Managements Discussion and Analysis
OVERVIEW
Earnings Summary
U.S. Bancorp and its
subsidiaries (the Company) reported net income attributable to U.S. Bancorp of $1.6 billion for the third quarter of 2017, or $0.88 per diluted common share, compared with $1.5 billion, or $0.84 per diluted common share, for
the third quarter of 2016. Return on average assets and return on average common equity were 1.38 percent and 13.6 percent, respectively, for the third quarter of 2017, compared with 1.36 percent and 13.5 percent, respectively,
for the third quarter of 2016.
Total net revenue for the third quarter of 2017 was $220 million (4.1 percent) higher than the
third quarter of 2016, reflecting an 8.4 percent increase in net interest income (8.3 percent on a taxable-equivalent basis), partially offset by a 0.9 percent decrease in noninterest income. The increase in net interest income from
the third quarter of 2016 was mainly a result of loan growth and the impact of rising interest rates. The noninterest income decrease was principally due to lower mortgage banking revenue, primarily the result of a higher level of refinancing
activities in the third quarter of 2016, partially offset by increases in trust and investment management fees, payment services revenue, and treasury management fees as well as higher equity investment income.
Noninterest expense in the third quarter of 2017 was $108 million (3.7 percent) higher than the third quarter of 2016, primarily due to
increased compensation expense related to hiring to support business growth and compliance programs, merit increases and higher variable compensation.
The provision for credit losses for the third quarter of 2017 of $360 million was $35 million (10.8 percent) higher than the third
quarter of 2016. Net charge-offs in the third quarter of 2017 were $330 million, compared with $315 million in the third quarter of 2016. Refer to Corporate Risk Profile for further information on the provision for credit
losses, net charge-offs, nonperforming assets and other factors considered by the Company in assessing the credit quality of the loan portfolio and establishing the allowance for credit losses.
Net income attributable to U.S. Bancorp for the first nine months of 2017 was $4.5 billion, or $2.55 per diluted common share, compared
with $4.4 billion, or $2.43 per diluted common share, for the first nine months of 2016. Return on average assets and return on average common equity were 1.36 percent and 13.4 percent, respectively, for the first nine months of
2017, compared with 1.37 percent and 13.4 percent, respectively, for the first nine months of 2016.
Total net revenue for the
first nine months of 2017 was $546 million (3.4 percent) higher than the first nine months of 2016, reflecting a 6.1 percent increase in net interest income (6.0 percent on a taxable-equivalent basis) and a 0.3 percent increase
in noninterest income. The increase in net interest income from a year ago was mainly a result of loan growth and the impact of rising interest rates. The noninterest income increase was driven by higher payment services revenue, trust and
investment management fees and treasury management fees, partially offset by lower mortgage banking revenue and lower equity investment income, reflecting the impact of the sale of the Companys membership in Visa Europe Limited (Visa
Europe) to Visa Inc. in the second quarter of 2016.
Noninterest expense in the first nine months of 2017 was $334 million (3.9
percent) higher than the first nine months of 2016, the result of increased compensation expense related to hiring to support business growth and compliance programs, merit increases and higher variable compensation, as well as the impact of a
Federal Deposit Insurance Corporation (FDIC) insurance surcharge which began in late 2016. The increase from the first nine months of 2016 was partially offset by an increase in reserves related to legal and regulatory matters and a
charitable contribution, both recognized in the second quarter of 2016.
The provision for credit losses for the first nine months of 2017
of $1.1 billion was $73 million (7.4 percent) higher than the first nine months of 2016. Net charge-offs in the first nine months of 2017 were $1.0 billion, compared with $947 million in the first nine months of 2016. Refer
to Corporate Risk Profile for further information on the provision for credit losses, net charge-offs, nonperforming assets and other factors considered by the Company in assessing the credit quality of the loan portfolio and
establishing the allowance for credit losses.
STATEMENT OF INCOME ANALYSIS
Net Interest Income
Net interest
income, on a taxable-equivalent basis, was $3.2 billion in the third quarter and $9.2 billion in the first nine months of 2017, representing increases of $243 million (8.3 percent) and $522 million (6.0 percent), respectively,
over the same periods of 2016. The increases were principally driven by loan growth and the impact of rising interest rates. Average earning assets were $15.0 billion (3.8 percent) higher in the third quarter and $18.2 billion
(4.7 percent) higher in the first nine months of 2017, compared with the same periods of 2016, reflecting increases in loans, other earning assets and investment securities. The net interest margin, on a taxable-equivalent basis, in the third
quarter and first nine months of 2017 was 3.10 percent and 3.06 percent, respectively, compared with 2.98 percent and 3.02 percent in the third quarter and first nine months of 2016, respectively. The increases in the net
interest margin from the same periods of the prior year were due to higher interest rates and changes in the loan portfolio mix, partially offset by higher funding costs and higher cash balances. Refer to the Consolidated Daily Average Balance
Sheet and Related Yields and Rates tables for further information on net interest income.
Average investment securities in
the third quarter and first nine months of 2017 were $3.7 billion (3.4 percent) and $4.2 billion (3.9 percent) higher, respectively, than the same periods of 2016, primarily due to purchases of U.S. Treasury and U.S. government
mortgage-backed securities, net of prepayments and maturities, in support of liquidity management.
Average total loans in the third
quarter and first nine months of 2017 were $8.0 billion (3.0 percent) and $9.3 billion (3.5 percent) higher, respectively, than the same periods of 2016, due to growth in commercial loans, residential mortgages, other retail loans and
credit card loans. The increases were driven by higher demand for loans from new and existing customers. These increases were partially offset by a decrease in commercial real estate loans due to disciplined underwriting of construction and
development loans and customers paying down balances, as well as a decrease in loans covered by loss sharing agreements with the FDIC, a
run-off
portfolio.
Average total deposits for the third quarter and first nine months of 2017 were $16.6 billion (5.2 percent) and $24.3 billion (7.9
percent) higher, respectively, than the same periods of 2016. Average noninterest-bearing deposit balances were essentially unchanged in the third quarter and increased $1.9 billion (2.4 percent) in the first nine months of 2017, compared with
the same periods of 2016, reflecting increases in Wealth Management and Securities Services, and Consumer and Small Business Banking balances, offset by decreases in Wholesale Banking and Commercial Real Estate balances. Average total savings
deposits for the third quarter and first nine months of 2017 increased $12.7 billion (6.2 percent) and $23.2 billion (12.0 percent), respectively, over the same periods of 2016, a result of growth across all business lines. Average time
deposits were $3.9 billion (12.2 percent) higher and $787 million (2.4 percent) lower for the third quarter and first nine months of 2017, respectively, compared with the same periods of the prior year. Changes in time deposits are largely
related to those deposits managed as an alternative to other funding sources such as wholesale borrowing, based largely on relative pricing and liquidity characteristics.
Provision for Credit Losses
The
provision for credit losses for the third quarter and first nine months of 2017 increased $35 million (10.8 percent) and $73 million (7.4 percent), respectively, over the same periods of 2016. The provision for credit losses was
$30 million higher than net charge-offs in the third quarter and $50 million higher than
net-charge-offs
in the first nine months of 2017. The provision for credit losses was $10 million higher
than net charge-offs and $35 million higher than net charge-offs in the third quarter and first nine months of 2016, respectively. The increase in the allowance for credit losses during the third quarter and first nine months of 2017 reflected
loan portfolio growth and exposures related to recent weather events, partially offset by improvements in the energy loan and residential mortgage portfolios. Net charge-offs increased $15 million (4.8 percent) and $58 million (6.1
percent) in the third quarter and first nine months of 2017, respectively, compared with the same periods of the prior year, primarily due to higher credit card net charge-offs, partially offset by lower net charge-offs related to residential
mortgages and commercial and commercial real estate loans. Refer to Corporate Risk Profile for further information on the provision for credit losses, net charge-offs, nonperforming assets and other factors considered by the Company in
assessing the credit quality of the loan portfolio and establishing the allowance for credit losses.
|
|
|
Table 2
|
|
Noninterest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
(Dollars in Millions)
|
|
2017
|
|
|
2016
|
|
|
Percent
Change
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Percent
Change
|
|
Credit and debit card revenue
|
|
$
|
308
|
|
|
$
|
299
|
|
|
|
3.0
|
%
|
|
|
|
|
|
$
|
919
|
|
|
$
|
861
|
|
|
|
6.7
|
%
|
Corporate payment products revenue
|
|
|
201
|
|
|
|
190
|
|
|
|
5.8
|
|
|
|
|
|
|
|
564
|
|
|
|
541
|
|
|
|
4.3
|
|
Merchant processing services
|
|
|
405
|
|
|
|
412
|
|
|
|
(1.7
|
)
|
|
|
|
|
|
|
1,190
|
|
|
|
1,188
|
|
|
|
.2
|
|
ATM processing services
|
|
|
92
|
|
|
|
87
|
|
|
|
5.7
|
|
|
|
|
|
|
|
267
|
|
|
|
251
|
|
|
|
6.4
|
|
Trust and investment management fees
|
|
|
380
|
|
|
|
362
|
|
|
|
5.0
|
|
|
|
|
|
|
|
1,128
|
|
|
|
1,059
|
|
|
|
6.5
|
|
Deposit service charges
|
|
|
192
|
|
|
|
192
|
|
|
|
|
|
|
|
|
|
|
|
553
|
|
|
|
539
|
|
|
|
2.6
|
|
Treasury management fees
|
|
|
153
|
|
|
|
147
|
|
|
|
4.1
|
|
|
|
|
|
|
|
466
|
|
|
|
436
|
|
|
|
6.9
|
|
Commercial products revenue
|
|
|
221
|
|
|
|
219
|
|
|
|
.9
|
|
|
|
|
|
|
|
638
|
|
|
|
654
|
|
|
|
(2.4
|
)
|
Mortgage banking revenue
|
|
|
213
|
|
|
|
314
|
|
|
|
(32.2
|
)
|
|
|
|
|
|
|
632
|
|
|
|
739
|
|
|
|
(14.5
|
)
|
Investment products fees
|
|
|
39
|
|
|
|
41
|
|
|
|
(4.9
|
)
|
|
|
|
|
|
|
120
|
|
|
|
120
|
|
|
|
|
|
Securities gains (losses), net
|
|
|
9
|
|
|
|
10
|
|
|
|
(10.0
|
)
|
|
|
|
|
|
|
47
|
|
|
|
16
|
|
|
|
*
|
|
Other
|
|
|
209
|
|
|
|
172
|
|
|
|
21.5
|
|
|
|
|
|
|
|
646
|
|
|
|
742
|
|
|
|
(12.9
|
)
|
Total noninterest income
|
|
$
|
2,422
|
|
|
$
|
2,445
|
|
|
|
(.9
|
)%
|
|
|
|
|
|
$
|
7,170
|
|
|
$
|
7,146
|
|
|
|
.3
|
%
|
Noninterest Income
Noninterest income was $2.4 billion in the third quarter and $7.2 billion in the first nine months of
2017, representing a decrease of $23 million (0.9 percent) and an increase of $24 million (0.3 percent), respectively, compared with the same periods of 2016. The decrease in the third quarter of 2017, compared with the third quarter of
2016, was principally due to lower mortgage banking revenue, partially offset by increases in trust and investment management fees, payment services revenue, treasury management fees, and other noninterest income. The increase in the first nine
months of 2017, compared with the same period of the prior year, was driven by increases in payment services revenue, trust and investment management fees, and treasury management fees, as well as higher gains on sales of investment securities,
partially offset by decreases in mortgage banking revenue and other noninterest income. Mortgage banking revenue decreased due to lower origination and sales volumes from home refinancing, as refinancing activities were significantly higher in the
second and third quarters of 2016 due to a decline in longer term interest rates during that period. Trust and investment management fees increased due to favorable market conditions, and net asset and account growth. Payment services revenue was
higher due to increases in credit and debit card revenue and corporate payment products revenue, both driven by higher sales volumes. The increases in payment services revenue were partially offset by lower merchant processing services revenue in
the third quarter of 2017 due to the Company exiting certain joint ventures in the second quarter of 2017 and the impacts of recent weather events. Treasury management fees increased in the third quarter and first nine months of 2017, compared with
the same periods of the prior year, due to higher transaction volume. Other revenue increased in the third quarter of 2017, compared to the third quarter of 2016, primarily due to higher equity investment income. Other revenue was lower in the first
nine months of 2017, compared with the first nine months of 2016, primarily due to lower equity investment income, reflecting the impact of the second quarter 2016 Visa Europe sale.
Noninterest Expense
Noninterest
expense was $3.0 billion in the third quarter and $9.0 billion in the first nine months of 2017, representing increases of $108 million (3.7 percent) and $334 million (3.9 percent), respectively, over the same periods of 2016.
The increases from a year ago were primarily due to higher compensation expense, partially offset by lower professional services expense. Compensation expense increased principally due to the impact of hiring to support business growth and
compliance programs, merit increases and higher variable compensation. Professional services expense decreased primarily due to fewer consulting services as compliance programs near maturity. The increase in noninterest expense in the first nine
months of 2017, compared with the same period of the prior year, was further offset by decreases in marketing and business development expense and other expense. Marketing and business development expense was lower, primarily due to the impact of
the charitable contribution recorded in the second quarter of 2016. Other expense decreased, primarily due to the impact of the increase in reserves related to legal and regulatory matters recorded in the second quarter of 2016, partially offset by
the FDIC insurance surcharge which began in late 2016.
|
|
|
Table 3
|
|
Noninterest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
(Dollars in Millions)
|
|
2017
|
|
|
2016
|
|
|
Percent
Change
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Percent
Change
|
|
Compensation
|
|
$
|
1,440
|
|
|
$
|
1,329
|
|
|
|
8.4
|
%
|
|
|
|
|
|
$
|
4,247
|
|
|
$
|
3,855
|
|
|
|
10.2
|
%
|
Employee benefits
|
|
|
281
|
|
|
|
280
|
|
|
|
.4
|
|
|
|
|
|
|
|
882
|
|
|
|
858
|
|
|
|
2.8
|
|
Net occupancy and equipment
|
|
|
258
|
|
|
|
250
|
|
|
|
3.2
|
|
|
|
|
|
|
|
760
|
|
|
|
741
|
|
|
|
2.6
|
|
Professional services
|
|
|
104
|
|
|
|
127
|
|
|
|
(18.1
|
)
|
|
|
|
|
|
|
305
|
|
|
|
346
|
|
|
|
(11.8
|
)
|
Marketing and business development
|
|
|
92
|
|
|
|
102
|
|
|
|
(9.8
|
)
|
|
|
|
|
|
|
291
|
|
|
|
328
|
|
|
|
(11.3
|
)
|
Technology and communications
|
|
|
246
|
|
|
|
243
|
|
|
|
1.2
|
|
|
|
|
|
|
|
723
|
|
|
|
717
|
|
|
|
.8
|
|
Postage, printing and supplies
|
|
|
82
|
|
|
|
80
|
|
|
|
2.5
|
|
|
|
|
|
|
|
244
|
|
|
|
236
|
|
|
|
3.4
|
|
Other intangibles
|
|
|
44
|
|
|
|
45
|
|
|
|
(2.2
|
)
|
|
|
|
|
|
|
131
|
|
|
|
134
|
|
|
|
(2.2
|
)
|
Other
|
|
|
492
|
|
|
|
475
|
|
|
|
3.6
|
|
|
|
|
|
|
|
1,423
|
|
|
|
1,457
|
|
|
|
(2.3
|
)
|
Total noninterest expense
|
|
$
|
3,039
|
|
|
$
|
2,931
|
|
|
|
3.7
|
%
|
|
|
|
|
|
$
|
9,006
|
|
|
$
|
8,672
|
|
|
|
3.9
|
%
|
Efficiency ratio (a)
|
|
|
54.3
|
%
|
|
|
54.5
|
%
|
|
|
|
|
|
|
|
|
|
|
55.0
|
%
|
|
|
54.7
|
%
|
|
|
|
|
(a)
|
See
Non-GAAP
Financial Measures beginning on page 31.
|
Income Tax Expense
The provision
for income taxes was $589 million (an effective rate of 27.3 percent) for the third quarter and $1.6 billion (an effective rate of 26.4 percent) for the first nine months of 2017, compared with $566 million (an effective rate of
27.2 percent) and $1.6 billion (an effective rate of 26.6 percent) for the same periods of 2016. For further information on income taxes, refer to Note 11 of the Notes to Consolidated Financial Statements.
BALANCE SHEET ANALYSIS
Loans
The Companys loan portfolio was $278.7 billion at September 30, 2017, compared with $273.2 billion at
December 31, 2016, an increase of $5.5 billion (2.0 percent). The increase was driven primarily by higher commercial loans, residential mortgages and other retail loans, partially offset by lower commercial real estate loans, credit
card loans and covered loans.
Commercial loans increased $3.5 billion (3.8 percent) at September 30, 2017,
compared with December 31, 2016, reflecting higher demand from new and existing customers.
Residential mortgages held in the loan
portfolio increased $2.0 billion (3.6 percent) at September 30, 2017, compared with December 31, 2016, as origination activity more than offset the effect of customers paying down balances in the first nine months of 2017.
Residential mortgages originated and placed in the Companys loan portfolio include well-secured jumbo mortgages and branch-originated first lien home equity loans to borrowers with high credit quality.
Other retail loans increased $3.0 billion (5.6 percent) at September 30, 2017, compared with December 31, 2016, primarily
driven by higher installment and retail leasing loans, partially offset by decreases in student loans, home equity loans and revolving credit balances.
Commercial real estate loans decreased $1.7 billion (3.9 percent) at September 30, 2017, compared with December 31, 2016,
primarily the result of disciplined underwriting of construction and development loans and customers paying down balances.
Credit card
loans decreased $826 million (3.8 percent) at September 30, 2017, compared with December 31, 2016, primarily the result of customers paying down balances.
The Company generally retains portfolio loans through maturity; however, the Companys intent may change over time based upon various
factors such as ongoing asset/liability management activities, assessment of product profitability, credit risk, liquidity needs, and capital implications. If the Companys intent or ability to hold an existing portfolio loan changes, it is
transferred to loans held for sale.
Loans Held for Sale
Loans held for sale, consisting primarily of residential mortgages to be sold in the secondary market, were $3.8 billion at September 30, 2017, compared with $4.8 billion at
December 31, 2016. The decrease in loans held for sale was principally due to a lower level of mortgage loan closings in the third quarter of 2017. Almost all of the residential mortgage loans the Company originates or purchases for sale follow
guidelines that allow the loans to be sold into existing, highly liquid secondary markets; in particular in government agency transactions and to government-sponsored enterprises (GSEs).
Investment Securities
Investment
securities totaled $111.8 billion at September 30, 2017, compared with $109.3 billion at December 31, 2016. The $2.5 billion (2.3 percent) increase was primarily due to $2.2 billion of net investment purchases and a
$432 million favorable change in net unrealized gains (losses) on
available-for-sale
investment securities.
|
|
|
Table 4
|
|
Investment Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-Sale
|
|
|
|
|
|
Held-to-Maturity
|
|
At September 30, 2017
(Dollars in Millions)
|
|
Amortized
Cost
|
|
|
Fair Value
|
|
|
Weighted-
Average
Maturity in
Years
|
|
|
Weighted-
Average
Yield (e)
|
|
|
|
|
|
Amortized
Cost
|
|
|
Fair Value
|
|
|
Weighted-
Average
Maturity in
Years
|
|
|
Weighted-
Average
Yield (e)
|
|
U.S. Treasury and Agencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturing in one year or less
|
|
$
|
5,188
|
|
|
$
|
5,177
|
|
|
|
.5
|
|
|
|
.82
|
%
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
%
|
Maturing after one year through five years
|
|
|
13,124
|
|
|
|
13,066
|
|
|
|
3.1
|
|
|
|
1.51
|
|
|
|
|
|
|
|
1,546
|
|
|
|
1,548
|
|
|
|
3.5
|
|
|
|
1.80
|
|
Maturing after five years through ten years
|
|
|
3,851
|
|
|
|
3,825
|
|
|
|
5.5
|
|
|
|
1.86
|
|
|
|
|
|
|
|
3,647
|
|
|
|
3,590
|
|
|
|
6.2
|
|
|
|
1.81
|
|
Maturing after ten years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
22,163
|
|
|
$
|
22,068
|
|
|
|
2.9
|
|
|
|
1.41
|
%
|
|
|
|
|
|
$
|
5,193
|
|
|
$
|
5,138
|
|
|
|
5.4
|
|
|
|
1.81
|
%
|
Mortgage-Backed Securities (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturing in one year or less
|
|
$
|
99
|
|
|
$
|
101
|
|
|
|
.6
|
|
|
|
4.27
|
%
|
|
|
|
|
|
$
|
129
|
|
|
$
|
129
|
|
|
|
.5
|
|
|
|
3.08
|
%
|
Maturing after one year through five years
|
|
|
17,946
|
|
|
|
17,889
|
|
|
|
4.4
|
|
|
|
2.03
|
|
|
|
|
|
|
|
23,627
|
|
|
|
23,525
|
|
|
|
3.8
|
|
|
|
2.07
|
|
Maturing after five years through ten years
|
|
|
19,291
|
|
|
|
19,149
|
|
|
|
5.9
|
|
|
|
2.11
|
|
|
|
|
|
|
|
14,745
|
|
|
|
14,635
|
|
|
|
5.7
|
|
|
|
2.21
|
|
Maturing after ten years
|
|
|
2,416
|
|
|
|
2,422
|
|
|
|
12.9
|
|
|
|
2.26
|
|
|
|
|
|
|
|
287
|
|
|
|
288
|
|
|
|
12.4
|
|
|
|
2.21
|
|
Total
|
|
$
|
39,752
|
|
|
$
|
39,561
|
|
|
|
5.6
|
|
|
|
2.09
|
%
|
|
|
|
|
|
$
|
38,788
|
|
|
$
|
38,577
|
|
|
|
4.6
|
|
|
|
2.13
|
%
|
Asset-Backed Securities (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturing in one year or less
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
%
|
|
|
|
|
|
$
|
|
|
|
$
|
1
|
|
|
|
.5
|
|
|
|
1.88
|
%
|
Maturing after one year through five years
|
|
|
333
|
|
|
|
338
|
|
|
|
3.8
|
|
|
|
.95
|
|
|
|
|
|
|
|
5
|
|
|
|
6
|
|
|
|
3.2
|
|
|
|
1.91
|
|
Maturing after five years through ten years
|
|
|
85
|
|
|
|
87
|
|
|
|
5.3
|
|
|
|
2.92
|
|
|
|
|
|
|
|
2
|
|
|
|
2
|
|
|
|
6.1
|
|
|
|
2.02
|
|
Maturing after ten years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
16.6
|
|
|
|
1.85
|
|
Total
|
|
$
|
418
|
|
|
$
|
425
|
|
|
|
4.1
|
|
|
|
1.35
|
%
|
|
|
|
|
|
$
|
7
|
|
|
$
|
12
|
|
|
|
3.9
|
|
|
|
1.94
|
%
|
Obligations of State and Political
Subdivisions (b) (c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturing in one year or less
|
|
$
|
367
|
|
|
$
|
369
|
|
|
|
.2
|
|
|
|
7.37
|
%
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
%
|
Maturing after one year through five years
|
|
|
580
|
|
|
|
608
|
|
|
|
3.2
|
|
|
|
6.04
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
3.3
|
|
|
|
8.15
|
|
Maturing after five years through ten years
|
|
|
3,519
|
|
|
|
3,548
|
|
|
|
8.7
|
|
|
|
5.41
|
|
|
|
|
|
|
|
5
|
|
|
|
6
|
|
|
|
8.3
|
|
|
|
2.77
|
|
Maturing after ten years
|
|
|
1,215
|
|
|
|
1,156
|
|
|
|
19.9
|
|
|
|
4.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,681
|
|
|
$
|
5,681
|
|
|
|
10.0
|
|
|
|
5.50
|
%
|
|
|
|
|
|
$
|
6
|
|
|
$
|
7
|
|
|
|
7.8
|
|
|
|
3.32
|
%
|
Other Debt Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturing in one year or less
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
%
|
|
|
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
|
|
|
|
|
1.68
|
%
|
Maturing after one year through five years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
22
|
|
|
|
2.8
|
|
|
|
2.09
|
|
Maturing after five years through ten years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturing after ten years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
%
|
|
|
|
|
|
$
|
24
|
|
|
$
|
24
|
|
|
|
2.6
|
|
|
|
2.05
|
%
|
Other Investments
|
|
$
|
27
|
|
|
$
|
37
|
|
|
|
|
|
|
|
.01
|
%
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
%
|
Total investment securities (d)
|
|
$
|
68,041
|
|
|
$
|
67,772
|
|
|
|
5.1
|
|
|
|
2.15
|
%
|
|
|
|
|
|
$
|
44,018
|
|
|
$
|
43,758
|
|
|
|
4.7
|
|
|
|
2.09
|
%
|
(a)
|
Information related to asset and mortgage-backed securities included above is presented based upon weighted-average maturities anticipating future prepayments.
|
(b)
|
Information related to obligations of state and political subdivisions is presented based upon yield to first optional call date if the security is purchased at a premium, yield to maturity if purchased at par or a
discount.
|
(c)
|
Maturity calculations for obligations of state and political subdivisions are based on the first optional call date for securities with a fair value above par and contractual maturity for securities with a fair value
equal to or below par.
|
(d)
|
The weighted-average maturity of the
available-for-sale
investment securities was 5.1 years at December 31, 2016, with a
corresponding weighted-average yield of 2.06 percent. The weighted-average maturity of the
held-to-maturity
investment securities was 4.6 years at December 31,
2016, with a corresponding weighted-average yield of 1.93 percent.
|
(e)
|
Weighted-average yields for obligations of state and political subdivisions are presented on a fully-taxable equivalent basis under a federal income tax rate of 35 percent. Yields on
available-for-sale
and
held-to-maturity
investment securities are computed based on amortized
cost balances, excluding any premiums or discounts recorded related to the transfer of investment securities at fair value from
available-for-sale
to
held-to-maturity.
Weighted-average yield and maturity calculations exclude equity securities that have no stated yield or maturity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
|
|
December 31, 2016
|
|
(Dollars in Millions)
|
|
Amortized
Cost
|
|
|
Percent
of Total
|
|
|
|
|
|
Amortized
Cost
|
|
|
Percent
of Total
|
|
U.S. Treasury and agencies
|
|
$
|
27,356
|
|
|
|
24.4
|
%
|
|
|
|
|
|
$
|
22,560
|
|
|
|
20.5
|
%
|
Mortgage-backed securities
|
|
|
78,540
|
|
|
|
70.1
|
|
|
|
|
|
|
|
81,698
|
|
|
|
74.3
|
|
Asset-backed securities
|
|
|
425
|
|
|
|
.4
|
|
|
|
|
|
|
|
483
|
|
|
|
.4
|
|
Obligations of state and political subdivisions
|
|
|
5,687
|
|
|
|
5.1
|
|
|
|
|
|
|
|
5,173
|
|
|
|
4.7
|
|
Other debt securities and investments
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
62
|
|
|
|
.1
|
|
Total investment securities
|
|
$
|
112,059
|
|
|
|
100.0
|
%
|
|
|
|
|
|
$
|
109,976
|
|
|
|
100.0
|
%
|
The Companys
available-for-sale
securities are carried at fair value with changes in fair value reflected in other comprehensive income (loss) unless a security is deemed to be
other-than-temporarily impaired. At September 30, 2017, the Companys net unrealized losses on
available-for-sale
securities were $269 million, compared
with $701 million at December 31, 2016. The favorable change in net unrealized gains (losses) was primarily due to increases in the fair value of U.S. Treasury, U.S. government mortgage-backed and state and political securities as a result
of changes in interest rates. Gross unrealized losses on
available-for-sale
securities totaled $596 million at September 30, 2017, compared with
$1.0 billion at December 31, 2016. At September 30, 2017, the Company had no plans to sell securities with unrealized losses, and believes it is more likely than not that it would not be required to sell such securities before
recovery of their amortized cost.
Refer to Notes 3 and 14 in the Notes to Consolidated Financial Statements for further information
on investment securities.
Deposits
Total deposits were $342.6 billion at
September 30, 2017, compared with $334.6 billion at December 31, 2016, the result of increases in total savings deposits and time deposits, partially offset by a decrease in noninterest-bearing deposits. Interest checking balances
increased $3.7 billion (5.6 percent) primarily due to higher Wholesale Banking and Commercial Real Estate, and Consumer and Small Business Banking balances. Savings account balances increased $1.9 billion (4.6 percent), primarily
due to higher Consumer and Small Business Banking balances. Money market deposit balances decreased $2.1 billion (1.9 percent) at September 30, 2017, compared with December 31, 2016, primarily due to lower Wholesale Banking and
Commercial Real Estate balances, partially offset by higher Wealth Management and Securities Services balances. Time deposits increased $8.4 billion (27.5 percent) at September 30, 2017, compared with December 31, 2016, driven by
an increase in those deposits managed as an alternative to other funding sources such as wholesale borrowing, based largely on relative pricing and liquidity characteristics, partially offset by lower Consumer and Small Business Banking balances
resulting from maturities. Noninterest-bearing deposits decreased $3.9 billion (4.6 percent) at September 30, 2017, compared with December 31, 2016, primarily due to lower Wholesale Banking and Commercial Real Estate, and
Wealth Management and Securities Services balances, partially offset by higher Consumer and Small Business Banking balances.
Borrowings
The Company utilizes both short-term and long-term borrowings as part of its asset/liability management and funding strategies. Short-term borrowings, which include federal funds
purchased, commercial paper, repurchase agreements, borrowings secured by high-grade assets and other short-term borrowings, were $15.9 billion at September 30, 2017, compared with $14.0 billion at December 31, 2016. The
$1.9 billion (13.6 percent) increase in short-term borrowings was primarily due to higher other short-term borrowings balances, partially offset by lower federal funds purchased balances. Long-term debt was $34.5 billion at
September 30, 2017, compared with $33.3 billion at December 31, 2016. The $1.2 billion (3.6 percent) increase was primarily due to issuances of $3.9 billion of medium-term notes and $3.4 billion of bank notes,
partially offset by $2.8 billion of bank note repayments, $1.3 billion of medium-term note maturities and a $2.1 billion decrease in Federal Home Loan Bank (FHLB) advances. Refer to the Liquidity Risk
Management section for discussion of liquidity management of the Company.
CORPORATE RISK PROFILE
Overview
Managing risks is an essential part of successfully operating a financial services company. The Companys Board of Directors has approved a risk management framework which establishes governance and risk management requirements for all
risk-taking activities. This framework includes Company and business line risk appetite statements which set boundaries for the types and amount of risk that may be undertaken in pursuing business objectives and initiatives. The Board of Directors,
primarily through its Risk Management Committee, oversees performance relative to the risk management framework, risk appetite statements, and other policy requirements.
The Executive Risk Committee (ERC), which is chaired by the Chief Risk Officer and includes the Chief Executive Officer and other
members of the executive management team, oversees execution against the risk management framework and risk appetite statements. The ERC focuses on current and emerging risks, including strategic and reputational risks, by directing timely and
comprehensive actions. Senior operating committees have also been established, each responsible for overseeing a specified category of risk.
The Companys most prominent risk exposures are credit, interest rate, market, liquidity, operational, compliance, strategic, and
reputational. Credit risk is the risk of not collecting the interest and/or the principal balance of a loan, investment or derivative contract when it is due. Interest rate risk is the potential reduction of net interest income or market valuations
as a result of changes in interest rates. Market risk arises from fluctuations in interest rates, foreign exchange rates, and security prices that may result in changes in the values of financial instruments, such as trading and
available-for-sale
securities, mortgage loans held for sale (MLHFS), mortgage servicing rights (MSRs) and derivatives that are accounted for on a fair
value basis. Liquidity risk is the possible inability to fund obligations or new business at a reasonable cost and in a timely manner. Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems, or
from external events, including the risk of loss resulting from breaches in data security. Operational risk can also include failures by third parties with which the Company does business. Compliance risk is the risk of loss arising from violations
of, or nonconformance with, laws, rules, regulations, prescribed practices, internal policies and procedures, or ethical standards, potentially exposing the Company to fines, civil money penalties, payment of damages and the voiding of contracts.
Compliance risk also arises in situations where the laws or rules governing certain Company products or activities of the Companys customers may be ambiguous or untested. Strategic risk is the risk to earnings or capital arising from adverse
business decisions or improper implementation of those decisions. Reputational risk is the risk to current or anticipated earnings, capital, or franchise or enterprise value arising from negative public opinion. This risk may impair the
Companys competitiveness by affecting its ability to establish new relationships, offer new services or continue serving existing relationships. In addition to the risks identified above, other risk factors exist that may impact the Company.
Refer to Risk Factors in the Companys Annual Report on Form
10-K
for the year ended December 31, 2016, for a detailed discussion of these factors.
The Companys Board and management-level governance committees are supported by a three lines of defense model for
establishing effective checks and balances. The first line of defense, the business lines, manages risks in conformity with established limits and policy requirements. In turn, business line leaders and their risk officers establish programs to
ensure conformity with these limits and policy requirements. The second line of defense, which includes the Chief Risk Officers organization as well as policy and oversight activities of corporate support functions, translates risk appetite
and strategy into actionable risk limits and policies. The second line of defense monitors first line of defense conformity with limits and policies, and provides reporting and escalation of emerging risks and other concerns to senior management and
the Risk Management Committee of the Board of Directors. The third line of defense, internal audit, is responsible for providing the Audit Committee of the Board of Directors and senior management with independent assessment and assurance regarding
the effectiveness of the Companys governance, risk management and control processes.
Management regularly provides reports to the
Risk Management Committee of the Board of Directors. The Risk Management Committee discusses with management the Companys risk management performance, and provides a summary of key risks to the entire Board of Directors, covering the status of
existing matters, areas of potential future concern and specific information on certain types of loss events. The Risk Management Committee considers quarterly reports by management assessing the Companys performance relative to the risk
appetite statements and the associated risk limits, including:
|
|
Qualitative considerations, such as the macroeconomic environment, regulatory and compliance changes, litigation developments, and technology and cybersecurity;
|
|
|
Capital ratios and projections, including regulatory measures and stressed scenarios;
|
|
|
Credit measures, including adversely rated and nonperforming loans, leveraged transactions, credit concentrations and lending limits;
|
|
|
Interest rate and market risk, including market value and net income simulation, and trading-related Value at Risk (VaR);
|
|
|
Liquidity risk, including funding projections under various stressed scenarios;
|
|
|
Operational and compliance risk, including losses stemming from events such as fraud, processing errors, control breaches, breaches in data security or adverse business decisions, as well as reporting on technology
performance, and various legal and regulatory compliance measures; and
|
|
|
Reputational and strategic risk considerations, impacts and responses.
|
Credit Risk Management
The Companys strategy for credit risk management includes well-defined,
centralized credit policies, uniform underwriting criteria, and ongoing risk monitoring and review processes for all commercial and consumer credit exposures. In evaluating its credit risk, the Company considers changes, if any, in underwriting
activities, the loan portfolio composition (including product mix and geographic, industry or customer-specific concentrations), collateral values, trends in loan performance and macroeconomic factors, such as changes in unemployment rates, gross
domestic product and consumer bankruptcy filings. The Risk Management Committee oversees the Companys credit risk management process.
In addition, credit quality ratings as defined by the Company are an important part of the Companys overall credit risk management and
evaluation of its allowance for credit losses. Loans with a pass rating represent those loans not classified on the Companys rating scale for problem credits, as minimal risk has been identified. Loans with a special mention or classified
rating, including loans that are 90 days or more past due and still accruing, nonaccrual loans, those loans considered troubled debt restructurings (TDRs), and loans in a junior lien position that are current but are behind a modified or
delinquent loan in a first lien position, encompass all loans held by the Company that it considers to have a potential or well-defined weakness that may put full collection of contractual cash flows at risk. The Companys internal credit
quality ratings for consumer loans are primarily based on delinquency and nonperforming status, except for a limited population of larger loans within those portfolios that are individually evaluated. For this limited population, the determination
of the internal credit quality rating may also consider collateral value and customer cash flows. Refer to Note 4 in the Notes to Consolidated Financial Statements for further discussion of the Companys loan portfolios including internal
credit quality ratings. In addition, refer to Managements Discussion and Analysis Credit Risk Management in the Companys Annual Report on
Form 10-K
for the year ended
December 31, 2016, for a more detailed discussion on credit risk management processes.
The Company manages its credit risk, in part,
through diversification of its loan portfolio and limit setting by product type criteria and concentrations. As part of its normal business activities, the Company offers a broad array of lending products. The Company categorizes its loan portfolio
into three segments, which is the level at which it develops and documents a systematic methodology to determine the allowance for credit losses. The Companys three loan portfolio segments are commercial lending, consumer lending and covered
loans.
The commercial lending segment includes loans and leases made to small business, middle market, large corporate, commercial real
estate, financial institution,
non-profit
and public sector customers. Key risk characteristics relevant to commercial lending segment loans include the industry and geography of the borrowers business,
purpose of the loan, repayment source, borrowers debt capacity and financial flexibility, loan covenants, and nature of pledged collateral, if any. These risk characteristics, among others, are considered in determining estimates about the
likelihood of default by the borrowers and the severity of loss in the event of default. The Company considers these risk characteristics in assigning internal risk ratings to, or forecasting losses on, these loans, which are the significant factors
in determining the allowance for credit losses for loans in the commercial lending segment.
Included within the commercial lending
segment are energy loans, which represented 0.9 percent of the Companys total loans outstanding at September 30, 2017. The effects of low energy prices beginning in late 2014, have resulted in higher than historical levels of
criticized commitments and nonperforming assets at September 30, 2017 and December 31, 2016.
The following table provides a summary of the
Companys energy loans:
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
Loans outstanding
|
|
$
|
2,498
|
|
|
$
|
2,642
|
|
Total commitments
|
|
|
10,262
|
|
|
|
10,955
|
|
Total criticized commitments
|
|
|
1,282
|
|
|
|
2,847
|
|
Nonperforming assets
|
|
|
120
|
|
|
|
257
|
|
Allowance for credit losses as a percentage of loans
outstanding
|
|
|
5.0
|
%
|
|
|
7.8
|
%
|
The consumer lending segment represents loans and leases made to consumer customers,
including residential mortgages, credit card loans, and other retail loans such as revolving consumer lines, auto loans and leases, home equity loans and lines, and student loans, a
run-off
portfolio. Home
equity or second mortgage loans are junior lien
closed-end
accounts fully disbursed at origination. These loans typically are fixed rate loans, secured by residential real estate, with a
10-
or
15-year
fixed payment amortization schedule. Home equity lines are revolving accounts giving the borrower the ability to draw and repay balances repeatedly, up to a
maximum commitment, and are secured by residential real estate. These include accounts in either a first or junior lien position. Typical terms on home equity lines in the portfolio are variable rates benchmarked to the prime rate, with a
10-
or
15-year
draw period during which a minimum payment is equivalent to the monthly interest, followed by a
20-
or
10-year
amortization period, respectively. At September 30, 2017, substantially all of the Companys home equity lines were in the draw period. Approximately $1.3 billion, or 9 percent, of the
outstanding home equity line balances at September 30, 2017, will enter the amortization period within the next 36 months. Key risk characteristics relevant to consumer lending segment loans primarily relate to the borrowers capacity and
willingness to repay and include unemployment rates and other economic factors, customer payment history and credit scores, and in some cases, updated
loan-to-value
(LTV) information reflecting current market conditions on real estate based loans. These risk characteristics, among others, are reflected in forecasts of delinquency levels, bankruptcies and losses which are the primary factors in
determining the allowance for credit losses for the consumer lending segment.
The covered loan segment represents loans acquired in
FDIC-assisted transactions that are covered by loss sharing agreements with the FDIC that greatly reduce the risk of future credit losses to the Company. Key risk characteristics for covered segment loans are consistent with the segment they would
otherwise be included in had the loss share coverage not been in place, but consider the indemnification provided by the FDIC.
The
Company further disaggregates its loan portfolio segments into various classes based on their underlying risk characteristics. The two classes within the commercial lending segment are commercial loans and commercial real estate loans. The three
classes within the consumer lending segment are residential mortgages, credit card loans and other retail loans. The covered loan segment consists of only one class.
The Companys consumer lending segment utilizes several distinct business processes and channels to originate consumer credit, including
traditional branch lending, mobile and
on-line
banking, indirect lending, portfolio acquisitions, correspondent banks and loan brokers. Each distinct underwriting and origination activity manages unique credit
risk characteristics and prices its loan production commensurate with the differing risk profiles.
Residential mortgage originations are
generally limited to prime borrowers and are performed through the Companys branches, loan production offices, mobile and
on-line
services and a wholesale network of originators. The Company may retain
residential mortgage loans it originates on its balance sheet or sell the loans into the secondary market while retaining the servicing rights and customer relationships. Utilizing the secondary markets enables the Company to effectively reduce its
credit and other asset/liability risks. For residential mortgages that are retained in the Companys portfolio and for home equity and second mortgages, credit risk is also diversified by geography and managed by adherence to LTV and borrower
credit criteria during the underwriting process.
The Company estimates updated LTV information on its outstanding residential mortgages
quarterly, based on a method that combines automated valuation model updates and relevant home price indices. LTV is the ratio of the loans outstanding principal balance to the current estimate of property value. For home equity and second
mortgages, combined
loan-to-value
(CLTV) is the combination of the first mortgage original principal balance and the second lien outstanding principal
balance, relative to the current estimate of property value. Certain loans do not have a LTV or CLTV, primarily due to lack of availability of relevant automated valuation model and/or home price indices values, or lack of necessary valuation data
on acquired loans.
The following tables provide summary information of residential mortgages and home equity and second
mortgages by LTV and borrower type at September 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Mortgages
(Dollars in Millions)
|
|
Interest
Only
|
|
|
Amortizing
|
|
|
Total
|
|
|
Percent
of Total
|
|
Loan-to-Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than or equal to 80%
|
|
$
|
1,885
|
|
|
$
|
49,598
|
|
|
$
|
51,483
|
|
|
|
86.8
|
%
|
Over 80% through 90%
|
|
|
7
|
|
|
|
3,254
|
|
|
|
3,261
|
|
|
|
5.5
|
|
Over 90% through 100%
|
|
|
11
|
|
|
|
560
|
|
|
|
571
|
|
|
|
1.0
|
|
Over 100%
|
|
|
5
|
|
|
|
537
|
|
|
|
542
|
|
|
|
.9
|
|
No LTV available
|
|
|
6
|
|
|
|
38
|
|
|
|
44
|
|
|
|
.1
|
|
Loans purchased from GNMA mortgage pools (a)
|
|
|
|
|
|
|
3,416
|
|
|
|
3,416
|
|
|
|
5.7
|
|
Total
|
|
$
|
1,914
|
|
|
$
|
57,403
|
|
|
$
|
59,317
|
|
|
|
100.0
|
%
|
Borrower Type
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime borrowers
|
|
$
|
1,914
|
|
|
$
|
52,753
|
|
|
$
|
54,667
|
|
|
|
92.2
|
%
|
Sub-prime
borrowers
|
|
|
|
|
|
|
845
|
|
|
|
845
|
|
|
|
1.4
|
|
Other borrowers
|
|
|
|
|
|
|
389
|
|
|
|
389
|
|
|
|
.7
|
|
Loans purchased from GNMA mortgage pools (a)
|
|
|
|
|
|
|
3,416
|
|
|
|
3,416
|
|
|
|
5.7
|
|
Total
|
|
$
|
1,914
|
|
|
$
|
57,403
|
|
|
$
|
59,317
|
|
|
|
100.0
|
%
|
(a)
|
Represents loans purchased from Government National Mortgage Association (GNMA) mortgage pools whose payments are primarily insured by the Federal Housing Administration or guaranteed by the United States
Department of Veterans Affairs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity and Second Mortgages
(Dollars in Millions)
|
|
Lines
|
|
|
Loans
|
|
|
Total
|
|
|
Percent
of Total
|
|
Loan-to-Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than or equal to 80%
|
|
$
|
11,972
|
|
|
$
|
605
|
|
|
$
|
12,577
|
|
|
|
77.1
|
%
|
Over 80% through 90%
|
|
|
2,129
|
|
|
|
711
|
|
|
|
2,840
|
|
|
|
17.4
|
|
Over 90% through 100%
|
|
|
390
|
|
|
|
117
|
|
|
|
507
|
|
|
|
3.1
|
|
Over 100%
|
|
|
261
|
|
|
|
25
|
|
|
|
286
|
|
|
|
1.8
|
|
No LTV/CLTV available
|
|
|
85
|
|
|
|
13
|
|
|
|
98
|
|
|
|
.6
|
|
Total
|
|
$
|
14,837
|
|
|
$
|
1,471
|
|
|
$
|
16,308
|
|
|
|
100.0
|
%
|
Borrower Type
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime borrowers
|
|
$
|
14,548
|
|
|
$
|
1,387
|
|
|
$
|
15,935
|
|
|
|
97.7
|
%
|
Sub-prime
borrowers
|
|
|
53
|
|
|
|
75
|
|
|
|
128
|
|
|
|
.8
|
|
Other borrowers
|
|
|
236
|
|
|
|
9
|
|
|
|
245
|
|
|
|
1.5
|
|
Total
|
|
$
|
14,837
|
|
|
$
|
1,471
|
|
|
$
|
16,308
|
|
|
|
100.0
|
%
|
The total amount of consumer lending segment residential mortgage, home equity and second mortgage loans to
customers that may be defined as
sub-prime
borrowers represented only 0.2 percent of the Companys total assets at September 30, 2017 and December 31, 2016. The Company considers
sub-prime
loans to be loans made to borrowers with a risk of default significantly higher than those approved for prime lending programs, as reflected in credit scores obtained from independent agencies at loan
origination, in addition to other credit underwriting criteria.
Sub-prime
portfolios include only loans originated according to the Companys underwriting programs specifically designed to serve customers
with weakened credit histories. The
sub-prime
designation indicators have been and will continue to be subject to
re-evaluation
over time as borrower characteristics,
payment performance and economic conditions change. The
sub-prime
loans originated during periods from June 2009 and after are with borrowers who met the Companys program guidelines and have a credit
score that generally is at or below a threshold of 620 to 650 depending on the program.
Sub-prime
loans originated during periods prior to June 2009 were based upon program level guidelines without regard to
credit score.
Home equity and second mortgages were $16.3 billion at September 30, 2017, compared with $16.4 billion at
December 31, 2016, and included $4.8 billion of home equity lines in a first lien position and $11.5 billion of home equity and second mortgage loans and lines in a junior lien position. Loans and lines in a junior lien position at
September 30, 2017, included approximately $4.9 billion of loans and lines for which the Company also serviced the related first lien loan, and approximately $6.6 billion where the Company did not service the related first lien loan.
The Company was able to determine the status of the related first liens using information the Company has as the servicer of the first lien or information reported on customer credit bureau files. The Company also evaluates other indicators of
credit risk for these junior lien loans and lines including delinquency, estimated average CLTV ratios and updated weighted-average credit scores in making its assessment of credit risk, related loss estimates and determining the allowance for
credit losses.
