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US BANCORP \DE\ 10-Q 2010
e10vq
Table of Contents

 
[FORM 10-Q] 
 
[USBANCORP LOGO] 
 


Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2010
 
OR
 
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from (not applicable)
 
Commission file number 1-6880
 
(Exact name of registrant as specified in its charter)
 
     
Delaware
(State or other jurisdiction of
incorporation or organization)
  41-0255900
(I.R.S. Employer
Identification No.)
 
800 Nicollet Mall
Minneapolis, Minnesota 55402
(Address of principal executive offices, including zip code)
 
651-466-3000
(Registrant’s telephone number, including area code)
 
(Former name, former address and former fiscal year, if changed since last report)
 
 
     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.
 
YES þ  NO o
 
     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
YES þ  NO o
 
     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
     
Large accelerated filer þ
  Accelerated filer o
Non-accelerated filer o
(Do not check if a smaller reporting company)
  Smaller reporting company o
 
     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
YES o  NO þ
 
     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
     
Class
Common Stock, $.01 Par Value
  Outstanding as of October 31, 2010
1,918,307,353 shares
 


 

 
 
     
Part I — Financial Information
   
   
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 EX-12
 EX-31.1
 EX-31.2
 EX-32
 EX-101 INSTANCE DOCUMENT
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT
 EX-101 DEFINITION LINKBASE DOCUMENT
 
 
This quarterly report on Form 10-Q contains forward-looking statements about U.S. Bancorp. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are based on the information available to, and assumptions and estimates made by, management as of the date made. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of U.S. Bancorp. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated. Global and domestic economies could fail to recover from the recent economic downturn or could experience another severe contraction, which could adversely affect U.S. Bancorp’s revenues and the values of its assets and liabilities. Global financial markets could experience a recurrence of significant turbulence, which could reduce the availability of funding to certain financial institutions and lead to a tightening of credit, a reduction of business activity, and increased market volatility. Stress in the commercial real estate markets, as well as a delay or failure of recovery in the residential real estate markets, could cause additional credit losses and deterioration in asset values. In addition, U.S. Bancorp’s business and financial performance is likely to be impacted by effects of recently enacted and future legislation and regulation. U.S. Bancorp’s results could also be adversely affected by continued deterioration in general business and economic conditions; changes in interest rates; deterioration in the credit quality of its loan portfolios or in the value of the collateral securing those loans; deterioration in the value of securities held in its investment securities portfolio; legal and regulatory developments; increased competition from both banks and non-banks; changes in customer behavior and preferences; effects of mergers and acquisitions and related integration; effects of critical accounting policies and judgments; and management’s ability to effectively manage credit risk, residual value risk, market risk, operational risk, interest rate risk and liquidity risk.
 
For discussion of these and other risks that may cause actual results to differ from expectations, refer to U.S. Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2009, on file with the Securities and Exchange Commission, including the sections entitled “Risk Factors” and “Corporate Risk Profile” contained in Exhibit 13, and all subsequent filings with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. Forward-looking statements speak only as of the date they are made, and U.S. Bancorp undertakes no obligation to update them in light of new information or future events.
 
 
 
U.S. Bancorp
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Table 1    Selected Financial Data
                                                         
    Three Months Ended
      Nine Months Ended
 
    September 30,       September 30,  
                  Percent
                      Percent
 
(Dollars and Shares in Millions, Except Per Share Data)   2010     2009       Change       2010       2009       Change  
Condensed Income Statement
                                                       
Net interest income (taxable-equivalent basis) (a)
    $  2,477       $  2,157         14.8 %     $ 7,289       $ 6,356         14.7 %
Noninterest income
    2,119       2,169         (2.3 )       6,202         6,229         (.4 )
Securities gains (losses), net
    (9 )     (76 )       88.2         (64 )       (293 )       78.2  
                                                         
Total net revenue
    4,587       4,250         7.9         13,427         12,292         9.2  
Noninterest expense
    2,385       2,053         16.2         6,898         6,053         14.0  
Provision for credit losses
    995       1,456         (31.7 )       3,444         4,169         (17.4 )
                                                         
Income before taxes
    1,207       741         62.9         3,085         2,070         49.0  
Taxable-equivalent adjustment
    53       50         6.0         156         148         5.4  
Applicable income taxes
    260       86         *         620         287         *  
                                                         
Net income
    894       605         47.8         2,309         1,635         41.2  
Net (income) loss attributable to noncontrolling interests
    14       (2 )       *         34         (32 )       *  
                                                         
Net income attributable to U.S. Bancorp
    $    908       $    603         50.6       $ 2,343       $ 1,603         46.2  
                               
Net income applicable to U.S. Bancorp common shareholders
    $    871       $    583         49.4       $ 2,381       $ 1,223         94.7  
                               
Per Common Share
                                                       
Earnings per share
    $     .46       $     .31         48.4 %     $ 1.25       $ .67         86.6 %
Diluted earnings per share
    .45       .30         50.0         1.24         .66         87.9  
Dividends declared per share
    .05       .05                 .15         .15          
Book value per share
    14.19       12.38         14.6                                
Market value per share
    21.62       21.86         (1.1 )                              
Average common shares outstanding
    1,913       1,908         .3         1,911         1,832         4.3  
Average diluted common shares outstanding
    1,920       1,917         .2         1,920         1,840         4.3  
Financial Ratios
                                                       
Return on average assets
    1.26 %     .90 %                 1.11 %       .81 %          
Return on average common equity
    12.8       10.0                   12.3         7.7            
Net interest margin (taxable-equivalent basis) (a)
    3.91       3.67                   3.90         3.62            
Efficiency ratio (b)
    51.9       47.5                   51.1         48.1            
Average Balances
                                                       
Loans
    $192,541       $181,968         5.8 %     $ 192,192       $ 183,837         4.5 %
Loans held for sale
    6,465       7,359         (12.1 )       4,824         6,222         (22.5 )
Investment securities
    47,870       42,558         12.5         47,080         42,357         11.2  
Earning assets
    251,916       234,111         7.6         249,408         234,559         6.3  
Assets
    286,060       264,411         8.2         283,056         265,579         6.6  
Noninterest-bearing deposits
    39,732       36,982         7.4         39,223         36,800         6.6  
Deposits
    182,660       166,362         9.8         182,837         163,391         11.9  
Short-term borrowings
    36,303       28,025         29.5         33,727         29,278         15.2  
Long-term debt
    29,422       36,797         (20.0 )       30,696         37,780         (18.8 )
Total U.S. Bancorp shareholders’ equity
    28,887       24,679         17.1         27,582         26,559         3.9  
                               
