc........................ 1,787,303 Pooling
Horizon Bancorp, Inc................. 5,331,987 Pooling
Great Financial Corporation.......... 28,500,000 Purchase
Branches of:
First Union.......................... -- Purchase
Bank One............................. -- Purchase
--------------------------------------------------------------------
10 U.S. Bancorp
16
NOTE 4
MERGER AND RESTRUCTURING CHARGES
The Company recorded merger and restructuring charges of $348.7 million, $532.8
million and $593.8 million in 2000, 1999 and 1998, respectively. These charges
were primarily related to the Company's various acquisitions (see Note 3) and
included primarily severance and systems conversion costs. Merger and
restructuring charges in 1998 includes $45.1 million of restructuring costs
associated with Mercantile Bancorporation's centralization, branch closing and
consolidation of operations effort prior to its acquisition by the Company. The
components of the charges are shown below:
(Dollars in Millions) Mercantile Firstar USBC* Other Total
-------------------------------------------------------------------------------------------------------------------
2000
Severance................................................... $ 43.0 $ 16.3 $ -- $ .1 $ 59.4
Systems conversions......................................... 115.2 19.0 -- 59.3 193.5
Asset writedowns and lease terminations..................... 42.7 4.6 -- -- 47.3
Charitable contributions.................................... -- -- -- 2.5 2.5
Other merger-related charges................................ 26.1 12.7 -- 7.2 46.0
---------------------------------------------------
Total 2000.................................................. $227.0 $ 52.6 $ -- $ 69.1 $348.7
1999
Severance................................................... $131.0 $ 10.6 $ 8.0 $ -- $149.6
Systems conversions......................................... 19.5 78.9 4.4 29.7 132.5
Asset writedowns and lease terminations..................... .2 4.4 1.6 -- 6.2
Charitable contributions.................................... 35.0 -- -- -- 35.0
Loss on sale of securities.................................. 177.8 -- -- -- 177.8
Other merger-related charges................................ 46.0 2.0 18.6 (34.9) 31.7
---------------------------------------------------
Total 1999.................................................. $409.5 $ 95.9 $ 32.6 $ (5.2) $532.8
1998
Severance................................................... $ -- $ 80.0 $ -- $ 63.1 $143.1
Systems conversions......................................... -- 26.9 229.4 38.5 294.8
Asset writedowns and lease terminations..................... -- 44.4 -- 20.0 64.4
Benefit curtailment gains................................... -- -- (25.6) -- (25.6)
Charitable contributions.................................... -- 20.0 -- 3.0 23.0
Other merger-related charges................................ -- 39.7 54.4 94.1
---------------------------------------------------
Total 1998.................................................. $ -- $211.0 $203.8 $179.0 $593.8
-------------------------------------------------------------------------------------------------------------------
* Represents the former U.S. Bancorp of Portland acquired in 1997 by USBM.
The Company determines merger-related charges and related accruals based on
its integration strategy and formulated plans. These plans are established as of
the acquisition date and regularly evaluated during the integration process.
Severance charges include the cost of severance, other benefits and
outplacement costs associated with the termination of employees primarily in
branch offices and centralized corporate support and data processing functions.
The severance amounts are determined based on the Company's existing severance
pay programs and are paid out over a benefit period of up to two years from the
time of termination. The total number of employees included in severance amounts
were approximately 3,635 for USBC, 2,000 for Firstar, 2,400 for Mercantile and
520 for other acquisitions. The adequacy of the accrued severance liability is
reviewed periodically taking into consideration actual payments and remaining
projected payment liabilities. Adjustments are made to increase or decrease
these accruals as needed. Reversals of expenses can reflect a lower utilization
of benefits by affected staff, changes in initial assumptions as a result of
subsequent mergers and alterations of business plans.
Systems conversion costs are recorded as incurred and are associated with
the preparation and mailing of numerous customer communications for the
acquisitions and conversion of customer accounts, printing and distribution of
training materials and policy and procedure manuals, outside consulting fees,
and other expenses related to system conversions and the integration of acquired
branches and operations.
Asset writedowns and lease terminations represent lease termination costs
and impairment of assets for redundant office space, branches that will be
vacated and equipment disposed of as part of the integration plan.
In connection with certain mergers, the Company has made charitable
contributions at the time of merger to reaffirm the Company's commitment to a
market or as part of specific conditions necessary to achieve regulatory
approval. These contributions are generally funded up-front and represent costs
that would not have been incurred
U.S. Bancorp 11
17
had the merger not occurred. Charitable contributions are charged to merger and
restructuring expenses or considered in determining the acquisition cost at the
applicable closing date.
Other merger-related expenses are recorded as incurred and include
investment banking fees, legal fees and stock registration fees. The following
table presents a summary of activity with respect to the merger and
restructuring related accruals:
(Dollars in Millions) Mercantile Firstar USBC Other Total
----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997................................ $ -- $ -- $ 189.0 $ 87.1 $ 276.1
Provision charged to operating expense................... -- 211.0 203.8 179.0 593.8
Additions related to purchase acquisitions............... -- -- -- 55.3 55.3
Cash outlays............................................. -- (78.7) (273.6) (161.0) (513.3)
Noncash writedowns and other............................. -- (7.1) (37.9) (14.4) (59.4)
------------------------------------------------------
Balance at December 31, 1998................................ -- 125.2 81.3 146.0 352.5
Provision charged to operating expense................... 409.4 95.8 32.6 (5.0) 532.8
Additions related to purchase acquisitions............... -- -- -- 70.2 70.2
Cash outlays............................................. (182.8) (176.5) (36.0) (112.5) (507.8)
Noncash writedowns and other............................. (27.7) (44.5) (28.2) (32.6) (133.0)
Loss on sale of securities............................... (177.7) -- -- -- (177.7)
Transfer of tax liability*............................... -- -- (33.8) -- (33.8)
------------------------------------------------------
Balance at December 31, 1999................................ 21.2 -- 15.9 66.1 103.2
Provision charged to operating expense................... 227.0 52.6 -- 69.1 348.7
Additions related to purchase acquisitions............... -- -- -- 46.0 46.0
Cash outlays............................................. (197.9) (52.6) (11.2) (105.9) (367.6)
Noncash writedowns and other............................. (50.3) -- (4.7) (25.5) (80.5)
------------------------------------------------------
Balance at December 31, 2000................................ $ -- $ -- $ -- $ 49.8 $ 49.8
----------------------------------------------------------------------------------------------------------------------
*The liability relates to certain severance related items.
The components of the merger related accrual were as follows:
December 31
---------------
(Dollars in Millions) 2000 1999
-------------------------------------------------------------------------------
Severance................................................... $13.8 $ 55.8
Other employee-related costs................................ 6.8 16.6
Lease termination and facility costs........................ 8.4 9.5
Contracts and system writeoffs.............................. 7.4 6.4
Other....................................................... 13.4 14.9
---------------
Total.................................................... $49.8 $103.2
-------------------------------------------------------------------------------
The merger related accrual by significant acquisition was as follows:
December 31
---------------
(Dollars in Millions) 2000 1999
-------------------------------------------------------------------------------
Piper Jaffray Companies, Inc................................ $15.0 $ 17.5
Western Bancorp............................................. 5.1 20.8
Scripps Financial Corporation............................... 4.6 --
Bank of Commerce............................................ 4.1 7.5
Peninsula Bank.............................................. 3.0 --
Lyon Financial Services, Inc................................ 2.7 --
Northwest Bancshares, Inc................................... 2.3 3.5
USBC........................................................ -- 15.9
Mercantile Bancorporation................................... -- 21.2
Other acquisitions.......................................... 13.0 16.8
---------------
Total.................................................... $49.8 $103.2
-------------------------------------------------------------------------------
In connection with the merger of Firstar and USBM, management estimates the
Company will incur pre-tax merger related charges of approximately $970 million.
These are currently estimated to include $188 million in employee related costs,
$327 million for conversions of systems and consolidation of operations, $104
million in
12 U.S. Bancorp
18
occupancy and equipment charges (elimination of duplicate facilities and
write-off of equipment), $178 million of charges related to credit and other
balance sheet restructuring activities and $173 million in other merger related
costs (including investment banking fees, legal fees and other transaction costs
of $59 million and $76 million of charitable contribution to foundations).
In addition to the estimated expenses of the Firstar and USBM merger, the
Company expects to incur an additional $101 million, pretax, of merger and
restructuring related expenses primarily in 2001 as a result of prior years'
acquisitions.
NOTE 5
RESTRICTIONS ON CASH AND DUE FROM BANKS
Bank subsidiaries are required to maintain minimum average reserve balances with
the Federal Reserve Bank. The amount of those reserve balances was approximately
$389 million at December 31, 2000.
NOTE 6
INVESTMENT SECURITIES
The detail of the amortized cost, gross unrealized holding gains and losses, and
fair value of held-to-maturity and available-for-sale securities at December 31
was as follows:
2000 1999
-------------------------------------------------------------------------------------
Gross Gross Gross
Unrealized Unrealized Unrealized
Amortized Holding Holding Fair Amortized Holding
(Dollars in Millions) Cost Gains Losses Value Cost Gains
---------------------------------------------------------------------------------------------------------------------------------
Held-to-maturity:
U.S. Treasuries and agencies......... $ -- $ -- $ -- $ -- $ -- $--
Mortgage-backed securities........... 36 -- -- 36 45 --
Obligations of state and political
subdivisions........................ 216 5 -- 221 149 6
-------------------------------------------------------------------------------------
Total held-to-maturity securities.... $ 252 $ 5 $ -- $ 257 $ 194 $ 6
---------------------------------------------------------------------------------------------------------------------------------
Available-for-sale:
U.S. Treasuries and agencies......... $ 1,600 $ 27 $ (3) $ 1,624 $ 2,370 $14
Mortgage-backed securities........... 11,800 128 (35) 11,893 9,625 29
Obligations of state and political
subdivisions........................ 2,370 41 (2) 2,409 2,731 25
Other................................ 1,472 21 (29) 1,464 2,777 4
-------------------------------------------------------------------------------------
Total available-for-sale
securities.......................... $17,242 $217 $(69) $17,390 $17,503 $72
---------------------------------------------------------------------------------------------------------------------------------
1999
-----------------------
Gross
Unrealized
Holding Fair
(Dollars in Millions) Losses Value
----------------------------------------
Held-to-maturity:
U.S. Treasuries and agencies......... $ -- $ --
Mortgage-backed securities........... -- 45
Obligations of state and political
subdivisions........................ -- 155
-----------------------
Total held-to-maturity securities.... $ -- $ 200
----------------------------------------
Available-for-sale:
U.S. Treasuries and agencies......... $ (21) $ 2,363
Mortgage-backed securities........... (193) 9,461
Obligations of state and political
subdivisions........................ (18) 2,738
Other................................ (88) 2,693
-----------------------
Total available-for-sale
securities.......................... $(320) $17,255
----------------------------------------
Securities carried at $13.3 billion at December 31, 2000, and $10.7 billion
at December 31, 1999, were pledged to secure public, private and trust deposits
and for other purposes required by law. Securities sold under agreements to
repurchase were collateralized by securities and securities purchased under
agreements to resell with an amortized cost of $1.0 billion and $1.2 billion at
December 31, 2000, and 1999, respectively.
The following table provides information as to the amount of gross gains and
(losses) realized through the sales of available-for-sale investment securities.
Included in the gross losses below for 1999 is $177.7 million related to the
Mercantile balance sheet restructuring. These losses were included in merger and
restructuring related expense.
(Dollars in Millions) 2000 1999 1998
------------------------------------------------------------------------------------------------
Gross realized gains........................................ $ 23.1 $ 31.1 $36.4
Gross realized losses....................................... (15.0) (195.6) (7.3)
--------------------------------
Net realized gains (losses).............................. $ 8.1 $(164.5) $29.1
--------------------------------
Income tax (benefit) on realized gains (losses)............. $ 2.8 $ (57.9) $10.5
------------------------------------------------------------------------------------------------
For amortized cost, fair value and yield by maturity date of
held-to-maturity and available-for-sale securities outstanding as of December
31, 2000, see Table 9 from which such information is incorporated by reference
into these Notes to Consolidated Financial Statements.
U.S. Bancorp 13
19
NOTE 7
LOANS AND ALLOWANCE FOR CREDIT LOSSES
The composition of the loan portfolio at December 31, 2000 was as follows:
(Dollars in Millions) 2000 1999
---------------------------------------------------------------------------------------
COMMERCIAL
Commercial............................................... $ 47,041 $ 42,021
Lease financing.......................................... 5,776 3,835
-----------------------
Total commercial...................................... 52,817 45,856
COMMERCIAL REAL ESTATE
Commercial mortgages..................................... 19,466 18,636
Construction and development............................. 6,977 6,506
-----------------------
Total commercial real estate.......................... 26,443 25,142
RESIDENTIAL MORTGAGES....................................... 7,753 11,395
RETAIL
Credit card.............................................. 6,012 5,004
Retail leasing........................................... 4,153 2,123
Other retail............................................. 25,187 23,709
-----------------------
Total retail.......................................... 35,352 30,836
-----------------------
Total loans........................................ $122,365 $113,229
---------------------------------------------------------------------------------------
Loans are presented net of unearned interest which amounted to $1.1 billion
and $553.2 million at December 31, 2000 and 1999, respectively. The Company had
loans of $7.8 billion at December 31, 2000, and $3.5 billion at December 31,
1999 pledged at the Federal Home Loan Bank ("FHLB"). Loans of $3.6 billion at
December 31, 2000, and $3.7 billion at December 31, 1999, were pledged by USBM
at the Federal Reserve Bank.
The following table lists information related to nonperforming loans as of
December 31.
(Dollars in Millions) 2000 1999
-----------------------------------------------------------------------------------
Loans on nonaccrual status.................................. $765.0 $518.0
Renegotiated loans.......................................... -- 2.0
-------------------
Total nonperforming loans................................... $765.0 $520.0
-----------------------------------------------------------------------------------
Interest income that would have been recognized at original
contractual terms.......................................... 72.2 47.2
Amount recognized as interest income........................ 21.4 17.7
-------------------
Forgone revenue............................................. $ 50.8 $ 29.5
-----------------------------------------------------------------------------------
Activity in the allowance for credit losses was as follows:
(Dollars in Millions) 2000 1999 1998
------------------------------------------------------------------------------------------------------
Balance at beginning of year................................ $1,710.3 $1,705.7 $1,665.8
Add:
Provision charged to operating expense................... 828.0 646.0 491.3
Deduct:
Loans charged off........................................ 1,017.6 902.8 773.7
Less recoveries of loans charged off..................... 192.2 230.2 228.5
--------------------------------------
Net loans charged off.................................... 825.4 672.6 545.2
Acquisitions and other changes.............................. 74.0 31.2 93.8
--------------------------------------
Balance at end of year...................................... $1,786.9 $1,710.3 $1,705.7
------------------------------------------------------------------------------------------------------
14 U.S. Bancorp
20
A portion of the allowance for credit losses is allocated to loans deemed
impaired. All impaired loans are included in nonperforming assets. A summary of
these loans and the related allowance for loan losses is as follows:
2000 1999 1998
-----------------------------------------------------------------------------
Recorded Valuation Recorded Valuation Recorded Valuation
(Dollars in Millions) Investment Allowance Investment Allowance Investment Allowance
---------------------------------------------------------------------------------------------------------------------------------
Impaired Loans:
Valuation allowance required................. $198 $57 $ 22 $8 $ 45 $10
No valuation allowance required.............. 486 -- 397 -- 318 --
-----------------------------------------------------------------------------
Total impaired loans............................ $684 $57 $419 $8 $363 $10
-----------------------------------------------------------------------------
Average balance of impaired loans during year... $526 $408 $362
Interest income recognized on impaired loans
during year.................................... 7.8 3.3 4.6
---------------------------------------------------------------------------------------------------------------------------------
Commitments to lend additional funds to customers whose loans were
classified as nonaccrual or renegotiated at December 31, 2000, totaled $22.3
million. During 2000, there were no loans that were restructured at market
interest rates and returned to a fully performing status.
NOTE 8
TRANSFERS AND SERVICING OF FINANCIAL ASSETS
RECEIVABLE SALES When the Company sells receivables or selected financial
assets, it may retain interest-only strips, servicing rights and/or other
retained interests in the receivables. The gain or loss on sale of the
receivables depends in part on the previous carrying amount of the financial
assets involved in the transfer, allocated between the assets sold and the
retained interests based on their relative fair values at the date of transfer.
Market prices are used to determine retained interest fair values when readily
available. However, quotes are generally not available for retained interests,
so the Company estimates fair value based on the present value of future
expected cash flows using management's best estimates of certain key assumptions
including credit losses, prepayment speeds, forward yield curves and discount
rates commensurate with the risks involved. Retained interests recorded to date
have been valued using a discounted cash flow methodology.
At least quarterly, the Company revalues the retained interests by obtaining
market prices if available or by calculating the present value of remaining cash
flows. When using a present value methodology, key assumptions from the most
recent valuation, including asset specific characteristics, are reviewed for
appropriateness and updated as necessary.
The Company has established a securitization trust which holds short-term
commercial loans that were originated by the Company. These loans totaled $2.0
billion at December 31, 2000 and included net sales of originated loans to the
trust of approximately $3.7 billion during 2000. The Company received $18
million in servicing fee revenue from the trust during 2000. Under a credit
enhancement agreement with the trust, the Company may repurchase assets or
provide alternative funding to the trust if the credit quality of the assets
held falls below certain levels. No funding or repurchase of assets occurred
during 2000.
The Company also established a securitization trust which held credit card
receivables originated by the Company. This trust was terminated in December
2000 and $509 million of credit card receivables were transferred from the trust
to the Company in exchange for the seller's certificates held by the Company.
During the period in 2000 that the trust was in existence, $665 million of
credit card collections were reinvested in the trust. The Company received $18
million in servicing fee revenue from the trust in 2000 and recorded a $2.2
million gain upon the termination of the trust.
For the year ended December 31, 2000, the Company sold $255.7 million of the
U.S. government guaranteed portions of loans originated under Small Business
Administration (SBA) programs, recognizing a pre-tax gain on sale of $10.6
million. The SBA covers losses occurring on these guaranteed portions.
Although the Company has no credit recourse relating to these sales, it does
continue to own a portion of the non-guaranteed elements of the loans.
The Company continues to service the loans and is required under the SBA
programs to retain specified yield amounts. A portion of the yield is recognized
as servicing fee income as it occurs, and the remainder is capitalized as an
excess servicing asset and is included in the gain on sale calculation.
U.S. Bancorp 15
21
SERVICING ASSET POSITION
SBA
(Dollars in Millions) Loans
-----------------------------------------------------------------
Servicing assets at December 31, 1999................... $ 4.3
Servicing assets recognized during the period........... 4.0
Amortization............................................ (1.4)
-----
Servicing assets at December 31, 2000................... $ 6.9
-----------------------------------------------------------------
No valuation allowances were required during 2000. Servicing assets are reported
in aggregate but measured on a transaction specific basis. Market values were
determined using discounted cash flows, utilizing the assumptions noted in the
table below. Key economic assumptions used in valuing servicing assets at the
date of sale resulting from sales completed during 2000 were as follows:
2000
(Dollars in Millions) SBA Loans(1)
------------------------------------------------------------------
Fair value of assets recognized................. $7.9
Prepayment speed(2)............................. 21 CPR
Weighted average life (years)................... 3.9
Expected credit losses.......................... Not Applicable
Discount rate................................... 12%
Variable returns to transferees................. Not Applicable
------------------------------------------------------------------
1. All loans were adjustable based on the Wall Street Journal Prime rate.
2. The Company used a prepayment vector based on loan seasoning for valuation.
The given speed was the effective prepayment speed that yields the same
weighted average life calculated using the prepayment vector.
RESIDUAL ECONOMIC ASSUMPTIONS AND ADVERSE CHANGES
The Company has retained interests on the following asset sales: $1.8 billion
sale of indirect automobile loans on September 24, 1999, $420 million sale of
corporate and purchasing card receivables on February 27, 1997, and sales of SBA
loans since 1988.