The following table provides a summary of delinquency statistics and other credit quality indicators for the Companys junior lien
positions at September 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Junior Liens Behind
|
|
|
|
|
(Dollars in Millions)
|
|
Company Owned
or Serviced
First Lien
|
|
|
Third Party
First Lien
|
|
|
Total
|
|
Total
|
|
$
|
4,882
|
|
|
$
|
6,653
|
|
|
$
|
11,535
|
|
Percent 30-89 days past due
|
|
|
.27
|
%
|
|
|
.44
|
%
|
|
|
.37
|
%
|
Percent 90 days or more past due
|
|
|
.06
|
%
|
|
|
.07
|
%
|
|
|
.06
|
%
|
Weighted-average CLTV
|
|
|
72
|
%
|
|
|
68
|
%
|
|
|
69
|
%
|
Weighted-average credit score
|
|
|
777
|
|
|
|
772
|
|
|
|
774
|
|
See the Analysis and Determination of the Allowance for Credit Losses section for additional
information on how the Company determines the allowance for credit losses for loans in a junior lien position.
|
|
|
Table 5
|
|
Delinquent Loan Ratios as a Percent of Ending Loan Balances
|
|
|
|
|
|
|
|
|
|
90 days or more past due
excluding
nonperforming loans
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
Commercial
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
.06
|
%
|
|
|
.06
|
%
|
Lease financing
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
.05
|
|
|
|
.06
|
|
Commercial Real Estate
|
|
|
|
|
|
|
|
|
Commercial mortgages
|
|
|
|
|
|
|
.01
|
|
Construction and development
|
|
|
.03
|
|
|
|
.05
|
|
Total commercial real estate
|
|
|
.01
|
|
|
|
.02
|
|
Residential Mortgages (a)
|
|
|
.18
|
|
|
|
.27
|
|
Credit Card
|
|
|
1.20
|
|
|
|
1.16
|
|
Other Retail
|
|
|
|
|
|
|
|
|
Retail leasing
|
|
|
.03
|
|
|
|
.02
|
|
Home equity and second mortgages
|
|
|
.24
|
|
|
|
.25
|
|
Other
|
|
|
.13
|
|
|
|
.13
|
|
Total other retail (b)
|
|
|
.15
|
|
|
|
.15
|
|
Total loans, excluding covered loans
|
|
|
.18
|
|
|
|
.20
|
|
Covered Loans
|
|
|
4.66
|
|
|
|
5.53
|
|
Total loans
|
|
|
.23
|
%
|
|
|
.28
|
%
|
|
|
|
90 days or more past due
including
nonperforming loans
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
Commercial
|
|
|
.33
|
%
|
|
|
.57
|
%
|
Commercial real estate
|
|
|
.30
|
|
|
|
.31
|
|
Residential mortgages (a)
|
|
|
.98
|
|
|
|
1.31
|
|
Credit card
|
|
|
1.20
|
|
|
|
1.18
|
|
Other retail (b)
|
|
|
.43
|
|
|
|
.45
|
|
Total loans, excluding covered loans
|
|
|
.55
|
|
|
|
.71
|
|
Covered loans
|
|
|
4.84
|
|
|
|
5.68
|
|
Total loans
|
|
|
.60
|
%
|
|
|
.78
|
%
|
(a)
|
Delinquent loan ratios exclude $1.8 billion at September 30, 2017, and $2.5 billion at December 31, 2016, of loans purchased from GNMA mortgage pools whose repayments are primarily insured by the Federal Housing
Administration or guaranteed by the United States Department of Veterans Affairs. Including these loans, the ratio of residential mortgages 90 days or more past due including all nonperforming loans was 4.09 percent at September 30, 2017, and 5.73
percent at December 31, 2016.
|
(b)
|
Delinquent loan ratios exclude student loans that are guaranteed by the federal government. Including these loans, the ratio of total other retail loans 90 days or more past due including all nonperforming loans was
.54 percent at September 30, 2017, and .63 percent at December 31, 2016.
|
Loan Delinquencies
Trends in
delinquency ratios are an indicator, among other considerations, of credit risk within the Companys loan portfolios. The Company measures delinquencies, both including and excluding nonperforming loans, to enable comparability with other
companies. Accruing loans 90 days or more past due totaled $649 million ($497 million excluding covered loans) at September 30, 2017, compared with $764 million ($552 million excluding covered loans) at December 31,
2016. These balances exclude loans purchased from Government National Mortgage Association (GNMA) mortgage pools whose repayments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department
of Veterans Affairs, as well as student loans guaranteed by the federal government. Accruing loans 90 days or more past due are not included in nonperforming assets and continue to accrue interest because they are adequately secured by collateral,
are in the process of collection and are reasonably expected to result in repayment or restoration to current status, or are managed in homogeneous portfolios with specified
charge-off
timeframes adhering to
regulatory guidelines. The ratio of accruing loans 90 days or more past due to total loans was 0.23 percent (0.18 percent excluding covered loans) at September 30, 2017, compared with 0.28 percent (0.20 percent excluding
covered loans) at December 31, 2016.
The following table provides summary delinquency information for residential mortgages, credit card and
other retail loans included in the consumer lending segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
|
|
|
As a Percent of Ending
Loan Balances
|
|
(Dollars in Millions)
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
|
|
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
Residential Mortgages (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89
days
|
|
$
|
155
|
|
|
$
|
151
|
|
|
|
|
|
|
|
.26
|
%
|
|
|
.26
|
%
|
90 days or more
|
|
|
107
|
|
|
|
156
|
|
|
|
|
|
|
|
.18
|
|
|
|
.27
|
|
Nonperforming
|
|
|
474
|
|
|
|
595
|
|
|
|
|
|
|
|
.80
|
|
|
|
1.04
|
|
Total
|
|
$
|
736
|
|
|
$
|
902
|
|
|
|
|
|
|
|
1.24
|
%
|
|
|
1.57
|
%
|
Credit Card
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89
days
|
|
$
|
296
|
|
|
$
|
284
|
|
|
|
|
|
|
|
1.42
|
%
|
|
|
1.31
|
%
|
90 days or more
|
|
|
251
|
|
|
|
253
|
|
|
|
|
|
|
|
1.20
|
|
|
|
1.16
|
|
Nonperforming
|
|
|
1
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
.01
|
|
Total
|
|
$
|
548
|
|
|
$
|
540
|
|
|
|
|
|
|
|
2.62
|
%
|
|
|
2.48
|
%
|
Other Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail Leasing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89
days
|
|
$
|
25
|
|
|
$
|
18
|
|
|
|
|
|
|
|
.31
|
%
|
|
|
.28
|
%
|
90 days or more
|
|
|
2
|
|
|
|
1
|
|
|
|
|
|
|
|
.03
|
|
|
|
.02
|
|
Nonperforming
|
|
|
7
|
|
|
|
2
|
|
|
|
|
|
|
|
.09
|
|
|
|
.03
|
|
Total
|
|
$
|
34
|
|
|
$
|
21
|
|
|
|
|
|
|
|
.43
|
%
|
|
|
.33
|
%
|
Home Equity and Second Mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89
days
|
|
$
|
62
|
|
|
$
|
60
|
|
|
|
|
|
|
|
.38
|
%
|
|
|
.37
|
%
|
90 days or more
|
|
|
39
|
|
|
|
41
|
|
|
|
|
|
|
|
.24
|
|
|
|
.25
|
|
Nonperforming
|
|
|
123
|
|
|
|
128
|
|
|
|
|
|
|
|
.75
|
|
|
|
.78
|
|
Total
|
|
$
|
224
|
|
|
$
|
229
|
|
|
|
|
|
|
|
1.37
|
%
|
|
|
1.40
|
%
|
Other (b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89
days
|
|
$
|
244
|
|
|
$
|
206
|
|
|
|
|
|
|
|
.75
|
%
|
|
|
.66
|
%
|
90 days or more
|
|
|
42
|
|
|
|
41
|
|
|
|
|
|
|
|
.13
|
|
|
|
.13
|
|
Nonperforming
|
|
|
33
|
|
|
|
27
|
|
|
|
|
|
|
|
.10
|
|
|
|
.09
|
|
Total
|
|
$
|
319
|
|
|
$
|
274
|
|
|
|
|
|
|
|
.98
|
%
|
|
|
.88
|
%
|
(a)
|
Excludes $297 million of loans
30-89
days past due and $1.8 billion of loans 90 days or more past due at September 30, 2017, purchased from GNMA mortgage pools
that continue to accrue interest, compared with $273 million and $2.5 billion at December 31, 2016, respectively.
|
(b)
|
Includes revolving credit, installment, automobile and student loans.
|
The following table provides summary delinquency information for covered loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
|
|
|
As a Percent of Ending
Loan Balances
|
|
(Dollars in Millions)
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
|
|
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
30-89
days
|
|
$
|
48
|
|
|
$
|
55
|
|
|
|
|
|
|
|
1.48
|
%
|
|
|
1.43
|
%
|
90 days or more
|
|
|
152
|
|
|
|
212
|
|
|
|
|
|
|
|
4.66
|
|
|
|
5.53
|
|
Nonperforming
|
|
|
6
|
|
|
|
6
|
|
|
|
|
|
|
|
.18
|
|
|
|
.16
|
|
Total
|
|
$
|
206
|
|
|
$
|
273
|
|
|
|
|
|
|
|
6.32
|
%
|
|
|
7.12
|
%
|
Restructured Loans
In certain circumstances, the Company may modify the terms of a loan to maximize the collection of amounts due when a borrower is experiencing financial difficulties or is expected to experience
difficulties in the near-term. In most cases, the modification is either a concessionary reduction in interest rate, extension of the maturity date or reduction in the principal balance that would otherwise not be considered.
Troubled Debt Restructurings
Concessionary modifications are classified as TDRs unless the modification results in only an insignificant delay in the payments to be received. TDRs accrue interest if the borrower complies with the revised terms and conditions and has
demonstrated repayment performance at a level commensurate with the modified terms over several payment cycles, which is generally six months or greater. At September 30, 2017, performing TDRs were $4.0 billion, compared with
$4.2 billion at December 31, 2016. Loans classified as TDRs are considered impaired loans for reporting and measurement purposes.
The Company continues to work with customers to modify loans for borrowers who are experiencing financial difficulties, including those loans
acquired through FDIC-assisted acquisitions. Many of the Companys TDRs are determined on a
case-by-case
basis in connection with ongoing loan collection processes.
The modifications vary within each of the Companys loan classes. Commercial lending segment TDRs generally include extensions of the maturity date and may be accompanied by an increase or decrease to the interest rate. The Company may also
work with the borrower to make other changes to the loan to mitigate losses, such as obtaining additional collateral and/or guarantees to support the loan.
The Company has also implemented certain residential mortgage loan restructuring programs that may result in TDRs. The Company modifies
residential mortgage loans under Federal Housing Administration,
United States Department of Veterans Affairs, and its own internal programs. Under these programs, the Company offers qualifying homeowners the opportunity to permanently modify their loan and
achieve more affordable monthly payments by providing loan concessions. These concessions may include adjustments to interest rates, conversion of adjustable rates to fixed rates, extensions of maturity dates or deferrals of payments, capitalization
of accrued interest and/or outstanding advances, or in limited situations, partial forgiveness of loan principal. In most instances, participation in residential mortgage loan restructuring programs requires the customer to complete a short-term
trial period. A permanent loan modification is contingent on the customer successfully completing the trial period arrangement, and the loan documents are not modified until that time. The Company reports loans in a trial period arrangement as TDRs
and continues to report them as TDRs after the trial period.
Credit card and other retail loan TDRs are generally part of distinct
restructuring programs providing customers modification solutions over a specified time period, generally up to 60 months.
In
accordance with regulatory guidance, the Company considers secured consumer loans that have had debt discharged through bankruptcy where the borrower has not reaffirmed the debt to be TDRs. If the loan amount exceeds the collateral value, the loan
is charged down to collateral value and the remaining amount is reported as nonperforming.
Modifications to loans in the covered segment
are similar in nature to that described above for
non-covered
loans, and the evaluation and determination of TDR status is similar, except that acquired loans restructured after acquisition are not considered
TDRs for purposes of the Companys accounting and disclosure if the loans evidenced credit deterioration as of the acquisition date and are accounted for in pools. Losses associated with modifications on covered loans, including the economic
impact of interest rate reductions, are generally eligible for reimbursement under the loss sharing agreements.
The following table provides a summary of TDRs by loan class, including the delinquency status for TDRs that continue to accrue interest and TDRs included in
nonperforming assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a Percent of Performing TDRs
|
|
|
|
|
|
|
|
At September 30, 2017
(Dollars in Millions)
|
|
Performing
TDRs
|
|
|
30-89 Days
Past Due
|
|
|
90 Days or More
Past Due
|
|
|
Nonperforming
TDRs
|
|
|
Total
TDRs
|
|
Commercial
|
|
$
|
323
|
|
|
|
2.8
|
%
|
|
|
1.1
|
%
|
|
$
|
136
|
(a)
|
|
$
|
459
|
|
Commercial real estate
|
|
|
141
|
|
|
|
1.6
|
|
|
|
|
|
|
|
24
|
(b)
|
|
|
165
|
|
Residential mortgages
|
|
|
1,590
|
|
|
|
2.8
|
|
|
|
3.7
|
|
|
|
348
|
|
|
|
1,938
|
(d)
|
Credit card
|
|
|
230
|
|
|
|
10.5
|
|
|
|
5.9
|
|
|
|
1
|
(c)
|
|
|
231
|
|
Other retail
|
|
|
135
|
|
|
|
3.9
|
|
|
|
4.6
|
|
|
|
50
|
(c)
|
|
|
185
|
(e)
|
TDRs, excluding GNMA and covered loans
|
|
|
2,419
|
|
|
|
3.5
|
|
|
|
3.4
|
|
|
|
559
|
|
|
|
2,978
|
|
Loans purchased from GNMA mortgage pools (g)
|
|
|
1,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,571
|
(f)
|
Covered loans
|
|
|
29
|
|
|
|
4.8
|
|
|
|
10.3
|
|
|
|
4
|
|
|
|
33
|
|
Total
|
|
$
|
4,019
|
|
|
|
2.1
|
%
|
|
|
2.1
|
%
|
|
$
|
563
|
|
|
$
|
4,582
|
|
(a)
|
Primarily represents loans less than six months from the modification date that have not met the performance period required to return to accrual status (generally six months) and small business credit cards with a
modified rate equal to 0 percent.
|
(b)
|
Primarily represents loans less than six months from the modification date that have not met the performance period required to return to accrual status (generally six months).
|
(c)
|
Primarily represents loans with a modified rate equal to 0 percent.
|
(d)
|
Includes $324 million of residential mortgage loans to borrowers that have had debt discharged through bankruptcy and $45 million in trial period arrangements or previously placed in trial period
arrangements but not successfully completed.
|
(e)
|
Includes $78 million of other retail loans to borrowers that have had debt discharged through bankruptcy and $13 million in trial period arrangements or previously placed in trial period arrangements but
not successfully completed.
|
(f)
|
Includes $217 million of Federal Housing Administration and United States Department of Veterans Affairs residential mortgage loans to borrowers that have had debt discharged through bankruptcy and
$351 million in trial period arrangements or previously placed in trial period arrangements but not successfully completed.
|
(g)
|
Approximately 4.2 percent and 45.2 percent of the total TDR loans purchased from GNMA mortgage pools are
30-89
days past due and 90 days or more past due,
respectively, but are not classified as delinquent as their repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs.
|
Short-term Modifications
The Company makes short-term modifications that it does not consider to be TDRs, in limited circumstances, to assist borrowers experiencing temporary financial hardships. Consumer lending
programs include payment reductions, deferrals of up to three past due payments, and the ability to return to current status if the borrower makes required payments. The Company may also make short-term modifications to commercial lending loans,
with the most common modification being an extension of the maturity date of three months or less. Such extensions generally are used when the maturity date is imminent and the borrower is experiencing some level of financial stress, but the Company
believes the borrower will pay all contractual amounts owed. Short-term modified loans were not material at September 30, 2017.
Nonperforming Assets
The level of nonperforming assets represents another indicator of the potential for future credit losses.
Nonperforming assets include nonaccrual loans, restructured loans not performing in accordance with modified terms and not accruing interest, restructured loans that have not met the performance period required to return to accrual status, other
real estate owned (OREO) and other nonperforming assets owned by the Company. Nonperforming assets are generally either originated by the Company or acquired under FDIC loss sharing agreements that substantially reduce the risk of credit
losses to the Company. Interest payments collected from assets on nonaccrual status are generally applied against the principal balance and not recorded as income. However, interest income may be recognized for interest payments if the remaining
carrying amount of the loan is believed to be collectible.
At September 30, 2017, total nonperforming assets were
$1.3 billion, compared with $1.6 billion at December 31, 2016. The $352 million (22.0 percent) decrease in nonperforming assets was driven by improvements in commercial loans, residential mortgages and OREO. Nonperforming covered
assets were $32 million at September 30, 2017 and December 31, 2016. The ratio of total nonperforming assets to total loans and other real estate was 0.45 percent at September 30, 2017, compared with 0.59 percent at
December 31, 2016.
OREO, excluding covered assets, was $164 million at September 30, 2017, compared with $186 million
at December 31, 2016, and was related to foreclosed properties that previously secured loan balances. These balances exclude foreclosed GNMA loans whose repayments are primarily insured by the Federal Housing Administration or guaranteed by the
United States Department of Veterans Affairs.
The following table provides an analysis of OREO, excluding covered assets, as a percent of their related
loan balances, including geographical location detail for residential (residential mortgage, home equity and second mortgage) and commercial (commercial and commercial real estate) loan balances:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
|
|
|
As a Percent of Ending
Loan Balances
|
|
(Dollars in Millions)
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
|
|
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illinois
|
|
$
|
16
|
|
|
$
|
15
|
|
|
|
|
|
|
|
.37
|
%
|
|
|
.35
|
%
|
Minnesota
|
|
|
12
|
|
|
|
12
|
|
|
|
|
|
|
|
.19
|
|
|
|
.19
|
|
Washington
|
|
|
10
|
|
|
|
8
|
|
|
|
|
|
|
|
.22
|
|
|
|
.19
|
|
Ohio
|
|
|
8
|
|
|
|
9
|
|
|
|
|
|
|
|
.28
|
|
|
|
.31
|
|
Wisconsin
|
|
|
8
|
|
|
|
11
|
|
|
|
|
|
|
|
.37
|
|
|
|
.50
|
|
All other states
|
|
|
102
|
|
|
|
120
|
|
|
|
|
|
|
|
.18
|
|
|
|
.22
|
|
Total residential
|
|
|
156
|
|
|
|
175
|
|
|
|
|
|
|
|
.21
|
|
|
|
.24
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
California
|
|
|
4
|
|
|
|
4
|
|
|
|
|
|
|
|
.02
|
|
|
|
.02
|
|
Tennessee
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
.04
|
|
|
|
.04
|
|
Idaho
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
.07
|
|
|
|
|
|
Virginia
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
.05
|
|
New Mexico
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All other states
|
|
|
2
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
8
|
|
|
|
11
|
|
|
|
|
|
|
|
.01
|
|
|
|
.01
|
|
Total
|
|
$
|
164
|
|
|
$
|
186
|
|
|
|
|
|
|
|
.06
|
%
|
|
|
.07
|
%
|
Analysis of Loan Net Charge-Offs
Total loan net charge-offs were $330 million for the third quarter and $1.0 billion for the first nine months of 2017, compared with $315 million and $947 million for the
same periods of 2016. The ratio of total loan net charge-offs to average loans outstanding on an annualized basis for the third quarter and first nine months of 2017 was 0.47 percent and 0.49 percent, respectively, compared with
0.46 percent and 0.48 percent for the third quarter and first nine months of 2016, respectively. The year-over-year increases in total net charge-offs reflected higher credit card net charge-offs, partially offset by lower net charge-offs
related to residential mortgages and commercial and commercial real estate loans.
|
|
|
Table 6
|
|
Nonperforming Assets (a)
|
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
Commercial
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
231
|
|
|
$
|
443
|
|
Lease financing
|
|
|
38
|
|
|
|
40
|
|
Total commercial
|
|
|
269
|
|
|
|
483
|
|
Commercial Real Estate
|
|
|
|
|
|
|
|
|
Commercial mortgages
|
|
|
89
|
|
|
|
87
|
|
Construction and development
|
|
|
33
|
|
|
|
37
|
|
Total commercial real estate
|
|
|
122
|
|
|
|
124
|
|
Residential Mortgages (b)
|
|
|
474
|
|
|
|
595
|
|
Credit Card
|
|
|
1
|
|
|
|
3
|
|
Other Retail
|
|
|
|
|
|
|
|
|
Retail leasing
|
|
|
7
|
|
|
|
2
|
|
Home equity and second mortgages
|
|
|
123
|
|
|
|
128
|
|
Other
|
|
|
33
|
|
|
|
27
|
|
Total other retail
|
|
|
163
|
|
|
|
157
|
|
Total nonperforming loans, excluding covered loans
|
|
|
1,029
|
|
|
|
1,362
|
|
Covered Loans
|
|
|
6
|
|
|
|
6
|
|
Total nonperforming loans
|
|
|
1,035
|
|
|
|
1,368
|
|
Other Real Estate (c)(d)
|
|
|
164
|
|
|
|
186
|
|
Covered Other Real Estate (d)
|
|
|
26
|
|
|
|
26
|
|
Other Assets
|
|
|
26
|
|
|
|
23
|
|
Total nonperforming assets
|
|
$
|
1,251
|
|
|
$
|
1,603
|
|
Total nonperforming assets, excluding covered assets
|
|
$
|
1,219
|
|
|
$
|
1,571
|
|
Excluding covered assets
|
|
|
|
|
|
|
|
|
Accruing loans 90 days or more past due (b)
|
|
$
|
497
|
|
|
$
|
552
|
|
Nonperforming loans to total loans
|
|
|
.37
|
%
|
|
|
.51
|
%
|
Nonperforming assets to total loans plus other real estate (c)
|
|
|
.44
|
%
|
|
|
.58
|
%
|
Including covered assets
|
|
|
|
|
|
|
|
|
Accruing loans 90 days or more past due (b)
|
|
$
|
649
|
|
|
$
|
764
|
|
Nonperforming loans to total loans
|
|
|
.37
|
%
|
|
|
.50
|
%
|
Nonperforming assets to total loans plus other real estate
(c)
|
|
|
.45
|
%
|
|
|
.59
|
%
|
Changes in Nonperforming Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
Commercial and
Commercial
Real Estate
|
|
|
Residential
Mortgages,
Credit Card and
Other Retail
|
|
|
Covered
Assets
|
|
|
Total
|
|
Balance December 31, 2016
|
|
$
|
623
|
|
|
$
|
948
|
|
|
$
|
32
|
|
|
$
|
1,603
|
|
Additions to nonperforming assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New nonaccrual loans and foreclosed properties
|
|
|
377
|
|
|
|
312
|
|
|
|
20
|
|
|
|
709
|
|
Advances on loans
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
Total additions
|
|
|
400
|
|
|
|
312
|
|
|
|
20
|
|
|
|
732
|
|
Reductions in nonperforming assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paydowns, payoffs
|
|
|
(360
|
)
|
|
|
(169
|
)
|
|
|
(7
|
)
|
|
|
(536
|
)
|
Net sales
|
|
|
(38
|
)
|
|
|
(126
|
)
|
|
|
(13
|
)
|
|
|
(177
|
)
|
Return to performing status
|
|
|
(7
|
)
|
|
|
(111
|
)
|
|
|
|
|
|
|
(118
|
)
|
Charge-offs (e)
|
|
|
(213
|
)
|
|
|
(40
|
)
|
|
|
|
|
|
|
(253
|
)
|
Total reductions
|
|
|
(618
|
)
|
|
|
(446
|
)
|
|
|
(20
|
)
|
|
|
(1,084
|
)
|
Net additions to (reductions in) nonperforming assets
|
|
|
(218
|
)
|
|
|
(134
|
)
|
|
|
|
|
|
|
(352
|
)
|
Balance September 30, 2017
|
|
$
|
405
|
|
|
$
|
814
|
|
|
$
|
32
|
|
|
$
|
1,251
|
|
(a)
|
Throughout this document, nonperforming assets and related ratios do not include accruing loans 90 days or more past due.
|
(b)
|
Excludes $1.8 billion and $2.5 billion at September 30, 2017, and December 31, 2016, respectively, of loans purchased from GNMA mortgage pools that are 90 days or more past due that continue to
accrue interest, as their repayments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs.
|
(c)
|
Foreclosed GNMA loans of $300 million and $373 million at September 30, 2017, and December 31, 2016, respectively, continue to accrue interest and are recorded as other assets and excluded from
nonperforming assets because they are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs.
|
(d)
|
Includes equity investments in entities whose principal assets are other real estate owned.
|
(e)
|
Charge-offs exclude actions for certain card products and loan sales that were not classified as nonperforming at the time the
charge-off
occurred.
|
|
|
|
Table 7
|
|
Net Charge-offs as a Percent of Average Loans Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
2017
|
|
|
2016
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
.34
|
%
|
|
|
.38
|
%
|
|
|
|
|
|
|
.33
|
%
|
|
|
.37
|
%
|
Lease financing
|
|
|
.29
|
|
|
|
.23
|
|
|
|
|
|
|
|
.27
|
|
|
|
.33
|
|
Total commercial
|
|
|
.34
|
|
|
|
.37
|
|
|
|
|
|
|
|
.33
|
|
|
|
.36
|
|
Commercial Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgages
|
|
|
(.03
|
)
|
|
|
.06
|
|
|
|
|
|
|
|
(.04
|
)
|
|
|
|
|
Construction and development
|
|
|
(.17
|
)
|
|
|
(.14
|
)
|
|
|
|
|
|
|
(.09
|
)
|
|
|
(.04
|
)
|
Total commercial real estate
|
|
|
(.07
|
)
|
|
|
.01
|
|
|
|
|
|
|
|
(.06
|
)
|
|
|
(.01
|
)
|
Residential Mortgages
|
|
|
.05
|
|
|
|
.08
|
|
|
|
|
|
|
|
.06
|
|
|
|
.12
|
|
Credit Card
|
|
|
3.55
|
|
|
|
3.11
|
|
|
|
|
|
|
|
3.73
|
|
|
|
3.25
|
|
Other Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail leasing
|
|
|
.10
|
|
|
|
.07
|
|
|
|
|
|
|
|
.13
|
|
|
|
.10
|
|
Home equity and second mortgages
|
|
|
(.02
|
)
|
|
|
.02
|
|
|
|
|
|
|
|
(.02
|
)
|
|
|
.02
|
|
Other
|
|
|
.73
|
|
|
|
.68
|
|
|
|
|
|
|
|
.74
|
|
|
|
.68
|
|
Total other retail
|
|
|
.42
|
|
|
|
.41
|
|
|
|
|
|
|
|
.44
|
|
|
|
.41
|
|
Total loans, excluding covered loans
|
|
|
.48
|
|
|
|
.47
|
|
|
|
|
|
|
|
.49
|
|
|
|
.48
|
|
Covered Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
.47
|
%
|
|
|
.46
|
%
|
|
|
|
|
|
|
.49
|
%
|
|
|
.48
|
%
|
Analysis and Determination of the Allowance for Credit Losses
The allowance for credit losses reserves for probable and estimable losses incurred in the Companys loan and lease portfolio, including unfunded credit commitments, and
includes certain amounts that do not represent loss exposure to the Company because those losses are recoverable under loss sharing agreements with the FDIC. The allowance for credit losses is increased through provisions charged to earnings and
reduced by net charge-offs. Management evaluates the adequacy of the allowance for incurred losses on a quarterly basis.
The
allowance recorded for loans in the commercial lending segment is based on reviews of individual credit relationships and considers the migration analysis of commercial lending segment loans and actual loss experience. For each loan type, this
historical loss experience is adjusted as necessary to consider any relevant changes in portfolio composition, lending policies, underwriting standards, risk management practices or economic conditions. The results of the analysis are evaluated
quarterly to confirm an appropriate historical timeframe is selected for each commercial loan type. The allowance recorded for impaired loans greater than $5 million in the commercial lending segment is based on an individual loan analysis
utilizing expected cash flows discounted using the original effective interest rate, the observable market price of the loan, or the fair value of the collateral, less selling costs, for collateral-dependent loans, rather than the migration
analysis. The allowance recorded for all other commercial lending segment loans is determined on a homogenous pool basis and includes consideration of product mix, risk characteristics of the portfolio, bankruptcy experience and historical losses,
adjusted for current trends.
The allowance recorded for TDR loans and purchased impaired loans in the consumer lending segment is
determined on a homogenous pool basis utilizing expected cash flows discounted using the original effective interest rate of the pool, or the prior quarter effective rate, respectively. The allowance for collateral-dependent loans in the consumer
lending segment is determined based on the fair value of the collateral less costs to sell. The allowance recorded for all other consumer lending segment loans is determined on a homogenous pool basis and includes consideration of product mix, risk
characteristics of the portfolio, bankruptcy experience, delinquency status, refreshed LTV ratios when possible, portfolio growth and historical losses, adjusted for current trends. Credit card and other retail loans 90 days or more past due are
generally not placed on nonaccrual status because of the relatively short period of time to
charge-off
and, therefore, are excluded from nonperforming loans and measures that include nonperforming loans as
part of the calculation.
When evaluating the appropriateness of the allowance for credit losses for any loans and lines in a junior lien
position, the Company considers the delinquency and modification status of the first lien. At September 30, 2017, the Company serviced the first lien on 42 percent of the home equity loans and lines in a junior lien position. The Company
also considers information received from its primary regulator on the status of the first liens that are serviced by other large servicers in the industry and the status of first lien mortgage accounts reported on customer credit bureau files.
Regardless of whether or not the Company services the first lien, an assessment is made of economic conditions, problem loans, recent loss experience and
other factors in determining the allowance for credit losses. Based on the available information, the Company estimated $296 million or 1.8 percent of the total home equity portfolio at
September 30, 2017, represented
non-delinquent
junior liens where the first lien was delinquent or modified.
The Company uses historical loss experience on the loans and lines in a junior lien position where the first lien is serviced by the Company,
or can be identified in credit bureau data, to establish loss estimates for junior lien loans and lines the Company services that are current, but the first lien is delinquent or modified. Historically, the number of junior lien defaults has been a
small percentage of the total portfolio (approximately 1.1 percent annually), while the long-term average loss rate on loans that default has been approximately 90 percent. In addition, the Company obtains updated credit scores on its home
equity portfolio each quarter, and in some cases more frequently, and uses this information to qualitatively supplement its loss estimation methods. Credit score distributions for the portfolio are monitored monthly and any changes in the
distribution are one of the factors considered in assessing the Companys loss estimates. In its evaluation of the allowance for credit losses, the Company also considers the increased risk of loss associated with home equity lines that are
contractually scheduled to convert from a revolving status to a fully amortizing payment and with residential lines and loans that have a balloon payoff provision.
The allowance for the covered loan segment is evaluated each quarter in a manner similar to that described for
non-covered
loans, and represents any decreases in expected cash flows on those loans after the acquisition date. The provision for credit losses for covered loans considers the indemnification provided by the
FDIC.
In addition, the evaluation of the appropriate allowance for credit losses for purchased
non-impaired
loans acquired after January 1, 2009, in the various loan segments considers credit discounts recorded as a part of the initial determination of the fair value of the loans. For these loans,
no allowance for credit losses is recorded at the purchase date. Credit discounts representing the principal losses expected over the life of the loans are a component of the initial fair value. Subsequent to the purchase date, the methods utilized
to estimate the required allowance for credit losses for these loans is similar to originated loans; however, the Company records a provision for credit losses only when the required allowance, net of any expected reimbursement under any loss
sharing agreements with the FDIC, exceeds any remaining credit discounts.
The evaluation of the appropriate allowance for credit losses
for purchased impaired loans in the various loan segments considers the expected cash flows to be collected from the borrower. These loans are initially recorded at fair value and, therefore, no allowance for credit losses is recorded at the
purchase date.
Subsequent to the purchase date, the expected cash flows of purchased loans are subject to evaluation. Decreases in
expected cash flows are recognized by recording an allowance for credit losses with the related provision for credit losses reduced for the amount reimbursable by the FDIC, where applicable. If the expected cash flows on the purchased loans increase
such that a previously recorded impairment allowance can be reversed, the Company records a reduction in the allowance with a related reduction in losses reimbursable by the FDIC, where applicable. Increases in expected cash flows of purchased
loans, when there are no reversals of previous impairment allowances, are recognized over the remaining life of the loans and resulting decreases in expected cash flows of the FDIC indemnification assets are amortized over the shorter of the
remaining contractual term of the indemnification agreements or the remaining life of the loans.
The Companys methodology for
determining the appropriate allowance for credit losses for all the loan segments also considers the imprecision inherent in the methodologies used. As a result, in addition to the amounts determined under the methodologies described above,
management also considers the potential impact of other qualitative factors which include, but are not limited to, economic factors; geographic and other concentration risks; delinquency and nonaccrual trends; current business conditions; changes in
lending policy, underwriting standards and other relevant business practices; results of internal review; and the regulatory environment. The consideration of these items results in adjustments to allowance amounts included in the Companys
allowance for credit losses for each of the above loan segments.
Refer to Managements Discussion and AnalysisAnalysis
of the Allowance for Credit Losses in the Companys Annual Report on Form
10-K
for the year ended December 31, 2016, for further discussion on the analysis and determination of the
allowance for credit losses.
At September 30, 2017, the allowance for credit losses was $4.4 billion (1.58 percent of
period-end
loans), compared with an allowance of $4.4 billion (1.59 percent of
period-end
loans) at December 31, 2016. The ratio of the allowance for credit
losses to nonperforming loans was 426 percent at September 30, 2017, compared with 318 percent at December 31, 2016. The ratio of the allowance for credit losses to annualized loan net charge-offs was 337 percent at
September 30, 2017, compared with 343 percent of full year 2016 net charge-offs at December 31, 2016.
|
|
|
Table 8
|
|
Summary of Allowance for Credit Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
(Dollars in Millions)
|
|
2017
|
|
|
2016
|
|
|
|
|
|
2017
|
|
|
2016
|
|
Balance at beginning of period
|
|
$
|
4,377
|
|
|
$
|
4,329
|
|
|
|
|
|
|
$
|
4,357
|
|
|
$
|
4,306
|
|
Charge-Offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
109
|
|
|
|
98
|
|
|
|
|
|
|
|
296
|
|
|
|
301
|
|
Lease financing
|
|
|
6
|
|
|
|
6
|
|
|
|
|
|
|
|
19
|
|
|
|
21
|
|
Total commercial
|
|
|
115
|
|
|
|
104
|
|
|
|
|
|
|
|
315
|
|
|
|
322
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgages
|
|
|
1
|
|
|
|
7
|
|
|
|
|
|
|
|
5
|
|
|
|
10
|
|
Construction and development
|
|
|
1
|
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
|
|
9
|
|
Total commercial real estate
|
|
|
2
|
|
|
|
9
|
|
|
|
|
|
|
|
7
|
|
|
|
19
|
|
Residential mortgages
|
|
|
16
|
|
|
|
19
|
|
|
|
|
|
|
|
49
|
|
|
|
67
|
|
Credit card
|
|
|
214
|
|
|
|
182
|
|
|
|
|
|
|
|
653
|
|
|
|
559
|
|
Other retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail leasing
|
|
|
3
|
|
|
|
2
|
|
|
|
|
|
|
|
11
|
|
|
|
7
|
|
Home equity and second mortgages
|
|
|
8
|
|
|
|
12
|
|
|
|
|
|
|
|
25
|
|
|
|
31
|
|
Other
|
|
|
75
|
|
|
|
70
|
|
|
|
|
|
|
|
227
|
|
|
|
205
|
|
Total other retail
|
|
|
86
|
|
|
|
84
|
|
|
|
|
|
|
|
263
|
|
|
|
243
|
|
Covered loans (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total charge-offs
|
|
|
433
|
|
|
|
398
|
|
|
|
|
|
|
|
1,287
|
|
|
|
1,210
|
|
Recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
30
|
|
|
|
14
|
|
|
|
|
|
|
|
71
|
|
|
|
65
|
|
Lease financing
|
|
|
2
|
|
|
|
3
|
|
|
|
|
|
|
|
8
|
|
|
|
8
|
|
Total commercial
|
|
|
32
|
|
|
|
17
|
|
|
|
|
|
|
|
79
|
|
|
|
73
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgages
|
|
|
3
|
|
|
|
2
|
|
|
|
|
|
|
|
15
|
|
|
|
11
|
|
Construction and development
|
|
|
6
|
|
|
|
6
|
|
|
|
|
|
|
|
10
|
|
|
|
12
|
|
Total commercial real estate
|
|
|
9
|
|
|
|
8
|
|
|
|
|
|
|
|
25
|
|
|
|
23
|
|
Residential mortgages
|
|
|
9
|
|
|
|
7
|
|
|
|
|
|
|
|
22
|
|
|
|
19
|
|
Credit card
|
|
|
27
|
|
|
|
21
|
|
|
|
|
|
|
|
72
|
|
|
|
64
|
|
Other retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail leasing
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
4
|
|
|
|
3
|
|
Home equity and second mortgages
|
|
|
9
|
|
|
|
11
|
|
|
|
|
|
|
|
28
|
|
|
|
29
|
|
Other
|
|
|
16
|
|
|
|
18
|
|
|
|
|
|
|
|
52
|
|
|
|
52
|
|
Total other retail
|
|
|
26
|
|
|
|
30
|
|
|
|
|
|
|
|
84
|
|
|
|
84
|
|
Covered loans (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recoveries
|
|
|
103
|
|
|
|
83
|
|
|
|
|
|
|
|
282
|
|
|
|
263
|
|
Net Charge-Offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
79
|
|
|
|
84
|
|
|
|
|
|
|
|
225
|
|
|
|
236
|
|
Lease financing
|
|
|
4
|
|
|
|
3
|
|
|
|
|
|
|
|
11
|
|
|
|
13
|
|
Total commercial
|
|
|
83
|
|
|
|
87
|
|
|
|
|
|
|
|
236
|
|
|
|
249
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgages
|
|
|
(2
|
)
|
|
|
5
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
(1
|
)
|
Construction and development
|
|
|
(5
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
(8
|
)
|
|
|
(3
|
)
|
Total commercial real estate
|
|
|
(7
|
)
|
|
|
1
|
|
|
|
|
|
|
|
(18
|
)
|
|
|
(4
|
)
|
Residential mortgages
|
|
|
7
|
|
|
|
12
|
|
|
|
|
|
|
|
27
|
|
|
|
48
|
|
Credit card
|
|
|
187
|
|
|
|
161
|
|
|
|
|
|
|
|
581
|
|
|
|
495
|
|
Other retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail leasing
|
|
|
2
|
|
|
|
1
|
|
|
|
|
|
|
|
7
|
|
|
|
4
|
|
Home equity and second mortgages
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
2
|
|
Other
|
|
|
59
|
|
|
|
52
|
|
|
|
|
|
|
|
175
|
|
|
|
153
|
|
Total other retail
|
|
|
60
|
|
|
|
54
|
|
|
|
|
|
|
|
179
|
|
|
|
159
|
|
Covered loans (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net charge-offs
|
|
|
330
|
|
|
|
315
|
|
|
|
|
|
|
|
1,005
|
|
|
|
947
|
|
Provision for credit losses
|
|
|
360
|
|
|
|
325
|
|
|
|
|
|
|
|
1,055
|
|
|
|
982
|
|
Other changes (b)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
Balance at end of period (c)
|
|
$
|
4,407
|
|
|
$
|
4,338
|
|
|
|
|
|
|
$
|
4,407
|
|
|
$
|
4,338
|
|
Components
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
3,908
|
|
|
$
|
3,797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability for unfunded credit commitments
|
|
|
499
|
|
|
|
541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance for credit losses
|
|
$
|
4,407
|
|
|
$
|
4,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Credit Losses as a Percentage of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-end
loans, excluding covered loans
|
|
|
1.59
|
%
|
|
|
1.61
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans, excluding covered loans
|
|
|
425
|
|
|
|
309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming and accruing loans 90 days or more past due, excluding covered loans
|
|
|
287
|
|
|
|
225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming assets, excluding covered assets
|
|
|
359
|
|
|
|
264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annualized net charge-offs, excluding covered loans
|
|
|
334
|
|
|
|
343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-end
loans
|
|
|
1.58
|
%
|
|
|
1.60
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans
|
|
|
426
|
|
|
|
310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming and accruing loans 90 days or more past due
|
|
|
262
|
|
|
|
202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming assets
|
|
|
352
|
|
|
|
261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annualized net charge-offs
|
|
|
337
|
|
|
|
346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Relates to covered loan charge-offs and recoveries not reimbursable by the FDIC.
|
(b)
|
Includes net changes in credit losses to be reimbursed by the FDIC and reductions in the allowance for covered loans where the reversal of a previously recorded allowance was offset by an associated decrease in the
indemnification asset, and the impact of any loan sales.
|
(c)
|
At September 30, 2017 and 2016, $1.7 billion and $1.5 billion, respectively, of the total allowance for credit losses related to incurred losses on credit card and other retail loans.
|
Residual Value Risk
Management
The Company manages its risk to changes in the residual value of leased assets through disciplined residual valuation setting at the inception of a lease,
diversification of its leased assets, regular residual asset valuation reviews and monitoring of residual value gains or losses upon the disposition of assets. Retail leasing residual values were $5.8 billion at September 30, 2017,
compared with $4.9 billion at December 31, 2016, reflecting overall growth in the retail leasing portfolio during the first nine months of 2017, while commercial leasing residual values were essentially unchanged. As of September 30,
2017, no significant change in the concentration of the portfolios had occurred since December 31, 2016. Refer to Managements Discussion and Analysis Residual Value Risk Management in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2016, for further discussion on residual value risk management.
Operational Risk Management
Operational risk is inherent in all business activities, and the management of this risk is important to the achievement of the Companys objectives. Business lines have direct
and primary responsibility and accountability for identifying, controlling, and monitoring operational risks embedded in their business activities. The Company maintains a system of controls with the objective of providing proper transaction
authorization and execution, proper system operations, proper oversight of third parties with whom it does business, safeguarding of assets from misuse or theft, and ensuring the reliability and security of financial and other data. Refer to
Managements Discussion and Analysis Operational Risk Management in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2016, for further discussion
on operational risk management.
Compliance Risk Management
The Company may suffer legal or regulatory sanctions, material financial loss, or damage to reputation through failure to comply with laws, regulations, rules, standards of good practice,
and codes of conduct, including those related to compliance with Bank Secrecy Act/anti-money laundering requirements, sanctions compliance requirements as administered by the Office of Foreign Assets Control, consumer protections and other
requirements. The Company has controls and processes in place for the assessment, identification, monitoring, management and reporting of compliance risks and issues. Refer to Managements Discussion and Analysis Compliance Risk
Management in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2016, for further discussion on compliance risk management.
Interest Rate Risk Management
In the banking industry, changes in interest rates are a significant risk that can impact earnings, market valuations and the safety and soundness of an entity. To manage the impact on net
interest income and the market value of assets and liabilities, the Company manages its exposure to changes in interest rates through asset and liability management activities within guidelines established by its Asset and Liability Management
Committee (ALCO) and approved by the Board of Directors. The ALCO has the responsibility for approving and ensuring compliance with the ALCO management policies, including interest rate risk exposure. The Company uses net interest income
simulation analysis and market value of equity modeling for measuring and analyzing consolidated interest rate risk. The Company has established policy limits within which it manages the overall interest rate risk profile, and at September 30,
2017 and December 31, 2016, the Company was within those limits.
Net Interest Income
Simulation Analysis
Management estimates the impact on net interest income of changes in market interest rates under a number of scenarios, including
gradual shifts, immediate and sustained parallel shifts, and flattening or steepening of the yield curve. Table 9 summarizes the projected impact to net interest income over the next 12 months of various potential interest rate changes. The
sensitivity of the projected impact to net interest income over the next 12 months is dependent on balance sheet growth, product mix, deposit behavior, pricing and funding decisions. While the Company utilizes assumptions based on historical
information and expected behaviors, actual outcomes could vary significantly. For example, if deposit outflows are more limited (stable) than the assumptions the Company used in preparing Table 9, the projected impact to net interest
income would increase to 2.02 percent in the Up 50 basis point (bps) and 3.91
|
|
|
Table 9
|
|
Sensitivity of Net Interest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Down 50 bps
Immediate
|
|
|
Up 50 bps
Immediate
|
|
|
Down 200 bps
Gradual
|
|
|
Up 200 bps
Gradual
|
|
|
|
|
|
Down 50 bps
Immediate
|
|
|
Up 50 bps
Immediate
|
|
|
Down 200 bps
Gradual
|
|
|
Up 200 bps
Gradual
|
|
Net interest income
|
|
|
(2.56
|
)%
|
|
|
1.48
|
%
|
|
|
*
|
|
|
|
1.99
|
%
|
|
|
|
|
|
|
(2.82
|
)%
|
|
|
1.52
|
%
|
|
|
*
|
|
|
|
1.82
|
%
|
*
|
Given the level of interest rates, downward rate scenario is not computed.
|
percent in the Up 200 bps scenarios. Refer to Managements Discussion and Analysis Net Interest Income Simulation Analysis in the Companys Annual
Report on
Form 10-K
for the year ended December 31, 2016, for further discussion on net interest income simulation analysis.
Market Value of Equity
Modeling
The Company also manages interest rate sensitivity by utilizing market value of equity modeling, which measures the degree to which the market values of the
Companys assets and liabilities and
off-balance
sheet instruments will change given a change in interest rates. Management measures the impact of changes in market interest rates under a number of
scenarios, including immediate and sustained parallel shifts, and flattening or steepening of the yield curve. A 200 bps increase would have resulted in a 0.9 percent decrease in the market value of equity at September 30, 2017,
compared with a 1.9 percent decrease at December 31, 2016. A 200 bps decrease, where possible given current rates, would have resulted in a 10.3 percent decrease in the market value of equity at September 30, 2017, compared with
an 8.1 percent decrease at December 31, 2016. Refer to Managements Discussion and Analysis Market Value of Equity Modeling in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2016, for further discussion on market value of equity modeling.
Use of Derivatives to Manage Interest Rate and Other Risks
To manage the sensitivity of earnings and capital to interest rate, prepayment, credit, price and foreign currency fluctuations (asset and liability management positions), the Company enters
into derivative transactions. The Company uses derivatives for asset and liability management purposes primarily in the following ways:
|
|
To convert fixed-rate debt from fixed-rate payments to floating-rate payments;
|
|
|
To convert the cash flows associated with floating-rate debt from floating-rate payments to fixed-rate payments;
|
|
|
To mitigate changes in value of the Companys unfunded mortgage loan commitments, funded MLHFS and MSRs;
|
|
|
To mitigate remeasurement volatility of foreign currency denominated balances; and
|
|
|
To mitigate the volatility of the Companys net investment in foreign operations driven by fluctuations in foreign currency exchange rates.
|
The Company may enter into derivative contracts that are either exchange-traded, centrally cleared through clearinghouses or
over-the-counter.
In addition, the Company enters into interest rate and foreign exchange derivative contracts to support the business requirements of its customers
(customer-related positions). The Company minimizes the market and liquidity risks of customer-related positions by either entering into similar offsetting positions with broker-dealers, or on a portfolio basis by entering into other derivative or
non-derivative
financial instruments that partially or fully offset the exposure from these customer-related positions. The Company does not utilize derivatives for speculative purposes.
The Company does not designate all of the derivatives that it enters into for risk management purposes as accounting hedges because of the
inefficiency of applying the accounting requirements and may instead elect fair value accounting for the related hedged items. In particular, the Company enters into interest rate swaps, swaptions, forward commitments to buy
to-be-announced
securities (TBAs), U.S. Treasury and Eurodollar futures and options on U.S. Treasury futures to mitigate fluctuations in the value of its
MSRs, but does not designate those derivatives as accounting hedges.
Additionally, the Company uses forward commitments to sell TBAs and
other commitments to sell residential mortgage loans at specified prices to economically hedge the interest rate risk in its residential mortgage loan production activities. At September 30, 2017, the Company had $5.8 billion of forward
commitments to sell, hedging $2.5 billion of MLHFS and $3.5 billion of unfunded mortgage loan commitments. The forward commitments to sell and the unfunded mortgage loan commitments on loans intended to be sold are considered derivatives
under the accounting guidance related to accounting for derivative instruments and hedging activities. The Company has elected the fair value option for the MLHFS.
Derivatives are subject to credit risk associated with counterparties to the contracts. Credit risk associated with derivatives is measured by
the Company based on the probability of counterparty default. The Company manages the credit risk of its derivative positions by diversifying its positions among various counterparties, by entering into master netting arrangements, and, where
possible, by requiring collateral arrangements. The Company may also transfer counterparty credit risk related to interest rate swaps to third parties through the use of risk participation agreements. In addition, certain interest rate swaps,
interest rate forwards and credit contracts are required to be centrally cleared through clearinghouses to further mitigate counterparty credit risk.
For additional information on derivatives and hedging activities, refer to Notes 12 and 13 in the Notes to Consolidated Financial
Statements.