                                                         
      September 30,
2010
      December 31,
2009
                                         
                                                         
Period End Balances
                                                       
Loans
    $194,617       $194,755         (.1 )%                              
Allowance for credit losses
    5,540       5,264         5.2                                
Investment securities
    48,963       44,768         9.4                                
Assets
    290,654       281,176         3.4                                
Deposits
    187,406       183,242         2.3                                
Long-term debt
    30,353       32,580         (6.8 )                              
Total U.S. Bancorp shareholders’ equity
    29,151       25,963         12.3                                
Capital ratios
                                                       
Tier 1 capital
    10.3 %     9.6 %                                        
Total risk-based capital
    13.3       12.9                                          
Leverage
    9.0       8.5                                          
Tier 1 common equity to risk-weighted assets (c)
    7.6       6.8                                          
Tangible common equity to tangible assets (c)
    6.2       5.3                                          
Tangible common equity to risk-weighted assets (c)
    7.2       6.1                                          
 
  * Not meaningful.
(a) Presented on a fully taxable-equivalent basis utilizing a tax rate of 35 percent.
(b) Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding net securities gains (losses).
(c) See Non-Regulatory Capital Ratios on page 27.
 
 
 
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OVERVIEW
 
Earnings Summary U.S. Bancorp and its subsidiaries (the “Company”) reported net income attributable to U.S. Bancorp of $908 million for the third quarter of 2010 or $.45 per diluted common share, compared with $603 million, or $.30 per diluted common share for the third quarter of 2009. Return on average assets and return on average common equity were 1.26 percent and 12.8 percent, respectively, for the third quarter of 2010, compared with .90 percent and 10.0 percent, respectively, for the third quarter of 2009. Significant items in the third quarter of 2009 that impact the comparison of results included provision for credit losses in excess of net charge-offs of $415 million, net securities losses of $76 million, and a $39 million gain related to the Company’s investment in Visa Inc.
Total net revenue, on a taxable-equivalent basis, for the third quarter of 2010 was $337 million (7.9 percent) higher than the third quarter of 2009, reflecting a 14.8 percent increase in net interest income and a .8 percent increase in total noninterest income. The increase in net interest income over a year ago was largely the result of an increase in average earning assets, primarily related to acquisitions, and continued growth in lower cost core deposit funding. Noninterest income increased over a year ago as a result of higher payments-related revenue, commercial products revenue and mortgage banking revenue.
Total noninterest expense in the third quarter of 2010 was $332 million (16.2 percent) higher than the third quarter of 2009, primarily due to the impact of acquisitions and higher total compensation and employee benefits expense.
The provision for credit losses for the third quarter of 2010 was $995 million, or $461 million (31.7 percent) lower than the third quarter of 2009. The provision for credit losses equaled net charge-offs in the third quarter of 2010, and exceeded net charge-offs by $415 million in the third quarter of 2009. Net charge-offs in the third quarter of 2010 were $995 million, compared with net charge-offs of $1,041 million in the third quarter of 2009. 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.
The Company reported net income attributable to U.S. Bancorp of $2.3 billion for the first nine months of 2010 or $1.24 per diluted common share, compared with $1.6 billion, or $.66 per diluted common share for the first nine months of 2009. Return on average assets and return on average common equity were 1.11 percent and 12.3 percent, respectively, for the first nine months of 2010, compared with .81 percent and 7.7 percent, respectively, for the first nine months of 2009. Diluted earnings per common share for the first nine months of 2010 included a non-recurring $.05 benefit in the second quarter related to an exchange of newly issued perpetual preferred stock for outstanding income trust securities (“ITS exchange”), net of related debt extinguishment costs. Also impacting the first nine months of 2010 were $200 million of provision for credit losses in excess of net charge-offs, net securities losses of $64 million and a $28 million gain related to the Company’s investment in Visa Inc. The first nine months of 2009 included $1.4 billion of provision for credit losses in excess of net charge-offs, net securities losses of $293 million, a $123 million Federal Deposit Insurance Corporation (“FDIC”) special assessment, a $92 million gain from a corporate real estate transaction, a $39 million gain related to the Company’s investment in Visa Inc. and a reduction to earnings per share from recognition of $154 million of unaccreted preferred stock discount as a result of the redemption of preferred stock previously issued to the U.S. Department of the Treasury.
Total net revenue, on a taxable-equivalent basis, for the first nine months of 2010 was $1.1 billion (9.2 percent) higher than the first nine months of 2009, reflecting a 14.7 percent increase in net interest income and a 3.4 percent increase in total noninterest income. The increase in net interest income over a year ago was largely the result of continued growth in lower cost core deposit funding and an increase in average earning assets. Noninterest income increased over a year ago, principally due to higher payments-related and commercial products revenue and a decrease in net securities losses, partially offset by lower mortgage banking revenue, deposit service charges and trust and investment management fees.
Total noninterest expense in the first nine months of 2010 was $845 million (14.0 percent) higher than the first nine months of 2009, primarily due to the impact of acquisitions, higher total compensation and employee benefits expense and costs related to investments in affordable housing and other tax-advantaged projects,
 
 
 
U.S. Bancorp
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partially offset by lower FDIC deposit insurance expense due to the special assessment in the second quarter of 2009.
The provision for credit losses for the first nine months of 2010 was $3.4 billion, or $725 million (17.4 percent) lower than the first nine months of 2009. The provision for credit losses exceeded net charge-offs by $200 million in the first nine months of 2010, compared with $1.4 billion in the first nine months of 2009. Net charge-offs in the first nine months of 2010 were $3.2 billion, compared with net charge-offs of $2.8 billion in the first nine months of 2009. Refer to “Corporate Risk Profile” for further information on the provision for credit losses, net charge-offs, nonperforming assets and factors considered by the Company in assessing the credit quality of the loan portfolio and establishing the allowance for credit losses.
 