At December 31, 2000, key economic assumptions and the sensitivity of the
current fair value of residual cash flows to immediate 10 percent and 20 percent
adverse changes in those assumptions were as follows:
Indirect Corporate
Automobile SBA Card
At December 31, 2000 (Dollars in Millions) Loans Loans(1) Receivables(2)
--------------------------------------------------------------------------------------------------------
Carrying amount/fair value of retained interests............ $46.2 $4.2 $8.4
Weighted-average life (in years)............................ 1.0 3.9 .1
PREPAYMENT SPEED ASSUMPTION (ANNUAL RATE)(3,4).............. 1.5 ABS 21 CPR --
Impact on fair value of 10% adverse change............... $(.3) $(.3) --
Impact on fair value of 20% adverse change............... $(.7) $(.6) --
EXPECTED CREDIT LOSSES (CUMULATIVE)......................... 1.6% -- --
Impact on fair value of 10% adverse change............... $(1.2) -- --
Impact on fair value of 20% adverse change............... $(2.4) -- --
RESIDUAL CASH FLOWS DISCOUNT RATE (ANNUAL).................. 12.0% 12.0% --
Impact on fair value of 10% adverse change............... $(.6) $(.2) --
Impact on fair value of 20% adverse change............... $(1.2) $(.3) --
INTEREST RATES ON VARIABLE AND ADJUSTABLE CONTRACTS......... NA NA --
Impact on fair value of 10% adverse change............... NA NA --
Impact on fair value of 20% adverse change............... NA NA --
--------------------------------------------------------------------------------------------------------
1. Credit losses are covered by the appropriate SBA loan program and are not
included in retained interests. Principal reductions caused by defaults are
included in the prepayment assumption.
2. Retained interest is effectively a single period receivable that is paid and
renewed each month during the revolving period. Therefore, no assumptions are
used in its estimate. Losses are recognized in the period they occur.
3. The Company uses prepayment vectors based on loan seasoning for valuation.
The given speed is the effective prepayment speed that yields the same
weighted average life calculated using the prepayment vector.
4. ABS is the absolute prepayment rate and is the auto industry's standard
measure of prepayment speed. CPR is the constant prepayment rate.
These sensitivities are hypothetical and should be used with caution. As the
figures indicate, changes in fair value based on a 10 percent variation in
assumptions generally cannot be extrapolated because the relationship of the
change in the assumptions to the change in fair value may not be linear. Also,
in this table the effect of a variation in a particular assumption on the fair
value of the retained interest is calculated without changing any other
assumption; however, changes in one factor may result in changes in another (for
example, increases in market interest rates may result in lower prepayments and
increased credit losses), which might magnify or counteract the sensitivities.
16 U.S. Bancorp
22
OTHER INFORMATION
The table below summarizes certain cash flows received from and paid to special
purpose entities for the loan sales described above:
Year Ended
December 31
(Dollars in Millions) 2000
---------------------------------------------------------------------------
Proceeds from new sales..................................... $ 3,966.3
Proceeds from corporate and credit card securitization(1)... 8,042.7
Reinvestment in corporate and credit card securitization
receivables(2)............................................. (7,972.9)
Servicing fees received..................................... 52.9
Other cash flows received on retained interests(2).......... 34.2
Purchases of delinquent or foreclosed assets................ --
---------------------------------------------------------------------------
1. The corporate and credit card, securitizations are revolving transaction
where proceeds are reinvested until its legal termination. The indirect
automobile and SBA loan sales are amortizing transaction where the cash flow
is used to pay amounts due to investors.
2. This amount represents total cash flows received from retained interests by
the Company other than servicing fees. Other cash flows include, for example,
all cash flows from interest-only strips and cash above the minimum required
level in cash collateral accounts.
Quantitative information relating to loan sales and managed assets is given
below:
December 31, 2000
------------------------------------------------------------
Period Ended Year Ended
------------------------------------------------------------
Total Principal Delinquent* Average Net Credit
Asset Type (Dollars in Millions) Balance Balance Balance Loss
----------------------------------------------------------------------------------------------------------------------------
Commercial loans............................................ $ 17,382 $ 50 $16,796 $46.3
Indirect automobile loans................................... 1,242 21 1,638 37.6
Guaranteed SBA loans........................................ 828 11 689 --
Corporate card receivables.................................. 815 27 958 8.6
Credit card receivables..................................... 2,219 70 2000 96.2
------------------------------------------------------------
Total loans managed......................................... $ 22,486 $ 179 $22,081 $188.7
Less:
Loans sold or securitized................................ 3,853 4,588
-------- -------
Loans held in portfolio.................................. $ 18,633 $17,493
----------------------------------------------------------------------------------------------------------------------------
*Principal amount 60 days or more past due.
NOTE 9
PREMISES AND EQUIPMENT
Premises and equipment at December 31 consisted of the following:
(Dollars in Millions) 2000 1999
--------------------------------------------------------------------------------
Land........................................................ $ 276 $ 282
Buildings and improvements.................................. 1,786 1,960
Furniture, fixtures and equipment........................... 1,888 1,752
Capitalized building and equipment leases................... 171 108
Construction in progress.................................... 48 46
----------------
4,169 4,148
Less accumulated depreciation and amortization.............. 2,333 2,283
----------------
Total.................................................... $1,836 $1,865
--------------------------------------------------------------------------------
U.S. Bancorp 17
23
NOTE 10
MORTGAGE SERVICING RIGHTS
Changes in capitalized mortgage servicing rights are summarized as follows:
(Dollars in Millions) 2000 1999
------------------------------------------------------------------------------
Balance at beginning of year................................ $ 213 $ 232
Rights purchased............................................ 16 1
Rights capitalized.......................................... 137 170
Amortization................................................ (35) (47)
Rights sold................................................. (101) (144)
Impairment.................................................. (1) --
--------------
Balance at end of year................................... $ 229 $ 212
------------------------------------------------------------------------------
The fair value of capitalized mortgage servicing rights was $244.8 million
on December 31, 2000 and $269.1 million on December 31, 1999. At December 31,
2000, the reduction in the current fair value of mortgage servicing rights to
immediate 25 and 50 basis point adverse interest rate changes would be
approximately $11.2 million and $25.2 million, respectively. The Company has
purchased principal-only securities that act as a partial economic hedge to this
possible adverse interest rate change. The Company serviced $17.0 billion and
$19.5 billion of mortgage loans for other investors as of December 31, 2000 and
1999, respectively.
NOTE 11
INTANGIBLE ASSETS
The following is a summary of intangible assets at December 31, which are
included in the consolidated balance sheet:
(Dollars in Millions) 2000 1999
--------------------------------------------------------------------------------
Goodwill.................................................... $4,312 $3,790
Core deposit benefits....................................... 374 407
Mortgage servicing rights................................... 229 212
Other identified intangibles................................ 394 416
----------------
Total intangible assets.................................. $5,309 $4,825
--------------------------------------------------------------------------------
18 U.S. Bancorp
24
NOTE 12
SHORT-TERM BORROWINGS
The following table is a summary of short-term borrowings for the last three
years:
2000 1999 1998
-----------------------------------------------------------
(Dollars in Millions) Amount Rate Amount Rate Amount Rate
-------------------------------------------------------------------------------------------------------------------------
At year end
Federal funds purchased.................................. $ 2,849 5.8% $ 5,489 4.7% $ 4,749 4.7%
Securities sold under agreements to repurchase........... 3,347 4.6 3,174 3.8 3,176 4.1
Commercial paper......................................... 223 6.4 170 4.7 182 5.5
Treasury, tax and loan notes............................. 776 5.2 619 5.0 549 4.2
Other short-term borrowings.............................. 4,638 6.1 1,106 5.6 1,355 5.1
-----------------------------------------------------------
Total.............................................. $ 11,833 5.6% $ 10,558 4.6% $ 10,011 4.5%
-------------------------------------------------------------------------------------------------------------------------
Average for the year
Federal funds purchased.................................. $ 5,690 6.2% $ 5,898 5.0% $ 4,688 5.3%
Securities sold under agreements to repurchase........... 3,028 4.8 3,128 4.0 3,275 4.5
Commercial paper......................................... 215 6.3 370 5.1 258 5.6
Treasury, tax and loan notes............................. 912 6.1 577 4.5 761 5.2
Other short-term borrowings.............................. 2,741 7.7 1,734 6.9 2,120 6.8
-----------------------------------------------------------
Total.............................................. $ 12,586 6.2% $ 11,707 5.0% $ 11,102 5.4%
-------------------------------------------------------------------------------------------------------------------------
Maximum month-end balance
Federal funds purchased.................................. $ 7,807 $ 7,080 $ 5,129
Securities sold under agreements to repurchase........... 3,415 3,278 3,487
Commercial paper......................................... 300 397 324
Treasury, tax and loan notes............................. 3,578 1,435 1,567
Other short-term borrowings.............................. 4,920 4,945 2,570
-------------------------------------------------------------------------------------------------------------------------
U.S. Bancorp 19
25
NOTE 13
LONG-TERM DEBT
Long-term debt (debt with original maturities of more than one year) at December
31 consisted of the following:
(Dollars in Millions) 2000 1999
---------------------------------------------------------------------------------
U.S. BANCORP (Parent Company)
Fixed-rate subordinated notes
7.625% due 2002.......................................... $ 150 $ 150
8.125% due 2002.......................................... 150 150
7.00% due 2003........................................... 150 150
6.625% due 2003.......................................... 100 100
8.00% due 2004........................................... 125 125
7.625% due 2005.......................................... 150 150
6.75% due 2005........................................... 300 300
6.875% due 2007.......................................... 250 250
7.30% due 2007........................................... 200 200
7.50% due 2026........................................... 200 200
7.25% due 2003........................................... 32 32
Fixed-rate senior notes
6.35% due 2001........................................... 200 200
6.80% due 2001........................................... 150 150
6.50% due 2002........................................... 199 199
5.875% due 2003.......................................... 100 100
7.05% due 2004........................................... 150 150
Medium-term notes........................................... 3,835 2,654
Capitalized lease obligations, mortgage indebtedness and
other...................................................... 122 71
-------------------
Subtotal................................................. 6,563 5,331
SUBSIDIARIES
Fixed-rate subordinated notes
6.00% due 2003........................................... 100 100
7.55% due 2004........................................... 100 100
8.35% due 2004........................................... 100 100
7.30% due 2005........................................... 100 100
6.875% due 2006.......................................... 125 125
6.50% due 2008........................................... 300 300
6.30% due 2008........................................... 300 300
5.70% due 2008........................................... 400 400
6.375% due 2004.......................................... 75 75
6.375% due 2004.......................................... 149 149
6.625% due 2006.......................................... 99 99
7.125% due 2009.......................................... 495 495
7.80% due 2010........................................... 299 --
Fixed-rate senior notes
6.25% due 2002........................................... 249 249
7.13% due 2000........................................... -- 25
Federal Home Loan Bank advances............................. 2,753 3,946
Bank notes.................................................. 9,051 8,459
Euro medium-term notes due 2004............................. 400 400
Floating-rate notes due 2000................................ -- 250
Capitalized lease obligations, mortgage indebtedness and
other...................................................... 218 24
-------------------
Total.............................................. $ 21,876 $ 21,027
---------------------------------------------------------------------------------
Medium-term notes ("MTNs") outstanding at December 31, 2000, mature from
January 2001 through December 2004. The MTNs bear fixed or floating interest
rates ranging from 5.80 percent to 7.50 percent. The weighted average interest
rate of MTNs at December 31, 2000, was 6.82 percent. Federal Home Loan Bank
advances outstanding at December 31, 2000, mature from 2001 through 2026. The
advances bear fixed or floating interest rates ranging from 4.99 percent to 8.25
percent. The Company has an arrangement with the FHLB whereby
20 U.S. Bancorp
26
based on collateral available (residential and commercial mortgages), the
Company could have borrowed an additional $13.0 billion at December 31, 2000.
The weighted average interest rate of FHLB advances at December 31, 2000, was
6.45 percent. Bank notes outstanding at December 31, 2000, mature from January
2001 through 2005. The notes bear fixed or floating interest rates ranging from
5.25 percent to 7.02 percent. The weighted average interest rate of Bank notes
at December 31, 2000, was 6.73 percent. Euro medium-term notes outstanding at
December 31, 2000, bear floating rate interest at three-month LIBOR plus .15
percent. The interest rate at December 31, 2000, was 6.95 percent.
The Company has a line of credit of $200 million, of which the total amount
was available at December 31, 2000.
Maturities of long-term debt outstanding at December 31, 2000, were:
Parent
(Dollars in Millions) Consolidated Company
------------------------------------------------------------------------------------
2001........................................................ $ 7,732 $ 1,422
2002........................................................ 4,551 1,468
2003........................................................ 2,804 1,541
2004........................................................ 2,069 932
2005........................................................ 1,426 457
Thereafter.................................................. 3,294 743
----------------------
Total....................................................... $21,876 $ 6,563
------------------------------------------------------------------------------------
NOTE 14
COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
SUBSIDIARY TRUSTS HOLDING SOLELY THE JUNIOR SUBORDINATED DEBENTURES OF
THE PARENT COMPANY
The Company issued $1.4 billion of company-obligated mandatorily redeemable
preferred securities of subsidiary trusts holding solely the junior subordinated
debentures of the parent company (the "Trust Preferred Securities") through six
separate issuances by six wholly-owned subsidiary grantor trusts (the "Trusts").
The Trust Preferred Securities accrue and pay distributions periodically at
specified rates as provided in the indentures. The Trusts used the net proceeds
from the offerings to purchase a like amount of Junior Subordinated Deferrable
Interest Debentures (the "Debentures") of the Company. The Debentures are the
sole assets of the Trusts and are eliminated, along with the related income
statement effects, in the consolidated financial statements.
The Company's obligations under the Debentures and related documents, taken
together, constitute a full and unconditional guarantee by the Company of the
obligations of the Trusts. The guarantee covers the distributions and payments
on liquidation or redemption of the Trust Preferred Securities, but only to the
extent of funds held by the Trusts.
The Trust Preferred Securities are mandatorily redeemable upon the maturity
of the Debentures, or upon earlier redemption as provided in the indentures. The
Company has the right to redeem the Debentures in whole, (but not in part), on
or after specific dates, at a redemption price specified in the indentures plus
any accrued but unpaid interest to the redemption date. The Trust Preferred
Securities are redeemable in whole or in part in 2003, 2006 and 2007 in the
amounts of $350 million, $750 million and $300 million, respectively.
The Trust Preferred Securities qualify as Tier I capital of the Company for
regulatory capital purposes. The Company used the proceeds from the sales of the
Debentures for general corporate purposes.
The following table is a summary of the Trust Preferred Securities as of
December 31, 2000:
Issuance Debenture Rate Rate at Maturity Redemption
Issuance Trust (Dollars in Millions) Date Amount Type 12/31/00 Date Date
---------------------------------------------------------------------------------------------------------------------------------
USB Capital II....................................... 03/1998 $350 Fixed 7.20% 04/2028 04/01/2003
USB Capital I........................................ 12/1996 300 Fixed 8.27% 12/2026 12/15/2006
FBS Capital I........................................ 11/1996 300 Fixed 8.09% 11/2026 11/15/2006
Star Capital I....................................... 06/1997 150 Variable 7.35% 06/2027 06/15/2007
Firstar Capital Trust I.............................. 12/1996 150 Fixed 8.32% 12/2026 12/15/2006
Mercantile Capital Trust I........................... 02/1997 150 Variable 7.61% 02/2027 02/01/2007
---------------------------------------------------------------------------------------------------------------------------------
Note: The variable rate Trust Preferred Securities re-price quarterly.
U.S. Bancorp 21
27
NOTE 15
SHAREHOLDERS' EQUITY
At December 31, 2000 and 1999, the Company had authority to issue 2.0 billion
shares of common stock and 10 million shares of preferred stock. The Company had
1,902.1 million and 1,928.5 million shares of common stock outstanding at
December 31, 2000 and 1999, respectively. At December 31, 2000 the Company had
207.2 million shares of common stock reserved for future issuances. These shares
are primarily reserved for stock option plans, dividend reinvestment plans and
deferred compensation plans. In connection with the merger of Firstar and USBM,
the number of authorized common shares for U.S. Bancorp was increased from 2
billion to 4 billion effective February 27, 2001.
Under the U.S. Bancorp Preferred Share Purchase Rights Plan each share of
common stock carries a right to purchase one one-thousandth of a share of
preferred stock. The rights become exercisable in certain limited circumstances
involving a potential business combination transaction or an acquisition of
shares of the Company and are exercisable at a price of $100 per right, subject
to adjustment. Following certain other events, each right entitles its holder to
purchase for $100 an amount of common stock of the Company, or, in certain
circumstances, securities of the acquiror, having a then-current market value of
twice the exercise price of the right. The rights are redeemable and may be
amended at the Company's option before they are exercisable. Until a right is
exercised, the holder or a right has no rights as a shareholder of the Company.
The rights expire on February 27, 2011.
The Company issued 18.2 million and 47.8 million shares of common stock with
an aggregate value of $.3 billion and $1.3 billion in connection with purchase
acquisitions during 2000 and 1999, respectively.
On February 16, 2000, USBM's Board of Directors authorized the repurchase of
up to $2.5 billion of its common stock over a two-year period ending March 31,
2002. This USBM repurchase program replaced a program which was scheduled to
expire on March 31, 2000. On April 11, 2000, Firstar's Board of Directors
approved a common stock repurchase program of 100 million shares. The stock
repurchase programs of Firstar and USBM were rescinded on October 4, 2000 and
January 17, 2001, respectively, in connection with the planned merger of the
formerly separate companies.
The following table summarizes the Company's common stock repurchases for each
of the last three years:
(Dollars and Shares in Millions) Number of Shares Value
------------------------------------------------------------------
2000.............................. 58.6 $1,182.2
1999.............................. 44.5 1,187.9
1998.............................. 37.0 1,104.0
------------------------------------------------------------------
USBM offered employees and directors an Employee Stock Purchase Plan
("ESPP") that permitted all eligible employees with at least one year of service
and directors to purchase common stock (see Note 17). In connection with the
planned merger with Firstar, the ESPP was terminated effective October 13, 2000.
USBM's Dividend Reinvestment Plan providing for automatic reinvestment of
dividends and optional cash purchases was suspended on November 9, 2000,
following the announcement of the definitive agreement to merge with Firstar.
A reconciliation of the transactions affecting Other Comprehensive Income
included in shareholders' equity for the years ended December 31, is as follows:
(Dollars in Millions) Pre-tax Tax-effect Net-of-tax
------------------------------------------------------------------
2000
Unrealized gain on securities
available for sale............ $ 436.0 $(157.8) $ 278.2
Reclassification adjustment for
gains realized in net
income........................ (41.6) 15.8 (25.8)
Foreign currency translation
adjustment.................... (.5) .2 (.3)
---------------------------------
Total....................... $ 393.9 $(141.8) $ 252.1
---------------------------------
1999
Unrealized loss on securities
available for sale............ $(743.9) $ 268.2 $(475.7)
Reclassification adjustment for
losses realized in net
income........................ 163.9 (57.7) 106.2
---------------------------------
Total....................... $(580.0) $ 210.5 $(369.5)
---------------------------------
1998
Unrealized gain on securities
available for sale............ $ 179.9 $ (64.8) $ 115.1
Reclassification adjustment for
gains realized in net
income........................ (34.0) 12.2 (21.8)
---------------------------------
Total....................... $ 145.9 $ (52.6) $ 93.3
------------------------------------------------------------------
22 U.S. Bancorp
28
NOTE 16
EARNINGS PER SHARE
The components of earnings per share were:
(Dollars in Millions, Except Per Share Data) 2000 1999 1998
------------------------------------------------------------------------------------------------
Net income.................................................. $2,875.6 $2,381.8 $2,132.9
Adjustments to net income:
Dividends on preferred stock............................... -- -- (.1)
--------------------------------
Net income applicable to common shareholders................ $2,875.6 $2,381.8 $2,132.8
--------------------------------
Weighted average shares outstanding: (in millions)
Common shares.............................................. 1,906.0 1,907.8 1,898.8
Net effect of the assumed purchase of stock based on the
treasury stock method:
Preferred shares........................................... -- -- .6
Options and stock plans.................................... 12.5 22.2 31.1
--------------------------------
Dilutive common shares outstanding.......................... 1,918.5 1,930.0 1,930.5
Earning per share:
Basic...................................................... $1.51 $1.25 $1.12
Diluted.................................................... $1.50 $1.23 $1.10
------------------------------------------------------------------------------------------------
NOTE 17
EMPLOYEE BENEFITS
RETIREMENT PLANS Pension benefits are provided to substantially all employees
based on years of service and employees' compensation while employed with the
Company. Employees are fully vested after five years of service. The Company's
funding policy is to contribute amounts to its plans sufficient to meet the
minimum funding requirements of the Employee Retirement Income Security Act of
1974, plus such additional amounts as the Company determines to be appropriate.