Market Risk
Management
In addition to interest rate risk, the Company is exposed to other forms of market risk, principally related to trading activities which support customers
strategies to manage their own foreign currency, interest rate risk and funding activities. For purposes of its internal capital adequacy assessment process, the Company considers risk arising from its trading activities employing methodologies
consistent with the requirements of regulatory rules for market risk. The Companys Market Risk Committee (MRC), within the framework of the ALCO, oversees market risk management. The MRC monitors and reviews the Companys
trading positions and establishes policies for market risk management, including exposure limits for each portfolio. The Company uses a VaR approach to measure general market risk. Theoretically, VaR represents the statistical risk of loss the
Company has to adverse market movements over a
one-day
time horizon. The Company uses the Historical Simulation method to calculate VaR for its trading businesses measured at the ninety-ninth percentile using
a
one-year
look-back period for distributions derived from past market data. The market factors used in the calculations include those pertinent to market risks inherent in the underlying trading portfolios,
principally those that affect the Companys corporate bond trading business, foreign currency transaction business, client derivatives business, loan trading business and municipal securities business. On average, the Company expects the
one-day
VaR to be exceeded by actual losses two to three times per year for its trading businesses. The Company monitors the effectiveness of its risk programs by back-testing the performance of its VaR models,
regularly updating the historical data used by the VaR models and stress testing. If the Company were to experience market losses in excess of the estimated VaR more often than expected, the VaR models and associated assumptions would be analyzed
and adjusted.
The average, high, low and
period-end
one-day
VaR
amounts for the Companys trading positions were as follows:
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
(Dollars in Millions)
|
|
2017
|
|
|
2016
|
|
Average
|
|
$
|
1
|
|
|
$
|
1
|
|
High
|
|
|
1
|
|
|
|
1
|
|
Low
|
|
|
1
|
|
|
|
1
|
|
Period-end
|
|
|
1
|
|
|
|
1
|
|
The Company did not experience any actual trading losses for its combined trading businesses that exceeded VaR
during the nine months ended September 30, 2017 and 2016. The Company stress tests its market risk measurements to provide management with perspectives on market events that may not be captured by its VaR models, including worst case historical
market movement combinations that have not necessarily occurred on the same date.
The Company calculates Stressed VaR using the same
underlying methodology and model as VaR, except that a historical continuous
one-year
look-back period is utilized that reflects a period of significant financial stress appropriate to the Companys
trading portfolio. The period selected by the Company includes the significant market volatility of the last four months of 2008.
The average, high, low
and
period-end
one-day
Stressed VaR amounts for the Companys trading positions were as follows:
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
(Dollars in Millions)
|
|
2017
|
|
|
2016
|
|
Average
|
|
$
|
4
|
|
|
$
|
4
|
|
High
|
|
|
6
|
|
|
|
7
|
|
Low
|
|
|
2
|
|
|
|
2
|
|
Period-end
|
|
|
6
|
|
|
|
5
|
|
Valuations of positions in the client derivatives and foreign currency transaction businesses are based on
discounted cash flow or other valuation techniques using market-based assumptions. These valuations are compared to third party quotes or other market prices to determine if there are significant variances. Significant variances are approved by the
Companys market risk management department. Valuation of positions in the corporate bond trading, loan trading and municipal securities businesses are based on trader marks. These trader marks are evaluated against third party prices, with
significant variances approved by the Companys risk management department.
The Company also measures the market risk of its hedging
activities related to residential MLHFS and MSRs using the Historical Simulation method. The VaRs are measured at the ninety-ninth percentile and employ factors pertinent to the market risks inherent in the valuation of the assets and hedges. The
Company monitors the effectiveness of the models through back-testing, updating the data and regular validations. A three-year look-back period is used to obtain past market data for the models.
The average, high and low VaR amounts for the residential MLHFS and related hedges and the MSRs and related hedges were as follows:
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
(Dollars in Millions)
|
|
2017
|
|
|
2016
|
|
Residential Mortgage Loans Held For Sale and Related Hedges
|
|
|
|
|
|
|
|
|
Average
|
|
$
|
|
|
|
$
|
|
|
High
|
|
|
1
|
|
|
|
2
|
|
Low
|
|
|
|
|
|
|
|
|
Mortgage Servicing Rights and Related Hedges
|
|
|
|
|
|
|
|
|
Average
|
|
$
|
8
|
|
|
$
|
8
|
|
High
|
|
|
10
|
|
|
|
11
|
|
Low
|
|
|
6
|
|
|
|
4
|
|
Liquidity Risk
Management
The Companys liquidity risk management process is designed to identify, measure, and manage the Companys funding and liquidity risk to meet its daily
funding needs and to address expected and unexpected changes in its funding requirements. The Company engages in various activities to manage its liquidity risk. These activities include diversifying its funding sources, stress testing, and holding
readily-marketable assets which can be used as a source of liquidity if needed. In addition, the Companys profitable operations, sound credit quality and strong capital position have enabled it to develop a large and reliable base of core
deposit funding within its market areas and in domestic and global capital markets.
The Companys Board of Directors approves
the Companys liquidity policy. The Risk Management Committee of the Companys Board of Directors oversees the Companys liquidity risk management process and approves the contingency funding plan. The ALCO reviews the Companys
liquidity policy and limits, and regularly assesses the Companys ability to meet funding requirements arising from adverse company-specific or market events.
The Company regularly projects its funding needs under various stress scenarios and maintains a contingency funding plan consistent with the
Companys access to diversified sources of contingent funding. The Company maintains a substantial level of total available liquidity in the form of
on-balance
sheet and
off-balance
sheet funding sources. These liquidity sources include cash at the Federal Reserve Bank and certain European central banks, unencumbered liquid assets, and capacity to borrow at the FHLB and the
Federal Reserve Banks Discount Window. At September 30, 2017, the fair value of unencumbered
available-for-sale
and
held-to-maturity
investment securities totaled $104.9 billion, compared with $100.6 billion at December 31, 2016. Refer to Table 4 and Balance Sheet Analysis for further information
on investment securities maturities and trends. Asset liquidity is further enhanced by the Companys practice of pledging loans to access secured borrowing facilities through the FHLB and Federal Reserve Bank. At September 30, 2017, the
Company could have borrowed an additional $90.2 billion from the FHLB and Federal Reserve Bank based on collateral available for additional borrowings.
The Companys diversified deposit base provides a sizeable source of relatively stable and
low-cost
funding, while reducing the Companys reliance on the wholesale markets. Total deposits were $342.6 billion at September 30, 2017, compared with $334.6 billion at December 31,
2016. Refer to Balance Sheet Analysis for further information on the Companys deposits.
Additional funding is provided
by long-term debt and short-term borrowings. Long-term debt was $34.5 billion at September 30, 2017, and is an important funding source because of its multi-year borrowing structure. Short-term borrowings were $15.9 billion at
September 30, 2017, and supplement the Companys other funding sources. Refer to Balance Sheet Analysis for further information on the Companys long-term debt and short-term borrowings.
In addition to assessing liquidity risk on a consolidated basis, the Company monitors the parent companys liquidity. The Company
establishes limits for the minimal number of months into the future where the parent company can meet existing and forecasted obligations with cash and securities held that can be readily monetized. The Company measures and manages this limit in
both normal and adverse conditions. The Company maintains sufficient funding to meet expected capital and debt service obligations for 24 months without the support of dividends from subsidiaries and assuming access to the wholesale markets is
maintained. The Company maintains sufficient liquidity to meet its capital and debt service obligations for 12 months under adverse conditions without the support of dividends from subsidiaries or access to the wholesale markets. The parent company
is currently well in excess of required liquidity minimums.
At September 30, 2017, parent company long-term debt outstanding was
$15.8 billion, compared with $13.0 billion at December 31, 2016. The increase was primarily due to the issuance of $3.9 billion of medium-term notes, partially offset by $1.3 billion of medium-term note maturities. As of
September 30, 2017, there was no parent company debt scheduled to mature in the remainder of 2017.
The Company is subject to a
regulatory Liquidity Coverage Ratio (LCR) requirement which requires banks to maintain an adequate level of unencumbered high quality liquid assets to meet estimated liquidity needs over a
30-day
stressed period. At September 30, 2017, the Company was compliant with this requirement.
Refer to Managements Discussion
and Analysis Liquidity Risk Management in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2016, for further discussion on liquidity risk management.
European Exposures
The
Company provides merchant processing and corporate trust services in Europe either directly or through banking affiliations in Europe. Operating cash for these businesses is deposited on a short-term basis typically with certain European central
banks. For deposits placed at other European banks,
exposure is mitigated by the Company placing deposits at multiple banks and managing the amounts on deposit at any bank based on institution-specific deposit limits. At September 30, 2017,
the Company had an aggregate amount on deposit with European banks of approximately $8.1 billion, predominately with the Central Bank of Ireland and Bank of England.
In addition, the Company provides financing to domestic multinational corporations that generate revenue from customers in European countries,
transacts with various European banks as counterparties to certain derivative-related activities, and through a subsidiary, manages money market funds that hold certain investments in European sovereign debt. Any deterioration in economic conditions
in Europe is unlikely to have a significant effect on the Company related to these activities.
Off-Balance
Sheet Arrangements
Off-balance
sheet arrangements include any contractual
arrangements to which an unconsolidated entity is a party, under which the Company has an obligation to provide credit or liquidity enhancements or market risk support. In the ordinary course of business, the Company enters into an array of
commitments to extend credit, letters of credit and various forms of guarantees that may be considered
off-balance
sheet arrangements. Refer to Note 15 of the Notes to Consolidated Financial Statements
for further information on these arrangements. The Company does not utilize private label asset securitizations as a source of funding.
Off-balance
sheet arrangements also include any obligation related to a
variable interest held in an unconsolidated entity that provides financing, liquidity, credit enhancement or market risk support. Refer to Note 5 of the Notes to Consolidated Financial Statements for further information related to the
Companys interests in variable interest entities.
Capital
Management
The Company is committed to managing capital to maintain strong protection for depositors and creditors and for maximum shareholder benefit. The Company also
manages its capital to exceed regulatory capital requirements for banking organizations. Beginning January 1, 2014, the regulatory capital requirements effective for the Company follow Basel III, subject to certain transition provisions from
Basel I over the following four years to full implementation by January 1, 2018. Basel III includes two comprehensive methodologies for calculating risk-weighted assets: a general standardized approach and more risk-sensitive advanced
approaches, with the Companys capital adequacy being evaluated against the methodology that is most restrictive. Table 10 provides a summary of statutory regulatory capital ratios in effect for the Company at September 30, 2017 and
December 31, 2016. All regulatory ratios exceeded regulatory well-capitalized requirements.
Effective
January 1, 2018, the Company will be subject to a regulatory Supplementary Leverage Ratio (SLR) requirement for banks calculating capital adequacy using advanced approaches under Basel III. The SLR is defined as tier 1 capital
divided by total leverage exposure, which includes both
on-
and
off-balance
sheet exposures. At September 30, 2017, the Companys SLR exceeded the applicable
minimum SLR requirement.
Total U.S. Bancorp shareholders equity was $48.7 billion at September 30, 2017, compared
with $47.3 billion at December 31, 2016. The increase was primarily the result of corporate earnings, a preferred stock issuance and changes in unrealized gains and losses on
available-for-sale
investment securities included in other comprehensive income (loss). This increase was partially offset by common share repurchases, dividends and the
redemption of $1.1 billion of preferred stock.
|
|
|
Table 10
|
|
Regulatory Capital Ratios
|
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
Basel III transitional standardized approach:
|
|
|
|
|
|
|
|
|
Common equity tier 1 capital
|
|
$
|
34,876
|
|
|
$
|
33,720
|
|
Tier 1 capital
|
|
|
40,411
|
|
|
|
39,421
|
|
Total risk-based capital
|
|
|
48,104
|
|
|
|
47,355
|
|
Risk-weighted assets
|
|
|
363,957
|
|
|
|
358,237
|
|
Common equity tier 1 capital as a percent of risk-weighted assets
|
|
|
9.6
|
%
|
|
|
9.4
|
%
|
Tier 1 capital as a percent of risk-weighted assets
|
|
|
11.1
|
|
|
|
11.0
|
|
Total risk-based capital as a percent of risk-weighted assets
|
|
|
13.2
|
|
|
|
13.2
|
|
Tier 1 capital as a percent of adjusted quarterly average assets (leverage ratio)
|
|
|
9.1
|
|
|
|
9.0
|
|
Basel III transitional advanced approaches:
|
|
|
|
|
|
|
|
|
Common equity tier 1 capital
|
|
$
|
34,876
|
|
|
$
|
33,720
|
|
Tier 1 capital
|
|
|
40,411
|
|
|
|
39,421
|
|
Total risk-based capital
|
|
|
45,090
|
|
|
|
44,264
|
|
Risk-weighted assets
|
|
|
287,800
|
|
|
|
277,141
|
|
Common equity tier 1 capital as a percent of risk-weighted assets
|
|
|
12.1
|
%
|
|
|
12.2
|
%
|
Tier 1 capital as a percent of risk-weighted assets
|
|
|
14.0
|
|
|
|
14.2
|
|
Total risk-based capital as a percent of risk-weighted
assets
|
|
|
15.7
|
|
|
|
16.0
|
|
The Company believes certain capital ratios in addition to statutory regulatory capital
ratios are useful in evaluating its capital adequacy. The Companys tangible common equity, as a percent of tangible assets and as a percent of risk-weighted assets calculated under the transitional standardized approach, was 7.7 percent
and 9.5 percent, respectively, at September 30, 2017, compared with 7.5 percent and 9.2 percent, respectively, at December 31, 2016. The Companys common equity tier 1 capital to risk-weighted assets ratio using
the Basel III standardized approach as if fully implemented was 9.4 percent at September 30, 2017, compared with 9.1 percent at December 31, 2016. The Companys common equity tier 1 capital to risk-weighted assets
ratio using the Basel III advanced approaches as if fully implemented was 11.8 percent at September 30, 2017, compared with 11.7 percent at December 31, 2016.
On June 28, 2017, the Company announced its Board of Directors had approved an authorization to repurchase up to $2.6 billion of its
common stock, from July 1, 2017 through June 30, 2018.
The following table provides a detailed analysis of all shares purchased by the Company
or any affiliated purchaser during the third quarter of 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
Total Number
of Shares
Purchased
|
|
|
Average
Price Paid
Per Share
|
|
|
Total Number of
Shares Purchased
as Part of Publicly
Announced
Program (a)
|
|
|
Approximate Dollar
Value of Shares
that May Yet
Be
Purchased Under
the Program
(In Millions)
|
|
July
|
|
|
6,313,893
|
|
|
$
|
52.67
|
|
|
|
6,313,893
|
|
|
$
|
2,267
|
|
August
|
|
|
3,802,949
|
|
|
|
52.38
|
|
|
|
3,802,949
|
|
|
|
2,068
|
|
September
|
|
|
2,549,596
|
|
|
|
52.26
|
|
|
|
2,549,596
|
|
|
|
1,935
|
|
Total
|
|
|
12,666,438
|
|
|
$
|
52.50
|
|
|
|
12,666,438
|
|
|
$
|
1,935
|
|
(a)
|
All shares were purchased under the stock repurchase authorization program announced on June 28, 2017.
|
On September 19, 2017, the Company announced its Board of Directors had approved a 7.1 percent increase in the Companys
dividend rate per common share from $0.28 per quarter to $0.30 per quarter.
Refer to Managements Discussion and Analysis
Capital Management in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2016, for further discussion on capital management.
LINE OF BUSINESS FINANCIAL REVIEW
The Companys major lines of business are Wholesale Banking and Commercial Real Estate, Consumer and Small Business Banking, Wealth Management and
Securities Services, Payment Services, and Treasury and Corporate Support. These operating segments are components of the Company about which financial information is prepared and is evaluated regularly by management in deciding how to allocate
resources and assess performance.
Basis for Financial Presentation
Business line results are derived from the Companys business unit profitability reporting systems by specifically attributing managed balance sheet assets, deposits and other
liabilities and their related income or expense. The allowance for credit losses and related provision expense are allocated to the lines of business based on the related loan balances managed. Refer to Managements Discussion and
Analysis Line of Business Financial Review in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2016, for further discussion on the business lines basis
for financial presentation.
Designations, assignments and allocations change from time to time as management systems are enhanced,
methods of evaluating performance or product lines change or business segments are realigned to better respond to the Companys diverse customer base. During 2017, certain organization and methodology changes were made and, accordingly, 2016
results were restated and presented on a comparable basis.
Wholesale Banking and Commercial Real
Estate
Wholesale Banking and Commercial Real Estate offers lending, equipment finance and small-ticket leasing, depository services, treasury management, capital markets services,
international trade services and other financial services to middle market, large corporate, commercial real estate, financial institution,
non-profit
and public sector clients. Wholesale Banking and
Commercial Real Estate contributed $282 million of the Companys net income in the third quarter and $827 million in the first nine months of 2017, or increases of $57 million (25.3 percent) and $253 million (44.1 percent),
respectively, compared with the same periods of 2016.
Net revenue increased $48 million (6.1 percent) in the third
quarter and $186 million (8.0 percent) in the first nine months of 2017, compared with the same periods of 2016. Net interest income, on a taxable-equivalent basis, increased $53 million (9.4 percent) in the third quarter and
$168 million (10.3 percent) in the first nine months of 2017, compared with the same periods of 2016. The increases were primarily due to the impact of rising rates on the margin benefit from deposits and growth in average loan and deposit
balances, partially offset by lower spread on loans reflecting a competitive marketplace. Noninterest income decreased $5 million (2.3 percent) in the third quarter of 2017, compared with the third quarter of 2016, primarily due to higher loan
related charges, partially offset by higher treasury management fees. Noninterest income increased $18 million (2.7 percent) in the first nine months of 2017, compared with the same period of 2016, driven by
increases in treasury management fees and capital markets volume, partially offset by higher loan related charges.
Noninterest expense increased $41 million (11.5 percent) in the third quarter and $122 million (11.4 percent) in the first nine
months of 2017, compared with the same periods of 2016, primarily due to increases in variable costs allocated to manage the business and higher compensation expense, reflecting the impact of increased staffing, merit increases and variable
compensation. In addition, the increase in the first nine months of 2017 included the impact of the FDIC insurance surcharge on deposit balances. The provision for credit losses decreased $82 million in the third quarter and $333 million
(97.4 percent) in the first nine months of 2017, compared with the same periods of 2016, primarily due to favorable changes in the reserve allocation and continued stabilization of credit quality in the energy sector.
Consumer and Small Business
Banking
Consumer and Small Business Banking delivers products and services through banking offices, telephone servicing and sales,
on-line
services, direct mail, ATM processing and mobile devices. It encompasses community banking, metropolitan banking and indirect lending, as well as mortgage banking. Consumer and Small Business Banking
contributed $363 million of the Companys net income in the third quarter and $974 million in the first nine months of 2017, or an increase of $4 million (1.1 percent) and a decrease of $62 million (6.0 percent),
respectively, compared with the same periods of 2016.
Net revenue increased $30 million (1.6 percent) in the third
quarter and $204 million (3.8 percent) in the first nine months of 2017, compared with the same periods of 2016. Net interest income, on a taxable-equivalent basis, increased $110 million (9.2 percent) in the third quarter and
$266 million (7.6 percent) in the first nine months of 2017, compared with the same periods of 2016. The increases were primarily due to the impact of rising rates on the margin benefit from deposits along with growth in average loan and
deposit balances, partially offset by lower spread on loans. Noninterest income decreased $80 million (11.2 percent) in the third quarter and $62 million (3.3 percent) in the first nine months of 2017, compared with the same periods
of 2016, principally driven by lower mortgage banking revenue due to lower origination and sales volume related to refinancing activities, as refinancing activities were significantly higher in the second and third quarters of 2016. Partially
offsetting the impact of lower mortgage banking revenue was growth in retail leasing revenue due to stronger
end-of-term
gains on auto leases and higher ATM processing
services and treasury management fees.
Noninterest expense decreased $27 million (2.1 percent) in the third quarter of 2017,
compared with the third quarter of 2016, primarily due to lower mortgage related costs and professional services expense. Partially offsetting these decreases were higher compensation expense, reflecting the impact of increased staffing and merit
increases, and higher net shared services expense. Noninterest expense increased $73 million (1.9 percent) in the first nine months of 2017, compared with the same period of 2016, principally due to higher compensation and employee
benefits expenses, higher net shared services expense, and the impact of the FDIC insurance surcharge on deposit balances, partially offset by lower mortgage related costs and professional services expense. The provision for credit losses increased
$52 million in the third quarter and $230 million in the first nine months of 2017, compared with the same periods of 2016, primarily due to growth in other retail loans, exposures as a result of recent weather events, and higher releases
of reserves related to residential mortgages in the prior year as a result of improvements in the portfolio.
Wealth Management and Securities
Services
Wealth Management and Securities Services provides private banking, financial advisory services, investment management, retail brokerage services, insurance, trust,
custody and fund servicing through five businesses: Wealth Management, Corporate Trust Services, U.S. Bancorp Asset Management, Institutional Trust & Custody and Fund Services. Wealth Management and Securities Services contributed
$125 million of the Companys net income in the third quarter and $363 million in the first nine months of 2017, or increases of $30 million (31.6 percent) and $90 million (33.0 percent),
respectively, compared with the same periods of 2016.
Net revenue increased $65 million (12.1 percent) in the
third quarter and $223 million (14.3 percent) in the first nine months of 2017, compared with the same periods of 2016. Net interest income, on a taxable-equivalent basis, increased $57 million (42.2 percent) in the third quarter and
$184 million (49.2 percent) in the first nine months of 2017, compared with the same periods of 2016. The increases were principally due to the impact of rising rates on the margin benefit from deposits along with higher average loan and
deposit balances. Noninterest income increased $8 million (2.0 percent) in the third quarter and $39 million (3.3 percent) in the first nine months of 2017, compared with the same periods of 2016, principally due to favorable market
conditions and net asset and account growth.
|
|
|
Table 11
|
|
Line of Business Financial Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale Banking and
Commercial Real Estate
|
|
|
|
|
|
Consumer and Small
Business Banking
|
|
|
|
|
Three Months Ended September 30,
(Dollars in Millions)
|
|
2017
|
|
|
2016
|
|
|
Percent
Change
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Percent
Change
|
|
|
|
|
Condensed Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (taxable-equivalent basis)
|
|
$
|
616
|
|
|
$
|
563
|
|
|
|
9.4
|
%
|
|
|
|
|
|
$
|
1,309
|
|
|
$
|
1,199
|
|
|
|
9.2
|
%
|
|
|
|
|
Noninterest income
|
|
|
215
|
|
|
|
220
|
|
|
|
(2.3
|
)
|
|
|
|
|
|
|
632
|
|
|
|
712
|
|
|
|
(11.2
|
)
|
|
|
|
|
Securities gains (losses), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue
|
|
|
831
|
|
|
|
783
|
|
|
|
6.1
|
|
|
|
|
|
|
|
1,941
|
|
|
|
1,911
|
|
|
|
1.6
|
|
|
|
|
|
Noninterest expense
|
|
|
396
|
|
|
|
355
|
|
|
|
11.5
|
|
|
|
|
|
|
|
1,266
|
|
|
|
1,293
|
|
|
|
(2.1
|
)
|
|
|
|
|
Other intangibles
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
397
|
|
|
|
356
|
|
|
|
11.5
|
|
|
|
|
|
|
|
1,274
|
|
|
|
1,301
|
|
|
|
(2.1
|
)
|
|
|
|
|
Income before provision and income taxes
|
|
|
434
|
|
|
|
427
|
|
|
|
1.6
|
|
|
|
|
|
|
|
667
|
|
|
|
610
|
|
|
|
9.3
|
|
|
|
|
|
Provision for credit losses
|
|
|
(9
|
)
|
|
|
73
|
|
|
|
*
|
|
|
|
|
|
|
|
97
|
|
|
|
45
|
|
|
|
*
|
|
|
|
|
|
Income before income taxes
|
|
|
443
|
|
|
|
354
|
|
|
|
25.1
|
|
|
|
|
|
|
|
570
|
|
|
|
565
|
|
|
|
.9
|
|
|
|
|
|
Income taxes and taxable-equivalent adjustment
|
|
|
161
|
|
|
|
129
|
|
|
|
24.8
|
|
|
|
|
|
|
|
207
|
|
|
|
206
|
|
|
|
.5
|
|
|
|
|
|
Net income
|
|
|
282
|
|
|
|
225
|
|
|
|
25.3
|
|
|
|
|
|
|
|
363
|
|
|
|
359
|
|
|
|
1.1
|
|
|
|
|
|
Net (income) loss attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to U.S. Bancorp
|
|
$
|
282
|
|
|
$
|
225
|
|
|
|
25.3
|
|
|
|
|
|
|
$
|
363
|
|
|
$
|
359
|
|
|
|
1.1
|
|
|
|
|
|
Average Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
73,882
|
|
|
$
|
70,814
|
|
|
|
4.3
|
%
|
|
|
|
|
|
$
|
10,317
|
|
|
$
|
10,546
|
|
|
|
(2.2
|
)%
|
|
|
|
|
Commercial real estate
|
|
|
20,115
|
|
|
|
21,466
|
|
|
|
(6.3
|
)
|
|
|
|
|
|
|
18,353
|
|
|
|
18,307
|
|
|
|
.3
|
|
|
|
|
|
Residential mortgages
|
|
|
6
|
|
|
|
8
|
|
|
|
(25.0
|
)
|
|
|
|
|
|
|
56,131
|
|
|
|
53,933
|
|
|
|
4.1
|
|
|
|
|
|
Credit card
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other retail
|
|
|
|
|
|
|
2
|
|
|
|
*
|
|
|
|
|
|
|
|
53,932
|
|
|
|
50,786
|
|
|
|
6.2
|
|
|
|
|
|
Total loans, excluding covered loans
|
|
|
94,003
|
|
|
|
92,290
|
|
|
|
1.9
|
|
|
|
|
|
|
|
138,733
|
|
|
|
133,572
|
|
|
|
3.9
|
|
|
|
|
|
Covered loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,347
|
|
|
|
4,107
|
|
|
|
(18.5
|
)
|
|
|
|
|
Total loans
|
|
|
94,003
|
|
|
|
92,290
|
|
|
|
1.9
|
|
|
|
|
|
|
|
142,080
|
|
|
|
137,679
|
|
|
|
3.2
|
|
|
|
|
|
Goodwill
|
|
|
1,647
|
|
|
|
1,647
|
|
|
|
|
|
|
|
|
|
|
|
3,681
|
|
|
|
3,681
|
|
|
|
|
|
|
|
|
|
Other intangible assets
|
|
|
13
|
|
|
|
16
|
|
|
|
(18.8
|
)
|
|
|
|
|
|
|
2,701
|
|
|
|
2,270
|
|
|
|
19.0
|
|
|
|
|
|
Assets
|
|
|
102,327
|
|
|
|
100,864
|
|
|
|
1.5
|
|
|
|
|
|
|
|
156,737
|
|
|
|
153,501
|
|
|
|
2.1
|
|
|
|
|
|
Noninterest-bearing deposits
|
|
|
35,353
|
|
|
|
36,685
|
|
|
|
(3.6
|
)
|
|
|
|
|
|
|
28,705
|
|
|
|
28,355
|
|
|
|
1.2
|
|
|
|
|
|
Interest checking
|
|
|
9,710
|
|
|
|
9,629
|
|
|
|
.8
|
|
|
|
|
|
|
|
47,401
|
|
|
|
43,834
|
|
|
|
8.1
|
|
|
|
|
|
Savings products
|
|
|
45,143
|
|
|
|
44,301
|
|
|
|
1.9
|
|
|
|
|
|
|
|
60,821
|
|
|
|
57,759
|
|
|
|
5.3
|
|
|
|
|
|
Time deposits
|
|
|
19,611
|
|
|
|
13,489
|
|
|
|
45.4
|
|
|
|
|
|
|
|
12,899
|
|
|
|
14,282
|
|
|
|
(9.7
|
)
|
|
|
|
|
Total deposits
|
|
|
109,817
|
|
|
|
104,104
|
|
|
|
5.5
|
|
|
|
|
|
|
|
149,826
|
|
|
|
144,230
|
|
|
|
3.9
|
|
|
|
|
|
Total U.S. Bancorp shareholders equity
|
|
|
9,952
|
|
|
|
8,997
|
|
|
|
10.6
|
|
|
|
|
|
|
|
11,489
|
|
|
|
11,312
|
|
|
|
1.6
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale Banking and
Commercial Real Estate
|
|
|
|
|
|
Consumer and Small
Business Banking
|
|
|
|
|
Nine Months Ended September 30,
(Dollars in Millions)
|
|
2017
|
|
|
2016
|
|
|
Percent
Change
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Percent
Change
|
|
|
|
|
Condensed Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (taxable-equivalent basis)
|
|
$
|
1,806
|
|
|
$
|
1,638
|
|
|
|
10.3
|
%
|
|
|
|
|
|
$
|
3,789
|
|
|
$
|
3,523
|
|
|
|
7.6
|
%
|
|
|
|
|
Noninterest income
|
|
|
697
|
|
|
|
676
|
|
|
|
3.1
|
|
|
|
|
|
|
|
1,837
|
|
|
|
1,899
|
|
|
|
(3.3
|
)
|
|
|
|
|
Securities gains (losses), net
|
|
|
(3
|
)
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue
|
|
|
2,500
|
|
|
|
2,314
|
|
|
|
8.0
|
|
|
|
|
|
|
|
5,626
|
|
|
|
5,422
|
|
|
|
3.8
|
|
|
|
|
|
Noninterest expense
|
|
|
1,188
|
|
|
|
1,066
|
|
|
|
11.4
|
|
|
|
|
|
|
|
3,821
|
|
|
|
3,746
|
|
|
|
2.0
|
|
|
|
|
|
Other intangibles
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
24
|
|
|
|
(8.3
|
)
|
|
|
|
|
Total noninterest expense
|
|
|
1,191
|
|
|
|
1,069
|
|
|
|
11.4
|
|
|
|
|
|
|
|
3,843
|
|
|
|
3,770
|
|
|
|
1.9
|
|
|
|
|
|
Income before provision and income taxes
|
|
|
1,309
|
|
|
|
1,245
|
|
|
|
5.1
|
|
|
|
|
|
|
|
1,783
|
|
|
|
1,652
|
|
|
|
7.9
|
|
|
|
|
|
Provision for credit losses
|
|
|
9
|
|
|
|
342
|
|
|
|
(97.4
|
)
|
|
|
|
|
|
|
252
|
|
|
|
22
|
|
|
|
*
|
|
|
|
|
|
Income before income taxes
|
|
|
1,300
|
|
|
|
903
|
|
|
|
44.0
|
|
|
|
|
|
|
|
1,531
|
|
|
|
1,630
|
|
|
|
(6.1
|
)
|
|
|
|
|
Income taxes and taxable-equivalent adjustment
|
|
|
473
|
|
|
|
329
|
|
|
|
43.8
|
|
|
|
|
|
|
|
557
|
|
|
|
594
|
|
|
|
(6.2
|
)
|
|
|
|
|
Net income
|
|
|
827
|
|
|
|
574
|
|
|
|
44.1
|
|
|
|
|
|
|
|
974
|
|
|
|
1,036
|
|
|
|
(6.0
|
)
|
|
|
|
|
Net (income) loss attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to U.S. Bancorp
|
|
$
|
827
|
|
|
$
|
574
|
|
|
|
44.1
|
|
|
|
|
|
|
$
|
974
|
|
|
$
|
1,036
|
|
|
|
(6.0
|
)
|
|
|
|
|
Average Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
73,236
|
|
|
$
|
70,414
|
|
|
|
4.0
|
%
|
|
|
|
|
|
$
|
10,157
|
|
|
$
|
10,367
|
|
|
|
(2.0
|
)%
|
|
|
|
|
Commercial real estate
|
|
|
20,742
|
|
|
|
21,089
|
|
|
|
(1.6
|
)
|
|
|
|
|
|
|
18,469
|
|
|
|
18,150
|
|
|
|
1.8
|
|
|
|
|
|
Residential mortgages
|
|
|
7
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
55,725
|
|
|
|
53,127
|
|
|
|
4.9
|
|
|
|
|
|
Credit card
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other retail
|
|
|
1
|
|
|
|
2
|
|
|
|
(50.0
|
)
|
|
|
|
|
|
|
52,710
|
|
|
|
49,738
|
|
|
|
6.0
|
|
|
|
|
|
Total loans, excluding covered loans
|
|
|
93,986
|
|
|
|
91,512
|
|
|
|
2.7
|
|
|
|
|
|
|
|
137,061
|
|
|
|
131,382
|
|
|
|
4.3
|
|
|
|
|
|
Covered loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,531
|
|
|
|
4,289
|
|
|
|
(17.7
|
)
|
|
|
|
|
Total loans
|
|
|
93,986
|
|
|
|
91,512
|
|
|
|
2.7
|
|
|
|
|
|
|
|
140,592
|
|
|
|
135,671
|
|
|
|
3.6
|
|
|
|
|
|
Goodwill
|
|
|
1,647
|
|
|
|
1,647
|
|
|
|
|
|
|
|
|
|
|
|
3,682
|
|
|
|
3,681
|
|
|
|
|
|
|
|
|
|
Other intangible assets
|
|
|
14
|
|
|
|
17
|
|
|
|
(17.6
|
)
|
|
|
|
|
|
|
2,733
|
|
|
|
2,394
|
|
|
|
14.2
|
|
|
|
|
|
Assets
|
|
|
102,580
|
|
|
|
99,932
|
|
|
|
2.6
|
|
|
|
|
|
|
|
154,894
|
|
|
|
150,711
|
|
|
|
2.8
|
|
|
|
|
|
Noninterest-bearing deposits
|
|
|
36,217
|
|
|
|
36,543
|
|
|
|
(.9
|
)
|
|
|
|
|
|
|
27,666
|
|
|
|
27,092
|
|
|
|
2.1
|
|
|
|
|
|
Interest checking
|
|
|
9,505
|
|
|
|
8,202
|
|
|
|
15.9
|
|
|
|
|
|
|
|
47,035
|
|
|
|
43,184
|
|
|
|
8.9
|
|
|
|
|
|
Savings products
|
|
|
46,563
|
|
|
|
40,043
|
|
|
|
16.3
|
|
|
|
|
|
|
|
60,452
|
|
|
|
57,035
|
|
|
|
6.0
|
|
|
|
|
|
Time deposits
|
|
|
15,238
|
|
|
|
12,999
|
|
|
|
17.2
|
|
|
|
|
|
|
|
12,975
|
|
|
|
14,394
|
|
|
|
(9.9
|
)
|
|
|
|
|
Total deposits
|
|
|
107,523
|
|
|
|
97,787
|
|
|
|
10.0
|
|
|
|
|
|
|
|
148,128
|
|
|
|
141,705
|
|
|
|
4.5
|
|
|
|
|
|
Total U.S. Bancorp shareholders equity
|
|
|
9,852
|
|
|
|
8,927
|
|
|
|
10.4
|
|
|
|
|
|
|
|
11,482
|
|
|
|
11,138
|
|
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wealth Management and
Securities Services
|
|
|
Payment
Services
|
|
|
Treasury and
Corporate Support
|
|
|
Consolidated
Company
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Percent
Change
|
|
|
|
|
|
2017
|
|
|
|
|
|
2016
|
|
|
Percent
Change
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Percent
Change
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Percent
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
192
|
|
|
$
|
135
|
|
|
|
42.2
|
%
|
|
|
|
|
|
$
|
563
|
|
|
|
|
|
|
$
|
538
|
|
|
|
4.6
|
%
|
|
|
|
|
|
$
|
506
|
|
|
$
|
508
|
|
|
|
(.4
|
)%
|
|
|
|
|
|
$
|
3,186
|
|
|
$
|
2,943
|
|
|
|
8.3
|
%
|
|
|
|
|
|
411
|
|
|
|
403
|
|
|
|
2.0
|
|
|
|
|
|
|
|
920
|
|
|
|
|
|
|
|
912
|
|
|
|
.9
|
|
|
|
|
|
|
|
235
|
|
|
|
188
|
|
|
|
25.0
|
|
|
|
|
|
|
|
2,413
|
|
|
|
2,435
|
|
|
|
(.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
10
|
|
|
|
(10.0
|
)
|
|
|
|
|
|
|
9
|
|
|
|
10
|
|
|
|
(10.0
|
)
|
|
|
|
|
|
603
|
|
|
|
538
|
|
|
|
12.1
|
|
|
|
|
|
|
|
1,483
|
|
|
|
|
|
|
|
1,450
|
|
|
|
2.3
|
|
|
|
|
|
|
|
750
|
|
|
|
706
|
|
|
|
6.2
|
|
|
|
|
|
|
|
5,608
|
|
|
|
5,388
|
|
|
|
4.1
|
|
|
|
|
|
|
401
|
|
|
|
384
|
|
|
|
4.4
|
|
|
|
|
|
|
|
707
|
|
|
|
|
|
|
|
662
|
|
|
|
6.8
|
|
|
|
|
|
|
|
225
|
|
|
|
192
|
|
|
|
17.2
|
|
|
|
|
|
|
|
2,995
|
|
|
|
2,886
|
|
|
|
3.8
|
|
|
|
|
|
|
5
|
|
|
|
6
|
|
|
|
(16.7
|
)
|
|
|
|
|
|
|
30
|
|
|
|
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44
|
|
|
|
45
|
|
|
|
(2.2
|
)
|
|
|
|
|
|
406
|
|
|
|
390
|
|
|
|
4.1
|
|
|
|
|
|
|
|
737
|
|
|
|
|
|
|
|
692
|
|
|
|
6.5
|
|
|
|
|
|
|
|
225
|
|
|
|
192
|
|
|
|
17.2
|
|
|
|
|
|
|
|
3,039
|
|
|
|
2,931
|
|
|
|
3.7
|
|
|
|
|
|
|
197
|
|
|
|
148
|
|
|
|
33.1
|
|
|
|
|
|
|
|
746
|
|
|
|
|
|
|
|
758
|
|
|
|
(1.6
|
)
|
|
|
|
|
|
|
525
|
|
|
|
514
|
|
|
|
2.1
|
|
|
|
|
|
|
|
2,569
|
|
|
|
2,457
|
|
|
|
4.6
|
|
|
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
*
|
|
|
|
|
|
|
|
270
|
|
|
|
|
|
|
|
208
|
|
|
|
29.8
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
360
|
|
|
|
325
|
|
|
|
10.8
|
|
|
|
|
|
|
196
|
|
|
|
149
|
|
|
|
31.5
|
|
|
|
|
|
|
|
476
|
|
|
|
|
|
|
|
550
|
|
|
|
(13.5
|
)
|
|
|
|
|
|
|
524
|
|
|
|
514
|
|
|
|
1.9
|
|
|
|
|
|
|
|
2,209
|
|
|
|
2,132
|
|
|
|
3.6
|
|
|
|
|
|
|
71
|
|
|
|
54
|
|
|
|
31.5
|
|
|
|
|
|
|
|
173
|
|
|
|
|
|
|
|
200
|
|
|
|
(13.5
|
)
|
|
|
|
|
|
|
28
|
|
|
|
27
|
|
|
|
3.7
|
|
|
|
|
|
|
|
640
|
|
|
|
616
|
|
|
|
3.9
|
|
|
|
|
|
|
125
|
|
|
|
95
|
|
|
|
31.6
|
|
|
|
|
|
|
|
303
|
|
|
|
|
|
|
|
350
|
|
|
|
(13.4
|
)
|
|
|
|
|
|
|
496
|
|
|
|
487
|
|
|
|
1.8
|
|
|
|
|
|
|
|
1,569
|
|
|
|
1,516
|
|
|
|
3.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
|
|
*
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
(14
|
)
|
|
|
57.1
|
|
|
|
|
|
$
|
125
|
|
|
$
|
95
|
|
|
|
31.6
|
|
|
|
|
|
|
$
|
303
|
|
|
|
|
|
|
$
|
342
|
|
|
|
(11.4
|
)
|
|
|
|
|
|
$
|
490
|
|
|
$
|
481
|
|
|
|
1.9
|
|
|
|
|
|
|
$
|
1,563
|
|
|
$
|
1,502
|
|
|
|
4.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,504
|
|
|
$
|
2,892
|
|
|
|
21.2
|
%
|
|
|
|
|
|
$
|
8,233
|
|
|
|
|
|
|
$
|
7,766
|
|
|
|
6.0
|
%
|
|
|
|
|
|
$
|
697
|
|
|
$
|
351
|
|
|
|
98.6
|
%
|
|
|
|
|
|
$
|
96,633
|
|
|
$
|
92,369
|
|
|
|
4.6
|
%
|
|
|
|
|
|
514
|
|
|
|
516
|
|
|
|
(.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,639
|
|
|
|
3,085
|
|
|
|
(14.5
|
)
|
|
|
|
|
|
|
41,621
|
|
|
|
43,374
|
|
|
|
(4.0
|
)
|
|
|
|
|
|
2,893
|
|
|
|
2,343
|
|
|
|
23.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,030
|
|
|
|
56,284
|
|
|
|
4.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,926
|
|
|
|
|
|
|
|
20,628
|
|
|
|
1.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,926
|
|
|
|
20,628
|
|
|
|
1.4
|
|
|
|
|
|
|
1,684
|
|
|
|
1,548
|
|
|
|
8.8
|
|
|
|
|
|
|
|
453
|
|
|
|
|
|
|
|
515
|
|
|
|
(12.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,069
|
|
|
|
52,851
|
|
|
|
6.1
|
|
|
|
|
|
|
8,595
|
|
|
|
7,299
|
|
|
|
17.8
|
|
|
|
|
|
|
|
29,612
|
|
|
|
|
|
|
|
28,909
|
|
|
|
2.4
|
|
|
|
|
|
|
|
3,336
|
|
|
|
3,436
|
|
|
|
(2.9
|
)
|
|
|
|
|
|
|
274,279
|
|
|
|
265,506
|
|
|
|
3.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
|
|
*
|
|
|
|
|
|
|
|
3,347
|
|
|
|
4,131
|
|
|
|
(19.0
|
)
|
|
|
|
|
|
8,595
|
|
|
|
7,299
|
|
|
|
17.8
|
|
|
|
|
|
|
|
29,612
|
|
|
|
|
|
|
|
28,909
|
|
|
|
2.4
|
|
|
|
|
|
|
|
3,336
|
|
|
|
3,460
|
|
|
|
(3.6
|
)
|
|
|
|
|
|
|
277,626
|
|
|
|
269,637
|
|
|
|
3.0
|
|
|
|
|
|
|
1,568
|
|
|
|
1,567
|
|
|
|
.1
|
|
|
|
|
|
|
|
2,469
|
|
|
|
|
|
|
|
2,463
|
|
|
|
.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,365
|
|
|
|
9,358
|
|
|
|
.1
|
|
|
|
|
|
|
79
|
|
|
|
99
|
|
|
|
(20.2
|
)
|
|
|
|
|
|
|
385
|
|
|
|
|
|
|
|
494
|
|
|
|
(22.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,178
|
|
|
|
2,879
|
|
|
|
10.4
|
|
|
|
|
|
|
11,495
|
|
|
|
10,383
|
|
|
|
10.7
|
|
|
|
|
|
|
|
35,035
|
|
|
|
|
|
|
|
34,715
|
|
|
|
.9
|
|
|
|
|
|
|
|
145,036
|
|
|
|
138,400
|
|
|
|
4.8
|
|
|
|
|
|
|
|
450,630
|
|
|
|
437,863
|
|
|
|
2.9
|
|
|
|
|
|
|
14,715
|
|
|
|
13,803
|
|
|
|
6.6
|
|
|
|
|
|
|
|
1,029
|
|
|
|
|
|
|
|
954
|
|
|
|
7.9
|
|
|
|
|
|
|
|
2,162
|
|
|
|
2,224
|
|
|
|
(2.8
|
)
|
|
|
|
|
|
|
81,964
|
|
|
|
82,021
|
|
|
|
(.1
|
)
|
|
|
|
|
|
10,917
|
|
|
|
9,958
|
|
|
|
9.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38
|
|
|
|
35
|
|
|
|
8.6
|
|
|
|
|
|
|
|
68,066
|
|
|
|
63,456
|
|
|
|
7.3
|
|
|
|
|
|
|
42,209
|
|
|
|
37,966
|
|
|
|
11.2
|
|
|
|
|
|
|
|
103
|
|
|
|
|
|
|
|
98
|
|
|
|
5.1
|
|
|
|
|
|
|
|
445
|
|
|
|
492
|
|
|
|
(9.6
|
)
|
|
|
|
|
|
|
148,721
|
|
|
|
140,616
|
|
|
|
5.8
|
|
|
|
|
|
|
3,521
|
|
|
|
3,776
|
|
|
|
(6.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
369
|
|
|
|
908
|
|
|
|
(59.4
|
)
|
|
|
|
|
|
|
36,400
|
|
|
|
32,455
|
|
|
|
12.2
|
|
|
|
|
|
|
71,362
|
|
|
|
65,503
|
|
|
|
8.9
|
|
|
|
|
|
|
|
1,132
|
|
|
|
|
|
|
|
1,052
|
|
|
|
7.6
|
|
|
|
|
|
|
|
3,014
|
|
|
|
3,659
|
|
|
|
(17.6
|
)
|
|
|
|
|
|
|
335,151
|
|
|
|
318,548
|
|
|
|
5.2
|
|
|
|
|
|
|
2,381
|
|
|
|
2,378
|
|
|
|
.1
|
|
|
|
|
|
|
|
6,206
|
|
|
|
|
|
|
|
6,385
|
|
|
|
(2.8
|
)
|
|
|
|
|
|
|
18,791
|
|
|
|
18,719
|
|
|
|
.4
|
|
|
|
|
|
|
|
48,819
|
|
|
|
47,791
|
|
|
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
Wealth Management and
Securities Services
|
|
|
Payment
Services
|
|
|
|
|
|
Treasury and
Corporate Support
|
|
|
|
|
|
Consolidated
Company
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Percent
Change
|
|
|
|
|
|
2017
|
|
|
|
|
|
2016
|
|
|
Percent
Change
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Percent
Change
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Percent
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
558
|
|
|
$
|
374
|
|
|
|
49.2
|
%
|
|
|
|
|
|
$
|
1,653
|
|
|
|
|
|
|
$
|
1,579
|
|
|
|
4.7
|
%
|
|
|
|
|
|
$
|
1,443
|
|
|
$
|
1,613
|
|
|
|
(10.5
|
)%
|
|
|
|
|
|
$
|
9,249
|
|
|
$
|
8,727
|
|
|
|
6.0
|
%
|
|
|
|
|
|
1,222
|
|
|
|
1,183
|
|
|
|
3.3
|
|
|
|
|
|
|
|
2,686
|
|
|
|
|
|
|
|
2,651
|
|
|
|
1.3
|
|
|
|
|
|
|
|
681
|
|
|
|
721
|
|
|
|
(5.5
|
)
|
|
|
|
|
|
|
7,123
|
|
|
|
7,130
|
|
|
|
(.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50
|
|
|
|
16
|
|
|
|
*
|
|
|
|
|
|
|
|
47
|
|
|
|
16
|
|
|
|
*
|
|
|
|
|
|
|
1,780
|
|
|
|
1,557
|
|
|
|
14.3
|
|
|
|
|
|
|
|
4,339
|
|
|
|
|
|
|
|
4,230
|
|
|
|
2.6
|
|
|
|
|
|
|
|
2,174
|
|
|
|
2,350
|
|
|
|
(7.5
|
)
|
|
|
|
|
|
|
16,419
|
|
|
|
15,873
|
|
|
|
3.4
|
|
|
|
|
|
|
1,194
|
|
|
|
1,113
|
|
|
|
7.3
|
|
|
|
|
|
|
|
2,069
|
|
|
|
|
|
|
|
1,941
|
|
|
|
6.6
|
|
|
|
|
|
|
|
603
|
|
|
|
672
|
|
|
|
(10.3
|
)
|
|
|
|
|
|
|
8,875
|
|
|
|
8,538
|
|
|
|
3.9
|
|
|
|
|
|
|
15
|
|
|
|
18
|
|
|
|
(16.7
|
)
|
|
|
|
|
|
|
91
|
|
|
|
|
|
|
|
89
|
|
|
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
131
|
|
|
|
134
|
|
|
|
(2.2
|
)
|
|
|
|
|
|
1,209
|
|
|
|
1,131
|
|
|
|
6.9
|
|
|
|
|
|
|
|
2,160
|
|
|
|
|
|
|
|
2,030
|
|
|
|
6.4
|
|
|
|
|
|
|
|
603
|
|
|
|
672
|
|
|
|
(10.3
|
)
|
|
|
|
|
|
|
9,006
|
|
|
|
8,672
|
|
|
|
3.9
|
|
|
|
|
|
|
571
|
|
|
|
426
|
|
|
|
34.0
|
|
|
|
|
|
|
|
2,179
|
|
|
|
|
|
|
|
2,200
|
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
1,571
|
|
|
|
1,678
|
|
|
|
(6.4
|
)
|
|
|
|
|
|
|
7,413
|
|
|
|
7,201
|
|
|
|
2.9
|
|
|
|
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
*
|
|
|
|
|
|
|
|
794
|
|
|
|
|
|
|
|
615
|
|
|
|
29.1
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
5
|
|
|
|
*
|
|
|
|
|
|
|
|
1,055
|
|
|
|
982
|
|
|
|
7.4
|
|
|
|
|
|
|
570
|
|
|
|
428
|
|
|
|
33.2
|
|
|
|
|
|
|
|
1,385
|
|
|
|
|
|
|
|
1,585
|
|
|
|
(12.6
|
)
|
|
|
|
|
|
|
1,572
|
|
|
|
1,673
|
|
|
|
(6.0
|
)
|
|
|
|
|
|
|
6,358
|
|
|
|
6,219
|
|
|
|
2.2
|
|
|
|
|
|
|
207
|
|
|
|
155
|
|
|
|
33.5
|
|
|
|
|
|
|
|
504
|
|
|
|
|
|
|
|
577
|
|
|
|
(12.7
|
)
|
|
|
|
|
|
|
50
|
|
|
|
111
|
|
|
|
(55.0
|
)
|
|
|
|
|
|
|
1,791
|
|
|
|
1,766
|
|
|
|
1.4
|
|
|
|
|
|
|
363
|
|
|
|
273
|
|
|
|
33.0
|
|
|
|
|
|
|
|
881
|
|
|
|
|
|
|
|
1,008
|
|
|
|
(12.6
|
)
|
|
|
|
|
|
|
1,522
|
|
|
|
1,562
|
|
|
|
(2.6
|
)
|
|
|
|
|
|
|
4,567
|
|
|
|
4,453
|
|
|
|
2.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
(25
|
)
|
|
|
48.0
|
|
|
|
|
|
|
|
(18
|
)
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
(31
|
)
|
|
|
(43
|
)
|
|
|
27.9
|
|
|
|
|
|
$
|
363
|
|
|
$
|
273
|
|
|
|
33.0
|
|
|
|
|
|
|
$
|
868
|
|
|
|
|
|
|
$
|
983
|
|
|
|
(11.7
|
)
|
|
|
|
|
|
$
|
1,504
|
|
|
$
|
1,544
|
|
|
|
(2.6
|
)
|
|
|
|
|
|
$
|
4,536
|
|
|
$
|
4,410
|
|
|
|
2.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,356
|
|
|
$
|
2,874
|
|
|
|
16.8
|
%
|
|
|
|
|
|
$
|
7,942
|
|
|
|
|
|
|
$
|
7,438
|
|
|
|
6.8
|
%
|
|
|
|
|
|
$
|
656
|
|
|
$
|
358
|
|
|
|
83.2
|
%
|
|
|
|
|
|
$
|
95,347
|
|
|
$
|
91,451
|
|
|
|
4.3
|
%
|
|
|
|
|
|
511
|
|
|
|
524
|
|
|
|
(2.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,715
|
|
|
|
3,159
|
|
|
|
(14.1
|
)
|
|
|
|
|
|
|
42,437
|
|
|
|
42,922
|
|
|
|
(1.1
|
)
|
|
|
|
|
|
2,764
|
|
|
|
2,200
|
|
|
|
25.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58,496
|
|
|
|
55,334
|
|
|
|
5.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,801
|
|
|
|
|
|
|
|
20,339
|
|
|
|
2.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,801
|
|
|
|
20,339
|
|
|
|
2.3
|
|
|
|
|
|
|
1,658
|
|
|
|
1,537
|
|
|
|
7.9
|
|
|
|
|
|
|
|
466
|
|
|
|
|
|
|
|
532
|
|
|
|
(12.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,835
|
|
|
|
51,809
|
|
|
|
5.8
|
|
|
|
|
|
|
8,289
|
|
|
|
7,135
|
|
|
|
16.2
|
|
|
|
|
|
|
|
29,209
|
|
|
|
|
|
|
|
28,309
|
|
|
|
3.2
|
|
|
|
|
|
|
|
3,371
|
|
|
|
3,517
|
|
|
|
(4.2
|
)
|
|
|
|
|
|
|
271,916
|
|
|
|
261,855
|
|
|
|
3.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
35
|
|
|
|
(80.0
|
)
|
|
|
|
|
|
|
3,538
|
|
|
|
4,324
|
|
|
|
(18.2
|
)
|
|
|
|
|
|
8,289
|
|
|
|
7,135
|
|
|
|
16.2
|
|
|
|
|
|
|
|
29,209
|
|
|
|
|
|
|
|
28,309
|
|
|
|
3.2
|
|
|
|
|
|
|
|
3,378
|
|
|
|
3,552
|
|
|
|
(4.9
|
)
|
|
|
|
|
|
|
275,454
|
|
|
|
266,179
|
|
|
|
3.5
|
|
|
|
|
|
|
1,567
|
|
|
|
1,567
|
|
|
|
|
|
|
|
|
|
|
|
2,459
|
|
|
|
|
|
|
|
2,466
|
|
|
|
(.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,355
|
|
|
|
9,361
|
|
|
|
(.1
|
)
|
|
|
|
|
|
83
|
|
|
|
104
|
|
|
|
(20.2
|
)
|
|
|
|
|
|
|
409
|
|
|
|
|
|
|
|
502
|
|
|
|
(18.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,239
|
|
|
|
3,017
|
|
|
|
7.4
|
|
|
|
|
|
|
11,454
|
|
|
|
10,251
|
|
|
|
11.7
|
|
|
|
|
|
|
|
34,794
|
|
|
|
|
|
|
|
34,226
|
|
|
|
1.7
|
|
|
|
|
|
|
|
142,327
|
|
|
|
134,301
|
|
|
|
6.0
|
|
|
|
|
|
|
|
446,049
|
|
|
|
429,421
|
|
|
|
3.9
|
|
|
|
|
|
|
14,836
|
|
|
|
13,249
|
|
|
|
12.0
|
|
|
|
|
|
|
|
1,023
|
|
|
|
|
|
|
|
947
|
|
|
|
8.0
|
|
|
|
|
|
|
|
2,066
|
|
|
|
2,097
|
|
|
|
(1.5
|
)
|
|
|
|
|
|
|
81,808
|
|
|
|
79,928
|
|
|
|
2.4
|
|
|
|
|
|
|
10,438
|
|
|
|
9,319
|
|
|
|
12.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
|
|
|
|
41
|
|
|
|
4.9
|
|
|
|
|
|
|
|
67,021
|
|
|
|
60,746
|
|
|
|
10.3
|
|
|
|
|
|
|
42,559
|
|
|
|
35,520
|
|
|
|
19.8
|
|
|
|
|
|
|
|
101
|
|
|
|
|
|
|
|
97
|
|
|
|
4.1
|
|
|
|
|
|
|
|
446
|
|
|
|
496
|
|
|
|
(10.1
|
)
|
|
|
|
|
|
|
150,121
|
|
|
|
133,191
|
|
|
|
12.7
|
|
|
|
|
|
|
4,182
|
|
|
|
3,742
|
|
|
|
11.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
265
|
|
|
|
2,312
|
|
|
|
(88.5
|
)
|
|
|
|
|
|
|
32,660
|
|
|
|
33,447
|
|
|
|
(2.4
|
)
|
|
|
|
|
|
72,015
|
|
|
|
61,830
|
|
|
|
16.5
|
|
|
|
|
|
|
|
1,124
|
|
|
|
|
|
|
|
1,044
|
|
|
|
7.7
|
|
|
|
|
|
|
|
2,820
|
|
|
|
4,946
|
|
|
|
(43.0
|
)
|
|
|
|
|
|
|
331,610
|
|
|
|
307,312
|
|
|
|
7.9
|
|
|
|
|
|
|
2,383
|
|
|
|
2,379
|
|
|
|
.2
|
|
|
|
|
|
|
|
6,280
|
|
|
|
|
|
|
|
6,361
|
|
|
|
(1.3
|
)
|
|
|
|
|
|
|
18,345
|
|
|
|
18,435
|
|
|
|
(.5
|
)
|
|
|
|
|
|
|
48,342
|
|
|
|
47,240
|
|
|
|
2.3
|
|
Noninterest expense increased $16 million (4.1 percent) in the third quarter
and $78 million (6.9 percent) in the first nine months of 2017, compared with the same periods of 2016. The increases were primarily the result of higher compensation expense, reflecting the impact of higher staffing and merit increases,
higher net shared services expense, and higher FDIC insurance surcharges.