STATEMENT OF INCOME ANALYSIS
 
Net Interest Income Net interest income, on a taxable-equivalent basis, was $2.5 billion in the third quarter of 2010, compared with $2.2 billion in the third quarter of 2009. Net interest income, on a taxable-equivalent basis, was $7.3 billion in the first nine months of 2010, compared with $6.4 billion in the first nine months of 2009. The increases were primarily the result of continued growth in lower cost core deposit funding, increases in average earning assets and a higher net interest margin. Average deposits increased $16.3 billion (9.8 percent) in the third quarter and $19.4 billion (11.9 percent) in the first nine months of 2010, compared with the same periods of 2009. Average earning assets were $17.8 billion (7.6 percent) higher in the third quarter and $14.8 billion (6.3 percent) higher in the first nine months of 2010, compared with the same periods of 2009, driven by increases in average loans and investment securities. The net interest margin in the third quarter and first nine months of 2010 was 3.91 percent and 3.90 percent, respectively, compared with 3.67 percent in the third quarter of 2009 and 3.62 percent in the first nine months of 2009. The increases in net interest margin were principally due to the impact of favorable funding rates as a result of the increase in deposits and improved credit spreads. Refer to the “Consolidated Daily Average Balance Sheet and Related Yields and Rates” tables for further information on net interest income.
Total average loans for the third quarter and first nine months of 2010 were $10.6 billion (5.8 percent) and $8.4 billion (4.5 percent) higher, respectively, than the same periods of 2009, driven by growth in residential mortgages, retail loans, commercial real estate loans and acquired loans covered by loss sharing agreements with the FDIC, partially offset by a decline in commercial loans which was principally the result of lower utilization by customers of available commitments. Residential mortgage growth reflected increased origination and refinancing activity as a result of market interest rate declines. Average retail loans increased year-over-year, driven by increases in credit card and installment (primarily auto) loans. Average credit card balances for the third quarter and first nine months of 2010 were $1.1 billion (7.3 percent) and $2.0 billion (13.6 percent) higher, respectively, than the same periods of 2009, reflecting growth in existing portfolios and portfolio purchases during 2009 and the second quarter of 2010. Growth in average commercial real estate balances reflected the impact of new business activity, partially offset by customer debt deleveraging. Assets acquired in FDIC-assisted transactions that are covered by loss sharing agreements with the FDIC (“covered assets” or “covered loans”) relate to the fourth quarter 2008 acquisitions of the banking operations of Downey Savings and Loan Association, F.A. and PFF Bank and Trust (“Downey” and “PFF”, respectively) and the fourth quarter 2009 acquisition of the banking operations of First Bank of Oak Park Corporation (“FBOP”). Average covered loans were $19.3 billion and $20.4 billion in the third quarter and first nine months of 2010, respectively, compared with $10.3 billion and $10.8 billion in the same periods of 2009.
Average investment securities in the third quarter and first nine months of 2010 were $5.3 billion (12.5 percent) and $4.7 billion (11.2 percent) higher, respectively, than the same periods of 2009, primarily due to purchases of U.S. government agency-related securities and the consolidation of $.6 billion of held-to-maturity securities held in a variable interest entity (“VIE”) due to the adoption of new authoritative accounting guidance effective January 1, 2010.
Average total deposits for the third quarter and first nine months of 2010 were $16.3 billion (9.8 percent) and $19.4 billion (11.9 percent) higher, respectively, than the same periods of 2009. Excluding deposits from acquisitions, third quarter 2010 average total deposits increased $4.5 billion (2.7 percent) over the third quarter of 2009. Average noninterest-bearing deposits for the third quarter and first nine months of 2010 were $2.8 billion (7.4 percent) and $2.4 billion (6.6 percent) higher, respectively, than the same periods of 2009, primarily due to growth in Consumer and Wholesale Banking business line balances and the impact of acquisitions. Average total savings deposits were $13.9 billion (16.3 percent) higher in the third quarter and $21.7 billion (28.0 percent) higher in the first nine
 
 
 
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Table 2    Noninterest Income
 
                                                         
    Three Months Ended
      Nine Months Ended
 
    September 30,       September 30,  
                  Percent
                      Percent
 
(Dollars in Millions)   2010     2009       Change       2010       2009       Change  
Credit and debit card revenue
  $ 274     $ 267         2.6 %     $ 798       $ 782         2.0 %
Corporate payment products revenue
    191       181         5.5         537         503         6.8  
Merchant processing services
    318       300         6.0         930         836         11.2  
ATM processing services
    105       103         1.9         318         309         2.9  
Trust and investment management fees
    267       293         (8.9 )       798         891         (10.4 )
Deposit service charges
    160       256         (37.5 )       566         732         (22.7 )
Treasury management fees
    139       141         (1.4 )       421         420         .2  
Commercial products revenue
    197       157         25.5         563         430         30.9  
Mortgage banking revenue
    310       276         12.3         753         817         (7.8 )
Investment products fees and commissions
    27       27                 82         82          
Securities gains (losses), net
    (9 )     (76 )       88.2         (64 )       (293 )       78.2  
Other
    131       168         (22.0 )       436         427         2.1  
                                                         
Total noninterest income
  $ 2,110     $ 2,093         .8 %     $ 6,138       $ 5,936         3.4 %
                                                         

months of 2010, compared with the same periods of 2009, primarily the result of growth in Consumer Banking, institutional and corporate trust balances, and the impact of acquisitions. Average time certificates of deposit less than $100,000 were lower in the third quarter and first nine months of 2010 by $961 million (5.7 percent) and $586 million (3.3 percent), respectively, compared with the same periods in 2009, as decreases in Consumer Banking balances were partially offset by acquisition-related growth. Average time deposits greater than $100,000 were $617 million (2.3 percent) higher and $4.1 billion (13.2 percent) lower in the third quarter and first nine months of 2010, respectively, compared with the same periods of 2009, reflecting the net impact of acquisitions, offset by a decrease in required overall wholesale funding.
 