The actuarial cost method used to compute the pension liabilities and expense is
the projected unit credit method. Prior to their acquisition dates, employees of
certain acquired companies were covered by separate, noncontributory pension
plans that provided benefits based on years of service and compensation. Plan
assets primarily consist of listed stocks, corporate bonds, U.S. Treasury and
Agency securities, and mutual funds.
The Company also maintains several unfunded, nonqualified, supplemental
executive retirement programs that provide additional defined pension benefits
for certain employees. The assumptions used in computing the present value of
the accumulated benefit obligation, the projected benefit obligation and net
pension expense are substantially consistent with those assumptions used for the
funded qualified plans.
OTHER POSTRETIREMENT PLANS In addition to providing pension benefits, the
Company provides health care and death benefits to certain retired employees.
Employees may become eligible for health care benefits by meeting defined age
and service requirements. The Company may also subsidize the cost of coverage
for employees meeting certain requirements. The plan contains other cost-sharing
features such as deductibles and coinsurance. The estimated cost of these
retiree benefit payments is accrued during the employees' active service.
U.S. Bancorp 23
29
Information presented in the tables below reflects a measurement date of
September 30. The following table sets forth the components of net periodic
benefit cost for the retirement plans.
Pension Plans Other Postretirement Benefits
-----------------------------------------------------------------------
(Dollars in Millions) 2000 1999 1998 2000 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
Components of net periodic benefit cost
Service cost....................................... $ 65.4 $ 70.1 $ 68.4 $ 2.0 $ 3.8 $ 3.1
Interest cost...................................... 117.3 107.1 109.3 16.3 16.5 16.4
Expected return on plan assets..................... (201.6) (177.5) (145.5) (.6) (.5) (.4)
Net amortization and deferral...................... (13.2) 1.3 (6.6) .2 2.0 3.0
Recognized actuarial loss.......................... .7 1.9 1.9 (1.4) .2 --
-----------------------------------------------------------------------
Net periodic benefit cost............................. (31.4) 2.9 27.5 16.5 22.0 22.1
Curtailment and settlement (gains) losses.......... (17.0) (6.2) (22.6) 10.3 -- 13.9
-----------------------------------------------------------------------
Net periodic benefit cost after curtailment and
settlement (gains)................................... $ (48.4) $ (3.3) $ 4.9 $26.8 $22.0 $36.0
---------------------------------------------------------------------------------------------------------------------------------
The following tables summarize benefit obligation and plan asset activity for
the retirement plans.
Other
Pension Plans Postretirement Plans
---------------------------------------------------
(Dollars in Millions) 2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------------------
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of measurement period.... $1,580.3 $1,653.0 $ 225.0 $ 251.3
Service cost............................................. 65.4 70.1 2.0 3.8
Interest cost............................................ 117.4 107.1 16.3 16.5
Plan participants' contributions......................... -- -- 6.8 3.1
Plan amendments.......................................... -- 23.4 -- (10.9)
Actuarial (gain) loss.................................... .1 (144.3) 19.8 (18.7)
Acquisitions and special termination benefits............ -- 1.9 -- 2.9
Benefit payments......................................... (111.8) (92.0) (25.8) (23.0)
Curtailments............................................. (4.4) (4.0) -- --
Settlements.............................................. (51.6) (34.9) -- --
---------------------------------------------------
Benefit obligation at end of measurement period.......... $1,595.4 $1,580.3 $ 244.1 $ 225.0
-------------------------------------------------------------------------------------------------------------------
CHANGE IN FAIR VALUE OF PLAN ASSETS
Fair value at beginning of measurement period............ $1,985.3 $1,808.0 $ 13.4 $ 11.2
Actual return on plan assets............................. 443.7 220.3 .9 .6
Employer contributions................................... 18.9 76.0 18.8 15.3
Plan participants' contributions......................... -- -- 6.8 3.1
Acquisition/divestitures................................. 1.1 7.9 -- --
Settlements.............................................. (51.6) (34.9) -- --
Benefit payments......................................... (111.7) (92.0) (18.1) (16.8)
---------------------------------------------------
Fair value at end of measurement period.................. $2,285.7 $1,985.3 $ 21.8 $ 13.4
-------------------------------------------------------------------------------------------------------------------
FUNDED STATUS
Funded status at end of measurement period............... $ 690.3 $ 405.0 $(222.3) $(211.6)
Unrecognized transition (asset) obligation............... (1.8) (6.3) 9.0 20.3
Unrecognized prior service cost.......................... (87.6) (97.9) (7.8) (8.4)
Unrecognized net (gain).................................. (338.6) (103.0) (7.6) (28.7)
Fourth quarter contribution.............................. 1.2 .7 14.2 11.4
---------------------------------------------------
Net amount recognized.................................... $ 263.5 $ 198.5 $(214.5) $(217.0)
-------------------------------------------------------------------------------------------------------------------
COMPONENTS OF BALANCE SHEET
Prepaid benefit cost..................................... $ 433.1 $ 351.6 $ -- $ --
Accrued benefit liability................................ (169.6) (153.1) (214.5) (217.0)
---------------------------------------------------
Net amount recognized.................................... $ 263.5 $ 198.5 $(214.5) $(217.0)
-------------------------------------------------------------------------------------------------------------------
24 U.S. Bancorp
30
The following table sets forth the weighted average plan assumptions and other
data:
USBM Firstar
-----------------------------------------------------------------------
2000 1999 1998 2000 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
Pension Plan Actuarial Computations
Discount rate in determining benefit obligations... 7.8% 7.5% 6.5% 7.75% 6.58% 6.59%
Expected long-term return on plan assets........... 9.5 9.5 9.5 12.15 11.38 9.62
Rate of increase in future compensation............ 5.6 5.6 5.6 4.00 4.06 4.34
Other Postretirement Plan Actuarial Computations
Discount rate in determining benefit obligations... 7.8% 7.5% 6.5% 7.75% 6.75% 6.49%
Expected long-term return on plan assets........... 5.0 5.0 5.0 * * *
Health care cost trend rate
Prior to age 65................................. 7.7 7.0 7.0 7.50 7.66 8.06
After age 65.................................... 7.7 5.5 6.4 7.50 7.66 8.06
Effect of One Percent Increase in Health Care Cost
Trend Rate Service and interest costs.............. $ 1.0 $ 1.3 $ 1.2 $ .4 $ .4 $ .3
Accumulated postretirement benefit obligation...... 13.1 12.4 13.1 5.2 4.0 4.7
Effect of One Percent Decrease in Health Care Cost
Trend Rate Service and interest costs.............. $ (.9) $ (1.0) $ (1.0) $ (.4) $ (.4) $ (.3)
Accumulated postretirement benefit obligation...... (11.6) (10.9) (11.8) (4.6) (3.6) (4.1)
---------------------------------------------------------------------------------------------------------------------------------
* The Firstar Plan had no assets as of December 31, 2000, 1999 and 1998.
The following table provides information for pension plans with benefit
obligations in excess of plan assets:
(Dollars in Millions) 2000 1999
-----------------------------------------------------------------
Benefit obligation........................... $216.5 $189.8
Accumulated benefit obligation............... 193.9 155.0
Fair value of plan assets.................... -- --
-----------------------------------------------------------------
EMPLOYEE INVESTMENT PLAN The Company has defined contribution retirement savings
plans which allow qualified employees, at their option, to make contributions up
to certain percentages of pre-tax base salary through salary deductions under
Section 401(k) of the Internal Revenue Code. A portion of these contributions is
matched by the Company. All of the Company's matching contributions are invested
in the Company's common stock. Employee contributions are invested, at the
employees' direction, among a variety of investment alternatives. Total expense
was $53.6 million, $57.3 million and $37.1 million in 2000, 1999 and 1998,
respectively.
EMPLOYEE STOCK PURCHASE PLAN The ESPP of USBM permitted all eligible employees
with at least one year of service and directors to purchase common stock. Plan
participants could purchase stock for 85 percent of the fair market value, which
is based on the price at the beginning or the end of the purchase period,
whichever is lower. Any discount was determined by a committee of the Board of
Directors. In 2000 and 1999, the purchase price was 85 percent of the fair
market value. The plan resulted in no compensation expense to the Company. Due
to the merger with Firstar, the ESPP was terminated effective October 13, 2000.
NOTE 18
STOCK OPTIONS AND COMPENSATION PLANS
STOCK OPTION AND COMPENSATION PLANS As part of its employee and director
compensation programs, the Company may grant certain stock awards under the
provisions of existing stock option and compensation plans. The Company has
stock options outstanding under various plans at December 31, including plans
assumed in acquisitions. The plans provide for grants of options to purchase
shares of common stock generally at the stock's fair market value at the date of
grant. In addition, the plans provide for grants of shares of common stock which
are subject to restriction on transfer and to a right of repurchase by the
Company.
With respect to stock option and stock compensation plans, the Company has
elected to follow Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25") in accounting for its employee stock
incentive and purchase plans. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying stock
U.S. Bancorp 25
31
on the date of grant, no compensation expense is recognized. On the date
exercised, if new shares are issued, the option proceeds equal to the par value
of the shares are credited to common stock and additional proceeds are credited
to capital surplus. If treasury shares are issued, the option proceeds equal to
the average treasury share price are credited to treasury stock and additional
proceeds are credited to capital surplus.
Options granted are generally exercisable up to ten years from the date of
grant and vest over three to five years. Restricted shares vest over three to
seven years. The vesting of certain options and restricted shares accelerate
based on growth in diluted operating earnings per share and on the performance
of the Company in comparison to performance of a predetermined group of regional
banks. Compensation expense for restricted stock is based on the market price of
the Company stock at the time of the grant and amortized on a straight-line
basis over the vesting period. For the performance-based restricted shares,
compensation expense is amortized using the estimated vesting period.
Compensation expense related to the restricted stock was $43.4 million, $69.5
million and $41.9 million in 2000, 1999 and 1998, respectively.
Stock incentive plans of acquired companies are generally terminated at the
merger closing dates. Option holders under such plans receive the Company's
common stock, or options to buy the Company's stock, based on the conversion
terms of the various merger agreements. The historical option information
presented below has been restated to reflect the options originally granted
under acquired companies' plans.
At December 31, 2000, there were 40.6 million shares (subject to adjustment
for forfeitures) available for grant under various plans.
The following is a summary of stock options outstanding and exercised under
various stock options plans of the Company.
2000 1999 1998
---------------------------------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Stock Options/ Average Stock Options/ Average Stock Options/ Average
Awards Exercise Price Awards Exercise Price Awards Exercise Price
---------------------------------------------------------------------------------------------------------------------------------
EXECUTIVE STOCK OPTION
PLANS:
Number outstanding at
beginning of year.......... 153,163,030 $22.74 107,405,102 $17.97 104,497,354 $13.95
Granted.................. 22,633,170 19.64 75,922,950 27.08 36,778,209 25.56
Assumed/converted........ 447,341 6.85 1,210,738 16.58 1,748,563 12.39
Exercised................ (10,017,357) 11.02 (22,332,730) 13.03 (31,722,689) 13.92
Cancelled................ (12,829,958) 19.91 (9,043,030) 25.63 (3,896,335) 17.99
---------------------------------------------------------------------------------------------------
Number outstanding at end of
year....................... 153,396,226 $22.80 153,163,030 $22.74 107,405,102 $17.97
Exercisable at end of
year....................... 68,870,745 $19.78 70,527,758 $18.00 64,448,703 $14.12
---------------------------------------------------------------------------------------------------------------------------------
RESTRICTED SHARE PLANS:
Number outstanding at
beginning of year.......... 4,212,954 6,072,217 4,491,132
Granted.................. 4,110,440 1,379,808 3,668,750
Cancelled................ (1,946,257) (3,239,071) (2,087,665)
---------------------------------------------------------------------------------------------------
Number outstanding at end of
year....................... 6,377,137 4,212,954 6,072,217
---------------------------------------------------------------------------------------------------------------------------------
Additional information regarding options outstanding as of December 31, 2000 is
as follows:
Options Outstanding Exercisable Options
------------------------------------------------------ -----------------------------
Weighted-Average
Range of Remaining Contractual Weighted-Average Weighted-Average
Exercise Prices Shares Life (Years) Exercise Price Shares Exercise Price
---------------------------------------------------------------------------------------------------------------------------------
$ 1.44 - $10.00......................... 11,373,733 3.6 $ 6.09 11,291,564 $ 6.08
$10.01 - $15.00......................... 9,099,454 5.4 11.61 8,256,582 11.34
$15.01 - $20.00......................... 21,459,832 7.4 17.66 12,801,936 18.04
$20.01 - $25.00......................... 40,893,167 8.6 22.50 13,133,256 23.22
$25.01 - $30.00......................... 62,864,266 8.0 28.14 16,660,189 26.49
$30.01 - $35.00......................... 6,704,533 7.4 32.52 5,770,602 32.64
$35.01 - $37.20......................... 1,001,241 7.5 35.82 956,616 35.81
---------------------------------------------------------------------------------------
153,396,226 7.6 $22.80 68,870,745 $19.78
---------------------------------------------------------------------------------------------------------------------------------
Pro forma information regarding net income and earnings per share is
required by SFAS 123, "Accounting and Disclosure of Stock-Based Compensation"
and has been determined as if the Company accounted for its employee stock
option plans under the fair value method of SFAS 123. The fair value of options
was estimated at the grant date using a Black-Scholes option pricing model.
Option valuation models require the use of highly subjective assumptions.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
26 U.S. Bancorp
32
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
The pro forma disclosures include options granted in 2000, 1999 and 1998 and
are not likely to be representative of the pro forma disclosures for future
years. The estimated fair value of the options is amortized to expense over the
options' vesting period.
Year Ended December 31
(Dollars in Millions, ------------------------------
Except Per-Share Data) 2000 1999 1998
---------------------------------------------------------------
Pro forma net income........... $2,752.1 $2,240.5 $1,922.1
Pro forma earnings per share:
Earnings per share.......... $ 1.44 $ 1.17 $ 1.01
Diluted earnings per
share...................... 1.43 1.16 1.00
---------------------------------------------------------------
Weighted average assumptions in
option valuation:
USBM
Risk-free interest rates....... 6.1% 5.4% 5.4%
Dividend yields................ 3.0 3.5 2.3
Stock volatility factor........ 0.37 0.27 0.25
Expected life of options (in
years)........................ 4.7 6.1 2.3
FIRSTAR
Risk-free interest rates....... 5.4% 5.6% 4.8%
Dividend yields................ 2.5 2.0 1.6
Stock volatility factor........ 0.37 0.41 0.38
Expected life of options (in
years)........................ 2.5-5.5 2.5-5.5 2.5-5.5
---------------------------------------------------------------
Directors and selected senior officers of the Company may participate in
deferred compensation plans which may postpone the receipt of compensation.
Amounts deferred under the plan may be valued on the basis of an interest index
or be used to purchase shares of the Company's common stock. Although the plan
is unfunded for tax purposes, a portion of the shares of treasury stock held at
December 31, 2000, 1999 and 1998 were acquired to meet obligations arising from
these plans and are considered common stock equivalents for the purpose of
computing earnings per share.
The Company has entered into agreements with certain officers that provide
for the payment of a lump sum benefit to the officer, plus the continuation of
certain medical and insurance benefits and immediate exercisability of stock
options, in the event that the officer's employment is terminated involuntarily
by the Company or voluntarily by the officer for good reason, following a change
in control of the Company during the officer's protected period. The benefits
payable under the agreements can be up to three times the officer's base salary
and incentive bonus.
NOTE 19
INCOME TAXES
The components of income tax expense (benefit) were:
(Dollars in Millions) 2000 1999 1998
------------------------------------------------------------------------------------------------------
FEDERAL
Current..................................................... $ 996.1 $1,036.0 $ 913.4
Deferred.................................................... 324.5 219.5 94.6
--------------------------------------
Federal income tax....................................... 1,320.6 1,255.5 1,008.0
STATE
Current..................................................... 159.0 103.3 167.6
Deferred.................................................... 32.6 33.4 (8.2)
--------------------------------------
State income tax......................................... 191.6 136.7 159.4
--------------------------------------
Total income tax provision............................... $1,512.2 $1,392.2 $1,167.4
------------------------------------------------------------------------------------------------------
U.S. Bancorp 27
33
The reconciliation between income tax expense and the amount computed by
applying the statutory federal income tax rate was as follows:
(Dollars in Millions) 2000 1999 1998
------------------------------------------------------------------------------------------------------
Tax at statutory rate (35%)................................. $1,535.8 $1,320.9 $1,155.1
State income tax, at statutory rates, net of federal tax
benefit.................................................... 124.5 88.9 103.6
Tax effect of:
Tax-exempt interest, net................................. (56.0) (60.3) (66.0)
Amortization of nondeductible goodwill................... 91.6 73.1 61.4
Tax credits.............................................. (62.7) (41.7) (36.3)
Nondeductible merger charges............................. 4.9 56.4 8.2
Sale of preferred minority interest...................... (50.0) -- --
Other items.............................................. (75.9) (45.1) (58.6)
--------------------------------------
Applicable income taxes..................................... $1,512.2 $1,392.2 $1,167.4
------------------------------------------------------------------------------------------------------
At December 31, 2000, for income tax purposes, the Company had federal net
operating loss carry forwards of $2.8 million available, which expire in years
2001 through 2009.
Deferred income tax assets and liabilities reflect the tax effect of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for the same items for income
tax reporting purposes.
Significant components of the Company's deferred tax assets and liabilities as
of December 31 were as follows:
(Dollars in Millions) 2000 1999 1998
--------------------------------------------------------------------------------------------------
DEFERRED TAX ASSETS
Allowance for credit losses................................. $ 637.0 $ 633.4 $ 626.1
Pension and postretirement benefits......................... 53.5 67.7 73.5
Deferred fees............................................... 35.0 56.2 75.3
Real estate and other asset basis differences............... 31.9 30.2 31.9
State and federal net operating loss carry forwards......... 25.0 23.8 22.1
Federal AMT credits and capital losses...................... 22.0 22.9 7.6
Charitable contributions.................................... .9 6.5 4.2
Accrued severance, pension and retirement benefits.......... 30.6 70.9 56.0
Other deferred tax assets, net.............................. 196.0 186.4 293.8
----------------------------------
Gross deferred tax assets................................ 1,031.9 1,098.0 1,190.5
DEFERRED TAX LIABILITIES
Leasing activities.......................................... (1,218.1) (941.0) (673.6)
Accelerated depreciation.................................... (92.7) (68.4) (44.1)
Other investment basis differences.......................... (41.1) (16.8) (13.4)
Securities available-for-sale............................... (52.2) 89.3 (121.3)
Other deferred tax liabilities, net......................... (124.0) (107.9) (104.2)
----------------------------------
Gross deferred tax liabilities........................... (1,528.1) (1,044.8) (956.6)
Valuation allowance......................................... (16.6) (12.7) (10.9)
----------------------------------
NET DEFERRED TAX ASSETS (LIABILITIES)....................... $ (512.8) $ 40.5 $ 223.0
--------------------------------------------------------------------------------------------------
Realization of the deferred tax assets over time is dependent upon the
existence of taxable income in carryback periods or the Company generating
sufficient taxable earnings in future periods. In determining that realization
of the deferred tax asset was more likely than not, the Company gave
consideration to a number of factors, including its taxable income during
carryback periods, its recent earnings history, its expectations for earnings in
the future and, where applicable, the expiration dates associated with tax
carrybacks and carryforwards. A valuation allowance has been established to
offset deferred tax assets related to state net operating loss carryforwards
totaling approximately $437 million, which expire at various times within the
next 15 years.