Payment Services
Payment Services includes consumer and business credit cards, stored-value cards, debit cards, corporate, government and purchasing card services, consumer lines of credit and merchant
processing. Payment Services contributed $303 million of the Companys net income in the third quarter and $868 million in the first nine months of 2017, or decreases of $39 million (11.4 percent) and $115 million
(11.7 percent), respectively, compared with the same periods of 2016.
Net revenue increased $33 million (2.3 percent) in
the third quarter and $109 million (2.6 percent) in the first nine months of 2017, compared with the same periods of 2016. Net interest income, on a taxable-equivalent basis, increased $25 million (4.6 percent) in the third quarter and
$74 million (4.7 percent) in the first nine months of 2017, compared with the same periods of 2016, primarily due to higher average loan volumes and rising interest rates, in addition to growth in loan fees. Noninterest income increased
$8 million (0.9 percent) in the third quarter and $35 million (1.3 percent) in the first nine months of 2017, compared with the same periods of 2016, primarily due to higher credit and debit card revenue and corporate payment products
revenue, both driven by higher sales. These increases were partially offset by lower merchant processing services revenue in the third quarter of 2017 due to the Company exiting certain joint ventures in the second quarter of 2017 and the impacts of
recent weather events. The increase in noninterest income for the first nine months of 2017 was further offset by the impact of a gain on the sale of an equity investment in the prior year.
Noninterest expense increased $45 million (6.5 percent) in the third quarter and $130 million (6.4 percent) in the first
nine months of 2017, compared with the same periods of 2016, principally due to higher net shared services expense, driven by implementation costs of capital investments to support business growth, and higher compensation and employee benefits
expenses, reflecting higher staffing to support business investment and compliance programs and merit increases. The provision for credit losses increased $62 million (29.8 percent) in the third quarter and $179 million (29.1 percent) in
the first nine months of 2017, compared with the same periods of 2016, due to unfavorable changes in the reserve allocation related to portfolio growth and higher loss rates, as well as higher net charge-offs.
Treasury and Corporate
Support
Treasury and Corporate Support includes the Companys investment portfolios, funding, capital management, interest rate risk management, income taxes not
allocated to the business lines, including most investments in
tax-advantaged
projects, and the residual aggregate of those expenses associated with corporate activities that are managed on a consolidated
basis. Treasury and Corporate Support recorded net income of $490 million in the third quarter and $1.5 billion in the first nine months of 2017, compared with $481 million and $1.5 billion in the same periods of 2016,
respectively.
Net revenue increased $44 million (6.2 percent) in the third quarter and decreased $176 million
(7.5 percent) in the first nine months of 2017, compared with the same periods of 2016. Net interest income, on a taxable-equivalent basis, decreased $2 million (0.4 percent) in the third quarter and $170 million (10.5 percent) in the
first nine months of 2017, compared with the same periods of 2016, principally due to the impact of rising rates on the margin benefit on deposits credited to the business lines, partially offset by growth in the investment portfolio. Total
noninterest income increased $46 million (23.2 percent) in the third quarter of 2017, compared with the third quarter of 2016, principally due to higher equity investment income. Total noninterest income decreased $6 million (0.8
percent) in the first nine months of 2017, compared with the same period of 2016, primarily due to the impact of the 2016 Visa Europe sale, partially offset by higher income from other equity investments and higher gains on sales of investment
securities in the current year.
Noninterest expense increased $33 million (17.2 percent) in the third quarter of 2017,
compared with the third quarter of 2016, principally due to higher compensation expense, reflecting the impact of increased staffing and merit increases including variable compensation, and higher accruals for legal and regulatory matters, partially
offset by lower net shared services expense. Noninterest expense decreased $69 million (10.3 percent) in the first nine months of 2017, compared with the same period of 2016, principally due to lower net shared services expense in the current
year, and the impacts of an increase in reserves related to legal and regulatory matters and a charitable contribution, both recorded in the second quarter of 2016. These decreases were partially offset by increased compensation expense recorded in
the current
year. The provision for credit losses was $6 million lower in the first nine months of 2017, compared with the same period of 2016, primarily due to lower net charge-offs.
Income taxes are assessed to each line of business at a managerial tax rate of 36.4 percent with the residual tax expense or benefit to
arrive at the consolidated effective tax rate included in Treasury and Corporate Support.
NON-GAAP
FINANCIAL MEASURES
In addition to capital ratios defined by banking regulators, the Company considers various other measures when evaluating capital utilization and adequacy,
including:
|
|
Tangible common equity to tangible assets,
|
|
|
Tangible common equity to risk-weighted assets,
|
|
|
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented standardized approach, and
|
|
|
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced approaches.
|
These capital measures are viewed by management as useful additional methods of reflecting the level of capital available to withstand
unexpected negative market or economic conditions. Additionally, presentation of these measures allows investors, analysts and banking regulators to assess the Companys capital position relative to other financial services companies. These
measures differ from currently effective capital ratios defined by banking regulations principally in that the numerator of the currently effective ratios, which are subject to certain transitional provisions, temporarily excludes a portion of
unrealized gains and losses related to
available-for-sale
securities and retirement plan obligations, and includes a portion of capital related to intangible assets,
other than MSRs. These capital measures are not defined in generally accepted accounting principles (GAAP), or are not currently effective or defined in federal banking regulations. As a result, these capital measures disclosed by the
Company may be considered
non-GAAP
financial measures.
The Company also discloses net interest
income and related ratios and analysis on a taxable-equivalent basis, which may also be considered
non-GAAP
financial measures. The Company believes this presentation to be the preferred industry measurement
of net interest income as it provides a relevant comparison of net interest income arising from taxable and
tax-exempt
sources. In addition, certain performance measures, including the efficiency ratio and net
interest margin utilize net interest income on a taxable-equivalent basis.
There may be limits in the usefulness of these measures to
investors. As a result, the Company encourages readers to consider the consolidated financial statements and other financial information contained in this report in their entirety, and not to rely on any single financial measure.
The following table shows the Companys calculation of these
non-GAAP
financial measures:
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
Total equity
|
|
$
|
49,351
|
|
|
$
|
47,933
|
|
Preferred stock
|
|
|
(5,419
|
)
|
|
|
(5,501
|
)
|
Noncontrolling interests
|
|
|
(628
|
)
|
|
|
(635
|
)
|
Goodwill (net of deferred tax liability) (1)
|
|
|
(8,141
|
)
|
|
|
(8,203
|
)
|
Intangible assets, other than mortgage servicing rights
|
|
|
(595
|
)
|
|
|
(712
|
)
|
Tangible common equity (a)
|
|
|
34,568
|
|
|
|
32,882
|
|
|
|
|
Tangible common equity (as calculated above)
|
|
|
34,568
|
|
|
|
32,882
|
|
Adjustments (2)
|
|
|
(52
|
)
|
|
|
(55
|
)
|
Common equity tier 1 capital estimated for the Basel III fully implemented standardized and advanced
approaches (b)
|
|
|
34,516
|
|
|
|
32,827
|
|
|
|
|
Total assets
|
|
|
459,227
|
|
|
|
445,964
|
|
Goodwill (net of deferred tax liability) (1)
|
|
|
(8,141
|
)
|
|
|
(8,203
|
)
|
Intangible assets, other than mortgage servicing rights
|
|
|
(595
|
)
|
|
|
(712
|
)
|
Tangible assets (c)
|
|
|
450,491
|
|
|
|
437,049
|
|
|
|
|
Risk-weighted assets, determined in accordance with prescribed transitional standardized approach
regulatory
requirements (d)
|
|
|
363,957
|
|
|
|
358,237
|
|
Adjustments (3)
|
|
|
3,907
|
|
|
|
4,027
|
|
Risk-weighted assets estimated for the Basel III fully implemented standardized approach (e)
|
|
|
367,864
|
|
|
|
362,264
|
|
Risk-weighted assets, determined in accordance with prescribed transitional advanced approaches regulatory
requirements
|
|
|
287,800
|
|
|
|
277,141
|
|
Adjustments (4)
|
|
|
4,164
|
|
|
|
4,295
|
|
Risk-weighted assets estimated for the Basel III fully implemented advanced approaches (f)
|
|
|
291,964
|
|
|
|
281,436
|
|
Ratios
|
|
|
|
|
|
|
|
|
Tangible common equity to tangible assets (a)/(c)
|
|
|
7.7
|
%
|
|
|
7.5
|
%
|
Tangible common equity to risk-weighted assets (a)/(d)
|
|
|
9.5
|
|
|
|
9.2
|
|
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented
standardized
approach (b)/(e)
|
|
|
9.4
|
|
|
|
9.1
|
|
Common equity tier 1 capital to risk-weighted assets estimated for the Basel III fully implemented advanced
approaches (b)/(f)
|
|
|
11.8
|
|
|
|
11.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
2017
|
|
|
2016
|
|
Net interest income
|
|
$
|
3,135
|
|
|
$
|
2,893
|
|
|
|
|
|
|
$
|
9,097
|
|
|
$
|
8,573
|
|
Taxable-equivalent adjustment (5)
|
|
|
51
|
|
|
|
50
|
|
|
|
|
|
|
|
152
|
|
|
|
154
|
|
Net interest income, on a taxable-equivalent basis
|
|
|
3,186
|
|
|
|
2,943
|
|
|
|
|
|
|
|
9,249
|
|
|
|
8,727
|
|
|
|
|
|
|
|
Net interest income, on a taxable-equivalent basis (as calculated above)
|
|
|
3,186
|
|
|
|
2,943
|
|
|
|
|
|
|
|
9,249
|
|
|
|
8,727
|
|
Noninterest income
|
|
|
2,422
|
|
|
|
2,445
|
|
|
|
|
|
|
|
7,170
|
|
|
|
7,146
|
|
Less: Securities gains (losses), net
|
|
|
9
|
|
|
|
10
|
|
|
|
|
|
|
|
47
|
|
|
|
16
|
|
Total net revenue, excluding net securities gains (losses) (g)
|
|
|
5,599
|
|
|
|
5,378
|
|
|
|
|
|
|
|
16,372
|
|
|
|
15,857
|
|
|
|
|
|
|
|
Noninterest expense (h)
|
|
|
3,039
|
|
|
|
2,931
|
|
|
|
|
|
|
|
9,006
|
|
|
|
8,672
|
|
|
|
|
|
|
|
Efficiency ratio (h)/(g)
|
|
|
54.3
|
%
|
|
|
54.5
|
%
|
|
|
|
|
|
|
55.0
|
%
|
|
|
54.7
|
%
|
(1)
|
Includes goodwill related to certain investments in unconsolidated financial institutions per prescribed regulatory requirements.
|
(2)
|
Includes net (gains) losses on cash flow hedges included in accumulated other comprehensive income (loss) and other adjustments.
|
(3)
|
Includes higher risk-weighting for unfunded loan commitments, investment securities, residential mortgages, MSRs and other adjustments.
|
(4)
|
Primarily reflects higher risk-weighting for MSRs.
|
(5)
|
Utilizes a tax rate of 35 percent for those assets and liabilities whose income or expense is not included for federal income tax purposes.
|
CRITICAL ACCOUNTING POLICIES
The accounting and reporting policies of the Company comply with accounting principles generally accepted in the United States and conform to general
practices within the banking industry. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. The Companys financial position and results of operations can be affected by these
estimates and assumptions, which are integral to understanding the Companys financial statements. Critical accounting policies are those policies management believes are the most important to the portrayal of the Companys financial
condition and results, and require management to make estimates that are difficult, subjective or complex. Most accounting policies are not considered by management to be critical accounting policies. Those policies considered to be critical
accounting policies relate to the allowance for credit losses, fair value estimates, purchased loans and related indemnification assets, MSRs, goodwill and other intangibles and income taxes. Management has discussed the development and the
selection of critical accounting policies with the Companys Audit Committee. These accounting policies are discussed in detail in Managements Discussion and Analysis Critical Accounting Policies and the Notes to
Consolidated Financial Statements in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2016.
CONTROLS AND PROCEDURES
Under
the supervision and with the participation of the Companys management, including its principal executive officer and principal financial officer, the Company has evaluated the effectiveness of the design and operation of its disclosure
controls and procedures (as defined in
Rules 13a-15(e)
and
15d-15(e)
under the Securities Exchange Act of 1934 (the Exchange Act)). Based upon this
evaluation, the principal executive officer and principal financial officer have concluded that, as of the end of the period covered by this report, the Companys disclosure controls and procedures were effective.
During the most recently completed fiscal quarter, there was no change made in the Companys internal control over financial reporting
(as defined in Rules
13a-15(f)
and
15d-15(f)
under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Companys
internal control over financial reporting.
U.S. Bancorp
Consolidated Balance Sheet
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
|
|
|
(Unaudited
|
)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
20,540
|
|
|
$
|
15,705
|
|
Investment securities
|
|
|
|
|
|
|
|
|
Held-to-maturity
(fair
value $43,758 and $42,435, respectively)
|
|
|
44,018
|
|
|
|
42,991
|
|
Available-for-sale
($686
and $755 pledged as collateral, respectively) (a)
|
|
|
67,772
|
|
|
|
66,284
|
|
Loans held for sale (including $3,754 and $4,822 of mortgage loans carried at fair value,
respectively)
|
|
|
3,757
|
|
|
|
4,826
|
|
Loans
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
96,928
|
|
|
|
93,386
|
|
Commercial real estate
|
|
|
41,430
|
|
|
|
43,098
|
|
Residential mortgages
|
|
|
59,317
|
|
|
|
57,274
|
|
Credit card
|
|
|
20,923
|
|
|
|
21,749
|
|
Other retail
|
|
|
56,859
|
|
|
|
53,864
|
|
Total loans, excluding covered loans
|
|
|
275,457
|
|
|
|
269,371
|
|
Covered loans
|
|
|
3,262
|
|
|
|
3,836
|
|
Total loans
|
|
|
278,719
|
|
|
|
273,207
|
|
Less allowance for loan losses
|
|
|
(3,908
|
)
|
|
|
(3,813
|
)
|
Net loans
|
|
|
274,811
|
|
|
|
269,394
|
|
Premises and equipment
|
|
|
2,402
|
|
|
|
2,443
|
|
Goodwill
|
|
|
9,370
|
|
|
|
9,344
|
|
Other intangible assets
|
|
|
3,193
|
|
|
|
3,303
|
|
Other assets (including $445 and $314 of trading securities at fair value pledged as collateral,
respectively) (a)
|
|
|
33,364
|
|
|
|
31,674
|
|
Total assets
|
|
$
|
459,227
|
|
|
$
|
445,964
|
|
Liabilities and Shareholders Equity
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
|
|
|
Noninterest-bearing
|
|
$
|
82,152
|
|
|
$
|
86,097
|
|
Interest-bearing (b)
|
|
|
260,437
|
|
|
|
248,493
|
|
Total deposits
|
|
|
342,589
|
|
|
|
334,590
|
|
Short-term borrowings
|
|
|
15,856
|
|
|
|
13,963
|
|
Long-term debt
|
|
|
34,515
|
|
|
|
33,323
|
|
Other liabilities
|
|
|
16,916
|
|
|
|
16,155
|
|
Total liabilities
|
|
|
409,876
|
|
|
|
398,031
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
5,419
|
|
|
|
5,501
|
|
Common stock, par value $0.01 a share authorized: 4,000,000,000 shares; issued: 9/30/17 and 12/31/16
2,125,725,742 shares
|
|
|
21
|
|
|
|
21
|
|
Capital surplus
|
|
|
8,457
|
|
|
|
8,440
|
|
Retained earnings
|
|
|
53,023
|
|
|
|
50,151
|
|
Less cost of common stock in treasury: 9/30/17 458,958,607 shares; 12/31/16 428,813,585
shares
|
|
|
(16,978
|
)
|
|
|
(15,280
|
)
|
Accumulated other comprehensive income (loss)
|
|
|
(1,219
|
)
|
|
|
(1,535
|
)
|
Total U.S. Bancorp shareholders equity
|
|
|
48,723
|
|
|
|
47,298
|
|
Noncontrolling interests
|
|
|
628
|
|
|
|
635
|
|
Total equity
|
|
|
49,351
|
|
|
|
47,933
|
|
Total liabilities and equity
|
|
$
|
459,227
|
|
|
$
|
445,964
|
|
(a)
|
Includes only collateral pledged by the Company where counterparties have the right to sell or pledge the collateral.
|
(b)
|
Includes time deposits greater than $250,000 balances of $7.4 billion and $3.0 billion at September 30, 2017 and December 31, 2016, respectively.
|
See Notes to Consolidated Financial Statements.
U.S. Bancorp
Consolidated
Statement of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
(Dollars and Shares in Millions, Except Per Share Data)
(Unaudited)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Interest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
3,059
|
|
|
$
|
2,731
|
|
|
$
|
8,757
|
|
|
$
|
8,039
|
|
Loans held for sale
|
|
|
40
|
|
|
|
43
|
|
|
|
104
|
|
|
|
110
|
|
Investment securities
|
|
|
568
|
|
|
|
515
|
|
|
|
1,653
|
|
|
|
1,555
|
|
Other interest income
|
|
|
47
|
|
|
|
31
|
|
|
|
131
|
|
|
|
89
|
|
Total interest income
|
|
|
3,714
|
|
|
|
3,320
|
|
|
|
10,645
|
|
|
|
9,793
|
|
Interest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
293
|
|
|
|
161
|
|
|
|
730
|
|
|
|
452
|
|
Short-term borrowings
|
|
|
90
|
|
|
|
70
|
|
|
|
233
|
|
|
|
201
|
|
Long-term debt
|
|
|
196
|
|
|
|
196
|
|
|
|
585
|
|
|
|
567
|
|
Total interest expense
|
|
|
579
|
|
|
|
427
|
|
|
|
1,548
|
|
|
|
1,220
|
|
Net interest income
|
|
|
3,135
|
|
|
|
2,893
|
|
|
|
9,097
|
|
|
|
8,573
|
|
Provision for credit losses
|
|
|
360
|
|
|
|
325
|
|
|
|
1,055
|
|
|
|
982
|
|
Net interest income after provision for credit losses
|
|
|
2,775
|
|
|
|
2,568
|
|
|
|
8,042
|
|
|
|
7,591
|
|
Noninterest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit and debit card revenue
|
|
|
308
|
|
|
|
299
|
|
|
|
919
|
|
|
|
861
|
|
Corporate payment products revenue
|
|
|
201
|
|
|
|
190
|
|
|
|
564
|
|
|
|
541
|
|
Merchant processing services
|
|
|
405
|
|
|
|
412
|
|
|
|
1,190
|
|
|
|
1,188
|
|
ATM processing services
|
|
|
92
|
|
|
|
87
|
|
|
|
267
|
|
|
|
251
|
|
Trust and investment management fees
|
|
|
380
|
|
|
|
362
|
|
|
|
1,128
|
|
|
|
1,059
|
|
Deposit service charges
|
|
|
192
|
|
|
|
192
|
|
|
|
553
|
|
|
|
539
|
|
Treasury management fees
|
|
|
153
|
|
|
|
147
|
|
|
|
466
|
|
|
|
436
|
|
Commercial products revenue
|
|
|
221
|
|
|
|
219
|
|
|
|
638
|
|
|
|
654
|
|
Mortgage banking revenue
|
|
|
213
|
|
|
|
314
|
|
|
|
632
|
|
|
|
739
|
|
Investment products fees
|
|
|
39
|
|
|
|
41
|
|
|
|
120
|
|
|
|
120
|
|
Securities gains (losses), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gains (losses), net
|
|
|
9
|
|
|
|
12
|
|
|
|
47
|
|
|
|
19
|
|
Total other-than-temporary impairment
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
(4
|
)
|
Portion of other-than-temporary impairment recognized in other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Total securities gains (losses), net
|
|
|
9
|
|
|
|
10
|
|
|
|
47
|
|
|
|
16
|
|
Other
|
|
|
209
|
|
|
|
172
|
|
|
|
646
|
|
|
|
742
|
|
Total noninterest income
|
|
|
2,422
|
|
|
|
2,445
|
|
|
|
7,170
|
|
|
|
7,146
|
|
Noninterest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
1,440
|
|
|
|
1,329
|
|
|
|
4,247
|
|
|
|
3,855
|
|
Employee benefits
|
|
|
281
|
|
|
|
280
|
|
|
|
882
|
|
|
|
858
|
|
Net occupancy and equipment
|
|
|
258
|
|
|
|
250
|
|
|
|
760
|
|
|
|
741
|
|
Professional services
|
|
|
104
|
|
|
|
127
|
|
|
|
305
|
|
|
|
346
|
|
Marketing and business development
|
|
|
92
|
|
|
|
102
|
|
|
|
291
|
|
|
|
328
|
|
Technology and communications
|
|
|
246
|
|
|
|
243
|
|
|
|
723
|
|
|
|
717
|
|
Postage, printing and supplies
|
|
|
82
|
|
|
|
80
|
|
|
|
244
|
|
|
|
236
|
|
Other intangibles
|
|
|
44
|
|
|
|
45
|
|
|
|
131
|
|
|
|
134
|
|
Other
|
|
|
492
|
|
|
|
475
|
|
|
|
1,423
|
|
|
|
1,457
|
|
Total noninterest expense
|
|
|
3,039
|
|
|
|
2,931
|
|
|
|
9,006
|
|
|
|
8,672
|
|
Income before income taxes
|
|
|
2,158
|
|
|
|
2,082
|
|
|
|
6,206
|
|
|
|
6,065
|
|
Applicable income taxes
|
|
|
589
|
|
|
|
566
|
|
|
|
1,639
|
|
|
|
1,612
|
|
Net income
|
|
|
1,569
|
|
|
|
1,516
|
|
|
|
4,567
|
|
|
|
4,453
|
|
Net (income) loss attributable to noncontrolling interests
|
|
|
(6
|
)
|
|
|
(14
|
)
|
|
|
(31
|
)
|
|
|
(43
|
)
|
Net income attributable to U.S. Bancorp
|
|
$
|
1,563
|
|
|
$
|
1,502
|
|
|
$
|
4,536
|
|
|
$
|
4,410
|
|
Net income applicable to U.S. Bancorp common shareholders
|
|
$
|
1,485
|
|
|
$
|
1,434
|
|
|
$
|
4,302
|
|
|
$
|
4,198
|
|
Earnings per common share
|
|
$
|
.89
|
|
|
$
|
.84
|
|
|
$
|
2.56
|
|
|
$
|
2.44
|
|
Diluted earnings per common share
|
|
$
|
.88
|
|
|
$
|
.84
|
|
|
$
|
2.55
|
|
|
$
|
2.43
|
|
Dividends declared per common share
|
|
$
|
.30
|
|
|
$
|
.28
|
|
|
$
|
.86
|
|
|
$
|
.79
|
|
Average common shares outstanding
|
|
|
1,672
|
|
|
|
1,710
|
|
|
|
1,683
|
|
|
|
1,724
|
|
Average diluted common shares outstanding
|
|
|
1,678
|
|
|
|
1,716
|
|
|
|
1,689
|
|
|
|
1,730
|
|
See Notes to Consolidated Financial Statements.
U.S. Bancorp
Consolidated
Statement of Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
(Dollars in Millions)
(Unaudited)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net income
|
|
$
|
1,569
|
|
|
$
|
1,516
|
|
|
$
|
4,567
|
|
|
$
|
4,453
|
|
Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in unrealized gains and losses on securities
available-for-sale
|
|
|
24
|
|
|
|
(105
|
)
|
|
|
479
|
|
|
|
716
|
|
Other-than-temporary impairment not recognized in earnings on securities
available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
Changes in unrealized gains and losses on derivative hedges
|
|
|
(3
|
)
|
|
|
31
|
|
|
|
(33
|
)
|
|
|
(152
|
)
|
Foreign currency translation
|
|
|
2
|
|
|
|
6
|
|
|
|
11
|
|
|
|
(30
|
)
|
Reclassification to earnings of realized gains and losses
|
|
|
21
|
|
|
|
54
|
|
|
|
58
|
|
|
|
196
|
|
Income taxes related to other comprehensive income (loss)
|
|
|
(17
|
)
|
|
|
(3
|
)
|
|
|
(199
|
)
|
|
|
(289
|
)
|
Total other comprehensive income (loss)
|
|
|
27
|
|
|
|
(17
|
)
|
|
|
316
|
|
|
|
440
|
|
Comprehensive income
|
|
|
1,596
|
|
|
|
1,499
|
|
|
|
4,883
|
|
|
|
4,893
|
|
Comprehensive (income) loss attributable to noncontrolling interests
|
|
|
(6
|
)
|
|
|
(14
|
)
|
|
|
(31
|
)
|
|
|
(43
|
)
|
Comprehensive income attributable to U.S. Bancorp
|
|
$
|
1,590
|
|
|
$
|
1,485
|
|
|
$
|
4,852
|
|
|
$
|
4,850
|
|
See Notes to Consolidated Financial Statements.
U.S. Bancorp
Consolidated
Statement of Shareholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Bancorp Shareholders
|
|
|
|
|
|
|
|
(Dollars and Shares in Millions)
(Unaudited)
|
|
Common Shares
Outstanding
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Capital
Surplus
|
|
|
Retained
Earnings
|
|
|
Treasury
Stock
|
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
Total
U.S. Bancorp
Shareholders
Equity
|
|
|
Noncontrolling
Interests
|
|
|
Total
Equity
|
|
Balance December 31, 2015
|
|
|
1,745
|
|
|
$
|
5,501
|
|
|
$
|
21
|
|
|
$
|
8,376
|
|
|
$
|
46,377
|
|
|
$
|
(13,125
|
)
|
|
$
|
(1,019
|
)
|
|
$
|
46,131
|
|
|
$
|
686
|
|
|
$
|
46,817
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,410
|
|
|
|
|
|
|
|
|
|
|
|
4,410
|
|
|
|
43
|
|
|
|
4,453
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
440
|
|
|
|
440
|
|
|
|
|
|
|
|
440
|
|
Preferred stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(201
|
)
|
|
|
|
|
|
|
|
|
|
|
(201
|
)
|
|
|
|
|
|
|
(201
|
)
|
Common stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,364
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,364
|
)
|
|
|
|
|
|
|
(1,364
|
)
|
Issuance of common and treasury stock
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
(59
|
)
|
|
|
|
|
|
|
228
|
|
|
|
|
|
|
|
169
|
|
|
|
|
|
|
|
169
|
|
Purchase of treasury stock
|
|
|
(47
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,947
|
)
|
|
|
|
|
|
|
(1,947
|
)
|
|
|
|
|
|
|
(1,947
|
)
|
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(38
|
)
|
|
|
(38
|
)
|
Purchase of noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
(50
|
)
|
|
|
(40
|
)
|
Net other changes in noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Stock option and restricted stock grants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
111
|
|
|
|
|
|
|
|
111
|
|
Balance September 30, 2016
|
|
|
1,705
|
|
|
$
|
5,501
|
|
|
$
|
21
|
|
|
$
|
8,429
|
|
|
$
|
49,231
|
|
|
$
|
(14,844
|
)
|
|
$
|
(579
|
)
|
|
$
|
47,759
|
|
|
$
|
640
|
|
|
$
|
48,399
|
|
Balance December 31, 2016
|
|
|
1,697
|
|
|
$
|
5,501
|
|
|
$
|
21
|
|
|
$
|
8,440
|
|
|
$
|
50,151
|
|
|
$
|
(15,280
|
)
|
|
$
|
(1,535
|
)
|
|
$
|
47,298
|
|
|
$
|
635
|
|
|
$
|
47,933
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,536
|
|
|
|
|
|
|
|
|
|
|
|
4,536
|
|
|
|
31
|
|
|
|
4,567
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
316
|
|
|
|
316
|
|
|
|
|
|
|
|
316
|
|
Preferred stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(204
|
)
|
|
|
|
|
|
|
|
|
|
|
(204
|
)
|
|
|
|
|
|
|
(204
|
)
|
Common stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,450
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,450
|
)
|
|
|
|
|
|
|
(1,450
|
)
|
Issuance of preferred stock
|
|
|
|
|
|
|
993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
993
|
|
|
|
|
|
|
|
993
|
|
Redemption of preferred stock
|
|
|
|
|
|
|
(1,075
|
)
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,085
|
)
|
|
|
|
|
|
|
(1,085
|
)
|
Issuance of common and treasury stock
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
(115
|
)
|
|
|
|
|
|
|
257
|
|
|
|
|
|
|
|
142
|
|
|
|
|
|
|
|
142
|
|
Purchase of treasury stock
|
|
|
(37
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,955
|
)
|
|
|
|
|
|
|
(1,955
|
)
|
|
|
|
|
|
|
(1,955
|
)
|
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(41
|
)
|
|
|
(41
|
)
|
Net other changes in noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
3
|
|
Stock option and restricted stock grants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
132
|
|
|
|
|
|
|
|
132
|
|
Balance September 30, 2017
|
|
|
1,667
|
|
|
$
|
5,419
|
|
|
$
|
21
|
|
|
$
|
8,457
|
|
|
$
|
53,023
|
|
|
$
|
(16,978
|
)
|
|
$
|
(1,219
|
)
|
|
$
|
48,723
|
|
|
$
|
628
|
|
|
$
|
49,351
|
|
See Notes to Consolidated Financial Statements.
U.S. Bancorp
Consolidated
Statement of Cash Flows
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
(Unaudited)
|
|
Nine Months Ended
September 30,
|
|
|
2017
|
|
|
2016
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
Net income attributable to U.S. Bancorp
|
|
$
|
4,536
|
|
|
$
|
4,410
|
|
Adjustments to reconcile net income to net cash provided by operating activities
|
|
|
|
|
|
|
|
|
Provision for credit losses
|
|
|
1,055
|
|
|
|
982
|
|
Depreciation and amortization of premises and equipment
|
|
|
219
|
|
|
|
219
|
|
Amortization of intangibles
|
|
|
131
|
|
|
|
134
|
|
(Gain) loss on sale of loans held for sale
|
|
|
(544
|
)
|
|
|
(753
|
)
|
(Gain) loss on sale of securities and other assets
|
|
|
(387
|
)
|
|
|
(463
|
)
|
Loans originated for sale in the secondary market, net of repayments
|
|
|
(26,080
|
)
|
|
|
(31,975
|
)
|
Proceeds from sales of loans held for sale
|
|
|
27,481
|
|
|
|
30,033
|
|
Other, net
|
|
|
230
|
|
|
|
651
|
|
Net cash provided by operating activities
|
|
|
6,641
|
|
|
|
3,238
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
Proceeds from sales of
available-for-sale
investment securities
|
|
|
3,063
|
|
|
|
8,171
|
|
Proceeds from maturities of
held-to-maturity
investment securities
|
|
|
6,348
|
|
|
|
7,116
|
|
Proceeds from maturities of
available-for-sale
investment securities
|
|
|
9,459
|
|
|
|
10,252
|
|
Purchases of
held-to-maturity
investment securities
|
|
|
(7,403
|
)
|
|
|
(6,428
|
)
|
Purchases of
available-for-sale
investment securities
|
|
|
(13,575
|
)
|
|
|
(22,897
|
)
|
Net increase in loans outstanding
|
|
|
(5,698
|
)
|
|
|
(11,063
|
)
|
Proceeds from sales of loans
|
|
|
1,348
|
|
|
|
1,782
|
|
Purchases of loans
|
|
|
(2,245
|
)
|
|
|
(2,136
|
)
|
Other, net
|
|
|
(617
|
)
|
|
|
(38
|
)
|
Net cash used in investing activities
|
|
|
(9,320
|
)
|
|
|
(15,241
|
)
|
Financing Activities
|
|
|
|
|
|
|
|
|
Net increase in deposits
|
|
|
7,999
|
|
|
|
34,197
|
|
Net increase (decrease) in short-term borrowings
|
|
|
1,893
|
|
|
|
(12,182
|
)
|
Proceeds from issuance of long-term debt
|
|
|
7,726
|
|
|
|
10,631
|
|
Principal payments or redemption of long-term debt
|
|
|
(6,561
|
)
|
|
|
(4,806
|
)
|
Proceeds from issuance of preferred stock
|
|
|
993
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
138
|
|
|
|
159
|
|
Repurchase of preferred stock
|
|
|
(1,085
|
)
|
|
|
|
|
Repurchase of common stock
|
|
|
(1,950
|
)
|
|
|
(1,902
|
)
|
Cash dividends paid on preferred stock
|
|
|
(213
|
)
|
|
|
(206
|
)
|
Cash dividends paid on common stock
|
|
|
(1,426
|
)
|
|
|
(1,331
|
)
|
Purchase of noncontrolling interests
|
|
|
|
|
|
|
(40
|
)
|
Net cash provided by financing activities
|
|
|
7,514
|
|
|
|
24,520
|
|
Change in cash and due from banks
|
|
|
4,835
|
|
|
|
12,517
|
|
Cash and due from banks at beginning of period
|
|
|
15,705
|
|
|
|
11,147
|
|
Cash and due from banks at end of period
|
|
$
|
20,540
|
|
|
$
|
23,664
|
|
See Notes to Consolidated Financial Statements.
Notes to Consolidated Financial Statements
(Unaudited)
|
|
|
Note 1
|
|
Basis of Presentation
|
The accompanying consolidated financial statements have been prepared in accordance with the instructions to
Form 10-Q
and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations and cash flow activity required in accordance with
accounting principles generally accepted in the United States. In the opinion of management of U.S. Bancorp (the Company), all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of results
for the interim periods have been made. These financial statements and notes should be read in conjunction with the consolidated financial statements and notes included in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2016. Certain amounts in prior periods have been reclassified to conform to the current presentation.
Accounting policies for the lines of business are generally the same as those used in preparation of the consolidated financial statements
with respect to activities specifically attributable to each business line. However, the preparation of business line results requires management to establish methodologies to allocate funding costs, expenses and other financial elements to each
line of business. Table 11 Line of Business Financial Performance included in Managements Discussion and Analysis provides details of segment results. This information is incorporated by reference into these Notes to Consolidated
Financial Statements.
|
|
|
Note 2
|
|
Accounting Changes
|
Stock-Based Compensation
Effective January 1, 2017, the Company adopted accounting guidance, issued by the Financial Accounting Standards Board (FASB) in March 2016, simplifying the accounting for
stock-based compensation awards issued to employees. The guidance requires all excess tax benefits and deficiencies that pertain to stock-based compensation awards to be recognized within income tax expense instead of within capital surplus. The
adoption of this guidance did not have a material impact on the Companys financial statements.
Revenue Recognition
In May 2014, the FASB issued accounting guidance, effective for the Company on January 1, 2018, clarifying the principles for recognizing revenue from certain contracts
with customers. The guidance does not apply to revenue associated with financial instruments, such as loans and securities. The Company is currently evaluating the adoption of this guidance using either a fully retrospective approach, where the
guidance would be applied to all periods presented in the financial statements, or a modified retrospective approach, where the guidance would only be applied to existing contracts in effect at the adoption date and new contracts going forward. The
Company expects the adoption of this guidance will not be material to its financial statements.
Accounting for Leases
In February
2016, the FASB issued accounting guidance, effective for the Company on January 1, 2019, related to the accounting for leases. This guidance requires lessees to recognize all leases on the Consolidated Balance Sheet as lease assets and lease
liabilities based primarily on the present value of future lease payments. Lessor accounting is largely unchanged. A modified retrospective approach is required at adoption which requires all prior periods presented in the financial statements to be
restated, with a cumulative effect adjustment to retained earnings as of the beginning of the earliest period presented. This guidance also requires additional disclosures regarding leasing arrangements. The Company expects the adoption of this
guidance will not be material to its financial statements.
Financial InstrumentsCredit
Losses
In June 2016, the FASB issued accounting guidance, effective for the Company no later than January 1, 2020, related to the impairment of financial instruments. This
guidance changes existing impairment recognition to a model that is based on expected losses rather than incurred losses, which is intended to result in more timely recognition of credit losses. This guidance is also intended to reduce the
complexity of current accounting guidance by decreasing the number of credit impairment models that entities use to account for debt instruments. A modified retrospective approach is required at adoption with a cumulative effect adjustment to
retained earnings as of the adoption date. The guidance also requires additional credit quality disclosures for loans. The Company is currently evaluating the impact of this guidance on its financial statements, and expects its allowance for credit
losses to increase upon adoption. The extent of this increase will continue to be evaluated and will depend on economic conditions and the composition of the Companys loan portfolio at the time of adoption.
Financial InstrumentsHedge Accounting
In August 2017, the FASB issued accounting guidance, effective for the Company no later than January 1, 2019, related to hedge accounting. This guidance makes targeted changes to the hedge
accounting model to simplify the application of hedge accounting and more closely align financial reporting to an entitys risk management activities. This guidance expands risk management strategies that qualify for hedge accounting,
simplifies certain effectiveness assessment requirements, eliminates separate measurement and reporting of ineffectiveness and changes certain presentation and disclosure requirements for hedge accounting activities. The Company expects the adoption
of this guidance will not be material to its financial statements.
|
|
|
Note 3
|
|
Investment Securities
|
The amortized cost, other-than-temporary impairment recorded in other comprehensive income (loss), gross unrealized holding
gains and losses, and fair value of
held-to-maturity
and
available-for-sale
investment
securities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
Unrealized Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Losses
|
|
|
|
|
(Dollars in Millions)
|
|
Amortized
Cost
|
|
|
Unrealized
Gains
|
|
|
Other-than-
Temporary (e)
|
|
|
Other (f)
|
|
|
Fair
Value
|
|
|
|
|
|
Amortized
Cost
|
|
|
Unrealized
Gains
|
|
|
Other-than-
Temporary (e)
|
|
|
Other (f)
|
|
|
Fair
Value
|
|
Held-to-maturity
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agencies
|
|
$
|
5,193
|
|
|
$
|
17
|
|
|
$
|
|
|
|
$
|
(72
|
)
|
|
$
|
5,138
|
|
|
|
|
|
|
$
|
5,246
|
|
|
$
|
12
|
|
|
$
|
|
|
|
$
|
(132
|
)
|
|
$
|
5,126
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
38,787
|
|
|
|
101
|
|
|
|
|
|
|
|
(312
|
)
|
|
|
38,576
|
|
|
|
|
|
|
|
37,706
|
|
|
|
85
|
|
|
|
|
|
|
|
(529
|
)
|
|
|
37,262
|
|
Non-agency
non-prime
(d)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized debt obligations/Collateralized loan obligations
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
Other
|
|
|
7
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
8
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
Obligations of state and political subdivisions
|
|
|
6
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
6
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
Obligations of foreign governments
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
Other debt securities
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
14
|
|
Total
held-to-maturity
|
|
$
|
44,018
|
|
|
$
|
124
|
|
|
$
|
|
|
|
$
|
(384
|
)
|
|
$
|
43,758
|
|
|
|
|
|
|
$
|
42,991
|
|
|
$
|
106
|
|
|
$
|
|
|
|
$
|
(662
|
)
|
|
$
|
42,435
|
|
Available-for-sale
(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agencies
|
|
$
|
22,163
|
|
|
$
|
25
|
|
|
$
|
|
|
|
$
|
(120
|
)
|
|
$
|
22,068
|
|
|
|
|
|
|
$
|
17,314
|
|
|
$
|
11
|
|
|
$
|
|
|
|
$
|
(198
|
)
|
|
$
|
17,127
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
39,744
|
|
|
|
197
|
|
|
|
|
|
|
|
(388
|
)
|
|
|
39,553
|
|
|
|
|
|
|
|
43,558
|
|
|
|
225
|
|
|
|
|
|
|
|
(645
|
)
|
|
|
43,138
|
|
Non-agency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime (c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
240
|
|
|
|
6
|
|
|
|
(3
|
)
|
|
|
(1
|
)
|
|
|
242
|
|
Non-prime
(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
178
|
|
|
|
20
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
195
|
|
Commercial agency
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
Other asset-backed securities
|
|
|
418
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
425
|
|
|
|
|
|
|
|
475
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
483
|
|
Obligations of state and political subdivisions
|
|
|
5,681
|
|
|
|
88
|
|
|
|
|
|
|
|
(88
|
)
|
|
|
5,681
|
|
|
|
|
|
|
|
5,167
|
|
|
|
55
|
|
|
|
|
|
|
|
(183
|
)
|
|
|
5,039
|
|
Corporate debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
9
|
|
Other investments
|
|
|
27
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
37
|
|
|
|
|
|
|
|
27
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
36
|
|
Total
available-for-sale
|
|
$
|
68,041
|
|
|
$
|
327
|
|
|
$
|
|
|
|
$
|
(596
|
)
|
|
$
|
67,772
|
|
|
|
|
|
|
$
|
66,985
|
|
|
$
|
334
|
|
|
$
|
(6
|
)
|
|
$
|
(1,029
|
)
|
|
$
|
66,284
|
|
(a)
|
Held-to-maturity
investment securities are carried at historical cost or at fair value at the time of transfer from the
available-for-sale
to
held-to-maturity
category, adjusted for amortization of premiums and
accretion of discounts and credit-related other-than-temporary impairment.
|
(b)
|
Available-for-sale
investment securities are carried at fair value with unrealized net gains or losses reported within accumulated other
comprehensive income (loss) in shareholders equity.
|
(c)
|
Prime securities are those designated as such by the issuer at origination. When an issuer designation is unavailable, the Company determines at acquisition date the categorization based on asset pool characteristics
(such as weighted-average credit score,
loan-to-value,
loan type, prevalence of low documentation loans) and deal performance (such as pool delinquencies and security
market spreads). When the Company determines the designation, prime securities typically have a weighted-average credit score of 725 or higher and a
loan-to-value
of
80 percent or lower; however, other pool characteristics may result in designations that deviate from these credit score and
loan-to-value
thresholds.
|
(d)
|
Includes all securities not meeting the conditions to be designated as prime.
|
(e)
|
Represents impairment not related to credit for those investment securities that have been determined to be other-than-temporarily impaired.
|
(f)
|
Represents unrealized losses on investment securities that have not been determined to be other-than-temporarily impaired.
|
The weighted-average maturity of the
available-for-sale
investment securities was 5.1 years at September 30, 2017 and December 31, 2016. The corresponding weighted-average yields were 2.15 percent and 2.06 percent, respectively. The weighted-average maturity of the
held-to-maturity
investment securities was 4.7 years at September 30, 2017 and 4.6 years at December 31, 2016. The corresponding weighted-average yields were
2.09 percent and 1.93 percent, respectively.