Provision for Credit Losses The provision for credit losses for the third quarter and first nine months of 2010 decreased $461 million (31.7 percent) and $725 million (17.4 percent), respectively, from the same periods of 2009. Net charge-offs decreased $46 million (4.4 percent) in the third quarter of 2010, compared with the third quarter of 2009, principally due to improvement in the commercial and commercial real estate portfolios. Net charge-offs increased $486 million (17.6 percent) in the first nine months of 2010, compared with the same period of 2009, as borrowers impacted by weak economic conditions and real estate markets defaulted on loans. Delinquencies decreased in most major loan categories in the third quarter of 2010, compared to the second quarter of 2010. The provision for credit losses equaled net charge-offs in the third quarter of 2010, but exceeded net charge-offs by $415 million in the third quarter of 2009. The provision for credit losses exceeded net charge-offs by $200 million in the first nine months of 2010, compared with $1.4 billion in the first nine months of 2009. 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.
 
Noninterest Income Noninterest income in the third quarter and first nine months of 2010 was $2.1 billion and $6.1 billion, respectively, compared with $2.1 billion and $5.9 billion in the same periods of 2009. The $17 million (.8 percent) increase during the third quarter and $202 million (3.4 percent) increase during the first nine months of 2010, compared with the same periods of 2009, were due to higher payments-related revenues, principally due to increased transaction volumes, increases in commercial products revenue attributable to higher standby letters of credit fees, commercial loan fees and syndication revenue, and decreases in net securities losses, primarily due to lower impairments in the current year. Mortgage banking revenue increased for the third quarter of 2010 compared to the third quarter of 2009 due to higher production and servicing revenue, partially offset by an unfavorable net change in the valuation of mortgage servicing rights (“MSRs”) and related economic hedging activities. Mortgage banking revenue declined in the first nine months of 2010, compared with the same period in 2009, principally due to lower loan production, partially offset by higher servicing income and a favorable net change in the valuation of MSRs and related economic hedging activities. Deposit service charges decreased in the third quarter and first nine months of 2010, compared with the same periods of the prior year, as a result of Company-initiated and regulatory revisions to overdraft fee policies and lower overdraft incidences. Trust and investment management fees declined in the
 
 
 
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Table 3    Noninterest Expense
 
                                                         
    Three Months Ended
      Nine Months Ended
 
    September 30,       September 30,  
                  Percent
                      Percent
 
(Dollars in Millions)   2010     2009       Change       2010       2009       Change  
Compensation
  $ 973     $ 769         26.5 %     $ 2,780       $ 2,319         19.9 %
Employee benefits
    171       134         27.6         523         429         21.9  
Net occupancy and equipment
    229       203         12.8         682         622         9.6  
Professional services
    78       63         23.8         209         174         20.1  
Marketing and business development
    108       137         (21.2 )       254         273         (7.0 )
Technology and communications
    186       175         6.3         557         487         14.4  
Postage, printing and supplies
    74       72         2.8         223         218         2.3  
Other intangibles
    90       94         (4.3 )       278         280         (.7 )
Other
    476       406         17.2         1,392         1,251         11.3  
                                                         
Total noninterest expense
  $ 2,385     $ 2,053         16.2 %     $ 6,898       $ 6,053         14.0 %
                                                         
Efficiency ratio (a)
    51.9 %     47.5 %                 51.1 %       48.1 %          
                                                         
(a) Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income excluding securities gains (losses), net.

third quarter and first nine months of 2010, compared with the same periods of 2009, as low interest rates negatively impacted money market investment fees and lower money market fund balances led to a decline in account-level fees. Other income decreased in the third quarter of 2010, compared with the third quarter of 2009, primarily due to the third quarter 2009 gain related to the Company’s investment in Visa Inc. and lower customer derivative revenue, partially offset by improved retail lease end-of-term results and higher income from equity investments. The increase in other income for the first nine months of 2010, compared with the first nine months of 2009, reflected improved retail lease end-of-term results and higher income from equity investments, partially offset by the $92 million gain on a corporate real estate transaction that occurred in the first quarter of 2009 and lower customer derivative revenue.
 
Noninterest Expense Noninterest expense was $2.4 billion in the third quarter and $6.9 billion in the first nine months of 2010, compared with $2.1 billion in the third quarter and $6.1 billion in the first nine months of 2009, or increases of $332 million (16.2 percent) and $845 million (14.0 percent), respectively. The increases in noninterest expense from a year ago were principally due to acquisitions, increased total compensation and employee benefits expense and higher costs related to investments in affordable housing and other tax-advantaged projects. Total compensation and employee benefits expense increased, reflecting acquisitions, a five percent cost reduction program that was in effect during the second and third quarters of 2009, higher incentives costs related to improved financial results, merit increases, and increased pension costs associated with previous declines in the value of pension assets. Net occupancy and equipment expense and professional services expense increased principally due to acquisitions and other business initiatives. Technology and communications expense increased as a result of business initiatives and volume increases across various business lines. Other expense increased in the third quarter and first nine months of 2010, compared with the same periods of 2009, reflecting higher costs related to investments in affordable housing and other tax-advantaged projects, which benefit the Company’s income tax expense, and higher other real estate owned (“OREO”) costs, partially offset by the $123 million FDIC special assessment recorded in the second quarter of 2009. Marketing and business development expense decreased in the third quarter and first nine months of 2010, compared with the same periods of the prior year, largely due to payments-related initiatives during 2009, partially offset by increased contributions to the Company’s charitable foundation in the third quarter of 2010.
 
Income Tax Expense The provision for income taxes was $260 million (an effective rate of 22.5 percent) for the third quarter and $620 million (an effective rate of 21.2 percent) for the first nine months of 2010, compared with $86 million (an effective rate of 12.4 percent) and $287 million (an effective rate of 14.9 percent) for the same periods of 2009. The increases in the effective tax rate for the third quarter and first nine months of 2010, compared with the same periods of the prior year, primarily reflected the marginal impact of higher pre-tax earnings year-over-year. For further information on income taxes, refer to Note 10 of the Notes to Consolidated Financial Statements.
 