28 U.S. Bancorp
34
Certain events covered by Internal Revenue Code section 593 (e), which was
not repealed, will trigger a recapture of base year reserve of acquired thrift
institutions. The base year reserve of acquired thrift institutions would be
recaptured if an entity ceases to qualify as a bank for federal income tax
purposes. The base year reserve of thrift institutions also remain subject to
income tax penalty provisions that, in general, require recapture upon certain
stock redemptions of, and excess distributions to, stockholders. At December 31,
2000, retained earnings included approximately $101.8 million of base year
reserves for which no deferred federal income tax liability has been recognized.
NOTE 20
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CREDIT
CONCENTRATIONS
In the normal course of business, the Company uses various off-balance sheet
financial instruments to manage its interest rate and market risk and to meet
the needs of its customers. These instruments carry varying degrees of credit,
interest rate or liquidity risk. The contract or notional amounts of these
financial instruments at December 31 were as follows:
(Dollars In Millions) 2000 1999
----------------------------------------------------------------------------------------
Commitments to extend credit
Commercial............................................... $46,434 $46,734
Corporate and purchasing cards........................... 21,236 18,503
Consumer credit cards.................................... 20,254 19,971
Other consumer........................................... 8,580 8,895
Letters of credit
Standby.................................................. 6,380 5,832
Commercial............................................... 527 587
Interest rate swap contracts
Hedges................................................... 8,758 8,643
Basis swaps.............................................. 1,000 --
Intermediated............................................ 4,007 2,008
Options contracts
Hedge interest rate floors purchased..................... 500 805
Intermediated interest rate and foreign exchange caps and
floors purchased........................................ 709 589
Intermediated interest rate and foreign exchange caps and
floors written.......................................... 709 589
Credit derivatives purchased................................ 80 20
Futures and forward contracts............................... 25 34
Recourse on assets sold..................................... 2,138 1,927
Foreign currency commitments
Commitments to purchase.................................. 1,717 1,639
Commitments to sell...................................... 1,724 1,597
Commitments from securities lending......................... 1,037 717
Commitments to sell residential mortgages................... 963 589
----------------------------------------------------------------------------------------
COMMITMENTS TO EXTEND CREDIT Commitments to extend credit are legally binding
and generally have fixed expiration dates or other termination clauses. The
contractual amount represents the Company's exposure to credit loss, in the
event of default by the borrower. The Company manages this credit risk by using
the same credit policies it applies to loans. Collateral is obtained to secure
commitments based on management's credit assessment of the borrower. The
collateral may include marketable securities, receivables, inventory, equipment
and real estate. Since the Company expects many of the commitments to expire
without being drawn, total commitment amounts do not necessarily represent the
Company's future liquidity requirements. In addition, the commitments include
consumer credit lines that are cancelable upon notification to the consumer.
LETTERS OF CREDIT Standby letters of credit are conditional commitments the
Company issues to guarantee the performance of a customer to a third party. The
guarantees frequently support public and private borrowing arrangements,
including commercial paper issuances, bond financings and other similar
transactions. The Company issues commercial letters of credit on behalf of
customers to ensure payment or collection in connection with trade transactions.
In the event of a customer's nonperformance, the Company's credit loss exposure
is the same as in any extension of
U.S. Bancorp 29
35
credit, up to the letter's contractual amount. Management assesses the
borrower's credit to determine the necessary collateral, which may include
marketable securities, real estate, accounts receivable and inventory. Since the
conditions requiring the Company to fund letters of credit may not occur, the
Company expects its liquidity requirements to be less than the total outstanding
commitments.
INTEREST RATE SWAPS AND OPTIONS Interest rate swaps are contracts to exchange
fixed- and variable-rate interest payment obligations based on a notional
principal amount. The Company enters into swaps to hedge its balance sheet
against fluctuations in interest rates and as an intermediary for customers.
At December 31, 2000, and 1999, interest rate swaps with notional values
totaling $8.8 billion and $8.6 billion, respectively, hedged loans, borrowings,
deposits and long-term debt.
The Company received fixed-rate interest and paid floating-rate interest on
substantially all swaps in its hedging portfolio as of December 31, 2000.
Activity with respect to interest rate swap hedges was as follows:
(Dollars In Millions) 2000 1999 1998
-------------------------------------------------------------------
Notional amount outstanding at
beginning of year................. $8,643 $ 8,107 $ 6,528
Additions.......................... 1,720 5,032 3,180
Maturities......................... (260) (2,240) (1,358)
Amortization....................... (666) (143) --
Terminations....................... (679) (2,113) (243)
----------------------------
Notional amount outstanding at end
of year........................... $8,758 $ 8,643 $ 8,107
-------------------------------------------------------------------
At December 31:
Weighted average interest rate
paid.............................. 6.78% 6.51% 5.72%
Weighted average interest rate
received.......................... 6.54% 6.38% 6.24%
-------------------------------------------------------------------
For the hedging portfolio's notional balances and yields by maturity date as
of year-end 2000, see Table 19.
At December 31, 2000, and 1999, LIBOR-based interest rate floors totaling
$500 million with an average remaining maturity of .7 years and $805 million
with an average remaining maturity of 1.1 years, respectively, hedged floating
rate commercial loans and deposits. The strike rate on these LIBOR-based floors
was 4.63 percent at December 31, 2000 and 4.68 percent at December 31, 1999. The
premium on floors is amortized over the life of the contract. The impact of the
floors on net interest income was not significant for the years ended December
31, 2000, 1999 and 1998.
For swaps and options used as hedges, the Company recognizes interest income
or expense as it is accrued over the term of the hedge. The gain or loss on a
terminated hedge is amortized over the remaining life of the original swap or
remaining life of the hedged item, whichever is shorter. The impact of the
amortization of deferred gains and losses on hedges on net interest income was
not significant for the years ended December 31, 2000, 1999 and 1998. Net
unamortized deferred losses were $18.7 million at December 31, 2000.
In addition to utilizing swaps and options as part of its asset/liability
management strategy, the Company acts as an intermediary for swap and option
agreements on behalf of its customers. To reduce its market risk exposure, the
Company generally enters into offsetting positions. The total notional amount of
customer swap agreements, including the offsetting positions, was $4.0 billion
and $2.0 billion at December 31, 2000 and 1999, respectively. The total notional
amount of customer option agreements, including the offsetting positions, was
$1.4 billion and $1.2 billion at December 31, 2000, and 1999, respectively.
Market value changes on intermediated swaps, options and futures contracts are
recognized in income in the period of change. Realized gains or losses on
intermediated transactions were not significant for the years ended December 31,
2000, 1999 and 1998.
The credit risk related to interest rate swap and option agreements is that
counterparties may be unable to meet the contractual terms. The Company
estimates this risk by calculating the present value of the cost to replace all
outstanding contracts in a gain position at current market rates, reported on a
net basis by each counterparty. At December 31, 2000 and 1999, the gain position
of these contracts, in the aggregate, was approximately $167 million and $53
million, respectively.
The Company manages the credit risk of its interest rate swap and option
contracts through bilateral collateral agreements, credit approvals, limits and
monitoring procedures. Commercial lending officers perform credit analyses and
establish counterparty limits. Senior Credit Administration periodically reviews
positions to monitor compliance with the limits. In addition, the Company
reduces the assumed counterparty credit risk through master netting agreements
that permit the Company to settle multiple interest rate contracts with a given
counterparty on a net basis.
FUTURES AND FORWARD CONTRACTS Futures and forward contracts are agreements for
the delayed delivery of securities or cash settlement money market instruments.
The Company enters into futures contracts to hedge the
30 U.S. Bancorp
36
market risk on its fixed income inventory positions. The Company enters into
forward contracts to hedge the interest rate risk of its mortgage loans held for
sale. At December 31, 2000 and 1999, futures contracts outstanding were $25
million and $15 million, respectively. There were no forward contracts
outstanding at December 31, 2000. Forward contracts outstanding at December 31,
1999 were $19 million. At December 31, 2000, net unamortized deferred gains on
the forward agreements were not significant. The Company manages its credit risk
on forward contracts, which arises from nonperformance by counterparties,
through credit approval and limit procedures.
RECOURSE ON ASSETS SOLD The Company is obligated under recourse provisions
related to the sale of certain loans. The contract amount of these loans was
$3.5 billion at December 31, 2000, and $3.8 billion at December 31, 1999. The
maximum contractual amount of recourse on these loans was $2.1 billion at
December 31, 2000, and $1.9 billion at December 31, 1999.
FOREIGN CURRENCY COMMITMENTS The Company uses foreign currency commitments to
help customers reduce the risks associated with changes in foreign currency
exchange rates. Through these contracts, the Company exchanges currencies at
specified rates on specified dates with various counterparties. The Company
minimizes the market and liquidity risks by taking offsetting positions. In
addition, the Company controls the market risks by limiting the net exposure
through policies, procedures, and monitoring. The Company manages its credit
risk, or potential risk of loss from default by a counterparty, through credit
limit approval and monitoring procedures. The aggregate replacement cost of
contracts in a gain position at December 31, 2000, was not significant.
COMMITMENTS FROM SECURITIES LENDING The Company participates in securities
lending activities by acting as a customer's agent involving the loan or sale of
securities. The Company indemnifies customers for the difference between the
market value of the securities lent and the market value of the collateral
received. These transactions are collateralized by cash.
CREDIT CONCENTRATIONS The Company primarily lends to borrowers in the 24 states
where it has banking offices. Collateral for commercial loans may include
marketable securities, accounts receivable, inventory and equipment. For detail
of the Company's commercial portfolio by industry group and geography as of
December 31, 2000, and 1999, see Table 9 on page 50, which is incorporated by
reference into these Notes to Consolidated Financial Statements.
For detail of the Company's commercial real estate portfolio by property
type and geography as of December 31, 2000, and 1999, see Table 10 on page 51,
which is incorporated by reference into these Notes to Consolidated Financial
Statements. Such loans are collateralized by the related property.
For detail of the company's retail loan portfolio see Table 7 on page 49
under the category "Retail" for the last five years ended December 31, which is
incorporated by reference into these Notes to Consolidated Financial Statements.
RESIDENTIAL MORTGAGE SALE COMMITMENTS The Company enters into commitments to
sell groups of residential mortgage loans that it originates or purchases as
part of its mortgage banking activities. The Company commits to sell the loans
at specified prices in a future period typically within 90 days. The risk
associated with these commitments consists primarily of loans not closing in
sufficient volumes and at appropriate yields to meet the sale commitments. The
Company had contracts totaling $963 million and $589 million on December 31,
2000 and 1999, respectively. Gains or losses on these contracts are included in
the determination of the market value of mortgages held for sale.
NOTE 21 FAIR VALUES OF FINANCIAL INSTRUMENTS
Due to the nature of its business and its customers' needs, the Company offers a
large number of financial instruments, most of which are not actively traded.
When market quotes are unavailable, valuation techniques including discounted
cash flow calculations and pricing models or services are used. The Company also
uses various aggregation methods and assumptions, such as the discount rate and
cash flow timing and amounts. As a result, the fair value estimates can neither
be substantiated by independent market comparisons, nor realized by the
immediate sale or settlement of the financial instrument. Also, the estimates
reflect a point in time and could change significantly based on changes in
economic factors, such as interest rates. Furthermore, the disclosure of certain
financial and nonfinancial assets and liabilities are not required. Finally, the
fair value disclosure is not intended to estimate a market value of the Company
as a whole. A summary of the Company's valuation techniques and assumptions
follows.
U.S. Bancorp 31
37
CASH AND CASH EQUIVALENTS The carrying value of cash, amounts due from banks,
federal funds sold and securities purchased under resale agreements was assumed
to approximate fair value.
SECURITIES Generally, trading account securities and available-for-sale
securities were valued using available market quotes. In some instances, for
securities that are not widely traded, market quotes for comparable securities
were used.
LOANS The loan portfolio consists of both floating and fixed-rate loans, the
fair value of which was estimated using discounted cash flow analyses and other
valuation techniques. To calculate discounted cash flows, the loans were
aggregated into pools of similar types and expected repayment terms. The
expected cash flows of loans considered historical prepayment experiences and
estimated credit losses for nonperforming loans and were discounted using
current rates offered to borrowers of similar credit characteristics.
DEPOSIT LIABILITIES The fair value of demand deposits, savings accounts and
certain money market deposits is equal to the amount payable on demand at
year-end. The fair value of fixed-rate certificates of deposit was estimated by
discounting the contractural cash flow using the discount rates implied by the
high-grade corporate bond yield curve.
SHORT-TERM BORROWINGS Federal funds purchased, securities sold under agreements
to repurchase and other short-term funds borrowed are at floating rates or have
short-term maturities. Their carrying value is assumed to approximate their fair
value.
LONG-TERM DEBT AND COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES
OF SUBSIDIARY TRUSTS HOLDING SOLELY THE JUNIOR SUBORDINATED DEBENTURES OF THE
PARENT COMPANY Medium-term notes, Euro medium-term notes, bank notes, Federal
Home Loan Bank Advances, capital lease obligations and mortgage note obligations
estimated fair value was determined using a discounted cash flow analysis based
on current market rates of similar maturity debt securities to discount cash
flows. Other long-term debt instruments and company-obligated mandatorily
redeemable preferred securities of subsidiary trusts holding solely the junior
subordinated debentures of the parent company were valued using available market
quotes.
INTEREST RATE SWAPS, BASIS SWAPS AND OPTIONS The interest rate options and swap
cash flows were estimated using a third party pricing model and discounted based
on appropriate LIBOR, Eurodollar futures, swap and Treasury Note yield curves.
LOAN COMMITMENTS, LETTERS OF CREDIT AND GUARANTEES The Company's commitments
have floating rates and do not expose the Company to interest rate risk. No
premium or discount was ascribed to the loan commitments because virtually all
funding would be at current market rates.
32 U.S. Bancorp
38
The estimated fair values of the Company's financial instruments are shown in
the table below.
2000 1999
--------------------------------------------
Carrying Fair Carrying Fair
(Dollars in Millions) Amount Value Amount Value
------------------------------------------------------------------------------------------------------------
FINANCIAL ASSETS
Cash and cash equivalents................................ $ 9,132 $ 9,132 $ 9,258 $ 9,258
Trading account securities............................... 753 753 617 617
Investment securities.................................... 17,642 17,647 17,449 17,455
Loans held for sale...................................... 764 764 670 670
Loans.................................................... 120,578 121,139 111,519 112,150
--------------------------------------------
Total financial assets............................. 148,869 $149,435 139,513 $140,150
-------- --------
Nonfinancial assets............................. 16,052 14,805
------- --------
Total assets................................. $164,921 $154,318
------- --------
FINANCIAL LIABILITIES
Deposits................................................. $109,535 $109,593 $103,417 $103,847
Short-term borrowings.................................... 11,833 11,833 10,558 10,558
Long-term debt........................................... 21,876 22,006 21,027 20,948
Company-obligated mandatorily redeemable preferred
securities.............................................. 1,400 1,351 1,400 1,284
--------------------------------------------
Total financial liabilities........................ 144,644 $144,783 136,402 $136,637
-------- --------
Nonfinancial liabilities........................ 5,109 3,969
Shareholders' equity............................ 15,168 13,947
------- --------
Total liabilities and shareholders' equity......... $164,921 $154,318
------- --------
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
Hedge swaps
Gain............................................... 140 $ 4
Loss............................................... (33) (247)
Trading swaps
Interest rate contracts
Gain............................................... 27 27 42 42
Loss............................................... (21) (21) (38) (38)
Foreign exchange contracts
Gain............................................... 13 13 7 7
Loss............................................... (9) (9) (5) (5)
------------------------------------------------------------------------------------------------------------
NOTE 22
COMMITMENTS AND CONTINGENT LIABILITIES
Rental expense for operating leases amounted to $219.3 million in 2000, $193.8
million in 1999, and $197.8 million in 1998. Future minimum payments, net of
sublease rentals, under capitalized leases and noncancelable operating leases
with initial or remaining terms of one year or more, consisted of the following
at December 31, 2000:
Capitalized Operating
(Dollars in Millions) Leases Leases
---------------------------------------------------------------------------------------------
2001........................................................ $ 11.4 $ 196.5
2002........................................................ 10.3 180.3
2003........................................................ 8.7 155.7
2004........................................................ 7.9 122.3
2005........................................................ 6.6 101.7
Thereafter.................................................. 56.5 564.7
------------------------
Total minimum lease payments................................ $101.4 $1,321.2
--------
Less amount representing interest........................... 42.3
------
Present value of net minimum lease payments................. $ 59.1
---------------------------------------------------------------------------------------------
Various legal proceedings are currently pending against the Company. Due to
their complex nature, it may be years before some matters are resolved. In the
opinion of management, the aggregate liability, if any, will not have a material
adverse effect on the Company's financial position, liquidity or results of
operations.
U.S. Bancorp 33
39
NOTE 23
U.S. BANCORP (PARENT COMPANY)
CONDENSED BALANCE SHEET
December 31 (Dollars in Millions) 2000 1999
-------------------------------------------------------------------------------------
ASSETS
Deposits with subsidiary banks, principally
interest-bearing........................................... $ 1,714 $ 1,046
Available-for-sale securities............................... 325 340
Investments in:
Bank affiliates.......................................... 15,019 14,625
Nonbank affiliates....................................... 1,059 796
Advances to:
Bank affiliates.......................................... 1,071 1,016
Nonbank affiliates....................................... 2,858 1,927
Other assets................................................ 2,179 2,180
---------------------
Total assets.......................................... $24,225 $21,930
---------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term funds borrowed................................... $ 224 $ 170
Advances from subsidiaries.................................. 97 111
Long-term debt.............................................. 6,563 5,331
Junior subordinated debentures issued to subsidiary
trusts..................................................... 1,443 1,434
Other liabilities........................................... 730 937
Shareholders' equity........................................ 15,168 13,947
---------------------
Total liabilities and shareholders' equity............ $24,225 $21,930
-------------------------------------------------------------------------------------
CONDENSED STATEMENT OF INCOME
Year Ended December 31 (Dollars in Millions) 2000 1999 1998
------------------------------------------------------------------------------------------------------
INCOME
Dividends from subsidiaries (including $3,010.5, $1,661.0
and $2,093.2 from bank subsidiaries)....................... $3,027.8 $1,704.3 $2,206.6
Interest from subsidiaries.................................. 234.8 177.2 159.3
Service and management fees from subsidiaries............... 246.0 229.1 322.9
Other income................................................ 217.0 202.0 162.9
--------------------------------------
Total income....................................... 3,725.6 2,312.6 2,851.7
EXPENSES
Interest on short-term funds borrowed....................... 19.3 26.8 26.6
Interest on long-term debt.................................. 441.7 296.4 249.9
Interest on junior subordinated debentures issued to
subsidiary trusts.......................................... 111.3 110.3 103.5
Merger-related charges...................................... 21.3 103.8 158.3
Other expenses.............................................. 225.2 307.7 429.7
--------------------------------------
Total expenses........................................ 818.8 845.0 968.0
--------------------------------------
Income before income taxes and equity in undistributed
income of subsidiaries..................................... 2,906.8 1,467.6 1,883.7
Income tax credit........................................... (34.0) (36.9) (152.0)
--------------------------------------
Income of parent company.................................... 2,940.8 1,504.5 2,035.7
Equity (deficiency) in undistributed income of
subsidiaries............................................... (65.2) 877.3 97.2
--------------------------------------
Net income............................................ $2,875.6 $2,381.8 $2,132.9
------------------------------------------------------------------------------------------------------
34 U.S. Bancorp
40
CONDENSED STATEMENT OF CASH FLOWS
Year Ended December 31 (Dollars in Millions) 2000 1999 1998
---------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income.................................................. $ 2,875.6 $ 2,381.8 $ 2,132.9
Adjustments to reconcile net income to net cash provided by
operating activities:
(Equity) deficiency in undistributed income of
subsidiaries............................................ 65.2 (877.3) (97.2)
Losses (gains) on available-for-sale securities.......... 4.1 (7.0) (12.8)
Depreciation and amortization of premises and
equipment............................................... 51.7 76.2 76.2
Other -- net............................................. (391.1) (3.2) (198.4)
-----------------------------------------
Net cash provided by operating activities............. 2,605.5 1,570.5 1,900.7
INVESTING ACTIVITIES
Available-for-sale securities
Sales and maturities..................................... 92.2 128.9 94.6
Purchases................................................ (59.4) (334.3) (70.5)
Investments in subsidiaries................................. (4.6) (26.0) (1,325.6)
Equity distributions from subsidiaries...................... -- 145.0 325.0
Net decrease (increase) in short-term advances to
affiliates................................................. (829.0) 58.1 (597.1)
Other -- net................................................ (113.7) (421.3) 13.7
-----------------------------------------
Net cash used in investing activities................. (914.5) (449.6) (1,559.9)
FINANCING ACTIVITIES
Net (decrease) increase in short-term advances from
subsidiaries............................................... (15.6) 62.6 21.4
Net (decrease) increase in short-term funds borrowed........ 53.3 (11.5) 78.1
Net change in long-term debt................................ 1,183.7 824.8 1,091.4
Issuance of junior subordinated debentures to subsidiary
trusts..................................................... -- -- 360.8
Proceeds from dividend reinvestment, stock option and stock
purchase plans............................................. 210.0 277.6 340.8
Repurchase of common stock.................................. (1,182.2) (1,187.9) (1,104.0)
Shares reserved to meet deferred compensation obligations... -- -- 1.2
Cash dividends.............................................. (1,271.3) (1,029.7) (910.9)
-----------------------------------------
Net cash used in financing activities................. (1,022.1) (1,064.1) (121.2)
-----------------------------------------
Change in cash and cash equivalents................... 668.9 56.8 219.6
Cash and cash equivalents at beginning of year.............. 1,045.5 988.7 769.1
-----------------------------------------
Cash and cash equivalents at end of year.............. $ 1,714.4 $ 1,045.5 $ 988.7
---------------------------------------------------------------------------------------------------------
Transfer of funds (dividends, loans or advances) from bank subsidiaries to
the Company is restricted. Federal law prohibits loans unless they are secured
and generally limits any loan to the Company or individual affiliate to 10
percent of the bank's equity. In aggregate, loans to the Company and all
affiliates cannot exceed 20 percent of the bank's equity.