For amortized cost, fair value and yield by maturity date of
held-to-maturity
and
available-for-sale
investment securities outstanding at September 30,
2017, refer to Table 4 included in Managements Discussion and Analysis, which is incorporated by reference into these Notes to Consolidated Financial Statements.
Investment securities with a fair value of $11.9 billion at September 30, 2017,
and $11.3 billion at December 31, 2016, were pledged to secure public, private and trust deposits, repurchase agreements and for other purposes required by contractual obligation or law. Included in these amounts were securities where the
Company and certain counterparties have agreements granting the counterparties the right to sell or pledge the securities. Investment securities securing these types of arrangements had a fair value of $686 million at September 30, 2017,
and $755 million at December 31, 2016.
The following table provides information about the amount of interest income from taxable and
non-taxable
investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
(Dollars in Millions)
|
|
2017
|
|
|
2016
|
|
|
|
|
|
2017
|
|
|
2016
|
|
Taxable
|
|
$
|
523
|
|
|
$
|
467
|
|
|
|
|
|
|
$
|
1,513
|
|
|
$
|
1,403
|
|
Non-taxable
|
|
|
45
|
|
|
|
48
|
|
|
|
|
|
|
|
140
|
|
|
|
152
|
|
Total interest income from investment securities
|
|
$
|
568
|
|
|
$
|
515
|
|
|
|
|
|
|
$
|
1,653
|
|
|
$
|
1,555
|
|
The following table provides information about the
amount of gross gains and losses realized through the sales of
available-for-sale
investment securities:
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
(Dollars in Millions)
|
|
2017
|
|
|
2016
|
|
|
|
|
|
2017
|
|
|
2016
|
|
Realized gains
|
|
$
|
9
|
|
|
$
|
12
|
|
|
|
|
|
|
$
|
65
|
|
|
$
|
31
|
|
Realized losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18
|
)
|
|
|
(12
|
)
|
Net realized gains (losses)
|
|
$
|
9
|
|
|
$
|
12
|
|
|
|
|
|
|
$
|
47
|
|
|
$
|
19
|
|
Income tax (benefit) on net realized gains (losses)
|
|
$
|
3
|
|
|
$
|
4
|
|
|
|
|
|
|
$
|
18
|
|
|
$
|
7
|
|
The Company conducts a regular assessment of its investment securities with unrealized losses to determine
whether investment securities are other-than-temporarily impaired considering, among other factors, the nature of the investment securities, the credit ratings or financial condition of the issuer, the extent and duration of the unrealized loss,
expected cash flows of underlying collateral, the existence of any government or agency guarantees, market conditions and whether the Company intends to sell or it is more likely than not the Company will be required to sell the investment
securities. The Company determines other-than-temporary impairment recorded in earnings for debt securities not intended to be sold by estimating the future cash flows of each individual investment security, using market information where available,
and discounting the cash flows at the original effective rate of the investment security. Other-than-temporary impairment recorded in other comprehensive income (loss) is measured as the difference between that discounted amount and the fair value
of each investment security. The total amount of other-than-temporary impairment recorded was immaterial for the three and nine months ended September 30, 2017 and 2016.
At September 30, 2017, certain investment securities had a fair value below amortized cost. The following table shows the gross unrealized losses and
fair value of the Companys investment securities with unrealized losses, aggregated by investment category and length of time the individual investment securities have been in continuous unrealized loss positions, at September 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 12 Months
|
|
|
12 Months or Greater
|
|
|
|
|
|
Total
|
|
(Dollars in Millions)
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
Held-to-maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agencies
|
|
$
|
2,886
|
|
|
$
|
(62
|
)
|
|
|
|
|
|
$
|
241
|
|
|
$
|
(10
|
)
|
|
|
|
|
|
$
|
3,127
|
|
|
$
|
(72
|
)
|
Residential agency mortgage-backed securities
|
|
|
19,913
|
|
|
|
(237
|
)
|
|
|
|
|
|
|
3,989
|
|
|
|
(75
|
)
|
|
|
|
|
|
|
23,902
|
|
|
|
(312
|
)
|
Other asset-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
Other debt securities
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
Total
held-to-maturity
|
|
$
|
22,814
|
|
|
$
|
(299
|
)
|
|
|
|
|
|
$
|
4,235
|
|
|
$
|
(85
|
)
|
|
|
|
|
|
$
|
27,049
|
|
|
$
|
(384
|
)
|
Available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agencies
|
|
$
|
15,241
|
|
|
$
|
(98
|
)
|
|
|
|
|
|
$
|
1,389
|
|
|
$
|
(22
|
)
|
|
|
|
|
|
$
|
16,630
|
|
|
$
|
(120
|
)
|
Residential agency mortgage-backed securities
|
|
|
19,025
|
|
|
|
(281
|
)
|
|
|
|
|
|
|
7,914
|
|
|
|
(107
|
)
|
|
|
|
|
|
|
26,939
|
|
|
|
(388
|
)
|
Commercial agency mortgage-backed securities
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
Obligations of state and political subdivisions
|
|
|
1,857
|
|
|
|
(35
|
)
|
|
|
|
|
|
|
627
|
|
|
|
(53
|
)
|
|
|
|
|
|
|
2,484
|
|
|
|
(88
|
)
|
Other investments
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
Total
available-for-sale
|
|
$
|
36,130
|
|
|
$
|
(414
|
)
|
|
|
|
|
|
$
|
9,930
|
|
|
$
|
(182
|
)
|
|
|
|
|
|
$
|
46,060
|
|
|
$
|
(596
|
)
|
The Company does not consider these unrealized losses to be credit-related. These
unrealized losses primarily relate to changes in interest rates and market spreads subsequent to purchase. A substantial portion of investment securities that have unrealized losses are either U.S. Treasury and agencies, agency mortgage-backed or
state and political securities. In general, the issuers of the investment securities are contractually prohibited from prepayment at less than par, and the Company did not pay significant purchase premiums for these investment securities. At
September 30, 2017, the Company had no plans to sell investment securities with unrealized losses, and believes it is more likely than not it would not be required to sell such investment securities before recovery of their amortized cost.
|
|
|
Note 4
|
|
Loans and Allowance for Credit Losses
|
The composition of the loan portfolio, disaggregated by class and underlying specific portfolio type, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
|
|
December 31, 2016
|
|
(Dollars in Millions)
|
|
Amount
|
|
|
Percent
of Total
|
|
|
|
|
|
Amount
|
|
|
Percent
of Total
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
91,449
|
|
|
|
32.8
|
%
|
|
|
|
|
|
$
|
87,928
|
|
|
|
32.2
|
%
|
Lease financing
|
|
|
5,479
|
|
|
|
2.0
|
|
|
|
|
|
|
|
5,458
|
|
|
|
2.0
|
|
Total commercial
|
|
|
96,928
|
|
|
|
34.8
|
|
|
|
|
|
|
|
93,386
|
|
|
|
34.2
|
|
Commercial Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgages
|
|
|
29,902
|
|
|
|
10.7
|
|
|
|
|
|
|
|
31,592
|
|
|
|
11.6
|
|
Construction and development
|
|
|
11,528
|
|
|
|
4.1
|
|
|
|
|
|
|
|
11,506
|
|
|
|
4.2
|
|
Total commercial real estate
|
|
|
41,430
|
|
|
|
14.8
|
|
|
|
|
|
|
|
43,098
|
|
|
|
15.8
|
|
Residential Mortgages
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages
|
|
|
46,107
|
|
|
|
16.6
|
|
|
|
|
|
|
|
43,632
|
|
|
|
16.0
|
|
Home equity loans, first liens
|
|
|
13,210
|
|
|
|
4.7
|
|
|
|
|
|
|
|
13,642
|
|
|
|
5.0
|
|
Total residential mortgages
|
|
|
59,317
|
|
|
|
21.3
|
|
|
|
|
|
|
|
57,274
|
|
|
|
21.0
|
|
Credit Card
|
|
|
20,923
|
|
|
|
7.5
|
|
|
|
|
|
|
|
21,749
|
|
|
|
7.9
|
|
Other Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail leasing
|
|
|
7,923
|
|
|
|
2.8
|
|
|
|
|
|
|
|
6,316
|
|
|
|
2.3
|
|
Home equity and second mortgages
|
|
|
16,308
|
|
|
|
5.9
|
|
|
|
|
|
|
|
16,369
|
|
|
|
6.0
|
|
Revolving credit
|
|
|
3,225
|
|
|
|
1.2
|
|
|
|
|
|
|
|
3,282
|
|
|
|
1.2
|
|
Installment
|
|
|
8,900
|
|
|
|
3.2
|
|
|
|
|
|
|
|
8,087
|
|
|
|
3.0
|
|
Automobile
|
|
|
18,530
|
|
|
|
6.6
|
|
|
|
|
|
|
|
17,571
|
|
|
|
6.4
|
|
Student
|
|
|
1,973
|
|
|
|
.7
|
|
|
|
|
|
|
|
2,239
|
|
|
|
.8
|
|
Total other retail
|
|
|
56,859
|
|
|
|
20.4
|
|
|
|
|
|
|
|
53,864
|
|
|
|
19.7
|
|
Total loans, excluding covered loans
|
|
|
275,457
|
|
|
|
98.8
|
|
|
|
|
|
|
|
269,371
|
|
|
|
98.6
|
|
Covered Loans
|
|
|
3,262
|
|
|
|
1.2
|
|
|
|
|
|
|
|
3,836
|
|
|
|
1.4
|
|
Total loans
|
|
$
|
278,719
|
|
|
|
100.0
|
%
|
|
|
|
|
|
$
|
273,207
|
|
|
|
100.0
|
%
|
The Company had loans of $85.2 billion at September 30, 2017, and $84.5 billion at
December 31, 2016, pledged at the Federal Home Loan Bank, and loans of $66.8 billion at September 30, 2017, and $66.5 billion at December 31, 2016, pledged at the Federal Reserve Bank.
Originated loans are reported at the principal amount outstanding, net of unearned interest and deferred fees and costs. Net unearned interest
and deferred fees and costs amounted to $825 million at September 30, 2017, and $672 million at December 31, 2016. All purchased loans and related indemnification assets are recorded at fair value at the date of purchase. The
Company evaluates purchased loans for impairment at the date of purchase in accordance with applicable authoritative accounting guidance. Purchased loans with evidence of credit deterioration since origination for which it is probable that all
contractually required payments will not be collected are considered purchased impaired loans. All other purchased loans are considered purchased nonimpaired loans.
Changes in the accretable balance for purchased impaired loans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
(Dollars in Millions)
|
|
2017
|
|
|
2016
|
|
|
|
|
|
2017
|
|
|
2016
|
|
Balance at beginning of period
|
|
$
|
546
|
|
|
$
|
891
|
|
|
|
|
|
|
$
|
698
|
|
|
$
|
957
|
|
Accretion
|
|
|
(107
|
)
|
|
|
(102
|
)
|
|
|
|
|
|
|
(286
|
)
|
|
|
(297
|
)
|
Disposals
|
|
|
(17
|
)
|
|
|
(23
|
)
|
|
|
|
|
|
|
(68
|
)
|
|
|
(77
|
)
|
Reclassifications from nonaccretable difference (a)
|
|
|
47
|
|
|
|
31
|
|
|
|
|
|
|
|
130
|
|
|
|
214
|
|
Other
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
Balance at end of period
|
|
$
|
466
|
|
|
$
|
797
|
|
|
|
|
|
|
$
|
466
|
|
|
$
|
797
|
|
(a)
|
Primarily relates to changes in expected credit performance.
|
Allowance for Credit Losses
The allowance for credit losses is established for probable and estimable losses incurred in the Companys loan and lease portfolio, including unfunded credit commitments, and includes
certain amounts that do not represent loss exposure to the Company because those losses are recoverable under loss sharing agreements with the Federal Deposit Insurance Corporation (FDIC). The allowance for credit losses is increased
through provisions charged to earnings and reduced by net charge-offs. Management evaluates the adequacy of the allowance for incurred losses on a quarterly basis.
The allowance recorded for loans in the commercial lending segment is based on reviews of individual credit relationships and considers the
migration analysis of commercial lending segment loans and actual loss experience. For each loan type, this historical loss experience is adjusted as necessary to consider any relevant changes in portfolio composition, lending policies, underwriting
standards, risk management practices or economic conditions. The results of the analysis are evaluated quarterly to confirm an appropriate historical time frame is selected for each commercial loan type. The allowance recorded for impaired loans
greater than $5 million in the commercial lending segment is based on an individual loan analysis utilizing expected cash flows discounted using the original effective interest rate, the observable market price of the loan, or the fair value of
the collateral, less selling costs, for collateral-dependent loans, rather than the migration analysis. The allowance recorded for all other commercial lending segment loans is determined on a homogenous pool basis and includes consideration of
product mix, risk characteristics of the portfolio, bankruptcy experience, portfolio growth and historical losses, adjusted for current trends. The Company also considers the impacts of any loan modifications made to commercial lending segment loans
and any subsequent payment defaults to its expectations of cash flows, principal balance, and current expectations about the borrowers ability to pay in determining the allowance for credit losses.
The allowance recorded for Troubled Debt Restructuring (TDR) loans and purchased impaired loans in the consumer lending segment is
determined on a homogenous pool basis utilizing expected cash flows discounted using the original effective interest rate of the pool, or the prior quarter effective rate, respectively. The allowance for collateral-dependent loans in the consumer
lending segment is determined based on the fair value of the collateral less costs to sell. The allowance recorded for all other consumer lending segment loans is determined on a homogenous pool basis and includes consideration of product mix, risk
characteristics of the portfolio, bankruptcy experience, delinquency status, refreshed
loan-to-value
ratios when possible, portfolio growth and historical losses,
adjusted for current trends. The Company also considers any modifications made to consumer lending segment loans including the impacts of any subsequent payment defaults since modification in determining the allowance for credit losses, such as the
borrowers ability to pay under the restructured terms, and the timing and amount of payments.
The allowance for the covered loan
segment is evaluated each quarter in a manner similar to that described for
non-covered
loans and reflects decreases in expected cash flows of those loans after the acquisition date. The provision for credit
losses for covered loans considers the indemnification provided by the FDIC.
In addition, subsequent payment defaults on loan
modifications considered TDRs are considered in the underlying factors used in the determination of the appropriateness of the allowance for credit losses. For each loan segment, the Company estimates future loan charge-offs through a variety of
analysis, trends and underlying assumptions. With respect to the commercial lending segment, TDRs may be collectively evaluated for impairment where observed performance history, including defaults, is a primary driver of the loss allocation. For
commercial TDRs individually evaluated for impairment, attributes of the borrower are the primary factors in determining the allowance for credit losses. However, historical loss experience is also incorporated into the allowance methodology applied
to this category of loans. With respect to the consumer lending segment, performance of the portfolio, including defaults on TDRs, is considered when estimating future cash flows.
The Companys methodology for determining the appropriate allowance for credit losses for each loan segment also considers the
imprecision inherent in the methodologies used. As a result, in addition to the amounts determined under the methodologies described above, management also considers the potential impact of other qualitative factors which include, but are not
limited to, economic factors; geographic and other concentration risks; delinquency and nonaccrual trends; current business conditions; changes in lending policy, underwriting standards and other relevant business practices; results of internal
review; and the regulatory environment. The consideration of these items results in adjustments to allowance amounts included in the Companys allowance for credit losses for each of the above loan segments.
The Company also assesses the credit risk associated with
off-balance
sheet loan commitments, letters
of credit, and derivatives. Credit risk associated with derivatives is reflected in the fair values recorded for those positions. The liability for
off-balance
sheet credit exposure related to loan commitments
and other credit guarantees is included in
other liabilities. Because business processes and credit risks associated with unfunded credit commitments are essentially the same as for loans, the Company utilizes similar processes to
estimate its liability for unfunded credit commitments.
Activity in the allowance for credit losses by portfolio class was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
(Dollars in Millions)
|
|
Commercial
|
|
|
Commercial
Real Estate
|
|
|
Residential
Mortgages
|
|
|
Credit
Card
|
|
|
Other
Retail
|
|
|
Total Loans,
Excluding
Covered Loans
|
|
|
Covered
Loans
|
|
|
Total
Loans
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
1,395
|
|
|
$
|
856
|
|
|
$
|
455
|
|
|
$
|
990
|
|
|
$
|
648
|
|
|
$
|
4,344
|
|
|
$
|
33
|
|
|
$
|
4,377
|
|
Add
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses
|
|
|
71
|
|
|
|
(12
|
)
|
|
|
2
|
|
|
|
216
|
|
|
|
84
|
|
|
|
361
|
|
|
|
(1
|
)
|
|
|
360
|
|
Deduct
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
charged-off
|
|
|
115
|
|
|
|
2
|
|
|
|
16
|
|
|
|
214
|
|
|
|
86
|
|
|
|
433
|
|
|
|
|
|
|
|
433
|
|
Less recoveries of loans
charged-off
|
|
|
(32
|
)
|
|
|
(9
|
)
|
|
|
(9
|
)
|
|
|
(27
|
)
|
|
|
(26
|
)
|
|
|
(103
|
)
|
|
|
|
|
|
|
(103
|
)
|
Net loans
charged-off
|
|
|
83
|
|
|
|
(7
|
)
|
|
|
7
|
|
|
|
187
|
|
|
|
60
|
|
|
|
330
|
|
|
|
|
|
|
|
330
|
|
Other changes (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
1,383
|
|
|
$
|
851
|
|
|
$
|
450
|
|
|
$
|
1,019
|
|
|
$
|
672
|
|
|
$
|
4,375
|
|
|
$
|
32
|
|
|
$
|
4,407
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
1,473
|
|
|
$
|
748
|
|
|
$
|
544
|
|
|
$
|
884
|
|
|
$
|
643
|
|
|
$
|
4,292
|
|
|
$
|
37
|
|
|
$
|
4,329
|
|
Add
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses
|
|
|
90
|
|
|
|
34
|
|
|
|
(12
|
)
|
|
|
178
|
|
|
|
37
|
|
|
|
327
|
|
|
|
(2
|
)
|
|
|
325
|
|
Deduct
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
charged-off
|
|
|
104
|
|
|
|
9
|
|
|
|
19
|
|
|
|
182
|
|
|
|
84
|
|
|
|
398
|
|
|
|
|
|
|
|
398
|
|
Less recoveries of loans
charged-off
|
|
|
(17
|
)
|
|
|
(8
|
)
|
|
|
(7
|
)
|
|
|
(21
|
)
|
|
|
(30
|
)
|
|
|
(83
|
)
|
|
|
|
|
|
|
(83
|
)
|
Net loans
charged-off
|
|
|
87
|
|
|
|
1
|
|
|
|
12
|
|
|
|
161
|
|
|
|
54
|
|
|
|
315
|
|
|
|
|
|
|
|
315
|
|
Other changes (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Balance at end of period
|
|
$
|
1,476
|
|
|
$
|
781
|
|
|
$
|
520
|
|
|
$
|
901
|
|
|
$
|
626
|
|
|
$
|
4,304
|
|
|
$
|
34
|
|
|
$
|
4,338
|
|
(a)
|
Includes net changes in credit losses to be reimbursed by the FDIC and reductions in the allowance for covered loans where the reversal of a previously recorded allowance was offset by an associated decrease in the
indemnification asset, and the impact of any loan sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
(Dollars in Millions)
|
|
Commercial
|
|
|
Commercial
Real Estate
|
|
|
Residential
Mortgages
|
|
|
Credit
Card
|
|
|
Other
Retail
|
|
|
Total Loans,
Excluding
Covered Loans
|
|
|
Covered
Loans
|
|
|
Total
Loans
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
1,450
|
|
|
$
|
812
|
|
|
$
|
510
|
|
|
$
|
934
|
|
|
$
|
617
|
|
|
$
|
4,323
|
|
|
$
|
34
|
|
|
$
|
4,357
|
|
Add
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses
|
|
|
169
|
|
|
|
21
|
|
|
|
(33
|
)
|
|
|
666
|
|
|
|
234
|
|
|
|
1,057
|
|
|
|
(2
|
)
|
|
|
1,055
|
|
Deduct
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
charged-off
|
|
|
315
|
|
|
|
7
|
|
|
|
49
|
|
|
|
653
|
|
|
|
263
|
|
|
|
1,287
|
|
|
|
|
|
|
|
1,287
|
|
Less recoveries of loans
charged-off
|
|
|
(79
|
)
|
|
|
(25
|
)
|
|
|
(22
|
)
|
|
|
(72
|
)
|
|
|
(84
|
)
|
|
|
(282
|
)
|
|
|
|
|
|
|
(282
|
)
|
Net loans
charged-off
|
|
|
236
|
|
|
|
(18
|
)
|
|
|
27
|
|
|
|
581
|
|
|
|
179
|
|
|
|
1,005
|
|
|
|
|
|
|
|
1,005
|
|
Other changes (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
1,383
|
|
|
$
|
851
|
|
|
$
|
450
|
|
|
$
|
1,019
|
|
|
$
|
672
|
|
|
$
|
4,375
|
|
|
$
|
32
|
|
|
$
|
4,407
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
1,287
|
|
|
$
|
724
|
|
|
$
|
631
|
|
|
$
|
883
|
|
|
$
|
743
|
|
|
$
|
4,268
|
|
|
$
|
38
|
|
|
$
|
4,306
|
|
Add
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses
|
|
|
438
|
|
|
|
53
|
|
|
|
(63
|
)
|
|
|
514
|
|
|
|
42
|
|
|
|
984
|
|
|
|
(2
|
)
|
|
|
982
|
|
Deduct
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
charged-off
|
|
|
322
|
|
|
|
19
|
|
|
|
67
|
|
|
|
559
|
|
|
|
243
|
|
|
|
1,210
|
|
|
|
|
|
|
|
1,210
|
|
Less recoveries of loans
charged-off
|
|
|
(73
|
)
|
|
|
(23
|
)
|
|
|
(19
|
)
|
|
|
(64
|
)
|
|
|
(84
|
)
|
|
|
(263
|
)
|
|
|
|
|
|
|
(263
|
)
|
Net loans
charged-off
|
|
|
249
|
|
|
|
(4
|
)
|
|
|
48
|
|
|
|
495
|
|
|
|
159
|
|
|
|
947
|
|
|
|
|
|
|
|
947
|
|
Other changes (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
(3
|
)
|
Balance at end of period
|
|
$
|
1,476
|
|
|
$
|
781
|
|
|
$
|
520
|
|
|
$
|
901
|
|
|
$
|
626
|
|
|
$
|
4,304
|
|
|
$
|
34
|
|
|
$
|
4,338
|
|
(a)
|
Includes net changes in credit losses to be reimbursed by the FDIC and reductions in the allowance for covered loans where the reversal of a previously recorded allowance was offset by an associated decrease in the
indemnification asset, and the impact of any loan sales.
|
Additional detail of the allowance for credit losses by portfolio class was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
Commercial
|
|
|
Commercial
Real Estate
|
|
|
Residential
Mortgages
|
|
|
Credit
Card
|
|
|
Other
Retail
|
|
|
Total Loans,
Excluding
Covered Loans
|
|
|
Covered
Loans
|
|
|
Total
Loans
|
|
Allowance Balance at September 30, 2017 Related to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment (a)
|
|
$
|
25
|
|
|
$
|
2
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
27
|
|
|
$
|
|
|
|
$
|
27
|
|
TDRs collectively evaluated for impairment
|
|
|
12
|
|
|
|
4
|
|
|
|
139
|
|
|
|
62
|
|
|
|
16
|
|
|
|
233
|
|
|
|
1
|
|
|
|
234
|
|
Other loans collectively evaluated for impairment
|
|
|
1,346
|
|
|
|
840
|
|
|
|
311
|
|
|
|
957
|
|
|
|
656
|
|
|
|
4,110
|
|
|
|
|
|
|
|
4,110
|
|
Loans acquired with deteriorated credit quality
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
31
|
|
|
|
36
|
|
Total allowance for credit losses
|
|
$
|
1,383
|
|
|
$
|
851
|
|
|
$
|
450
|
|
|
$
|
1,019
|
|
|
$
|
672
|
|
|
$
|
4,375
|
|
|
$
|
32
|
|
|
$
|
4,407
|
|
Allowance Balance at December 31, 2016 Related to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment (a)
|
|
$
|
50
|
|
|
$
|
4
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
54
|
|
|
$
|
|
|
|
$
|
54
|
|
TDRs collectively evaluated for impairment
|
|
|
12
|
|
|
|
4
|
|
|
|
180
|
|
|
|
65
|
|
|
|
20
|
|
|
|
281
|
|
|
|
1
|
|
|
|
282
|
|
Other loans collectively evaluated for impairment
|
|
|
1,388
|
|
|
|
798
|
|
|
|
330
|
|
|
|
869
|
|
|
|
597
|
|
|
|
3,982
|
|
|
|
|
|
|
|
3,982
|
|
Loans acquired with deteriorated credit quality
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
33
|
|
|
|
39
|
|
Total allowance for credit losses
|
|
$
|
1,450
|
|
|
$
|
812
|
|
|
$
|
510
|
|
|
$
|
934
|
|
|
$
|
617
|
|
|
$
|
4,323
|
|
|
$
|
34
|
|
|
$
|
4,357
|
|
(a)
|
Represents the allowance for credit losses related to loans greater than $5 million classified as nonperforming or TDRs.
|
Additional detail of loan balances by portfolio class was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
Commercial
|
|
|
Commercial
Real Estate
|
|
|
Residential
Mortgages
|
|
|
Credit
Card
|
|
|
Other
Retail
|
|
|
Total Loans,
Excluding
Covered Loans
|
|
|
Covered
Loans (b)
|
|
|
Total
Loans
|
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment (a)
|
|
$
|
386
|
|
|
$
|
44
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
430
|
|
|
$
|
|
|
|
$
|
430
|
|
TDRs collectively evaluated for impairment
|
|
|
138
|
|
|
|
143
|
|
|
|
3,509
|
|
|
|
231
|
|
|
|
185
|
|
|
|
4,206
|
|
|
|
33
|
|
|
|
4,239
|
|
Other loans collectively evaluated for impairment
|
|
|
96,404
|
|
|
|
41,166
|
|
|
|
55,807
|
|
|
|
20,692
|
|
|
|
56,673
|
|
|
|
270,742
|
|
|
|
1,177
|
|
|
|
271,919
|
|
Loans acquired with deteriorated credit quality
|
|
|
|
|
|
|
77
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
79
|
|
|
|
2,052
|
|
|
|
2,131
|
|
Total loans
|
|
$
|
96,928
|
|
|
$
|
41,430
|
|
|
$
|
59,317
|
|
|
$
|
20,923
|
|
|
$
|
56,859
|
|
|
$
|
275,457
|
|
|
$
|
3,262
|
|
|
$
|
278,719
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment (a)
|
|
$
|
623
|
|
|
$
|
70
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
693
|
|
|
$
|
|
|
|
$
|
693
|
|
TDRs collectively evaluated for impairment
|
|
|
145
|
|
|
|
146
|
|
|
|
3,678
|
|
|
|
222
|
|
|
|
173
|
|
|
|
4,364
|
|
|
|
35
|
|
|
|
4,399
|
|
Other loans collectively evaluated for impairment
|
|
|
92,611
|
|
|
|
42,751
|
|
|
|
53,595
|
|
|
|
21,527
|
|
|
|
53,691
|
|
|
|
264,175
|
|
|
|
1,553
|
|
|
|
265,728
|
|
Loans acquired with deteriorated credit quality
|
|
|
7
|
|
|
|
131
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
139
|
|
|
|
2,248
|
|
|
|
2,387
|
|
Total loans
|
|
$
|
93,386
|
|
|
$
|
43,098
|
|
|
$
|
57,274
|
|
|
$
|
21,749
|
|
|
$
|
53,864
|
|
|
$
|
269,371
|
|
|
$
|
3,836
|
|
|
$
|
273,207
|
|
(a)
|
Represents loans greater than $5 million classified as nonperforming or TDRs.
|
(b)
|
Includes expected reimbursements from the FDIC under loss sharing agreements.
|
Credit Quality
The credit quality of the Companys loan portfolios is assessed as a function of net credit losses, levels of
nonperforming assets and delinquencies, and credit quality ratings as defined by the Company.
For all loan classes, loans are
considered past due based on the number of days delinquent except for monthly amortizing loans which are classified delinquent based upon the number of contractually required payments not made (for example, two missed payments is considered 30 days
delinquent). When a loan is placed on nonaccrual status, unpaid accrued interest is reversed, reducing interest income in the current period.
Commercial lending segment loans are generally placed on nonaccrual status when the collection of principal and interest has become 90 days
past due or is otherwise considered doubtful. Commercial lending segment loans are generally fully or partially charged down to the fair value of the collateral securing the loan, less costs to sell, when the loan is placed on nonaccrual.
Consumer lending segment loans are generally
charged-off
at a specific number of days or payments past
due. Residential mortgages and other retail loans secured by
1-4
family properties are generally charged down to the fair value of the collateral securing the loan, less costs to sell, at 180 days past due.
Residential mortgage loans and lines in a first lien position are placed on nonaccrual status in instances where a partial
charge-off
occurs unless the loan is well secured and in the process of collection.
Residential mortgage loans and lines in a junior lien position secured by
1-4 family
properties are placed on nonaccrual status at 120 days past due or when they are behind a first lien that has
become 180 days or greater past due or placed on nonaccrual status. Any secured consumer lending segment loan whose borrower has had debt discharged through bankruptcy, for which the loan amount exceeds the fair value of the collateral, is charged
down to the fair value of the related collateral and the remaining balance is placed on nonaccrual status. Credit card loans continue to accrue interest until the account is
charged-off.
Credit cards are
charged-off
at 180 days past due. Other retail loans not secured by
1-4
family properties are
charged-off
at 120 days past
due; and revolving consumer lines are
charged-off
at 180 days past due. Similar to credit cards, other retail loans are generally not placed on nonaccrual status because of the relative short period of time to
charge-off.
Certain retail customers having financial difficulties may have the terms of their credit card and other loan agreements modified to require only principal payments and, as such, are reported as
nonaccrual.
For all loan classes, interest payments received on nonaccrual loans are generally recorded
as a reduction to a loans carrying amount while a loan is on nonaccrual and are recognized as interest income upon payoff of the loan. However, interest income may be recognized for interest payments if the remaining carrying amount of the
loan is believed to be collectible. In certain circumstances, loans in any class may be restored to accrual status, such as when a loan has demonstrated sustained repayment performance or no amounts are past due and prospects for future payment are
no longer in doubt; or when the loan becomes well secured and is in the process of collection. Loans where there has been a partial
charge-off
may be returned to accrual status if all principal and interest
(including amounts previously
charged-off)
is expected to be collected and the loan is current.
Covered loans not considered to be purchased impaired are evaluated for delinquency, nonaccrual status and
charge-off
consistent with the class of loan they would be included in had the loss share coverage not been in place. Generally, purchased impaired loans are considered accruing loans. However, the timing and
amount of future cash flows for some loans is not reasonably estimable, and those loans are classified as nonaccrual loans with interest income not recognized until the timing and amount of the future cash flows can be reasonably estimated.
The following table provides a summary of loans by portfolio class, including the delinquency status of those that continue to accrue interest, and those that
are nonperforming:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruing
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
Current
|
|
|
30-89 Days
Past Due
|
|
|
90 Days or
More Past Due
|
|
|
Nonperforming
|
|
|
Total
|
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
96,389
|
|
|
$
|
218
|
|
|
$
|
52
|
|
|
$
|
269
|
|
|
$
|
96,928
|
|
Commercial real estate
|
|
|
41,242
|
|
|
|
62
|
|
|
|
4
|
|
|
|
122
|
|
|
|
41,430
|
|
Residential mortgages (a)
|
|
|
58,581
|
|
|
|
155
|
|
|
|
107
|
|
|
|
474
|
|
|
|
59,317
|
|
Credit card
|
|
|
20,375
|
|
|
|
296
|
|
|
|
251
|
|
|
|
1
|
|
|
|
20,923
|
|
Other retail
|
|
|
56,282
|
|
|
|
331
|
|
|
|
83
|
|
|
|
163
|
|
|
|
56,859
|
|
Total loans, excluding covered loans
|
|
|
272,869
|
|
|
|
1,062
|
|
|
|
497
|
|
|
|
1,029
|
|
|
|
275,457
|
|
Covered loans
|
|
|
3,056
|
|
|
|
48
|
|
|
|
152
|
|
|
|
6
|
|
|
|
3,262
|
|
Total loans
|
|
$
|
275,925
|
|
|
$
|
1,110
|
|
|
$
|
649
|
|
|
$
|
1,035
|
|
|
$
|
278,719
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
92,588
|
|
|
$
|
263
|
|
|
$
|
52
|
|
|
$
|
483
|
|
|
$
|
93,386
|
|
Commercial real estate
|
|
|
42,922
|
|
|
|
44
|
|
|
|
8
|
|
|
|
124
|
|
|
|
43,098
|
|
Residential mortgages (a)
|
|
|
56,372
|
|
|
|
151
|
|
|
|
156
|
|
|
|
595
|
|
|
|
57,274
|
|
Credit card
|
|
|
21,209
|
|
|
|
284
|
|
|
|
253
|
|
|
|
3
|
|
|
|
21,749
|
|
Other retail
|
|
|
53,340
|
|
|
|
284
|
|
|
|
83
|
|
|
|
157
|
|
|
|
53,864
|
|
Total loans, excluding covered loans
|
|
|
266,431
|
|
|
|
1,026
|
|
|
|
552
|
|
|
|
1,362
|
|
|
|
269,371
|
|
Covered loans
|
|
|
3,563
|
|
|
|
55
|
|
|
|
212
|
|
|
|
6
|
|
|
|
3,836
|
|
Total loans
|
|
$
|
269,994
|
|
|
$
|
1,081
|
|
|
$
|
764
|
|
|
$
|
1,368
|
|
|
$
|
273,207
|
|
(a)
|
At September 30, 2017, $297 million of loans 3089 days past due and $1.8 billion of loans 90 days or more past due purchased from Government National Mortgage Association (GNMA)
mortgage pools whose repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs, were classified as current, compared with $273 million and $2.5 billion at
December 31, 2016, respectively.
|
At September 30, 2017, the amount of foreclosed residential real estate held
by the Company, and included in other real estate owned (OREO), was $182 million ($156 million excluding covered assets), compared with $201 million ($175 million excluding covered assets) at December 31, 2016.
These amounts exclude $300 million and $373 million at September 30, 2017 and December 31, 2016, respectively, of foreclosed residential real estate related to mortgage loans whose payments are primarily insured by the Federal
Housing Administration or guaranteed by the United States Department of Veterans Affairs. In addition, the amount of residential mortgage loans secured by residential real estate in the process of foreclosure at September 30, 2017 and
December 31, 2016, was $1.7 billion and $2.1 billion, respectively, of which $1.3 billion and $1.6 billion, respectively, related to loans purchased from Government National Mortgage Association (GNMA) mortgage
pools whose repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs.
The Company classifies its loan portfolios using internal credit quality ratings on a quarterly basis. These ratings include pass, special
mention and classified, and are an important part of the Companys overall credit risk management process and evaluation of the allowance for credit losses. Loans with a pass rating represent those loans not classified on the Companys
rating scale for problem credits, as minimal credit risk has been identified. Special mention loans are those that have a potential weakness deserving managements close attention. Classified loans are those where a well-defined weakness has
been identified that may put full collection of contractual cash flows at risk. It is possible that others, given the same information, may reach different reasonable conclusions regarding the credit quality rating classification of specific loans.
The following table provides a summary of loans by portfolio class and the Companys internal credit
quality rating:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Criticized
|
|
|
|
|
(Dollars in Millions)
|
|
Pass
|
|
|
Special
Mention
|
|
|
Classified (a)
|
|
|
Total
Criticized
|
|
|
Total
|
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial (b)
|
|
$
|
94,127
|
|
|
$
|
1,328
|
|
|
$
|
1,473
|
|
|
$
|
2,801
|
|
|
$
|
96,928
|
|
Commercial real estate
|
|
|
39,998
|
|
|
|
640
|
|
|
|
792
|
|
|
|
1,432
|
|
|
|
41,430
|
|
Residential mortgages (c)
|
|
|
58,671
|
|
|
|
3
|
|
|
|
643
|
|
|
|
646
|
|
|
|
59,317
|
|
Credit card
|
|
|
20,671
|
|
|
|
|
|
|
|
252
|
|
|
|
252
|
|
|
|
20,923
|
|
Other retail
|
|
|
56,567
|
|
|
|
5
|
|
|
|
287
|
|
|
|
292
|
|
|
|
56,859
|
|
Total loans, excluding covered loans
|
|
|
270,034
|
|
|
|
1,976
|
|
|
|
3,447
|
|
|
|
5,423
|
|
|
|
275,457
|
|
Covered loans
|
|
|
3,209
|
|
|
|
|
|
|
|
53
|
|
|
|
53
|
|
|
|
3,262
|
|
Total loans
|
|
$
|
273,243
|
|
|
$
|
1,976
|
|
|
$
|
3,500
|
|
|
$
|
5,476
|
|
|
$
|
278,719
|
|
Total outstanding commitments
|
|
$
|
579,628
|
|
|
$
|
3,232
|
|
|
$
|
4,684
|
|
|
$
|
7,916
|
|
|
$
|
587,544
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial (b)
|
|
$
|
89,739
|
|
|
$
|
1,721
|
|
|
$
|
1,926
|
|
|
$
|
3,647
|
|
|
$
|
93,386
|
|
Commercial real estate
|
|
|
41,634
|
|
|
|
663
|
|
|
|
801
|
|
|
|
1,464
|
|
|
|
43,098
|
|
Residential mortgages (c)
|
|
|
56,457
|
|
|
|
10
|
|
|
|
807
|
|
|
|
817
|
|
|
|
57,274
|
|
Credit card
|
|
|
21,493
|
|
|
|
|
|
|
|
256
|
|
|
|
256
|
|
|
|
21,749
|
|
Other retail
|
|
|
53,576
|
|
|
|
6
|
|
|
|
282
|
|
|
|
288
|
|
|
|
53,864
|
|
Total loans, excluding covered loans
|
|
|
262,899
|
|
|
|
2,400
|
|
|
|
4,072
|
|
|
|
6,472
|
|
|
|
269,371
|
|
Covered loans
|
|
|
3,766
|
|
|
|
|
|
|
|
70
|
|
|
|
70
|
|
|
|
3,836
|
|
Total loans
|
|
$
|
266,665
|
|
|
$
|
2,400
|
|
|
$
|
4,142
|
|
|
$
|
6,542
|
|
|
$
|
273,207
|
|
Total outstanding commitments
|
|
$
|
562,704
|
|
|
$
|
4,920
|
|
|
$
|
5,629
|
|
|
$
|
10,549
|
|
|
$
|
573,253
|
|
(a)
|
Classified rating on consumer loans primarily based on delinquency status.
|
(b)
|
At September 30, 2017, $611 million of energy loans ($1.3 billion of total outstanding commitments) had a special mention or classified rating, compared with $1.2 billion of energy loans
($2.8 billion of total outstanding commitments) at December 31, 2016.
|
(c)
|
At September 30, 2017, $1.8 billion of GNMA loans 90 days or more past due and $1.6 billion of restructured GNMA loans whose repayments are insured by the Federal Housing Administration or guaranteed
by the United States Department of Veterans Affairs were classified with a pass rating, compared with $2.5 billion and $1.6 billion at December 31, 2016, respectively.
|
For all loan classes, a loan is considered to be impaired when, based on current events or information, it is probable the Company will be
unable to collect all amounts due per the contractual terms of the loan agreement. Impaired loans include all nonaccrual and TDR loans. For all loan classes, interest income on TDR loans is recognized under the modified terms and conditions if the
borrower has demonstrated repayment performance at a level commensurate with the modified terms over several payment cycles. Interest income is generally not recognized on other impaired loans until the loan is paid off. However, interest income may
be recognized for interest payments if the remaining carrying amount of the loan is believed to be collectible.
Factors used by the
Company in determining whether all principal and interest payments due on commercial and commercial real estate loans will be collected and, therefore, whether those loans are impaired include, but are not limited to, the financial condition of the
borrower, collateral and/or guarantees on the loan, and the borrowers estimated future ability to pay based on industry, geographic location and certain financial ratios. The evaluation of impairment on residential mortgages, credit card loans
and other retail loans is primarily driven by delinquency status of individual loans or whether a loan has been modified, and considers any government guarantee where applicable. Individual covered loans, whose future losses are covered by loss
sharing agreements with the FDIC that substantially reduce the risk of credit losses to the Company, are evaluated for impairment and accounted for in a manner consistent with the class of loan they would have been included in had the loss sharing
coverage not been in place.
A summary of impaired loans, which include all nonaccrual and TDR loans, by portfolio class was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
Period-end
Recorded
Investment (a)
|
|
|
Unpaid
Principal
Balance
|
|
|
Valuation
Allowance
|
|
|
Commitments
to Lend
Additional
Funds
|
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
592
|
|
|
$
|
1,040
|
|
|
$
|
39
|
|
|
$
|
168
|
|
Commercial real estate
|
|
|
263
|
|
|
|
545
|
|
|
|
11
|
|
|
|
|
|
Residential mortgages
|
|
|
2,064
|
|
|
|
2,471
|
|
|
|
121
|
|
|
|
1
|
|
Credit card
|
|
|
231
|
|
|
|
231
|
|
|
|
62
|
|
|
|
|
|
Other retail
|
|
|
298
|
|
|
|
508
|
|
|
|
19
|
|
|
|
4
|
|
Total loans, excluding GNMA and covered loans
|
|
|
3,448
|
|
|
|
4,795
|
|
|
|
252
|
|
|
|
173
|
|
Loans purchased from GNMA mortgage pools
|
|
|
1,571
|
|
|
|
1,571
|
|
|
|
20
|
|
|
|
|
|
Covered loans
|
|
|
35
|
|
|
|
43
|
|
|
|
1
|
|
|
|
|
|
Total
|
|
$
|
5,054
|
|
|
$
|
6,409
|
|
|
$
|
273
|
|
|
$
|
173
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
849
|
|
|
$
|
1,364
|
|
|
$
|
68
|
|
|
$
|
284
|
|
Commercial real estate
|
|
|
293
|
|
|
|
697
|
|
|
|
10
|
|
|
|
|
|
Residential mortgages
|
|
|
2,274
|
|
|
|
2,847
|
|
|
|
153
|
|
|
|
|
|
Credit card
|
|
|
222
|
|
|
|
222
|
|
|
|
64
|
|
|
|
|
|
Other retail
|
|
|
281
|
|
|
|
456
|
|
|
|
22
|
|
|
|
4
|
|
Total loans, excluding GNMA and covered loans
|
|
|
3,919
|
|
|
|
5,586
|
|
|
|
317
|
|
|
|
288
|
|
Loans purchased from GNMA mortgage pools
|
|
|
1,574
|
|
|
|
1,574
|
|
|
|
28
|
|
|
|
|
|
Covered loans
|
|
|
36
|
|
|
|
42
|
|
|
|
1
|
|
|
|
1
|
|
Total
|
|
$
|
5,529
|
|
|
$
|
7,202
|
|
|
$
|
346
|
|
|
$
|
289
|
|
(a)
|
Substantially all loans classified as impaired at September 30, 2017 and December 31, 2016, had an associated allowance for credit losses.
|
Additional information on impaired loans follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
|
|
|
2016
|
|
(Dollars in Millions)
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
|
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
Three Months Ended September 30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
624
|
|
|
$
|
3
|
|
|
|
|
|
|
$
|
845
|
|
|
$
|
2
|
|
Commercial real estate
|
|
|
272
|
|
|
|
2
|
|
|
|
|
|
|
|
334
|
|
|
|
6
|
|
Residential mortgages
|
|
|
2,111
|
|
|
|
25
|
|
|
|
|
|
|
|
2,381
|
|
|
|
30
|
|
Credit card
|
|
|
231
|
|
|
|
1
|
|
|
|
|
|
|
|
214
|
|
|
|
1
|
|
Other retail
|
|
|
288
|
|
|
|
4
|
|
|
|
|
|
|
|
287
|
|
|
|
3
|
|
Total loans, excluding GNMA and covered loans
|
|
|
3,526
|
|
|
|
35
|
|
|
|
|
|
|
|
4,061
|
|
|
|
42
|
|
Loans purchased from GNMA mortgage pools
|
|
|
1,672
|
|
|
|
17
|
|
|
|
|
|
|
|
1,458
|
|
|
|
23
|
|
Covered loans
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
38
|
|
|
|
|
|
Total
|
|
$
|
5,236
|
|
|
$
|
52
|
|
|
|
|
|
|
$
|
5,557
|
|
|
$
|
65
|
|
|
|
|
|
|
|
Nine Months Ended September 30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
720
|
|
|
$
|
5
|
|
|
|
|
|
|
$
|
786
|
|
|
$
|
6
|
|
Commercial real estate
|
|
|
274
|
|
|
|
7
|
|
|
|
|
|
|
|
321
|
|
|
|
12
|
|
Residential mortgages
|
|
|
2,178
|
|
|
|
82
|
|
|
|
|
|
|
|
2,457
|
|
|
|
93
|
|
Credit card
|
|
|
229
|
|
|
|
3
|
|
|
|
|
|
|
|
212
|
|
|
|
3
|
|
Other retail
|
|
|
282
|
|
|
|
11
|
|
|
|
|
|
|
|
296
|
|
|
|
9
|
|
Total loans, excluding GNMA and covered loans
|
|
|
3,683
|
|
|
|
108
|
|
|
|
|
|
|
|
4,072
|
|
|
|
123
|
|
Loans purchased from GNMA mortgage pools
|
|
|
1,688
|
|
|
|
54
|
|
|
|
|
|
|
|
1,674
|
|
|
|
71
|
|
Covered loans
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
38
|
|
|
|
1
|
|
Total
|
|
$
|
5,408
|
|
|
$
|
162
|
|
|
|
|
|
|
$
|
5,784
|
|
|
$
|
195
|
|
Troubled Debt Restructurings
In certain circumstances, the Company may modify the terms of a loan to maximize the collection of amounts due when a borrower is experiencing financial difficulties or is expected to experience
difficulties in the near-term. Concessionary modifications are classified as TDRs unless the modification results in only an insignificant delay in payments to be received. The Company recognizes interest on TDRs if the borrower complies with the
revised terms and conditions as agreed upon with the Company and has demonstrated repayment performance at a level commensurate with the modified terms over several payment cycles, which is generally six months or greater. To the extent a previous
restructuring was insignificant, the Company considers the cumulative effect of past restructurings related to the receivable when determining whether a current restructuring is a TDR. Loans classified as TDRs are considered impaired loans for
reporting and measurement purposes.