 
 
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BALANCE SHEET ANALYSIS
 
Loans The Company’s total loan portfolio was $194.6 billion at September 30, 2010, compared with $194.8 billion at December 31, 2009, a decrease of $138 million (.1 percent). The decrease was driven primarily by lower commercial and covered loans, partially offset by higher residential mortgages and retail loans. The $1.2 billion (2.4 percent) decrease in commercial loans was primarily driven by lower capital spending and uncertain economic conditions decreasing utilization of existing commitments by business customers. The decrease was also due to the consolidation of a VIE and elimination of a related loan balance as a result of adopting new authoritative accounting guidance effective January 1, 2010.
Commercial real estate loans increased $225 million (.7 percent) at September 30, 2010, compared with December 31, 2009, reflecting the impact of new business activity, partially offset by customer debt deleveraging.
Residential mortgages held in the loan portfolio increased $2.5 billion (9.7 percent) at September 30, 2010, compared with December 31, 2009, reflecting an increase in mortgage banking origination and refinancing activity as a result of current market interest rate declines. Most loans retained in the portfolio are to customers with prime or near-prime credit characteristics at the date of origination.
Total retail loans outstanding, which include credit card, retail leasing, home equity and second mortgages and other retail loans, increased $1.1 billion (1.7 percent) at September 30, 2010, compared with December 31, 2009. The increase was primarily driven by higher installment (primarily auto) and federally-guaranteed student loans, partially offset by lower credit card, home equity and retail leasing balances.
 
Loans Held for Sale Loans held for sale, consisting primarily of residential mortgages, were $8.4 billion at September 30, 2010, compared with $4.8 billion at December 31, 2009. The increase in loans held for sale was principally due to an increase in mortgage loan origination and refinancing activity as a result of a decline in market interest rates.
 
Investment Securities Investment securities totaled $49.0 billion at September 30, 2010, compared with $44.8 billion at December 31, 2009. The $4.2 billion (9.4 percent) increase reflected $2.3 billion of net investment purchases, the consolidation of $.6 billion of held-to-maturity securities held in a VIE due to the adoption of new authoritative accounting guidance effective January 1, 2010, and a $1.3 billion favorable change in net unrealized gains (losses) on available-for-sale securities.
The Company conducts a regular assessment of its investment portfolio to determine whether any securities are other-than-temporarily impaired. At September 30, 2010, the Company’s net unrealized gain on available-for-sale securities was $633 million, compared with a net unrealized loss of $635 million at December 31, 2009. The favorable change in net unrealized gains (losses) was primarily due to increases in the fair value of agency and certain non-agency mortgage-backed and state and political securities. Unrealized losses on available-for-sale securities in an unrealized loss position totaled $689 million at September 30, 2010, compared with $1.3 billion at December 31, 2009. When assessing unrealized losses for other-than-temporary impairment, the Company considers the nature of the investment, the financial condition of the issuer, the extent and duration of unrealized loss, expected cash flows of underlying collateral or assets and market conditions. At September 30, 2010, the Company had no plans to sell securities with unrealized losses and believes it is more likely than not it would not be required to sell such securities before recovery of their amortized cost.
There is limited market activity for structured investment related and non-agency mortgage-backed securities held by the Company. As a result, the Company estimates the fair value of these securities using estimates of expected cash flows, discount rates and management’s assessment of various other market factors, which are judgmental in nature. The Company recorded $18 million and $85 million of impairment charges in earnings during the third quarter and first nine months of 2010, respectively, predominately on non-agency mortgage-backed and structured investment related securities. These impairment charges were due to changes in expected cash flows resulting from increases in defaults in the underlying mortgage pools and regulatory actions in the first quarter of 2010 related to an insurer of some of the securities. Further adverse changes in market conditions may result in additional impairment charges in future periods. Refer to Notes 3 and 12 in the Notes to Consolidated Financial Statements for further information on investment securities.
 
 
 
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Table 4    Investment Securities
 
                                                                   
    Available-for-Sale       Held-to-Maturity  
                Weighted-
                        Weighted-
       
                Average
    Weighted-
                  Average
    Weighted-
 
September 30, 2010
  Amortized
    Fair
    Maturity in
    Average
      Amortized
    Fair
    Maturity in
    Average
 
(Dollars in Millions)   Cost     Value     Years     Yield(e)       Cost     Value     Years     Yield(e)  
U.S. Treasury and Agencies
                                                                 
Maturing in one year or less
  $ 1,192     $ 1,198       .3       2.26 %     $     $             %
Maturing after one year through five years
    100       103       1.8       2.73                            
Maturing after five years through ten years
    50       54       8.1       4.44                            
Maturing after ten years
    201       201       13.5       1.99         63       63       11.3       1.81  
                                                                   
Total
  $ 1,543     $ 1,556       2.4       2.33 %     $ 63     $ 63       11.3       1.81 %
                                                                   
Mortgage-Backed Securities (a)
                                                                 
Maturing in one year or less
  $ 2,282     $ 2,286       .6       1.82 %     $     $             %
Maturing after one year through five years
    29,151       29,992       3.2       3.25         14       8       2.4       1.80  
Maturing after five years through ten years
    4,203       4,011       6.3       2.78         3       3       6.1       .76  
Maturing after ten years
    771       688       12.3       1.98                            
                                                                   
Total
  $ 36,407     $ 36,977       3.6       3.08 %     $ 17     $ 11       3.1       1.60 %
                                                                   
Asset-Backed Securities (a)
                                                                 
Maturing in one year or less
  $ 4     $ 11       .5       17.37 %     $ 137     $ 128       .4       .70 %
Maturing after one year through five years
    205       210       3.3       13.89         82       82       2.6       1.09  
Maturing after five years through ten years
    571       589       8.3       3.13         74       69       7.1       .81  
Maturing after ten years
    148       150       10.8       2.54         18       13       21.9       .82  
                                                                   
Total
  $ 928     $ 960       7.6       5.47 %     $ 311     $ 292       3.8       .83 %
                                                                   
Obligations of State and Political Subdivisions (b)(c)
                                                                 
Maturing in one year or less
  $ 8     $ 8       .3       7.29 %     $ 1     $ 1       .3       7.79 %
Maturing after one year through five years
    1,594       1,630       4.2       6.33         5       5       3.6       7.99  
Maturing after five years through ten years
    4,899       4,997       6.2       6.79         8       9       6.2       6.85  
Maturing after ten years
    346       322       21.9       7.18         15       15       16.3       5.55  
                                                                   