Dividend payments to the Company by its subsidiary banks are subject to
regulatory review and statutory limitations and, in some instances, regulatory
approval. The approval of the Comptroller of the Currency is required if total
dividends by a national bank in any calendar year exceed the bank's net income
for that year combined with its retained net income for the preceding two
calendar years or if the bank's retained earnings are less than zero.
Furthermore, dividends are restricted by the Comptroller of the Currency's
minimum capital constraints for all national banks. Within these guidelines, all
bank subsidiaries have the ability to pay dividends without prior regulatory
approval. The amount of dividends available to the parent company from the bank
subsidiaries at December 31, 2000 was $504 million.
U.S. Bancorp 35
41
NOTE 24
SUPPLEMENTAL DISCLOSURES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
Listed below are supplemental disclosures to the Consolidated Statement of Cash
Flows:
Year Ended December 31 (Dollars in Millions) 2000 1999 1998
---------------------------------------------------------------------------------------------------
Income taxes paid........................................... $ 1,046.5 $ 901.1 $ 816.1
Interest paid............................................... 5,686.3 4,697.6 4,888.9
Net noncash transfers to foreclosed property................ 94.3 102.9 86.2
Change in unrealized gain (loss) on available-for-sale
securities, net of taxes of $141.5 in 2000, $210.6 in 1999
and $52.0 in 1998.......................................... 252.4 (369.5) 93.3
-----------------------------------
Acquisitions and divestitures
Assets acquired.......................................... $ 3,314.6 $ 4,229.3 $ 7,840.8
Liabilities (assumed).................................... (3,755.9) (2,610.0) (7,097.5)
-----------------------------------
Net................................................... $ (441.3) $ 1,619.3 $ 743.3
---------------------------------------------------------------------------------------------------
REGULATORY CAPITAL The measures used to assess capital include the capital
ratios established by bank regulatory agencies, including the specific ratios
for the "well capitalized" designation. For a description of the regulatory
capital requirements and the actual ratios as of December 31, 2000 and 1999 for
the Company and its significant bank subsidiaries, see Table 21.
MONEY MARKET INVESTMENTS are included with cash and due from banks as part of
cash and cash equivalents. Money market investments are comprised of the
following components at December 31:
(Dollars in Millions) 2000 1999
------------------------------------------------------------------------------
Interest-bearing deposits................................... $ 82 $ 56
Federal funds sold.......................................... 203 1,100
Securities purchased under agreements to resell............. 372 778
--------------
Total money market investments........................... $657 $1,934
--------------
36 U.S. Bancorp
42
REPORT OF INDEPENDENT
ACCOUNTANTS
To the Shareholders and Board of Directors of U.S. Bancorp:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, shareholders' equity and cash flows present
fairly, in all material respects, the financial position of U.S. Bancorp and its
subsidiaries at December 31, 2000 and 1999, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2000 in conformity with accounting principles generally accepted in the
United States of America. These financial statements are the responsibility of
the Corporation's management; our responsibility is to express an opinion on
these financial statements based on our audits. The consolidated financial
statements give retroactive effect to the merger of Firstar Corporation and the
former U.S. Bancorp on February 27, 2001 in a transaction accounted for as a
pooling of interests, as described in Notes 1 and 3 to the consolidated
financial statements. We conducted our audits of these statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
/S/ PRICEWATERHOUSECOOPERS, LLP
Minneapolis, Minnesota
April 13, 2001
U.S. Bancorp 37
43
(This page has been left blank intentionally.)
38 U.S. Bancorp
44
CONSOLIDATED BALANCE SHEET --
FIVE-YEAR SUMMARY
% Change
December 31 (Dollars in Millions) 2000 1999 1998 1997 1996 1999-2000
---------------------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks.............................. $ 8,475 $ 7,324 $ 8,882 $ 7,972 $ 8,295 15.7%
Money market investments............................. 657 1,934 1,039 1,411 1,555 (66.0)
Trading account securities........................... 753 617 666 268 276 22.0
Held-to-maturity securities.......................... 252 194 233 2,942 3,872 29.9
Available-for-sale securities........................ 17,390 17,255 20,732 17,500 14,799 .8
Loans held for sale.................................. 764 670 1,794 743 185 14.0
Loans
Commercial........................................ 52,817 45,856 41,068 36,329 33,141 15.2
Commercial real estate............................ 26,443 25,142 21,808 19,798 18,904 5.2
Residential mortgages............................. 7,753 11,395 13,980 15,892 13,919 (32.0)
Retail............................................ 35,352 30,836 30,102 27,010 25,278 14.6
--------------------------------------------------------
Total loans.......................................... 122,365 113,229 106,958 99,029 91,242 8.1
Less allowance for credit losses.................. 1,787 1,710 1,706 1,666 1,600 4.5
--------------------------------------------------------
Net loans...................................... 120,578 111,519 105,252 97,363 89,642 8.1
Other assets......................................... 16,052 14,805 12,116 9,289 7,986 8.4
--------------------------------------------------------
Total assets................................ $164,921 $154,318 $150,714 $137,488 $126,610 6.9%
--------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing............................... $ 26,633 $ 26,350 $ 27,479 $ 24,062 $ 23,417 1.1%
Interest-bearing.................................. 82,902 77,067 76,867 74,261 70,394 7.6
--------------------------------------------------------
Total deposits.............................. 109,535 103,417 104,346 98,323 93,811 5.9
Short-term borrowings................................ 11,833 10,558 10,011 10,385 11,641 12.1
Long-term debt....................................... 21,876 21,027 18,679 13,181 6,796 4.0
Company-obligated mandatorily redeemable preferred
securities........................................ 1,400 1,400 1,400 1,050 750 --
Other liabilities.................................... 5,109 3,969 3,704 3,147 2,895 28.7
--------------------------------------------------------
Total liabilities........................... 149,753 140,371 138,140 126,086 115,893 6.7
Shareholders' equity................................. 15,168 13,947 12,574 11,402 10,717 8.8
--------------------------------------------------------
Total liabilities and shareholders'
equity..................................... $164,921 $154,318 $150,714 $137,488 $126,610 6.9%
---------------------------------------------------------------------------------------------------------------------------------
U.S. Bancorp 39
45
CONSOLIDATED STATEMENT OF INCOME -- FIVE-YEAR SUMMARY
% Change
Year Ended December 31 (Dollars in Millions) 2000 1999 1998 1997 1996 1999-2000
---------------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME
Loans............................................. $10,562.5 $ 9,122.7 $ 8,818.3 $8,419.0 $7,794.9 15.7%
Loans held for sale............................... 102.1 103.9 91.9 40.0 43.1 (1.7)
Investment securities
Taxable........................................ 1,008.3 1,047.1 1,179.5 1,060.7 1,038.6 (3.7)
Non-taxable.................................... 140.6 150.1 158.2 158.0 159.3 (6.3)
Money market investments.......................... 53.9 44.9 63.0 63.6 72.9 20.0
Trading securities................................ 53.7 45.0 25.6 16.8 16.9 19.3
Other interest income............................. 151.4 113.0 88.2 42.6 41.1 34.0
-----------------------------------------------------------
Total interest income.................... 12,072.5 10,626.7 10,424.7 9,800.7 9,166.8 13.5
INTEREST EXPENSE
Deposits.......................................... 3,618.8 2,970.0 3,234.7 3,084.2 2,921.5 21.8
Short-term borrowings............................. 781.7 582.4 594.7 643.3 657.3 34.2
Long-term debt.................................... 1,510.4 1,126.9 926.5 586.0 407.3 34.0
Company-obligated mandatorily redeemable preferred
securities....................................... 112.0 111.0 103.8 76.3 3.3 0.9
-----------------------------------------------------------
Total interest expense................... 6,022.9 4,790.3 4,859.7 4,389.8 3,989.4 25.7
-----------------------------------------------------------
Net interest income............................... 6,049.6 5,836.4 5,565.0 5,410.9 5,177.4 3.5
Provision for credit losses....................... 828.0 646.0 491.3 639.9 429.9 28.2
-----------------------------------------------------------
Net interest income after provision for credit
losses........................................... 5,221.6 5,190.4 5,073.7 4,771.0 4,747.5 0.4
NONINTEREST INCOME
Credit card and payment processing revenue........ 992.1 837.8 748.0 611.8 548.6 18.4
Trust and investment management fees.............. 926.2 887.1 788.3 686.1 592.9 4.4
Deposit service charges........................... 551.1 497.2 470.3 450.6 627.0 10.8
Cash management fees.............................. 292.4 280.6 242.0 214.2 * 4.2
Mortgage banking revenue.......................... 189.9 190.4 244.6 137.9 95.7 (0.3)
Trading account profits and commissions........... 258.4 222.4 130.3 44.8 31.5 16.2
Investment products fees and commissions.......... 466.6 450.8 306.9 110.4 86.1 3.5
Investment banking revenue........................ 360.3 246.6 100.4 -- -- 46.1
Commercial product revenue........................ 304.4 215.7 121.9 97.9 * 51.2
Securities gains, net............................. 8.1 13.2 29.1 7.3 18.7 (38.6)
Other............................................. 533.7 403.1 468.2 357.6 767.5 32.4
-----------------------------------------------------------
Total noninterest income................. 4,883.2 4,244.9 3,650.0 2,718.6 2,768.0 15.4
NONINTEREST EXPENSE
Salaries.......................................... 2,427.1 2,355.3 2,196.7 1,892.0 1,773.9 3.0
Employee benefits................................. 399.8 410.1 424.9 424.0 405.2 (2.5)
Net occupancy..................................... 396.9 371.8 356.9 335.0 326.3 6.8
Furniture and equipment........................... 308.2 307.9 314.1 312.3 322.8 0.1
Postage........................................... 174.5 170.7 155.4 106.6 144.0 2.2
Goodwill.......................................... 242.8 177.7 177.2 115.3 190.8 36.6
Other intangible assets........................... 149.5 152.1 124.6 92.1 * (1.7)
Merger and restructuring related charges.......... 348.7 532.8 593.8 633.0 192.4 (34.6)
Other............................................. 1,269.5 1,182.9 1,079.8 1,029.4 1,158.6 7.7
-----------------------------------------------------------
Total noninterest expense................ 5,717.0 5,661.3 5,423.4 4,939.7 4,514.0 1.1
-----------------------------------------------------------
Income before income taxes........................ 4,387.8 3,774.0 3,300.3 2,549.9 3,001.5 16.3
Applicable income taxes........................... 1,512.2 1,392.2 1,167.4 950.6 1,082.9 8.6
-----------------------------------------------------------
Net income........................................ $ 2,875.6 $ 2,381.8 $ 2,132.9 $1,599.3 $1,918.6 20.7
-----------------------------------------------------------
Net income applicable to common equity............ $ 2,875.6 $ 2,381.8 $ 2,132.8 $1,588.2 $1,899.3 20.7
---------------------------------------------------------------------------------------------------------------------------------
*Information not available, amounts included in other line items above.
40 U.S. Bancorp
46
QUARTERLY CONSOLIDATED FINANCIAL DATA
2000 1999
----------------------------------------------------------------------------------------------
(Dollars in Millions, Except Fourth Third Second First Fourth Third Second First
Per Share Data) Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
---------------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME
Loans.......................... $2,787.9 $2,710.7 $2,591.8 $2,472.1 $2,379.4 $2,322.3 $2,235.8 $2,185.2
Loans held for sale............ 22.2 32.7 35.2 12.0 24.6 25.6 22.6 31.1
Investment securities
Taxable..................... 251.3 250.4 255.6 251.0 246.8 263.8 262.8 273.7
Non-taxable................. 33.4 34.8 33.5 38.9 35.9 38.3 37.5 38.4
Money market investments....... 10.8 14.5 15.0 13.6 10.3 10.9 12.6 11.1
Trading securities............. 14.0 12.8 12.6 14.3 10.9 10.9 12.0 11.2
Other interest income.......... 39.4 37.7 37.0 37.3 32.5 28.7 27.1 24.7
----------------------------------------------------------------------------------------------
Total interest income.... 3,159.0 3,093.6 2,980.7 2,839.2 2,740.4 2,700.5 2,610.4 2,575.4
INTEREST EXPENSE
Deposits....................... 975.7 954.0 875.9 813.2 775.0 734.2 722.0 738.8
Short-term borrowings.......... 220.7 191.2 198.7 171.1 144.2 167.8 140.4 130.0
Long-term debt................. 398.3 403.9 371.3 336.9 315.6 291.8 261.8 257.7
Company-obligated mandatorily
redeemable preferred
securities.................... 22.8 31.5 29.3 28.4 27.1 28.0 28.0 27.9
----------------------------------------------------------------------------------------------
Total interest expense... 1,617.5 1,580.6 1,475.2 1,349.6 1,261.9 1,221.8 1,152.2 1,154.4
Net interest income............ 1,541.5 1,513.0 1,505.5 1,489.6 1,478.5 1,478.7 1,458.2 1,421.0
Provision for credit losses.... 229.5 214.0 201.3 183.2 173.7 178.9 150.3 143.1
----------------------------------------------------------------------------------------------
Net interest income after
provision for credit losses... 1,312.0 1,299.0 1,304.2 1,306.4 1,304.8 1,299.8 1,307.9 1,277.9
NONINTEREST INCOME
Credit card and payment
processing revenue............ 264.7 261.2 247.3 218.9 234.6 227.9 201.8 173.6
Trust and investment management
fees.......................... 233.8 231.1 230.4 230.9 229.9 219.5 219.0 218.7
Deposit service charges........ 145.4 144.3 138.0 123.4 131.2 126.6 124.7 114.7
Cash management fees........... 71.8 74.7 74.1 71.8 73.2 72.3 67.6 67.5
Mortgage banking revenue....... 54.4 44.7 48.1 42.7 35.3 45.4 54.7 55.0
Trading account profits and
commissions................... 62.4 50.9 59.8 85.3 66.7 49.7 51.8 54.2
Investment products fees and
commissions................... 108.9 107.8 109.1 140.8 115.3 105.7 118.0 111.8
Investment banking revenue..... 92.8 100.6 72.9 94.0 89.0 60.8 60.5 36.3
Commercial product revenue..... 85.2 86.0 71.6 61.6 57.6 53.4 48.9 55.8
Securities gains (losses),
net........................... 7.0 1.1 .3 (.3) 2.1 (4.9) 3.1 12.9
Other.......................... 138.5 131.2 151.7 112.3 102.3 126.0 82.7 92.0
----------------------------------------------------------------------------------------------
Total noninterest
income.................. 1,264.9 1,233.6 1,203.3 1,181.4 1,137.2 1,082.4 1,032.8 992.5
NONINTEREST EXPENSE
Salaries....................... 593.7 602.4 601.4 629.6 610.4 574.7 590.9 579.3
Employee benefits.............. 98.2 89.4 100.3 111.9 91.6 98.1 100.7 119.7
Net occupancy.................. 104.2 99.8 95.7 97.2 95.7 92.8 90.1 93.2
Furniture and equipment........ 76.2 79.6 75.7 76.7 79.6 77.4 77.1 73.8
Postage........................ 44.2 43.1 42.6 44.6 41.4 42.4 41.9 45.0
Goodwill....................... 64.2 60.4 59.8 58.4 51.7 44.0 40.4 41.6
Other intangible assets........ 37.8 37.3 37.0 37.4 35.5 37.6 38.6 40.4
Merger-related charges......... 84.1 117.7 81.9 65.0 90.5 379.3 45.1 17.9
Other.......................... 329.3 321.7 316.7 301.8 336.2 300.4 290.7 255.6
----------------------------------------------------------------------------------------------
Total noninterest
expense................. 1,431.9 1,451.4 1,411.1 1,422.6 1,432.6 1,646.7 1,315.5 1,266.5
----------------------------------------------------------------------------------------------
Income before income taxes..... 1,145.0 1,081.2 1,096.4 1,065.2 1,009.4 735.5 1,025.2 1,003.9
Applicable income taxes........ 376.3 370.9 386.6 378.4 372.4 310.7 359.6 349.5
----------------------------------------------------------------------------------------------
Net income..................... $ 768.7 $ 710.3 $ 709.8 $ 686.8 $ 637.0 $ 424.8 $ 665.6 $ 654.4
----------------------------------------------------------------------------------------------
Earnings per share............. $ .41 $ .37 $ .37 $ .36 $ .33 $ .22 $ .35 $ .34
Diluted earnings per share..... $ .40 $ .37 $ .37 $ .36 $ .33 $ .22 $ .34 $ .34
---------------------------------------------------------------------------------------------------------------------------------
U.S. Bancorp 41
47
CONSOLIDATED DAILY AVERAGE BALANCE
Year Ended December 31 2000
------------------------------------------------------------------------------------------------------------------------
Yields
(Dollars in Millions) Balance Interest and Rates
------------------------------------------------------------------------------------------------------------------------
ASSETS
Money market investments.................................... $ 931 $ 53.9 5.79%
Trading account securities.................................. 779 57.6 7.39
Taxable securities.......................................... 14,567 1,008.3 6.92
Nontaxable securities....................................... 2,744 203.1 7.40
Loans held for sale......................................... 1,303 102.1 7.84
Loans
Commercial............................................... 50,062 4,257.2 8.50
Commercial real estate................................... 26,040 2,305.5 8.85
Residential mortgage..................................... 9,578 723.4 7.55
Retail................................................... 32,637 3,295.4 10.10
-------------------------
Total loans.............................................. 118,317 10,581.5 8.94
-------
Other earning assets........................................ 1,965 151.4 7.70
Allowance for credit losses.............................. 1,781
-------------------------
Total earning assets*.............................. 140,606 12,157.9 8.65
Other assets................................................ 19,656
-------
Total assets....................................... $158,481
-------
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits................................ $ 23,820
Interest-bearing deposits
Interest checking........................................ 13,035 270.4 2.07
Money market accounts.................................... 22,774 1,000.0 4.39
Savings accounts......................................... 5,027 74.0 1.47
Time certificates of deposit less than $100,000.......... 25,861 1,458.3 5.64
Time deposits greater than $100,000...................... 12,909 816.1 6.32
-------------------------
Total interest-bearing deposits.................... 79,606 3,618.8 4.55
Short-term borrowings....................................... 12,586 781.7 6.21
Long-term debt.............................................. 22,410 1,510.4 6.74
Company-obligated mandatorily redeemable preferred
securities................................................. 1,400 112.0 8.00
-------------------------
Total interest-bearing liabilities................. 116,002 6,022.9 5.19
Other liabilities........................................... 4,294
Shareholders' equity........................................ 14,365
-------
Total liabilities and shareholders' equity............. $158,481
-------
Net interest income......................................... $ 6,135.0
--------
Gross interest margin....................................... 3.46%
---------
Gross interest margin without taxable-equivalent
increments................................................. 3.40%
---------
PERCENT OF EARNING ASSETS
Interest income............................................. 8.65%
Interest expense............................................ 4.29
---------
Net interest margin......................................... 4.36
---------
Net interest margin without taxable-equivalent increments... 4.30%
------------------------------------------------------------------------------------------------------------------------
Interest and rates are presented on a fully taxable-equivalent basis under a
tax rate of 35 percent.