The following table provides a summary of loans modified as TDRs during the periods presented by portfolio
class:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
|
|
|
2016
|
|
(Dollars in Millions)
|
|
Number
of Loans
|
|
|
Pre-Modification
Outstanding
Loan Balance
|
|
|
Post-Modification
Outstanding
Loan Balance
|
|
|
|
|
|
Number
of Loans
|
|
|
Pre-Modification
Outstanding
Loan Balance
|
|
|
Post-Modification
Outstanding
Loan Balance
|
|
Three Months Ended September 30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
616
|
|
|
$
|
40
|
|
|
$
|
27
|
|
|
|
|
|
|
|
638
|
|
|
$
|
200
|
|
|
$
|
169
|
|
Commercial real estate
|
|
|
29
|
|
|
|
18
|
|
|
|
16
|
|
|
|
|
|
|
|
26
|
|
|
|
225
|
|
|
|
223
|
|
Residential mortgages
|
|
|
141
|
|
|
|
15
|
|
|
|
16
|
|
|
|
|
|
|
|
700
|
|
|
|
81
|
|
|
|
87
|
|
Credit card
|
|
|
8,106
|
|
|
|
38
|
|
|
|
38
|
|
|
|
|
|
|
|
8,051
|
|
|
|
38
|
|
|
|
40
|
|
Other retail
|
|
|
1,949
|
|
|
|
39
|
|
|
|
32
|
|
|
|
|
|
|
|
593
|
|
|
|
9
|
|
|
|
9
|
|
Total loans, excluding GNMA and covered loans
|
|
|
10,841
|
|
|
|
150
|
|
|
|
129
|
|
|
|
|
|
|
|
10,008
|
|
|
|
553
|
|
|
|
528
|
|
Loans purchased from GNMA mortgage pools
|
|
|
1,340
|
|
|
|
169
|
|
|
|
171
|
|
|
|
|
|
|
|
2,609
|
|
|
|
317
|
|
|
|
308
|
|
Covered loans
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
3
|
|
|
|
3
|
|
Total loans
|
|
|
12,184
|
|
|
$
|
319
|
|
|
$
|
300
|
|
|
|
|
|
|
|
12,632
|
|
|
$
|
873
|
|
|
$
|
839
|
|
Nine Months Ended September 30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
2,117
|
|
|
$
|
239
|
|
|
$
|
195
|
|
|
|
|
|
|
|
1,734
|
|
|
$
|
692
|
|
|
$
|
567
|
|
Commercial real estate
|
|
|
93
|
|
|
|
56
|
|
|
|
55
|
|
|
|
|
|
|
|
70
|
|
|
|
242
|
|
|
|
240
|
|
Residential mortgages
|
|
|
641
|
|
|
|
72
|
|
|
|
73
|
|
|
|
|
|
|
|
1,192
|
|
|
|
129
|
|
|
|
136
|
|
Credit card
|
|
|
25,657
|
|
|
|
123
|
|
|
|
124
|
|
|
|
|
|
|
|
22,693
|
|
|
|
109
|
|
|
|
111
|
|
Other retail
|
|
|
3,210
|
|
|
|
65
|
|
|
|
55
|
|
|
|
|
|
|
|
1,669
|
|
|
|
27
|
|
|
|
28
|
|
Total loans, excluding GNMA and covered loans
|
|
|
31,718
|
|
|
|
555
|
|
|
|
502
|
|
|
|
|
|
|
|
27,358
|
|
|
|
1,199
|
|
|
|
1,082
|
|
Loans purchased from GNMA mortgage pools
|
|
|
5,312
|
|
|
|
697
|
|
|
|
686
|
|
|
|
|
|
|
|
6,978
|
|
|
|
770
|
|
|
|
761
|
|
Covered loans
|
|
|
10
|
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
35
|
|
|
|
6
|
|
|
|
6
|
|
Total loans
|
|
|
37,040
|
|
|
$
|
1,254
|
|
|
$
|
1,190
|
|
|
|
|
|
|
|
34,371
|
|
|
$
|
1,975
|
|
|
$
|
1,849
|
|
Residential mortgages, home equity and second mortgages, and loans purchased from GNMA mortgage pools in the
table above include trial period arrangements offered to customers during the periods presented. The post-modification balances for these loans reflect the current outstanding balance until a permanent modification is made. In addition, the
post-modification balances typically include capitalization of unpaid accrued interest and/or fees under the various modification programs. For those loans modified as TDRs during the third quarter of 2017, at September 30, 2017, 61 residential
mortgages, 46 home equity and second mortgage loans and 932 loans purchased from GNMA mortgage pools with outstanding balances of $8 million, $4 million and $122 million, respectively, were in a trial period and have estimated
post-modification balances of $9 million, $4 million and $123 million, respectively, assuming permanent modification occurs at the end of the trial period.
The Company has implemented certain restructuring programs that may result in TDRs. However, many of the Companys TDRs are also
determined on a
case-by-case
basis in connection with ongoing loan collection processes.
For the commercial lending segment, modifications generally result in the Company working with borrowers on a
case-by-case
basis. Commercial and commercial real estate modifications generally include extensions of the maturity date and may be accompanied by an increase or
decrease to the interest rate, which may not be deemed a market interest rate. In addition, the Company may work with the borrower in identifying other changes that mitigate loss to the Company, which may include additional collateral or guarantees
to support the loan. To a lesser extent, the Company may waive contractual principal. The Company classifies all of the above concessions as TDRs to the extent the Company determines that the borrower is experiencing financial difficulty.
Modifications for the consumer lending segment are generally part of programs the Company has initiated. The Company modifies residential
mortgage loans under Federal Housing Administration, United States Department of Veterans Affairs, or its own internal programs. Under these programs, the Company offers qualifying homeowners the opportunity to permanently modify their loan and
achieve more affordable monthly payments by providing loan concessions. These concessions may include adjustments to interest rates, conversion of adjustable rates to fixed rates, extension of maturity dates or deferrals of payments, capitalization
of accrued interest and/or outstanding advances, or in limited situations, partial forgiveness of loan principal. In most instances, participation in residential mortgage loan restructuring programs requires the customer to complete a short-term
trial period. A permanent loan modification is contingent on the customer successfully completing the trial period arrangement, and the loan documents are not modified until that time. The Company reports loans in a trial period arrangement as TDRs
and continues to report them as TDRs after the trial period.
Credit card and other retail loan TDRs are generally part of distinct
restructuring programs providing customers experiencing financial difficulty with modifications whereby balances may be amortized up to 60 months, and generally include waiver of fees and reduced interest rates.
In addition, the Company considers secured loans to consumer borrowers that have debt
discharged through bankruptcy where the borrower has not reaffirmed the debt to be TDRs.
Modifications to loans in the covered segment
are similar in nature to that described above for
non-covered
loans, and the evaluation and determination of TDR status is similar, except that acquired loans restructured after acquisition are not considered
TDRs for accounting and disclosure purposes if the loans evidenced credit deterioration as of the acquisition date and are accounted for in pools. Losses associated with the modification on covered loans, including the economic impact of interest
rate reductions, are generally eligible for reimbursement under loss sharing agreements with the FDIC.
The following table provides a summary of TDR
loans that defaulted (fully or partially
charged-off
or became 90 days or more past due) during the periods presented that were modified as TDRs within 12 months previous to default:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
|
|
|
2016
|
|
(Dollars in Millions)
|
|
Number
of Loans
|
|
|
Amount
Defaulted
|
|
|
|
|
|
Number
of Loans
|
|
|
Amount
Defaulted
|
|
Three Months Ended September 30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
200
|
|
|
$
|
25
|
|
|
|
|
|
|
|
121
|
|
|
$
|
4
|
|
Commercial real estate
|
|
|
10
|
|
|
|
3
|
|
|
|
|
|
|
|
6
|
|
|
|
3
|
|
Residential mortgages
|
|
|
84
|
|
|
|
7
|
|
|
|
|
|
|
|
43
|
|
|
|
4
|
|
Credit card
|
|
|
2,076
|
|
|
|
9
|
|
|
|
|
|
|
|
1,617
|
|
|
|
7
|
|
Other retail
|
|
|
89
|
|
|
|
1
|
|
|
|
|
|
|
|
103
|
|
|
|
1
|
|
Total loans, excluding GNMA and covered loans
|
|
|
2,459
|
|
|
|
45
|
|
|
|
|
|
|
|
1,890
|
|
|
|
19
|
|
Loans purchased from GNMA mortgage pools
|
|
|
354
|
|
|
|
46
|
|
|
|
|
|
|
|
39
|
|
|
|
5
|
|
Covered loans
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
1
|
|
Total loans
|
|
|
2,814
|
|
|
$
|
91
|
|
|
|
|
|
|
|
1,931
|
|
|
$
|
25
|
|
|
|
|
|
|
|
Nine Months Ended September 30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
555
|
|
|
$
|
49
|
|
|
|
|
|
|
|
374
|
|
|
$
|
15
|
|
Commercial real estate
|
|
|
28
|
|
|
|
6
|
|
|
|
|
|
|
|
21
|
|
|
|
9
|
|
Residential mortgages
|
|
|
251
|
|
|
|
26
|
|
|
|
|
|
|
|
101
|
|
|
|
13
|
|
Credit card
|
|
|
6,107
|
|
|
|
26
|
|
|
|
|
|
|
|
4,822
|
|
|
|
21
|
|
Other retail
|
|
|
320
|
|
|
|
4
|
|
|
|
|
|
|
|
269
|
|
|
|
5
|
|
Total loans, excluding GNMA and covered loans
|
|
|
7,261
|
|
|
|
111
|
|
|
|
|
|
|
|
5,587
|
|
|
|
63
|
|
Loans purchased from GNMA mortgage pools
|
|
|
711
|
|
|
|
95
|
|
|
|
|
|
|
|
93
|
|
|
|
12
|
|
Covered loans
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
1
|
|
Total loans
|
|
|
7,974
|
|
|
$
|
206
|
|
|
|
|
|
|
|
5,683
|
|
|
$
|
76
|
|
In addition to the defaults in the table above, the Company had a total of 402 and 1,278 residential mortgage
loans, home equity and second mortgage loans and loans purchased from GNMA mortgage pools for the three months and nine months ended September 30, 2017, respectively, where borrowers did not successfully complete the trial period arrangement
and, therefore, are no longer eligible for a permanent modification under the applicable modification program. These loans had aggregate outstanding balances of $50 million and $156 million for three months and nine months ended
September 30, 2017, respectively.
Covered Assets
Covered assets represent loans and other assets acquired from the FDIC, subject to loss sharing agreements, and include expected reimbursements from the FDIC. The carrying amount of the covered
assets consisted of purchased impaired loans, purchased nonimpaired loans and other assets as shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
|
|
December 31, 2016
|
|
(Dollars in Millions)
|
|
Purchased
Impaired
Loans
|
|
|
Purchased
Nonimpaired
Loans
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
Purchased
Impaired
Loans
|
|
|
Purchased
Nonimpaired
Loans
|
|
|
Other
|
|
|
Total
|
|
Residential mortgage loans
|
|
$
|
2,052
|
|
|
$
|
422
|
|
|
$
|
|
|
|
$
|
2,474
|
|
|
|
|
|
|
$
|
2,248
|
|
|
$
|
506
|
|
|
$
|
|
|
|
$
|
2,754
|
|
Other retail loans
|
|
|
|
|
|
|
173
|
|
|
|
|
|
|
|
173
|
|
|
|
|
|
|
|
|
|
|
|
278
|
|
|
|
|
|
|
|
278
|
|
Losses reimbursable by the FDIC (a)
|
|
|
|
|
|
|
|
|
|
|
320
|
|
|
|
320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
381
|
|
|
|
381
|
|
Unamortized changes in FDIC asset (b)
|
|
|
|
|
|
|
|
|
|
|
295
|
|
|
|
295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
423
|
|
|
|
423
|
|
Covered loans
|
|
|
2,052
|
|
|
|
595
|
|
|
|
615
|
|
|
|
3,262
|
|
|
|
|
|
|
|
2,248
|
|
|
|
784
|
|
|
|
804
|
|
|
|
3,836
|
|
Foreclosed real estate
|
|
|
|
|
|
|
|
|
|
|
26
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
|
|
|
|
26
|
|
Total covered assets
|
|
$
|
2,052
|
|
|
$
|
595
|
|
|
$
|
641
|
|
|
$
|
3,288
|
|
|
|
|
|
|
$
|
2,248
|
|
|
$
|
784
|
|
|
$
|
830
|
|
|
$
|
3,862
|
|
(a)
|
Relates to loss sharing agreements with remaining terms up to two years.
|
(b)
|
Represents decreases in expected reimbursements by the FDIC as a result of decreases in expected losses on the covered loans. These amounts are amortized as a reduction in interest income on covered loans over the
shorter of the expected life of the respective covered loans or the remaining contractual term of the indemnification agreements.
|
Interest income is recognized on purchased impaired loans through accretion of the difference between the carrying amount of those loans and
their expected cash flows. The initial determination of the fair value of the purchased loans
includes the impact of expected credit losses and, therefore, no allowance for credit losses is recorded at the purchase date. To the extent credit deterioration occurs after the date of
acquisition, the Company records an allowance for credit losses.
|
|
|
Note 5
|
|
Accounting for Transfers and Servicing of Financial Assets and Variable Interest Entities
|
The Company transfers financial assets in the normal course of business. The majority of the Companys financial asset
transfers are residential mortgage loan sales primarily to government-sponsored enterprises (GSEs), transfers of
tax-advantaged
investments, commercial loan sales through participation agreements,
and other individual or portfolio loan and securities sales. In accordance with the accounting guidance for asset transfers, the Company considers any ongoing involvement with transferred assets in determining whether the assets can be derecognized
from the balance sheet. Guarantees provided to certain third parties in connection with the transfer of assets are further discussed in Note 15.
For loans sold under participation agreements, the Company also considers whether the terms of the loan participation agreement meet the
accounting definition of a participating interest. With the exception of servicing and certain performance-based guarantees, the Companys continuing involvement with financial assets sold is minimal and generally limited to market customary
representation and warranty clauses. Any gain or loss on sale depends on the previous carrying amount of the transferred financial assets, the consideration received, and any liabilities incurred in exchange for the transferred assets. Upon
transfer, any servicing assets and other interests that continue to be held by the Company are initially recognized at fair value. For further information on mortgage servicing rights (MSRs), refer to Note 6. On a limited basis, the
Company may acquire and package high-grade corporate bonds for select corporate customers, in which the Company generally has no continuing involvement with these transactions. Additionally, the Company is an authorized GNMA issuer and issues GNMA
securities on a regular basis. The Company has no other asset securitizations or similar asset-backed financing arrangements that are
off-balance
sheet.
The Company also provides financial support primarily through the use of waivers of management fees associated with various unconsolidated
registered money market funds it manages. The Company provided $6 million and $9 million of support to the funds during the three months ended September 30, 2017 and 2016, respectively, and $17 million and $35 million during
the nine months ended September 30, 2017 and 2016, respectively.
The Company is involved in various entities that are considered to
be variable interest entities (VIEs). The Companys investments in VIEs are primarily related to investments promoting affordable housing, community development and renewable energy sources. Some of these
tax-advantaged
investments support the Companys regulatory compliance with the Community Reinvestment Act. The Companys investments in these entities generate a return primarily through the realization
of federal and state income tax credits, and other tax benefits, such as tax deductions from operating losses of the investments, over specified time periods. These tax credits are recognized as a reduction of tax expense or, for investments
qualifying as investment tax credits, as a reduction to the related investment asset. The Company recognized federal and state income tax credits related to its affordable housing and other
tax-advantaged
investments in tax expense of $173 million and $172 million for the three months ended September 30, 2017 and 2016, respectively, and $495 million and $504 million for the nine months ended September 30, 2017 and 2016,
respectively. The Company also recognized $361 million and $219 million of investment tax credits for the three months ended September 30, 2017 and 2016, respectively, and $843 million and $850 million for the nine months
ended September 30, 2017 and 2016, respectively. The Company recognized $163 million and $169 million of expenses related to all of these investments for the three months ended September 30, 2017 and 2016, respectively, of which
$61 million for both periods was included in tax expense and the remaining amounts were included in noninterest expense. The Company recognized $464 million and $476 million of expenses related to all of these investments for the nine
months ended September 30, 2017 and 2016, respectively, of which $187 million and $194 million, respectively, were included in tax expense and the remaining amounts were included in noninterest expense.
The Company is not required to consolidate VIEs in which it has concluded it does not have a controlling financial interest, and thus is not
the primary beneficiary. In such cases, the Company does not have both the power to direct the entities most significant activities and the obligation to absorb losses or the right to receive benefits that could potentially be significant to
the VIEs.
The Companys investments in these unconsolidated VIEs are carried in other assets on the Consolidated Balance Sheet. The
Companys unfunded capital and other commitments related to these unconsolidated VIEs are generally carried in other liabilities on the Consolidated Balance Sheet. The Companys maximum exposure to loss from these
unconsolidated VIEs include the investment recorded on the Companys Consolidated Balance Sheet, net of unfunded capital commitments, and previously recorded tax credits which remain subject
to recapture by taxing authorities based on compliance features required to be met at the project level. While the Company believes potential losses from these investments are remote, the maximum exposure was determined by assuming a scenario where
the community-based business and housing projects completely fail and do not meet certain government compliance requirements resulting in recapture of the related tax credits.
The following table provides a summary of investments in community development and
tax-advantaged
VIEs that the
Company has not consolidated:
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
Investment carrying amount
|
|
$
|
5,580
|
|
|
$
|
5,009
|
|
Unfunded capital and other commitments
|
|
|
3,029
|
|
|
|
2,477
|
|
Maximum exposure to loss
|
|
|
11,090
|
|
|
|
10,373
|
|
The Company also has noncontrolling financial investments in private investment funds and partnerships
considered to be VIEs, which are not consolidated. The Companys recorded investment in these entities, carried in other assets on the Consolidated Balance Sheet, was approximately $28 million at September 30, 2017 and
December 31, 2016. The maximum exposure to loss related to these VIEs was $49 million at September 30, 2017 and $50 million at December 31, 2016, representing the Companys investment balance and its unfunded
commitments to invest additional amounts.
The Companys individual net investments in unconsolidated VIEs, which exclude any
unfunded capital commitments, ranged from less than $1 million to $57 million at September 30, 2017, compared with less than $1 million to $40 million at December 31, 2016.
The Company is required to consolidate VIEs in which it has concluded it has a controlling financial interest. The Company sponsors entities
to which it transfers its interests in
tax-advantaged
investments to third parties. At September 30, 2017, approximately $3.6 billion of the Companys assets and $2.6 billion of its
liabilities included on the Consolidated Balance Sheet were related to community development and
tax-advantaged
investment VIEs which the Company has consolidated, primarily related to these transfers. These
amounts compared to $3.5 billion and $2.6 billion, respectively, at December 31, 2016. The majority of the assets of these consolidated VIEs are reported in other assets, and the liabilities are reported in long-term debt and other
liabilities. The assets of a particular VIE are the primary source of funds to settle its obligations. The creditors of the VIEs do not have recourse to the general credit of the Company. The Companys exposure to the consolidated VIEs is
generally limited to the carrying value of its variable interests plus any related tax credits previously recognized or transferred to others with a guarantee.
The Company also sponsors a conduit to which it previously transferred high-grade investment securities. The Company consolidates the conduit
because of its ability to manage the activities of the conduit. At September 30, 2017, $23 million of the
held-to-maturity
investment securities on the
Companys Consolidated Balance Sheet were related to the conduit, compared with $24 million at December 31, 2016.
In
addition, the Company sponsors a municipal bond securities tender option bond program. The Company controls the activities of the programs entities, is entitled to the residual returns and provides liquidity and remarketing arrangements to the
program. As a result, the Company has consolidated the programs entities. At September 30, 2017, $2.1 billion of
available-for-sale
investment securities
and $2.0 billion of short-term borrowings on the Consolidated Balance Sheet were related to the tender option bond program, compared with $1.1 billion of
available-for-sale
investment securities and $1.1 billion of short-term borrowings at December 31, 2016.
|
|
|
Note 6
|
|
Mortgage Servicing Rights
|
The Company serviced $233.1 billion of residential mortgage loans for others at September 30, 2017, and
$232.6 billion at December 31, 2016, which include subserviced mortgages with no corresponding MSRs asset. The net impact included in mortgage banking revenue of fair value changes of MSRs due to changes in valuation assumptions and
derivatives used to economically hedge MSRs were net losses of less than $1 million and net gains of $25 million for the three months ended September 30, 2017 and 2016, respectively and net gains of $17 million and net losses of
$7 million for the nine months ended September 30, 2017 and 2016, respectively. Loan servicing and ancillary fees, not including valuation changes, included in mortgage banking revenue were $183 million and $191 million for the
three months ended September 30, 2017 and 2016, respectively, and $561 million and $562 million for the nine months ended September 30, 2017 and 2016, respectively.
Changes in fair value of capitalized MSRs are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
(Dollars in Millions)
|
|
2017
|
|
|
2016
|
|
|
|
|
|
2017
|
|
|
2016
|
|
Balance at beginning of period
|
|
$
|
2,582
|
|
|
$
|
2,056
|
|
|
|
|
|
|
$
|
2,591
|
|
|
$
|
2,512
|
|
Rights purchased
|
|
|
4
|
|
|
|
18
|
|
|
|
|
|
|
|
10
|
|
|
|
32
|
|
Rights capitalized
|
|
|
115
|
|
|
|
142
|
|
|
|
|
|
|
|
319
|
|
|
|
372
|
|
Changes in fair value of MSRs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due to fluctuations in market interest rates (a)
|
|
|
(12
|
)
|
|
|
42
|
|
|
|
|
|
|
|
(42
|
)
|
|
|
(446
|
)
|
Due to revised assumptions or models (b)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
Other changes in fair value (c)
|
|
|
(92
|
)
|
|
|
(127
|
)
|
|
|
|
|
|
|
(298
|
)
|
|
|
(339
|
)
|
Balance at end of period
|
|
$
|
2,598
|
|
|
$
|
2,131
|
|
|
|
|
|
|
$
|
2,598
|
|
|
$
|
2,131
|
|
(a)
|
Includes changes in MSR value associated with changes in market interest rates, including estimated prepayment rates and anticipated earnings on escrow deposits.
|
(b)
|
Includes changes in MSR value not caused by changes in market interest rates, such as changes in cost to service, ancillary income and option adjusted spread, as well as the impact of any model changes.
|
(c)
|
Primarily represents changes due to realization of expected cash flows over time (decay).
|
The
estimated sensitivity to changes in interest rates of the fair value of the MSRs portfolio and the related derivative instruments was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
|
|
December 31, 2016
|
|
(Dollars in Millions)
|
|
Down
100 bps
|
|
|
Down
50 bps
|
|
|
Down
25 bps
|
|
|
Up
25 bps
|
|
|
Up
50 bps
|
|
|
Up
100 bps
|
|
|
|
|
|
Down
100 bps
|
|
|
Down
50 bps
|
|
|
Down
25 bps
|
|
|
Up
25 bps
|
|
|
Up
50 bps
|
|
|
Up
100 bps
|
|
MSR portfolio
|
|
$
|
(524
|
)
|
|
$
|
(232
|
)
|
|
$
|
(109
|
)
|
|
$
|
96
|
|
|
$
|
178
|
|
|
$
|
307
|
|
|
|
|
|
|
$
|
(476
|
)
|
|
$
|
(209
|
)
|
|
$
|
(98
|
)
|
|
$
|
85
|
|
|
$
|
159
|
|
|
$
|
270
|
|
Derivative instrument hedges
|
|
|
463
|
|
|
|
219
|
|
|
|
105
|
|
|
|
(97
|
)
|
|
|
(187
|
)
|
|
|
(352
|
)
|
|
|
|
|
|
|
375
|
|
|
|
180
|
|
|
|
88
|
|
|
|
(84
|
)
|
|
|
(165
|
)
|
|
|
(314
|
)
|
Net sensitivity
|
|
$
|
(61
|
)
|
|
$
|
(13
|
)
|
|
$
|
(4
|
)
|
|
$
|
(1
|
)
|
|
$
|
(9
|
)
|
|
$
|
(45
|
)
|
|
|
|
|
|
$
|
(101
|
)
|
|
$
|
(29
|
)
|
|
$
|
(10
|
)
|
|
$
|
1
|
|
|
$
|
(6
|
)
|
|
$
|
(44
|
)
|
The fair value of MSRs and their sensitivity to changes in interest rates is influenced by the mix of the
servicing portfolio and characteristics of each segment of the portfolio. The Companys servicing portfolio consists of the distinct portfolios of government-insured mortgages, conventional mortgages and Housing Finance Agency (HFA)
mortgages. The servicing portfolios are predominantly comprised of fixed-rate agency loans with limited adjustable-rate or jumbo mortgage loans. The HFA division specializes in servicing loans made under state and local housing authority programs.
These programs provide mortgages to
low-income
and moderate-income borrowers and are generally government-insured programs with a favorable rate subsidy, down payment and/or closing cost assistance.
A summary of the Companys MSRs and related characteristics by portfolio was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
|
|
December 31, 2016
|
|
(Dollars in Millions)
|
|
HFA
|
|
|
Government
|
|
|
Conventional (c)
|
|
|
Total
|
|
|
|
|
|
HFA
|
|
|
Government
|
|
|
Conventional (c)
|
|
|
Total
|
|
Servicing portfolio (a)
|
|
$
|
39,725
|
|
|
$
|
37,001
|
|
|
$
|
154,589
|
|
|
$
|
231,315
|
|
|
|
|
|
|
$
|
34,746
|
|
|
$
|
37,530
|
|
|
$
|
157,771
|
|
|
$
|
230,047
|
|
Fair value
|
|
$
|
440
|
|
|
$
|
422
|
|
|
$
|
1,736
|
|
|
$
|
2,598
|
|
|
|
|
|
|
$
|
398
|
|
|
$
|
422
|
|
|
$
|
1,771
|
|
|
$
|
2,591
|
|
Value (bps) (b)
|
|
|
111
|
|
|
|
114
|
|
|
|
112
|
|
|
|
112
|
|
|
|
|
|
|
|
115
|
|
|
|
112
|
|
|
|
112
|
|
|
|
113
|
|
Weighted-average servicing fees (bps)
|
|
|
35
|
|
|
|
34
|
|
|
|
27
|
|
|
|
30
|
|
|
|
|
|
|
|
36
|
|
|
|
34
|
|
|
|
27
|
|
|
|
30
|
|
Multiple (value/servicing fees)
|
|
|
3.17
|
|
|
|
3.35
|
|
|
|
4.15
|
|
|
|
3.73
|
|
|
|
|
|
|
|
3.19
|
|
|
|
3.29
|
|
|
|
4.15
|
|
|
|
3.77
|
|
Weighted-average note rate
|
|
|
4.42
|
%
|
|
|
3.93
|
%
|
|
|
4.02
|
%
|
|
|
4.07
|
%
|
|
|
|
|
|
|
4.37
|
%
|
|
|
3.95
|
%
|
|
|
4.02
|
%
|
|
|
4.06
|
%
|
Weighted-average age (in years)
|
|
|
2.9
|
|
|
|
4.2
|
|
|
|
4.1
|
|
|
|
3.9
|
|
|
|
|
|
|
|
2.9
|
|
|
|
3.8
|
|
|
|
3.8
|
|
|
|
3.7
|
|
Weighted-average expected prepayment (constant prepayment rate)
|
|
|
9.8
|
%
|
|
|
11.7
|
%
|
|
|
10.0
|
%
|
|
|
10.2
|
%
|
|
|
|
|
|
|
9.4
|
%
|
|
|
11.3
|
%
|
|
|
9.8
|
%
|
|
|
10.0
|
%
|
Weighted-average expected life (in years)
|
|
|
7.7
|
|
|
|
6.5
|
|
|
|
6.8
|
|
|
|
6.9
|
|
|
|
|
|
|
|
8.0
|
|
|
|
6.8
|
|
|
|
6.9
|
|
|
|
7.0
|
|
Weighted-average option adjusted spread (d)
|
|
|
9.9
|
%
|
|
|
9.2
|
%
|
|
|
7.2
|
%
|
|
|
8.0
|
%
|
|
|
|
|
|
|
9.9
|
%
|
|
|
9.2
|
%
|
|
|
7.2
|
%
|
|
|
8.0
|
%
|
(a)
|
Represents principal balance of mortgages having corresponding MSR asset.
|
(b)
|
Calculated as fair value divided by the servicing portfolio.
|
(c)
|
Represents loans sold primarily to GSEs.
|
(d)
|
Option adjusted spread is the incremental spread added to the risk-free rate to reflect optionality and other risk inherent in the MSRs.
|
At September 30, 2017 and December 31, 2016, the Company had authority to issue 50 million shares of preferred
stock. The number of shares issued and outstanding and the carrying amount of each outstanding series of the Companys preferred stock were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
|
|
December 31, 2016
|
|
(Dollars in Millions)
|
|
Shares
Issued and
Outstanding
|
|
|
Liquidation
Preference
|
|
|
Discount
|
|
|
Carrying
Amount
|
|
|
|
|
|
Shares
Issued and
Outstanding
|
|
|
Liquidation
Preference
|
|
|
Discount
|
|
|
Carrying
Amount
|
|
Series A
|
|
|
12,510
|
|
|
$
|
1,251
|
|
|
$
|
145
|
|
|
$
|
1,106
|
|
|
|
|
|
|
|
12,510
|
|
|
$
|
1,251
|
|
|
$
|
145
|
|
|
$
|
1,106
|
|
Series B
|
|
|
40,000
|
|
|
|
1,000
|
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
|
|
40,000
|
|
|
|
1,000
|
|
|
|
|
|
|
|
1,000
|
|
Series F
|
|
|
44,000
|
|
|
|
1,100
|
|
|
|
12
|
|
|
|
1,088
|
|
|
|
|
|
|
|
44,000
|
|
|
|
1,100
|
|
|
|
12
|
|
|
|
1,088
|
|
Series G
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,400
|
|
|
|
1,085
|
|
|
|
10
|
|
|
|
1,075
|
|
Series H
|
|
|
20,000
|
|
|
|
500
|
|
|
|
13
|
|
|
|
487
|
|
|
|
|
|
|
|
20,000
|
|
|
|
500
|
|
|
|
13
|
|
|
|
487
|
|
Series I
|
|
|
30,000
|
|
|
|
750
|
|
|
|
5
|
|
|
|
745
|
|
|
|
|
|
|
|
30,000
|
|
|
|
750
|
|
|
|
5
|
|
|
|
745
|
|
Series J
|
|
|
40,000
|
|
|
|
1,000
|
|
|
|
7
|
|
|
|
993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total preferred stock (a)
|
|
|
186,510
|
|
|
$
|
5,601
|
|
|
$
|
182
|
|
|
$
|
5,419
|
|
|
|
|
|
|
|
189,910
|
|
|
$
|
5,686
|
|
|
$
|
185
|
|
|
$
|
5,501
|
|
(a)
|
The par value of all shares issued and outstanding at September 30, 2017 and December 31, 2016, was $1.00 per share.
|
During the first nine months of 2017, the Company issued depositary shares representing an ownership interest in 40,000 shares of
Series J
Non-Cumulative
Perpetual Preferred Stock with a liquidation preference of $25,000 per share (the Series J Preferred Stock). The Series J Preferred Stock has no stated
maturity and will not be subject to any sinking fund or other obligation of the Company. Dividends, if declared, will accrue and be payable semiannually, in arrears, at a rate per annum equal to 5.300 percent from the date of issuance to, but
excluding, April 15, 2027, and thereafter will accrue and be payable quarterly at a floating rate per annum equal to three-month LIBOR plus 2.914 percent. The Series J Preferred Stock is redeemable at the Companys option, in whole or
in part, on or after April 15, 2027. The Series J Preferred Stock is redeemable at the Companys option, in whole, but not in part, prior to April 15, 2027 within 90 days following an official administrative or judicial decision,
amendment to, or change in the laws or regulations that would not allow the Company to treat the full liquidation value of the Series J Preferred Stock as Tier 1 capital for purposes of the capital adequacy guidelines of the Federal Reserve Board.
During the first nine months of 2017, the Company redeemed all outstanding shares of the Series G
Non-Cumulative
Perpetual Preferred Stock (the Series G Preferred Stock) at a redemption price equal to the liquidation preference amount. The Company included a $10 million loss in the
computation of earnings per diluted common share for the first nine months of 2017, which represents the stock issuance costs recorded in preferred stock upon the issuance of the Series G Preferred Stock that were reclassified to retained earnings
on the date the Company provided notice of its intent to redeem the outstanding shares.
|
|
|
Note 8
|
|
Accumulated Other Comprehensive Income (Loss)
|
Shareholders equity is affected by transactions and valuations of asset and liability positions that require adjustments
to accumulated other comprehensive income (loss). The reconciliation of the transactions affecting accumulated other comprehensive income (loss) included in shareholders equity is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
(Dollars in Millions)
|
|
Unrealized Gains
(Losses) on
Securities
Available-For-
Sale
|
|
|
Unrealized Gains
(Losses) on
Securities
Transferred
From
Available-For-Sale
to Held-To-
Maturity
|
|
|
Unrealized Gains
(Losses) on
Derivative Hedges
|
|
|
Unrealized Gains
(Losses) on
Retirement Plans
|
|
|
Foreign
Currency
Translation
|
|
|
Total
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
(174
|
)
|
|
$
|
21
|
|
|
$
|
51
|
|
|
$
|
(1,077
|
)
|
|
$
|
(67
|
)
|
|
$
|
(1,246
|
)
|
Changes in unrealized gains and losses
|
|
|
24
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
21
|
|
Foreign currency translation adjustment (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
2
|
|
Reclassification to earnings of realized gains and losses
|
|
|
(9
|
)
|
|
|
(3
|
)
|
|
|
4
|
|
|
|
29
|
|
|
|
|
|
|
|
21
|
|
Applicable income taxes
|
|
|
(7
|
)
|
|
|
1
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
(17
|
)
|
Balance at end of period
|
|
$
|
(166
|
)
|
|
$
|
19
|
|
|
$
|
52
|
|
|
$
|
(1,059
|
)
|
|
$
|
(65
|
)
|
|
$
|
(1,219
|
)
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
612
|
|
|
$
|
31
|
|
|
$
|
(133
|
)
|
|
$
|
(1,006
|
)
|
|
$
|
(66
|
)
|
|
$
|
(562
|
)
|
Changes in unrealized gains and losses
|
|
|
(105
|
)
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
(74
|
)
|
Foreign currency translation adjustment (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
6
|
|
Reclassification to earnings of realized gains and losses
|
|
|
(10
|
)
|
|
|
(5
|
)
|
|
|
28
|
|
|
|
41
|
|
|
|
|
|
|
|
54
|
|
Applicable income taxes
|
|
|
44
|
|
|
|
1
|
|
|
|
(22
|
)
|
|
|
(16
|
)
|
|
|
(10
|
)
|
|
|
(3
|
)
|
Balance at end of period
|
|
$
|
541
|
|
|
$
|
27
|
|
|
$
|
(96
|
)
|
|
$
|
(981
|
)
|
|
$
|
(70
|
)
|
|
$
|
(579
|
)
|
(a)
|
Represents the impact of changes in foreign currency exchange rates on the Companys investment in foreign operations and related hedges.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
(Dollars in Millions)
|
|
Unrealized Gains
(Losses) on
Securities
Available-For-
Sale
|
|
|
Unrealized Gains
(Losses) on
Securities
Transferred
From
Available-For-Sale
to Held-To-
Maturity
|
|
|
Unrealized Gains
(Losses) on
Derivative Hedges
|
|
|
Unrealized Gains
(Losses) on
Retirement Plans
|
|
|
Foreign
Currency
Translation
|
|
|
Total
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
(431
|
)
|
|
$
|
25
|
|
|
$
|
55
|
|
|
$
|
(1,113
|
)
|
|
$
|
(71
|
)
|
|
$
|
(1,535
|
)
|
Changes in unrealized gains and losses
|
|
|
479
|
|
|
|
|
|
|
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
|
446
|
|
Foreign currency translation adjustment (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
11
|
|
Reclassification to earnings of realized gains and losses
|
|
|
(47
|
)
|
|
|
(10
|
)
|
|
|
28
|
|
|
|
87
|
|
|
|
|
|
|
|
58
|
|
Applicable income taxes
|
|
|
(167
|
)
|
|
|
4
|
|
|
|
2
|
|
|
|
(33
|
)
|
|
|
(5
|
)
|
|
|
(199
|
)
|
Balance at end of period
|
|
$
|
(166
|
)
|
|
$
|
19
|
|
|
$
|
52
|
|
|
$
|
(1,059
|
)
|
|
$
|
(65
|
)
|
|
$
|
(1,219
|
)
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
111
|
|
|
$
|
36
|
|
|
$
|
(67
|
)
|
|
$
|
(1,056
|
)
|
|
$
|
(43
|
)
|
|
$
|
(1,019
|
)
|
Changes in unrealized gains and losses
|
|
|
716
|
|
|
|
|
|
|
|
(152
|
)
|
|
|
|
|
|
|
|
|
|
|
564
|
|
Other-than-temporary impairment not recognized in earnings on securities
available-for-sale
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
Foreign currency translation adjustment (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30
|
)
|
|
|
(30
|
)
|
Reclassification to earnings of realized gains and losses
|
|
|
(16
|
)
|
|
|
(14
|
)
|
|
|
104
|
|
|
|
122
|
|
|
|
|
|
|
|
196
|
|
Applicable income taxes
|
|
|
(269
|
)
|
|
|
5
|
|
|
|
19
|
|
|
|
(47
|
)
|
|
|
3
|
|
|
|
(289
|
)
|
Balance at end of period
|
|
$
|
541
|
|
|
$
|
27
|
|
|
$
|
(96
|
)
|
|
$
|
(981
|
)
|
|
$
|
(70
|
)
|
|
$
|
(579
|
)
|
(a)
|
Represents the impact of changes in foreign currency exchange rates on the Companys investment in foreign operations and related hedges.
|
Additional detail about the impact to net income for items reclassified out of accumulated other
comprehensive income (loss) and into earnings is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact to Net Income
|
|
|
Affected Line Item in the
Consolidated Statement of Income
|
|
|
Three Months Ended
September 30,
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
(Dollars in Millions)
|
|
2017
|
|
|
2016
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Unrealized gains (losses) on securities
available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gains (losses) on sale of securities
|
|
$
|
9
|
|
|
$
|
12
|
|
|
|
|
|
|
$
|
47
|
|
|
$
|
19
|
|
|
Total securities gains (losses), net
|
Other-than-temporary impairment recognized in earnings
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
9
|
|
|
|
10
|
|
|
|
|
|
|
|
47
|
|
|
|
16
|
|
|
Total before tax
|
|
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
(18
|
)
|
|
|
(6
|
)
|
|
Applicable income taxes
|
|
|
|
5
|
|
|
|
6
|
|
|
|
|
|
|
|
29
|
|
|
|
10
|
|
|
Net-of-tax
|
Unrealized gains (losses) on securities transferred from
available-for-sale
to
held-to-maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of unrealized gains
|
|
|
3
|
|
|
|
5
|
|
|
|
|
|
|
|
10
|
|
|
|
14
|
|
|
Interest income
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
(4
|
)
|
|
|
(5
|
)
|
|
Applicable income taxes
|
|
|
|
2
|
|
|
|
4
|
|
|
|
|
|
|
|
6
|
|
|
|
9
|
|
|
Net-of-tax
|
Unrealized gains (losses) on derivative hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gains (losses) on derivative hedges
|
|
|
(4
|
)
|
|
|
(28
|
)
|
|
|
|
|
|
|
(28
|
)
|
|
|
(104
|
)
|
|
Interest expense
|
|
|
|
2
|
|
|
|
11
|
|
|
|
|
|
|
|
11
|
|
|
|
40
|
|
|
Applicable income taxes
|
|
|
|
(2
|
)
|
|
|
(17
|
)
|
|
|
|
|
|
|
(17
|
)
|
|
|
(64
|
)
|
|
Net-of-tax
|
Unrealized gains (losses) on retirement plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial gains (losses) and prior service cost (credit) amortization
|
|
|
(29
|
)
|
|
|
(41
|
)
|
|
|
|
|
|
|
(87
|
)
|
|
|
(122
|
)
|
|
Employee benefits expense
|
|
|
|
11
|
|
|
|
16
|
|
|
|
|
|
|
|
33
|
|
|
|
47
|
|
|
Applicable income taxes
|
|
|
|
(18
|
)
|
|
|
(25
|
)
|
|
|
|
|
|
|
(54
|
)
|
|
|
(75
|
)
|
|
Net-of-tax
|
Total impact to net income
|
|
$
|
(13
|
)
|
|
$
|
(32
|
)
|
|
|
|
|
|
$
|
(36
|
)
|
|
$
|
(120
|
)
|
|
|
|
|
|
Note 9
|
|
Earnings Per Share
|
The components of earnings per share were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
(Dollars and Shares in Millions, Except Per Share Data)
|
|
2017
|
|
|
2016
|
|
|
|
|
|
2017
|
|
|
2016
|
|
Net income attributable to U.S. Bancorp
|
|
$
|
1,563
|
|
|
$
|
1,502
|
|
|
|
|
|
|
$
|
4,536
|
|
|
$
|
4,410
|
|
Preferred dividends
|
|
|
(71
|
)
|
|
|
(61
|
)
|
|
|
|
|
|
|
(204
|
)
|
|
|
(201
|
)
|
Impact of preferred stock redemption (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
Impact of the purchase of noncontrolling interests (b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
Earnings allocated to participating stock awards
|
|
|
(7
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
(20
|
)
|
|
|
(20
|
)
|
Net income applicable to U.S. Bancorp common shareholders
|
|
$
|
1,485
|
|
|
$
|
1,434
|
|
|
|
|
|
|
$
|
4,302
|
|
|
$
|
4,198
|
|
Average common shares outstanding
|
|
|
1,672
|
|
|
|
1,710
|
|
|
|
|
|
|
|
1,683
|
|
|
|
1,724
|
|
Net effect of the exercise and assumed purchase of stock awards
|
|
|
6
|
|
|
|
6
|
|
|
|
|
|
|
|
6
|
|
|
|
6
|
|
Average diluted common shares outstanding
|
|
|
1,678
|
|
|
|
1,716
|
|
|
|
|
|
|
|
1,689
|
|
|
|
1,730
|
|
Earnings per common share
|
|
$
|
.89
|
|
|
$
|
.84
|
|
|
|
|
|
|
$
|
2.56
|
|
|
$
|
2.44
|
|
Diluted earnings per common share
|
|
$
|
.88
|
|
|
$
|
.84
|
|
|
|
|
|
|
$
|
2.55
|
|
|
$
|
2.43
|
|
(a)
|
Represents stock issuance costs originally recorded in preferred stock upon the issuance of the Companys Series G Preferred Stock that were reclassified to retained earnings on the date the Company announced
its intent to redeem the outstanding shares.
|
(b)
|
Represents the difference between the carrying amount and amount paid by the Company to purchase third party investor holdings of the preferred stock of USB Realty Corp, a consolidated subsidiary of the Company.
|
Options outstanding at September 30, 2017, to purchase 1 million common shares for the three months and nine
months ended September 30, 2017, and outstanding at September 30, 2016, to purchase 1 million common shares for the three months and nine months ended September 30, 2016, were not included in the computation of diluted earnings
per share because they were antidilutive.
|
|
|
Note 10
|
|
Employee Benefits
|
The components of net periodic benefit cost for the Companys retirement plans were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
Pension Plans
|
|
|
Postretirement
Welfare Plan
|
|
|
|
|
|
Pension Plans
|
|
|
Postretirement
Welfare Plan
|
|
(Dollars in Millions)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Service cost
|
|
$
|
47
|
|
|
$
|
45
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
140
|
|
|
$
|
133
|
|
|
$
|
|
|
|
$
|
|
|
Interest cost
|
|
|
55
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
165
|
|
|
|
158
|
|
|
|
2
|
|
|
|
2
|
|
Expected return on plan assets
|
|
|
(71
|
)
|
|
|
(66
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
(213
|
)
|
|
|
(198
|
)
|
|
|
(2
|
)
|
|
|
(1
|
)
|
Prior service cost (credit) amortization
|
|
|
|
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(4
|
)
|
|
|
(3
|
)
|
|
|
(2
|
)
|
Actuarial loss (gain) amortization
|
|
|
31
|
|
|
|
44
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
95
|
|
|
|
131
|
|
|
|
(4
|
)
|
|
|
(3
|
)
|
Net periodic benefit cost
|
|
$
|
62
|
|
|
$
|
74
|
|
|
$
|
(3
|
)
|
|
$
|
(2
|
)
|
|
|
|
|
|
$
|
186
|
|
|
$
|
220
|
|
|
$
|
(7
|
)
|
|
$
|
(4
|
)
|
The components of income tax expense were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
(Dollars in Millions)
|
|
2017
|
|
|
2016
|
|
|
|
|
|
2017
|
|
|
2016
|
|
Federal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
455
|
|
|
$
|
717
|
|
|
|
|
|
|
$
|
1,479
|
|
|
$
|
1,631
|
|
Deferred
|
|
|
54
|
|
|
|
(232
|
)
|
|
|
|
|
|
|
(103
|
)
|
|
|
(279
|
)
|
Federal income tax
|
|
|
509
|
|
|
|
485
|
|
|
|
|
|
|
|
1,376
|
|
|
|
1,352
|
|
State
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
53
|
|
|
|
108
|
|
|
|
|
|
|
|
199
|
|
|
|
235
|
|
Deferred
|
|
|
27
|
|
|
|
(27
|
)
|
|
|
|
|
|
|
64
|
|
|
|
25
|
|
State income tax
|
|
|
80
|
|
|
|
81
|
|
|
|
|
|
|
|
263
|
|
|
|
260
|
|
Total income tax provision
|
|
$
|
589
|
|
|
$
|
566
|
|
|
|
|
|
|
$
|
1,639
|
|
|
$
|
1,612
|
|
A reconciliation of expected income tax expense at the federal statutory rate of 35 percent to the Companys
applicable income tax expense follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
(Dollars in Millions)
|
|
2017
|
|
|
2016
|
|
|
|
|
|
2017
|
|
|
2016
|
|
Tax at statutory rate
|
|
$
|
755
|
|
|
$
|
729
|
|
|
|
|
|
|
$
|
2,172
|
|
|
$
|
2,123
|
|
State income tax, at statutory rates, net of federal tax benefit
|
|
|
71
|
|
|
|
53
|
|
|
|
|
|
|
|
201
|
|
|
|
170
|
|
Tax effect of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax credits and benefits, net of related expenses
|
|
|
(187
|
)
|
|
|
(183
|
)
|
|
|
|
|
|
|
(577
|
)
|
|
|
(523
|
)
|
Tax-exempt
income
|
|
|
(50
|
)
|
|
|
(49
|
)
|
|
|
|
|
|
|
(150
|
)
|
|
|
(148
|
)
|
Noncontrolling interests
|
|
|
(2
|
)
|
|
|
(5
|
)
|
|
|
|
|
|
|
(11
|
)
|
|
|
(15
|
)
|
Other items (a)
|
|
|
2
|
|
|
|
21
|
|
|
|
|
|
|
|
4
|
|
|
|
5
|
|
Applicable income taxes
|
|
$
|
589
|
|
|
$
|
566
|
|
|
|
|
|
|
$
|
1,639
|
|
|
$
|
1,612
|
|
(a)
|
Includes excess tax benefits associated with stock-based compensation under accounting guidance effective January 1, 2017. Previously, these benefits were recorded in capital surplus.
|
The Companys income tax returns are subject to review and examination by federal, state, local and foreign government authorities. On an
ongoing basis, numerous federal, state, local and foreign examinations are in progress and cover multiple tax years. As of September 30, 2017, the federal taxing authority has completed its examination of the Company through the fiscal year
ended December 31, 2010. The years open to examination by foreign, state and local government authorities vary by jurisdiction.