Total
  $ 6,847     $ 6,957       6.5       6.70 %     $ 29     $ 30       10.7       6.40 %
                                                                   
Other Debt Securities
                                                                 
Maturing in one year or less
  $ 6     $ 7       .2       .89 %     $ 1     $ 1       .2       1.21 %
Maturing after one year through five years
    92       81       1.7       6.61         16       12       2.8       1.44  
Maturing after five years through ten years
    31       30       7.0       6.33         88       74       7.3       1.17  
Maturing after ten years
    1,376       1,211       31.2       4.29         32       20       10.1       1.16  
                                                                   
Total
  $ 1,505     $ 1,329       28.8       4.46 %     $ 137     $ 107       7.4       1.20 %
                                                                   
Other Investments
  $ 543     $ 627       12.9       2.43 %     $     $             %
                                                                   
Total investment securities (d)
  $ 47,773     $ 48,406       4.9       3.66 %     $ 557     $ 503       5.9       1.35 %
                                                                   
(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 politcal 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 7.1 years at December 31, 2009, with a corresponding weighted-average yield of 4.00 percent. The weighted-average maturity of the held-to-maturity investment securities was 8.4 years at December 31, 2009, with a corresponding weighted-average yield of 5.10 percent.
(e) Average yields are presented on a fully-taxable equivalent basis under a tax rate of 35 percent. Yields on available-for-sale and held-to-maturity securities are computed based on historical cost balances. Average yield and maturity calculations exclude equity securities that have no stated yield or maturity.
 
                                   
    September 30, 2010       December 31, 2009  
    Amortized
    Percent
      Amortized
    Percent
 
(Dollars in Millions)   Cost     of Total       Cost     of Total  
U.S. Treasury and agencies
  $ 1,606       3.3 %     $ 3,415       7.5 %
Mortgage-backed securities
    36,424       75.4         32,289       71.1  
Asset-backed securities
    1,239       2.6         559       1.2  
Obligations of state and political subdivisions
    6,876       14.2         6,854       15.1  
Other debt securities and investments
    2,185       4.5         2,286       5.1  
                                   
Total investment securities
  $ 48,330       100.0 %     $ 45,403       100.0 %
                                   
 

 
 
 
 
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Deposits Total deposits were $187.4 billion at September 30, 2010, compared with $183.2 billion at December 31, 2009, the result of increases in savings, interest checking and noninterest-bearing deposit balances, partially offset by decreases in time deposits. Savings account balances increased $5.8 billion (34.3 percent), primarily due to continued strong participation in a savings product offered by Consumer Banking. Noninterest-bearing deposits increased $2.6 billion (6.7 percent), primarily due to increases in Wholesale and Consumer Banking balances. Interest checking balances increased $1.5 billion (3.8 percent), primarily due to higher broker dealer balances. Time certificates of deposit less than $100,000 decreased $3.5 billion (18.2 percent), as a result of decreases in Consumer Banking and expected decreases in acquired certificates of deposit. Time deposits greater than $100,000 decreased $2.1 billion (7.1 percent). Time deposits greater than $100,000 are managed as an alternative to other funding sources, such as wholesale borrowing, based largely on relative pricing.
 
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 $34.3 billion at September 30, 2010, compared with $31.3 billion at December 31, 2009. The $3.0 billion (9.7 percent) increase in short-term borrowings reflected wholesale funding associated with the Company’s asset growth and asset/liability management activities.
Long-term debt was $30.4 billion at September 30, 2010, compared with $32.6 billion at December 31, 2009, reflecting a $2.6 billion net decrease in Federal Home Loan Bank advances, $5.3 billion of medium-term note maturities and repayments and the extinguishment of $.6 billion of junior subordinated debentures in connection with the ITS exchange, partially offset by $4.3 billion of medium-term note and subordinated debt issuances and the consolidation of $2.1 billion of long-term debt related to certain VIEs at September 30, 2010. Refer to the “Liquidity Risk Management” section for discussion of liquidity management of the Company.
 
CORPORATE RISK PROFILE
 
Overview Managing risks is an essential part of successfully operating a financial services company. The most prominent risk exposures are credit, residual value, operational, interest rate, market and liquidity risk. Credit risk is the risk of not collecting the interest and/or the principal balance of a loan, investment or derivative contract when it is due. Residual value risk is the potential reduction in the end-of-term value of leased assets. Operational risk includes risks related to fraud, legal and compliance, processing errors, technology, breaches of internal controls and business continuation and disaster recovery. Interest rate risk is the potential reduction of net interest income as a result of changes in interest rates, which can affect the re-pricing of assets and liabilities differently. Market risk arises from fluctuations in interest rates, foreign exchange rates, and security prices that may result in changes in the values of financial instruments, such as trading and available-for-sale securities and derivatives that are accounted for on a mark-to-market basis. Liquidity risk is the possible inability to fund obligations to depositors, investors or borrowers. In addition, corporate strategic decisions, as well as the risks described above, could give rise to reputation risk. Reputation risk is the risk that negative publicity or press, whether true or not, could result in costly litigation or cause a decline in the Company’s stock value, customer base, funding sources or revenue.
 
Credit Risk Management The Company’s strategy for credit risk management includes well-defined, centralized credit policies, uniform underwriting criteria, and ongoing risk monitoring and review processes for all commercial and consumer credit exposures. In evaluating its credit risk, the Company considers changes, if any, in underwriting activities, the loan portfolio composition (including product mix and geographic, industry or customer-specific concentrations), trends in loan performance, the level of allowance coverage relative to similar banking institutions and macroeconomic factors, such as changes in unemployment rates, gross domestic product and consumer bankruptcy filings. Refer to “Management’s Discussion and Analysis — Credit Risk Management” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, for a more detailed discussion on credit risk management processes.
The Company manages its credit risk, in part, through diversification of its loan portfolio and limit setting by product type criteria and concentrations. As part of its normal business activities, the Company offers a broad array of commercial and retail lending products. The Company’s retail lending business utilizes several distinct business processes and channels to originate retail credit, including traditional branch lending, indirect lending, portfolio acquisitions and a consumer finance division. Generally, loans managed by the Company’s consumer finance division exhibit higher credit risk characteristics, but are priced commensurate with the differing risk profile. With respect to residential mortgages originated through these channels, the Company may either retain the loans on its balance sheet or sell its interest in the balances into the
 
 
 
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secondary market while retaining the servicing rights and customer relationships. For residential mortgages that are retained in the Company’s portfolio and for home equity and second mortgages, credit risk is also diversified by geography and managed by adherence to loan-to-value and borrower credit criteria during the underwriting process.
 