Interest income and rates on loans include loan fees. Nonaccrual loans are
included in average loan balances.
*Before deducting the allowance for credit losses and excluding the unrealized
(loss) gain on available-for-sale securities.
42 U.S. Bancorp
48
SHEET AND RELATED YIELDS AND RATES
1999 1998 1999-2000
-----------------------------------------------------------------------------------------------------------------------------------
Yields Yields % Change
Balance Interest and Rates Balance Interest and Rates Average Balance
-----------------------------------------------------------------------------------------------------------------------------------
$ 1,082 $ 44.9 4.15% $ 1,170 $ 63.0 5.38% (13.96)%
630 47.8 7.59 428 27.6 6.45 23.65
16,301 1,047.1 6.42 17,977 1,179.5 6.56 (10.64)
2,970 220.6 7.43 3,137 238.2 7.59 (7.61)
1,450 103.9 7.17 1,264 91.9 7.27 (10.14)
43,328 3,288.3 7.59 38,983 3,110.4 7.98 15.54
23,076 1,940.3 8.41 20,458 1,784.1 8.72 12.84
12,680 953.7 7.52 15,160 1,170.5 7.72 (24.46)
30,554 2,963.4 9.70 27,850 2,782.5 9.99 6.82
------------------------- -------------------------
109,638 9,145.7 8.34 102,451 8,847.5 8.64 7.92
------- -------
1,686 113.0 6.70 1,311 88.2 6.73 16.55
1,709 1,688 4.21
------------------------- -------------------------
133,757 10,723.0 8.02 127,738 10,535.9 8.25 5.12
18,119 16,837
------- -------
$150,167 $142,887
------- -------
$ 23,556 $ 23,011 1.12
12,898 231.0 1.79 12,263 230.9 1.88 1.06
22,534 842.2 3.74 20,337 825.1 4.06 1.07
5,961 111.9 1.88 6,504 146.7 2.26 (15.67)
26,296 1,322.6 5.03 29,583 1,622.7 5.49 (1.65)
8,675 462.3 5.33 7,242 409.3 5.65 48.81
------------------------- -------------------------
76,364 2,970.0 3.89 75,929 3,234.7 4.26 4.25
11,707 582.4 4.97 11,102 594.7 5.36 7.51
20,248 1,126.9 5.57 15,732 926.5 5.89 10.68
1,400 111.0 7.93 1,314 103.8 7.90 0.00
------------------------- -------------------------
109,719 4,790.3 4.37 104,077 4,859.7 4.67 5.73
3,671 3,416 16.97
13,221 12,383 8.65
------- -------
$150,167 $142,887 5.54
------- ------- ---------------
$ 5,932.7 $ 5,676.2
-------- --------
3.65% 3.58%
-------- --------
3.58% 3.49%
-------- --------
8.02% 8.25%
3.58 3.80
-------- --------
4.44 4.44
-------- --------
4.37% 4.36%
------------------------------------------------------------------------------------------------------
U.S. Bancorp 43
49
SUPPLEMENTAL FINANCIAL DATA
EARNINGS PER SHARE SUMMARY 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------
Earnings per share.......................................... $1.51 $1.25 $1.12 $.86 $1.02
Diluted earnings per share.................................. $1.50 $1.23 $1.10 $.85 $1.00
------------------------------------------------------------------------------------------------------------------------
RATIOS
------------------------------------------------------------------------------------------------------------------------
Return on average assets.................................... 1.81% 1.59% 1.49% 1.24% 1.57%
Return on average common equity............................. 20.0 18.0 17.2 14.7 18.0
Average total equity to average assets...................... 9.1 8.8 8.7 8.4 8.7
Dividends per share to net income per share................. 43.0 37.0 29.5 31.4 20.6
------------------------------------------------------------------------------------------------------------------------
OTHER STATISTICS
(Shares in Millions)
------------------------------------------------------------------------------------------------------------------------
Common shares outstanding -- year end *..................... 1,902.0 1,982.5 1,903.5 1,864.0 1,847.9
Average common shares outstanding and common stock
equivalents
Earnings per share.................................... 1,906.0 1,907.8 1,898.8 1,841.0 1,861.6
Diluted earnings per share............................ 1,918.5 1,930.0 1,930.5 1,872.2 1,898.2
Common dividends declared (millions)........................ $1,267.0 $1,090.8 $977.6 $801.9 $635.2
------------------------------------------------------------------------------------------------------------------------
*Defined as total common shares less common stock held in treasury.
STOCK PRICE RANGE AND DIVIDENDS
2000 1999
-------------------------------------------------------------------------------------------
Sales Price Sales Price
-------------------------- Dividends -------------------------- Dividends
High Low Declared High Low Declared
---------------------------------------------------------------------------------------------------------------------------------
First quarter..................... $24.63 $17.00 $ .1625 $31.85 $27.42 $ .1000
Second quarter.................... 27.75 21.06 .1625 34.56 26.25 .1000
Third quarter..................... 25.00 19.75 .1625 29.44 22.31 .1000
Fourth quarter.................... 24.25 15.63 .1625 29.38 20.25 .1625
Closing price -- December 31...... 23.25 21.13
---------------------------------------------------------------------------------------------------------------------------------
The common stock of U.S. Bancorp is traded on the New York Stock Exchange, under
the ticker symbol, "USB."
44 U.S. Bancorp
50
(This page has been left blank intentionally.)
U.S. Bancorp 45
51
TABLE 1
LINE OF BUSINESS FINANCIAL PERFORMANCE
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. Prior to the merger, the Company operated its
business units separately in 2000 and 1999 as Firstar and USBM and the basis of
financial presentation differed significantly. Accordingly, the presentation of
comparative business line results is not practicable at this time.
At the date of the merger of Firstar and USBM, the Company has reorganized
into the following operating segments: Consumer Banking; Payment Systems;
Wholesale Banking; Private Client, Trust and Asset Management; Capital Markets;
Treasury; and Corporate Support. For descriptions of these operating segments
see "BUSINESS SEGMENTS" in Note 1 on page 6.
The following table provides restated financial results during 2000 for the
Company's primary operating segments:
Year Ended December 31, 2000
---------------------------------------------------------------
Private
Client, Trust
Consumer Payment Wholesale and Asset Capital
(Dollars in Millions) Banking Systems Banking Management Markets
----------------------------------------------------------------------------------------------------------
Net interest income.................... $3,123.3 $ 515.2 $1,780.1 $ 227.6 $ 28.9
Noninterest income..................... 1,128.8 867.4 495.7 906.2 1,098.2
---------------------------------------------------------------
Total revenue....................... 4,252.1 1,382.6 2,275.8 1,133.8 1,127.1
Noninterest expense.................... 1,677.6 357.6 382.2 478.3 909.1
Other intangible amortization.......... 62.3 23.7 1.3 19.9 --
Goodwill amortization.................. 4.4 11.4 8.0 1.2 1.0
---------------------------------------------------------------
Total noninterest expense........... 1,744.3 392.7 391.5 499.4 910.1
Operating income................. 2,507.8 989.9 1,884.3 634.4 217.0
---------------------------------------------------------------
Provision for credit losses............ 368.7 400.8 141.4 7.0 --
Income before taxes.................... 2,139.1 589.1 1,742.9 627.4 217.0
Income taxes and taxable-equivalent
adjustment............................ 760.9 209.5 619.9 223.2 77.2
---------------------------------------------------------------
Operating earnings, before
merger-related charges................ $1,378.2 $ 379.6 $1,123.0 $ 404.2 $ 139.8
---------------------------------------------------------------
Net merger-related charges (after-tax)*
Net income
AVERAGE BALANCE SHEET DATA
Loans.................................. $ 41,016 $ 8,871 $ 55,763 $ 3,802 $ 263
Assets................................. 46,706 9,400 60,254 5,255 3,392
Noninterest-bearing deposits........... 11,483 184 9,436 2,267 155
Interest-bearing deposits.............. 62,156 1 4,847 4,754 --
---------------------------------------------------------------
Total Deposits...................... $ 73,639 $ 185 $ 14,283 $ 7,021 $ 155
----------------------------------------------------------------------------------------------------------
Year Ended December 31, 2000
--------------------------------------
Corporate Consolidated
(Dollars in Millions) Treasury Support Company
---------------------------------------
Net interest income.................... $1,322.7 $ (862.8) $6,135.0
Noninterest income..................... 218.1 168.8 4,883.2
--------------------------------------
Total revenue....................... 1,540.8 (694.0) 11,018.2
Noninterest expense.................... 18.7 1,152.5 4,976.0
Other intangible amortization.......... -- 42.3 149.5
Goodwill amortization.................. -- 216.8 242.8
--------------------------------------
Total noninterest expense........... 18.7 1,411.6 5,368.3
Operating income................. 1,522.1 (2,105.6) 5,649.9
--------------------------------------
Provision for credit losses............ 1.0 (90.9) 828.0
Income before taxes.................... 1,521.1 (2,014.7) 4,821.9
Income taxes and taxable-equivalent
adjustment............................ 541.1 (716.8) 1,715.0
--------------------------------------
Operating earnings, before
merger-related charges................ $ 980.0 $(1,297.9) $3,106.9
--------------------------------------
Net merger-related charges (after-tax)* (231.3)
--------
Net income $2,875.6
----------
AVERAGE BALANCE SHEET DATA
Loans.................................. $ 11,923 $ (3,321) $118,317
Assets................................. 24,417 9,057 158,481
Noninterest-bearing deposits........... 255 40 23,820
Interest-bearing deposits.............. 10,793 (2,945) 79,606
--------------------------------------
Total Deposits...................... $ 11,048 $ (2,905) $103,426
---------------------------------------------------------------------------------------------
*Merger-related charges are not allocated to the business lines.
TABLE 2
RECONCILIATION OF OPERATING EARNINGS* TO NET INCOME IN ACCORDANCE WITH
GAAP
(Dollars in Millions) 2000 1999 1998
------------------------------------------------------------------------------------------------------
Operating earnings, before merger and restructuring items... $3,106.9 $2,799.0 $2,519.3
Merger and restructuring related items
Other merger -- related charges.......................... (348.7) (355.1) (593.8)
Securities losses........................................ -- (177.7) --
Provision for credit losses.............................. -- (7.5) (37.9)
Gain on sale of branches................................. -- -- 48.1
Applicable tax benefit................................... 117.4 123.1 197.2
--------------------------------------
Net income in accordance with GAAP.......................... $2,875.6 $2,381.8 $2,132.9
------------------------------------------------------------------------------------------------------
*The Company analyzes its performance on a net income basis in accordance with
accounting principles generally accepted in the United States, as well as on an
operating basis before merger and restructuring related charges referred to as
"operating earnings." Operating earnings are presented as supplemental
information to enhance the readers' understanding of, and highlight trends in,
the Company's core financial results excluding the impact of discrete business
acquisitions and restructuring activities. Operating earnings should not be
viewed as a substitute for net income and earning per share as determined in
accordance with accounting principles generally accepted in the United States.
46 U.S. Bancorp
52
TABLE 3
ANALYSIS OF NET INTEREST INCOME
(Dollars in Millions) 2000 1999 1998
---------------------------------------------------------------------------------------------------------
Components of net interest income
Income on earning assets................................. $12,157.9 $10,723.0 $10,535.9
Expenses on interest bearing liabilities................. 6,022.9 4,790.3 4,859.7
-----------------------------------------
Net interest income -- (taxable-equivalent basis)........... $ 6,135.0 $ 5,932.7 $ 5,676.2
-----------------------------------------
Net interest income, as reported............................ $ 6,049.6 $ 5,836.4 $ 5,565.0
-----------------------------------------
Average yields and rates paid -- (taxable-equivalent basis)
Earning assets yield..................................... 8.65% 8.02% 8.25%
Rate paid on interest-bearing liabilities................ 5.19 4.37 4.67
-----------------------------------------
Gross interest margin....................................... 3.46% 3.65% 3.58%
-----------------------------------------
Net interest margin......................................... 4.36% 4.44% 4.44%
-----------------------------------------
Net interest margin -- (without taxable-equivalent
increments)................................................ 4.30% 4.37% 4.36%
---------------------------------------------------------------------------------------------------------
Average balances:
Investment securities.................................... $ 17,311 $ 19,271 $ 21,114
Loans.................................................... 118,317 109,638 102,451
Earning assets........................................... 140,606 133,757 127,738
Interest bearing liabilities............................. 116,002 109,719 104,077
Net free funds*.......................................... 24,604 24,038 23,661
---------------------------------------------------------------------------------------------------------
*Represents noninterest-bearing deposits, other non-earning assets and
liabilities and equity.
TABLE 4
NET INTEREST INCOME -- CHANGES DUE TO RATE AND VOLUME
2000 Compared with 1999 1999 Compared with 1998
----------------------------------------------------------------------------------------------
(Dollars in Millions) Volume Yield/Rate Total Volume Yield/Rate Total
---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in
Interest income
Commercial loans...... $ 511.1 $ 457.8 $ 968.9 $ 346.7 $(168.8) $ 177.9
Commercial real
estate............... 249.2 116.0 365.2 228.3 (72.1) 156.2
Residential
mortgages............ (233.3) 3.0 (230.3) (191.5) (25.3) (216.8)
Retail loans.......... 202.0 130.0 332.0 270.2 (89.3) 180.9
----------------------------------------------------------------------------------------------
Total loans........ 729.0 706.8 1,435.8 653.7 (355.5) 298.2
Loans held for sale... (10.5) 8.7 (1.8) 13.5 (1.5) 12.0
Investment
securities........... (128.2) 71.9 (56.3) (122.7) (27.3) (150.0)
Money market
investments.......... (6.3) 15.3 9.0 (4.7) (13.4) (18.1)
Trading securities.... 11.3 (1.5) 9.8 13.0 7.2 20.2
Other earning
assets............... 18.7 19.7 38.4 25.2 (0.4) 24.8
----------------------------------------------------------------------------------------------
Total.............. 614.0 820.9 1,434.9 578.0 (390.9) 187.1
Interest expense
Interest checking..... 2.5 36.9 39.4 12.0 (11.9) 0.1
Money market
accounts............. 9.0 148.8 157.8 89.1 (72.0) 17.1
Other savings
accounts............. (17.5) (20.4) (37.9) (12.2) (22.6) (34.8)
Savings
certificates......... (21.9) 157.6 135.7 (180.3) (119.8) (300.1)
Certificates over
$100,000............. 225.6 128.2 353.8 81.0 (28.0) 53.0
----------------------------------------------------------------------------------------------
Total
interest-bearing
deposits.......... 197.7 451.1 648.8 (10.4) (254.3) (264.7)
Short-term
borrowings........... 43.7 155.6 199.3 32.4 (44.7) (12.3)
Long-term debt........ 120.3 263.2 383.5 266.0 (65.6) 200.4
Mandatorily redeemable
preferred
securities of
subsidiary
trusts............. -- 1.0 1.0 6.8 0.4 7.2
----------------------------------------------------------------------------------------------
Total.............. 361.7 870.9 1,232.6 294.8 (364.2) (69.4)
----------------------------------------------------------------------------------------------
Increase (decrease) in
net interest
income............. $ 252.3 $ (50.0) $ 202.3 $ 283.2 $ (26.7) $ 256.5
---------------------------------------------------------------------------------------------------------------------------------
This table shows the components of the change in net interest income by volume
and rate on a taxable-equivalent basis. The effect of changes in rates on volume
changes is allocated based on the percentage relationship of changes in volume
and changes in rate. This table does not take into account the level of
noninterest-bearing funding, nor does it fully reflect changes in the mix of
assets and liabilities.
U.S. Bancorp 47
53
TABLE 5
NONINTEREST INCOME
(Dollars in Millions) 2000 1999 1998
------------------------------------------------------------------------------------------------------
Credit card and payment processing revenue.................. $ 992.1 $ 837.8 $ 748.0
Trust and investment management fees........................ 926.2 887.1 788.3
Deposit service charges..................................... 551.1 497.2 470.3
Cash management fees........................................ 292.4 280.6 242.0
Mortgage banking revenue.................................... 189.9 190.4 244.6
Trading account profits and commissions..................... 258.4 222.4 130.3
Investment products fees and commissions.................... 466.6 450.8 306.9
Investment banking revenue.................................. 360.3 246.6 100.4
Insurance product revenue................................... 145.3 105.3 82.5
Commercial product revenue.................................. 304.4 215.7 121.9
Retail product revenue...................................... 69.1 78.0 25.9
Securities gains, net....................................... 8.1 13.2 29.1
Other....................................................... 319.3 219.8 359.8
--------------------------------------
Total noninterest income................................. $4,883.2 $4,244.9 $3,650.0
------------------------------------------------------------------------------------------------------
TABLE 6
NONINTEREST EXPENSE
(Dollars in Millions) 2000 1999 1998
------------------------------------------------------------------------------------------------
Salaries.................................................... $2,427.1 $2,355.3 $2,196.7
Employee benefits........................................... 399.8 410.1 424.9
Net occupancy............................................... 396.9 371.8 356.9
Furniture and equipment..................................... 308.2 307.9 314.1
Professional services....................................... 109.0 95.7 105.3
Advertising and marketing................................... 122.1 124.1 126.9
Other personnel costs....................................... 107.0 88.4 73.7
Software.................................................... 111.9 72.2 51.5
Data Processing............................................. 149.7 133.7 120.0
Communication............................................... 138.8 123.4 114.2
Postage..................................................... 174.5 170.7 155.4
Printing.................................................... 86.5 90.7 89.6
Goodwill.................................................... 242.8 177.7 177.2
Other intangible assets..................................... 149.5 152.1 124.6
Other....................................................... 444.5 454.7 398.6
--------------------------------
Total operating noninterest expense...................... 5,368.3 5,128.5 4,829.6
Merger and restructuring-related charges.................... 348.7 532.8 593.8
--------------------------------
Total noninterest expense................................ $5,717.0 $5,661.3 $5,423.4
--------------------------------
Efficiency ratio*........................................... 51.9% 55.7% 58.3%
Efficiency ratio, before merger and restructuring-related
charges.................................................... 48.8 50.5 51.9
Banking efficiency ratio, before merger and
restructuring-related charges**............................ 43.5 46.3 49.4
------------------------------------------------------------------------------------------------
*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.