The
Companys net deferred tax liability was $588 million at September 30, 2017 and $479 million at December 31, 2016.
|
|
|
Note 12
|
|
Derivative Instruments
|
In the ordinary course of business, the Company enters into derivative transactions to manage various risks and to accommodate
the business requirements of its customers. The Company recognizes all derivatives on the Consolidated Balance Sheet at fair value in other assets or in other liabilities. On the date the Company enters into a derivative contract, the derivative is
designated as either a fair value hedge, cash flow hedge, net investment hedge, or a designation is not made as it is a customer-related transaction, an economic hedge for asset/liability risk management purposes or another stand-alone derivative
created through the Companys operations (free-standing derivative). When a derivative is designated as a fair value, cash flow or net investment hedge, the Company performs an assessment, at inception and, at a minimum, quarterly
thereafter, to determine the effectiveness of the derivative in offsetting changes in the value or cash flows of the hedged item(s).
Fair Value Hedges
These derivatives are interest rate swaps the Company uses to hedge the change in fair value related to
interest rate changes of its underlying fixed-rate debt. Changes in the fair value of derivatives designated as fair value hedges, and changes in the fair value of the hedged items, are recorded in earnings. All fair value hedges were highly
effective for the three and nine months ended September 30, 2017, and the change in fair value attributed to hedge ineffectiveness was not material.
Cash Flow Hedges
These
derivatives are interest rate swaps the Company uses to hedge the forecasted cash flows from its underlying variable-rate debt. Changes in the fair value of derivatives designated as cash flow hedges are recorded in other comprehensive income (loss)
until the cash flows of the hedged items are realized. If a derivative designated as a cash flow hedge is terminated or ceases to be highly effective, the gain or loss in other comprehensive income (loss) is amortized to earnings over the period the
forecasted hedged transactions impact earnings. If a hedged forecasted transaction is no longer probable, hedge accounting is ceased and any gain or loss included in other comprehensive income (loss) is reported in earnings immediately, unless the
forecasted transaction is at least reasonably possible of occurring, whereby the amounts remain within other comprehensive income (loss). At September 30, 2017, the Company had $52 million
(net-of-tax)
of realized and unrealized gains on derivatives classified as cash flow hedges recorded in other comprehensive income (loss), compared with $55 million
(net-of-tax)
of realized and unrealized gains at December 31, 2016. The estimated amounts to be reclassified from other comprehensive income (loss) into earnings during the remainder of 2017 and the next
12 months were immaterial. All cash flow hedges were highly effective for the three and nine months ended September 30, 2017, and the change in fair value attributed to hedge ineffectiveness was not material.
Net Investment Hedges
The
Company uses forward commitments to sell specified amounts of certain foreign currencies, and
non-derivative
debt instruments, to hedge the volatility of its net investment in foreign operations driven by
fluctuations in foreign currency exchange rates. The ineffectiveness on all net investment hedges was not material for the three and nine months ended September 30, 2017. At September 30, 2017, the carrying amount of
non-derivative
debt instruments designated as net investment hedges was $1.2 billion. There were no
non-derivative
debt instruments designated as net investment hedges at
December 31, 2016.
Other Derivative Positions
The Company enters into free-standing derivatives to mitigate interest rate risk and for other risk management purposes. These derivatives include forward commitments to sell
to-be-announced
securities (TBAs) and other commitments to sell residential mortgage loans, which are used to economically hedge the interest rate risk related to
residential mortgage loans held for sale (MLHFS) and unfunded mortgage loan commitments. The Company also enters into interest rate swaps, swaptions, forward commitments to buy TBAs, U.S. Treasury and Eurodollar futures and options on
U.S. Treasury futures to economically hedge the change in the fair value of the Companys MSRs. The Company also enters into foreign currency forwards to economically hedge remeasurement gains and losses the Company recognizes on foreign
currency denominated assets and liabilities. In addition, the Company acts as a seller and buyer of interest rate derivatives and foreign exchange contracts for its customers. The Company mitigates the market and liquidity risk associated with these
customer derivatives by entering into similar offsetting positions with broker-dealers, or on a portfolio basis by entering into other derivative or
non-derivative
financial instruments that partially or fully
offset the exposure from these customer-related positions. The Companys customer derivatives and related hedges are monitored and reviewed by the Companys Market Risk Committee, which establishes policies for market risk management,
including exposure limits for each portfolio. The Company also has
derivative contracts that are created through its operations, including certain unfunded mortgage loan commitments and swap agreements related to the sale of a portion of its Class B common
shares of Visa Inc. Refer to Note 14 for further information on these swap agreements.
For additional information on the Companys
purpose for entering into derivative transactions and its overall risk management strategies, refer to Management Discussion and Analysis Use of Derivatives to Manage Interest Rate and Other Risks, which is incorporated by
reference into these Notes to Consolidated Financial Statements.
The following table summarizes the asset and liability management derivative positions
of the Company:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
|
|
|
|
Liability Derivatives
|
|
(Dollars in Millions)
|
|
Notional
Value
|
|
|
Fair
Value
|
|
|
Weighted-
Average
Remaining
Maturity
In Years
|
|
|
|
|
|
Notional
Value
|
|
|
Fair
Value
|
|
|
Weighted-
Average
Remaining
Maturity
In Years
|
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receive fixed/pay floating swaps
|
|
$
|
3,350
|
|
|
$
|
42
|
|
|
|
3.42
|
|
|
|
|
|
|
$
|
1,550
|
|
|
$
|
8
|
|
|
|
1.33
|
|
Cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pay fixed/receive floating swaps
|
|
|
3,772
|
|
|
|
3
|
|
|
|
6.88
|
|
|
|
|
|
|
|
578
|
|
|
|
4
|
|
|
|
.98
|
|
Net investment hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts
|
|
|
347
|
|
|
|
6
|
|
|
|
.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other economic hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures and forwards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buy
|
|
|
2,545
|
|
|
|
11
|
|
|
|
.07
|
|
|
|
|
|
|
|
2,075
|
|
|
|
10
|
|
|
|
.05
|
|
Sell
|
|
|
5,605
|
|
|
|
12
|
|
|
|
.03
|
|
|
|
|
|
|
|
4,396
|
|
|
|
12
|
|
|
|
.04
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
4,005
|
|
|
|
59
|
|
|
|
7.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
|
|
|
1,536
|
|
|
|
28
|
|
|
|
.10
|
|
|
|
|
|
|
|
21
|
|
|
|
1
|
|
|
|
.09
|
|
Receive fixed/pay floating swaps
|
|
|
3,673
|
|
|
|
|
|
|
|
8.22
|
|
|
|
|
|
|
|
4,328
|
|
|
|
94
|
|
|
|
12.55
|
|
Pay fixed/receive floating swaps
|
|
|
2,414
|
|
|
|
15
|
|
|
|
3.23
|
|
|
|
|
|
|
|
4,233
|
|
|
|
45
|
|
|
|
8.22
|
|
Foreign exchange forward contracts
|
|
|
622
|
|
|
|
9
|
|
|
|
.05
|
|
|
|
|
|
|
|
44
|
|
|
|
|
|
|
|
.07
|
|
Equity contracts
|
|
|
98
|
|
|
|
2
|
|
|
|
.99
|
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
.07
|
|
Credit contracts
|
|
|
1,490
|
|
|
|
|
|
|
|
3.59
|
|
|
|
|
|
|
|
3,625
|
|
|
|
2
|
|
|
|
3.02
|
|
Other (a)
|
|
|
239
|
|
|
|
1
|
|
|
|
.01
|
|
|
|
|
|
|
|
1,325
|
|
|
|
124
|
|
|
|
2.25
|
|
Total
|
|
$
|
29,696
|
|
|
$
|
188
|
|
|
|
|
|
|
|
|
|
|
$
|
22,202
|
|
|
$
|
300
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receive fixed/pay floating swaps
|
|
$
|
2,550
|
|
|
$
|
49
|
|
|
|
4.28
|
|
|
|
|
|
|
$
|
1,250
|
|
|
$
|
12
|
|
|
|
2.32
|
|
Cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pay fixed/receive floating swaps
|
|
|
3,272
|
|
|
|
108
|
|
|
|
8.63
|
|
|
|
|
|
|
|
2,787
|
|
|
|
35
|
|
|
|
.83
|
|
Net investment hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts
|
|
|
1,347
|
|
|
|
15
|
|
|
|
.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other economic hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures and forwards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buy
|
|
|
1,748
|
|
|
|
13
|
|
|
|
.09
|
|
|
|
|
|
|
|
1,722
|
|
|
|
18
|
|
|
|
.05
|
|
Sell
|
|
|
2,278
|
|
|
|
129
|
|
|
|
.08
|
|
|
|
|
|
|
|
4,214
|
|
|
|
43
|
|
|
|
.09
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
1,565
|
|
|
|
43
|
|
|
|
8.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
|
|
|
1,073
|
|
|
|
25
|
|
|
|
.07
|
|
|
|
|
|
|
|
12
|
|
|
|
1
|
|
|
|
.06
|
|
Receive fixed/pay floating swaps
|
|
|
6,452
|
|
|
|
26
|
|
|
|
11.48
|
|
|
|
|
|
|
|
1,561
|
|
|
|
16
|
|
|
|
6.54
|
|
Pay fixed/receive floating swaps
|
|
|
4,705
|
|
|
|
13
|
|
|
|
6.51
|
|
|
|
|
|
|
|
2,320
|
|
|
|
9
|
|
|
|
7.80
|
|
Foreign exchange forward contracts
|
|
|
849
|
|
|
|
6
|
|
|
|
.02
|
|
|
|
|
|
|
|
867
|
|
|
|
6
|
|
|
|
.02
|
|
Equity contracts
|
|
|
11
|
|
|
|
|
|
|
|
.40
|
|
|
|
|
|
|
|
102
|
|
|
|
1
|
|
|
|
.57
|
|
Credit contracts
|
|
|
1,397
|
|
|
|
|
|
|
|
3.38
|
|
|
|
|
|
|
|
3,674
|
|
|
|
2
|
|
|
|
3.57
|
|
Other (a)
|
|
|
19
|
|
|
|
|
|
|
|
.03
|
|
|
|
|
|
|
|
830
|
|
|
|
106
|
|
|
|
3.42
|
|
Total
|
|
$
|
27,266
|
|
|
$
|
427
|
|
|
|
|
|
|
|
|
|
|
$
|
19,339
|
|
|
$
|
249
|
|
|
|
|
|
(a)
|
Includes short-term underwriting purchase and sale commitments with total asset notional values of $239 million and $19 million at September 30, 2017 and December 31, 2016, respectively, and
liability notional values of $241 million and $19 million at September 30, 2017 and December 31, 2016, respectively. In addition, includes derivative liability swap agreements related to the sale of a portion of the
Companys Class B common shares of Visa Inc. The Visa swap agreements had a total notional value, fair value and weighted average remaining maturity of $1.1 billion, $123 million and 2.75 years at September 30, 2017,
respectively, compared to $811 million, $106 million and 3.50 years at December 31, 2016, respectively.
|
The following table summarizes the customer-related derivative positions of the Company:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
|
|
|
|
Liability Derivatives
|
|
(Dollars in Millions)
|
|
Notional
Value
|
|
|
Fair
Value
|
|
|
Weighted-
Average
Remaining
Maturity
In Years
|
|
|
|
|
|
Notional
Value
|
|
|
Fair
Value
|
|
|
Weighted-
Average
Remaining
Maturity
In Years
|
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receive fixed/pay floating swaps
|
|
$
|
37,701
|
|
|
$
|
794
|
|
|
|
5.27
|
|
|
|
|
|
|
$
|
56,518
|
|
|
$
|
561
|
|
|
|
3.81
|
|
Pay fixed/receive floating swaps
|
|
|
59,030
|
|
|
|
582
|
|
|
|
3.63
|
|
|
|
|
|
|
|
34,153
|
|
|
|
694
|
|
|
|
5.63
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
29,624
|
|
|
|
18
|
|
|
|
1.63
|
|
|
|
|
|
|
|
505
|
|
|
|
10
|
|
|
|
4.47
|
|
Written
|
|
|
505
|
|
|
|
11
|
|
|
|
4.47
|
|
|
|
|
|
|
|
27,283
|
|
|
|
16
|
|
|
|
1.53
|
|
Futures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sell
|
|
|
4,273
|
|
|
|
1
|
|
|
|
1.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forwards, spots and swaps
|
|
|
24,501
|
|
|
|
732
|
|
|
|
.79
|
|
|
|
|
|
|
|
22,874
|
|
|
|
687
|
|
|
|
.82
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
3,288
|
|
|
|
81
|
|
|
|
1.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,288
|
|
|
|
81
|
|
|
|
1.47
|
|
Total
|
|
$
|
158,922
|
|
|
$
|
2,219
|
|
|
|
|
|
|
|
|
|
|
$
|
144,621
|
|
|
$
|
2,049
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receive fixed/pay floating swaps
|
|
$
|
38,501
|
|
|
$
|
930
|
|
|
|
4.07
|
|
|
|
|
|
|
$
|
39,403
|
|
|
$
|
632
|
|
|
|
4.89
|
|
Pay fixed/receive floating swaps
|
|
|
36,671
|
|
|
|
612
|
|
|
|
4.99
|
|
|
|
|
|
|
|
40,324
|
|
|
|
996
|
|
|
|
4.07
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
14,545
|
|
|
|
51
|
|
|
|
1.85
|
|
|
|
|
|
|
|
125
|
|
|
|
2
|
|
|
|
1.37
|
|
Written
|
|
|
125
|
|
|
|
3
|
|
|
|
1.37
|
|
|
|
|
|
|
|
13,518
|
|
|
|
50
|
|
|
|
1.70
|
|
Futures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buy
|
|
|
306
|
|
|
|
|
|
|
|
1.96
|
|
|
|
|
|
|
|
7,111
|
|
|
|
7
|
|
|
|
.90
|
|
Foreign exchange rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forwards, spots and swaps
|
|
|
20,664
|
|
|
|
849
|
|
|
|
.58
|
|
|
|
|
|
|
|
19,640
|
|
|
|
825
|
|
|
|
.60
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
2,376
|
|
|
|
98
|
|
|
|
1.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,376
|
|
|
|
98
|
|
|
|
1.67
|
|
Total
|
|
$
|
113,188
|
|
|
$
|
2,543
|
|
|
|
|
|
|
|
|
|
|
$
|
122,497
|
|
|
$
|
2,610
|
|
|
|
|
|
The table below shows the effective portion of the gains (losses) recognized in other comprehensive income (loss) and the
gains (losses) reclassified from other comprehensive income (loss) into earnings
(net-of-tax):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
Gains (Losses)
Recognized in
Other
Comprehensive
Income
(Loss)
|
|
|
Gains (Losses)
Reclassified from
Other
Comprehensive
Income
(Loss) into Earnings
|
|
|
|
|
|
Gains (Losses)
Recognized in
Other
Comprehensive
Income
(Loss)
|
|
|
Gains (Losses)
Reclassified from
Other
Comprehensive
Income
(Loss) into Earnings
|
|
(Dollars in Millions)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Asset and Liability Management Positions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts (a)
|
|
$
|
(1
|
)
|
|
$
|
20
|
|
|
$
|
(2
|
)
|
|
$
|
(17
|
)
|
|
|
|
|
|
$
|
(20
|
)
|
|
$
|
(93
|
)
|
|
$
|
(17
|
)
|
|
$
|
(64
|
)
|
Net investment hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(55
|
)
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
Non-derivative
debt
instruments
|
|
|
(24
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(35
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
Ineffectiveness on cash flow and net investment hedges was not material for the three and nine months ended September 30, 2017 and 2016.
|
(a)
|
Gains (Losses) reclassified from other comprehensive income (loss) into interest expense.
|
The table below shows the gains (losses) recognized in earnings for fair value hedges, other economic
hedges and the customer-related positions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Gains (Losses)
Recognized in Earnings
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
(Dollars in Millions)
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
2017
|
|
|
2016
|
|
Asset and Liability Management Positions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
Other noninterest income
|
|
|
|
$
|
(6
|
)
|
|
$
|
(31
|
)
|
|
|
|
|
|
$
|
(2
|
)
|
|
$
|
63
|
|
Other economic hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures and forwards
|
|
Mortgage banking revenue
|
|
|
|
|
(16
|
)
|
|
|
21
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
(34
|
)
|
Purchased and written options
|
|
Mortgage banking revenue
|
|
|
|
|
82
|
|
|
|
102
|
|
|
|
|
|
|
|
199
|
|
|
|
315
|
|
Receive fixed/pay floating swaps
|
|
Mortgage banking revenue
|
|
|
|
|
28
|
|
|
|
(134
|
)
|
|
|
|
|
|
|
176
|
|
|
|
268
|
|
Pay fixed/receive floating swaps
|
|
Mortgage banking revenue
|
|
|
|
|
(19
|
)
|
|
|
113
|
|
|
|
|
|
|
|
(130
|
)
|
|
|
111
|
|
Foreign exchange forward contracts
|
|
Commercial products revenue
|
|
|
|
|
(13
|
)
|
|
|
9
|
|
|
|
|
|
|
|
(50
|
)
|
|
|
(46
|
)
|
Equity contracts
|
|
Compensation expense
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit contracts
|
|
Other noninterest income
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
Other
|
|
Other noninterest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(38
|
)
|
Customer-Related Positions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receive fixed/pay floating swaps
|
|
Other noninterest income
|
|
|
|
|
221
|
|
|
|
(397
|
)
|
|
|
|
|
|
|
(352
|
)
|
|
|
1,326
|
|
Pay fixed/receive floating swaps
|
|
Other noninterest income
|
|
|
|
|
(190
|
)
|
|
|
417
|
|
|
|
|
|
|
|
412
|
|
|
|
(1,289
|
)
|
Purchased and written options
|
|
Other noninterest income
|
|
|
|
|
(18
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
(26
|
)
|
|
|
(3
|
)
|
Futures
|
|
Other noninterest income
|
|
|
|
|
1
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
3
|
|
Foreign exchange rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forwards, spots and swaps
|
|
Commercial products revenue
|
|
|
|
|
23
|
|
|
|
21
|
|
|
|
|
|
|
|
69
|
|
|
|
61
|
|
Purchased and written options
|
|
Commercial products revenue
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
2
|
|
|
|
3
|
|
(a)
|
Gains (Losses) on items hedged by interest rate contracts included in noninterest income (expense), were $6 million and $31 million for the three months ended September 30, 2017 and 2016, respectively,
and $2 million and $(61) million for the nine months ended September 30, 2017 and 2016, respectively. The ineffective portion was immaterial for the three and nine months ended September 30, 2017 and 2016.
|
Derivatives are subject to credit risk associated with counterparties to the derivative contracts. The Company measures that credit risk using
a credit valuation adjustment and includes it within the fair value of the derivative. The Company manages counterparty credit risk through diversification of its derivative positions among various counterparties, by entering into derivative
positions that are centrally cleared through clearinghouses, by entering into master netting arrangements and, where possible, by requiring collateral arrangements. A master netting arrangement allows two counterparties, who have multiple derivative
contracts with each other, the ability to net settle amounts under all contracts, including any related collateral, through a single payment and in a single currency. Collateral arrangements generally require the counterparty to deliver collateral
(typically cash or U.S. Treasury and agency securities) equal to the Companys net derivative receivable, subject to minimum transfer and credit rating requirements.
The Companys collateral arrangements are predominately bilateral and, therefore, contain provisions that require collateralization of
the Companys net liability derivative positions. Required collateral coverage is based on net liability thresholds and may be contingent upon the Companys credit rating from two of the nationally recognized statistical rating
organizations. If the Companys credit rating were to fall below credit ratings thresholds established in the collateral arrangements, the counterparties to the derivatives could request immediate additional collateral coverage up to and
including full collateral coverage for derivatives in a net liability position. The aggregate fair value of all derivatives under collateral arrangements that were in a net liability position at September 30, 2017, was $685 million. At
September 30, 2017, the Company had $663 million of cash posted as collateral against this net liability position.
|
|
|
Note 13
|
|
Netting Arrangements for Certain Financial Instruments and Securities Financing Activities
|
|
|
The Companys derivative portfolio consists of bilateral
over-the-counter
trades, certain interest rate derivatives and credit contracts required to be centrally cleared through clearinghouses per current regulations, and
exchange-traded positions which may include U.S. Treasury and Eurodollar futures or options on U.S. Treasury futures. Of the Companys $355.4 billion total notional amount of derivative positions at September 30, 2017,
$187.3 billion related to bilateral
over-the-counter
trades, $163.0 billion related to those centrally cleared through clearinghouses and $5.1 billion
related to those that were exchange-traded. Irrespective of how derivatives are traded, the Companys derivative contracts typically include offsetting rights (referred to as netting arrangements), and depending on expected volume, credit risk,
and counterparty preference, collateral maintenance may be required. For all derivatives under collateral support arrangements, fair value is determined daily and, depending on the collateral maintenance
requirements, the Company and a counterparty may receive or deliver collateral, based upon the net fair value of all derivative positions between the Company and the counterparty. Collateral is
typically cash, but securities may be allowed under collateral arrangements with certain counterparties. Receivables and payables related to cash collateral are included in other assets and other liabilities on the Consolidated Balance Sheet, along
with the related derivative asset and liability fair values. Any securities pledged to counterparties as collateral remain on the Consolidated Balance Sheet. Securities received from counterparties as collateral are not recognized on the
Consolidated Balance Sheet, unless the counterparty defaults. In general, securities used as collateral can be sold, repledged or otherwise used by the party in possession. No restrictions exist on the use of cash collateral by either party. Refer
to Note 12 for further discussion of the Companys derivatives, including collateral arrangements.
As part of the Companys
treasury and broker-dealer operations, the Company executes transactions that are treated as securities sold under agreements to repurchase or securities purchased under agreements to resell, both of which are accounted for as collateralized
financings. Securities sold under agreements to repurchase include repurchase agreements and securities loaned transactions. Securities purchased under agreements to resell include reverse repurchase agreements and securities borrowed transactions.
For securities sold under agreements to repurchase, the Company records a liability for the cash received, which is included in short-term borrowings on the Consolidated Balance Sheet. For securities purchased under agreements to resell, the Company
records a receivable for the cash paid, which is included in other assets on the Consolidated Balance Sheet.
Securities transferred to
counterparties under repurchase agreements and securities loaned transactions continue to be recognized on the Consolidated Balance Sheet, are measured at fair value, and are included in investment securities or other assets. Securities received
from counterparties under reverse repurchase agreements and securities borrowed transactions are not recognized on the Consolidated Balance Sheet unless the counterparty defaults. The securities transferred under repurchase and reverse repurchase
transactions typically are U.S. Treasury and agency securities or residential agency mortgage-backed securities. The securities loaned or borrowed typically are corporate debt securities traded by the Companys broker-dealer. In general, the
securities transferred can be sold, repledged or otherwise used by the party in possession. No restrictions exist on the use of cash collateral by either party. Repurchase/reverse repurchase and securities loaned/borrowed transactions expose the
Company to counterparty risk. The Company manages this risk by performing assessments, independent of business line managers, and establishing concentration limits on each counterparty. Additionally, these transactions include collateral
arrangements that require the fair values of the underlying securities to be determined daily, resulting in cash being obtained or refunded to counterparties to maintain specified collateral levels.
The following table summarizes the maturities by category of collateral pledged for repurchase agreements and securities loaned transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
Overnight and
Continuous
|
|
|
Less Than
30 Days
|
|
|
Total
|
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agencies
|
|
$
|
91
|
|
|
$
|
|
|
|
$
|
91
|
|
Residential agency mortgage-backed securities
|
|
|
622
|
|
|
|
45
|
|
|
|
667
|
|
Total repurchase agreements
|
|
|
713
|
|
|
|
45
|
|
|
|
758
|
|
Securities loaned
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
|
359
|
|
|
|
|
|
|
|
359
|
|
Total securities loaned
|
|
|
359
|
|
|
|
|
|
|
|
359
|
|
Gross amount of recognized liabilities
|
|
$
|
1,072
|
|
|
$
|
45
|
|
|
$
|
1,117
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agencies
|
|
$
|
60
|
|
|
$
|
|
|
|
$
|
60
|
|
Residential agency mortgage-backed securities
|
|
|
681
|
|
|
|
30
|
|
|
|
711
|
|
Corporate debt securities
|
|
|
30
|
|
|
|
|
|
|
|
30
|
|
Total repurchase agreements
|
|
|
771
|
|
|
|
30
|
|
|
|
801
|
|
Securities loaned
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
|
223
|
|
|
|
|
|
|
|
223
|
|
Total securities loaned
|
|
|
223
|
|
|
|
|
|
|
|
223
|
|
Gross amount of recognized liabilities
|
|
$
|
994
|
|
|
$
|
30
|
|
|
$
|
1,024
|
|
The Company executes its derivative, repurchase/reverse repurchase and securities
loaned/borrowed transactions under the respective industry standard agreements. These agreements include master netting arrangements that allow for multiple contracts executed with the same counterparty to be viewed as a single arrangement. This
allows for net settlement of a single amount on a daily basis. In the event of default, the master netting arrangement provides for
close-out
netting, which allows all of these positions with the defaulting
counterparty to be terminated and net settled with a single payment amount.
The Company has elected to offset the assets and liabilities
under netting arrangements for the balance sheet presentation of the majority of its derivative counterparties, excluding certain centrally cleared derivative contracts due to current uncertainty about the legal enforceability of netting
arrangements. The netting occurs at the counterparty level, and includes all assets and liabilities related to the derivative contracts, including those associated with cash collateral received or delivered. The Company has not elected to offset the
assets and liabilities under netting arrangements for the balance sheet presentation of repurchase/reverse repurchase and securities loaned/borrowed transactions.
The following tables provide information on the Companys netting adjustments, and items not offset on the Consolidated Balance Sheet but available for
offset in the event of default:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Recognized
Assets
|
|
|
Gross Amounts
Offset on the
Consolidated
Balance Sheet (a)
|
|
|
Net Amounts
Presented on the
Consolidated
Balance Sheet
|
|
|
Gross Amounts Not Offset on the
Consolidated Balance Sheet
|
|
|
|
|
(Dollars in Millions)
|
|
|
|
|
Financial
Instruments (b)
|
|
|
Collateral
Received (c)
|
|
|
Net Amount
|
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets (d)
|
|
$
|
1,844
|
|
|
$
|
(727
|
)
|
|
$
|
1,117
|
|
|
$
|
(69
|
)
|
|
$
|
(7
|
)
|
|
$
|
1,041
|
|
Reverse repurchase agreements
|
|
|
56
|
|
|
|
|
|
|
|
56
|
|
|
|
(42
|
)
|
|
|
(14
|
)
|
|
|
|
|
Securities borrowed
|
|
|
1,105
|
|
|
|
|
|
|
|
1,105
|
|
|
|
|
|
|
|
(1,072
|
)
|
|
|
33
|
|
Total
|
|
$
|
3,005
|
|
|
$
|
(727
|
)
|
|
$
|
2,278
|
|
|
$
|
(111
|
)
|
|
$
|
(1,093
|
)
|
|
$
|
1,074
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets (d)
|
|
$
|
2,122
|
|
|
$
|
(984
|
)
|
|
$
|
1,138
|
|
|
$
|
(78
|
)
|
|
$
|
(10
|
)
|
|
$
|
1,050
|
|
Reverse repurchase agreements
|
|
|
77
|
|
|
|
|
|
|
|
77
|
|
|
|
(60
|
)
|
|
|
(17
|
)
|
|
|
|
|
Securities borrowed
|
|
|
944
|
|
|
|
|
|
|
|
944
|
|
|
|
(10
|
)
|
|
|
(909
|
)
|
|
|
25
|
|
Total
|
|
$
|
3,143
|
|
|
$
|
(984
|
)
|
|
$
|
2,159
|
|
|
$
|
(148
|
)
|
|
$
|
(936
|
)
|
|
$
|
1,075
|
|
(a)
|
Includes $78 million and $210 million of cash collateral related payables that were netted against derivative assets at September 30, 2017 and December 31, 2016, respectively.
|
(b)
|
For derivative assets this includes any derivative liability fair values that could be offset in the event of counterparty default; for reverse repurchase agreements this includes any repurchase agreement payables
that could be offset in the event of counterparty default; for securities borrowed this includes any securities loaned payables that could be offset in the event of counterparty default.
|
(c)
|
Includes the fair value of securities received by the Company from the counterparty. These securities are not included on the Consolidated Balance Sheet unless the counterparty defaults.
|
(d)
|
Excludes $563 million and $848 million at September 30, 2017 and December 31, 2016, respectively, of derivative assets not subject to netting arrangements or where uncertainty exists regarding
legal enforceability of the netting arrangements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Recognized
Liabilities
|
|
|
Gross Amounts
Offset on the
Consolidated
Balance Sheet (a)
|
|
|
Net Amounts
Presented on the
Consolidated
Balance Sheet
|
|
|
Gross Amounts Not Offset on the
Consolidated Balance Sheet
|
|
|
|
|
(Dollars in Millions)
|
|
|
|
|
Financial
Instruments (b)
|
|
|
Collateral
Pledged (c)
|
|
|
Net Amount
|
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities (d)
|
|
$
|
1,581
|
|
|
$
|
(1,182
|
)
|
|
$
|
399
|
|
|
$
|
(69
|
)
|
|
$
|
|
|
|
$
|
330
|
|
Repurchase agreements
|
|
|
758
|
|
|
|
|
|
|
|
758
|
|
|
|
(42
|
)
|
|
|
(716
|
)
|
|
|
|
|
Securities loaned
|
|
|
359
|
|
|
|
|
|
|
|
359
|
|
|
|
|
|
|
|
(354
|
)
|
|
|
5
|
|
Total
|
|
$
|
2,698
|
|
|
$
|
(1,182
|
)
|
|
$
|
1,516
|
|
|
$
|
(111
|
)
|
|
$
|
(1,070
|
)
|
|
$
|
335
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities (d)
|
|
$
|
1,951
|
|
|
$
|
(1,185
|
)
|
|
$
|
766
|
|
|
$
|
(78
|
)
|
|
$
|
|
|
|
$
|
688
|
|
Repurchase agreements
|
|
|
801
|
|
|
|
|
|
|
|
801
|
|
|
|
(60
|
)
|
|
|
(741
|
)
|
|
|
|
|
Securities loaned
|
|
|
223
|
|
|
|
|
|
|
|
223
|
|
|
|
(10
|
)
|
|
|
(211
|
)
|
|
|
2
|
|
Total
|
|
$
|
2,975
|
|
|
$
|
(1,185
|
)
|
|
$
|
1,790
|
|
|
$
|
(148
|
)
|
|
$
|
(952
|
)
|
|
$
|
690
|
|
(a)
|
Includes $533 million and $411 million of cash collateral related receivables that were netted against derivative liabilities at September 30, 2017 and December 31, 2016, respectively.
|
(b)
|
For derivative liabilities this includes any derivative asset fair values that could be offset in the event of counterparty default; for repurchase agreements this includes any reverse repurchase agreement
receivables that could be offset in the event of counterparty default; for securities loaned this includes any securities borrowed receivables that could be offset in the event of counterparty default.
|
(c)
|
Includes the fair value of securities pledged by the Company to the counterparty. These securities are included on the Consolidated Balance Sheet unless the Company defaults.
|
(d)
|
Excludes $768 million and $908 million at September 30, 2017 and December 31, 2016, respectively, of derivative liabilities not subject to netting arrangements or where uncertainty exists
regarding legal enforceability of the netting arrangements.
|
|
|
|
Note 14
|
|
Fair Values of Assets and Liabilities
|
The Company uses fair value measurements for the initial recording of certain assets and liabilities, periodic remeasurement
of certain assets and liabilities, and disclosures. Derivatives, trading and
available-for-sale
investment securities, MSRs and substantially all MLHFS are recorded at
fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as loans held for sale, loans held for investment and certain other assets. These
nonrecurring fair value adjustments typically involve application of
lower-of-cost-or-fair
value accounting or impairment write-downs of individual assets.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A fair value measurement reflects all of the assumptions that market participants would use in pricing
the asset or liability, including assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset and the risk of nonperformance.
The Company groups its assets and liabilities measured at fair value into a three-level hierarchy for valuation techniques used to measure
financial assets and financial liabilities at fair value. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:
|
|
|
Level 1 Quoted prices in active markets for identical assets or liabilities. Level 1 includes U.S. Treasury securities, as well as exchange-traded instruments.
|
|
|
|
Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 includes debt securities that are traded less frequently than exchange-traded instruments and which are typically valued using third
party pricing services; derivative contracts and other assets and liabilities, including securities, whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by
observable market data; and MLHFS whose values are determined using quoted prices for similar assets or pricing models with inputs that are observable in the market or can be corroborated by observable market data.
|
|
|
|
Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial
instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This
category includes MSRs, certain debt securities and certain derivative contracts.
|
When the Company changes its valuation
inputs for measuring financial assets and financial liabilities at fair value, either due to changes in current market conditions or other factors, it may need to transfer those assets or liabilities to another level in the hierarchy based on the
new inputs used. The Company recognizes these transfers at the end of the reporting period in which the transfers occur. During the nine months ended September 30, 2017 and 2016, there were no transfers of financial assets or financial
liabilities between the hierarchy levels.
The Company has processes and controls in place to increase the reliability of estimates it
makes in determining fair value measurements. Items quoted on an exchange are verified to the quoted price. Items provided by a third party pricing service are subject to price verification procedures as described in more detail in the specific
valuation discussions below. For fair value measurements modeled internally, the Companys valuation models are subject to the Companys Model Risk Governance Policy and Program, as maintained by the Companys risk management
department. The purpose of model validation is to assess the accuracy of the models input, processing, and reporting components. All models are required to be independently reviewed and approved prior to being placed in use, and are subject to
formal change control procedures. Under the Companys Model Risk Governance Policy, models are required to be reviewed at least annually to ensure they are operating as intended. Inputs into the models are market observable inputs whenever
available. When market observable inputs are not available, the inputs are developed based upon analysis of historical experience and evaluation of other relevant market data. Significant unobservable model inputs are subject to review by senior
management in corporate functions, who are independent from the modeling. Significant unobservable model inputs are also compared to actual results, typically on a quarterly basis. Significant Level 3 fair value measurements are also subject to
corporate-level review and are benchmarked to market transactions or other market data, when available. Additional discussion of processes and controls are provided in the valuation methodologies section that follows.
The following section describes the valuation methodologies used by the Company to measure
financial assets and liabilities at fair value and for estimating fair value for financial instruments not recorded at fair value as required under disclosure guidance related to the fair value of financial instruments. In addition, the following
section includes an indication of the level of the fair value hierarchy in which the assets or liabilities are classified. Where appropriate, the description includes information about the valuation models and key inputs to those models. During the
nine months ended September 30, 2017 and 2016, there were no significant changes to the valuation techniques used by the Company to measure fair value.
Cash and Due From
Banks
The carrying value of cash and due from banks approximate fair value and are classified within Level 1. Fair value is provided for disclosure purposes only.
Federal Funds Sold and Securities Purchased Under Resale Agreements
The carrying value of federal funds sold and securities purchased under resale agreements approximate fair value because of the relatively short time between the origination of the
instrument and its expected realization and are classified within Level 2. Fair value is provided for disclosure purposes only.
Investment Securities
When quoted market prices for identical securities are available in an active market, these prices
are used to determine fair value and these securities are classified within Level 1 of the fair value hierarchy. Level 1 investment securities include U.S. Treasury and exchange-traded securities.
For other securities, quoted market prices may not be readily available for the specific securities. When possible, the Company determines
fair value based on market observable information, including quoted market prices for similar securities, inactive transaction prices, and broker quotes. These securities are classified within Level 2 of the fair value hierarchy. Level 2
valuations are generally provided by a third party pricing service. The Company reviews the valuation methodologies utilized by the pricing service and, on a quarterly basis, reviews the security level prices provided by the pricing service against
managements expectation of fair value, based on changes in various benchmarks and market knowledge from recent trading activity. Additionally, each quarter, the Company validates the fair value provided by the pricing services by comparing
them to recent observable market trades (where available), broker provided quotes, or other independent secondary pricing sources. Prices obtained from the pricing service are adjusted if they are found to be inconsistent with relevant market data.
Level 2 investment securities are predominantly agency mortgage-backed securities, certain other asset-backed securities, obligations of state and political subdivisions and agency debt securities.
The fair value of securities for which there are no market trades, or where trading is inactive as compared to normal market activity, are
classified within Level 3 of the fair value hierarchy. The Company determines the fair value of these securities by using a discounted cash flow methodology and incorporating observable market information, where available. These valuations are
modeled by a unit within the Companys treasury department. The valuations use assumptions regarding housing prices, interest rates and borrower performance. Inputs are refined and updated at least quarterly to reflect market developments and
actual performance. The primary valuation drivers of these securities are the prepayment rates, default rates and default severities associated with the underlying collateral, as well as the discount rate used to calculate the present value of the
projected cash flows. Level 3 fair values, including the assumptions used, are subject to review by senior management in corporate functions, who are independent from the modeling. The fair value measurements are also compared to fair values
provided by third party pricing services and broker provided quotes, where available. Securities classified within Level 3 include
non-agency
mortgage-backed securities,
non-agency
commercial mortgage-backed securities, certain asset-backed securities and certain corporate debt securities. At September 30, 2017, the Company did not have any
available-for-sale
investment securities classified within Level 3.
Mortgage Loans Held For Sale
MLHFS measured at fair value, for which an active secondary market and readily available
market prices exist, are initially valued at the transaction price and are subsequently valued by comparison to instruments with similar collateral and risk profiles. MLHFS are classified within Level 2. The valuations of MLHFS are developed by
the mortgage banking division and are subject to independent price verification procedures by corporate functions. Included in mortgage banking revenue were net gains of $28 million and $27 million for the three months ended
September 30, 2017 and 2016, respectively, and net gains of $69 million and $154 million for the nine months ended September 30, 2017 and 2016, respectively, from the changes to fair value of these MLHFS under fair value option
accounting guidance. Changes in fair value due to instrument specific credit risk were immaterial. Interest income for MLHFS is measured based on contractual interest rates and reported as interest income on the Consolidated
Statement of Income. Electing to measure MLHFS at fair value reduces certain timing differences and better matches changes in fair value of these assets with changes in the value of the
derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting.
Loans
The loan portfolio includes adjustable and fixed-rate loans, the fair value of which is estimated using discounted
cash flow analyses and other valuation techniques. The expected cash flows of loans consider historical prepayment experiences and estimated credit losses and are discounted using current rates offered to borrowers with similar credit
characteristics. Generally, loan fair values reflect Level 3 information. Fair value is provided for disclosure purposes only, with the exception of impaired collateral-based loans that are measured at fair value on a
non-recurring
basis utilizing the underlying collateral fair value.
Mortgage Servicing
Rights
MSRs are valued using a discounted cash flow methodology, and are classified within Level 3. The Company determines fair value of the MSRs by projecting
future cash flows for different interest rate scenarios using prepayment rates and other assumptions, and discounts these cash flows using a risk adjusted rate based on option adjusted spread levels. The MSR valuations, as well as the assumptions
used, are developed by the mortgage banking division and are subject to review by senior management in corporate functions, who are independent from the modeling. The MSR valuations and assumptions are validated through comparison to trade
information when available, publicly available data and industry surveys and are also compared to independent third party valuations each quarter. Risks inherent in MSR valuation include higher than expected prepayment rates and/or delayed receipt
of cash flows. There is minimal observable market activity for MSRs on comparable portfolios and, therefore, the determination of fair value requires significant management judgment. Refer to Note 6 for further information on MSR valuation
assumptions.
Derivatives
The majority of derivatives held by the Company are executed
over-the-counter
or centrally cleared
through clearinghouses and are valued using standard cash flow,
Black-Derman-Toy
and Monte Carlo valuation techniques. The models incorporate inputs, depending on the type of derivative, including interest
rate curves, foreign exchange rates and volatility. The inputs into these models are subject to independent review by corporate functions. Additionally, the Companys valuations are compared to counterparty valuations, where available. All
derivative values incorporate an assessment of the risk of counterparty nonperformance, measured based on the Companys evaluation of credit risk as well as external assessments of credit risk, where available. The Company monitors and manages
its nonperformance risk by considering its ability to net derivative positions under master netting arrangements, as well as collateral received or provided under collateral arrangements. Accordingly, the Company has elected to measure the fair
value of derivatives, at a counterparty level, on a net basis. The majority of the derivatives are classified within Level 2 of the fair value hierarchy, as the significant inputs to the models, including nonperformance risk, are observable.
However, certain derivative transactions are with counterparties where risk of nonperformance cannot be observed in the market and, therefore, the credit valuation adjustments result in these derivatives being classified within Level 3 of the
fair value hierarchy. The credit valuation adjustments for nonperformance risk are determined by the Companys treasury department using credit assumptions provided by the risk management department. The credit assumptions are compared to
actual results quarterly and are recalibrated as appropriate.
The Company also has other derivative contracts that are created
through its operations, including commitments to purchase and originate mortgage loans and swap agreements executed in conjunction with the sale of a portion of its Class B common shares of Visa Inc. (the Visa swaps). The mortgage
loan commitments are valued by pricing models that include market observable and unobservable inputs, which result in the commitments being classified within Level 3 of the fair value hierarchy. The unobservable inputs include assumptions about
the percentage of commitments that actually become a closed loan and the MSR value that is inherent in the underlying loan value, both of which are developed by the Companys mortgage banking division. The closed loan percentages for the
mortgage loan commitments are monitored on an
on-going
basis, as these percentages are also used for the Companys economic hedging activities. The inherent MSR value for the commitments are generated by
the same models used for the Companys MSRs and thus are subject to the same processes and controls as described for the MSRs above. The Visa swaps require payments by either the Company or the purchaser of the Visa Inc. Class B common
shares when there are changes in the conversion rate of the Visa Inc. Class B common shares to Visa Inc. Class A common shares, as well as quarterly payments to the purchaser based on specified terms of the agreements. Management reviews
and updates the Visa swaps fair value in conjunction with its review of Visa Inc. related litigation contingencies, and the associated escrow funding. The fair value of the Visa swaps are calculated by the Companys corporate development
department using a discounted cash flow methodology which includes unobservable inputs about the timing and settlement
amounts related to the resolution of certain Visa Inc. related litigation. The expected litigation resolution impacts the Visa Inc. Class B common share to Visa Inc. Class A common
share conversion rate, as well as the ultimate termination date for the Visa swaps. Accordingly, the Visa swaps are classified within Level 3. Refer to Note 15 for further information on the Visa Inc. restructuring and related card association
litigation.
Other Financial Instruments
Other financial instruments include cost method equity investments and certain community development and
tax-advantaged
related assets and liabilities. The
majority of the Companys cost method equity investments are in Federal Home Loan Bank and Federal Reserve Bank stock, for which the carrying amounts approximate fair value and are classified within Level 2. Investments in other equity and
limited partnership funds are estimated using fund provided net asset values. These equity investments are classified within Level 3. The community development and
tax-advantaged
related asset balances
primarily represent the underlying assets of consolidated community development and
tax-advantaged
entities. The community development and
tax-advantaged
related
liabilities represent the underlying liabilities of the consolidated entities (included in long-term debt) and liabilities related to other third party interests (included in other liabilities). The carrying value of the community development and
tax-advantaged
related asset and other liability balances are a reasonable estimate of fair value and are classified within Level 3. Refer to Note 5 for further information on community development and
tax-advantaged
related assets and liabilities. Fair value is provided for disclosure purposes only.
Deposit Liabilities
The fair value of demand deposits, savings accounts and certain money market deposits is equal to the amount
payable on demand. The fair value of fixed-rate certificates of deposit is estimated by discounting the contractual cash flow using current market rates. Deposit liabilities are classified within Level 2. Fair value is provided for disclosure
purposes only.
Short-term Borrowings
Federal funds purchased, securities sold under agreements to repurchase, commercial paper and other short-term funds borrowed have floating rates or short-term maturities. The fair
value of short-term borrowings is determined by discounting contractual cash flows using current market rates. Short-term borrowings are classified within Level 2. Included in short-term borrowings is the Companys obligation on securities
sold short, which is required to be accounted for at fair value per applicable accounting guidance. Fair value for other short-term borrowings is provided for disclosure purposes only.
Long-term Debt
The fair
value for most long-term debt is determined by discounting contractual cash flows using current market rates. Long-term debt is classified within Level 2. Fair value is provided for disclosure purposes only.
Loan Commitments, Letters of Credit and Guarantees
The fair value of commitments, letters of credit and guarantees represents the estimated costs to terminate or otherwise settle the obligations with a third party. Other loan
commitments, letters of credit and guarantees are not actively traded, and the Company estimates their fair value based on the related amount of unamortized deferred commitment fees adjusted for the probable losses for these arrangements. These
arrangements are classified within Level 3. Fair value is provided for disclosure purposes only.
Significant Unobservable Inputs of Level 3
Assets and Liabilities
The following section provides information on the significant inputs used by the Company to determine the fair value
measurements of Level 3 assets and liabilities recorded at fair value on the Consolidated Balance Sheet. In addition, the following section includes a discussion of the sensitivity of the fair value measurements to changes in the significant
inputs and a description of any interrelationships between these inputs for Level 3 assets and liabilities recorded at fair value on a recurring basis. The discussion below excludes nonrecurring fair value measurements of collateral value used
for impairment measures for loans and OREO. These valuations utilize third party appraisal or broker price opinions, and are classified as Level 3 due to the significant judgment involved.
Available-For-Sale
Investment Securities
The significant unobservable inputs used in the fair value measurement of the Companys modeled Level 3
available-for-sale
investment securities are prepayment rates, probability of default and loss severities associated with the underlying collateral, as well as the discount margin used to calculate the
present value of the projected cash flows. Increases in prepayment rates for Level 3 securities will typically result in higher fair values, as increased prepayment rates accelerate the receipt of expected cash flows and reduce exposure to
credit losses. Increases in the probability of default and loss severities will result in lower fair values, as these increases reduce expected cash flows. Discount margin is the Companys estimate of the current market spread above the
respective benchmark rate. Higher discount margin will result in lower fair values, as it reduces the present value of the expected cash flows.
Prepayment rates generally move in the opposite direction of market interest rates. In the
current environment, an increase in the probability of default will generally be accompanied with an increase in loss severity, as both are impacted by underlying collateral values. Discount margins are influenced by market expectations about the
securitys collateral performance and, therefore, may directionally move with probability and severity of default; however, discount margins are also impacted by broader market forces, such as competing investment yields, sector liquidity,
economic news, and other macroeconomic factors. At September 30, 2017, the Company did not have any
available-for-sale
investment securities classified within
Level 3.
Mortgage Servicing Rights
The significant unobservable inputs used in the fair value measurement of the Companys MSRs are expected prepayments and the option adjusted spread that is added to the risk-free rate to
discount projected cash flows. Significant increases in either of these inputs in isolation would result in a significantly lower fair value measurement. Significant decreases in either of these inputs in isolation would result in a significantly
higher fair value measurement. There is no direct interrelationship between prepayments and option adjusted spread. Prepayment rates generally move in the opposite direction of market interest rates. Option adjusted spread is generally impacted by
changes in market return requirements.
The following table shows the significant valuation assumption ranges for MSRs at September 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum
|
|
|
Maximum
|
|
|
Average
|
|
Expected prepayment
|
|
|
6
|
%
|
|
|
18
|
%
|
|
|
10
|
%
|
Option adjusted spread
|
|
|
7
|
|
|
|
10
|
|
|
|
8
|
|
Derivatives
The Company has two distinct Level 3 derivative portfolios: (i) the Companys commitments to purchase and originate mortgage loans that meet the requirements of a derivative and
(ii) the Companys asset/liability and customer-related derivatives that are Level 3 due to unobservable inputs related to measurement of risk of nonperformance by the counterparty. In addition, the Companys Visa swaps are
classified within Level 3.
The significant unobservable inputs used in the fair value measurement of the Companys
derivative commitments to purchase and originate mortgage loans are the percentage of commitments that actually become a closed loan and the MSR value that is inherent in the underlying loan value. A significant increase in the rate of loans that
close would result in a larger derivative asset or liability. A significant increase in the inherent MSR value would result in an increase in the derivative asset or a reduction in the derivative liability. Expected loan close rates and the inherent
MSR values are directly impacted by changes in market rates and will generally move in the same direction as interest rates.