The following tables provide summary information of the loan-to-values of residential mortgages and home equity and second mortgages by distribution channel and type at September 30, 2010 (excluding covered loans):
 
                                   
Residential mortgages
    Interest
                Percent
 
(Dollars in Millions)     Only     Amortizing     Total     of Total  
Consumer Finance
                                 
Less than or equal to 80%
    $ 1,336     $ 4,317     $ 5,653       51.6 %
Over 80% through 90%
      522       2,107       2,629       24.0  
Over 90% through 100%
      491       2,033       2,524       23.1  
Over 100%
            147       147       1.3  
                                   
Total
    $ 2,349     $ 8,604     $ 10,953       100.0 %
Other Retail
                                 
Less than or equal to 80%
    $ 1,947     $ 14,227     $ 16,174       91.7 %
Over 80% through 90%
      61       560       621       3.5  
Over 90% through 100%
      77       762       839       4.8  
Over 100%
                         
                                   
Total
    $ 2,085     $ 15,549     $ 17,634       100.0 %
Total Company
                                 
Less than or equal to 80%
    $ 3,283     $ 18,544     $ 21,827       76.3 %
Over 80% through 90%
      583       2,667       3,250       11.4  
Over 90% through 100%
      568       2,795       3,363       11.8  
Over 100%
            147       147       .5  
                                   
Total
    $ 4,434     $ 24,153     $ 28,587       100.0 %
                                   
Note:   Loan-to-values determined as of the date of origination and adjusted for cumulative principal payments, and consider mortgage insurance, as applicable.
 
                                   
Home equity and second mortgages
                      Percent
 
(Dollars in Millions)     Lines     Loans     Total     of Total  
Consumer Finance (a)
                                 
Less than or equal to 80%
    $ 942     $ 202     $ 1,144       46.8 %
Over 80% through 90%
      426       154       580       23.8  
Over 90% through 100%
      336       256       592       24.2  
Over 100%
      54       73       127       5.2  
                                   
Total
    $ 1,758     $ 685     $ 2,443       100.0 %
Other Retail
                                 
Less than or equal to 80%
    $ 11,759     $ 1,363     $ 13,122       78.2 %
Over 80% through 90%
      2,034       480       2,514       15.0  
Over 90% through 100%
      692       384       1,076       6.4  
Over 100%
      41       26       67       .4  
                                   
Total
    $ 14,526     $ 2,253     $ 16,779       100.0 %
Total Company
                                 
Less than or equal to 80%
    $ 12,701     $ 1,565     $ 14,266       74.2 %
Over 80% through 90%
      2,460       634       3,094       16.1  
Over 90% through 100%
      1,028       640       1,668       8.7  
Over 100%
      95       99       194       1.0  
                                   
Total
    $ 16,284     $ 2,938     $ 19,222       100.0 %
                                   
(a) Consumer finance category includes credit originated and managed by the consumer finance division, as well as the majority of home equity and second mortgages with a loan-to-value greater than 100 percent that were originated in the branches.
Note:   Loan-to-values determined on original appraisal value of collateral and the current amortized loan balance, or maximum of current commitment or current balance on lines.
 
Within the consumer finance division, at September 30, 2010, approximately $2.2 billion of residential mortgages were to customers that may be defined as sub-prime borrowers based on credit scores from independent credit rating agencies at loan origination, compared with $2.5 billion at December 31, 2009.
 
The following table provides further information on the loan-to-values of residential mortgages specifically for the consumer finance division at September 30, 2010:
 
                                   
      Interest
                Percent of
 
(Dollars in Millions)     Only     Amortizing     Total     Division  
Sub-Prime Borrowers
                                 
Less than or equal to 80%
    $ 6     $ 995     $ 1,001       9.1 %
Over 80% through 90%
      3       508       511       4.7  
Over 90% through 100%
      14       656       670       6.1  
Over 100%
            55       55       .5  
                                   
Total
    $ 23     $ 2,214     $ 2,237       20.4 %
Other Borrowers
                                 
Less than or equal to 80%
    $ 1,330     $ 3,322     $ 4,652       42.5 %
Over 80% through 90%
      519       1,599       2,118       19.3  
Over 90% through 100%
      477       1,377       1,854       16.9  
Over 100%
            92       92       .8  
                                   
Total
    $ 2,326     $ 6,390     $ 8,716       79.6 %
                                   
Total Consumer Finance
    $ 2,349     $ 8,604     $ 10,953       100.0 %
                                   
 
In addition to residential mortgages, at September 30, 2010, the consumer finance division had $.5 billion of home equity and second mortgage loans to customers that may be defined as sub-prime borrowers, compared with $.6 billion at December 31, 2009.
 
The following table provides further information on the loan-to-values of home equity and second mortgages specifically for the consumer finance division at September 30, 2010:
 
                                   
                        Percent
 
(Dollars in Millions)     Lines     Loans     Total     of Total  
Sub-Prime Borrowers
                                 
Less than or equal to 80%
    $ 38     $ 119     $ 157       6.4 %
Over 80% through 90%
      42       91       133       5.4  
Over 90% through 100%
      6       156       162       6.6  
Over 100%
      35       57       92       3.8  
                                   
Total
    $ 121     $ 423     $ 544       22.3 %
Other Borrowers
                                 
Less than or equal to 80%
    $ 904     $ 83     $ 987       40.4 %
Over 80% through 90%
      384       63       447       18.3  
Over 90% through 100%
      330       100       430       17.6  
Over 100%
      19       16       35       1.4  
                                   
Total
    $ 1,637     $ 262     $ 1,899       77.7 %
                                   
Total Consumer Finance
    $ 1,758     $ 685     $ 2,443       100.0 %
                                   
The total amount of residential mortgage, home equity and second mortgage loans, other than covered loans, to customers that may be defined as sub-prime borrowers represented only 1.0 percent of total assets at September 30, 2010, compared with 1.1 percent at December 31, 2009. Covered loans include $1.7 billion in loans with negative-amortization payment options at September 30, 2010, compared with $2.2 billion at December 31, 2009. Other than covered loans, the Company does not have any residential mortgages with payment schedules that would cause balances to increase over time.
 