**Without investment banking and brokerage activity.
48 U.S. Bancorp
54
TABLE 7
LOAN PORTFOLIO DISTRIBUTION
2000 1999 1998 1997
---------------------------------------------------------------------------------------
Percent Percent Percent Percent
At December 31 (Dollars in Millions) Amount of Total Amount of Total Amount of Total Amount of Total
--------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL
Commercial........................ $ 47,041 38.5% $ 42,021 37.1% $ 37,777 35.3% $33,662 34.0%
Lease financing................... 5,776 4.7 3,835 3.4 3,291 3.1 2,667 2.7
---------------------------------------------------------------------------------------
Total commercial............ 52,817 43.2 45,856 40.5 41,068 38.4 36,329 36.7
COMMERCIAL REAL ESTATE
Commercial mortgages.............. 19,466 15.9 18,636 16.5 16,602 15.5 15,739 15.9
Construction and development...... 6,977 5.7 6,506 5.7 5,206 4.9 4,059 4.1
---------------------------------------------------------------------------------------
Total commercial real
estate..................... 26,443 21.6 25,142 22.2 21,808 20.4 19,798 20.0
RESIDENTIAL MORTGAGES................ 7,753 6.3 11,395 10.1 13,980 13.1 15,892 16.0
RETAIL
Credit card....................... 6,012 4.9 5,004 4.4 4,856 4.5 4,993 5.1
Retail leasing.................... 4,153 3.4 2,123 1.9 1,621 1.5 1,087 1.1
Other retail...................... 25,187 20.6 23,709 20.9 23,625 22.1 20,930 21.1
---------------------------------------------------------------------------------------
Total retail................... 35,352 28.9 30,836 27.2 30,102 28.1 27,010 27.3
---------------------------------------------------------------------------------------
Total loans................. $122,365 100.0% $113,229 100.0% $106,958 100.0% $99,029 100.0%
--------------------------------------------------------------------------------------------------------------------------------
1996
------------------
Percent
At December 31 (Dollars in Millions) Amount of Total
------------------------------------- ------------------
COMMERCIAL
Commercial........................ $30,790 33.7%
Lease financing................... 2,351 2.6
------------------
Total commercial............ 33,141 36.3
COMMERCIAL REAL ESTATE
Commercial mortgages.............. 15,363 16.8
Construction and development...... 3,541 3.9
------------------
Total commercial real
estate..................... 18,904 20.7
RESIDENTIAL MORTGAGES................ 13,919 15.3
RETAIL
Credit card....................... 5,089 5.6
Retail leasing.................... 787 0.8
Other retail...................... 19,402 21.3
------------------
Total retail................... 25,278 27.7
------------------
Total loans................. $91,242 100.0%
----------------------------------------------------------------------------------------------------------
TABLE 8
SELECTED LOAN MATURITY DISTRIBUTION
Over One
One Year Through Over Five
At December 31, 2000 (Dollars in Millions) or Less Five Years Years Total
------------------------------------------------------------------------------------------------------------
Commercial.................................................. $23,498 $24,673 $ 4,646 $ 52,817
Commercial real estate...................................... 7,645 13,261 5,537 26,443
Residential mortgages....................................... 526 892 6,335 7,753
Retail...................................................... 16,974 11,399 6,979 35,352
----------------------------------------------
Total loans........................................... $48,643 $50,225 $23,497 $122,365
Total of loans due after one year with:
Predetermined interest rates............................. $ 36,953
Floating interest rates.................................. $ 36,769
------------------------------------------------------------------------------------------------------------
U.S. Bancorp 49
55
TABLE 9
COMMERCIAL LOAN EXPOSURE BY INDUSTRY GROUP AND GEOGRAPHY
December 31, 2000 December 31, 1999
-------------------- --------------------
INDUSTRY GROUP (Dollars in Millions) Loans % Loans %
--------------------------------------------------------------------------------------------------------------------
Consumer products and services.............................. $ 9,791 18.4% $ 8,197 17.9%
Capital goods............................................... 6,984 13.2 5,668 12.4
Financials.................................................. 5,438 10.3 4,577 10.0
Consumer staples............................................ 5,427 10.3 4,424 9.6
Agriculture................................................. 4,177 7.9 3,813 8.3
Transportation.............................................. 2,775 5.3 2,389 5.2
Private investors........................................... 2,405 4.6 2,517 5.5
Paper and forestry products, mining and basic materials..... 2,249 4.3 1,884 4.1
Health care................................................. 1,631 3.1 1,544 3.4
Technology.................................................. 1,223 2.3 1,175 2.6
Mortgage banking............................................ 961 1.8 1,051 2.3
Energy...................................................... 742 1.4 661 1.4
Other....................................................... 9,014 17.1 7,956 17.3
-------------------------------------------------
Total.................................................... $52,817 100.0% $45,856 100.0%
--------------------------------------------------------------------------------------------------------------------
GEOGRAPHY
--------------------------------------------------------------------------------------------------------------------
California.................................................. $ 3,174 6.0% $ 2,366 5.2%
Colorado.................................................... 2,661 5.0 2,272 5.0
Illinois.................................................... 3,336 6.3 3,128 6.8
Minnesota................................................... 8,724 16.5 7,969 17.4
Missouri.................................................... 2,163 4.1 1,697 3.7
Ohio........................................................ 2,269 4.3 1,698 3.7
Oregon...................................................... 2,769 5.2 2,647 5.8
Washington.................................................. 4,860 9.2 4,846 10.6
Wisconsin................................................... 3,153 6.0 2,671 5.8
Other banking regions:
Midwest.................................................. 4,547 8.6 4,230 9.2
Mideast.................................................. 2,230 4.2 2,074 4.5
Mountain................................................. 1,316 2.5 1,331 2.9
Southwestern............................................. 1,460 2.8 1,299 2.8
-------------------------------------------------
Total banking regions................................. 42,662 80.8 38,228 83.4
Other regions............................................... 10,155 19.2 7,628 16.6
-------------------------------------------------
Total.................................................... $52,817 100.0% $45,856 100.0%
--------------------------------------------------------------------------------------------------------------------
50 U.S. Bancorp
56
TABLE 10
COMMERCIAL REAL ESTATE EXPOSURE BY PROPERTY TYPE AND GEOGRAPHY
December 31, 2000 December 31, 1999
--------------------- ---------------------
PROPERTY TYPE (Dollars in Millions) Loans % Loans %
--------------------------------------------------------------------------------------------------------------------
Business owner occupied..................................... $ 7,329 27.7% $ 5,663 22.5%
Multi-family................................................ 3,908 14.8 3,538 14.1
Commercial property:
Industrial............................................... 1,923 7.3 2,343 9.3
Office................................................... 2,761 10.4 2,979 11.8
Retail................................................... 2,537 9.6 2,769 11.0
Other.................................................... 2,755 10.4 2,846 11.3
Homebuilders................................................ 1,521 5.8 1,399 5.6
Hotel/motel................................................. 1,916 7.2 1,404 5.6
Other....................................................... 1,793 6.8 2,201 8.8
-------------------------------------------------
Total.................................................... $26,443 100.0% $25,142 100.0%
--------------------------------------------------------------------------------------------------------------------
GEOGRAPHY
--------------------------------------------------------------------------------------------------------------------
California.................................................. $ 3,255 12.3% $ 1,859 7.4%
Colorado.................................................... 855 3.2 800 3.2
Illinois.................................................... 836 3.2 682 2.7
Minnesota................................................... 1,088 4.1 1,120 4.5
Missouri.................................................... 2,842 10.7 2,801 11.1
Ohio........................................................ 2,425 9.2 2,427 9.7
Oregon...................................................... 1,638 6.2 1,613 6.4
Washington.................................................. 2,937 11.1 2,808 11.2
Wisconsin................................................... 2,113 8.0 2,102 8.4
Other banking regions:
Midwest.................................................. 2,982 11.3 2,551 10.1
Mideast.................................................. 1,798 6.8 1,513 6.0
Mountain................................................. 573 2.2 544 2.2
Southwestern............................................. 1,264 4.8 1,201 4.8
-------------------------------------------------
Total banking regions................................. 24,606 25.1 22,021 23.1
Other regions............................................... 1,837 6.9 3,121 12.3
-------------------------------------------------
Total.................................................... $26,443 100.0% $25,142 100.0%
--------------------------------------------------------------------------------------------------------------------
U.S. Bancorp 51
57
TABLE 11
INVESTMENT SECURITIES
Available-for-Sale Held-to-Maturity
------------------------------------------------------------------------------
Average Weighted
Amortized Fair Maturity in Average Amortized Fair
December 31, 2000 (Dollars in Millions) Cost Value Years Yield Cost Value
-----------------------------------------------------------------------------------------------------------------------------------
U.S. Treasuries and agencies..................... $ 498 $ 500 0.32 6.46% $ -- $ --
Within one year............................... 1,030 1,050 2.74 6.36 -- --
One through five years........................ 63 65 6.81 7.11 -- --
Five through ten years........................ 9 9 14.96 7.48 -- --
Over.......................................... -- -- -- -- -- --
------------------------------------------------------------------------------
Total............................................ $ 1,600 $ 1,624 2.22 6.43 $ -- $ --
------------------------------------------------------------------------------
Mortgage-backed securities
Within one year............................... $ 379 $ 379 0.54 6.83 $ -- $ --
One through five years........................ 1,679 1,687 2.96 6.87 36 36
Five through ten years........................ 2,235 2,255 6.74 6.67 -- --
Over.......................................... 7,507 7,572 15.28 7.63 -- --
------------------------------------------------------------------------------
Total............................................ $11,800 $11,893 11.44 7.31 $ 36 $ 36
------------------------------------------------------------------------------
Obligations of state and political subdivisions
Within one year............................... $ 347 $ 348 0.50 7.34 $ 40 $ 39
One through five years........................ 1,265 1,284 3.10 7.50 58 51
Five through ten years........................ 600 614 7.39 7.49 64 68
Over.......................................... 158 163 15.13 7.93 54 63
------------------------------------------------------------------------------
Total............................................ $ 2,370 $ 2,409 4.61 7.50 $216 $221
------------------------------------------------------------------------------
Other
Within one year............................... $ 15 $ 15 0.46 6.50 $ -- $ --
One through five years........................ 655 658 2.78 6.72 -- --
Five through ten years........................ 8 8 7.30 4.68 -- --
Over.......................................... 269 256 26.18 7.58 -- --
------------------------------------------------------------------------------
Total............................................ $ 947 $ 937 9.44 6.94 $ -- $ --
------------------------------------------------------------------------------
Other equity securities.......................... $ 274 $ 276 -- -- $ -- $ --
Money market funds............................... 251 251 -- -- -- --
------------------------------------------------------------------------------
Total investment securities...................... $17,242 $17,390 9.47 7.23% $252 $257
-----------------------------------------------------------------------------------------------------------------------------------
Held-to-Maturity
------------------------
Average Weighted
Maturity in Average
December 31, 2000 (Dollars in Millions) Years Yield
--------------------------------------------------------------------------------------------------------------------
U.S. Treasuries and agencies..................... -- --%
Within one year............................... -- --
One through five years........................ -- --
Five through ten years........................ -- --
Over.......................................... -- --
------------------------
Total............................................ -- --
------------------------
Mortgage-backed securities
Within one year............................... -- --
One through five years........................ 4.63 7.92
Five through ten years........................ -- --
Over.......................................... -- --
------------------------
Total............................................ 4.63 7.92
------------------------
Obligations of state and political subdivisions
Within one year............................... 0.41 5.78
One through five years........................ 3.21 5.61
Five through ten years........................ 7.8 5.55
Over.......................................... 15.38 5.68
------------------------
Total............................................ 7.09 5.64
------------------------
Other
Within one year............................... -- --
One through five years........................ -- --
Five through ten years........................ -- --
Over.......................................... -- --
------------------------
Total............................................ -- --
------------------------
Other equity securities.......................... -- --
Money market funds............................... -- --
------------------------
Total investment securities...................... -- --%
------------------------------------------------------------------------------------------------------------------------------
Note: Information related to mortgage-backed securities included above is
presented based upon weighted average maturities anticipating future
prepayments. Average yields are presented on a fully-taxable equivalent
basis. Yields on available-for-sale securities are computed based on
historical cost balances.
TABLE 12
NET CHARGE-OFFS AS A PERCENTAGE OF AVERAGE LOANS OUTSTANDING
2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------------------
COMMERCIAL
Commercial............................................... .56% .41% *% *% *%
Lease financing.......................................... .46 .24 * * *
----------------------------------------
Total commercial...................................... .55 .40 .31 .50 .21
COMMERCIAL REAL ESTATE
Commercial mortgages..................................... .03 .02 * * *
Construction and development............................. .11 .03 * * *
----------------------------------------
Total commercial real estate.......................... .05 .02 (.04) (.05) (.03)
RESIDENTIAL MORTGAGES....................................... .13 .12 .08 .06 .05
RETAIL
Credit card.............................................. 3.68 3.50 3.53 4.05 3.93
Retail leasing........................................... .41 .28 * * *
Other retail............................................. 1.27 1.23 * * *
----------------------------------------
Total retail.......................................... 1.60 1.57 1.51 1.65 1.42
----------------------------------------
Total loans........................................ .70% .61% .53% .63% .45%
--------------------------------------------------------------------------------------------------------
*Information not available
52 U.S. Bancorp
58
TABLE 13
NONPERFORMING ASSETS*
December 31
----------------------------------------------
(Dollars in Millions) 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------------------------
COMMERCIAL
Commercial............................................... $470.4 $219.0 $230.4 $263.9 $ ***
Lease financing.......................................... 70.5 31.5 17.7 9.8 ***
----------------------------------------------
Total commercial...................................... 540.9 250.5 248.1 273.7 238.7
COMMERCIAL REAL ESTATE
Commercial mortgages..................................... 105.5 138.2 86.9 94.9 ***
Construction and development............................. 38.2 31.6 28.4 19.5 ***
----------------------------------------------
Total commercial real estate.......................... 143.7 169.8 115.3 114.4 123.5
RESIDENTIAL MORTGAGES....................................... 56.9 72.8 98.7 95.0 90.5
RETAIL
Credit card.............................................. 8.8 5.0 2.6 *** ***
Retail leasing........................................... -- .4 .5 .5 .3
Other retail............................................. 15.0 21.1 30.4 17.1 17.1
----------------------------------------------
Total retail.......................................... 23.8 26.5 33.5 17.6 17.4
----------------------------------------------
Total nonperforming loans....................... 765.3 519.6 495.6 500.7 470.1
OTHER REAL ESTATE........................................... 61.1 40.0 35.1 57.0 69.9
OTHER ASSETS................................................ 40.6 28.9 16.9 17.4 12.3
----------------------------------------------
Total nonperforming assets...................... $867.0 $588.5 $547.6 $575.1 $552.3
----------------------------------------------
Accruing loans 90 days or more past due**................... $385.2 $248.6 $252.9 $213.7 $234.6
Nonperforming loans to total loans.......................... .63% .46% .46% .51% .52%
Nonperforming assets to total loans plus other real
estate..................................................... .71 .52 .51 .58 .60
Net interest lost on nonperforming loans.................... $ 50.8 $ 29.5 $ 21.3 $ 32.1 $ 37.0
--------------------------------------------------------------------------------------------------------------
*Throughout this document, nonperforming assets and related ratios do not
include accruing loans 90 days or more past due.
**These loans are not included in nonperforming assets and continue to accrue
interest because they are secured by collateral and/or are in the process of
collection and are reasonably expected to result in repayment or restoration
to current status.
***Information not available
U.S. Bancorp 53
59
TABLE 14
SUMMARY OF ALLOWANCE FOR CREDIT LOSSES
(Dollars in Millions) 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------
Balance at beginning of year................................ $1,710.3 $1,705.7 $1,665.8 $1,600.1 $1,487.3
CHARGE-OFFS
Commercial
Commercial............................................ 319.8 250.1 * * *
Lease financing....................................... 27.9 12.4 * * *
--------------------------------------------------------
Total commercial................................... 347.7 262.5 202.3 232.8 143.4
Commercial real estate
Commercial mortgages.................................. 15.8 19.1 * * *
Construction and development.......................... 10.3 2.6 * * *
--------------------------------------------------------
Total commercial real estate....................... 26.1 21.7 23.6 27.3 30.4
Residential mortgages.................................... 13.7 16.2 14.4 11.1 12.8
Retail
Credit card........................................... 235.8 220.2 223.9 258.3 237.1
Retail leasing........................................ 14.8 6.2 * * *
Other retail.......................................... 379.5 376.0 * * *
--------------------------------------------------------
Total retail....................................... 630.1 602.4 533.4 522.4 426.4
--------------------------------------------------------
Total charge-offs............................... 1,017.6 902.8 773.7 793.6 613.0
RECOVERIES
Commercial
Commercial............................................ 64.0 84.8 * * *
Lease financing....................................... 7.2 4.0 * * *
--------------------------------------------------------
Total commercial................................... 71.2 88.8 81.9 59.3 75.4
Commercial real estate
Commercial mortgages.................................. 10.8 15.1 * * *
Construction and development.......................... 2.6 1.0 * * *
--------------------------------------------------------
Total commercial real estate....................... 13.4 16.1 31.0 37.7 35.8
Residential mortgages.................................... 1.3 1.4 3.0 2.5 5.3
Retail
Credit card........................................... 27.5 34.6 36.9 38.3 29.5
Retail leasing........................................ 2.0 1.1 * * *
Other retail.......................................... 76.8 88.2 * * *
--------------------------------------------------------
Total retail....................................... 106.3 123.9 112.6 93.1 80.8
--------------------------------------------------------
Total recoveries................................ 192.2 230.2 228.5 192.6 197.3
NET CHARGE-OFFS
Commercial
Commercial............................................ 255.8 165.3 * * *
Lease financing....................................... 20.7 8.4 * * *
--------------------------------------------------------
Total commercial................................... 276.5 173.7 120.4 173.5 68.0
Commercial real estate
Commercial mortgages.................................. 5.0 4.0 * * *
Construction and development.......................... 7.7 1.6 * * *
--------------------------------------------------------
Total commercial real estate....................... 12.7 5.6 (7.4) (10.4) (5.4)
Residential mortgages.................................... 12.4 14.8 11.4 8.6 7.5
Retail
Credit card........................................... 208.3 185.6 187.0 220.0 207.6
Retail leasing........................................ 12.8 5.1 * * *
Other retail.......................................... 302.7 287.8 * * *
--------------------------------------------------------
Total retail....................................... 523.8 478.5 420.8 429.3 345.6
--------------------------------------------------------
Total net charge-offs........................... 825.4 672.6 545.2 601.0 415.7
Provision for credit losses.............................. 828.0 646.0 491.3 639.9 429.9
Acquisitions and other changes........................... 74.0 31.2 93.8 26.8 98.6
--------------------------------------------------------
Balance at end of year................................... $1,786.9 $1,710.3 $1,705.7 $1,665.8 $1,600.1
--------------------------------------------------------
Allowance as a percentage of:
Period-end loans...................................... 1.46% 1.51% 1.59% 1.68% 1.75%
Nonperforming loans................................... 233 329 344 333 340
Nonperforming assets.................................. 206 291 312 290 290
Net charge-offs....................................... 216 254 313 277 385
------------------------------------------------------------------------------------------------------------------------
*Information not available
54 U.S. Bancorp
60
TABLE 15
DELINQUENT LOAN RATIOS*
December 31
------------------------------------
90 days or more past due 2000 1999 1998 1997 1996
----------------------------------------------------------------------------------------------------
COMMERCIAL
Commercial............................................... 1.11% .57% .69% **% **%
Lease financing.......................................... 1.24 .82 .57 ** **
------------------------------------
Total commercial...................................... 1.13 .59 .68 .84 .83
COMMERCIAL REAL ESTATE
Commercial mortgages..................................... .61 .82 .59 ** **
Construction and development............................. .57 .53 .60 ** **
------------------------------------
Total commercial real estate.......................... .60 .74 .59 .67 .82
RESIDENTIAL MORTGAGES....................................... 1.49 1.11 1.26 .90 .95
RETAIL
Credit card.............................................. 1.85 1.33 1.07 ** **
Retail leasing........................................... .20 .14 .13 ** **
Other retail............................................. .64 .47 .47 ** **
------------------------------------
Total retail.......................................... .79 .59 .55 .42 .47
------------------------------------
Total.............................................. .94% .68% .70% .72% .77%
----------------------------------------------------------------------------------------------------
* Ratios include nonperforming loans and are expressed as a percent of ending
loan balances.