The following table shows
the significant valuation assumption ranges for the Companys derivative commitments to purchase and originate mortgage loans at September 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum
|
|
|
Maximum
|
|
|
Average
|
|
Expected loan close rate
|
|
|
5
|
%
|
|
|
100
|
%
|
|
|
79
|
%
|
Inherent MSR value (basis points per loan)
|
|
|
(38
|
)
|
|
|
179
|
|
|
|
117
|
|
The significant unobservable input used in the fair value measurement of certain of the Companys
asset/liability and customer-related derivatives is the credit valuation adjustment related to the risk of counterparty nonperformance. A significant increase in the credit valuation adjustment would result in a lower fair value measurement. A
significant decrease in the credit valuation adjustment would result in a higher fair value measurement. The credit valuation adjustment is impacted by changes in the Companys assessment of the counterpartys credit position. At
September 30, 2017, the minimum, maximum and average credit valuation adjustment as a percentage of the derivative contract fair value prior to adjustment was 0 percent, 95 percent and 3 percent, respectively.
The significant unobservable inputs used in the fair value measurement of the Visa swaps are managements estimate of the probability of
certain litigation scenarios, and the timing of the resolution of the related litigation loss estimates in excess, or shortfall, of the Companys proportional share of escrow funds. An increase in the loss estimate or a delay in the resolution
of the related litigation would result in an increase in the derivative liability. A decrease in the loss estimate or an acceleration of the resolution of the related litigation would result in a decrease in the derivative liability.
The following table summarizes the balances of assets and liabilities measured at fair value on a recurring
basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Netting
|
|
|
Total
|
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agencies
|
|
$
|
21,321
|
|
|
$
|
747
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
22,068
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
|
|
|
|
39,553
|
|
|
|
|
|
|
|
|
|
|
|
39,553
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
425
|
|
|
|
|
|
|
|
|
|
|
|
425
|
|
Obligations of state and political subdivisions
|
|
|
|
|
|
|
5,681
|
|
|
|
|
|
|
|
|
|
|
|
5,681
|
|
Other investments
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37
|
|
Total
available-for-sale
|
|
|
21,358
|
|
|
|
46,414
|
|
|
|
|
|
|
|
|
|
|
|
67,772
|
|
Mortgage loans held for sale
|
|
|
|
|
|
|
3,754
|
|
|
|
|
|
|
|
|
|
|
|
3,754
|
|
Mortgage servicing rights
|
|
|
|
|
|
|
|
|
|
|
2,598
|
|
|
|
|
|
|
|
2,598
|
|
Derivative assets
|
|
|
1
|
|
|
|
1,836
|
|
|
|
570
|
|
|
|
(727
|
)
|
|
|
1,680
|
|
Other assets
|
|
|
258
|
|
|
|
1,302
|
|
|
|
|
|
|
|
|
|
|
|
1,560
|
|
Total
|
|
$
|
21,617
|
|
|
$
|
53,306
|
|
|
$
|
3,168
|
|
|
$
|
(727
|
)
|
|
$
|
77,364
|
|
Derivative liabilities
|
|
$
|
|
|
|
$
|
2,032
|
|
|
$
|
317
|
|
|
$
|
(1,182
|
)
|
|
$
|
1,167
|
|
Short-term borrowings and other liabilities (c)
|
|
|
138
|
|
|
|
1,077
|
|
|
|
|
|
|
|
|
|
|
|
1,215
|
|
Total
|
|
$
|
138
|
|
|
$
|
3,109
|
|
|
$
|
317
|
|
|
$
|
(1,182
|
)
|
|
$
|
2,382
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agencies
|
|
$
|
16,355
|
|
|
$
|
772
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
17,127
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
|
|
|
|
43,138
|
|
|
|
|
|
|
|
|
|
|
|
43,138
|
|
Non-agency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime (a)
|
|
|
|
|
|
|
|
|
|
|
242
|
|
|
|
|
|
|
|
242
|
|
Non-prime
(b)
|
|
|
|
|
|
|
|
|
|
|
195
|
|
|
|
|
|
|
|
195
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
481
|
|
|
|
2
|
|
|
|
|
|
|
|
483
|
|
Obligations of state and political subdivisions
|
|
|
|
|
|
|
5,039
|
|
|
|
|
|
|
|
|
|
|
|
5,039
|
|
Corporate debt securities
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
9
|
|
Other investments
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
|
|
Total
available-for-sale
|
|
|
16,391
|
|
|
|
49,445
|
|
|
|
448
|
|
|
|
|
|
|
|
66,284
|
|
Mortgage loans held for sale
|
|
|
|
|
|
|
4,822
|
|
|
|
|
|
|
|
|
|
|
|
4,822
|
|
Mortgage servicing rights
|
|
|
|
|
|
|
|
|
|
|
2,591
|
|
|
|
|
|
|
|
2,591
|
|
Derivative assets
|
|
|
|
|
|
|
2,416
|
|
|
|
554
|
|
|
|
(984
|
)
|
|
|
1,986
|
|
Other assets
|
|
|
183
|
|
|
|
1,137
|
|
|
|
|
|
|
|
|
|
|
|
1,320
|
|
Total
|
|
$
|
16,574
|
|
|
$
|
57,820
|
|
|
$
|
3,593
|
|
|
$
|
(984
|
)
|
|
$
|
77,003
|
|
Derivative liabilities
|
|
$
|
7
|
|
|
$
|
2,469
|
|
|
$
|
383
|
|
|
$
|
(1,185
|
)
|
|
$
|
1,674
|
|
Short-term borrowings and other liabilities (c)
|
|
|
142
|
|
|
|
938
|
|
|
|
|
|
|
|
|
|
|
|
1,080
|
|
Total
|
|
$
|
149
|
|
|
$
|
3,407
|
|
|
$
|
383
|
|
|
$
|
(1,185
|
)
|
|
$
|
2,754
|
|
(a)
|
Prime securities are those designated as such by the issuer at origination. When an issuer designation is unavailable, the Company determines at acquisition date the categorization based on asset pool characteristics
(such as weighted-average credit score,
loan-to-value,
loan type, prevalence of low documentation loans) and deal performance (such as pool delinquencies and security
market spreads).
|
(b)
|
Includes all securities not meeting the conditions to be designated as prime.
|
(c)
|
Primarily represents the Companys obligation on securities sold short required to be accounted for at fair value per applicable accounting guidance.
|
The following table presents the changes in fair value for all assets and liabilities measured at fair
value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended September 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
Beginning
of Period
Balance
|
|
|
Net Gains
(Losses)
Included in
Net Income
|
|
|
Net Gains
(Losses)
Included in
Other
Comprehensive
Income (Loss)
|
|
|
Purchases
|
|
|
Sales
|
|
|
Principal
Payments
|
|
|
Issuances
|
|
|
Settlements
|
|
|
End
of Period
Balance
|
|
|
Net Change in
Unrealized
Gains (Losses)
Relating to Assets
and Liabilities
Held at End of Period
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights
|
|
$
|
2,582
|
|
|
$
|
(103
|
) (c)
|
|
$
|
|
|
|
$
|
4
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
115
|
(f)
|
|
$
|
|
|
|
$
|
2,598
|
|
|
$
|
(103
|
) (c)
|
Net derivative assets and liabilities
|
|
|
240
|
|
|
|
111
|
(d)
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
(95
|
)
|
|
|
253
|
|
|
|
41
|
(g)
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
non-agency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime (a)
|
|
$
|
280
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(21
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
259
|
|
|
$
|
|
|
Non-prime
(b)
|
|
|
216
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
206
|
|
|
|
(1
|
)
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
Corporate debt securities
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
Total
available-for-sale
|
|
|
507
|
|
|
|
|
|
|
|
(1
|
) (e)
|
|
|
|
|
|
|
|
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
476
|
|
|
|
(1
|
)
|
Mortgage servicing rights
|
|
|
2,056
|
|
|
|
(85
|
) (c)
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
142
|
(f)
|
|
|
|
|
|
|
2,131
|
|
|
|
(85
|
) (c)
|
Net derivative assets and liabilities
|
|
|
1,080
|
|
|
|
84
|
(h)
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
(231
|
)
|
|
|
931
|
|
|
|
16
|
(i)
|
(a)
|
Prime securities are those designated as such by the issuer at origination. When an issuer designation is unavailable, the Company determines at acquisition date the categorization based on asset pool characteristics
(such as weighted-average credit score,
loan-to-value,
loan type, prevalence of low documentation loans) and deal performance (such as pool delinquencies and security
market spreads).
|
(b)
|
Includes all securities not meeting the conditions to be designated as prime.
|
(c)
|
Included in mortgage banking revenue.
|
(d)
|
Approximately $18 million included in other noninterest income and $93 million included in mortgage banking revenue.
|
(e)
|
Included in changes in unrealized gains and losses on securities
available-for-sale.
|
(f)
|
Represents MSRs capitalized during the period.
|
(g)
|
Approximately $9 million included in other noninterest income and $32 million included in mortgage banking revenue.
|
(h)
|
Approximately $(73) million included in other noninterest income and $157 million included in mortgage banking revenue.
|
(i)
|
Approximately $(81) million included in other noninterest income and $97 million included in mortgage banking revenue.
|
The following table presents the changes in fair value for all assets and liabilities measured at fair
value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
Beginning
of Period
Balance
|
|
|
Net Gains
(Losses)
Included in
Net Income
|
|
|
Net Gains
(Losses)
Included in
Other
Comprehensive
Income (Loss)
|
|
|
Purchases
|
|
|
Sales
|
|
|
Principal
Payments
|
|
|
Issuances
|
|
|
Settlements
|
|
|
End
of Period
Balance
|
|
|
Net Change in
Unrealized
Gains (Losses)
Relating to Assets
and Liabilities
Held at End of Period
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
non-agency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime (a)
|
|
$
|
242
|
|
|
$
|
|
|
|
$
|
(2
|
)
|
|
$
|
|
|
|
$
|
(234
|
)
|
|
$
|
(6
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Non-prime
(b)
|
|
|
195
|
|
|
|
|
|
|
|
(17
|
)
|
|
|
|
|
|
|
(175
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
|
9
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
|
|
|
448
|
|
|
|
|
(c)
|
|
|
(17
|
) (f)
|
|
|
|
|
|
|
(422
|
)
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights
|
|
|
2,591
|
|
|
|
(322
|
) (d)
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
319
|
(g)
|
|
|
|
|
|
|
2,598
|
|
|
|
(322
|
) (d)
|
Net derivative assets and liabilities
|
|
|
171
|
|
|
|
372
|
(e)
|
|
|
|
|
|
|
1
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
(283
|
)
|
|
|
253
|
|
|
|
87
|
(h)
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
non-agency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime (a)
|
|
$
|
318
|
|
|
$
|
(1
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(58
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
259
|
|
|
$
|
|
|
Non-prime
(b)
|
|
|
240
|
|
|
|
(1
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
|
|
|
206
|
|
|
|
(4
|
)
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
Corporate debt securities
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
Total
available-for-sale
|
|
|
569
|
|
|
|
(2
|
) (c)
|
|
|
(4
|
) (f)
|
|
|
|
|
|
|
|
|
|
|
(87
|
)
|
|
|
|
|
|
|
|
|
|
|
476
|
|
|
|
(4
|
)
|
Mortgage servicing rights
|
|
|
2,512
|
|
|
|
(785
|
) (d)
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
372
|
(g)
|
|
|
|
|
|
|
2,131
|
|
|
|
(785
|
) (d)
|
Net derivative assets and liabilities
|
|
|
498
|
|
|
|
1,047
|
(i)
|
|
|
|
|
|
|
1
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
(610
|
)
|
|
|
931
|
|
|
|
494
|
(j)
|
(a)
|
Prime securities are those designated as such by the issuer at origination. When an issuer designation is unavailable, the Company determines at acquisition date the categorization based on asset pool characteristics
(such as weighted-average credit score,
loan-to-value,
loan type, prevalence of low documentation loans) and deal performance (such as pool delinquencies and security
market spreads).
|
(b)
|
Includes all securities not meeting the conditions to be designated as prime.
|
(c)
|
Included in securities gains (losses).
|
(d)
|
Included in mortgage banking revenue.
|
(e)
|
Approximately $128 million included in other noninterest income and $244 million included in mortgage banking revenue.
|
(f)
|
Included in changes in unrealized gains and losses on securities
available-for-sale.
|
(g)
|
Represents MSRs capitalized during the period.
|
(h)
|
Approximately $55 million included in other noninterest income and $32 million included in mortgage banking revenue.
|
(i)
|
Approximately $560 million included in other noninterest income and $487 million included in mortgage banking revenue.
|
(j)
|
Approximately $397 million included in other noninterest income and $97 million included in mortgage banking revenue.
|
The Company is also required periodically to measure certain other financial assets at fair value on a nonrecurring basis. These measurements
of fair value usually result from the application of
lower-of-cost-or-fair
value
accounting or write-downs of individual assets.
The following table summarizes the balances as of the measurement date of assets measured at fair value
on a nonrecurring basis, and still held as of the reporting date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
|
|
December 31, 2016
|
|
(Dollars in Millions)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Loans (a)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
76
|
|
|
$
|
76
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
59
|
|
|
$
|
59
|
|
Other assets (b)
|
|
|
|
|
|
|
|
|
|
|
30
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
|
|
|
|
60
|
|
(a)
|
Represents the carrying value of loans for which adjustments were based on the fair value of the collateral, excluding loans fully
charged-off.
|
(b)
|
Primarily represents the fair value of foreclosed properties that were measured at fair value based on an appraisal or broker price opinion of the collateral subsequent to their initial acquisition.
|
The following table summarizes losses recognized related to nonrecurring fair value measurements of individual assets or portfolios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
(Dollars in Millions)
|
|
2017
|
|
|
2016
|
|
|
|
|
|
2017
|
|
|
2016
|
|
Loans (a)
|
|
$
|
45
|
|
|
$
|
45
|
|
|
|
|
|
|
$
|
120
|
|
|
$
|
156
|
|
Other assets (b)
|
|
|
3
|
|
|
|
6
|
|
|
|
|
|
|
|
15
|
|
|
|
25
|
|
(a)
|
Represents write-downs of loans which were based on the fair value of the collateral, excluding loans fully
charged-off.
|
(b)
|
Primarily represents related losses of foreclosed properties that were measured at fair value subsequent to their initial acquisition.
|
Fair Value Option
The following table summarizes the differences between the aggregate fair value carrying amount of MLHFS for which the fair value option has been elected and
the aggregate unpaid principal amount that the Company is contractually obligated to receive at maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
|
|
December 31, 2016
|
|
(Dollars in Millions)
|
|
Fair
Value
Carrying
Amount
|
|
|
Aggregate
Unpaid
Principal
|
|
|
Carrying
Amount Over
(Under) Unpaid
Principal
|
|
|
|
|
|
Fair
Value
Carrying
Amount
|
|
|
Aggregate
Unpaid
Principal
|
|
|
Carrying
Amount Over
(Under) Unpaid
Principal
|
|
Total loans
|
|
$
|
3,754
|
|
|
$
|
3,638
|
|
|
$
|
116
|
|
|
|
|
|
|
$
|
4,822
|
|
|
$
|
4,763
|
|
|
$
|
59
|
|
Nonaccrual loans
|
|
|
1
|
|
|
|
2
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
2
|
|
|
|
3
|
|
|
|
(1
|
)
|
Loans 90 days or more past due
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
Disclosures About Fair Value of Financial Instruments
The following table summarizes the estimated fair value for financial instruments as of September 30, 2017 and December 31, 2016, and includes
financial instruments that are not accounted for at fair value. In accordance with disclosure guidance related to fair values of financial instruments, the Company did not include assets and liabilities that are not financial instruments, such as
the value of goodwill, long-term relationships with deposit, credit card, merchant processing and trust customers, other purchased intangibles, premises and equipment, deferred taxes and other liabilities. Additionally, in accordance with the
disclosure guidance, insurance contracts and investments accounted for under the equity method are excluded.
The estimated fair values of the
Companys financial instruments are shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
Carrying
Amount
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
Carrying
Amount
|
|
|
|
|
|
Fair Value
|
|
(Dollars in Millions)
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
20,540
|
|
|
|
|
|
|
$
|
20,540
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
20,540
|
|
|
|
|
|
|
$
|
15,705
|
|
|
|
|
|
|
$
|
15,705
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
15,705
|
|
Federal funds sold and securities purchased under resale agreements
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
78
|
|
|
|
|
|
|
|
78
|
|
|
|
|
|
|
|
138
|
|
|
|
|
|
|
|
|
|
|
|
138
|
|
|
|
|
|
|
|
138
|
|
Investment securities
held-to-maturity
|
|
|
44,018
|
|
|
|
|
|
|
|
4,668
|
|
|
|
39,074
|
|
|
|
16
|
|
|
|
43,758
|
|
|
|
|
|
|
|
42,991
|
|
|
|
|
|
|
|
4,605
|
|
|
|
37,810
|
|
|
|
20
|
|
|
|
42,435
|
|
Loans held for sale (a)
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
4
|
|
Loans
|
|
|
274,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
278,946
|
|
|
|
278,946
|
|
|
|
|
|
|
|
269,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
273,422
|
|
|
|
273,422
|
|
Other financial instruments
|
|
|
2,449
|
|
|
|
|
|
|
|
|
|
|
|
1,037
|
|
|
|
1,419
|
|
|
|
2,456
|
|
|
|
|
|
|
|
2,362
|
|
|
|
|
|
|
|
|
|
|
|
920
|
|
|
|
1,449
|
|
|
|
2,369
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
342,589
|
|
|
|
|
|
|
|
|
|
|
|
342,411
|
|
|
|
|
|
|
|
342,411
|
|
|
|
|
|
|
|
334,590
|
|
|
|
|
|
|
|
|
|
|
|
334,361
|
|
|
|
|
|
|
|
334,361
|
|
Short-term borrowings (b)
|
|
|
14,641
|
|
|
|
|
|
|
|
|
|
|
|
14,430
|
|
|
|
|
|
|
|
14,430
|
|
|
|
|
|
|
|
12,891
|
|
|
|
|
|
|
|
|
|
|
|
12,706
|
|
|
|
|
|
|
|
12,706
|
|
Long-term debt
|
|
|
34,515
|
|
|
|
|
|
|
|
|
|
|
|
34,842
|
|
|
|
|
|
|
|
34,842
|
|
|
|
|
|
|
|
33,323
|
|
|
|
|
|
|
|
|
|
|
|
33,678
|
|
|
|
|
|
|
|
33,678
|
|
Other liabilities
|
|
|
1,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,659
|
|
|
|
1,659
|
|
|
|
|
|
|
|
1,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,702
|
|
|
|
1,702
|
|
(a)
|
Excludes mortgages held for sale for which the fair value option under applicable accounting guidance was elected.
|
(b)
|
Excludes the Companys obligation on securities sold short required to be accounted for at fair value per applicable accounting guidance.
|
The fair value of unfunded commitments, deferred
non-yield
related loan fees, standby letters of
credit and other guarantees is approximately equal to their carrying value. The carrying value of unfunded commitments, deferred
non-yield
related loan fees and standby letters of credit was $564 million
and $618 million at September 30, 2017 and December 31, 2016, respectively. The carrying value of other guarantees was $194 million and $186 million at September 30, 2017 and December 31, 2016, respectively.
|
|
|
Note 15
|
|
Guarantees and Contingent Liabilities
|
Visa Restructuring and Card Association Litigation
The Companys payment services business issues credit and debit cards and acquires credit and debit card transactions through the Visa U.S.A. Inc. card association or its affiliates
(collectively Visa). In 2007, Visa completed a restructuring and issued shares of Visa Inc. common stock to its financial institution members in contemplation of its initial public offering (IPO) completed in the first
quarter of 2008 (the Visa Reorganization). As a part of the Visa Reorganization, the Company received its proportionate number of shares of Visa Inc. common stock, which were subsequently converted to Class B shares of Visa Inc.
(Class B shares). Visa U.S.A. Inc. (Visa U.S.A.) and MasterCard International (collectively, the Card Associations) are defendants in antitrust lawsuits challenging the practices of the Card Associations (the
Visa Litigation). Visa U.S.A. member banks have a contingent obligation to indemnify Visa Inc. under the Visa U.S.A. bylaws (which were modified at the time of the restructuring in October 2007) for potential losses arising from the
Visa Litigation. The indemnification by the Visa U.S.A. member banks has no specific maximum amount.
Using proceeds from its IPO and through reductions to the conversion ratio applicable to
the Class B shares held by Visa U.S.A. member banks, Visa Inc. has funded an escrow account for the benefit of member financial institutions to fund their indemnification obligations associated with the Visa Litigation. The receivable related
to the escrow account is classified in other liabilities as a direct offset to the related Visa Litigation contingent liability. On October 19, 2012, Visa signed a settlement agreement to resolve class action claims associated with the
multi-district interchange litigation pending in the United States District Court for the Eastern District of New York. This case is the largest of the remaining Visa Litigation matters. The district court approved the settlement, but that approval
was appealed by certain class members. On June 30, 2016, the United States Court of Appeals for the Second Circuit reversed the approval of the settlement and remanded the case to the district court for further proceedings consistent with the
appellate ruling. On November 23, 2016, certain class members filed a petition with the United States Supreme Court asking it to review the Second Circuits decision to reject the settlement. On March 27, 2017, the Supreme Court
denied the class members petition. The case is proceeding in the district court.
At September 30, 2017, the carrying amount of
the Companys liability related to the Visa Litigation matters, net of its share of the escrow fundings, was $19 million. During the three and nine months ended September 30, 2017, the Company sold 0.4 million and
1.8 million, respectively, of its Class B shares. These sales, and any previous sales of its Class B shares, do not impact the Companys liability for the Visa Litigation matters or the receivable related to the escrow account.
Upon final settlement of the Visa Litigation, the remaining 3.1 million Class B shares held by the Company will be eligible for conversion to Class A shares of Visa Inc., which are publicly traded. The Class B shares are excluded
from the Companys financial instruments disclosures included in Note 14.
Other Guarantees and Contingent Liabilities
The following table is a summary of other guarantees and contingent liabilities of the Company at September 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
Collateral
Held
|
|
|
Carrying
Amount
|
|
|
Maximum
Potential
Future
Payments
|
|
Standby letters of credit
|
|
$
|
|
|
|
$
|
55
|
|
|
$
|
11,154
|
|
Third party borrowing arrangements
|
|
|
|
|
|
|
|
|
|
|
11
|
|
Securities lending indemnifications
|
|
|
4,560
|
|
|
|
|
|
|
|
4,467
|
|
Asset sales
|
|
|
|
|
|
|
128
|
|
|
|
6,498
|
(a)
|
Merchant processing
|
|
|
538
|
|
|
|
54
|
|
|
|
99,229
|
|
Tender option bond program guarantee
|
|
|
2,109
|
|
|
|
|
|
|
|
1,998
|
|
Minimum revenue guarantees
|
|
|
|
|
|
|
|
|
|
|
8
|
|
Other
|
|
|
|
|
|
|
12
|
|
|
|
1,467
|
|
(a)
|
The maximum potential future payments do not include loan sales where the Company provides standard representation and warranties to the buyer against losses related to loan underwriting documentation defects that
may have existed at the time of sale that generally are identified after the occurrence of a triggering event such as delinquency. For these types of loan sales, the maximum potential future payments is generally the unpaid principal balance of
loans sold measured at the end of the current reporting period. Actual losses will be significantly less than the maximum exposure, as only a fraction of loans sold will have a representation and warranty breach, and any losses on repurchase would
generally be mitigated by any collateral held against the loans.
|
Merchant
Processing
The Company, through its subsidiaries, provides merchant processing services. Under the rules of credit card associations, a merchant processor retains a contingent
liability for credit card transactions processed. This contingent liability arises in the event of a billing dispute between the merchant and a cardholder that is ultimately resolved in the cardholders favor. In this situation, the transaction
is charged-back to the merchant and the disputed amount is credited or otherwise refunded to the cardholder. If the Company is unable to collect this amount from the merchant, it bears the loss for the amount of the refund paid to the
cardholder.
The Company currently processes card transactions in the United States, Canada, Europe and Mexico through wholly-owned
subsidiaries and joint ventures with other financial institutions. In the event a merchant was unable to fulfill product or services subject to future delivery, such as airline tickets, the Company could become financially liable for refunding the
purchase price of such products or services purchased through the credit card associations under the charge-back provisions. Charge-back risk related to these merchants is evaluated in a manner similar to credit risk assessments and, as such,
merchant processing contracts contain various provisions to protect the Company in the event of default. At September 30, 2017, the value of airline tickets purchased to be delivered at a future date through card transactions processed by the
Company was $7.5 billion. The Company held collateral of $371 million in escrow deposits, letters of credit and indemnities from financial institutions, and liens on various assets. In addition to specific collateral or other credit
enhancements, the Company maintains a liability for its implied guarantees associated with future delivery. At September 30, 2017, the liability was $41 million primarily related to these airline processing arrangements.
Asset Sales
The Company regularly sells loans to GSEs as part of its mortgage banking activities. The Company provides customary representations and warranties to GSEs in conjunction with these sales. These
representations and warranties generally require the Company to repurchase assets if it is subsequently determined that a loan did not meet specified criteria, such as a documentation deficiency or rescission of mortgage insurance. If the Company is
unable to cure or refute a repurchase request, the Company is generally obligated to repurchase the loan or otherwise reimburse the counterparty for losses. At September 30, 2017, the Company had reserved $13 million for potential losses
from representation and warranty obligations, compared with $19 million at December 31, 2016. The Companys reserve reflects managements best estimate of losses for representation and warranty obligations. The Companys
repurchase reserve is modeled at the loan level, taking into consideration the individual credit quality and borrower activity that has transpired since origination. The model applies credit quality and economic risk factors to derive a probability
of default and potential repurchase that are based on the Companys historical loss experience, and estimates loss severity based on expected collateral value. The Company also considers qualitative factors that may result in anticipated losses
differing from historical loss trends.
As of September 30, 2017 and December 31, 2016, the Company had
$12 million and $7 million, respectively, of unresolved representation and warranty claims from GSEs. The Company does not have a significant amount of unresolved claims from investors other than GSEs.
Litigation and Regulatory Matters
The Company is subject to
various litigation and regulatory matters that arise in the ordinary course of its business. The Company establishes reserves for such matters when potential losses become probable and can be reasonably estimated. The Company believes the ultimate
resolution of existing legal and regulatory matters will not have a material adverse effect on the financial condition, results of operations or cash flows of the Company. However, in light of the uncertainties inherent in these matters, it is
possible that the ultimate resolution of one or more of these matters may have a material adverse effect on the Companys results from operations for a particular period, and future changes in circumstances or additional information could
result in additional accruals or resolution in excess of established accruals, which could adversely affect the Companys results from operations, potentially materially.
Litigation Matters
In the last
several years, the Company and other large financial institutions have been sued in their capacity as trustee for residential mortgagebacked securities trusts. Among these lawsuits are actions originally brought in June 2014 by a group of
institutional investors, including BlackRock and PIMCO funds, against six bank trustees, including the Company. The actions brought by these institutional investors against the Company are in their early stages and currently are pending in the
Supreme Court of the State of New York, New York County, and in the United States District Court for the Southern District of New York. In these lawsuits, the investors allege that the Companys banking subsidiary, U.S. Bank National
Association, as trustee caused them to incur substantial losses by failing to enforce loan repurchase obligations and failing to abide by appropriate standards of care after events of default allegedly occurred. The plaintiffs seek monetary damages
in an unspecified amount and also seek equitable relief.
Regulatory Matters
The Company is currently subject to examinations, inquiries and investigations by government agencies and bank regulators concerning mortgage-related practices, including those related to
compliance with selling guidelines relating to residential home loans sold to GSEs, foreclosure-related expenses submitted to the Federal Housing Administration or GSEs for reimbursement, lender-placed insurance, and notices and filings in
bankruptcy cases.
The Company is also subject to ongoing examinations, inquiries and investigations by government agencies, bank
regulators and law enforcement with respect to Bank Secrecy Act/anti-money laundering compliance program adequacy and effectiveness and sanctions compliance requirements as administered by the Office of Foreign Assets Control. The Company is
cooperating with an investigation currently being conducted by the United States Attorneys Office in Manhattan regarding its banking relationship with Scott Tucker, who was recently convicted for operating a payday lending business in a
fraudulent manner. Tucker and his businesses maintained certain deposit accounts with U.S. Bank National Association. The investigation by the United States Attorneys Office also covers the Companys Bank Secrecy Act/anti-money laundering
compliance program. The Company is in discussions to attempt to resolve these matters. Any resolution, if reached, could include monetary fines or other penalties.
The Company is continually subject to examinations, inquiries and investigations in areas of increasing regulatory scrutiny, such as
compliance, risk management, third party risk management and consumer protection.
The Company is cooperating fully with all pending examinations, inquiries and
investigations, any of which could lead to administrative or legal proceedings or settlements. Remedies in these proceedings or settlements may include fines, penalties, restitution or alterations in the Companys business practices (which may
increase the Companys operating expenses and decrease its revenue).
In October 2015, the Company entered into a Consent Order
with the Office of the Comptroller of the Currency (the OCC) concerning deficiencies in the Companys Bank Secrecy Act/anti-money laundering compliance program, and requiring an ongoing review of that program. The Company could be
required to enter into further orders or pay fines or penalties arising from the Consent Order or regulatory actions taken by other government agencies with Bank Secrecy Act/anti-money laundering jurisdiction. Some of the compliance program
enhancements and other actions required by the Consent Order have already been, or are currently in the process of being, implemented, and are not expected to be material to the Company.
In April 2011, the Company and certain other large financial institutions entered into Consent Orders with the OCC and the Board of
Governors of the Federal Reserve System relating to residential mortgage servicing and foreclosure practices. In June 2015, the Company entered into an agreement to amend the 2011 Consent Order it had with the OCC. The OCC terminated the
amended Consent Order in February 2016. Depending on the Companys progress toward addressing the requirements of the 2011 Consent Order it has with the Board of Governors of the Federal Reserve System, the Company may be required to enter
into further orders and settlements, pay additional fines or penalties, make restitution or further modify the Companys business practices (which may increase the Companys operating expenses and decrease its revenue).
Outlook
Due to their complex
nature, it can be years before litigation and regulatory matters are resolved. The Company may be unable to develop an estimate or range of loss where matters are in early stages, there are significant factual or legal issues to be resolved, damages
are unspecified or uncertain, or there is uncertainty as to a litigation class being certified or the outcome of pending motions, appeals or proceedings. For those litigation and regulatory matters where the Company has information to develop an
estimate or range of loss, the Company believes the upper end of the range of reasonably possible losses in aggregate, in excess of any reserves established for matters where a loss is considered probable, is up to $300 million. The
Companys estimates are subject to significant judgment and uncertainties, and the matters underlying the estimates will change from time to time. Actual results may vary significantly from the current estimates.
For additional information on the nature of the Companys guarantees and contingent liabilities, refer to Note 22 in the
Companys Annual Report on Form
10-K
for the year ended December 31, 2016.
|
|
|
Note 16
|
|
Subsequent Events
|
The Company has evaluated the impact of events that have occurred subsequent to September 30, 2017 through the date the
consolidated financial statements were filed with the United States Securities and Exchange Commission. Based on this evaluation, the Company has determined none of these events were required to be recognized or disclosed in the consolidated
financial statements and related notes.
U.S. Bancorp
Consolidated Daily
Average Balance Sheet and Related
Yields and Rates (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
(Dollars in Millions)
(Unaudited)
|
|
Average
Balances
|
|
|
|
|
|
Interest
|
|
|
|
|
|
Yields
and
Rates
|
|
|
|
|
|
Average
Balances
|
|
|
|
|
|
Interest
|
|
|
|
|
|
Yields
and
Rates
|
|
|
|
|
|
|
|
|
% Change
Average
Balances
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities
|
|
$
|
111,832
|
|
|
|
|
|
|
$
|
591
|
|
|
|
|
|
|
|
2.11
|
%
|
|
|
|
|
|
$
|
108,109
|
|
|
|
|
|
|
$
|
539
|
|
|
|
|
|
|
|
2.00
|
%
|
|
|
|
|
|
|
|
|
|
|
3.4
|
%
|
Loans held for sale
|
|
|
3,935
|
|
|
|
|
|
|
|
40
|
|
|
|
|
|
|
|
4.06
|
|
|
|
|
|
|
|
4,691
|
|
|
|
|
|
|
|
43
|
|
|
|
|
|
|
|
3.68
|
|
|
|
|
|
|
|
|
|
|
|
(16.1
|
)
|
Loans (b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
96,633
|
|
|
|
|
|
|
|
822
|
|
|
|
|
|
|
|
3.38
|
|
|
|
|
|
|
|
92,369
|
|
|
|
|
|
|
|
654
|
|
|
|
|
|
|
|
2.82
|
|
|
|
|
|
|
|
|
|
|
|
4.6
|
|
Commercial real estate
|
|
|
41,621
|
|
|
|
|
|
|
|
469
|
|
|
|
|
|
|
|
4.47
|
|
|
|
|
|
|
|
43,374
|
|
|
|
|
|
|
|
429
|
|
|
|
|
|
|
|
3.94
|
|
|
|
|
|
|
|
|
|
|
|
(4.0
|
)
|
Residential mortgages
|
|
|
59,030
|
|
|
|
|
|
|
|
551
|
|
|
|
|
|
|
|
3.73
|
|
|
|
|
|
|
|
56,284
|
|
|
|
|
|
|
|
522
|
|
|
|
|
|
|
|
3.70
|
|
|
|
|
|
|
|
|
|
|
|
4.9
|
|
Credit card
|
|
|
20,926
|
|
|
|
|
|
|
|
618
|
|
|
|
|
|
|
|
11.72
|
|
|
|
|
|
|
|
20,628
|
|
|
|
|
|
|
|
569
|
|
|
|
|
|
|
|
10.98
|
|
|
|
|
|
|
|
|
|
|
|
1.4
|
|
Other retail
|
|
|
56,069
|
|
|
|
|
|
|
|
585
|
|
|
|
|
|
|
|
4.13
|
|
|
|
|
|
|
|
52,851
|
|
|
|
|
|
|
|
535
|
|
|
|
|
|
|
|
4.02
|
|
|
|
|
|
|
|
|
|
|
|
6.1
|
|
Total loans, excluding covered loans
|
|
|
274,279
|
|
|
|
|
|
|
|
3,045
|
|
|
|
|
|
|
|
4.41
|
|
|
|
|
|
|
|
265,506
|
|
|
|
|
|
|
|
2,709
|
|
|
|
|
|
|
|
4.06
|
|
|
|
|
|
|
|
|
|
|
|
3.3
|
|
Covered loans
|
|
|
3,347
|
|
|
|
|
|
|
|
44
|
|
|
|
|
|
|
|
5.32
|
|
|
|
|
|
|
|
4,131
|
|
|
|
|
|
|
|
49
|
|
|
|
|
|
|
|
4.76
|
|
|
|
|
|
|
|
|
|
|
|
(19.0
|
)
|
Total loans
|
|
|
277,626
|
|
|
|
|
|
|
|
3,089
|
|
|
|
|
|
|
|
4.42
|
|
|
|
|
|
|
|
269,637
|
|
|
|
|
|
|
|
2,758
|
|
|
|
|
|
|
|
4.07
|
|
|
|
|
|
|
|
|
|
|
|
3.0
|
|
Other earning assets
|
|
|
15,432
|
|
|
|
|
|
|
|
48
|
|
|
|
|
|
|
|
1.23
|
|
|
|
|
|
|
|
11,346
|
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
1.09
|
|
|
|
|
|
|
|
|
|
|
|
36.0
|
|
Total earning assets
|
|
|
408,825
|
|
|
|
|
|
|
|
3,768
|
|
|
|
|
|
|
|
3.67
|
|
|
|
|
|
|
|
393,783
|
|
|
|
|
|
|
|
3,371
|
|
|
|
|
|
|
|
3.41
|
|
|
|
|
|
|
|
|
|
|
|
3.8
|
|
Allowance for loan losses
|
|
|
(3,874
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,818
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.5
|
)
|
Unrealized gain (loss) on investment securities
|
|
|
(113
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Other assets
|
|
|
45,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.5
|
)
|
Total assets
|
|
$
|
450,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
437,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.9
|
|
Liabilities and Shareholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits
|
|
$
|
81,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
82,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(.1
|
)%
|
Interest-bearing deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest checking
|
|
|
68,066
|
|
|
|
|
|
|
|
26
|
|
|
|
|
|
|
|
.15
|
|
|
|
|
|
|
|
63,456
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
.08
|
|
|
|
|
|
|
|
|
|
|
|
7.3
|
|
Money market savings
|
|
|
105,072
|
|
|
|
|
|
|
|
176
|
|
|
|
|
|
|
|
.67
|
|
|
|
|
|
|
|
99,921
|
|
|
|
|
|
|
|
92
|
|
|
|
|
|
|
|
.36
|
|
|
|
|
|
|
|
|
|
|
|
5.2
|
|
Savings accounts
|
|
|
43,649
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
.07
|
|
|
|
|
|
|
|
40,695
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
.09
|
|
|
|
|
|
|
|
|
|
|
|
7.3
|
|
Time deposits
|
|
|
36,400
|
|
|
|
|
|
|
|
83
|
|
|
|
|
|
|
|
.91
|
|
|
|
|
|
|
|
32,455
|
|
|
|
|
|
|
|
48
|
|
|
|
|
|
|
|
.59
|
|
|
|
|
|
|
|
|
|
|
|
12.2
|
|
Total interest-bearing deposits
|
|
|
253,187
|
|
|
|
|
|
|
|
293
|
|
|
|
|
|
|
|
.46
|
|
|
|
|
|
|
|
236,527
|
|
|
|
|
|
|
|
161
|
|
|
|
|
|
|
|
.27
|
|
|
|
|
|
|
|
|
|
|
|
7.0
|
|
Short-term borrowings
|
|
|
15,505
|
|
|
|
|
|
|
|
93
|
|
|
|
|
|
|
|
2.37
|
|
|
|
|
|
|
|
15,929
|
|
|
|
|
|
|
|
71
|
|
|
|
|
|
|
|
1.78
|
|
|
|
|
|
|
|
|
|
|
|
(2.7
|
)
|
Long-term debt
|
|
|
35,544
|
|
|
|
|
|
|
|
196
|
|
|
|
|
|
|
|
2.20
|
|
|
|
|
|
|
|
37,875
|
|
|
|
|
|
|
|
196
|
|
|
|
|
|
|
|
2.06
|
|
|
|
|
|
|
|
|
|
|
|
(6.2
|
)
|
Total interest-bearing liabilities
|
|
|
304,236
|
|
|
|
|
|
|
|
582
|
|
|
|
|
|
|
|
.76
|
|
|
|
|
|
|
|
290,331
|
|
|
|
|
|
|
|
428
|
|
|
|
|
|
|
|
.59
|
|
|
|
|
|
|
|
|
|
|
|
4.8
|
|
Other liabilities
|
|
|
14,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12.3
|
)
|
Shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred equity
|
|
|
5,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.5
|
)
|
Common equity
|
|
|
43,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.6
|
|
Total U.S. Bancorp shareholders equity
|
|
|
48,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.2
|
|
Noncontrolling interests
|
|
|
628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.7
|
)
|
Total equity
|
|
|
49,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.1
|
|
Total liabilities and equity
|
|
$
|
450,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
437,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.9
|
|
Net interest income
|
|
|
|
|
|
|
|
|
|
$
|
3,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross interest margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.91
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.82
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross interest margin without taxable-equivalent increments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.86
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.77
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of Earning Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.67
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.41
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.98
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin without taxable-equivalent
increments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.05
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.93
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Interest and rates are presented on a fully taxable-equivalent basis utilizing a tax rate of 35 percent.
|
(b)
|
Interest income and rates on loans include loan fees. Nonaccrual loans are included in average loan balances.
|
U.S. Bancorp
Consolidated Daily
Average Balance Sheet and Related
Yields and Rates (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
(Dollars in Millions)
(Unaudited)
|
|
Average
Balances
|
|
|
|
|
|
Interest
|
|
|
|
|
|
Yields
and
Rates
|
|
|
|
|
|
Average
Balances
|
|
|
|
|
|
Interest
|
|
|
|
|
|
Yields
and
Rates
|
|
|
|
|
|
|
|
|
% Change
Average
Balances
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities
|
|
$
|
111,325
|
|
|
|
|
|
|
$
|
1,723
|
|
|
|
|
|
|
|
2.06
|
%
|
|
|
|
|
|
$
|
107,095
|
|
|
|
|
|
|
$
|
1,634
|
|
|
|
|
|
|
|
2.03
|
%
|
|
|
|
|
|
|
|
|
|
|
3.9
|
%
|
Loans held for sale
|
|
|
3,457
|
|
|
|
|
|
|
|
104
|
|
|
|
|
|
|
|
4.02
|
|
|
|
|
|
|
|
3,888
|
|
|
|
|
|
|
|
110
|
|
|
|
|
|
|
|
3.78
|
|
|
|
|
|
|
|
|
|
|
|
(11.1
|
)
|
Loans (b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
95,347
|
|
|
|
|
|
|
|
2,297
|
|
|
|
|
|
|
|
3.22
|
|
|
|
|
|
|
|
91,451
|
|
|
|
|
|
|
|
1,920
|
|
|
|
|
|
|
|
2.80
|
|
|
|
|
|
|
|
|
|
|
|
4.3
|
|
Commercial real estate
|
|
|
42,437
|
|
|
|
|
|
|
|
1,335
|
|
|
|
|
|
|
|
4.20
|
|
|
|
|
|
|
|
42,922
|
|
|
|
|
|
|
|
1,269
|
|
|
|
|
|
|
|
3.95
|
|
|
|
|
|
|
|
|
|
|
|
(1.1
|
)
|
Residential mortgages
|
|
|
58,496
|
|
|
|
|
|
|
|
1,627
|
|
|
|
|
|
|
|
3.71
|
|
|
|
|
|
|
|
55,334
|
|
|
|
|
|
|
|
1,548
|
|
|
|
|
|
|
|
3.73
|
|
|
|
|
|
|
|
|
|
|
|
5.7
|
|
Credit card
|
|
|
20,801
|
|
|
|
|
|
|
|
1,777
|
|
|
|
|
|
|
|
11.42
|
|
|
|
|
|
|
|
20,339
|
|
|
|
|
|
|
|
1,656
|
|
|
|
|
|
|
|
10.88
|
|
|
|
|
|
|
|
|
|
|
|
2.3
|
|
Other retail
|
|
|
54,835
|
|
|
|
|
|
|
|
1,677
|
|
|
|
|
|
|
|
4.09
|
|
|
|
|
|
|
|
51,809
|
|
|
|
|
|
|
|
1,573
|
|
|
|
|
|
|
|
4.06
|
|
|
|
|
|
|
|
|
|
|
|
5.8
|
|
Total loans, excluding covered loans
|
|
|
271,916
|
|
|
|
|
|
|
|
8,713
|
|
|
|
|
|
|
|
4.28
|
|
|
|
|
|
|
|
261,855
|
|
|
|
|
|
|
|
7,966
|
|
|
|
|
|
|
|
4.06
|
|
|
|
|
|
|
|
|
|
|
|
3.8
|
|
Covered loans
|
|
|
3,538
|
|
|
|
|
|
|
|
131
|
|
|
|
|
|
|
|
4.94
|
|
|
|
|
|
|
|
4,324
|
|
|
|
|
|
|
|
152
|
|
|
|
|
|
|
|
4.67
|
|
|
|
|
|
|
|
|
|
|
|
(18.2
|
)
|
Total loans
|
|
|
275,454
|
|
|
|
|
|
|
|
8,844
|
|
|
|
|
|
|
|
4.29
|
|
|
|
|
|
|
|
266,179
|
|
|
|
|
|
|
|
8,118
|
|
|
|
|
|
|
|
4.07
|
|
|
|
|
|
|
|
|
|
|
|
3.5
|
|
Other earning assets
|
|
|
13,795
|
|
|
|
|
|
|
|
132
|
|
|
|
|
|
|
|
1.27
|
|
|
|
|
|
|
|
8,654
|
|
|
|
|
|
|
|
89
|
|
|
|
|
|
|
|
1.37
|
|
|
|
|
|
|
|
|
|
|
|
59.4
|
|
Total earning assets
|
|
|
404,031
|
|
|
|
|
|
|
|
10,803
|
|
|
|
|
|
|
|
3.57
|
|
|
|
|
|
|
|
385,816
|
|
|
|
|
|
|
|
9,951
|
|
|
|
|
|
|
|
3.44
|
|
|
|
|
|
|
|
|
|
|
|
4.7
|
|
Allowance for loan losses
|
|
|
(3,842
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,848
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
.2
|
|
Unrealized gain (loss) on investment securities
|
|
|
(324
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Other assets
|
|
|
46,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.0
|
)
|
Total assets
|
|
$
|
446,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
429,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.9
|
|
Liabilities and Shareholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits
|
|
$
|
81,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
79,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.4
|
%
|
Interest-bearing deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest checking
|
|
|
67,021
|
|
|
|
|
|
|
|
56
|
|
|
|
|
|
|
|
.11
|
|
|
|
|
|
|
|
60,746
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
|
|
.07
|
|
|
|
|
|
|
|
|
|
|
|
10.3
|
|
Money market savings
|
|
|
106,856
|
|
|
|
|
|
|
|
460
|
|
|
|
|
|
|
|
.58
|
|
|
|
|
|
|
|
93,121
|
|
|
|
|
|
|
|
247
|
|
|
|
|
|
|
|
.35
|
|
|
|
|
|
|
|
|
|
|
|
14.7
|
|
Savings accounts
|
|
|
43,265
|
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
.07
|
|
|
|
|
|
|
|
40,070
|
|
|
|
|
|
|
|
26
|
|
|
|
|
|
|
|
.09
|
|
|
|
|
|
|
|
|
|
|
|
8.0
|
|
Time deposits
|
|
|
32,660
|
|
|
|
|
|
|
|
190
|
|
|
|
|
|
|
|
.78
|
|
|
|
|
|
|
|
33,447
|
|
|
|
|
|
|
|
150
|
|
|
|
|
|
|
|
.60
|
|
|
|
|
|
|
|
|
|
|
|
(2.4
|
)
|
Total interest-bearing deposits
|
|
|
249,802
|
|
|
|
|
|
|
|
730
|
|
|
|
|
|
|
|
.39
|
|
|
|
|
|
|
|
227,384
|
|
|
|
|
|
|
|
452
|
|
|
|
|
|
|
|
.27
|
|
|
|
|
|
|
|
|
|
|
|
9.9
|
|
Short-term borrowings
|
|
|
14,423
|
|
|
|
|
|
|
|
239
|
|
|
|
|
|
|
|
2.21
|
|
|
|
|
|
|
|
21,457
|
|
|
|
|
|
|
|
205
|
|
|
|
|
|
|
|
1.28
|
|
|
|
|
|
|
|
|
|
|
|
(32.8
|
)
|
Long-term debt
|
|
|
35,697
|
|
|
|
|
|
|
|
585
|
|
|
|
|
|
|
|
2.19
|
|
|
|
|
|
|
|
36,392
|
|
|
|
|
|
|
|
567
|
|
|
|
|
|
|
|
2.08
|
|
|
|
|
|
|
|
|
|
|
|
(1.9
|
)
|
Total interest-bearing liabilities
|
|
|
299,922
|
|
|
|
|
|
|
|
1,554
|
|
|
|
|
|
|
|
.69
|
|
|
|
|
|
|
|
285,233
|
|
|
|
|
|
|
|
1,224
|
|
|
|
|
|
|
|
.57
|
|
|
|
|
|
|
|
|
|
|
|
5.1
|
|
Other liabilities
|
|
|
15,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6.3
|
)
|
Shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred equity
|
|
|
5,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
.2
|
|
Common equity
|
|
|
42,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.6
|
|
Total U.S. Bancorp shareholders equity
|
|
|
48,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.3
|
|
Noncontrolling interests
|
|
|
633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.8
|
)
|
Total equity
|
|
|
48,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.3
|
|
Total liabilities and equity
|
|
$
|
446,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
429,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.9
|
|
Net interest income
|
|
|
|
|
|
|
|
|
|
$
|
9,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross interest margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.88
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.87
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross interest margin without taxable-equivalent increments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.83
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.82
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of Earning Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.57
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.44
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.06
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.02
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin without taxable-equivalent
increments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.01
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.97
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Interest and rates are presented on a fully taxable-equivalent basis utilizing a tax rate of 35 percent.
|
(b)
|
Interest income and rates on loans include loan fees. Nonaccrual loans are included in average loan balances.
|