 
 
10
U.S. Bancorp


Table of Contents


Table 5      Delinquent Loan Ratios as a Percent of Ending Loan Balances
 
 
                 
    September 30,
    December 31,
 
90 days or more past due excluding nonperforming loans   2010     2009  
Commercial
               
Commercial
    .22 %     .25 %
Lease financing
    .02        
                 
Total commercial
    .19       .22  
Commercial Real Estate
               
Commercial mortgages
           
Construction and development
    .22       .07  
                 
Total commercial real estate
    .05       .02  
Residential Mortgages
    1.75       2.80  
Retail
               
Credit card
    2.09       2.59  
Retail leasing
    .05       .11  
Other retail
    .47       .57  
                 
Total retail
    .85       1.07  
                 
Total loans, excluding covered loans
    .66       .88  
                 
Covered Loans
    4.96       3.59  
                 
Total loans
    1.08 %     1.19 %
                 
 
                 
    September 30,
    December 31,
 
90 days or more past due including nonperforming loans   2010     2009  
Commercial
    1.67 %     2.25 %
Commercial real estate
    4.20       5.22  
Residential mortgages (a)
    3.90       4.59  
Retail (b)
    1.26       1.39  
                 
Total loans, excluding covered loans
    2.37       2.87  
                 
Covered loans
    11.12       9.76  
                 
Total loans
    3.23 %     3.64 %
                 
(a) Delinquent loan ratios exclude loans purchased from Government National Mortgage Association (“GNMA”) mortgage pools whose repayments are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. Including the guaranteed amounts, the ratio of residential mortgages 90 days or more past due including nonperforming loans was 12.64 percent at September 30, 2010, and 12.86 percent at December 31, 2009.
(b) Delinquent loan ratios exclude student loans that are guaranteed by the federal government. Including the guaranteed amounts, the ratio of retail loans 90 days or more past due including nonperforming loans was 1.58 percent at September 30, 2010, and 1.57 percent at December 31, 2009.
 
Loan Delinquencies Trends in delinquency ratios are an indicator, among other considerations, of credit risk within the Company’s loan portfolios. The Company measures delinquencies, both including and excluding nonperforming loans, to enable comparability with other companies. Accruing loans 90 days or more past due totaled $2.1 billion ($1.2 billion excluding covered loans) at September 30, 2010, compared with $2.3 billion ($1.5 billion excluding covered loans) at December 31, 2009. The $360 million (23.6 percent) decrease, excluding covered loans, reflected a moderation in the level of stress in economic conditions in the first nine months of 2010. These loans are not included in nonperforming assets and continue to accrue interest because they are adequately secured by collateral, are in the process of collection and are reasonably expected to result in repayment or restoration to current status, or are managed in homogeneous portfolios with specified charge-off timeframes adhering to regulatory guidelines. The ratio of accruing loans 90 days or more past due to total loans was 1.08 percent (.66 percent excluding covered loans) at September 30, 2010, compared with 1.19 percent (.88 percent excluding covered loans) at December 31, 2009.
 
 
 
U.S. Bancorp
11


Table of Contents

The following table provides summary delinquency information for residential mortgages and retail loans, excluding covered loans:
 
                                   
            As a Percent of Ending
 
    Amount       Loan Balances  
    September 30,
    December 31,
      September 30,
    December 31,
 
(Dollars in Millions)   2010     2009       2010     2009  
Residential mortgages
                                 
30-89 days
  $ 472     $ 615         1.65 %     2.36 %
90 days or more
    500       729         1.75       2.80  
Nonperforming
    614       467         2.15       1.79  
                                   
Total
  $ 1,586     $ 1,811         5.55 %     6.95 %
                                   
Retail
                                 
Credit card
                                 
30-89 days
  $ 306     $ 400         1.85 %     2.38 %
90 days or more
    344       435         2.09       2.59  
Nonperforming
    199       142         1.21       .84  
                                   
Total
  $ 849     $ 977         5.15 %     5.81 %
Retail leasing
                                 
30-89 days
  $ 20     $ 34         .46 %     .74 %
90 days or more
    2       5         .05       .11  
Nonperforming
                         
                                   
Total
  $ 22     $ 39         .51 %     .85 %
Home equity and second mortgages
                                 
30-89 days
  $ 178     $ 181         .93 %     .93 %
90 days or more
    141       152         .73       .78  
Nonperforming
    35       32         .18       .17  
                                   
Total
  $ 354     $ 365         1.84 %     1.88 %
Other retail
                                 
30-89 days
  $ 203     $ 256         .81 %     1.10 %
90 days or more
    69       92         .28       .40  
Nonperforming
    28       30         .11       .13  
                                   
Total
  $ 300     $ 378         1.20 %     1.63 %
                                   
 
The following table provides information on delinquent and nonperforming loans, excluding covered loans, as a percent of ending loan balances, by channel:
 
                                   
    Consumer Finance (a)       Other Retail  
    September 30,
    December 31,
      September 30,
    December 31,
 
    2010     2009       2010     2009  
Residential mortgages
                                 
30-89 days
    2.61 %     3.99 %       1.05 %     1.30 %
90 days or more
    2.33       4.00         1.39       2.02  
Nonperforming
    3.18       3.04         1.51       .98  
                                   
Total
    8.12 %     11.03 %       3.95 %     4.30 %
                                   
Retail
                                 
Credit card
                                 
30-89 days
    %     %       1.85 %     2.38 %
90 days or more
                  2.09       2.59  
Nonperforming
                  1.21       .84  
                                   
Total
    %     %       5.15 %     5.81 %
Retail leasing
                                 
30-89 days
    %     %       .46 %     .74 %
90 days or more