** Information not available
TABLE 16
ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES
Allocation Amount At December 31
--------------------------------------------------------
(Dollars in Millions) 2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------
COMMERCIAL
Commercial.................... $ 626.5 $ 408.3 $ 343.7 $ 370.5 $ 341.5
Lease financing............... 26.7 20.2 21.5 16.4 13.7
--------------------------------------------------------
Total commercial........... 653.2 428.5 365.2 386.9 355.2
COMMERCIAL REAL ESTATE
Commercial mortgages.......... 59.2 110.4 105.2 105.6 149.3
Construction and
development.................. 23.6 22.5 25.9 27.7 24.1
--------------------------------------------------------
Total commercial real
estate.................... 82.8 132.9 131.1 133.3 173.4
RESIDENTIAL MORTGAGES............ 9.6 18.6 27.2 36.9 30.9
RETAIL
Credit card................... 265.6 320.8 304.3 217.4 234.5
Retail leasing................ 27.2 18.6 6.5 4.9 2.4
Other retail.................. 358.9 389.2 365.6 257.9 201.0
--------------------------------------------------------
Total retail............... 651.7 728.6 676.4 480.2 437.9
--------------------------------------------------------
Total allocated
allowance................. 1,397.3 1,308.6 1,199.9 1,037.3 997.4
Unallocated portion........ 389.6 401.7 505.8 628.5 602.7
--------------------------------------------------------
Total allowance.................. $1,786.9 $1,710.3 $1,705.7 $1,665.8 $1,600.1
---------------------------------------------------------------------------------------------
Allocation as a Percent of Loans Outstanding
--------------------------------------------
(Dollars in Millions) 2000 1999 1998 1997 1996
---------------------------------
COMMERCIAL
Commercial.................... 1.33% .97% .91% 1.10% 1.11%
Lease financing............... .46 .53 .65 .62 .58
--------------------------------------------
Total commercial........... 1.24 .93 .89 1.06 1.07
COMMERCIAL REAL ESTATE
Commercial mortgages.......... .30 .59 .63 .67 .97
Construction and
development.................. .34 .35 .50 .68 .68
--------------------------------------------
Total commercial real
estate.................... .31 .53 .60 .67 .92
RESIDENTIAL MORTGAGES............ .12 .16 .19 .23 .22
RETAIL
Credit card................... 4.42 6.41 6.27 4.35 4.61
Retail leasing................ .65 .87 .40 .45 .31
Other retail.................. 1.43 1.64 1.55 1.23 1.04
--------------------------------------------
Total retail............... 1.84 2.36 2.25 1.78 1.73
--------------------------------------------
Total allocated
allowance................. 1.14 1.16 1.12 1.05 1.09
Unallocated portion........ .32 .35 .47 .63 .66
--------------------------------------------
Total allowance.................. 1.46% 1.51% 1.59% 1.68% 1.75%
---------------------------------
U.S. Bancorp 55
61
TABLE 17
DEPOSITS BY TYPE
December 31 (Dollars in Millions) 2000 1999 1998 1997 1996
----------------------------------------------------------------------------------------------------------------------
Noninterest-bearing deposits................................ $ 26,633 $ 26,350 $ 27,479 $24,062 $23,417
Interest-bearing deposits
Savings accounts......................................... 4,516 5,445 6,352 6,414 6,807
Interest checking........................................ 13,982 13,141 13,385 12,212 11,529
Money market accounts.................................... 23,899 22,751 22,086 18,672 17,416
Time certificates of deposit less than $100,000............. 25,780 25,394 27,935 29,548 27,587
Time deposits greater than $100,000
Domestic................................................. 11,221 9,348 6,261 6,622 6,572
Foreign.................................................. 3,504 988 848 793 483
----------------------------------------------------------------------------------------------------------------------
Total deposits........................................ $109,535 $103,417 $104,346 $98,323 $93,811
----------------------------------------------------------------------------------------------------------------------
Percent of deposits by type
----------------------------------------------------------------------------------------------------------------------
Noninterest-bearing deposits................................ 24.3% 25.4% 26.3% 24.4% 25.0%
Interest-bearing deposits
Savings accounts......................................... 4.1 5.3 6.1 6.5 7.2
Interest checking........................................ 12.8 12.6 12.8 12.4 12.3
Money market accounts.................................... 21.8 22.0 21.2 19.0 18.6
Time certificates of deposit less than $100,000............. 23.5 24.6 26.8 30.2 29.4
Time deposits greater than $100,000
Domestic................................................. 10.3 9.1 6.0 6.7 7.0
Foreign.................................................. 3.2 1.0 .8 .8 .5
----------------------------------------------------------------------------------------------------------------------
Total deposits........................................ 100.0% 100.0% 100.0% 100.0% 100.0%
----------------------------------------------------------------------------------------------------------------------
The maturity of time deposits greater than $100,000 is as follows:
December 31, 2000 (Dollars in Millions)
-----------------------------------------------------------------------
Three months or less........................................ $ 9,466
Over three months through six months........................ 1,727
Over six months through twelve months....................... 1,850
Over twelve months.......................................... 1,682
-----------------------------------------------------------------------
Total.................................................... $14,725
-----------------------------------------------------------------------
56 U.S. Bancorp
62
TABLE 18
INTEREST RATE SENSITIVITY GAP ANALYSIS
Repricing Maturities
-------------------------------------------------------------------
Less than 3-6 6-12 1-5 More than
December 31, 2000 (Dollars in Millions) 3 months months months years 5 years Total
---------------------------------------------------------------------------------------------------------------------------------
EARNING ASSETS
Loans.................................................. $64,299 $ 7,246 $ 9,900 $32,911 $ 8,009 $122,365
Loans held for sale.................................... 764 -- -- -- -- 764
Investment securities.................................. 2,357 1,028 1,644 8,401 4,212 17,642
Other.................................................. 2,420 7 13 21 890 3,351
-------------------------------------------------------------------
Total earning assets............................. $69,840 $ 8,281 $11,557 $41,333 $13,111 $144,122
-------------------------------------------------------------------
INTEREST-BEARING LIABILITIES
Deposits............................................... $43,813 $ 7,714 $ 9,443 $21,865 $ 67 $ 82,902
Short-term borrowings.................................. 9,394 25 2,406 1 7 11,833
Long-term debt......................................... 13,825 389 839 4,825 1,998 21,876
Company-obligated mandatorily redeemable preferred
securities.......................................... 300 -- -- -- 1,100 1,400
-------------------------------------------------------------------
Total interest-bearing liabilities............... $67,332 $ 8,128 $12,688 $26,691 $ 3,172 $118,011
-------------------------------------------------------------------
Effect of off-balance sheet hedging instruments
Receiving fixed........................................ $ 811 $ 423 $ 568 $ 4,416 $ 2,040 $ 8,258
Receiving floating..................................... 1,500 -- -- -- -- 1,500
Paying fixed........................................... -- -- (500) -- -- (500)
Paying floating........................................ (9,093) (150) -- (15) -- (9,258)
-------------------------------------------------------------------
Total effect of off-balance sheet hedging
instruments..................................... $(6,782) $ 273 $ 68 $ 4,401 $ 2,040 $ --
-------------------------------------------------------------------
Repricing gap............................................. $(4,274) $ 426 $(1,063) $19,043 $11,979 $ 26,111
Cumulative repricing gap.................................. (4,274) (3,848) (4,911) 14,132 26,111
---------------------------------------------------------------------------------------------------------------------------------
The estimates of the Company's assets, liabilities, and hedging instruments are
based upon the Company's assessment of the repricing characteristics of
contractual and non-contractual instruments. Non-contractual deposit liabilities
are subject to immediate withdrawal. For purposes of the above analysis these
accounts are reported based upon a historical analysis of the Company's
accounts.
TABLE 19
INTEREST RATE SWAP HEDGING PORTFOLIO NOTIONAL BALANCES AND YIELDS BY
MATURITY DATE
December 31, 2000 (Dollars in Millions)
----------------------------------------------------------------------------------------------------------------
Weighted Weighted
Average Average
Notional Interest Rate Interest Rate
Maturity Date Amount Received Paid
----------------------------------------------------------------------------------------------------------------
2001........................................................ $1,465 6.76% 6.84%
2002........................................................ 544 6.22 6.74
2003........................................................ 1,674 6.02 6.69
2004........................................................ 1,475 6.60 6.72
2005........................................................ 1,000 6.88 6.87
Thereafter.................................................. 2,600 6.66 6.82
------ ---- ----
Total....................................................... $8,758 6.54% 6.78%
----------------------------------------------------------------------------------------------------------------
At December 31, 2000 the Company had $1.0 billion in basis swaps maturing in
2002.
U.S. Bancorp 57
63
TABLE 20
DEBT RATINGS
Standard &
At December 31, 2000 Moody's Poors Fitch
-----------------------------------------------------------------------------------------------
U.S. Bancorp
Short-term borrowings...................................... F1
Senior debt and medium-term notes.......................... A1 A A+
Subordinated debt.......................................... A2 A- A
Preferred stock............................................ a1 BBB+ A
Commercial paper........................................... P-1 A-1 F1
U.S. Bank, NA
Short-term time deposits................................... P-1 A-1 F1+
Long-term time deposits.................................... Aa3 A+ AA-
Bank notes................................................. Aa3/P-1 A+/A-1 A+/F1+
Subordinated debt.......................................... A1 A A
Firstar Bank, NA
Short-term time deposits................................... P-1 A-1 F1+
Long-term time deposits.................................... Aa3 A+ AA-
Bank notes................................................. Aa3/P-1 A+/A-1 A+/F1+
Subordinated debt.......................................... A1 A A
-----------------------------------------------------------------------------------------------
TABLE 21
REGULATORY CAPITAL RATIOS
At December 31 (Dollars in Millions) 2000 1999
----------------------------------------------------------------------------------
U.S. BANCORP
Tangible common equity*..................................... $10,856 $10,137
As a percent of tangible assets.......................... 6.76% 6.74%
Tier 1 Capital.............................................. $11,602 $10,936
As a percent of risk-weighted assets..................... 7.21% 7.35%
As a percent of adjusted quarterly average assets
(Leverage ratio)........................................ 7.39% 7.50%
Total Risk-based capital.................................... $17,038 $16,342
As a percent of risk-weighted assets..................... 10.59% 10.99%
SIGNIFICANT BANK SUBSIDIARIES**
U.S. BANK N.A.:
Tier 1 Capital........................................... 7.29% 6.89%
Total Risk-based Capital................................. 11.21 11.08
Leverage................................................. 7.89 7.67
FIRSTAR BANK, N.A.
Tier 1 Capital........................................... 6.58% 7.43%
Total Risk-based Capital................................. 10.39 10.22
Leverage................................................. 6.43 7.30
Well-
Minimum Capitalized
BANK REGULATORY CAPITAL REQUIREMENTS ------- -----------
Tier 1 Capital........................................... 4.00% 6.00%
Total Risk-based Capital................................. 8.00 10.00
Leverage................................................. 3.00 5.00
--------------------------------------------------------------------------------------
* Defined as shareholders' equity less goodwill
** These balances and ratios were prepared in accordance with regulatory
accounting principles as disclosed in the subsidiaries' regulatory reports.
58 U.S. Bancorp
64
TABLE 22
FOURTH QUARTER SUMMARY
Three Months Ended
December 31
-------------------------
(Dollars in Millions, Except Per Share Data) 2000 1999
-------------------------------------------------------------------------------------------
CONDENSED INCOME STATEMENT
Net interest income (taxable-equivalent basis).............. $1,562.5 $1,501.4
Securities gains, net....................................... 7.0 2.1
Other noninterest income.................................... 1,257.9 1,135.1
Merger-related charges...................................... 84.1 90.5
Other noninterest expense................................... 1,347.8 1,342.1
Provision for credit losses................................. 229.5 173.7
-------------------------
Income before income taxes............................... 1,166.0 1,032.3
Taxable-equivalent adjustment............................... 21.0 22.9
Income taxes................................................ 376.3 372.4
-------------------------
Net income............................................... $ 768.7 $ 637.0
-------------------------
FINANCIAL RATIOS
Return on average assets.................................... 1.89% 1.66%
Return on average common equity............................. 20.7 18.3
Net interest margin (taxable-equivalent basis).............. 4.33 4.49
Efficiency ratio............................................ 50.8 54.6
Banking efficiency ratio*................................... 44.9 50.3
PER COMMON SHARE
Earnings per share.......................................... $ .41 $ .33
Diluted earnings per share.................................. .40 .33
Dividends declared.......................................... .1625 .1625
SELECTED FINANCIAL RATIOS EXCLUDING MERGER-RELATED CHARGES
Return on average assets.................................... 2.02% 1.88%
Return on average equity.................................... 22.2 20.7
Efficiency ratio............................................ 47.9 51.2
Banking efficiency ratio*................................... 42.0 46.5
-------------------------------------------------------------------------------------------
*Without investment banking and brokerage activity
U.S. Bancorp 59
65
EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Year Ended December 31 (Dollars in Millions) 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------------------------------------------------
EARNINGS
1. Net income.............................................. $ 2,875.6 $2,381.8 $2,132.9 $1,599.3 $1,918.6
2. Applicable income taxes................................. 1,512.2 1,392.2 1,167.4 950.6 1,082.9
---------------------------------------------------------
3. Income before taxes (1 + 2)............................. $ 4,387.8 $3,774.0 $3,300.3 $2,549.9 $3,001.5
---------------------------------------------------------
4. Fixed charges:
a. Interest expense excluding interest on deposits...... $ 2,404.1 $1,820.3 $1,625.0 $1,305.6 $1,067.9
b. Portion of rents representative of interest and
amortization of debt expense......................... 86.7 78.9 73.3 68.0 68.5
---------------------------------------------------------
c. Fixed charges excluding interest on deposits (4a +
4b).................................................. 2,490.8 1,899.2 1,698.3 1,373.6 1,136.4
d. Interest on deposits................................. 3,618.8 2,970.0 3,234.7 3,084.2 2,921.5
---------------------------------------------------------
e. Fixed charges including interest on deposits (4c +
4d).................................................. $ 6,109.6 $4,869.2 $4,933.0 $4,457.8 $4,057.9
---------------------------------------------------------
5. Amortization of interest capitalized.................... $ -- $ -- $ -- $ -- $ --
6. Earnings excluding interest on deposits (3 + 4c + 5).... 6,878.6 5,673.2 4,998.6 3,923.5 4,137.9
7. Earnings including interest on deposits (3 + 4e + 5).... 10,497.4 8,643.2 8,233.3 7,007.7 7,059.4
8. Fixed charges excluding interest on deposits (4c)....... 2,490.8 1,899.2 1,698.3 1,373.6 1,136.4
9. Fixed charges including interest on deposits (4e)....... 6,109.6 4,869.2 4,933.0 4,457.8 4,057.9
RATIO OF EARNINGS TO FIXED CHARGES
10. Excluding interest on deposits (line 6/line 8).......... 2.76 2.99 2.94 2.86 3.64
11. Including interest on deposits (line 7/line 9).......... 1.72 1.78 1.67 1.57 1.74
-------------------------------------------------------------------------------------------------------------------------
60 U.S. Bancorp
66
MANAGING COMMITTEE
Jerry A. Grundhofer
President and Chief Executive Officer
John F. Grundhofer
Chairman
Andrew Cecere
Vice Chairman
Trust Services and Private Banking
William L. Chenevich
Vice Chairman
Technology and Operations Services
Richard K. Davis
Vice Chairman
Consumer Banking and Payment Systems
Andrew S. Duff
Vice Chairman
U.S. Bancorp Piper Jaffray
Joseph E. Hasten
Vice Chairman
Corporate Banking
David M. Moffett
Vice Chairman and
Chief Financial Officer
Daniel M. Quinn
Vice Chairman
Commercial Banking
Daniel Yohannes
Vice Chairman
Community and Public Affairs
John R. Heistad
Executive Vice President
Corporate Risk Management
J. Robert Hoffman
Executive Vice President and
Chief Credit Officer
Lee R. Mitau
Executive Vice President and
General Counsel
Stephen E. Smith
Executive Vice President
Human Resources
CORPORATE DIRECTORS
Jerry A. Grundhofer 1
President and Chief Executive Officer
U.S. Bancorp
John F. Grundhofer 1
Chairman
U.S. Bancorp
Linda L. Ahlers 3, 4
President
Marshall Field's
Arthur D. Collins, Jr. 1, 2, 5
President and Chief Operating Officer
Medtronic, Inc.
Peter H. Coors 2, 4, 5
Chairman
Coors Brewing Company
John C. Dannemiller 4, 5
Former Chairman, CEO and President
Applied Industrial Technologies
Victoria Buyniski Gluckman 3, 4
President and Chief Executive Officer
United Medical Resources, Inc.
Joshua Green III 3, 4
Chairman and Chief Executive Officer
Joshua Green Corporation
J. P. Hayden, Jr. 1, 2, 5
Chairman
The Midland Company
Roger L. Howe 1, 2, 3
Formerly Chairman
U.S. Precision Lens, Inc.
Thomas H. Jacobsen 4
Formerly Chairman
Firstar Corporation
Delbert W. Johnson 1, 3, 4
Vice President
Safeguard Scientifics, Inc.
Joel W. Johnson 4, 5
Chairman, President and Chief Executive Officer
Hormel Foods Corporation
Jerry W. Levin 2, 5
Chairman and Chief Executive Officer
Sunbeam Corporation
Sheldon B. Lubar 1, 5
Chairman
Lubar & Company
Frank Lyon, Jr. 2, 4
Wingmead
Daniel F. McKeithan, Jr. 1, 3, 5
President and Chief Executive Officer
Tamarack Petroleum Company, Inc.
David B. O'Maley 1, 2
Chairman, President and Chief Executive Officer
Ohio National Financial Services
O'dell M. Owens, M.D., M.P.H. 3, 4
Medical Director
United Healthcare
Thomas E. Petry 1, 2, 3
Formerly Chairman and Chief Executive Officer
Eagle-Picher Industries, Inc.
Richard G. Reiten 1, 2, 3
President and Chief Executive Officer
Northwest Natural Gas Company
S. Walter Richey 1, 2
Formerly Chairman and Chief Executive Officer
Meritex, Inc.
Warren R. Staley 1, 3
Chairman and Chief Executive Officer
Cargill, Inc.
Patrick T. Stokes 1, 5
President
Anheuser-Busch
John J. Stollenwerk 2, 3, 4
President
Allen-Edmonds Shoe Corporation
1 Executive Committee
2 Compensation Committee
3 Audit Committee
4 Community Outreach and
Fair Lending Committee
5 Governance Committee
67
CORPORATE INFORMATION
Executive Offices
U.S. Bancorp
U.S. Bank Place
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
Common Stock Transfer Agent and Registrar
Firstar Bank, N.A., a subsidiary of U.S. Bancorp, acts as transfer agent and
registrar, dividend paying agent and dividend reinvestment plan agent for U.S.
Bancorp and maintains all shareholder records for the corporation. Inquiries
related to shareholder records, stock transfers, changes of ownership, changes
of address and dividend payment should be sent to the transfer agent at the
following address:
Firstar Bank, N.A.
1555 North River Center Drive, Suite 301
Milwaukee, WI 53212
Phone: 1-800-637-7549
Fax: 414-276-4226
Email: firstarinvestorservice@firstar.com
Independent Public Accountants
The independent public accountants of U.S. Bancorp are
PricewaterhouseCoopers LLP.
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.
Dividend Reinvestment Plan
U.S. Bancorp shareholders can take advantage of 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:
Firstar Bank, N.A.
Dividend Reinvestment Department
1555 North River Center Drive, Suite 301
Milwaukee, WI 53212
or call 1-800-637-7549
Investment Community Contacts
Howell D. McCullough
Senior Vice President, Investor Relations
612-973-2261
howell.mccullough@usbank.com
Judith T. Murphy
Vice President, Investor Relations
612-973-2264
judith.murphy@usbank.com
Financial Information
U.S. Bancorp news and financial results are available through the company's web
site and mail.
Web site. For information about U.S. Bancorp, including news and financial
results and online annual reports, access our home page on the Internet at
www.usbank.com
Mail. At your request, we will mail to you our quarterly earnings news releases,
quarterly financial data on Form 10-Q and additional annual reports. To be added
to U.S. Bancorp's mailing list for quarterly earnings news releases, or to
request other information, please contact:
U.S. Bancorp Investor Relations
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
612-973-2263
corporaterelations@usbank.com
Media Requests
Wendy Raway
Vice President, Public Relations
612-973-2429
wendy.raway@usbank.com
Diversity
U.S. Bancorp and its 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 its subsidiaries are committed to providing Equal Employment
Opportunity to all employees and applicants for employment. In keeping with
this, employment decisions are made based upon job-related knowledge, skills and
abilities rather than race, color, religion, national origin, gender, age,
marital status, disability, veteran status, sexual orientation, gender identity
or any other characteristic protected by law. The corporation complies with
municipal, state, and federal Fair Employment Laws, including regulations
applying to federal contractors.
Community Annual Report
To request copies of the U.S. Bancorp Community Annual Report, published
separately from our U.S. Bancorp Annual Report and Form 10-K, please call U.S.
Bancorp Community Development at 612-973-4996. To request copies of the Firstar
Community Partnership Report, please call Firstar Community Development at (513)
632-4030.
U.S. Bancorp, including each of its subsidiaries, is an Equal Opportunity
Employer and a Drug-Free Workplace.
This report has been produced on recycled paper. [RECYCLED LOGO]
[US BANCORP LOGO]
For product and service information, locations and other information about our
U.S. Bank and Firstar banks and lines of business:
www.usbank.com
www.firstar.com